UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20202021
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 001-31303
Black Hills Corporation
Incorporated in South Dakota IRS Identification Number 46-0458824
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
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 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 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 | x | | Accelerated Filer | ☐ | |
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| Non-accelerated Filer | ☐ | | 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).Yes ☐ No ☒
☒
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| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered | |
| Common stock of $1.00 par value | | BKH | | New York Stock Exchange | |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
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| Class | Outstanding at OctoberJuly 31, 20202021 | |
| Common stock, $1.00 par value | 62,746,69263,480,270 | | shares | |
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| TABLE OF CONTENTS |
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| TABLE OF CONTENTS |
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| Item 1. | | | |
| Item 1A. | | | |
| Item 2. | | | |
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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 |
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| AOCI | Accumulated Other Comprehensive Income (Loss) |
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| Arkansas Gas | Black Hills Energy Arkansas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Arkansas (doing business as Black Hills Energy). |
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| ASC | Accounting Standards Codification |
| ASU | Accounting Standards Update issued by the FASB |
| ATM | At-the-market equity offering program |
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| Availability | The availability factor of a power plant is the percentage of the time that it is available to provide energy. |
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| BHC | Black Hills Corporation; the Company |
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| Black Hills Colorado IPP | Black Hills Colorado IPP, LLC a 50.1% owned subsidiary of Black Hills Electric Generation |
| Black Hills Electric Generation | Black Hills Electric Generation, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing wholesale electric capacity and energy primarily to our affiliate utilities. |
| Black Hills Energy | The name used to conduct the business of our utility companies |
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| Black Hills Energy Services | Black Hills Energy Services Company, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas commodity supply for the Choice Gas Programs (doing business as Black Hills Energy). |
| Black Hills Non-regulated Holdings | Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation |
| Black Hills Power | Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy). Also known as South Dakota Electric. |
| Black Hills Utility Holdings | Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation (doing business as Black Hills Energy) |
| Black Hills Wyoming | Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation |
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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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| Cheyenne Light | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service in the Cheyenne, Wyoming area (doing business as Black Hills Energy). Also known as Wyoming Electric. |
| Chief Operating Decision Maker (CODM) | Chief Executive Officer |
| Choice Gas Program | Regulator-approved programs in Wyoming and Nebraska that allow certain utility customers to select their natural gas commodity supplier, providing for the unbundling of the commodity service from the distribution delivery service. |
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City of Colorado Springs | Colorado Springs, Colorado |
City of Gillette | Gillette, Wyoming |
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| Colorado Electric | Black Hills Colorado Electric, LLC, a direct, wholly-owned subsidiary of Black Hills
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| Colorado Gas | Black Hills Colorado Gas, Inc., an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Colorado (doing business as Black Hills Energy). |
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| Consolidated Indebtedness to Capitalization Ratio | Any indebtedness outstanding at such time, divided by capital at such time. Capital being consolidated net worth (excluding noncontrolling interest) plus consolidated indebtedness (including letters of credit and certain guarantees issued) as defined within the current Revolving Credit Facility. |
| Cooling Degree Day (CDD) | A cooling degree day is equivalent to each degree that the average of the high and low temperatures 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 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. |
| Corriedale | Wind project near Cheyenne, Wyoming, that will be aThe 52.5 MW wind farm near Cheyenne, Wyoming, jointly owned by South Dakota Electric and Wyoming Electric, and will serveserving as the dedicated wind energy supply to the Renewable Ready program. |
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| COVID-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 pandemicpandemic. |
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| CP Program | Commercial Paper Program |
| CPUC | Colorado Public Utilities Commission |
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| CVA | Credit Valuation Adjustment |
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Dodd-Frank | Dodd-Frank Wall Street Reform and Consumer Protection Act |
DRSPP | Dividend Reinvestment and Stock Purchase Plan |
| Dth | Dekatherm. A unit of energy equal to 10 therms or approximately one million British thermal units (MMBtu) |
| Economy Energy | Purchased energy that costs less than that produced with the utilities’ owned generation. |
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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 |
| GHG | Greenhouse Gases |
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| 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 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. |
HomeServe | Repair service plans offered to electric and natural gas residential customers that cover parts and labor to repair electrical, gas, heating, cooling, and water systems. |
ICFR | Internal Controls over Financial Reporting |
| Iowa Gas | Black Hills Iowa Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Iowa (doing business as Black Hills Energy). |
| IPP | Independent Power Producer |
| IRP | Integrated Resource Plan |
| IRS | United States Internal Revenue Service |
| IUB | Iowa Utilities Board |
| Kansas Gas | Black Hills Kansas Gas Utility Company, LLC, a direct, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Kansas (doing business as Black Hills Energy). |
| KCC | Kansas Corporation Commission |
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| LIBOR | |
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| London Interbank Offered Rate |
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| MMBtu | Million British thermal units |
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| Moody’s | Moody’s Investors Service, Inc. |
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| MW | MegawattMegawatts |
| MWh | Megawatt-hourMegawatt-hours |
| Nebraska Gas | Black Hills Nebraska Gas, LLC, an indirect, wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Nebraska (doing business as Black Hills Energy). |
| Neil Simpson II | A mine-mouth, coal-fired power plant owned and operated by South Dakota Electric with a total capacity of 90 MW located at our Gillette, Wyoming energy complex. |
| NOL | |
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| Net Operating Loss |
| NPSC | Nebraska Public Service Commission |
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OCA | Office of Consumer Advocate |
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OCC | Office of Consumer Counsel |
| OCI | Other Comprehensive Income |
| PPA | Power Purchase Agreement |
PRPA | Platte River Power Authority |
| PSA | Power Sales Agreement |
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| Pueblo Airport Generation | The 420 MW combined cycle gas-fired power generation plants jointly owned by Colorado Electric (220 MW) and Black Hills Colorado IPP (200 MW). Black Hills Colorado IPP owns and operates this facility. The plants commenced operation on January 1, 2012. |
| Renewable Advantage | A 200 MW solar facility project to be constructed in Pueblo County, Colorado. The project aims to lower customer energy costs and provide economic and environmental benefits to Colorado Electric’s customers and communities. This project, which was approved by the CPUC in September 2020, will be owned by a third-party renewable energy developer with Colorado Electric purchasing all of the energy generated at the facility under the terms of a 15-year PPA. The project is expected to be placed in service in 2023. |
| Renewable Ready | Voluntary renewable energy subscription program for large commercial, industrial and governmental agency customers in South Dakota and Wyoming. |
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| Revolving Credit Facility | Our $750 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which was amended and restated on July 30, 2018,19, 2021, and now terminates on July 30, 2023.19, 2026. |
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| SDPUC | South Dakota Public Utilities Commission |
| SEC | United States Securities and Exchange Commission |
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| Service Guard Comfort Plan | NewAppliance protection plan that consolidated Service Guard and Customer Appliance Protection Plan (CAPP) and provides similar home appliance repair services through on-going monthly service agreements to residential utility customers. |
| S&P | Standard and Poor’s, a division of The McGraw-Hill Companies, Inc. |
| South Dakota Electric | Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in Montana, South Dakota and Wyoming (doing business as Black Hills Energy). |
| SSIR | System Safety and Integrity Rider |
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| TCJA | Tax Cuts and Jobs Act |
| Tech Services | Non-regulated product lines within Black Hills Corporationdelivered by our Utilities that 1) provide electrical system construction services to large industrial customers of our electric utilities, and 2) serve gas transportation customers throughout its service territory by constructing and maintaining customer-ownercustomer-owned gas infrastructure facilities, typically through one-time contracts. |
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| Utilities | Black Hills’ Electric and Gas Utilities |
| Wind Capacity Factor | Measures the amount of electricity a wind turbine produces in a given time period relative to its maximum potentialpotential. |
| Winter Storm Uri | February 2021 winter weather event that caused extremely cold temperatures in the central United States and led to unprecedented fluctuations in customer demand and market pricing for natural gas and energy. |
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| WPSC | Wyoming Public Service Commission |
| WRDC | Wyodak Resources Development Corporation, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings, providing coal supply primarily to five on-site, mine-mouth generating facilities (doing business as Black Hills Energy) |
| Wygen I | A mine-mouth, coal-fired power plant with a total capacity of 90 MW located at our Gillette, Wyoming energy complex. We ownBlack Hills Wyoming owns 76.5% of the plantfacility and Municipal Energy Agency of Nebraska (MEAN) owns the remaining 23.5%. |
| Wygen II | A mine-mouth, coal-fired power plant owned by Wyoming Electric with a total capacity of 95 MW located at our Gillette, Wyoming energy complex. |
| Wygen III | A mine-mouth, coal-fired power plant operated by South Dakota Electric with a total capacity of 110 MW located at our Gillette, Wyoming energy complex. South Dakota Electric owns 52% of the power plant, MDU owns 25% and the City of Gillette owns the remaining 23%. |
| Wyodak Plant | Wyodak, aThe 362 MW mine-mouth, coal-fired plant ingeneration facility near Gillette, Wyoming, jointly owned 80% by PacifiCorp (80%) and 20% by South Dakota Electric.Electric (20%). Our WRDC mine supplies all of the fuel for the plant.facility. |
| Wyoming Electric | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation, providing electric service to customers in the Cheyenne, Wyoming area (doing business as Black Hills Energy). |
| Wyoming Gas | Black Hills Wyoming Gas, LLC, an indirect and wholly-owned subsidiary of Black Hills Utility Holdings, providing natural gas services to customers in Wyoming (doing business as Black Hills Energy). |
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 the statement was made. 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 was made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, such as the COVID-19 pandemic or Winter Storm Uri, 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 our 2020 Annual Report on Form 10-K including statements contained within Item 1A - Risk Factors of our 2020 Annual Report on Form 10-K, Part II, Item 1A of this Quarterly Report on Form 10-Q and other reports that we file with the SEC from time to time.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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| (unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | 2020 | 2019 |
| (in thousands, except per share amounts) |
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| Revenue | $ | 346,590 | | $ | 325,548 | | $ | 1,210,554 | | $ | 1,257,246 | |
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| Operating expenses: | | | | |
| Fuel, purchased power and cost of natural gas sold | 71,686 | | 73,544 | | 331,194 | | 413,486 | |
| Operations and maintenance | 122,759 | | 116,583 | | 365,533 | | 365,116 | |
| Depreciation, depletion and amortization | 56,348 | | 51,884 | | 169,413 | | 154,507 | |
| Taxes - property and production | 13,563 | | 12,986 | | 42,062 | | 39,454 | |
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| Total operating expenses | 264,356 | | 254,997 | | 908,202 | | 972,563 | |
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| Operating income | 82,234 | | 70,551 | | 302,352 | | 284,683 | |
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| Other income (expense): | | | | |
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| Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts) | (36,521) | | (34,000) | | (108,067) | | (103,677) | |
| Interest income | 480 | | 513 | | 1,028 | | 1,208 | |
| Impairment of investment | 0 | | (19,741) | | (6,859) | | (19,741) | |
| Other income (expense), net | (1,193) | | 580 | | (703) | | 55 | |
| Total other income (expense) | (37,234) | | (52,648) | | (114,601) | | (122,155) | |
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| Income before income taxes | 45,000 | | 17,903 | | 187,751 | | 162,528 | |
| Income tax (expense) | (4,651) | | (2,508) | | (25,484) | | (22,078) | |
| Net income | 40,349 | | 15,395 | | 162,267 | | 140,450 | |
| Net income attributable to noncontrolling interest | (4,066) | | (3,655) | | (11,844) | | (10,319) | |
| Net income available for common stock | $ | 36,283 | | $ | 11,740 | | $ | 150,423 | | $ | 130,131 | |
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| Earnings per share of common stock: | | | | |
| Earnings per share, Basic | $ | 0.58 | | $ | 0.19 | | $ | 2.41 | | $ | 2.15 | |
| Earnings per share, Diluted | $ | 0.58 | | $ | 0.19 | | $ | 2.41 | | $ | 2.15 | |
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| Weighted average common shares outstanding: | | | | |
| Basic | 62,575 | | 60,976 | | 62,310 | | 60,458 | |
| Diluted | 62,630 | | 61,104 | | 62,362 | | 60,578 | |
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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| (unaudited) | Three Months Ended
September 30, | Nine Months Ended
September 30, |
| 2020 | 2019 | 2020 | 2019 |
| (in thousands) |
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| Net income | $ | 40,349 | | $ | 15,395 | | $ | 162,267 | | $ | 140,450 | |
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| Other comprehensive income (loss), net of tax: | | | | |
| Benefit plan liability adjustments - net gain (net of tax of $0,$0, $(17) and $0, respectively) | 0 | | 0 | | 55 | | 0 | |
| Reclassification adjustments of benefit plan liability - prior service cost (net of tax of $6, $3, $19 and $13, respectively) | (18) | | (16) | | (60) | | (45) | |
| Reclassification adjustments of benefit plan liability - net gain (net of tax of $(149), $(92), $(426) and $(197), respectively) | 448 | | (9) | | 1,365 | | 327 | |
| Derivative instruments designated as cash flow hedges: | | | | |
| Reclassification of net realized losses on settled/amortized interest rate swaps (net of tax of $(168), $(165), $(508) and $(500), respectively) | 544 | | 548 | | 1,630 | | 1,639 | |
| Net unrealized gains (losses) on commodity derivatives (net of tax of $(112), $35, $(44) and $100, respectively) | 401 | | (115) | | 181 | | (334) | |
| Reclassification of net realized (gains) losses on settled commodity derivatives (net of tax of $(41), $(5), $(172), and $142, respectively) | 137 | | 124 | | 562 | | (366) | |
| Other comprehensive income, net of tax | 1,512 | | 532 | | 3,733 | | 1,221 | |
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| Comprehensive income | 41,861 | | 15,927 | | 166,000 | | 141,671 | |
| Less: comprehensive income attributable to noncontrolling interest | (4,066) | | (3,655) | | (11,844) | | (10,319) | |
| Comprehensive income available for common stock | $ | 37,795 | | $ | 12,272 | | $ | 154,156 | | $ | 131,352 | |
See Note 11 for additional disclosures. | | | | | | | | | | | | | | |
| (unaudited) | Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | 2021 | 2020 |
| (in thousands, except per share amounts) |
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| Revenue | $ | 372,572 | | $ | 326,914 | | $ | 1,006,004 | | $ | 863,964 | |
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| Operating expenses: | | | | |
| Fuel, purchased power and cost of natural gas sold | 108,474 | | 71,629 | | 401,621 | | 259,508 | |
| Operations and maintenance | 123,245 | | 117,308 | | 252,924 | | 242,774 | |
| Depreciation, depletion and amortization | 58,443 | | 56,663 | | 115,712 | | 113,065 | |
| Taxes - property and production | 15,144 | | 14,381 | | 30,166 | | 28,499 | |
| Total operating expenses | 305,306 | | 259,981 | | 800,423 | | 643,846 | |
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| Operating income | 67,266 | | 66,933 | | 205,581 | | 220,118 | |
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| Other income (expense): | | | | |
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| Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts) | (38,669) | | (35,765) | | (76,494) | | (71,546) | |
| Interest income | 467 | | 220 | | 692 | | 548 | |
| Impairment of investment | 0 | | 0 | | 0 | | (6,859) | |
| Other income (expense), net | (191) | | (1,863) | | 75 | | 490 | |
| Total other income (expense) | (38,393) | | (37,408) | | (75,727) | | (77,367) | |
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| Income before income taxes | 28,873 | | 29,525 | | 129,854 | | 142,751 | |
| Income tax (expense) | (586) | | (4,831) | | (1,080) | | (20,833) | |
| Net income | 28,287 | | 24,694 | | 128,774 | | 121,918 | |
| Net income attributable to noncontrolling interest | (3,126) | | (3,728) | | (7,297) | | (7,778) | |
| Net income available for common stock | $ | 25,161 | | $ | 20,966 | | $ | 121,477 | | $ | 114,140 | |
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| Earnings per share of common stock: | | | | |
| Earnings per share, Basic | $ | 0.40 | | $ | 0.34 | | $ | 1.94 | | $ | 1.84 | |
| Earnings per share, Diluted | $ | 0.40 | | $ | 0.33 | | $ | 1.93 | | $ | 1.83 | |
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| Weighted average common shares outstanding: | | | | |
| Basic | 62,867 | | 62,573 | | 62,751 | | 62,175 | |
| Diluted | 62,918 | | 62,617 | | 62,817 | | 62,230 | |
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETSSTATEMENTS OF COMPREHENSIVE INCOME
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| (unaudited) | As of |
| September 30, 2020 | | December 31, 2019 |
| (in thousands) |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 6,955 | | | $ | 9,777 | |
| Restricted cash and equivalents | 4,257 | | | 3,881 | |
| Accounts receivable, net | 160,478 | | | 255,805 | |
| Materials, supplies and fuel | 126,358 | | | 117,172 | |
| Derivative assets, current | 2,001 | | | 342 | |
| Income tax receivable, net | 20,828 | | | 16,446 | |
| Regulatory assets, current | 49,493 | | | 43,282 | |
| Other current assets | 33,287 | | | 26,479 | |
| Total current assets | 403,657 | | | 473,184 | |
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| Investments | 15,659 | | | 21,929 | |
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| Property, plant and equipment | 7,128,387 | | | 6,784,679 | |
| Less: accumulated depreciation and depletion | (1,276,410) | | | (1,281,493) | |
| Total property, plant and equipment, net | 5,851,977 | | | 5,503,186 | |
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| Other assets: | | | |
| Goodwill | 1,299,454 | | | 1,299,454 | |
| Intangible assets, net | 12,242 | | | 13,266 | |
| Regulatory assets, non-current | 221,743 | | | 228,062 | |
| Other assets, non-current | 24,318 | | | 19,376 | |
| Total other assets, non-current | 1,557,757 | | | 1,560,158 | |
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| TOTAL ASSETS | $ | 7,829,050 | | | $ | 7,558,457 | |
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| (unaudited) | Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | 2021 | 2020 |
| (in thousands) |
| Net income | $ | 28,287 | | $ | 24,694 | | $ | 128,774 | | $ | 121,918 | |
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| Other comprehensive income (loss), net of tax: | | | | |
| Benefit plan liability adjustments - net gain (net of tax of $0, $0, $0 and $(17), respectively) | 0 | | 0 | | 0 | | 55 | |
| Reclassification adjustments of benefit plan liability - prior service cost (net of tax of $6, $6, $15 and $13, respectively) | (18) | | (19) | | (34) | | (42) | |
| Reclassification adjustments of benefit plan liability - net loss (net of tax of $(157), $(182), $(374) and $(277), respectively) | 440 | | 415 | | 821 | | 917 | |
| Derivative instruments designated as cash flow hedges: | | | | |
| Reclassification of net realized losses on settled/amortized interest rate swaps (net of tax of $(150), $(170), $(340) and $(340), respectively) | 563 | | 543 | | 1,086 | | 1,086 | |
| Net unrealized gains (losses) on commodity derivatives (net of tax of $(304), $14, $(339) and $68, respectively) | 939 | | (45) | | 1,046 | | (220) | |
| Reclassification of net realized (gains) losses on settled commodity derivatives (net of tax of $14, $(16), $6 and $(131), respectively) | (42) | | 54 | | (19) | | 425 | |
| Other comprehensive income, net of tax | 1,882 | | 948 | | 2,900 | | 2,221 | |
| | | | |
| Comprehensive income | 30,169 | | 25,642 | | 131,674 | | 124,139 | |
| Less: comprehensive income attributable to noncontrolling interest | (3,126) | | (3,728) | | (7,297) | | (7,778) | |
| Comprehensive income available for common stock | $ | 27,043 | | $ | 21,914 | | $ | 124,377 | | $ | 116,361 | |
See Note 9 for additional disclosures.
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
| | | | | | | | | | | |
| (unaudited) | As of |
| September 30, 2020 | | December 31, 2019 |
| (in thousands, except share amounts) |
| LIABILITIES AND EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 152,010 | | | $ | 193,523 | |
| Accrued liabilities | 244,010 | | | 226,767 | |
| Derivative liabilities, current | 1,439 | | | 2,254 | |
| Regulatory liabilities, current | 22,282 | | | 33,507 | |
| Notes payable | 84,320 | | | 349,500 | |
| Current maturities of long-term debt | 9,871 | | | 5,743 | |
| Total current liabilities | 513,932 | | | 811,294 | |
| | | |
| Long-term debt, net of current maturities | 3,526,894 | | | 3,140,096 | |
| | | |
| Deferred credits and other liabilities: | | | |
| Deferred income tax liabilities, net | 398,136 | | | 360,719 | |
| Regulatory liabilities, non-current | 505,317 | | | 503,145 | |
| Benefit plan liabilities | 144,049 | | | 154,472 | |
| Other deferred credits and other liabilities | 120,522 | | | 124,662 | |
| Total deferred credits and other liabilities | 1,168,024 | | | 1,142,998 | |
| | | |
| Commitments and contingencies (See Notes 7, 9, 12, 13) | | | |
| | | |
| Equity: | | | |
| Stockholders’ equity — | | | |
| Common stock $1 par value; 100,000,000 shares authorized; issued 62,773,015 and 61,480,658 shares, respectively | 62,773 | | | 61,481 | |
| Additional paid-in capital | 1,655,912 | | | 1,552,788 | |
| Retained earnings | 828,993 | | | 778,776 | |
| Treasury stock, at cost – 24,897 and 3,956 shares, respectively | (1,710) | | | (267) | |
| Accumulated other comprehensive income (loss) | (26,922) | | | (30,655) | |
| Total stockholders’ equity | 2,519,046 | | | 2,362,123 | |
| Noncontrolling interest | 101,154 | | | 101,946 | |
| Total equity | 2,620,200 | | | 2,464,069 | |
| | | |
| TOTAL LIABILITIES AND TOTAL EQUITY | $ | 7,829,050 | | | $ | 7,558,457 | |
| | | | | | | | | | | |
| (unaudited) | As of |
| June 30, 2021 | | December 31, 2020 |
| (in thousands) |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 1,175 | | | $ | 6,356 | |
| Restricted cash and equivalents | 4,559 | | | 4,383 | |
| Accounts receivable, net | 189,437 | | | 265,961 | |
| Materials, supplies and fuel | 114,089 | | | 117,400 | |
| Derivative assets, current | 3,925 | | | 1,848 | |
| Income tax receivable, net | 17,573 | | | 19,446 | |
| Regulatory assets, current | 218,628 | | | 51,676 | |
| Other current assets | 22,353 | | | 26,221 | |
| Total current assets | 571,739 | | | 493,291 | |
| | | |
| Property, plant and equipment | 7,558,204 | | | 7,305,530 | |
| Less: accumulated depreciation and depletion | (1,361,453) | | | (1,285,816) | |
| Total property, plant and equipment, net | 6,196,751 | | | 6,019,714 | |
| | | |
| Other assets: | | | |
| Goodwill | 1,299,454 | | | 1,299,454 | |
| Intangible assets, net | 11,356 | | | 11,944 | |
| Regulatory assets, non-current | 617,781 | | | 226,582 | |
| Other assets, non-current | 40,971 | | | 37,801 | |
| Total other assets, non-current | 1,969,562 | | | 1,575,781 | |
| | | |
| TOTAL ASSETS | $ | 8,738,052 | | | $ | 8,088,786 | |
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSBALANCE SHEETS
| | | | | | | | |
| (unaudited) | Nine Months Ended September 30, |
| 2020 | 2019 |
| Operating activities: | (in thousands) |
| Net income | $ | 162,267 | | $ | 140,450 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Depreciation, depletion and amortization | 169,413 | | 154,507 | |
| Deferred financing cost amortization | 5,523 | | 6,326 | |
| Impairment of investment | 6,859 | | 19,741 | |
| Stock compensation | 2,696 | | 8,332 | |
| Deferred income taxes | 28,502 | | 24,381 | |
| Employee benefit plans | 9,294 | | 7,965 | |
| Other adjustments, net | 7,910 | | 9,192 | |
| Changes in certain operating assets and liabilities: | | |
| Materials, supplies and fuel | (10,905) | | (4,126) | |
| Accounts receivable and other current assets | 75,960 | | 115,325 | |
| Accounts payable and other current liabilities | (11,136) | | (83,436) | |
| Regulatory assets - current | 1,954 | | 12,455 | |
| Regulatory liabilities - current | (17,686) | | (15,644) | |
| Contributions to defined benefit pension plans | (12,700) | | (12,700) | |
| Other operating activities, net | 1,508 | | 3,307 | |
| Net cash provided by operating activities | 419,459 | | 386,075 | |
| | |
| Investing activities: | | |
| Property, plant and equipment additions | (535,993) | | (592,537) | |
| Other investing activities | 6,269 | | (735) | |
| Net cash (used in) investing activities | (529,724) | | (593,272) | |
| | |
| Financing activities: | | |
| Dividends paid on common stock | (99,999) | | (91,779) | |
| Common stock issued | 99,316 | | 101,361 | |
| Net (payments) borrowings of short-term debt | (265,180) | | 109,280 | |
| Long-term debt - issuances | 400,000 | | 400,000 | |
| Long-term debt - repayments | (7,163) | | (304,307) | |
| Distributions to noncontrolling interest | (12,636) | | (12,736) | |
| Other financing activities | (6,519) | | (1,992) | |
| Net cash provided by financing activities | 107,819 | | 199,827 | |
| | |
| Net change in cash, restricted cash and cash equivalents | (2,446) | | (7,370) | |
| | |
| Cash, restricted cash and cash equivalents at beginning of period | 13,658 | | 24,145 | |
| Cash, restricted cash and cash equivalents at end of period | $ | 11,212 | | $ | 16,775 | |
| | |
| Supplemental cash flow information: | | |
| Cash (paid) refunded during the period: | | |
| Interest (net of amounts capitalized) | $ | (87,453) | | $ | (99,375) | |
| Income taxes | $ | 1,256 | | $ | 2,255 | |
| Non-cash investing and financing activities: | | |
| Accrued property, plant and equipment purchases at September 30 | $ | 86,474 | | $ | 86,661 | |
| | | | | | | | | | | |
| (unaudited) | As of |
| June 30, 2021 | | December 31, 2020 |
| (in thousands, except share amounts) |
| LIABILITIES AND EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 133,354 | | | $ | 183,340 | |
| Accrued liabilities | 219,022 | | | 243,612 | |
| Derivative liabilities, current | 5,178 | | | 2,044 | |
| Regulatory liabilities, current | 36,124 | | | 25,061 | |
| Notes payable | 829,850 | | | 234,040 | |
| Current maturities of long-term debt | 7,000 | | | 8,436 | |
| Total current liabilities | 1,230,528 | | | 696,533 | |
| | | |
| Long-term debt, net of current maturities | 3,530,216 | | | 3,528,100 | |
| | | |
| Deferred credits and other liabilities: | | | |
| Deferred income tax liabilities, net | 436,495 | | | 408,624 | |
| Regulatory liabilities, non-current | 497,608 | | | 507,659 | |
| Benefit plan liabilities | 151,290 | | | 150,556 | |
| Other deferred credits and other liabilities | 133,021 | | | 134,667 | |
| Total deferred credits and other liabilities | 1,218,414 | | | 1,201,506 | |
| | | |
Commitments, contingencies and guarantees (Note 3) | 0 | | 0 |
| | | |
| Equity: | | | |
| Stockholders’ equity — | | | |
| Common stock $1 par value; 100,000,000 shares authorized; issued 63,526,913 and 62,827,179 shares, respectively | 63,527 | | | 62,827 | |
| Additional paid-in capital | 1,701,825 | | | 1,657,285 | |
| Retained earnings | 921,122 | | | 870,738 | |
| Treasury stock, at cost – 46,528 and 32,492 shares, respectively | (2,988) | | | (2,119) | |
| Accumulated other comprehensive income (loss) | (24,446) | | | (27,346) | |
| Total stockholders’ equity | 2,659,040 | | | 2,561,385 | |
| Noncontrolling interest | 99,854 | | | 101,262 | |
| Total equity | 2,758,894 | | | 2,662,647 | |
| | | |
| TOTAL LIABILITIES AND TOTAL EQUITY | $ | 8,738,052 | | | $ | 8,088,786 | |
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | |
| (unaudited) | Six Months Ended June 30, |
| 2021 | 2020 |
| Operating activities: | (in thousands) |
| Net income | $ | 128,774 | | $ | 121,918 | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | |
| Depreciation, depletion and amortization | 115,712 | | 113,065 | |
| Deferred financing cost amortization | 4,381 | | 4,246 | |
| Impairment of investment | 0 | | 6,859 | |
| Stock compensation | 5,044 | | 1,113 | |
| Deferred income taxes | 692 | | 26,401 | |
| Employee benefit plans | 4,934 | | 5,656 | |
| Other adjustments, net | 10,495 | | 3,679 | |
| Changes in certain operating assets and liabilities: | | |
| Materials, supplies and fuel | 3,974 | | 7,503 | |
| Accounts receivable and other current assets | 88,513 | | 73,302 | |
| Accounts payable and other current liabilities | (59,640) | | (63,085) | |
| Regulatory assets | (540,709) | | 21,887 | |
| Regulatory liabilities | (9,509) | | 314 | |
| Contributions to defined benefit pension plans | 0 | | (12,700) | |
| Other operating activities, net | (2,834) | | (1,152) | |
| Net cash provided by (used in) operating activities | (250,173) | | 309,006 | |
| | |
| Investing activities: | | |
| Property, plant and equipment additions | (319,476) | | (348,313) | |
| Other investing activities | 9,739 | | (1,412) | |
| Net cash (used in) investing activities | (309,737) | | (349,725) | |
| | |
| Financing activities: | | |
| Dividends paid on common stock | (71,092) | | (66,440) | |
| Common stock issued | 40,037 | | 99,435 | |
| Term loan - borrowings | 800,000 | | 0 | |
| Term loan - repayments | (200,000) | | 0 | |
| Net payments of Revolving Credit Facility and CP Program | (4,190) | | (349,500) | |
| Long-term debt - issuances | 0 | | 400,000 | |
| Long-term debt - repayments | (1,436) | | (5,727) | |
| Distributions to noncontrolling interest | (8,705) | | (8,520) | |
| Other financing activities | 291 | | (6,474) | |
| Net cash provided by financing activities | 554,905 | | 62,774 | |
| | |
| Net change in cash, restricted cash and cash equivalents | (5,005) | | 22,055 | |
| | |
| Cash, restricted cash and cash equivalents at beginning of period | 10,739 | | 13,658 | |
| Cash, restricted cash and cash equivalents at end of period | $ | 5,734 | | $ | 35,713 | |
| | |
| Supplemental cash flow information: | | |
| Cash (paid) refunded during the period: | | |
| Interest, net of amounts capitalized | $ | (71,825) | | $ | (67,449) | |
| Income taxes | 1,486 | | 1,896 | |
| Non-cash investing and financing activities: | | |
| Accrued property, plant and equipment purchases at June 30 | 54,448 | | 59,916 | |
BLACK HILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (unaudited) | Common Stock | Treasury Stock | | | | | |
| (in thousands except share amounts) | Shares | Value | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Non controlling Interest | Total |
| December 31, 2019 | 61,480,658 | | $ | 61,481 | | 3,956 | | $ | (267) | | $ | 1,552,788 | | $ | 778,776 | | $ | (30,655) | | $ | 101,946 | | $ | 2,464,069 | |
| Net income available for common stock | — | | — | | — | | — | | — | | 93,174 | | — | | 4,050 | | 97,224 | |
| Other comprehensive income (loss), net of tax | — | | — | | — | | — | | — | | — | | 1,273 | | — | | 1,273 | |
| | | | | | | | | |
| | | | | | | | | |
| Dividends on common stock ($0.535 per share) | — | | — | | — | | — | | — | | (32,902) | | — | | — | | (32,902) | |
| Share-based compensation | 69,378 | | 69 | | 20,700 | | (1,658) | | 2,263 | | — | | — | | — | | 674 | |
| | | | | | | | | |
| Issuance of common stock | 1,222,942 | | 1,223 | | — | | — | | 98,777 | | — | | — | | — | | 100,000 | |
| Issuance costs | — | | — | | — | | — | | (967) | | — | | — | | — | | (967) | |
| | | | | | | | | |
| | | | | | | | | |
| Implementation of ASU 2016-13 Financial Instruments - - Credit Losses | — | | — | | — | | — | | — | | (207) | | — | | — | | (207) | |
| | | | | | | | | |
| | | | | | | | | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,741) | | (4,741) | |
| March 31, 2020 | 62,772,978 | | $ | 62,773 | | 24,656 | | $ | (1,925) | | $ | 1,652,861 | | $ | 838,841 | | $ | (29,382) | | $ | 101,255 | | $ | 2,624,423 | |
| Net income available for common stock | — | — | — | — | — | 20,966 | | — | | 3,728 | | 24,694 | |
| Other comprehensive income (loss), net of tax | — | | — | | — | | — | | — | | — | | 948 | | — | | 948 | |
| | | | | | | | | |
| | | | | | | | | |
| Dividends on common stock ($0.535 per share) | — | | — | | — | | — | | — | | (33,538) | | — | | — | | (33,538) | |
| Share-based compensation | 18 | | — | | 1,743 | | 46 | | 1,781 | | — | | — | | — | | 1,827 | |
| | | | | | | | | |
| | | | | | | | | |
| Issuance costs | — | | — | | — | | — | | (79) | | — | | — | | — | | (79) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (3,779) | | (3,779) | |
| June 30, 2020 | 62,772,996 | | $ | 62,773 | | 26,399 | | $ | (1,879) | | $ | 1,654,563 | | $ | 826,269 | | $ | (28,434) | | $ | 101,204 | | $ | 2,614,496 | |
| Net income available for common stock | — | | — | | — | | — | | — | | 36,283 | | — | | 4,066 | | 40,349 | |
| Other comprehensive income, net of tax | — | | — | | — | | — | | — | | — | | 1,512 | | — | | 1,512 | |
| Dividends on common stock (0.535 per share) | — | | — | | — | | — | | — | | (33,559) | | — | | — | | (33,559) | |
| Share-based compensation | 19 | | — | | (1,502) | | 169 | | 1,468 | | — | | — | | — | | 1,637 | |
| | | | | | | | | |
| | | | | | | | | |
| Issuance costs | — | | — | | — | | — | | (119) | | — | | — | | — | | (119) | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,116) | | (4,116) | |
| September 30, 2020 | 62,773,015 | | $ | 62,773 | | 24,897 | | $ | (1,710) | | $ | 1,655,912 | | $ | 828,993 | | $ | (26,922) | | $ | 101,154 | | $ | 2,620,200 | |
| | | | | | | | | |
12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (unaudited) | Common Stock | Treasury Stock | | | | | |
| (in thousands except share amounts) | Shares | Value | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Non controlling Interest | Total |
| December 31, 2020 | 62,827,179 | | $ | 62,827 | | 32,492 | | $ | (2,119) | | $ | 1,657,285 | | $ | 870,738 | | $ | (27,346) | | $ | 101,262 | | $ | 2,662,647 | |
| Net income | — | | — | | — | | — | | — | | 96,316 | | — | | 4,171 | | 100,487 | |
| Other comprehensive income, net of tax | — | | — | | — | | — | | — | | — | | 1,018 | | — | | 1,018 | |
| | | | | | | | | |
| | | | | | | | | |
| Dividends on common stock ($0.565 per share) | — | | — | | — | | — | | — | | (35,514) | | — | | — | | (35,514) | |
| Share-based compensation | 82,794 | | 83 | | 7,448 | | (445) | | 1,672 | | — | | — | | — | | 1,310 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Other | — | | — | | — | | — | | — | | (2) | | — | | — | | (2) | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,644) | | (4,644) | |
| March 31, 2021 | 62,909,973 | | $ | 62,910 | | 39,940 | | $ | (2,564) | | $ | 1,658,957 | | $ | 931,538 | | $ | (26,328) | | $ | 100,789 | | $ | 2,725,302 | |
| Net income | — | | — | | — | | — | | — | | 25,161 | | — | | 3,126 | | 28,287 | |
| Other comprehensive income, net of tax | — | | — | | — | | — | | — | | — | | 1,882 | | — | | 1,882 | |
| Dividends on common stock ($0.565 per share) | — | | — | | — | | — | | — | | (35,578) | | — | | — | | (35,578) | |
| Share-based compensation | 20,905 | | 21 | | 6,588 | | (424) | | 3,698 | | — | | — | | — | | 3,295 | |
| | | | | | | | | |
| Issuance of common stock | 596,035 | | 596 | | — | | — | | 39,636 | | — | | — | | — | | 40,232 | |
| Issuance costs | — | | — | | — | | — | | (466) | | — | | — | | — | | (466) | |
| | | | | | | | | |
| Other | — | | — | | — | | — | | — | | 1 | | — | | — | | 1 | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,061) | | (4,061) | |
| June 30, 2021 | 63,526,913 | | $ | 63,527 | | 46,528 | | $ | (2,988) | | $ | 1,701,825 | | $ | 921,122 | | $ | (24,446) | | $ | 99,854 | | $ | 2,758,894 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | Treasury Stock | | | | | |
| (in thousands except share amounts) | Shares | Value | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Non controlling Interest | Total |
| December 31, 2018 | 60,048,567 | | $ | 60,049 | | 44,253 | | $ | (2,510) | | $ | 1,450,569 | | $ | 700,396 | | $ | (26,916) | | $ | 105,835 | | $ | 2,287,423 | |
| Net income available for common stock | — | | — | | — | | — | | — | | 103,808 | | — | | 3,554 | | 107,362 | |
| Other comprehensive income (loss), net of tax | — | | — | | — | | — | | — | | — | | 457 | | — | | 457 | |
| | | | | | | | | |
| | | | | | | | | |
| Dividends on common stock ($0.505 per share) | — | | — | | — | | — | | — | | (30,332) | | — | | — | | (30,332) | |
| Share-based compensation | 48,956 | | 49 | | (20,497) | | 1,078 | | (589) | | — | | — | | — | | 538 | |
| Tax effect of share-based compensation | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Issuance of common stock | 280,497 | | 280 | | — | | — | | 19,719 | | — | | — | | — | | 19,999 | |
| Issuance costs | — | | — | | — | | — | | (289) | | — | | — | | — | | (289) | |
| | | | | | | | | |
| | | | | | | | | |
| Implementation of ASU 2016-02 Leases | — | | — | | — | | — | | — | | 3,390 | | — | | — | | 3,390 | |
| | | | | | | | | |
| | | | | | | | | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,846) | | (4,846) | |
| March 31, 2019 | 60,378,020 | | $ | 60,378 | | 23,756 | | $ | (1,432) | | $ | 1,469,410 | | $ | 777,262 | | $ | (26,459) | | $ | 104,543 | | $ | 2,383,702 | |
| Net income available for common stock | — | | — | | — | | — | | — | | 14,583 | | — | | 3,110 | | 17,693 | |
| Other comprehensive income, net of tax | — | | — | | — | | — | | — | | — | | 232 | | — | | 232 | |
| Dividends on common stock ($0.505 per share) | — | | — | | — | | — | | — | | (30,620) | | — | | — | | (30,620) | |
| Share-based compensation | 54,767 | | 54 | | 1,603 | | (112) | | 3,948 | | — | | — | | — | | 3,890 | |
| Tax effect of share-based compensation | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Issuance of common stock | 658,598 | | 659 | | — | | — | | 49,342 | | — | | — | | — | | 50,001 | |
| Issuance costs | — | | — | | — | | — | | (492) | | — | | — | | — | | (492) | |
| Implementation of ASU 2016-02 Leases | — | | — | | — | | — | | — | | (3) | | — | | — | | (3) | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,405) | | (4,405) | |
| June 30, 2019 | 61,091,385 | | $ | 61,091 | | 25,359 | | $ | (1,544) | | $ | 1,522,208 | | $ | 761,222 | | $ | (26,227) | | $ | 103,248 | | $ | 2,419,998 | |
| Net income available for common stock | — | | — | | — | | — | | — | | 11,740 | | — | | 3,655 | | 15,395 | |
| Other comprehensive income, net of tax | — | | — | | — | | — | | — | | — | | 532 | | — | | 532 | |
| Dividends on common stock ($0.505 per share) | — | | — | | — | | — | | — | | (30,827) | | — | | — | | (30,827) | |
| Share-based compensation | 18 | | 0 | | 1,213 | | (92) | | 1,769 | | — | | — | | — | | 1,677 | |
| Tax effect of share-based compensation | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Issuance of common stock | 389,237 | | 390 | | — | | — | | 29,611 | | — | | — | | — | | 30,001 | |
| Issuance costs | — | | — | | — | | — | | (398) | | — | | — | | — | | (398) | |
| Implementation of ASU 2016-02 Leases | — | | — | | — | | — | | — | | 3 | | — | | — | | 3 | |
| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (3,485) | | (3,485) | |
| September 30, 2019 | 61,480,640 | | $ | 61,481 | | 26,572 | | $ | (1,636) | | $ | 1,553,190 | | $ | 742,138 | | $ | (25,695) | | $ | 103,418 | | $ | 2,432,896 | |
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| Common Stock | Treasury Stock | | | | | |
| (in thousands except share amounts) | Shares | Value | Shares | Value | Additional Paid in Capital | Retained Earnings | AOCI | Non controlling Interest | Total |
| December 31, 2019 | 61,480,658 | | $ | 61,481 | | 3,956 | | $ | (267) | | $ | 1,552,788 | | $ | 778,776 | | $ | (30,655) | | $ | 101,946 | | $ | 2,464,069 | |
| Net income | — | | — | | — | | — | | — | | 93,174 | | — | | 4,050 | | 97,224 | |
| Other comprehensive income (loss), net of tax | — | | — | | — | | — | | — | | — | | 1,273 | | — | | 1,273 | |
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| Dividends on common stock ($0.535 per share) | — | | — | | — | | — | | — | | (32,902) | | — | | — | | (32,902) | |
| Share-based compensation | 69,378 | | 69 | | 20,700 | | (1,658) | | 2,263 | | — | | — | | — | | 674 | |
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| Issuance of common stock | 1,222,942 | | 1,223 | | — | | — | | 98,777 | | — | | — | | — | | 100,000 | |
| Issuance costs | — | | — | | — | | — | | (967) | | — | | — | | — | | (967) | |
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| Implementation of ASU 2016-13 Financial Instruments - Credit Losses | — | | — | | — | | — | | — | | (207) | | — | | — | | (207) | |
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| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (4,741) | | (4,741) | |
| March 31, 2020 | 62,772,978 | | $ | 62,773 | | 24,656 | | $ | (1,925) | | $ | 1,652,861 | | $ | 838,841 | | $ | (29,382) | | $ | 101,255 | | $ | 2,624,423 | |
| Net income | — | | — | | — | | — | | — | | 20,966 | | — | | 3,728 | | 24,694 | |
| Other comprehensive income (loss), net of tax | — | | — | | — | | — | | — | | — | | 948 | | — | | 948 | |
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| Dividends on common stock ($0.535 per share) | — | | — | | — | | — | | — | | (33,538) | | — | | — | | (33,538) | |
| Share-based compensation | 18 | | 0 | | 1,743 | | 46 | | 1,781 | | — | | — | | — | | 1,827 | |
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| Issuance costs | — | | — | | — | | — | | (79) | | — | | — | | — | | (79) | |
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| Distributions to noncontrolling interest | — | | — | | — | | — | | — | | — | | — | | (3,779) | | (3,779) | |
| June 30, 2020 | 62,772,996 | | $ | 62,773 | | 26,399 | | $ | (1,879) | | $ | 1,654,563 | | $ | 826,269 | | $ | (28,434) | | $ | 101,204 | | $ | 2,614,496 | |
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BLACK HILLS CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Reference is made to Notes to Consolidated Financial Statements
included in the Company’s 20192020 Annual Report on Form 10-K)
(1) Management’s Statement
The unaudited Condensed Consolidated Financial Statements included herein have been prepared by Black Hills Corporation (together with our subsidiaries the “Company”, “us”, “we” 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 GAAPaccounting 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 Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and the notes included in our 20192020 Annual Report on Form 10-K filed with the SEC.10-K.
Segment Reporting
We conduct our operations through the following reportable segments: Electric Utilities, Gas Utilities, Power Generation and Mining. Our reportable segments are based on our method of internal reporting, which is generally segregated by differences in products, services and regulation. All of our operations and assets are located within the United States.
Use of Estimates and Basis of Presentation
The information furnished in the accompanying Condensed Consolidated 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 SeptemberJune 30, 2020,2021, December 31, 20192020 and SeptemberJune 30, 20192020 financial information. Certain industrieslines of business in which we operate are highly seasonal, and revenue from, and certain expenses for, such operations may fluctuate significantly among quarterly periods. Demand for electricity and natural gas is sensitive to seasonal cooling, heating and industrial load requirements. In particular, the normal peak usage season for electric utilities is June through August while the normal peak usage season for gas utilities is November through March. Significant earnings variances can be expected between the Gas Utilities segment’s peak and off-peak seasons. Due to this seasonal nature, our interim results of operations for the three and nine months ended September 30, 2020 and September 30, 2019, and our financial condition as of September 30, 2020 and December 31, 2019 are not necessarily indicative of the results of operations and financial condition to be expected for any other period. All earnings per share amounts discussed refer to diluted earnings per share unless otherwise noted.
Reclassification
We changed certain classifications of operating expenses on the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2019 to conform with current year presentation. The prior year reclassifications, which are shown in the table below, did not impact previously reported operating income or net income.
| | | | | | | | |
| Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 |
| (in millions) |
| Fuel, purchased power and cost of natural gas sold | $ | 0.5 | | $ | 1.8 | |
| Operations and maintenance | (0.5) | | (1.8) | |
| Operating income | $ | 0 | | $ | 0 | |
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 the electric and natural gas utilities to be critical infrastructure sectors that provide 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 our customers, employees and the communities in which we operate while assuring the continuity of our business operations.
The Company’s Condensed Consolidated 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 Consolidated 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 ninesix months ended SeptemberJune 30, 2020,2021, there were no material adverse impacts on the Company’s results of operations.
Change inRecently Issued Accounting Principle - Pension Accounting Asset MethodStandards
Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ASU 2020-04
Effective January 1,In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which was subsequently amended by ASU 2021-01. The standard provides relief for companies preparing for discontinuation of interest rates, such as LIBOR, and allows optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are elective and are effective upon the ASU issuance through December 31, 2022. We are currently evaluating whether we changedwill apply the optional guidance as we assess the impact of the discontinuance of LIBOR on our methodcurrent arrangements and the potential impact on our financial position, results 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 gainsoperations 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 12 for additional information.cash flows.
Recently IssuedAdopted 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 2016-13
In June 2016, the FASB issued ASU 2016-13, Financial Instruments -- Credit Losses: Measurement of Credit Losses on Financial Instruments, which was subsequently amended by ASUs 2018-19, 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.
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 credit losses, primarily associated with the inclusion of expected losses on unbilled revenue. The cumulative effect of the adoption, net of tax impact, was $0.2 million, which was recorded as an adjustment to retained earnings.
Simplifying the Test for Goodwill Impairment, ASU 2017-04
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, by eliminating step 2 from the goodwill impairment test. Under the new guidance, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit. We adopted this standard prospectively on January 1, 2020.2021. Adoption of this guidancestandard did not have an impact on our financial position, results of operations or cash flows.
(2) Regulatory Matters
We had the following regulatory assets and liabilities (in thousands): | | | | | | | | |
| As of | As of |
| June 30, 2021 | December 31, 2020 |
| Regulatory assets | | |
Winter Storm Uri (a) | $ | 541,389 | | $ | 0 | |
Deferred energy and fuel cost adjustments (b) | 57,715 | | 39,035 | |
Deferred gas cost adjustments (b) | 676 | | 3,200 | |
Gas price derivatives (b) | 145 | | 2,226 | |
Deferred taxes on AFUDC (c) | 7,479 | | 7,491 | |
Employee benefit plans and related deferred taxes (d) | 116,003 | | 116,598 | |
Environmental (b) | 1,410 | | 1,413 | |
| | |
Loss on reacquired debt (b) | 21,914 | | 22,864 | |
| | |
Deferred taxes on flow through accounting (d) | 55,034 | | 47,515 | |
Decommissioning costs (b) | 7,205 | | 8,988 | |
Gas supply contract termination (b) | 0 | | 2,524 | |
Other regulatory assets (b) | 27,439 | | 26,404 | |
| Total regulatory assets | 836,409 | | 278,258 | |
| Less current regulatory assets | (218,628) | | (51,676) | |
| Regulatory assets, non-current | $ | 617,781 | | $ | 226,582 | |
| | |
| Regulatory liabilities | | |
Deferred energy and gas costs (b) | $ | 28,261 | | $ | 13,253 | |
Employee benefit plan costs and related deferred taxes (d) | 39,542 | | 40,256 | |
Cost of removal (b) | 179,968 | | 172,902 | |
| | |
Excess deferred income taxes (d) | 268,604 | | 285,259 | |
| | |
Other regulatory liabilities (d) | 17,357 | | 21,050 | |
| Total regulatory liabilities | 533,732 | | 532,720 | |
| Less current regulatory liabilities | (36,124) | | (25,061) | |
| Regulatory liabilities, non-current | $ | 497,608 | | $ | 507,659 | |
__________
(a) Timing of Winter Storm Uri incremental cost recovery and associated carrying costs are subject to pending applications with our utility commissions. See further information below.
(b) Recovery of costs, but we are not allowed a rate of return.
(c) In addition to recovery of costs, we are allowed a rate of return.
(d) 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
Except as discussed below, there have been no other significant changes to our Regulatory Matters from those previously disclosed in Note 2 of the Notes to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K.
Internal-Use Software: Customer’s AccountingWinter Storm Uri
In February 2021, a prolonged period of historic cold temperatures across the central United States, which covered all of our Utilities’ service territories, caused a substantial increase in heating and energy demand and contributed to unforeseeable and unprecedented market prices for Implementation Costs Incurrednatural gas and electricity. As a result of Winter Storm Uri, we incurred significant incremental fuel, purchased power and natural gas costs.
In the first quarter of 2021, $559 million of incremental costs from Winter Storm Uri were recorded to a regulatory asset. Our Utilities submitted cost recovery applications in our state jurisdictions seeking to recover $546 million in total of these incremental costs through separate tracking mechanisms over a weighted-average recovery period of 3.7 years. These incremental cost estimates are subject to adjustments as final decisions are issued by the respective utility commissions. As part of these applications, we seek approval to recover carrying costs. We are also seeking recovery of $13 million of previously disclosed Winter Storm Uri incremental costs through our existing regulatory mechanisms.
In the second quarter of 2021, Nebraska Gas and South Dakota Electric received commission approval on their Winter Storm Uri cost recovery applications. Additionally, Arkansas Gas and Iowa Gas received approval for interim recovery subject to a final decision on carrying costs and recovery periods at a later date. For the three and six months ended June 30, 2021, our Utilities recovered $4.6 million of Winter Storm Uri incremental and carrying costs from customers.
TCJA
On December 30, 2020, an administrative law judge approved a settlement of Colorado Electric’s plan to provide $9.3 million of TCJA-related bill credits to its customers. The bill credits, which represent a disposition of excess deferred income tax benefits resulting from the TCJA, were delivered to customers in February 2021. The settlement agreement further provided for Colorado Electric to deliver annual bill credits to customers, starting in April 2021, until remaining excess deferred income tax regulatory liabilities associated with the TCJA are fully amortized. In April 2021, Colorado Electric delivered $0.9 million of TCJA-related bill credits to customers.
On January 26, 2021, the NPSC approved Nebraska Gas’s plan to provide $2.9 million of TCJA-related bill credits to its customers. The bill credits, which represent a disposition of excess deferred income tax benefits resulting from the TCJA, were delivered to customers in June 2021.
These Colorado Electric and Nebraska Gas bill credits, which resulted in a Cloud Computing Arrangement That Isreduction in revenue, were offset by a Service Contract, ASU 2018-15reduction in income tax expense and resulted in a minimal impact to Net income for the three and six months ended June 30, 2021.
Colorado Gas
Rate Review
In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred inOn June 1, 2021, Colorado Gas filed 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 contractrate review with the requirementsCPUC seeking recovery of significant infrastructure investments in its 7,000-mile natural gas pipeline system. The rate review requests $14.6 million in new annual revenue with a capital structure of 50% equity and 50% debt and a return on equity of 9.95%. The request seeks to implement new rates in the first quarter of 2022.
On September 11, 2020, in accordance with the final Order from an earlier rate review filed February 1, 2019, Colorado Gas filed a SSIR proposal with the CPUC that would recover safety and integrity focused investments in its system for capitalizingfive years. On July 6, 2021, Colorado Gas received approval from the CPUC for its SSIR proposal that will recover safety and integrity focused investments in its system for three years. The return on SSIR investments will be the current weighted-average cost of long-term debt.
Iowa Gas
Rate Review
On June 1, 2021, Iowa Gas filed a rate review with the IUB seeking recovery of significant infrastructure investments in its 5,000-mile natural gas pipeline system. Additionally, Iowa Gas is seeking to implement a five year SSIR that would recover safety and integrity focused investments. The rate review requests shifting $2.2 million of rider revenue to base rates and $8.3 million in additional new annual revenue with a capital structure of 50% equity and 50% debt and a return on equity of 10.15%. Iowa statute allows implementation costs incurredof interim rates 10 days after filing a rate review and Iowa Gas implemented interim rates effective on June 11, 2021. The request seeks to develop or obtain internal-use software. Asfinalize rates in the first quarter of 2022.
Kansas Gas
Rate Review
On May 7, 2021, Kansas Gas filed a result, certain categoriesrate review and rider renewal with the KCC seeking recovery of implementation costs that previously would have been chargedsignificant infrastructure investments in its 4,600-mile natural gas pipeline system. Additionally, Kansas Gas is seeking renewal of its SSIR. The rate review requests shifting $4.9 million of rider revenue to expense as incurred are now capitalized as prepaymentsbase rates and amortized over$5.3 million in new annual revenue with a capital structure of 50% equity and 50% debt and a return on equity of 10.15%. The request seeks to implement new rates in the termfirst quarter of 2022.
Nebraska Gas
Jurisdictional Consolidation and Rate Review
On January 26, 2021, Nebraska Gas received approval from the NPSC to consolidate rate schedules into a new, single statewide structure and recover infrastructure investments in its 13,000-mile natural gas pipeline system. Final rates were enacted on March 1, 2021, which replaced interim rates effective September 1, 2020. The approval shifted $4.6 million of SSIR revenue to base rates and is expected to generate $6.5 million in new annual revenue with a capital structure of 50% equity and 50% debt and an authorized return on equity of 9.5%. The approval also includes an extension of the arrangement. We adopted this standard prospectively on January 1, 2020. AdoptionSSIR for five years and an expansion of this guidance did not have a material impact on our financial position, results of operations or cash flows.mechanism across the consolidated jurisdictions.
(2)(3) Commitments, Contingencies and Guarantees
There have been no significant changes to commitments, contingencies and guarantees from those previously disclosed in Note 3 of our Notes to the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K except for those described below.
Power Purchase Agreement - Colorado Electric Renewable Advantage
On February 19, 2021, Colorado Electric entered into a PPA with TC Colorado Solar, LLC to purchase up to 200 MW of renewable energy upon construction of a new solar facility, to be owned by TC Colorado Solar, LLC, which is expected to be completed by the end of 2023. This agreement will expire 15 years after construction completion. The solar project represents Colorado Electric’s preferred bid in a competitive solicitation process completed in September 2020 through its Renewable Advantage plan.
(4) Revenue
Our revenue contracts generally provide for performance obligations that: arethat are: fulfilled and transfer control to customers over time; represent a series of distinct services that are substantially the same; involve the same pattern of transfer to the customer; and provide a right to consideration from our customers in an amount that corresponds directly with the value to the customer for the performance completed to date. Therefore, we recognize revenue in the amount to which we have a right to invoice. The following tables depict the disaggregation of revenue, including intercompany revenue, from contracts with customers by customer type and timing of revenue recognition for each of the reportable segments for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019.2020. Sales tax and other similar taxes are excluded from revenues.
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| Three Months Ended September 30, 2020 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer types: | (in thousands) |
| Retail | $ | 169,505 | | $ | 94,367 | | $ | 0 | | $ | 14,668 | | $ | (8,100) | | $ | 270,440 | |
| Transportation | 0 | | 38,196 | | 0 | | 0 | | (139) | | 38,057 | |
| Wholesale | 5,925 | | 0 | | 26,049 | | 0 | | (24,521) | | 7,453 | |
| Market - off-system sales | 9,535 | | 36 | | 0 | | 0 | | (1,904) | | 7,667 | |
| Transmission/Other | 15,653 | | 10,277 | | 0 | | 0 | | (5,235) | | 20,695 | |
| Revenue from contracts with customers | $ | 200,618 | | $ | 142,876 | | $ | 26,049 | | $ | 14,668 | | $ | (39,899) | | $ | 344,312 | |
| Other revenues | 224 | | 1,053 | | 469 | | 568 | | (36) | | 2,278 | |
| Total revenues | $ | 200,842 | | $ | 143,929 | | $ | 26,518 | | $ | 15,236 | | $ | (39,935) | | $ | 346,590 | |
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| Timing of revenue recognition: | | | | | | |
| Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 14,668 | | $ | (8,100) | | $ | 6,568 | |
| Services transferred over time | 200,618 | | 142,876 | | 26,049 | | 0 | | (31,799) | | 337,744 | |
| Revenue from contracts with customers | $ | 200,618 | | $ | 142,876 | | $ | 26,049 | | $ | 14,668 | | $ | (39,899) | | $ | 344,312 | |
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| Three Months Ended September 30, 2019 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer Types: | | | | | | |
| Retail | $ | 162,214 | | $ | 89,810 | | $ | 0 | | $ | 14,992 | | $ | (8,146) | | $ | 258,870 | |
| Transportation | 0 | | 29,019 | | 0 | | 0 | | (195) | | 28,824 | |
| Wholesale | 8,210 | | 0 | | 16,119 | | 0 | | (14,414) | | 9,915 | |
| Market - off-system sales | 6,452 | | 139 | | 0 | | 0 | | (1,488) | | 5,103 | |
| Transmission/Other | 14,274 | | 10,965 | | 0 | | 0 | | (4,206) | | 21,033 | |
| Revenue from contracts with customers | $ | 191,150 | | $ | 129,933 | | $ | 16,119 | | $ | 14,992 | | $ | (28,449) | | $ | 323,745 | |
| Other revenues | 234 | | 811 | | 9,692 | | 560 | | (9,494) | | 1,803 | |
| Total Revenues | $ | 191,384 | | $ | 130,744 | | $ | 25,811 | | $ | 15,552 | | $ | (37,943) | | $ | 325,548 | |
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| Timing of Revenue Recognition: | | | | | | |
| Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 14,992 | | $ | (8,146) | | $ | 6,846 | |
| Services transferred over time | 191,150 | | 129,933 | | 16,119 | | 0 | | (20,303) | | 316,899 | |
| Revenue from contracts with customers | $ | 191,150 | | $ | 129,933 | | $ | 16,119 | | $ | 14,992 | | $ | (28,449) | | $ | 323,745 | |
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| Nine Months Ended September 30, 2020 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer types: | (in thousands) |
| Retail | $ | 459,949 | | $ | 513,208 | | $ | 0 | | $ | 43,917 | | $ | (23,855) | | $ | 993,219 | |
| Transportation | 0 | | 113,096 | | 0 | | 0 | | (416) | | 112,680 | |
| Wholesale | 14,947 | | 0 | | 77,234 | | 0 | | (72,609) | | 19,572 | |
| Market - off-system sales | 17,940 | | 197 | | 0 | | 0 | | (6,123) | | 12,014 | |
| Transmission/Other | 43,271 | | 32,038 | | 0 | | 0 | | (14,080) | | 61,229 | |
| Revenue from contracts with customers | $ | 536,107 | | $ | 658,539 | | $ | 77,234 | | $ | 43,917 | | $ | (117,083) | | $ | 1,198,714 | |
| Other revenues | 2,074 | | 7,273 | | 1,372 | | 1,940 | | (819) | | 11,840 | |
| Total revenues | $ | 538,181 | | $ | 665,812 | | $ | 78,606 | | $ | 45,857 | | $ | (117,902) | | $ | 1,210,554 | |
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| Timing of revenue recognition: | | | | | | |
| Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 43,917 | | $ | (23,855) | | $ | 20,062 | |
| Services transferred over time | 536,107 | | 658,539 | | 77,234 | | 0 | | (93,228) | | 1,178,652 | |
| Revenue from contracts with customers | $ | 536,107 | | $ | 658,539 | | $ | 77,234 | | $ | 43,917 | | $ | (117,083) | | $ | 1,198,714 | |
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| | Nine Months Ended September 30, 2019 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total | |
| Customer Types: | | |
| Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2021 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer types: | | Customer types: | (in thousands) |
| Retail | Retail | $ | 455,409 | | $ | 567,715 | | $ | 0 | | $ | 43,249 | | $ | (23,315) | | $ | 1,043,058 | | Retail | $ | 158,470 | | $ | 143,845 | | $ | 0 | | $ | 13,854 | | $ | (7,140) | | $ | 309,029 | |
| Transportation | Transportation | 0 | | 102,159 | | 0 | | 0 | | (903) | | 101,256 | | Transportation | 0 | | 31,649 | | 0 | | 0 | | (109) | | 31,540 | |
| Wholesale | Wholesale | 23,334 | | 0 | | 46,650 | | 0 | | (40,923) | | 29,061 | | Wholesale | 3,010 | | 0 | | 24,912 | | 0 | | (23,480) | | 4,442 | |
| Market - off-system sales | Market - off-system sales | 16,592 | | 517 | | 0 | | 0 | | (5,047) | | 12,062 | | Market - off-system sales | 8,941 | | 87 | | 0 | | 0 | | (1,675) | | 7,353 | |
| Transmission/Other | Transmission/Other | 42,865 | | 35,767 | | 0 | | 0 | | (12,608) | | 66,024 | | Transmission/Other | 12,233 | | 9,125 | | 0 | | 0 | | (5,299) | | 16,059 | |
| Revenue from contracts with customers | Revenue from contracts with customers | $ | 538,200 | | $ | 706,158 | | $ | 46,650 | | $ | 43,249 | | $ | (82,796) | | $ | 1,251,461 | | Revenue from contracts with customers | $ | 182,654 | | $ | 184,706 | | $ | 24,912 | | $ | 13,854 | | $ | (37,703) | | $ | 368,423 | |
| Other revenues | Other revenues | 2,465 | | 1,135 | | 29,114 | | 1,777 | | (28,706) | | 5,785 | | Other revenues | 2,279 | | 1,344 | | 436 | | 575 | | (485) | | 4,149 | |
| Total Revenues | $ | 540,665 | | $ | 707,293 | | $ | 75,764 | | $ | 45,026 | | $ | (111,502) | | $ | 1,257,246 | | |
| Total revenues | | Total revenues | $ | 184,933 | | $ | 186,050 | | $ | 25,348 | | $ | 14,429 | | $ | (38,188) | | $ | 372,572 | |
| | Timing of Revenue Recognition: | | |
| Timing of revenue recognition: | | Timing of revenue recognition: | |
| Services transferred at a point in time | Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 43,249 | | $ | (23,315) | | $ | 19,934 | | Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 13,854 | | $ | (7,140) | | $ | 6,714 | |
| Services transferred over time | Services transferred over time | 538,200 | | 706,158 | | 46,650 | | 0 | | (59,481) | | 1,231,527 | | Services transferred over time | 182,654 | | 184,706 | | 24,912 | | 0 | | (30,563) | | 361,709 | |
| Revenue from contracts with customers | Revenue from contracts with customers | $ | 538,200 | | $ | 706,158 | | $ | 46,650 | | $ | 43,249 | | $ | (82,796) | | $ | 1,251,461 | | Revenue from contracts with customers | $ | 182,654 | | $ | 184,706 | | $ | 24,912 | | $ | 13,854 | | $ | (37,703) | | $ | 368,423 | |
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer Types: | (in thousands) |
| Retail | $ | 141,804 | | $ | 120,594 | | $ | 0 | | $ | 14,846 | | $ | (7,916) | | $ | 269,328 | |
| Transportation | 0 | | 30,792 | | 0 | | 0 | | (138) | | 30,654 | |
| Wholesale | 3,470 | | 0 | | 25,718 | | 0 | | (24,476) | | 4,712 | |
| Market - off-system sales | 3,538 | | 23 | | 0 | | 0 | | (1,580) | | 1,981 | |
| Transmission/Other | 12,761 | | 9,189 | | 0 | | 0 | | (4,432) | | 17,518 | |
| Revenue from contracts with customers | $ | 161,573 | | $ | 160,598 | | $ | 25,718 | | $ | 14,846 | | $ | (38,542) | | $ | 324,193 | |
| Other revenues | 1,627 | | 512 | | 404 | | 570 | | (392) | | 2,721 | |
| Total Revenues | $ | 163,200 | | $ | 161,110 | | $ | 26,122 | | $ | 15,416 | | $ | (38,934) | | $ | 326,914 | |
| | | | | | |
| Timing of Revenue Recognition: | | | | | | |
| Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 14,846 | | $ | (7,916) | | $ | 6,930 | |
| Services transferred over time | 161,573 | | 160,598 | | 25,718 | | 0 | | (30,626) | | 317,263 | |
| Revenue from contracts with customers | $ | 161,573 | | $ | 160,598 | | $ | 25,718 | | $ | 14,846 | | $ | (38,542) | | $ | 324,193 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer types: | (in thousands) |
| Retail | $ | 356,970 | | $ | 485,450 | | $ | 0 | | $ | 27,937 | | $ | (14,247) | | $ | 856,110 | |
| Transportation | 0 | | 79,600 | | 0 | | 0 | | (219) | | 79,381 | |
| Wholesale | 8,932 | | 0 | | 53,604 | | 0 | | (47,931) | | 14,605 | |
| Market - off-system sales | 16,597 | | 160 | | 0 | | 0 | | (4,559) | | 12,198 | |
| Transmission/Other | 27,426 | | 19,515 | | 0 | | 0 | | (10,595) | | 36,346 | |
| Revenue from contracts with customers | $ | 409,925 | | $ | 584,725 | | $ | 53,604 | | $ | 27,937 | | $ | (77,551) | | $ | 998,640 | |
| Other revenues | 2,416 | | 3,844 | | 907 | | 1,164 | | (967) | | 7,364 | |
| Total revenues | $ | 412,341 | | $ | 588,569 | | $ | 54,511 | | $ | 29,101 | | $ | (78,518) | | $ | 1,006,004 | |
| | | | | | |
| Timing of revenue recognition: | | | | | | |
| Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 27,937 | | $ | (14,247) | | $ | 13,690 | |
| Services transferred over time | 409,925 | | 584,725 | | 53,604 | | 0 | | (63,304) | | 984,950 | |
| Revenue from contracts with customers | $ | 409,925 | | $ | 584,725 | | $ | 53,604 | | $ | 27,937 | | $ | (77,551) | | $ | 998,640 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2020 | Electric Utilities | Gas Utilities | Power Generation | Mining | Inter-company Revenues | Total |
| Customer Types: | (in thousands) |
| Retail | $ | 290,444 | | $ | 418,841 | | $ | 0 | | $ | 29,249 | | $ | (15,755) | | $ | 722,779 | |
| Transportation | 0 | | 74,900 | | 0 | | 0 | | (277) | | 74,623 | |
| Wholesale | 9,022 | | 0 | | 51,185 | | 0 | | (48,088) | | 12,119 | |
| Market - off-system sales | 8,405 | | 161 | | 0 | | 0 | | (4,219) | | 4,347 | |
| Transmission/Other | 27,618 | | 21,761 | | 0 | | 0 | | (8,845) | | 40,534 | |
| Revenue from contracts with customers | $ | 335,489 | | $ | 515,663 | | $ | 51,185 | | $ | 29,249 | | $ | (77,184) | | $ | 854,402 | |
| Other revenues | 1,850 | | 6,220 | | 903 | | 1,372 | | (783) | | 9,562 | |
| Total Revenues | $ | 337,339 | | $ | 521,883 | | $ | 52,088 | | $ | 30,621 | | $ | (77,967) | | $ | 863,964 | |
| | | | | | |
| Timing of Revenue Recognition: | | | | | | |
| Services transferred at a point in time | $ | 0 | | $ | 0 | | $ | 0 | | $ | 29,249 | | $ | (15,755) | | $ | 13,494 | |
| Services transferred over time | 335,489 | | 515,663 | | 51,185 | | 0 | | (61,429) | | 840,908 | |
| Revenue from contracts with customers | $ | 335,489 | | $ | 515,663 | | $ | 51,185 | | $ | 29,249 | | $ | (77,184) | | $ | 854,402 | |
| | | | | | |
Contract Balances
The nature of our primary revenue contracts provides an unconditional right to consideration upon service delivery; therefore, no customer contract assets or liabilities exist. The unconditional right to consideration is represented by the balance in our Accounts Receivable further discussed in Note 413.
(3) Business Segment Information
Our reportable segments are based on our method of internal reporting, which is generally segregated by differences in products, services and regulation. All of our operations and assets are located within the United States.
Segment and Corporate and Other information is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 | External Operating
Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 194,941 | | $ | 224 | | | $ | 5,677 | | $ | 0 | | | $ | 200,842 | |
| Gas Utilities | 141,275 | | 863 | | | 1,601 | | 190 | | | 143,929 | |
| Power Generation | 1,528 | | 414 | | | 24,521 | | 55 | | | 26,518 | |
| Mining | 6,568 | | 777 | | | 8,100 | | (209) | | | 15,236 | |
| Inter-company eliminations | — | | — | | | (39,899) | | (36) | | | (39,935) | |
| Total | $ | 344,312 | | $ | 2,278 | | | $ | 0 | | $ | 0 | | | $ | 346,590 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended September 30, 2019 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 185,811 | | $ | 234 | | | $ | 5,339 | | $ | 0 | | | $ | 191,384 | |
| Gas Utilities | 129,385 | | 810 | | | 549 | | 0 | | | 130,744 | |
| Power Generation | 1,703 | | 531 | | | 14,415 | | 9,162 | | | 25,811 | |
| Mining | 6,846 | | 228 | | | 8,146 | | 332 | | | 15,552 | |
| Inter-company eliminations | — | | — | | | (28,449) | | (9,494) | | | (37,943) | |
| Total | $ | 323,745 | | $ | 1,803 | | | $ | 0 | | $ | 0 | | | $ | 325,548 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Nine Months Ended September 30, 2020 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 518,641 | | $ | 2,074 | | | $ | 17,466 | | $ | 0 | | | $ | 538,181 | |
| Gas Utilities | 655,386 | | 7,083 | | | 3,153 | | 190 | | | 665,812 | |
| Power Generation | 4,625 | | 1,206 | | | 72,609 | | 166 | | | 78,606 | |
| Mining | 20,062 | | 1,477 | | | 23,855 | | 463 | | | 45,857 | |
| Inter-company eliminations | — | | — | | | (117,083) | | (819) | | | (117,902) | |
| Total | $ | 1,198,714 | | $ | 11,840 | | | $ | 0 | | $ | 0 | | | $ | 1,210,554 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Nine Months Ended September 30, 2019 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 521,614 | | $ | 2,465 | | | $ | 16,586 | | $ | 0 | | | $ | 540,665 | |
| Gas Utilities | 704,188 | | 1,134 | | | 1,971 | | 0 | | | 707,293 | |
| Power Generation | 5,725 | | 1,401 | | | 40,924 | | 27,714 | | | 75,764 | |
| Mining | 19,934 | | 785 | | | 23,315 | | 992 | | | 45,026 | |
| Inter-company eliminations | — | | — | | | (82,796) | | (28,706) | | | (111,502) | |
| Total | $ | 1,251,461 | | $ | 5,785 | | | $ | 0 | | $ | 0 | | | $ | 1,257,246 | |
| | | | | | | | | | | | | | |
| | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | 2020 | 2019 |
Adjusted operating income (a): | | | | |
| Electric Utilities | $ | 52,083 | | $ | 50,653 | | $ | 121,726 | | $ | 125,219 | |
| Gas Utilities | 18,147 | | 4,736 | | 139,253 | | 116,607 | |
| Power Generation | 8,738 | | 11,822 | | 31,489 | | 33,945 | |
| Mining | 3,505 | | 3,374 | | 9,992 | | 9,351 | |
| Corporate and Other | (239) | | (34) | | (108) | | (439) | |
| Operating income | 82,234 | | 70,551 | | 302,352 | | 284,683 | |
| | | | |
| Interest expense, net | (36,041) | | (33,487) | | (107,039) | | (102,469) | |
| Impairment of investment | 0 | | (19,741) | | (6,859) | | (19,741) | |
| Other income (expense), net | (1,193) | | 580 | | (703) | | 55 | |
| Income tax (expense) | (4,651) | | (2,508) | | (25,484) | | (22,078) | |
| Net income | 40,349 | | 15,395 | | 162,267 | | 140,450 | |
| Net income attributable to noncontrolling interest | (4,066) | | (3,655) | | (11,844) | | (10,319) | |
| Net income available for common stock | $ | 36,283 | | $ | 11,740 | | $ | 150,423 | | $ | 130,131 | |
| | | | |
| | | | |
__________
(a) Adjusted operating income recognizes inter-segment revenues and costs for Colorado Electric’s PPA with Black Hills Colorado IPP on an accrual basis rather than as a finance lease. This presentation of segment information does not impact consolidated financial results.
Segment and Corporate and Other balances included in the accompanying Condensed Consolidated Balance Sheets were as follows (in thousands):
| | | | | | | | | | | |
| Total assets (net of inter-company eliminations) as of: | September 30, 2020 | | December 31, 2019 |
| Segment: | | | |
| Electric Utilities | $ | 3,040,064 | | | $ | 2,900,983 | |
| Gas Utilities | 4,201,325 | | | 4,032,339 | |
| Power Generation | 403,491 | | | 417,715 | |
| Mining | 75,752 | | | 77,175 | |
| Corporate and Other | 108,418 | | | 130,245 | |
| Total assets | $ | 7,829,050 | | | $ | 7,558,457 | |
(4) Selected Balance Sheet Information
Accounts Receivable and Allowance for Credit Losses
Following is a summary of Accounts receivable, net included in the accompanying Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Accounts receivable, trade | $ | 108,351 | | | $ | 144,747 | |
| Unbilled revenue | 60,736 | | | 113,502 | |
| Less: Allowance for credit losses | (8,609) | | | (2,444) | |
| Accounts receivable, net | $ | 160,478 | | | $ | 255,805 | |
Changes to allowance for credit losses for the nine months ended September 30, 2020 and 2019, respectively, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at Beginning of Year | | | | Additions Charged to Costs and Expenses | | Recoveries and Other Additions | | Write-offs and Other Deductions | | Balance at September 30, |
| 2020 | | $ | 2,444 | | | | | $ | 8,471 | | (a) | $ | 3,720 | | | $ | (6,026) | | | $ | 8,609 | |
| 2019 | | $ | 3,209 | | | | | $ | 5,637 | | | $ | 2,742 | | | $ | (8,429) | | | $ | 3,159 | |
__________
(a) Due to the COVID-19 pandemic, all of our jurisdictions temporarily suspended disconnections for a period of time, which increased our accounts receivable arrears balances. As a result, we increased our allowance for credit losses and bad debt expense for the nine months ended September 30, 2020 by an incremental $3.7 million.
The ongoing credit evaluation of our customers during the COVID-19 pandemic is further discussed in the Credit Risk section of Note 9.
Materials, Supplies and Fuel
The following amounts by major classification are included in Materials, supplies and fuel on the accompanying Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Materials and supplies | $ | 93,069 | | | $ | 82,809 | |
| Fuel - Electric Utilities | 1,745 | | | 2,425 | |
| Natural gas in storage | 31,544 | | | 31,938 | |
| Total materials, supplies and fuel | $ | 126,358 | | | $ | 117,172 | |
Accrued Liabilities
The following amounts by major classification are included in Accrued liabilities on the accompanying Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | |
| September 30, 2020 | December 31, 2019 |
| Accrued employee compensation, benefits and withholdings | $ | 65,309 | | $ | 62,837 | |
| Accrued property taxes | 40,624 | | 44,547 | |
| Customer deposits and prepayments | 59,510 | | 54,728 | |
| Accrued interest | 46,044 | | 31,868 | |
| Other (none of which is individually significant) | 32,523 | | 32,787 | |
| Total accrued liabilities | $ | 244,010 | | $ | 226,767 | |
(5) Regulatory MattersFinancing
Short-term debt
We had the following regulatory assets and liabilities (in thousands) as of:
| | | | | | | | |
| | |
| September 30, 2020 | December 31, 2019 |
| | |
| Regulatory assets | | |
Deferred energy and fuel cost adjustments (a) | $ | 35,878 | | $ | 34,088 | |
Deferred gas cost adjustments (a) | 3,670 | | 1,540 | |
Gas price derivatives (a) | 499 | | 3,328 | |
Deferred taxes on AFUDC (b) | 7,683 | | 7,790 | |
Employee benefit plan costs and related deferred taxes (c) | 114,971 | | 115,900 | |
Environmental (a) | 1,417 | | 1,454 | |
| | |
Loss on reacquired debt (a) | 23,342 | | 24,777 | |
Renewable energy standard adjustment (a) | 0 | | 1,622 | |
Deferred taxes on flow through accounting (c) | 44,528 | | 41,220 | |
Decommissioning costs (b) | 9,421 | | 10,670 | |
Gas supply contract termination (a) | 4,027 | | 8,485 | |
Other regulatory assets (a) | 25,800 | | 20,470 | |
| Total regulatory assets | 271,236 | | 271,344 | |
| Less current regulatory assets | (49,493) | | (43,282) | |
| Regulatory assets, non-current | $ | 221,743 | | $ | 228,062 | |
| | |
| Regulatory liabilities | | |
Deferred energy and gas costs (a) | $ | 14,443 | | $ | 17,278 | |
Employee benefit plan costs and related deferred taxes (c) | 40,719 | | 43,349 | |
Cost of removal (a) | 169,426 | | 166,727 | |
| | |
Excess deferred income taxes (c) | 286,055 | | 285,438 | |
| | |
Other regulatory liabilities (c) | 16,956 | | 23,860 | |
| Total regulatory liabilities | 527,599 | | 536,652 | |
| Less current regulatory liabilities | (22,282) | | (33,507) | |
| Regulatory liabilities, non-current | $ | 505,317 | | $ | 503,145 | |
__________
(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
Except as discussed below, there have been no other significant changes to our Regulatory Matters from those previously disclosed in Note 13 of the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K.
Colorado Gas
Rate Reviews and Jurisdictional Consolidation
On September 11, 2020, Colorado Gas filed a rate review with the CPUC seeking recovery on significant infrastructure investments in its 7,000-mile natural gas pipeline system. The rate review requests $13.5 million in new annual revenue with a capital structure of 50% equity and 50% debt and a return on equity of 9.95%. The request seeks to implement new rates in the second quarter of 2021. On September 11, 2020, in accordance with the final order from the earlier rate review discussed below, Colorado Gas also filed a new SSIR proposal that would recover safety-focused investments in its system over five years.
On February 1, 2019, Colorado Gas filed a rate review with the CPUC requesting $2.5 million in new revenue to recover investments in safety, reliability and system integrity and approval to consolidate rates, tariffs, and services of its 2 existing gas distribution territories. Colorado Gas also requested a new rider mechanism to recover future safety and integrity investments in its system. On May 19, 2020, the CPUC issued a final order which denied the system integrity recovery mechanism and consolidation of rate territories. In addition, the order resulted in an annual revenue decrease of $0.6 million and a return on equity of 9.2%. New rates were effective July 3, 2020.
TCJA
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the TCJA. The TCJA reduced the U.S. federal corporate tax rate from 35% to 21%. As such, the Company remeasured our deferred income taxes at the 21% federal tax rate as of December 31, 2017. In 2018, the Company successfully delivered the benefits from the TCJA to most of its utility customers.
In 2020, regulatory proceedings resolved the last of the Company’s open dockets seeking approval of its TCJA plans. As a result, the Company relieved certain TCJA-related liabilities, which resulted in an increase to net income for the three and nine months ended September 30, 2020 of $3.5 million and $4.0 million, respectively.
Nebraska Gas
Jurisdictional Consolidation and Rate Review
On June 1, 2020, Nebraska Gas filed a rate review with the NPSC to consolidate rate schedules into a new, single statewide structure and seek recovery on significant infrastructure investments in its 13,000-mile natural gas pipeline system. The rate review requests $17.3 million in new revenue with a capital structure of 50% equity and 50% debt and a return on equity of 10%. Nebraska statute allows for implementation of interim rates 90 days after filing a rate review and Nebraska Gas implemented interim rates effective on September 1, 2020. The request seeks to finalize rates in the first quarter of 2021. Nebraska Gas is also requesting an extension of its SSIR for five years to align the rider recovery mechanism across the consolidated utility.
Black Hills Wyoming and Wyoming Electric
Wygen I FERC Filing
On October 15, 2020, the FERC approved a settlement agreement that represents a resolution of all issues in the joint application filed by Wyoming Electric and Black Hills Wyoming on August 2, 2019 for approval of a new 60 MW PPA. Under the terms of the settlement, Wyoming Electric will continue to receive 60 MW of capacity and energy from the Wygen I power plant. The new agreement will commence on January 1, 2022, replace the existing PPA and continue for 11 years.
(6) Earnings Per Share
A reconciliation of share amounts used to compute earnings per share in the accompanying Condensed Consolidated Statements of Income was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | 2019 | | 2020 | 2019 |
| | | | | |
| Net income available for common stock | $ | 36,283 | | $ | 11,740 | | | $ | 150,423 | | $ | 130,131 | |
| | | | | |
| Weighted average shares - basic | 62,575 | | 60,976 | | | 62,310 | | 60,458 | |
| Dilutive effect of: | | | | | |
| Equity compensation | 55 | | 128 | | | 52 | | 120 | |
| Weighted average shares - diluted | 62,630 | | 61,104 | | | 62,362 | | 60,578 | |
| | | | | |
| Earnings per share of common stock: | | | | | |
| Earnings per share, Basic | $ | 0.58 | | $ | 0.19 | | | $ | 2.41 | | $ | 2.15 | |
| Earnings per share, Diluted | $ | 0.58 | | $ | 0.19 | | | $ | 2.41 | | $ | 2.15 | |
The following securities were excluded from the diluted earnings per share computation because of their anti-dilutive nature (in thousands):
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2020 | 2019 | | 2020 | 2019 |
| | | | | |
| Equity compensation | 22 | | 2 | | | 22 | | 4 | |
| Restricted stock | 49 | | 0 | | | 40 | | 1 | |
| | | | | |
| Anti-dilutive shares | 71 | | 2 | | | 62 | | 5 | |
(7) Notes Payable, Current Maturities and Debt
We had the following short-term debtpayable outstanding in the accompanying Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | | | | | | | |
| September 30, 2020 | December 31, 2019 |
| Balance Outstanding | Letters of Credit (a) | Balance Outstanding | Letters of Credit (a) |
| Revolving Credit Facility | $ | 0 | | $ | 24,588 | | $ | 0 | | $ | 30,274 | |
| CP Program | 84,320 | | 0 | | 349,500 | | 0 | |
| Total | $ | 84,320 | | $ | 24,588 | | $ | 349,500 | | $ | 30,274 | |
| | | | | | | | | | | | | | |
| June 30, 2021 | December 31, 2020 |
| Balance Outstanding | Letters of Credit (a) | Balance Outstanding | Letters of Credit (a) |
| Term Loan | $ | 600,000 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Revolving Credit Facility | 0 | | 13,049 | | 0 | | 24,730 | |
| CP Program | 229,850 | | 0 | | 234,040 | | 0 | |
| Total Notes payable | $ | 829,850 | | $ | 13,049 | | $ | 234,040 | | $ | 24,730 | |
_______________(a) Letters of credit are off-balance sheet commitments that reduce the borrowing capacity available on our corporate Revolving Credit
Facility.
ForTerm Loan
On February 24, 2021, we entered into a nine-month, $800 million unsecured term loan to provide additional liquidity and meet our cash needs related to the nine months ended Septemberincremental fuel, purchased power and natural gas costs from Winter Storm Uri. The term loan, which matures on November 24, 2021, has an interest rate based on LIBOR plus 75 basis points, carries 0 prepayment penalty and is subject to the same covenant requirements as our Revolving Credit Facility. We repaid $200 million of this term loan in the first quarter of 2021. The interest rate on term loan borrowings on June 30, 2020,2021 was 0.85%.
We expect to refinance a portion of the term loan with longer-term debt prior to maturity. In the event we utilizedare unable to refinance the remaining obligation, we believe it is probable that our current plans to manage liquidity would be sufficient to meet our obligations.
Revolving Credit Facility and CP Program
On July 19, 2021, we amended and restated our corporate Revolving Credit Facility, maintaining total commitments of $750 million and extending the term through July 19, 2026 with 2 one year extension options (subject to consent from lenders). This facility is similar to the former revolving credit facility, which includes an accordion feature that allows us, with the consent of the administrative agent, the issuing agents and each bank increasing or providing a combinationnew commitment, to increase total commitments up to $1.0 billion. Borrowings continue to be available under a base rate or various Eurodollar rate options. Based on our current credit ratings, the margins for base rate borrowings, Eurodollar borrowings and letters of credit will be 0.125%, 1.125% and 1.125%, respectively, and a 0.175% commitment fee will be charged on unused amounts.
Our net short-term borrowings related to our $750 million Revolving Credit Facility and CP Program to meet our business needs and support our capital investment plan. Our netduring the six months ended June 30, 2021 decreased by $4.2 million. The weighted average interest rate on short-term borrowings (payments) during the nine months ended Septemberrelated to our Revolving Credit Facility and CP Program at June 30, 2020 were $(265) million.2021 was 0.19%.
Debt Covenants
Under our Revolving Credit Facility and term loan agreement,agreements, we are required to maintain a Consolidated Indebtedness to Capitalization Ratio not to exceed 0.65 to 1.00. Our Consolidated Indebtedness to Capitalization Ratio was calculated by dividing (i) consolidated indebtedness, which includes letters of credit and certain guarantees issued, by (ii) capital, which includes consolidated indebtedness plus consolidated net worth, which excludes noncontrolling interest in subsidiaries. Subject to applicable cure periods, a violation of any of these covenants would constitute an event of default that entitles the lenders to terminate their remaining commitments and accelerate all principal and interest outstanding.
Our Revolving Credit Facility and term loans require compliance with the following financial covenant, which we were in compliance with at SeptemberJune 30, 2020:2021:
| | | | | | | | | | | | | | |
| As of September 30, 2020 | | Covenant Requirement |
| Consolidated Indebtedness to Capitalization Ratio | 59.3% | | Less than | 65% |
| | | | | | | | | | | | | | |
| As of June 30, 2021 | | Covenant Requirement |
| Consolidated Indebtedness to Capitalization Ratio | 62.3% | | Less than | 65% |
On June 17, 2020, we completed a public debt offering which consisted
South Dakota Electric Series 94A Debt
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 tendered by the sole investor on March 17, 2020.
(8) Equity
February 2020At-the-Market Equity IssuanceOffering Program
On February 27, 2020, we issued 1.2 million shares of common stock to a single investor through an underwritten registered transaction at a price of $81.77 per share for proceeds of $99 million, net of $1.0 million of issuance costs. The shares of common stock were offered pursuant to our shelf registration statement filed with the SEC.
Shelf Registration, DRSPP and ATM Activity
On August 3, 2020, we filed a shelf registration and DRSPP with the SEC. In conjunction with these shelf filings, we renewed the ATM. The renewed ATM program, which allows us to sell shares of our common stock, is the same as the prior program other than the aggregate value increased from $300 million to $400 million and a forward sales option was incorporated. Under the ATM, shares may be offered from time to time pursuant to a sales agreement dated August 3, 2020. Shares of common stock are offered pursuant to our shelf registration statement filed with the SEC.
We did not issue any common shares under the ATM duringDuring the three and ninesix months ended SeptemberJune 30, 2020. During the three months ended September 30, 2019,2021, we issued a total of 0.40.6 million shares of common stock under the ATM for proceeds of $30$40 million, net of $0.3 million in issuance costs. During the nine months ended September 30, 2019, we issued a total of 1.3 million shares of common stock under the ATM for proceeds of $99 million, net of $1.0$0.4 million in issuance costs.
25(6) Earnings Per Share
A reconciliation of share amounts used to compute earnings per share in the accompanying Condensed Consolidated Statements of Income was as follows (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | 2020 | | 2021 | 2020 |
| | | | | |
| Net income available for common stock | $ | 25,161 | | $ | 20,966 | | | $ | 121,477 | | $ | 114,140 | |
| | | | | |
| Weighted average shares - basic | 62,867 | | 62,573 | | | 62,751 | | 62,175 | |
| Dilutive effect of: | | | | | |
| Equity compensation | 51 | | 44 | | | 66 | | 55 | |
| Weighted average shares - diluted | 62,918 | | 62,617 | | | 62,817 | | 62,230 | |
| | | | | |
| Earnings per share of common stock: | | | | | |
| Earnings per share, Basic | $ | 0.40 | | $ | 0.34 | | | $ | 1.94 | | $ | 1.84 | |
| Earnings per share, Diluted | $ | 0.40 | | $ | 0.33 | | | $ | 1.93 | | $ | 1.83 | |
The following securities were excluded from the diluted earnings per share computation because of their anti-dilutive nature (in thousands):
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | 2020 | | 2021 | 2020 |
| | | | | |
| Equity compensation | 13 | | 29 | | | 12 | | 26 | |
| Restricted stock | 0 | | 76 | | | 1 | | 36 | |
| | | | | |
| Anti-dilutive shares | 13 | | 105 | | | 13 | | 62 | |
(9)(7) Risk Management and Derivatives
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 retail natural gas and wholesale electric power marketing activities, andas well as our fuel procurement for several of our gas-fired generation assets, which include market fluctuations due to unpredictable factors such as the COVID-19 pandemic, weather (Winter Storm Uri), market speculation, pipeline constraints, and other factors that may impact natural gas and electric energy 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.
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 onupon payment history and the customers’customer’s 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 nine months ended September 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 $1.7 million and $3.7 million, respectively. See Note 4 for further information.
Derivatives and Hedging Activity
Our derivative and hedging activities included in the accompanying Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income are detailed below and in Note 108.
Utilities
The operations of our utilities, including natural gas sold by our Gas Utilities and natural gas used by our Electric Utilities’ generation plantsgenerating facilities or those plantsfacilities under PPAs where our Electric Utilities must provide the generation fuel (tolling agreements) and natural gas sold by our Gas Utilities,, expose our utility customers to volatility in natural gas prices.price volatility. Therefore, as allowed or required by state utilityregulatory commissions, we have entered into commission-approved hedging programs utilizing natural gas futures, options, over-the-counter swaps and basis swaps to reduce our customers’ underlying exposure to these fluctuations. These transactions are considered derivatives, and in accordance with accounting standards for derivatives and hedging, mark-to-market adjustments are recorded as Derivative assets or Derivative liabilities on the accompanying Condensed Consolidated Balance Sheets, net of balance sheet offsetting as permitted by GAAP.
For our regulated utilities’Utilities’ hedging plans, unrealized and realized gains and losses, as well as option premiums and commissions on these transactions are recorded as Regulatory assets or Regulatory liabilities in the accompanying Condensed Consolidated Balance Sheets in accordance with the state utilityregulatory commission guidelines. When the related costs are recovered through our rates, the hedging activity is recognized in the Condensed Consolidated Statements of Income.
We periodically use wholesale power purchase and sale contracts to manage purchased power costs and load requirements associated with serving our electric customers that are considered derivative instruments due to not qualifying for the normal purchases and normal sales exception to derivative accounting. Changes in the fair value of these commodity derivatives are recognized in the Condensed Consolidated Statements of Income.
We buy, sell and deliver natural gas at competitive prices by managing commodity price risk. As a result of these activities, this area of our business is exposed to risks associated with changes in the market price of natural gas. We manage our exposure to such risk using over-the-counter and exchange traded options and swaps with counterparties in anticipation of forecasted purchases and/orand sales during time frames ranging from October 2020July 2021 through May 2022.August 2023. A portion of our over-the-counter swaps have been designated as cash flow hedges to mitigate the commodity price risk associated with deliveries under fixed price forward contracts to deliver gas to our Choice Gas Program customers. The gain or loss on these designated derivatives is reported in AOCI in the accompanying Condensed Consolidated Balance Sheets and reclassified into earnings in the same period that the underlying hedged item is recognized in earnings. Effectiveness of our hedging position is evaluated at least quarterly.
The contract or notional amounts and terms of the electric and natural gas derivative commodity instruments held at our utilitiesUtilities are composed of both long and short positions. We had the following net long positions as of:
| | | September 30, 2020 | | December 31, 2019 | | | June 30, 2021 | | December 31, 2020 | |
| | Units | Notional
Amounts | | Maximum Term (months) (a) | | Notional
Amounts | | Maximum Term (months) (a) | | | Units | Notional
Amounts | | Maximum Term (months) (a) | | Notional
Amounts | | Maximum Term (months) (a) | |
| Natural gas futures purchased | Natural gas futures purchased | MMBtus | 1,930,000 | | | 6 | | 1,450,000 | | | 12 | | Natural gas futures purchased | MMBtus | 100,000 | | | 9 | | 620,000 | | | 3 | |
| Natural gas options purchased, net | Natural gas options purchased, net | MMBtus | 8,320,000 | | | 6 | | 3,240,000 | | | 3 | | Natural gas options purchased, net | MMBtus | 970,000 | | | 9 | | 3,160,000 | | | 3 | |
| Natural gas basis swaps purchased | Natural gas basis swaps purchased | MMBtus | 1,780,000 | | | 6 | | 1,290,000 | | | 12 | | Natural gas basis swaps purchased | MMBtus | 0 | | | 9 | | 900,000 | | | 3 | |
Natural gas over-the-counter swaps, net (b) | Natural gas over-the-counter swaps, net (b) | MMBtus | 4,525,100 | | | 20 | | 4,600,000 | | | 24 | | Natural gas over-the-counter swaps, net (b) | MMBtus | 6,660,000 | | | 26 | | 3,850,000 | | | 17 | |
Natural gas physical contracts, net (c) | Natural gas physical contracts, net (c) | MMBtus | 23,350,287 | | | 13 | | 13,548,235 | | | 12 | | Natural gas physical contracts, net (c) | MMBtus | 4,902,179 | | | 9 | | 17,513,061 | | | 22 | |
Electric wholesale contracts (c) | Electric wholesale contracts (c) | MWh | 55,225 | | | 3 | | 0 | | | 0 | | Electric wholesale contracts (c) | MWh | 110,425 | | | 6 | | 219,000 | | | 12 | |
__________
(a) Term reflects the maximum forward period hedged.
(b) As of SeptemberJune 30, 2020, 1,274,9002021, 3,030,000 MMBtus of natural gas over-the-counter swaps purchases were designated as cash flow hedges.
(c) Volumes exclude derivative contracts that qualify for the normal purchases and normal sales exception.exception permitted by GAAP.
We have certain derivative contracts which contain credit provisions. These credit provisions may require the Company to post collateral when credit exposure to the Company is in excess of a negotiated line of unsecured credit. At SeptemberJune 30, 2020,2021, the Company posted $0.5$1.0 million related to such provisions, which is included in Other current assets on the Condensed Consolidated Balance Sheets.
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:
| | | Balance Sheet Location | | September 30, 2020 | December 31, 2019 | | Balance Sheet Location | | June 30, 2021 | December 31, 2020 |
| Derivatives designated as hedges: | Derivatives designated as hedges: | | Derivatives designated as hedges: | |
| Asset derivative instruments: | Asset derivative instruments: | | Asset derivative instruments: | |
| Current commodity derivatives | Current commodity derivatives | Derivative assets, current | | $ | 435 | | $ | 1 | | Current commodity derivatives | Derivative assets, current | | $ | 1,549 | | $ | 181 | |
| Noncurrent commodity derivatives | Noncurrent commodity derivatives | Other assets, non-current | | 94 | | 3 | | Noncurrent commodity derivatives | Other assets, non-current | | 5 | | 43 | |
| Liability derivative instruments: | Liability derivative instruments: | | Liability derivative instruments: | |
| Current commodity derivatives | Current commodity derivatives | Derivative liabilities, current | | (9) | | (490) | | Current commodity derivatives | Derivative liabilities, current | | 0 | | (108) | |
| Noncurrent commodity derivatives | Other deferred credits and other liabilities | | 0 | | (29) | | |
| | Total derivatives designated as hedges | Total derivatives designated as hedges | | $ | 520 | | $ | (515) | | Total derivatives designated as hedges | | $ | 1,554 | | $ | 116 | |
| | Derivatives not designated as hedges: | Derivatives not designated as hedges: | | Derivatives not designated as hedges: | |
| Asset derivative instruments: | Asset derivative instruments: | | Asset derivative instruments: | |
| Current commodity derivatives | Current commodity derivatives | Derivative assets, current | | $ | 1,566 | | $ | 341 | | Current commodity derivatives | Derivative assets, current | | $ | 2,376 | | $ | 1,667 | |
| Noncurrent commodity derivatives | Noncurrent commodity derivatives | Other assets, non-current | | 434 | | 2 | | Noncurrent commodity derivatives | Other assets, non-current | | 375 | | 151 | |
| Liability derivative instruments: | Liability derivative instruments: | | Liability derivative instruments: | |
| Current commodity derivatives | Current commodity derivatives | Derivative liabilities, current | | (1,430) | | (1,764) | | Current commodity derivatives | Derivative liabilities, current | | (5,178) | | (1,936) | |
| Noncurrent commodity derivatives | Other deferred credits and other liabilities | | 0 | | (63) | | |
| | Total derivatives not designated as hedges | Total derivatives not designated as hedges | | $ | 570 | | $ | (1,484) | | Total derivatives not designated as hedges | | $ | (2,427) | | $ | (118) | |
Derivatives Designated as HedgesHedge Instruments
The impacts of cash flow hedges on our Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Income are presented below for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019.2020. 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
September 30, | | Three Months Ended
September 30, |
| 2020 | 2019 | | 2020 | 2019 |
| Derivatives in Cash Flow Hedging Relationships | Amount of (Gain)/Loss Recognized in OCI | Income Statement Location | Amount of Gain/(Loss) Reclassified from AOCI into Income |
| (in thousands) | | (in thousands) |
| Interest rate swaps | $ | 712 | | $ | 713 | | Interest expense | $ | (712) | | $ | (713) | |
| Commodity derivatives | 691 | | (21) | | Fuel, purchased power and cost of natural gas sold | (178) | | (129) | |
| Total | $ | 1,403 | | $ | 692 | | | $ | (890) | | $ | (842) | |
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Three Months Ended June 30, |
| | 2020 | 2019 | | 2020 | 2019 | | 2021 | 2020 | | 2021 | 2020 |
| Derivatives in Cash Flow Hedging Relationships | Derivatives in Cash Flow Hedging Relationships | Amount of (Gain)/Loss Recognized in OCI | Income Statement Location | Amount of Gain/(Loss) Reclassified from AOCI into Income | Derivatives in Cash Flow Hedging Relationships | Amount of (Gain)/Loss Recognized in OCI | Income Statement Location | Amount of Gain/(Loss) Reclassified from AOCI into Income |
| | (in thousands) | | (in thousands) | | (in thousands) | | (in thousands) |
| Interest rate swaps | Interest rate swaps | $ | 2,138 | | $ | 2,139 | | Interest expense | $ | (2,138) | | $ | (2,139) | | Interest rate swaps | $ | 713 | | $ | 713 | | Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts) | $ | (713) | | $ | (713) | |
| Commodity derivatives | Commodity derivatives | 959 | | (942) | | Fuel, purchased power and cost of natural gas sold | (734) | | 508 | | Commodity derivatives | 1,187 | | 11 | | Fuel, purchased power and cost of natural gas sold | 56 | | (70) | |
| Total | Total | $ | 3,097 | | $ | 1,197 | | | $ | (2,872) | | $ | (1,631) | | Total | $ | 1,900 | | $ | 724 | | | $ | (657) | | $ | (783) | |
Based on September | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | 2020 | | 2021 | 2020 |
| Derivatives in Cash Flow Hedging Relationships | Amount of (Gain)/Loss Recognized in OCI | Income Statement Location | Amount of Gain/(Loss) Reclassified from AOCI into Income |
| (in thousands) | | (in thousands) |
| Interest rate swaps | $ | 1,426 | | $ | 1,426 | | Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts) | $ | (1,426) | | $ | (1,426) | |
| Commodity derivatives | 1,360 | | 268 | | Fuel, purchased power and cost of natural gas sold | 25 | | (556) | |
| Total | $ | 2,786 | | $ | 1,694 | | | $ | (1,401) | | $ | (1,982) | |
As of June 30, 2020 prices, a $0.12021, $2.8 million gain wouldof net losses related to our interest rate swaps and commodity derivatives are expected to be realized, reported in pre-tax earnings and reclassified from AOCI duringinto earnings as losses within the next 12 months. As market prices fluctuate, estimated and actual realized gains or losses will change during future periods.
Derivatives Not Designated as HedgesHedge Instruments
The following table summarizes the impacts of derivative instruments not designated as hedge instruments on our Condensed Consolidated Statements of Income for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019.2020. 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 September 30, | | Three Months Ended June 30, |
| | 2020 | 2019 | | 2021 | 2020 |
| Derivatives Not Designated as Hedging Instruments | Derivatives Not Designated as Hedging Instruments | Income Statement Location | Amount of Gain/(Loss) on Derivatives Recognized in Income | Derivatives Not Designated as Hedging Instruments | Location of Gain/(Loss) on Derivatives Recognized in Income | Amount of Gain/(Loss) on Derivatives Recognized in Income |
| | | (in thousands) |
| Commodity derivatives - Electric | Commodity derivatives - Electric | Fuel, purchased power and cost of natural gas sold | $ | (1,386) | | $ | — | | Commodity derivatives - Electric | Fuel, purchased power and cost of natural gas sold | $ | (3,598) | | $ | (204) | |
| Commodity derivatives - Electric | Other income (expense), net | — | | 142 | | |
| Commodity derivatives - Natural Gas | Commodity derivatives - Natural Gas | Fuel, purchased power and cost of natural gas sold | 1,777 | | (20) | | Commodity derivatives - Natural Gas | Fuel, purchased power and cost of natural gas sold | 1,816 | | 449 | |
| | $ | 391 | | $ | 122 | | | $ | (1,782) | | $ | 245 | |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| | 2020 | 2019 | | 2021 | 2020 |
| Derivatives Not Designated as Hedging Instruments | Derivatives Not Designated as Hedging Instruments | Income Statement Location | Amount of Gain/(Loss) on Derivatives Recognized in Income | Derivatives Not Designated as Hedging Instruments | Location of Gain/(Loss) on Derivatives Recognized in Income | Amount of Gain/(Loss) on Derivatives Recognized in Income |
| | (in thousands) | | (in thousands) |
| Commodity derivatives - Electric | Commodity derivatives - Electric | Fuel, purchased power and cost of natural gas sold | $ | (228) | | $ | — | | Commodity derivatives - Electric | Fuel, purchased power and cost of natural gas sold | $ | (5,122) | | $ | 1,158 | |
| Commodity derivatives - Electric | Other income (expense), net | — | | 142 | | |
| Commodity derivatives - Natural Gas | Commodity derivatives - Natural Gas | Fuel, purchased power and cost of natural gas sold | 2,992 | | (1,180) | | Commodity derivatives - Natural Gas | Fuel, purchased power and cost of natural gas sold | 2,182 | | 1,215 | |
| | $ | 2,764 | | $ | (1,038) | | | $ | (2,940) | | $ | 2,373 | |
As discussed above, financial instruments used in our regulated utilitiesGas Utilities are not designated as cash flow hedges. There is no earnings impact for our Gas Utilities because the unrealized gains and losses arising from the use of these financial instruments are recorded as Regulatory assets or Regulatory liabilities. The net unrealized losses included in our Regulatory asset or Regulatory liability accounts related to these derivativesthe hedges in our Gas Utilities were $0.5$0.1 million and $3.3$2.2 million as of SeptemberJune 30, 20202021 and December 31, 2019,2020, respectively. For our Electric Utilities, the unrealized gains and losses arising from these derivatives are recognized in the Condensed Consolidated Statements of Income.
(10)(8) Fair Value Measurements
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;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; andmeans.
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.
Recurring Fair Value Measurements
Derivatives
The commodity contracts for our Utilities segments are valued using the market approach and include forward strip pricing at liquid delivery points, exchange-traded futures, options, basis swaps and over-the-counter swaps and options (Level 2) for wholesale electric energy and natural gas contracts. For exchange-traded futures, options and basis swap assets and liabilities, fair value was derived using broker quotes validated by the exchange settlement pricing for the applicable contract. For over-the-counter instruments, the fair value is obtained by utilizing a nationally recognized service that obtains observable inputs to compute the fair value, which we validate by comparing our valuation with the counterparty. The fair value of these swaps includes a CVA based on the credit spreads of the counterparties when we are in an unrealized gain position or on our own credit spread when we are in an unrealized loss position. For additional information, see Note 1 of our Notes to the Consolidated Financial Statements included in our 20192020 Annual Report on Form 10-K filed with the SEC.
| | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2020 |
| Level 1 | Level 2 | Level 3 | | Cash Collateral and Counterparty
Netting | Total |
| (in thousands) |
| Assets: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 6,544 | | $ | 0 | | | $ | (4,015) | | $ | 2,529 | |
| Commodity derivatives — Electric Utilities | 0 | | 0 | | 0 | | | 0 | | 0 | |
| Total | $ | 0 | | $ | 6,544 | | $ | 0 | | | $ | (4,015) | | $ | 2,529 | |
| | | | | | |
| Liabilities: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 1,537 | | $ | 0 | | | $ | (326) | | $ | 1,211 | |
| Commodity derivatives — Electric Utilities | 0 | | 228 | | 0 | | | 0 | | $ | 228 | |
| Total | $ | 0 | | $ | 1,765 | | $ | 0 | | | $ | (326) | | $ | 1,439 | |
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2019 |
| Level 1 | Level 2 | Level 3 | | Cash Collateral and Counterparty
Netting | Total |
| (in thousands) |
| Assets: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 1,433 | | $ | 0 | | | $ | (1,085) | | $ | 348 | |
| Total | $ | 0 | | $ | 1,433 | | $ | 0 | | | $ | (1,085) | | $ | 348 | |
| | | | | | |
| Liabilities: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 5,254 | | $ | 0 | | | $ | (2,909) | | $ | 2,345 | |
| Total | $ | 0 | | $ | 5,254 | | $ | 0 | | | $ | (2,909) | | $ | 2,345 | |
| | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2021 |
| Level 1 | Level 2 | Level 3 | | Cash Collateral and Counterparty
Netting | Total |
| (in thousands) |
| Assets: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 4,895 | | $ | 0 | | | $ | (590) | | $ | 4,305 | |
| Commodity derivatives — Electric Utilities | $ | 0 | | $ | 0 | | $ | 0 | | | $ | 0 | | $ | 0 | |
| Total | $ | 0 | | $ | 4,895 | | $ | 0 | | | $ | (590) | | $ | 4,305 | |
| | | | | | |
| Liabilities: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 200 | | $ | 0 | | | $ | 0 | | $ | 200 | |
| Commodity derivatives — Electric Utilities | $ | 0 | | $ | 4,978 | | $ | 0 | | | $ | 0 | | $ | 4,978 | |
| Total | $ | 0 | | $ | 5,178 | | $ | 0 | | | $ | 0 | | $ | 5,178 | |
| | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2020 |
| Level 1 | Level 2 | Level 3 | | Cash Collateral and Counterparty
Netting | Total |
| (in thousands) |
| Assets: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 2,504 | | $ | 0 | | | $ | (1,527) | | $ | 977 | |
| Commodity derivatives — Electric Utilities | $ | 0 | | $ | 1,065 | | $ | 0 | | | $ | 0 | | $ | 1,065 | |
| Total | $ | 0 | | $ | 3,569 | | $ | 0 | | | $ | (1,527) | | $ | 2,042 | |
| | | | | | |
| Liabilities: | | | | | | |
| Commodity derivatives — Gas Utilities | $ | 0 | | $ | 2,675 | | $ | 0 | | | $ | (1,552) | | $ | 1,123 | |
| Commodity derivatives — Electric Utilities | $ | 0 | | $ | 921 | | $ | 0 | | | $ | 0 | | $ | 921 | |
| Total | $ | 0 | | $ | 3,596 | | $ | 0 | | | $ | (1,552) | | $ | 2,044 | |
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 is presented in Note 1815 to the Consolidated Financial Statements included in our 20192020 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. See Note 12 for additional information.
Nonrecurring Fair Value Measurement
A discussion of the fair value of our investment in equity securities of a privately held oil and gas company, a Level 3 asset, is included in Note 15.
Other Fair Value Measuresfair value measures
The carrying amount of cash and cash equivalents, restricted cash and equivalents, and short-term borrowings approximates fair value due to their liquid or short-term nature. Cash, cash equivalents, and restricted cash are classified in Level 1 in the fair value hierarchy. Notes payable consist of commercial paper borrowings and since these borrowings are not traded on an exchange, they are classified in Level 2 in the fair value hierarchy.
The following table presents the carrying amounts and fair values of financial instruments not recorded at fair value on the Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | | | | | | | | | | |
| September 30, 2020 | | December 31, 2019 |
| Carrying
Amount | Fair Value | | Carrying
Amount | Fair Value |
Long-term debt, including current maturities (a) | $ | 3,536,765 | | $ | 4,177,801 | | | $ | 3,145,839 | | $ | 3,479,367 | |
| | | | | | | | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Carrying
Amount | Fair Value | | Carrying
Amount | Fair Value |
Long-term debt, including current maturities (a) | $ | 3,537,216 | | $ | 4,035,612 | | | $ | 3,536,536 | | $ | 4,208,167 | |
__________
(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 as Level 2 in the fair value hierarchy. Carrying amount of long-term debt is net of deferred financing costs.
(11)(9) Other Comprehensive Income (Loss)
We record deferred gains (losses) in AOCI related to interest rate swaps designated as cash flow hedges, commodity contracts designated as cash flow hedges and the amortization of components of our defined benefit plans. Deferred gains (losses) for our commodity contracts designated as cash flow hedges are recognized in earnings upon settlement, while deferred gains (losses) related to our interest rate swaps are recognized in earnings as they are amortized.
The following table details reclassifications out of AOCI and into netNet income. The amounts in parentheses below indicate decreases to netNet income in the Condensed Consolidated Statements of Income for the period (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Location on the Condensed Consolidated Statements of Income | Amount Reclassified from AOCI |
Three Months Ended
September 30, | | Nine Months Ended September 30, |
| 2020 | 2019 | | 2020 | 2019 |
| Gains and (losses) on cash flow hedges: | | | | | | |
| Interest rate swaps | Interest expense | $ | (712) | | $ | (713) | | | $ | (2,138) | | $ | (2,139) | |
| Commodity contracts | Fuel, purchased power and cost of natural gas sold | (178) | | (129) | | | (734) | | 508 | |
| | (890) | | (842) | | | (2,872) | | (1,631) | |
| Income tax | Income tax benefit (expense) | 209 | | 170 | | | 680 | | 358 | |
| Total reclassification adjustments related to cash flow hedges, net of tax | | $ | (681) | | $ | (672) | | | $ | (2,192) | | $ | (1,273) | |
| | | | | | |
| Amortization of components of defined benefit plans: | | | | | | |
| Prior service cost | Operations and maintenance | $ | 24 | | $ | 19 | | | $ | 79 | | $ | 58 | |
| | | | | | |
| Actuarial gain (loss) | Operations and maintenance | (597) | | (83) | | | (1,791) | | (524) | |
| | (573) | | (64) | | | (1,712) | | (466) | |
| Income tax | Income tax benefit (expense) | 143 | | 89 | | | 407 | | 184 | |
| Total reclassification adjustments related to defined benefit plans, net of tax | | $ | (430) | | $ | 25 | | | $ | (1,305) | | $ | (282) | |
| Total reclassifications | | $ | (1,111) | | $ | (647) | | | $ | (3,497) | | $ | (1,555) | |
| | | | | | | | | | | | | | | | | | | | |
| Location on the Condensed Consolidated Statements of Income | Amount Reclassified from AOCI |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | 2020 | | 2021 | 2020 |
| Gains and (losses) on cash flow hedges: | | | | | | |
| Interest rate swaps | Interest expense incurred net of amounts capitalized (including amortization of debt issuance costs, premiums and discounts) | $ | (713) | | $ | (713) | | | $ | (1,426) | | $ | (1,426) | |
| Commodity contracts | Fuel, purchased power and cost of natural gas sold | 56 | | (70) | | | 25 | | (556) | |
| | (657) | | (783) | | | (1,401) | | (1,982) | |
| Income tax | Income tax (expense) | 136 | | 186 | | | 334 | | 471 | |
| Total reclassification adjustments related to cash flow hedges, net of tax | | $ | (521) | | $ | (597) | | | $ | (1,067) | | $ | (1,511) | |
| | | | | | |
| Amortization of components of defined benefit plans: | | | | | | |
| Prior service cost | Operations and maintenance | $ | 24 | | $ | 25 | | | $ | 49 | | $ | 55 | |
| Actuarial gain (loss) | Operations and maintenance | (597) | | (597) | | | (1,195) | | (1,194) | |
| | (573) | | (572) | | | (1,146) | | (1,139) | |
| Income tax | Income tax (expense) | 151 | | 176 | | | 359 | | 264 | |
| Total reclassification adjustments related to defined benefit plans, net of tax | | $ | (422) | | $ | (396) | | | $ | (787) | | $ | (875) | |
| Total reclassifications | | $ | (943) | | $ | (993) | | | $ | (1,854) | | $ | (2,386) | |
Balances by classification included within AOCI, net of tax on the accompanying Condensed Consolidated Balance Sheets were as follows (in thousands):
| | | | | | | | | | | | | | |
| Interest Rate Swaps | Commodity Derivatives | Employee Benefit Plans | Total |
| As of December 31, 2019 | $ | (15,122) | | $ | (456) | | $ | (15,077) | | $ | (30,655) | |
| Other comprehensive income (loss) | | | | |
| before reclassifications | 0 | | 181 | | 55 | | 236 | |
| Amounts reclassified from AOCI | 1,630 | | 562 | | 1,305 | | 3,497 | |
| As of September 30, 2020 | $ | (13,492) | | $ | 287 | | $ | (13,717) | | $ | (26,922) | |
| | | | |
| | | | |
| Interest Rate Swaps | Commodity Derivatives | Employee Benefit Plans | Total |
| As of December 31, 2018 | $ | (17,307) | | $ | 328 | | $ | (9,937) | | $ | (26,916) | |
| Other comprehensive income (loss) | | | | |
| before reclassifications | 0 | | (334) | | 0 | | (334) | |
| Amounts reclassified from AOCI | 1,639 | | (366) | | 282 | | 1,555 | |
| As of September 30, 2019 | $ | (15,668) | | $ | (372) | | $ | (9,655) | | $ | (25,695) | |
(12) Employee Benefit Plans
Change in Accounting Principle - Pension Accounting Asset Method
Effective January 1, 2020, the Company changed its 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 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 re-measurement.
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 decrease to prior service costs, as recorded in Other income (expense), net, of $0.6 million, an increase in Income tax expense of $0.2 million and an increase to Net income of $0.4 million within the accompanying Condensed Consolidated Statements of Income for the nine months ended September 30, 2020.
Funding Status of Employee Benefit Plans | | | | | | | | | | | | | | |
| Derivatives Designated as Cash Flow Hedges | | |
| Interest Rate Swaps | Commodity Derivatives | Employee Benefit Plans | Total |
| As of December 31, 2020 | $ | (12,558) | | $ | 2 | | $ | (14,790) | | $ | (27,346) | |
| Other comprehensive income (loss) | | | | |
| before reclassifications | 0 | | 1,046 | | 0 | | 1,046 | |
| Amounts reclassified from AOCI | 1,086 | | (19) | | 787 | | 1,854 | |
| As of June 30, 2021 | $ | (11,472) | | $ | 1,029 | | $ | (14,003) | | $ | (24,446) | |
| | | | |
| Derivatives Designated as Cash Flow Hedges | | |
| Interest Rate Swaps | Commodity Derivatives | Employee Benefit Plans | Total |
| As of December 31, 2019 | $ | (15,122) | | $ | (456) | | $ | (15,077) | | $ | (30,655) | |
| Other comprehensive income (loss) | | | | |
| before reclassifications | 0 | | (220) | | 55 | | (165) | |
| Amounts reclassified from AOCI | 1,087 | | 424 | | 875 | | 2,386 | |
| As of June 30, 2020 | $ | (14,035) | | $ | (252) | | $ | (14,147) | | $ | (28,434) | |
Based on the fair value of assets and estimated discount rate used to value benefit obligations as of September 30, 2020, we estimate the unfunded status of our employee benefit plans to be approximately $51 million compared to $51 million at December 31, 2019. In 2012, we froze our pension plan and closed it to new participants. Since then, we have implemented various de-risking strategies including lump sum buyouts, the purchase of annuities and the reduction of return-seeking assets over time to a more liability-hedged portfolio.
As a result, recent capital markets volatility driven by the COVID-19 pandemic has not materially affected our unfunded status and does not require interim re-measurement of our pension plan assets or defined benefit obligations.
(10) 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 September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | 2019 | | 2020 | 2019 | | 2021 | 2020 | | 2021 | 2020 |
| Service cost | Service cost | $ | 1,352 | | $ | 1,346 | | | $ | 4,058 | | $ | 4,037 | | Service cost | $ | 1,260 | | $ | 1,353 | | | $ | 2,519 | | $ | 2,706 | |
| Interest cost | Interest cost | 3,356 | | 4,344 | | | 10,069 | | 13,031 | | Interest cost | 2,328 | | 3,356 | | | 4,656 | | 6,713 | |
| Expected return on plan assets | Expected return on plan assets | (5,647) | | (6,100) | | | (16,943) | | (18,300) | | Expected return on plan assets | (5,219) | | (5,648) | | | (10,438) | | (11,296) | |
| Prior service cost (benefit) | 0 | | 6 | | | 0 | | 19 | | |
| Net loss (gain) | 2,093 | | 941 | | | 6,279 | | 2,822 | | |
| | Net loss | | Net loss | 1,829 | | 2,093 | | | 3,658 | | 4,186 | |
| Net periodic benefit cost | Net periodic benefit cost | $ | 1,154 | | $ | 537 | | | $ | 3,463 | | $ | 1,609 | | Net periodic benefit cost | $ | 198 | | $ | 1,154 | | | $ | 395 | | $ | 2,309 | |
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 September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | 2019 | | 2020 | 2019 | | 2021 | 2020 | | 2021 | 2020 |
| Service cost | Service cost | $ | 514 | | $ | 454 | | | $ | 1,542 | | $ | 1,362 | | Service cost | $ | 559 | | $ | 514 | | | $ | 1,118 | | $ | 1,028 | |
| Interest cost | Interest cost | 412 | | 560 | | | 1,237 | | 1,683 | | Interest cost | 264 | | 413 | | | 529 | | 825 | |
| Expected return on plan assets | Expected return on plan assets | (46) | | (57) | | | (137) | | (172) | | Expected return on plan assets | (34) | | (46) | | | (68) | | (91) | |
| Prior service cost (benefit) | Prior service cost (benefit) | (136) | | (99) | | | (410) | | (298) | | Prior service cost (benefit) | (109) | | (137) | | | (218) | | (274) | |
| Net loss (gain) | 5 | | 0 | | | 15 | | 0 | | |
| Net loss | | Net loss | 117 | | 5 | | | 234 | | 10 | |
| Net periodic benefit cost | Net periodic benefit cost | $ | 749 | | $ | 858 | | | $ | 2,247 | | $ | 2,575 | | Net periodic benefit cost | $ | 797 | | $ | 749 | | | $ | 1,595 | | $ | 1,498 | |
Supplemental Non-qualified Defined Benefit and Defined Contribution Plans
The components of net periodic benefit cost for the Supplemental Non-qualified Defined Benefit and Defined Contribution Plans were as follows (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | 2019 | | 2020 | 2019 | | 2021 | 2020 | | 2021 | 2020 |
| Service cost | Service cost | $ | 1,035 | | $ | 429 | | | $ | 1,482 | | $ | 2,406 | | Service cost | $ | 1,020 | | $ | 1,817 | | | $ | 1,713 | | $ | 447 | |
| Interest cost | Interest cost | 274 | | 324 | | | 824 | | 972 | | Interest cost | 177 | | 275 | | | 354 | | 550 | |
| Prior service cost (benefit) | 1 | | 0 | | | 1 | | 1 | | |
| Net loss (gain) | 425 | | 134 | | | 1,277 | | 402 | | |
| | Net loss | | Net loss | 438 | | 426 | | | 877 | | 852 | |
| Net periodic benefit cost | Net periodic benefit cost | $ | 1,735 | | $ | 887 | | | $ | 3,584 | | $ | 3,781 | | Net periodic benefit cost | $ | 1,635 | | $ | 2,518 | | | $ | 2,944 | | $ | 1,849 | |
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 in the first ninesix months of 20202021 and anticipated contributions for 20202021 and 20212022 are as follows (in thousands):
| | | | | | | | | | | | |
| | Contributions Made | Additional Contributions | Contributions |
| | Nine Months Ended September 30, 2020 | Anticipated for 2020 | Anticipated for 2021 |
| Defined Benefit Pension Plan | | $ | 12,700 | | $ | 0 | | $ | 12,700 | |
| Non-pension Defined Benefit Postretirement Healthcare Plans | | $ | 4,006 | | $ | 1,335 | | $ | 5,227 | |
| Supplemental Non-qualified Defined Benefit and Defined Contribution Plans | | $ | 1,065 | | $ | 355 | | $ | 1,964 | |
(13) Commitments and Contingencies
There have been no significant changes to commitments and contingencies from those previously disclosed in Note 19 of our Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K except for those described below and in Note 5.
Power Sales Agreement - Colorado Electric
On July 1, 2020, Colorado Electric entered into a PSA with the City of Colorado Springs to sell up to 60 MW of wind energy purchased from PRPA under a separate 60 MW PPA transacted on June 26, 2019. This PSA with the City of Colorado Springs expires June 30, 2025.
Power Purchase Agreement - South Dakota Electric
On September 11, 2020, South Dakota Electric entered into a PPA with Fall River Solar, LLC to purchase up to 80 MW of renewable energy upon construction completion of a new solar facility which is expected by the end of 2022. This agreement will expire 20 years after construction completion. | | | | | | | | | | | | |
| | Contributions Made | Additional Contributions | Contributions |
| | Six Months Ended June 30, 2021 | Anticipated for 2021 | Anticipated for 2022 |
| Defined Benefit Pension Plan | | $ | 0 | | $ | 0 | | $ | 3,788 | |
| Non-pension Defined Benefit Postretirement Healthcare Plan | | $ | 2,763 | | $ | 2,763 | | $ | 5,241 | |
| Supplemental Non-qualified Defined Benefit and Defined Contribution Plans | | $ | 964 | | $ | 964 | | $ | 1,967 | |
(14)(11) Income Taxes
CARES ActWinter Storm Uri
On March 27, 2020,As discussed in Note 2 above, our Utilities submitted cost recovery applications which seek to recover incremental costs from Winter Storm Uri through a regulatory mechanism. We expect to recover these costs from customers over several years. Winter Storm Uri costs, which will be deductible in our 2021 tax return, created a net deferred tax liability of approximately $132 million. The deferred tax liability will reverse with the President signedsame timing as the CARES Act, which contained, in part, an allowance for deferral of the employer portion of Social Security employment tax liabilities until 2021 and 2022, as well as a COVID-19 employee retention tax credit of up to $5,000 per eligible employee.costs are recovered from our customers.
Eligible employers are taxpayers experiencing either: (1)The income tax deduction recognized from Winter Storm Uri will create a full or partial suspension of business operations stemming from a government COVID-19 related order or (2) a more than 50% dropNOL in gross receipts comparedour 2021 federal and state income tax returns. Our federal NOL carryforwards no longer expire due to the corresponding calendar quarter in 2019. This 50% employee retention tax credit applies upTCJA; however, our state NOL carryforwards expire at various dates from 2021 to $10,000 in qualified wages paid between March 13, 2020 through December 31, 2020, and is refundable2040. We do not anticipate material changes to our valuation allowance against the extent it exceedsstate NOL carryforwards from Winter Storm Uri. Therefore, we did not record an additional valuation allowance against the employer portionstate NOL carryforwards as of payroll tax liability.June 30, 2021.
Eligible wages or employer-paid health benefits must be paid for the period of time during which an employee did not provide services. However, employees do not need to stop providing all services to the employer for the credit to potentially apply.Income Tax (Expense) and Effective Tax Rates
Additionally,Three Months Ended June 30, 2021 Compared to the CARES Act accelerates the amount of alternative minimum tax (“AMT”) credits that can be refunded for the 2018 and 2019 annual tax returns. In 2020, we filed for, and received, a refund of approximately $2.4 million of AMT credit carryforwards under this provision.
During the three and nine months ended SeptemberThree Months Ended June 30, 2020 we utilized the payroll tax deferral provision which allowed us to defer payment of approximately $4.0 million and $6.9 million, respectively, of Social Security employment tax liabilities. We are currently reviewing the potential future benefits of the CARES Act related to employee retention tax credits to assess the impact on our financial position, results of operations and cash flows.
Income tax (expense) for the Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019.
Income tax (expense) for the three months ended SeptemberJune 30, 20202021 was $(4.7)$(0.6) million compared to $(2.5)$(4.8) million reported for the same period in 2019.2020. For the three months ended SeptemberJune 30, 2020,2021 the effective tax rate was 10.3%2.0% compared to 14.0%16.4% for the same period in 2019.2020. The lower effective tax rate is primarily due to $2.2 million of increased tax benefits from Nebraska Gas TCJA-related bill credits to customers (which is offset by reduced revenue) and $1.9 million of increased flow-through tax benefits related to repairs and certain indirect costs.
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
Income tax (expense) for the six months ended June 30, 2021 was $(1.1) million compared to $(21) million reported for the same period in 2020. For the six months ended June 30, 2021, the effective tax rate was 0.8% compared to 14.6% for the same period in 2020. The lower effective tax rate is primarily due to $10 million of increased tax benefits from Colorado Electric and Nebraska Gas TCJA-related bill credits to customers (which is offset by reduced revenue), $3.0 million of increased flow-through tax benefits related to repairs and certain indirect costs, $1.6 million of increased tax benefits from federal production tax credits associated with new wind assets and
reversal$1.4 million of
accruedincreased tax benefits from amortization of excess deferred income
taxes as part of resolving the last of the Company’s open dockets seeking approval of its TCJA plans as discussed in Note 5.taxes.
(12) Business Segment Information
Our reportable segments are based on our method of internal reporting, which is generally segregated by differences in products, services and regulation. All of our operations and assets are located within the United States.
Accounting standards for presentation of segments require an approach based on the way we organize the segments for making operating decisions and how the Chief Operating Decision Maker (CODM) assesses performance. The CODM assesses the performance of our segments using adjusted operating income, which recognizes intersegment revenues, costs, and assets for Colorado Electric’s PPA with Black Hills Colorado IPP on an accrual basis rather than as a finance lease. This presentation of segment information does not impact consolidated financial results.
Segment information was as follows (in thousands):
| | | | | | | | | | | |
| Total assets (net of intercompany eliminations) as of: | June 30, 2021 | | December 31, 2020 |
| Electric Utilities | $ | 3,239,628 | | | $ | 3,120,928 | |
| Gas Utilities | 4,935,784 | | | 4,376,204 | |
| Power Generation | 394,213 | | | 404,220 | |
| Mining | 75,109 | | | 77,085 | |
| Corporate and Other | 93,318 | | | 110,349 | |
| Total assets | $ | 8,738,052 | | | $ | 8,088,786 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended June 30, 2021 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 177,092 | | $ | 2,279 | | | $ | 5,562 | | $ | 0 | | | $ | 184,933 | |
| Gas Utilities | 183,187 | | 1,250 | | | 1,519 | | 94 | | | 186,050 | |
| Power Generation | 1,432 | | 386 | | | 23,480 | | 50 | | | 25,348 | |
| Mining | 6,712 | | 234 | | | 7,142 | | 341 | | | 14,429 | |
| Inter-company eliminations | — | | — | | | (37,703) | | (485) | | | (38,188) | |
| Total | $ | 368,423 | | $ | 4,149 | | | $ | 0 | | $ | 0 | | | $ | 372,572 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended June 30, 2020 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 156,197 | | $ | 1,627 | | | $ | 5,376 | | $ | 0 | | | $ | 163,200 | |
| Gas Utilities | 159,824 | | 512 | | | 774 | | 0 | | | 161,110 | |
| Power Generation | 1,242 | | 349 | | | 24,476 | | 55 | | | 26,122 | |
| Mining | 6,930 | | 233 | | | 7,916 | | 337 | | | 15,416 | |
| Inter-company eliminations | — | | — | | | (38,542) | | (392) | | | (38,934) | |
| Total | $ | 324,193 | | $ | 2,721 | | | $ | 0 | | $ | 0 | | | $ | 326,914 | |
Income tax (expense) for the Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019. | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2021 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 397,592 | | $ | 2,416 | | | $ | 12,333 | | $ | 0 | | | $ | 412,341 | |
| Gas Utilities | 581,686 | | 3,658 | | | 3,039 | | 186 | | | 588,569 | |
| Power Generation | 5,673 | | 807 | | | 47,931 | | 100 | | | 54,511 | |
| Mining | 13,689 | | 483 | | | 14,248 | | 681 | | | 29,101 | |
| Inter-company eliminations | — | | — | | | (77,551) | | (967) | | | (78,518) | |
| Total | $ | 998,640 | | $ | 7,364 | | | $ | 0 | | $ | 0 | | | $ | 1,006,004 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Six Months Ended June 30, 2020 | External Operating Revenue | | Inter-company Operating Revenue | | Total Revenues |
| Contract Customers | Other Revenues | Contract Customers | Other Revenues |
| Segment: | | | | | | | |
| Electric Utilities | $ | 323,700 | | $ | 1,850 | | | $ | 11,789 | | $ | 0 | | | $ | 337,339 | |
| Gas Utilities | 514,111 | | 6,220 | | | 1,552 | | 0 | | | 521,883 | |
| Power Generation | 3,097 | | 792 | | | 48,088 | | 111 | | | 52,088 | |
| Mining | 13,494 | | 700 | | | 15,755 | | 672 | | | 30,621 | |
| Inter-company eliminations | — | | — | | | (77,184) | | (783) | | | (77,967) | |
| Total | $ | 854,402 | | $ | 9,562 | | | $ | 0 | | $ | 0 | | | $ | 863,964 | |
| | | | | | | | | | | | | | |
| | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | 2021 | 2020 |
| Adjusted operating income: | | | | |
| Electric Utilities | $ | 35,568 | | $ | 33,993 | | $ | 57,381 | | $ | 69,643 | |
| Gas Utilities | 19,985 | | 18,209 | | 122,079 | | 121,106 | |
| Power Generation | 8,250 | | 11,402 | | 22,519 | | 22,751 | |
| Mining | 3,644 | | 3,358 | | 6,905 | | 6,487 | |
| Corporate and Other | (181) | | (29) | | (3,303) | | 131 | |
| Operating income | 67,266 | | 66,933 | | 205,581 | | 220,118 | |
| | | | |
| Interest expense, net | (38,202) | | (35,545) | | (75,802) | | (70,998) | |
| Impairment of investment | 0 | | 0 | | 0 | | (6,859) | |
| Other income (expense), net | (191) | | (1,863) | | 75 | | 490 | |
| Income tax (expense) | (586) | | (4,831) | | (1,080) | | (20,833) | |
| Net income | 28,287 | | 24,694 | | 128,774 | | 121,918 | |
| Net income attributable to noncontrolling interest | (3,126) | | (3,728) | | (7,297) | | (7,778) | |
| Net income available for common stock | $ | 25,161 | | $ | 20,966 | | $ | 121,477 | | $ | 114,140 | |
Income tax (expense)
(13) Selected Balance Sheet Information
Accounts Receivable and Allowance for Credit Losses
Following is a summary of Accounts receivable, net included in the accompanying Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Accounts receivable, trade | $ | 132,400 | | | $ | 146,899 | |
| Unbilled revenue | 63,066 | | | 126,065 | |
| Less: Allowance for credit losses | (6,029) | | | (7,003) | |
| Accounts receivable, net | $ | 189,437 | | | $ | 265,961 | |
Changes to allowance for credit losses for the ninesix months ended SeptemberJune 30, 2021 and 2020, was $(25) million compared to $(22) million reported forrespectively, were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at Beginning of Year | | | | Additions Charged to Costs and Expenses | | Recoveries and Other Additions | | Write-offs and Other Deductions | | Balance at June 30, |
| 2021 | | $ | 7,003 | | | | | $ | 1,510 | | | $ | 1,786 | | | $ | (4,270) | | | $ | 6,029 | |
| 2020 | | $ | 2,444 | | | | | $ | 6,715 | | | $ | 2,203 | | | $ | (3,777) | | | $ | 7,585 | |
Materials, Supplies and Fuel
The following amounts by major classification are included in Materials, supplies and fuel on the same periodaccompanying Condensed Consolidated Balance Sheets (in thousands) as of:
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
| Materials and supplies | $ | 85,277 | | | $ | 85,250 | |
| Fuel - Electric Utilities | 2,310 | | | 1,531 | |
| Natural gas in storage | 26,502 | | | 30,619 | |
| Total materials, supplies and fuel | $ | 114,089 | | | $ | 117,400 | |
Accrued Liabilities
The following amounts by major classification are included in
2019. The effective tax rate was 13.6% for bothAccrued liabilities on the
nine months ended September 30, 2020 and 2019, primarily due to increased tax benefits from forecasted federal production tax credits associated with new wind assets and reversal of accrued excess deferred income taxesaccompanying Condensed Consolidated Balance Sheets (in thousands) as
part of resolving the last of the Company’s open dockets seeking approval of its TCJA plans as discussed in Note 5 offset by a prior year discrete tax benefit related to repairs and certain indirect costs.of: | | | | | | | | |
| June 30, 2021 | December 31, 2020 |
| Accrued employee compensation, benefits and withholdings | $ | 69,067 | | $ | 77,806 | |
| Accrued property taxes | 39,416 | | 47,105 | |
| Customer deposits and prepayments | 47,583 | | 52,185 | |
| Accrued interest | 31,762 | | 31,520 | |
| Other (none of which is individually significant) | 31,194 | | 34,996 | |
| Total accrued liabilities | $ | 219,022 | | $ | 243,612 | |
(15) Investments
In February 2018, we contributed $28 million of assets in exchange for equity securities in a privately held oil and gas company as we divested our Oil and Gas segment. The carrying value of our investment in the equity securities was recorded at cost. We review this investment on a periodic basis to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the value of the investment.
During the third quarter of 2019, we assessed our investment for impairment as a result of a deterioration in earnings performance of the privately held oil and gas company and an adverse change in future natural gas prices. We engaged a third-party valuation consultant to estimate the fair value of our investment. The valuation was primarily based on an income approach but also considered a market valuation approach. The significant inputs used to estimate the fair value were the oil and gas reserve quantities and values utilizing forward market price curves, industry standard reserve adjustment factors and a discount rate of 10%. Based on the results of the valuation, we concluded that the carrying value of the investment exceeded fair value. As a result, we recorded a pre-tax impairment loss of $20 million for the three months ended September 30, 2019, which was the difference between the carrying value and the fair value of the investment at that time.
During the first quarter of 2020, we assessed our investment for impairment as a result of continued adverse changes in future natural gas prices and liquidity concerns at the privately held oil and gas company. We performed an internal analysis to compute the fair value of our investment, utilizing a consistent methodology as applied during the third quarter of 2019. Based on the results of the valuation, we concluded that the carrying value of the investment exceeded fair value. As a result, we recorded a pre-tax impairment loss of $6.9 million for the three months ended March 31, 2020, which was the difference between the carrying value and the fair value of the investment at that time.
The following table presents the carrying value of our investments (in thousands) as of:
| | | | | | | | |
| September 30, 2020 | December 31, 2019 |
| Investment in privately held oil and gas company | $ | 1,500 | | $ | 8,359 | |
| Cash surrender value of life insurance contracts | 13,467 | | 13,056 | |
| Other investments | 692 | | 514 | |
| Total investments | $ | 15,659 | | $ | 21,929 | |
(16)(14) Subsequent Events
We evaluated all subsequent event activity and concluded that no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosures, with the exception of those itemsColorado Gas regulatory activity disclosed in Note 5.2 and our amended and restated corporate Revolving Credit Facility disclosed in Note 5.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.OPERATIONS
The following discussions should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2020 Form 10-K.
Executive Summary
We are a customer-focused, growth-oriented electric and natural gas utility company operatingwith a mission of Improving Life with Energy and a vision to be the Energy Partner of Choice. The Company provides electric and natural gas utility service to 1.3 million customers over 800 communities in eight states, including Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming.
Recent Developments
Winter Storm Uri
In February 2021, a prolonged period of historic cold temperatures across the central United States. We reportStates, which covered all of our operationsUtilities’ service territories, caused a substantial increase in heating and results in the following business segments:energy demand and contributed to unforeseeable and unprecedented market prices for natural gas and electricity. As a result of Winter Storm Uri, we incurred significant incremental natural gas and fuel costs.
Electric UtilitiesOn February 24, 2021, we entered into a nine-month, $800 million unsecured term loan to provide additional liquidity and meet our cash needs related to the incremental fuel, purchased power and natural gas costs from Winter Storm Uri. See : Our Electric Utilities segment generates, transmits and distributes electricityNote 5 of the Notes to approximately 214,000 customers in Colorado, Montana, South Dakota and Wyoming. Our electric generating facilities and power purchase agreements provideCondensed Consolidated Financial Statements for the supply of electricity principally to our distribution systems. Additionally, we sell excess power to other utilities and marketing companies, including our affiliates. We also provide non-regulated services through our Tech Services product lines.further term loan information.
GasDuring the second quarter, our Utilities submitted cost recovery applications with the utility commissions in our state jurisdictions to recover incremental costs associated with Winter Storm Uri. See : Our Gas Utilities segment conducts natural gas utility operations throughNote 2 of the Notes to Condensed Consolidated Financial Statements for further information on our Arkansas, Colorado, Iowa, Kansas, Nebraska and Wyoming subsidiaries. Our Gas Utilities segment distributes and transports natural gas through our pipeline network to approximately 1,066,000 natural gas customers. Additionally, we sell contractual pipeline capacity and gas commodities to other utilities and marketing companies, including our affiliates, on an as-available basis.regulatory activity.
Black Hills Energy Services provides natural gas supply to approximately 49,000 retail distribution customers under the Choice Gas Program in Nebraska and Wyoming. Additionally, we provide services under the Service Guard Comfort Plan and Tech Services and also offer HomeServe products.COVID-19 Update
Power Generation: Our Power Generation segment produces electric power from its non-regulated generating plants and sellsFor the electric capacity and energy primarilysix months ended June 30, 2021, we did not experience significant impacts to our utilities under long-term contracts.financial results, liquidity or operational activities due to COVID-19. We continue to monitor loads, customers’ ability to pay, the potential for supply chain disruption that may impact our capital and maintenance project plans, the availability of third-party resources to execute our business plans and the capital markets to ensure we have the liquidity necessary to support our financial needs. State Orders lifting temporarily suspended disconnections have been issued in all of our jurisdictions.
We continue to provide periodic status updates and maintain ongoing dialogue with the regulatory commissions in our jurisdictions regarding our right to preserve deferred regulatory treatment for certain COVID-19 related costs and to seek recovery of these costs at a later date.
As we look forward, our operating results from COVID-19 could be affected as discussed in the “Risk Factors” section in Part I, Item 1A of our 2020 Annual Report on Form 10-K.
Business Segment Highlights and Corporate Activity
Electric Utilities
•On July 28, 2021, Wyoming Electric set a new all-time and summer peak load of 274 MW, exceeding the previous peak of 271 MW set in July 2020.
Mining•: Our Mining segment extracts coal at our mine near Gillette, Wyoming,On July 27, 2021, South Dakota Electric set a new all-time and sellssummer peak load of 397 MW, exceeding the coal primarily to on-site, mine-mouth power generation facilities.previous peak of 378 MW set in August 2020.
Our reportable segments are based•On June 30, 2021, South Dakota Electric and Wyoming Electric submitted an IRP to the SDPUC and WPSC. The IRP outlines a range of options for the two electric utilities to meet long-term forecasted energy needs over a 20-year planning horizon while strengthening reliability and resiliency of the grid. The analysis focused on our methodthe least-cost resource needs to best meet customers’ future peak energy needs while maintaining system flexibility and achieving the Company’s generation emissions reduction goals. The IRP’s preferred options for the near-term planning period through 2026 propose the addition of internal reporting,100 MW of renewable generation, the conversion of Neil Simpson II to natural gas in 2025 and consideration of up to 20 MW of battery storage.
•On February 19, 2021, Colorado Electric entered into a PPA with TC Colorado Solar, LLC to purchase up to 200 MW of renewable energy upon construction of a new solar facility, to be owned by TC Colorado Solar, LLC, which is generally segregatedexpected to be completed by the end of 2023. This agreement will expire 15 years after construction completion. The utility-scale solar project represents Colorado Electric’s preferred bid in a competitive solicitation process completed in September 2020 through its Renewable Advantage plan. With the addition of 200 MW of solar energy on its system, more than half of Colorado Electric’s generation is forecasted to be sourced from renewable energy resources by 2023, leading to a 70% reduction in carbon emissions by 2024 compared to the 2005 base year.
•On February 11, 2021, South Dakota Electric set a new winter peak load of 326 MW, surpassing the previous winter peak of 320 MW set in February 2019.
Gas Utilities
•See Note 2 for recent regulatory activity for our Gas Utilities in Colorado, Iowa, Kansas and Nebraska.
Corporate and Other
•On July 19, 2021, we amended and restated our corporate Revolving Credit Facility. See Note 5 for further information.
Results of Operations
The segment information does not include inter-company eliminations. Minor differences in products, services and regulation.amounts may result due to rounding. All of our operations and assets are located within the United States. All of our non-utility business segments support our utilities. Certain unallocated corporate expenses that support our operating segmentsamounts are presented as Corporate and Other.on a pre-tax basis unless otherwise indicated.
Certain industrieslines of business in which we operate are highly seasonal, and revenue from, and certain expenses for, such operations may fluctuate significantly among quarterly periods. Demand for electricity and natural gas is sensitive to seasonal cooling, heating and industrial load requirements. In particular, the normal peak usage season for our Electric Utilities is June through August while the normal peak usage season for our Gas Utilities is November through March. Significant earnings variances can be expected between the Gas Utilities segment’s peak and off-peak seasons. Due to this seasonal nature, our results of operations for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, and our financial condition as of SeptemberJune 30, 20202021 and December 31, 2019,2020, are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period or for the entire year.
COVID-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 plans across all of our jurisdictions with the goal of continuing to provide safe and reliable service during the COVID-19 pandemic.
For the three and nine months ended September 30, 2020, we have experienced limited impacts to our financial results and operational activities due to COVID-19. Year-to-date decreases to gross margins are driven primarily by lower volumes and waived customer late payment fees. Increased operations and maintenance expenses due to sequestration of mission critical and essential employees and increased bad debt expense were partially offset by decreased training, travel, outside services and employee related expenses.
During the three and nine months ended September 30, 2020, COVID-19 had a limited impact on revenues and customer loads. Increases in revenues and customer loads for the three months ended September 30, 2020, when compared to the same period in the prior year, were driven primarily by warmer and drier weather across our service territories. Declines in revenues and customer loads for the nine months ended September 30, 2020, when compared to the same period in the prior year, were driven primarily by milder first quarter winter temperatures in our Gas Utilities’ service territories. We continue to closely monitor loads in our states as updated executive orders and recommendations associated with COVID-19 are provided. We have continued to proactively communicate 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 losses and bad debt expense by $1.7 million and $3.7 million for the three and nine months ended September 30, 2020, respectively, after considering the potential economic impact of the COVID-19 pandemic in forward looking projections related to write-off and recovery rates. All of our jurisdictions temporarily suspended disconnections for a period of time. State orders lifting those restrictions have been issued in nearly all of our jurisdictions; however, we expect the status of restrictions will continue to fluctuate for the next several months. 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 businesses and fund our capital investment program. In February 2020, the Company issued $100 million in equity to support its 2020 capital investment program. In June 2020, the Company issued $400 million of long-term debt which was used to repay short-term debt and for working capital and general corporate purposes. For the nine months ended September 30, 2020, the Company also utilized a combination of its $750 million Revolving Credit Facility and CP Program to meet its funding requirements. The Company has no material debt maturities until late 2023 and as of September 30, 2020, had $648 million of liquidity which included $7.0 million of cash and $641 million of available capacity on its Revolving Credit Facility. We continue to meet our debt covenant requirements. We also continue to monitor the funding status of our employee benefit plan obligations, which did not materially change during the nine months ended September 30, 2020.
We are monitoring supply chains, including lead times for key materials and supplies, availability of resources, and statuses of large capital projects. To date, there have been limited impacts from COVID-19 on supply chains including the 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 ready to be executed if significant disruption to supply chain occurs; however, we currently do not anticipate a significant impact from COVID-19 on 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 services we provide to our customers. Actions the Company had taken earlier in the year include implementing protocols for our field operations personnel to continue to safely and effectively interact with our customers, asking employees to work from home, requiring employees to complete daily health assessments, covering COVID-19 testing at 100% for our active employee medical plans, limiting travel to only mission-critical purposes and sequestering essential employees.
During the third quarter of 2020, we suspended sequestration of essential employees but continue to monitor the impacts of COVID-19 in our service territories to ensure we provide essential services to our customers. Additionally, we implemented our Ready2Return program, which includes a phased return of our employees to our work facilities while keeping our workforce healthy, safe and informed. Our Ready2Return program also focuses on enhancing our facility readiness to improve ventilation, ensure social distancing and establish cleaning services to reduce the spread of infection.
We provide periodic status updates and maintain ongoing dialogue with the regulatory commissions in our jurisdictions. We are working with regulators in each of our service territories to preserve our right for deferred regulatory treatment for certain COVID-19 related costs and to seek recovery of these costs at a later date.
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, the availability of resources to execute our plans and the capital markets to ensure we have the liquidity necessary to support our financial needs.
As we look forward to the fourth quarter of 2020 and beyond, we anticipate that our operating results could be further affected by COVID-19, as discussed in detail in our Risk Factors.
2020 Business Segment Highlights and Corporate Activity
Electric Utilities
•South Dakota Electric and Wyoming Electric continued construction of the $79 million, Corriedale project. The wind project will be jointly owned by the two electric utilities to deliver renewable energy for large commercial, industrial and governmental agency customers. The project is expected to be fully in service in the fourth quarter of 2020.
•On October 15, 2020, the FERC approved a settlement agreement that represents a resolution of all issues in the joint application filed by Wyoming Electric and Black Hills Wyoming on August 2, 2019 for approval of a new 60 MW PPA. Under terms of the settlement, Wyoming Electric will continue to receive 60 MW of capacity and energy from the Wygen I power plant. The new agreement will commence on January 1, 2022, replace the existing PPA and continue for 11 years.
•On September 23, 2020, Colorado Electric received approval from the CPUC for its request for approval of its preferred solar bid in support of its Renewable Advantage program. The program plans to add up to 200 MW of renewable energy in Colorado by the end of 2023.
•On July 10, 2020, Wyoming Electric set a new all-time peak load of 271 MW, surpassing the previous peak of 265 MW set in July 2019.
•On May 5, 2020, citizens in Pueblo, Colorado voted overwhelmingly to retain Colorado Electric as its electric utility provider by 75.6% of votes cast. The current franchise agreement continues through 2030.
Gas Utilities
•On September 11, 2020, Colorado Gas filed a rate review with the CPUC seeking recovery on significant infrastructure investments in its 7,000-mile natural gas pipeline system. The rate review requests $13.5 million in new annual revenue with a capital structure of 50% equity and 50% debt and a return on equity of 9.95%. The request seeks to implement new rates in the second quarter of 2021. On September 11, 2020, in accordance with the final order from the earlier rate review discussed below, Colorado Gas also filed a new SSIR proposal that would recover safety-focused investments in its system over five years.
•On June 1, 2020, Nebraska Gas filed a rate review with the NPSC to consolidate rate schedules into a new, single statewide structure and seek recovery on significant infrastructure investments in its 13,000-mile natural gas pipeline system. The rate review requests $17.3 million in new revenue with a capital structure of 50% equity and 50% debt and a return on equity of 10%. Nebraska statute allows for implementation of interim rates 90 days after filing a rate review and Nebraska Gas implemented interim rates effective on September 1, 2020. The request seeks to finalize rates in the first quarter of 2021. Nebraska Gas is also requesting an extension of its SSIR for five years to align the rider recovery mechanisms across the consolidated utility.
•On February 1, 2019, Colorado Gas filed a rate review with the CPUC requesting $2.5 million in new revenue to recover investments in safety, reliability and system integrity and approval to consolidate rates, tariffs, and services of its two existing gas distribution territories. Colorado Gas also requested a new rider mechanism to recover future safety and integrity investments in its system. On May 19, 2020, the CPUC issued a final order which denied the new system integrity recovery mechanism and consolidation of rate territories. In addition, the order resulted in an annual revenue decrease of $0.6 million and a return on equity of 9.2%. New rates were effective July 3, 2020.
•Wyoming Gas’s new single statewide rate structure was effective March 1, 2020. On December 11, 2019, Wyoming Gas received approval from the WPSC to consolidate the rates, tariffs and services of its four existing gas distribution territories. New rates are expected to generate $13 million in new annual revenue based on a return on equity of 9.40% and a capital structure of 50.23% equity and 49.77% debt. The approval also allows for a rider to recover integrity investments for system safety and reliability.
Power Generation
•On October 15, 2020, the FERC approved a settlement agreement that represents a resolution of all issues in the joint application filed by Black Hills Wyoming and Wyoming Electric on August 2, 2019 for approval of a new 60 MW PPA. See additional information in the Electric Utilities Segment highlights above.
Corporate and Other
•On August 20, 2020, Fitch affirmed South Dakota Electric’s credit rating at A.
•On August 20, 2020, Fitch affirmed our BBB+ rating and maintained a stable outlook.
•On August 3, 2020, we filed a shelf registration and DRSPP with the SEC. In conjunction with these shelf filings, we renewed the ATM. The renewed ATM program, which allows us to sell shares of our common stock, is the same as the prior program other than the aggregate value increased from $300 million to $400 million and a forward sales option was incorporated.
•On June 17, 2020, we completed a public debt offering of $400 million principal amount in senior unsecured notes. The debt offering consisted of $400 million of 2.50%, 10-year senior notes due June 15, 2030. The proceeds were used to repay short-term debt and for working capital and general corporate purposes.
•On April 16, 2020, S&P affirmed South Dakota Electric’s credit rating at A.
•On April 10, 2020, S&P affirmed our BBB+ rating and maintained a stable outlook.
•On February 27, 2020, we issued 1.2 million shares of common stock at a price of $81.77 per share for net proceeds of $99 million.
Results of Operations
Segment information does not include intercompany eliminations and all amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences may result due to rounding.
Consolidated Summary and Overview
| | (in thousands, except per share amounts) | Three Months Ended September 30, | Nine Months Ended September 30, | |
| 2020 | 2019 | | 2020 | 2019 | | |
| Revenue | | | | | |
| Revenue | $ | 386,525 | | $ | 363,491 | | | $ | 1,328,456 | | $ | 1,368,748 | | | |
| Inter-company eliminations | (39,935) | | (37,943) | | | (117,902) | | (111,502) | | | |
| | $ | 346,590 | | $ | 325,548 | | | $ | 1,210,554 | | $ | 1,257,246 | | | | Three Months Ended June 30, | Six Months Ended June 30, |
Adjusted operating income (a) | | | | | |
| | | 2021 | 2020 | | 2021 | 2020 | |
| | | (in thousands, except per share amounts) |
| Adjusted operating income (a): | | Adjusted operating income (a): | | | | |
| Electric Utilities | Electric Utilities | $ | 52,083 | | $ | 50,653 | | | $ | 121,726 | | $ | 125,219 | | | Electric Utilities | $ | 35,568 | | $ | 33,993 | | | $ | 57,381 | | $ | 69,643 | | |
| Gas Utilities | Gas Utilities | 18,147 | | 4,736 | | | 139,253 | | 116,607 | | | Gas Utilities | 19,985 | | 18,209 | | | 122,079 | | 121,106 | | |
| Power Generation | Power Generation | 8,738 | | 11,822 | | | 31,489 | | 33,945 | | | Power Generation | 8,250 | | 11,402 | | | 22,519 | | 22,751 | | |
| Mining | Mining | 3,505 | | 3,374 | | | 9,992 | | 9,351 | | | Mining | 3,644 | | 3,358 | | | 6,905 | | 6,487 | | |
| Corporate and Other | Corporate and Other | (239) | | (34) | | | (108) | | (439) | | | Corporate and Other | (181) | | (29) | | | (3,303) | | 131 | | |
| Operating income | Operating income | 82,234 | | 70,551 | | | 302,352 | | 284,683 | | | Operating income | 67,266 | | 66,933 | | | 205,581 | | 220,118 | | |
| | Interest expense, net | Interest expense, net | (36,041) | | (33,487) | | | (107,039) | | (102,469) | | | Interest expense, net | (38,202) | | (35,545) | | | (75,802) | | (70,998) | | |
| Impairment of investment | Impairment of investment | — | | (19,741) | | | (6,859) | | (19,741) | | | Impairment of investment | — | | — | | | — | | (6,859) | | |
| Other income (expense), net | Other income (expense), net | (1,193) | | 580 | | | (703) | | 55 | | | Other income (expense), net | (191) | | (1,863) | | | 75 | | 490 | | |
| Income tax (expense) | Income tax (expense) | (4,651) | | (2,508) | | | (25,484) | | (22,078) | | | Income tax (expense) | (586) | | (4,831) | | | (1,080) | | (20,833) | | |
| Net income | Net income | 40,349 | | 15,395 | | | 162,267 | | 140,450 | | | Net income | 28,287 | | 24,694 | | | 128,774 | | 121,918 | | |
| Net income attributable to noncontrolling interest | Net income attributable to noncontrolling interest | (4,066) | | (3,655) | | | (11,844) | | (10,319) | | | Net income attributable to noncontrolling interest | (3,126) | | (3,728) | | | (7,297) | | (7,778) | | |
| Net income available for common stock | Net income available for common stock | $ | 36,283 | | $ | 11,740 | | | $ | 150,423 | | $ | 130,131 | | | Net income available for common stock | $ | 25,161 | | $ | 20,966 | | | 121,477 | | 114,140 | | |
| | Earnings per share, Basic | $ | 0.58 | | $ | 0.19 | | | $ | 2.41 | | $ | 2.15 | | | |
| Earnings per share, Diluted | $ | 0.58 | | $ | 0.19 | | | $ | 2.41 | | $ | 2.15 | | | |
| Total earnings per share of common stock, Diluted | | Total earnings per share of common stock, Diluted | $ | 0.40 | | $ | 0.33 | | | $ | 1.93 | | $ | 1.83 | | |
__________
(a) Adjusted operating income recognizes inter-segmentintersegment revenues and costs for Colorado Electric’s PPA with Black Hills Colorado IPP on an accrual basis rather than as a finance lease. This presentation of segment information does not impact consolidated financial results.
Three Months Ended SeptemberJune 30, 20202021 Compared to Three Months Ended SeptemberJune 30, 2019:2020
The variance to the prior year included the following:
•COVID-19 related impacts to consolidated results included $1.0 million of lower gross margin driven primarily by waived customer late payment fees, $1.7 million of additional bad debt expense and $0.5 million of costs due to sequestration of mission-critical and essential employees which were partially offset by $1.1 million of lower travel, training, and employee related expenses;
•Electric Utilities’ adjusted operating income increased $1.4$1.6 million primarily due to increased wholesale, power marketing and Tech Services revenues, increased rider revenues, regulatory actions reducing certain Winter Storm Uri impacts, and benefits from the release of TCJA revenue reservesprior year COVID-19 impacts which were partially offset by higher operating expenses andunfavorable mark-to-market lossesadjustments on wholesale energy contracts;contacts and higher operating expenses;
•Gas Utilities’ adjusted operating income increased $13$1.8 million primarily due to drier summer weather favorably impacting our Nebraska service territory irrigation loads, new customer rates, in Wyoming and Nebraska and mark-to-market gainsfavorable market-to-market adjustments on non-utility natural gaswholesale commodity contracts and prior year COVID-19 impacts partially offset by Nebraska Gas’s TCJA-related bill credits to customers and higher operating expenses;
•Power GenerationGeneration’s adjusted operating income decreased $3.1$3.2 million primarily due to higher operating expenses driven by the early retirement of certain assets;current year planned outages;
•InterestA $2.7 million increase in interest expense increased $2.6 million primarily due to higher debt balances partially offset by lower rates;
•A $1.7 million increase in other income primarily due to lower non-service pension costs driven by a lower discount rate and lower costs for our non-qualified benefit plans which were driven by market performance; and
41•A $4.2 million decrease in income tax expense due to a lower effective tax rate driven primarily by tax benefits from Nebraska Gas’s TCJA-related bill credits and flow-through tax benefits related to repairs and certain indirect costs.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
The variance to the prior year included the following:
•Electric Utilities’ adjusted operating income decreased $12 million primarily due to Colorado Electric’s TCJA-related bill credits to customers, impacts from Winter Storm Uri and unfavorable mark-to-market adjustments on wholesale energy contracts partially offset by increased rider revenues, increased wholesale, power marketing and Tech Services revenues and prior year COVID-19 impacts;
•Gas Utilities’ adjusted operating income increased $1.0 million primarily due to new rates and higher heating demand from colder weather mostly offset by Winter Storm Uri costs incurred by Black Hills Energy Services, Nebraska Gas TCJA-related bill credits to customers, and higher operating expenses;
•Corporate and Other expenses increased $3.4 million primarily due to a prior year favorable true-up of Contentsemployee costs allocated to our subsidiaries in the current year, which is offset in our business segments;
•A $4.8 million increase in interest expense due to higher debt balances partially offset by lower rates;
•A prior year $20$6.9 million pre-tax non-cash impairment of our investment in equity securities of a privately held oil and gas company;
•OtherA $19.8 million decrease in income tax expense increased $1.8 million primarily due to increased costs for our non-qualified benefit plan driven by market performance on plan assetslower pre-tax income and increased non-service pension costs resulting from a change in accounting principle for our defined benefit pension plan effective January 1, 2020; and
•Income tax expense increased $2.1 million primarily due to higher pre-tax earnings partially offset by a lower effective tax rate.
Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019:
The variance to the prior year included the following:
•COVID-19 related impacts to consolidated results included $3.4 million of lower gross marginrate driven primarily by lower volumes and waived customer late payment fees, $2.6 million of costs due to sequestration of mission-critical and essential employees and $3.7 million of additional bad debt expense which were partially offset by $4.6 million of lower travel, training, outside services and employee related expenses;
•Electric Utilities’ adjusted operating income decreased $3.5 million primarily due to higher operating expenses and COVID-19 impacts partially offset bytax benefits from the release of TCJA revenue reserves, rider revenuesColorado Electric and favorable weather;
•Nebraska Gas Utilities’ adjusted operating income increased $23 million primarily dueTCJA-related bill credits, flow-through tax benefits related to new customer rates in Wyoming, mark-to-market gains on non-utility natural gas commodity contracts, prior yearrepairs and certain indirect costs, amortization of excess deferred income taxes and customer growth partially offset by higher operating expenses and COVID-19 impacts;
•Power Generation adjusted operating income decreased $2.5 million primarily due to higher operating expenses driven by the early retirement of certain assets;
•Interest expense increased $4.6 million primarily due to higher debt balances partially offset by lower rates;
•A prior year $20 million pre-tax non-cash impairment of our investment in equity securities of a privately held oil and gas company compared to a current year $6.9 million impairment on the same investment; and
•Incomefederal production tax expense increased $3.4 million primarily due to higher pre-tax earningscredits associated with similar effective tax rates.new wind assets.
Segment Operating Results by Segment
A discussion of operating results from our business segments and Corporate activities follows in the sections below. Revenues for operating segments in the following sections are presented in total and by retail class. For disaggregation of revenue by contract type and operating segment, see Note 2 of the Notes to Condensed Consolidated Financial Statements for more information.follows.
Non-GAAP Financial Measure
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 for our Electric Utilities is calculated as operating revenue less cost of fuel and purchased power. Gross margin for our Gas Utilities is calculated as operating revenue less cost of natural gas sold. Our gross margin is impacted by the fluctuations in power and natural gas purchases 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 measures.measure. Furthermore, this measure is not intended to replace operating income, as determined in accordance with GAAP, as an indicator of operating performance.
Electric Utilities
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) |
| Revenue | $ | 200,842 | | $ | 191,384 | | $ | 9,458 | | $ | 538,181 | | $ | 540,665 | | $ | (2,484) | |
| | | | | | |
| Total fuel and purchased power | 77,885 | | 71,593 | | 6,292 | | 201,398 | | 207,004 | | (5,606) | |
| | | | | | |
| Gross margin (non-GAAP) | 122,957 | | 119,791 | | 3,166 | | 336,783 | | 333,661 | | 3,122 | |
| | | | | | |
| Operations and maintenance | 47,426 | | 47,172 | | 254 | | 144,956 | | 143,049 | | 1,907 | |
| Depreciation and amortization | 23,448 | | 21,966 | | 1,482 | | 70,101 | | 65,393 | | 4,708 | |
| Total operating expenses | 70,874 | | 69,138 | | 1,736 | | 215,057 | | 208,442 | | 6,615 | |
| | | | | | |
| Adjusted operating income | $ | 52,083 | | $ | 50,653 | | $ | 1,430 | | $ | 121,726 | | $ | 125,219 | | $ | (3,493) | |
Operating results for the Electric Utilities were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | Variance | 2021 | 2020 | Variance |
| |
| Revenue | $ | 184,933 | | $ | 163,200 | | $ | 21,733 | | $ | 412,341 | | $ | 337,339 | | $ | 75,002 | |
| | | | | | |
| Total fuel and purchased power | 75,238 | | 59,053 | | 16,185 | | 207,307 | | 123,513 | | 83,794 | |
| | | | | | |
| Gross margin (non-GAAP) | 109,695 | | 104,147 | | 5,548 | | 205,034 | | 213,826 | | (8,792) | |
| | | | | | |
| Operations and maintenance | 48,962 | | 47,031 | | 1,931 | | 97,539 | | 97,530 | | 9 | |
| Depreciation and amortization | 25,165 | | 23,123 | | 2,042 | | 50,114 | | 46,653 | | 3,461 | |
| Total operating expenses | 74,127 | | 70,154 | | 3,973 | | 147,653 | | 144,183 | | 3,470 | |
| | | | | | |
| Adjusted operating income | $ | 35,568 | | $ | 33,993 | | $ | 1,575 | | $ | 57,381 | | $ | 69,643 | | $ | (12,262) | |
Three Months Ended SeptemberJune 30, 20202021 Compared to the Three Months Ended SeptemberJune 30, 2019:2020:
Gross margin for the three months ended SeptemberJune 30, 20202021 increased as a result of the following:
| | | | | |
| (in millions) |
Release of TCJA revenue reservesRider recovery | $2.7 | |
Winter Storm Uri impacts (a) | 2.4 | |
| Wholesale, Power Marketing and Tech Services | 2.2 | |
| Prior year COVID-19 impacts | 1.5 | |
Rider recoveryResidential customer growth | 0.4 | |
Mark-to-market on wholesale energy contracts (b) | (3.4) | |
TCJA-related bill credits (c) | (0.9) | |
| Weather | (0.7) | |
| Other | 1.3 | |
Off-system power marketing | 0.9 | |
Weather | 0.2 | |
Mark-to-market on wholesale energy contracts | (1.4) | |
COVID-19 impacts | (0.2) | |
Other | 0.9 | |
Total increasechange in Gross margin (non-GAAP) | $ | 3.25.5 | |
________________
(a) In the first quarter 2021,our Electric Utilities accrued $3.2 million of negative impacts to our regulated wholesale power margins due to the higher fuel costs associated with Winter Storm Uri. Through regulatory actions in the second quarter of 2021, our Electric Utilities were able to reduce $2.4 million of that negative impact.
(b) Mark-to-market losses of $3.6 million for the three months ended June 30, 2021 will reverse in the second half of 2021 as these fixed price wholesale energy contracts are settled.
(c) In April 2021, Colorado Electric delivered TCJA-related bill credits to its customers. These bill credits were offset by a reduction in income tax expense and resulted in a minimal impact to Net Income.
Operations and maintenance expense increased primarily due to COVID-19higher maintenance costs related to planned and unplanned outages at the Gillette, Wyoming energy complex and higher operating expenses of $0.5 million for the sequestration of essential employees and $0.3 million of additional bad debt expenseassociated with Corriedale which were partially offset by $0.4 million of lower travel, training and employee related expenses.was placed in service November 30, 2020.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
NineSix Months Ended SeptemberJune 30, 20202021 Compared to the NineSix Months Ended SeptemberJune 30, 2019:2020:
Gross margin for the ninesix months ended SeptemberJune 30, 2020 increased2021 decreased as a result of the following:
| | | | | |
| |
| (in millions) |
Release of TCJA revenue reservesTCJA-related bill credits (a)
| $ | $(10.2) | |
Mark-to-market on wholesale energy contracts (b) | (6.3) | |
Winter Storm Uri impacts (c) | (2.9) | |
| Rider recovery | 4.0 | |
| Wholesale, Power Marketing and Tech Services | 2.7 | |
Rider recovery and true-up Prior year COVID-19 impacts(a)
| 1.01.5 | |
| Residential customer growth | 0.7 | |
| Weather | 0.9 | |
COVID-19 impacts (b)
| (1.7)0.4 | |
| Other | 0.21.3 | |
Total increasechange in Gross margin (non-GAAP) | $ | 3.1 (8.8) | |
____________________________________
(a) Gross margin increased dueIn February and April 2021, Colorado Electric delivered TCJA-related bill credits to $2.6 million of rider revenues, which was partiallyits customers. These bill credits were offset by a $1.6 million rider true-up.reduction in income tax expense and resulted in a minimal impact to Net income.
(b) The impactsMark-to-market losses of $5.1 million for the six months ended June 30, 2021 will reverse in the second half of 2021 as these fixed price wholesale energy contracts are settled.
(c) As a result of Winter Storm Uri, our Electric Utilities incurred a $0.8 million negative impact to Electric Utilities’ gross margin from COVID-19 were primarily driven by reduced commercial volumesour regulated wholesale power margins due to higher fuel costs and waived customer late payment fees partially offset by higher residential usage.$2.1 million of incremental fuel costs that are not recoverable through our fuel cost recovery mechanisms.
Operations and maintenance expense increasedremained constant primarily due to $1.4 million ofhigher maintenance costs related to planned and unplanned outages at the Gillette, Wyoming energy complex and higher operating expenses associated with Corriedale which was placed in service November 30, 2020, offset by prior year expenses related to the municipalization efforts to retain our franchise privileges in Pueblo, Colorado. COVID-19 impacts to operations and maintenance expense included $2.2 million of expenses related to the sequestration of essential employees and $0.9 million of additional bad debt expense which were partially offset by $2.4 million of lower travel, training, outside services and employee related expenses.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
Operating Statistics
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Electric Revenue | | Quantities Sold |
| (in thousands) | | (MWh) |
| Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended
September 30, | Nine Months Ended
September 30, |
| 2020 | 2019 | 2020 | 2019 | | 2020 | 2019 | 2020 | 2019 |
| | | | | | | | | |
| Residential | $ | 62,395 | | $ | 58,919 | | $ | 167,048 | | $ | 162,257 | | | 405,989 | | 384,735 | | 1,113,821 | | 1,075,394 | |
| Commercial | 64,756 | | 65,732 | | 178,979 | | 186,434 | | | 538,299 | | 560,547 | | 1,492,239 | | 1,556,449 | |
| Industrial | 35,660 | | 33,937 | | 99,725 | | 98,074 | | | 462,545 | | 462,809 | | 1,382,710 | | 1,335,260 | |
| Municipal | 4,834 | | 4,792 | | 12,732 | | 13,184 | | | 46,256 | | 46,106 | | 121,027 | | 121,025 | |
| Subtotal Retail Revenue - Electric | 167,645 | | 163,380 | | 458,484 | | 459,949 | | | 1,453,089 | | 1,454,197 | | 4,109,797 | | 4,088,128 | |
Contract Wholesale (a) | 5,924 | | 8,211 | | 14,947 | | 23,335 | | | 129,960 | | 229,369 | | 348,991 | | 646,611 | |
| Off-system/Power Marketing Wholesale | 9,535 | | 6,452 | | 17,939 | | 16,592 | | | 167,494 | | 160,357 | | 469,590 | | 436,298 | |
| Other | 17,738 | | 13,341 | | 46,811 | | 40,789 | | | — | | — | | — | | — | |
| Total Revenue and Energy Sold | 200,842 | | 191,384 | | 538,181 | | 540,665 | | | 1,750,543 | | 1,843,923 | | 4,928,378 | | 5,171,037 | |
Other Uses, Losses or Generation, net (b) | — | | — | | — | | — | | | 118,410 | | 112,172 | | 294,466 | | 299,038 | |
| Total Revenue and Energy | 200,842 | | 191,384 | | 538,181 | | 540,665 | | | 1,868,953 | | 1,956,095 | | 5,222,844 | | 5,470,075 | |
| Less cost of fuel and purchased power | 77,885 | | 71,593 | | 201,398 | | 207,004 | | | | | | |
| Gross Margin (non-GAAP) | $ | 122,957 | | $ | 119,791 | | $ | 336,783 | | $ | 333,661 | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenue (in thousands) | | Quantities Sold (MWh) |
| Three Months Ended
June 30, | Six Months Ended
June 30, | | Three Months Ended
June 30, | Six Months Ended
June 30, |
| 2021 | 2020 | 2021 | 2020 | | 2021 | 2020 | 2021 | 2020 |
| | | | | | | | | |
| Residential | $ | 53,451 | | $ | 50,148 | | $ | 126,211 | | $ | 104,653 | | | 335,063 | | 334,682 | | 731,149 | | 707,832 | |
| Commercial | 66,809 | | 56,400 | | 143,816 | | 114,223 | | | 501,463 | | 459,632 | | 994,418 | | 953,940 | |
| Industrial | 35,186 | | 31,896 | | 78,195 | | 64,065 | | | 441,793 | | 459,533 | | 856,984 | | 920,165 | |
| Municipal | 4,382 | | 4,020 | | 9,402 | | 7,898 | | | 39,863 | | 38,372 | | 76,105 | | 74,771 | |
| Subtotal Retail Revenue - Electric | 159,828 | | 142,464 | | 357,624 | | 290,839 | | | 1,318,182 | | 1,292,219 | | 2,658,656 | | 2,656,708 | |
| Contract Wholesale | 5,751 | | 3,470 | | 14,216 | | 9,023 | | | 129,763 | | 87,253 | | 286,758 | | 219,031 | |
| Off-system/Power Marketing Wholesale | 6,200 | | 3,537 | | 11,313 | | 8,404 | | | 188,607 | | 136,311 | | 316,190 | | 302,096 | |
| Other | 13,154 | | 13,729 | | 29,188 | | 29,073 | | | — | | — | | — | | — | |
| Total Revenue and Energy Sold | 184,933 | | 163,200 | | 412,341 | | 337,339 | | | 1,636,552 | | 1,515,783 | | 3,261,604 | | 3,177,835 | |
| Other Uses, Losses or Generation, net | — | | — | | — | | — | | | 93,747 | | 85,185 | | 224,722 | | 176,056 | |
| Total Revenue and Energy | 184,933 | | 163,200 | | 412,341 | | 337,339 | | | 1,730,299 | | 1,600,968 | | 3,486,326 | | 3,353,891 | |
| Less cost of fuel and purchased power | 75,238 | | 59,053 | | 207,307 | | 123,513 | | | | | | |
| Gross Margin (non-GAAP) | $ | 109,695 | | $ | 104,147 | | $ | 205,034 | | $ | 213,826 | | | | | | |
| | | Electric Revenue
(in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Quantities Sold (MWh) (b) | |
| Three Months Ended September 30, | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 | |
| Three Months Ended June 30, | | Three Months Ended June 30, | | Revenue
(in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Quantities Sold (MWh)(a) |
| | | | 2021 | 2020 | | 2021 | 2020 | | 2021 | 2020 |
| Colorado Electric | Colorado Electric | $ | 74,742 | | $ | 70,771 | | | $ | 42,236 | | $ | 41,916 | | | 666,916 | | 634,098 | | Colorado Electric | | $ | 64,313 | | $ | 57,897 | | | $ | 34,409 | | $ | 32,455 | | | 618,806 | | 547,814 | |
South Dakota Electric (a) | 78,861 | | 77,022 | | | 58,062 | | 55,217 | | | 699,150 | | 835,725 | | |
| South Dakota Electric | | South Dakota Electric | | 73,494 | | 62,587 | | | 51,892 | | 49,973 | | | 630,055 | | 570,528 | |
| Wyoming Electric | Wyoming Electric | 47,239 | | 43,591 | | | 22,659 | | 22,658 | | | 502,887 | | 486,272 | | Wyoming Electric | | 47,126 | | 42,716 | | | 23,394 | | 21,719 | | | 481,438 | | 482,626 | |
| Total Electric Revenue, Gross Margin (non-GAAP), and Quantities Sold | Total Electric Revenue, Gross Margin (non-GAAP), and Quantities Sold | $ | 200,842 | | $ | 191,384 | | | $ | 122,957 | | $ | 119,791 | | | 1,868,953 | | 1,956,095 | | Total Electric Revenue, Gross Margin (non-GAAP), and Quantities Sold | | $ | 184,933 | | $ | 163,200 | | | $ | 109,695 | | $ | 104,147 | | | 1,730,299 | | 1,600,968 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| Electric Revenue
(in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Quantities Sold (MWh) (b) |
| Nine Months Ended September 30, | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 |
| Colorado Electric | $ | 191,197 | | $ | 186,030 | | | $ | 106,961 | | $ | 104,411 | | | 1,765,501 | | 1,611,126 | |
South Dakota Electric (a) | 213,059 | | 225,309 | | | 163,659 | | 162,390 | | | 1,954,902 | | 2,438,366 | |
| Wyoming Electric | 133,925 | | 129,326 | | | 66,163 | | 66,860 | | | 1,502,441 | | 1,420,583 | |
| Total Electric Revenue, Gross Margin (non-GAAP), and Quantities Sold | $ | 538,181 | | $ | 540,665 | | | $ | 336,783 | | $ | 333,661 | | | 5,222,844 | | 5,470,075 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Six Months Ended June 30, | | Revenue
(in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Quantities Sold (MWh)(a) |
| | 2021 | 2020 | | 2021 | 2020 | | 2021 | 2020 |
| Colorado Electric | | $ | 144,054 | | $ | 116,455 | | | $ | 58,500 | | $ | 64,725 | | | 1,225,149 | | 1,098,585 | |
| South Dakota Electric | | 168,830 | | 134,198 | | | 101,442 | | 105,597 | | | 1,287,834 | | 1,255,752 | |
| Wyoming Electric | | 99,457 | | 86,686 | | | 45,092 | | 43,504 | | | 973,343 | | 999,554 | |
| Total Electric Revenue, Gross Margin (non-GAAP), and Quantities Sold | | $ | 412,341 | | $ | 337,339 | | | $ | 205,034 | | $ | 213,826 | | | 3,486,326 | | 3,353,891 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
________________
(a) Revenue and purchased power for the three and nine months ended September 30, 2020 as well as associated quantities, for certain wholesale contracts have been presented on a net basis. Amounts for the three and nine months ended September 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.
| | | | | | | | | | | | | | |
| Three Months Ended
September 30, | Nine Months Ended
September 30, |
| Quantities Generated and Purchased (MWh) | 2020 | 2019 | 2020 | 2019 |
| | | | |
| Coal-fired | 592,681 | | 564,220 | | 1,712,540 | | 1,621,355 | |
| Natural Gas and Oil | 199,408 | | 234,366 | | 453,950 | | 445,498 | |
| Wind | 54,518 | | 55,407 | | 191,696 | | 167,331 | |
| Total Generated | 846,607 | | 853,993 | | 2,358,186 | | 2,234,184 | |
| | | | |
Purchased (a) | 1,022,346 | | 1,102,102 | | 2,864,658 | | 3,235,891 | |
| Total Generated and Purchased | 1,868,953 | | 1,956,095 | | 5,222,844 | | 5,470,075 | |
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| Quantities Generated and Purchased (MWh) | 2021 | 2020 | 2021 | 2020 |
| | | | |
| Generated: | | | | |
| Coal | 497,238 | | 572,030 | | 980,216 | | 1,119,859 | |
| Natural Gas and Oil | 171,610 | | 86,798 | | 303,715 | | 254,542 | |
| Wind | 107,178 | | 63,628 | | 225,157 | | 137,178 | |
| Total Generated | 776,026 | | 722,456 | | 1,509,088 | | 1,511,579 | |
| Purchased | 954,273 | | 878,512 | | 1,977,238 | | 1,842,312 | |
| Total Generated and Purchased | 1,730,299 | | 1,600,968 | | 3,486,326 | | 3,353,891 | |
| | | Three Months Ended
September 30, | Nine Months Ended
September 30, | | Three Months Ended June 30, | Six Months Ended June 30, |
| Quantities Generated and Purchased (MWh) | Quantities Generated and Purchased (MWh) | 2020 | 2019 | 2020 | 2019 | Quantities Generated and Purchased (MWh) | 2021 | 2020 | 2021 | 2020 |
| Generated: | Generated: | | Generated: | |
| Colorado Electric | Colorado Electric | 97,450 | | 149,509 | | 271,957 | | 341,925 | | Colorado Electric | 110,821 | | 80,456 | | 201,077 | | 174,507 | |
| South Dakota Electric | South Dakota Electric | 518,821 | | 489,042 | | 1,434,353 | | 1,262,336 | | South Dakota Electric | 442,665 | | 442,566 | | 911,481 | | 915,532 | |
| Wyoming Electric | Wyoming Electric | 230,336 | | 215,442 | | 651,876 | | 629,923 | | Wyoming Electric | 222,540 | | 199,434 | | 396,530 | | 421,540 | |
| Total Generated | Total Generated | 846,607 | | 853,993 | | 2,358,186 | | 2,234,184 | | Total Generated | 776,026 | | 722,456 | | 1,509,088 | | 1,511,579 | |
| | Purchased: | Purchased: | | Purchased: | |
| Colorado Electric | Colorado Electric | 569,466 | | 484,589 | | 1,493,544 | | 1,269,201 | | Colorado Electric | 507,985 | | 467,358 | | 1,024,072 | | 924,078 | |
South Dakota Electric (a) | 180,329 | | 346,683 | | 520,549 | | 1,176,030 | | |
| South Dakota Electric | | South Dakota Electric | 187,389 | | 127,962 | | 376,353 | | 340,220 | |
| Wyoming Electric | Wyoming Electric | 272,551 | | 270,830 | | 850,565 | | 790,660 | | Wyoming Electric | 258,899 | | 283,192 | | 576,813 | | 578,014 | |
| Total Purchased | Total Purchased | 1,022,346 | | 1,102,102 | | 2,864,658 | | 3,235,891 | | Total Purchased | 954,273 | | 878,512 | | 1,977,238 | | 1,842,312 | |
| | Total Generated and Purchased | Total Generated and Purchased | 1,868,953 | | 1,956,095 | | 5,222,844 | | 5,470,075 | | Total Generated and Purchased | 1,730,299 | | 1,600,968 | | 3,486,326 | | 3,353,891 | |
________________
(a) Purchased power quantities for the three and nine months ended September 30, 2020, for certain wholesale contracts have been presented on a net basis. Amounts for the three and nine months ended September 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, |
| | Three Months Ended September 30, | | 2021 | | 2020 |
| Degree days | 2020 | 2019 | |
| Actual | Variance from
Normal | | Actual | Variance from
Normal | |
| Degree Days | | Degree Days | Actual | | Variance from
Normal | | Actual | | Variance from
Normal |
| Heating Degree Days: | Heating Degree Days: | | | | Heating Degree Days: | | | |
| Colorado Electric | Colorado Electric | 99 | | 1 | % | | 4 | | (96) | % | Colorado Electric | 595 | | | (6) | % | | 518 | | | (18) | % |
| South Dakota Electric | South Dakota Electric | 202 | | (10) | % | | 175 | | (22) | % | South Dakota Electric | 1,048 | | | 2 | % | | 1,127 | | | 10 | % |
| Wyoming Electric | Wyoming Electric | 208 | | (29) | % | | 120 | | (77) | % | Wyoming Electric | 1,221 | | | 2 | % | | 1,149 | | | (4) | % |
Combined (a) | Combined (a) | 156 | | (14) | % | | 86 | | (36) | % | Combined (a) | 875 | | | — | % | | 853 | | | (3) | % |
| | Cooling Degree Days: | Cooling Degree Days: | | | | Cooling Degree Days: | |
| Colorado Electric | Colorado Electric | 987 | | 44 | % | | 1,079 | | 58 | % | Colorado Electric | 300 | | | 44 | % | | 382 | | | 83 | % |
| South Dakota Electric | South Dakota Electric | 561 | | 5 | % | | 366 | | (31) | % | South Dakota Electric | 167 | | | 69 | % | | 120 | | | 21 | % |
| Wyoming Electric | Wyoming Electric | 492 | | 65 | % | | 433 | | 45 | % | Wyoming Electric | 117 | | | 134 | % | | 101 | | | 102 | % |
Combined (a) | Combined (a) | 742 | | 34 | % | | 705 | | 27 | % | Combined (a) | 218 | | | 56 | % | | 236 | | | 69 | % |
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| Degree days | 2020 | | 2019 | |
| | Actual | Variance from
Normal | | Actual | Variance from
Normal | | 2021 | | 2020 |
| Heating Degree Days: | | | | |
| Degree Days | | Degree Days | Actual | | Variance from
Normal | | Actual | | Variance from
Normal |
| Heating Degree Days | | Heating Degree Days | | | |
| Colorado Electric | Colorado Electric | 3,073 | | (9) | % | | 3,156 | | (6) | % | Colorado Electric | 3,326 | | | 2 | % | | 2,974 | | | (9) | % |
| South Dakota Electric | South Dakota Electric | 4,440 | | — | % | | 5,370 | | 20 | % | South Dakota Electric | 4,372 | | | 3 | % | | 4,238 | | | — | % |
| Wyoming Electric | Wyoming Electric | 4,356 | | (3) | % | | 4,677 | | 5 | % | Wyoming Electric | 4,482 | | | 6 | % | | 4,148 | | | (1) | % |
Combined (a) | Combined (a) | 3,799 | | (4) | % | | 4,198 | | 6 | % | Combined (a) | 3,915 | | | 3 | % | | 3,642 | | | (4) | % |
| | Cooling Degree Days: | Cooling Degree Days: | | | | Cooling Degree Days: | |
| Colorado Electric | Colorado Electric | 1,369 | | 53 | % | | 1,226 | | 37 | % | Colorado Electric | 300 | | | 44 | % | | 382 | | | 83 | % |
| South Dakota Electric | South Dakota Electric | 681 | | 8 | % | | 404 | | (36) | % | South Dakota Electric | 167 | | | 69 | % | | 120 | | | 21 | % |
| Wyoming Electric | Wyoming Electric | 593 | | 70 | % | | 462 | | 33 | % | Wyoming Electric | 117 | | | 134 | % | | 101 | | | 102 | % |
Combined (a) | Combined (a) | 977 | | 41 | % | | 791 | | 14 | % | Combined (a) | 218 | | | 56 | % | | 236 | | | 69 | % |
____________________
(a) Combined actuals are calculated based on the weighted average number of total customers by state.
| | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
Contracted Power Plant Fleet Availability (a) | 2020 | 2019 | 2020 | 2019 |
Coal-fired plants (b) | 97.4 | % | 94.6 | % | 94.1 | % | 90.0 | % |
Natural gas-fired plants and Other plants (c)(d) | 79.7 | % | 89.6 | % | 80.5 | % | 89.8 | % |
| Wind | 97.7 | % | 93.7 | % | 98.3 | % | 95.0 | % |
| Total Availability | 86.8 | % | 91.5 | % | 86.3 | % | 90.3 | % |
| | | | |
| Wind Capacity Factor | 33.2 | % | 33.8 | % | 39.3 | % | 37.1 | % |
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
Contracted generating facilities availability by fuel type (a) | 2021 | 2020 | 2021 | 2020 |
Coal (b) | 85.4 | % | 94.1 | % | 84.6 | % | 92.5 | % |
Natural Gas and diesel oil (b) (c) | 97.2 | % | 78.3 | % | 92.4 | % | 80.9 | % |
| Wind | 96.4 | % | 98.1 | % | 94.9 | % | 98.6 | % |
| Total availability | 93.4 | % | 85.0 | % | 90.3 | % | 86.0 | % |
| | | | |
| Wind capacity factor | 36.9 | % | 39.0 | % | 40.0 | % | 42.3 | % |
____________________
(a) Availability and Wind Capacity Factorwind capacity factor are calculated using a weighted average based on capacity of our generating fleet.
(b) 20192021 included planned outages at Neil Simpson II, andWygen II, Wygen III and Pueblo Airport Generation and unplanned outages at Neil Simpson II and Wyodak Plant and Wygen III.Plant.
(c) 2020 included a plannedan unplanned outage at Cheyenne Prairie and unplanned outages at Pueblo Airport Generation and Lange CT.Generation.
(d) 2019 included planned outages at Neil Simpson CT and Lange CT.
Operating results for the Gas Utilities
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) |
| Revenue: | | | | | | |
| Natural gas - regulated | $ | 128,468 | | $ | 117,549 | | $ | 10,919 | | $ | 612,797 | | $ | 651,366 | | $ | (38,569) | |
| Other - non-regulated services | 15,461 | | 13,195 | | 2,266 | | 53,015 | | 55,927 | | (2,912) | |
| Total revenue | 143,929 | | 130,744 | | 13,185 | | 665,812 | | 707,293 | | (41,481) | |
| | | | | | |
| Cost of sales: | | | | | | |
| Natural gas - regulated | 25,235 | | 28,154 | | (2,919) | | 222,144 | | 280,312 | | (58,168) | |
| Other - non-regulated services | 1,800 | | 4,870 | | (3,070) | | 4,874 | | 16,975 | | (12,101) | |
| Total cost of sales | 27,035 | | 33,024 | | (5,989) | | 227,018 | | 297,287 | | (70,269) | |
| | | | | | |
| Gross margin (non-GAAP) | 116,894 | | 97,720 | | 19,174 | | 438,794 | | 410,006 | | 28,788 | |
| | | | | | |
| Operations and maintenance | 73,642 | | 70,170 | | 3,472 | | 223,351 | | 225,239 | | (1,888) | |
| Depreciation and amortization | 25,105 | | 22,814 | | 2,291 | | 76,190 | | 68,160 | | 8,030 | |
| Total operating expenses | 98,747 | | 92,984 | | 5,763 | | 299,541 | | 293,399 | | 6,142 | |
| | | | | | |
| Adjusted operating income | $ | 18,147 | | $ | 4,736 | | $ | 13,411 | | $ | 139,253 | | $ | 116,607 | | $ | 22,646 | |
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | Variance | 2021 | 2020 | Variance |
| Revenue: | | | | | | |
| Natural gas - regulated | $ | 172,465 | | $ | 148,432 | | $ | 24,033 | | $ | 550,542 | | $ | 484,329 | | $ | 66,213 | |
| Other - non-regulated services | 13,585 | | 12,678 | | 907 | | 38,027 | | 37,554 | | 473 | |
| Total revenue | 186,050 | | 161,110 | | 24,940 | | 588,569 | | 521,883 | | 66,686 | |
| | | | | | |
| Cost of sales: | | | | | | |
| Natural gas - regulated | 62,317 | | 42,910 | | 19,407 | | 245,284 | | 196,909 | | 48,375 | |
| Other - non-regulated services | 798 | | 1,712 | | (914) | | 10,881 | | 3,074 | | 7,807 | |
| Total cost of sales | 63,115 | | 44,622 | | 18,493 | | 256,165 | | 199,983 | | 56,182 | |
| | | | | | |
| Gross margin (non-GAAP) | 122,935 | | 116,488 | | 6,447 | | 332,404 | | 321,900 | | 10,504 | |
| | | | | | |
| Operations and maintenance | 77,263 | | 72,415 | | 4,848 | | 159,463 | | 149,709 | | 9,754 | |
| Depreciation and amortization | 25,687 | | 25,864 | | (177) | | 50,862 | | 51,085 | | (223) | |
| Total operating expenses | 102,950 | | 98,279 | | 4,671 | | 210,325 | | 200,794 | | 9,531 | |
| | | | | | |
| Adjusted operating income | $ | 19,985 | | $ | 18,209 | | $ | 1,776 | | $ | 122,079 | | $ | 121,106 | | $ | 973 | |
Three Months Ended SeptemberJune 30, 20202021 Compared to the Three Months Ended SeptemberJune 30, 2019:2020:
Gross margin for the three months ended SeptemberJune 30, 2020 increased as a result of:
| | | | | |
| |
| (in millions) |
Weather (a)
| $ | 8.4 | |
New rates | 4.9 | |
Mark-to-market on non-utility natural gas commodity contracts | 1.8 | |
Customer growth - distribution | 1.5 | |
Non-Utility - Tech Services | 0.6 | |
COVID-19 impacts (b)
| (0.8) | |
Other | 2.8 | |
Total increase in Gross margin (non-GAAP) | $ | 19.2 | |
| |
| |
| |
| |
____________________
(a) Weather impacts for the three months ended September 30, 2020 compared to the same period in the prior year include increased irrigation loads to agriculture customers in 2020 in our Nebraska Gas service territory as 2019 was a record precipitation year and increased heating demand due to cooler temperatures.
(b) The impacts to Gas Utilities’ gross margin from COVID-19 were primarily driven by waived customer late payment fees.
Operations and maintenance expense increased primarily due to higher employee costs. COVID-19 impacts to operations and maintenance expense included $1.4 million of additional bad debt expense which was partially offset by $0.7 million of lower travel and training expenses.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019:
Gross margin for the nine months ended September 30, 20202021 increased as a result of:
| | | | | |
| (in millions) |
| New rates | $ | 14.15.5 | |
| Mark-to-market on non-utility natural gas commodity contracts | 4.2 | |
Customer growth - distribution | 3.61.6 | |
Prior year amortization of excess deferred income taxesCOVID-19 impacts | 3.50.9 | |
Non-Utility - Tech Services and Gas Supply ServicesWeather | 1.40.1 | |
Weather TCJA-related bill credits(a)
| 0.8 | |
COVID-19 impacts (b)
| (1.7)(2.9) | |
| Other | 2.91.2 | |
| Total increase in Gross margin (non-GAAP) | $ | 28.86.4 | |
______________________________
(a) Weather impacts for the nine months ended September 30, 2020 compared to the same period in the prior year include increased irrigation loads to agriculture customers in the third quarter of 2020 in ourIn June 2021, Nebraska Gas service territory as 2019 was a record precipitation year mostlyprovided TCJA-related bill credits to its customers. These bill credits were offset by lower heating demanda reduction in the first quarter of 2020 dueincome tax expense and resulted in a minimal impact to warmer temperatures.
(b) The impacts to Gas Utilities’ gross margin from COVID-19 were primarily driven by reduced volumes from certain transport customers and waived customer late payment fees.Net income.
Operations and maintenance expense decreased primarilyincreased due to $2.7$4.4 million of lowerhigher employee costs and outside services expensesdriven by higher headcount and $1.2higher stock compensation expense related to market performance, $1.6 million of lower employee costs partially offset byincreased facilities and office expenses, and $1.0 million of higherincreased property taxes due to a higher asset base. COVID-19 impacts to operations and maintenance expense included $2.8base partially offset by $3.2 million of additionaldecreased bad debt expense associated with lower expected credit losses. Other expenses, none of which was partially offset by $2.2 millionwere individually significant, comprised the remainder of lower travel, training, outside services and employee related expenses.the difference when compared to the same period in the prior year.
Depreciation and amortization was comparable to the same period in the prior year due to lower depreciation rates approved in the Nebraska Gas and Colorado Gas rate reviews mostly offset by increased primarilydepreciation due to a higher asset base driven by prior year and current year capital expenditures.
Operating Statistics
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gas Revenue
(in thousands) | | | | Gross Margin (non-GAAP) (in thousands) | | | | Gas Utilities Quantities Sold & Transported (Dth) | | |
| | Three Months Ended
September 30, | | | Three Months Ended
September 30, | | | Three Months Ended
September 30, | | |
| | 2020 | 2019 | | | | 2020 | 2019 | | | | 2020 | 2019 | | |
| | | | | | | | | | | | | | | |
| Residential | | $ | 61,515 | | $ | 57,244 | | | | | $ | 48,165 | | $ | 43,441 | | | | | 4,058,040 | | 3,599,549 | | | |
| Commercial | | 19,940 | | 19,629 | | | | | 12,821 | | 11,589 | | | | | 2,354,719 | | 2,298,919 | | | |
| Industrial | | 7,280 | | 8,770 | | | | | 2,514 | | 2,493 | | | | | 2,674,127 | | 2,960,930 | | | |
| Other | | 1,271 | | 2,499 | | | | | 1,271 | | 2,499 | | | | | — | | — | | | |
| Total Distribution | | 90,006 | | 88,142 | | | | | 64,771 | | 60,022 | | | | | 9,086,886 | | 8,859,398 | | | |
| | | | | | | | | | | | | | | |
| Transportation and Transmission | | 38,462 | | 29,407 | | | | | 38,462 | | 29,373 | | | | | 33,668,174 | | 31,538,815 | | | |
| | | | | | | | | | | | | | | |
| Total Regulated | | 128,468 | | 117,549 | | | | | 103,233 | | 89,395 | | | | | 42,755,060 | | 40,398,213 | | | |
| | | | | | | | | | | | | | | |
| Non-regulated Services | | 15,461 | | 13,195 | | | | | 13,661 | | 8,325 | | | | | | | | |
| | | | | | | | | | | | | | | |
Total Gas Revenue & Gross Margin
(non-GAAP) | | $ | 143,929 | | $ | 130,744 | | | | | $ | 116,894 | | $ | 97,720 | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | Gas Revenue
(in thousands) | | Gross Margin (non-GAAP)
(in thousands) | | Gas Utilities Quantities Sold & Transported (Dth) |
| | Nine Months Ended
September 30, | | Nine Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 |
| | | | | | | | | |
| Residential | | $ | 351,986 | | $ | 383,466 | | | $ | 207,654 | | $ | 201,168 | | | 40,790,670 | | 44,356,725 | |
| Commercial | | 127,617 | | 146,752 | | | 61,676 | | 61,673 | | | 19,155,051 | | 21,484,646 | |
| Industrial | | 18,539 | | 18,764 | | | 6,697 | | 5,830 | | | 5,771,732 | | 5,141,399 | |
| Other | | 856 | | (968) | | | 856 | | (968) | | | — | | — | |
| Total Distribution | | 498,998 | | 548,014 | | | 276,883 | | 267,703 | | | 65,717,453 | | 70,982,770 | |
| | | | | | | | | |
| Transportation and Transmission | | 113,799 | | 103,352 | | | 113,770 | | 103,351 | | | 108,967,182 | | 110,622,285 | |
| | | | | | | | | |
| Total Regulated | | 612,797 | | 651,366 | | | 390,653 | | 371,054 | | | 174,684,635 | | 181,605,055 | |
| | | | | | | | | |
| Non-regulated Services | | 53,015 | | 55,927 | | | 48,141 | | 38,952 | | | | |
| | | | | | | | | |
Total Gas Revenue & Gross Margin
(non-GAAP) | | $ | 665,812 | | $ | 707,293 | | | $ | 438,794 | | $ | 410,006 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | Gas Revenue
(in thousands) | | Gross Margin (non-GAAP) (in thousands) | | | | Gas Utilities Quantities Sold & Transported (Dth) | | |
| | Three Months Ended
September 30, | | | Three Months Ended
September 30, | | | Three Months Ended
September 30, | |
| | 2020 | 2019 | | | | 2020 | 2019 | | | | 2020 | 2019 | | |
| | | | | | | | | | | | | | | |
| Arkansas Gas | | $ | 21,043 | | $ | 21,387 | | | | | $ | 17,400 | | $ | 16,249 | | | | | 3,925,893 | | 4,094,454 | | | |
| Colorado Gas | | 22,724 | | 22,632 | | | | | 16,972 | | 15,667 | | | | | 3,702,666 | | 3,806,360 | | | |
| Iowa Gas | | 18,155 | | 16,381 | | | | | 14,672 | | 13,135 | | | | | 5,628,110 | | 5,686,772 | | | |
| Kansas Gas | | 18,591 | | 19,013 | | | | | 13,099 | | 12,309 | | | | | 8,564,408 | | 7,602,758 | | | |
| Nebraska Gas | | 46,315 | | 35,715 | | | | | 39,755 | | 28,046�� | | | | | 16,525,547 | | 13,999,302 | | | |
| Wyoming Gas | | 17,101 | | 15,616 | | | | | 14,996 | | 12,314 | | | | | 4,408,436 | | 5,208,567 | | | |
| Total Gas Revenue & Gross Margin (non-GAAP) | | $ | 143,929 | | $ | 130,744 | | | | | $ | 116,894 | | $ | 97,720 | | | | | 42,755,060 | | 40,398,213 | | | |
| | | | | |
| |
| (in millions) |
| New rates | $ | 14.7 | |
| Weather | 7.6 | |
| Mark-to-market on non-utility natural gas commodity contracts | 1.2 | |
| Prior year COVID-19 impacts | 0.9 | |
Black Hills Energy Services Winter Storm Uri costs (a) | (8.2) | |
TCJA-related bill credits (b) | (2.9) | |
| Non-utility - Service Guard Comfort Plan and Gas Supply Services | (2.3) | |
| Other | (0.5) | |
| Total increase in Gross margin (non-GAAP) | $ | 10.5 | |
__________(a) Black Hills Energy Services offers fixed contract pricing for non-regulated gas supply services to our regulated natural gas customers. The increased cost of natural gas sold during Winter Storm Uri is not recoverable through a regulatory mechanism.
(b) In June 2021, Nebraska Gas delivered TCJA-related bill credits to its customers. These bill credits were offset by a reduction in income tax expense and resulted in a minimal impact to Net income.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | Gas Revenue
(in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Gas Utilities Quantities Sold & Transported (Dth) |
| | Nine Months Ended
September 30, | | Nine Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2020 | 2019 | | 2020 | 2019 | | 2020 | 2019 |
| | | | | | | | | |
| Arkansas Gas | | $ | 124,621 | | $ | 127,014 | | | $ | 88,161 | | $ | 79,148 | | | 19,795,077 | | 21,061,567 | |
| Colorado Gas | | 123,943 | | 135,816 | | | 73,785 | | 73,022 | | | 21,845,915 | | 23,050,638 | |
| Iowa Gas | | 94,386 | | 105,736 | | | 50,355 | | 50,773 | | | 25,429,502 | | 28,834,731 | |
| Kansas Gas | | 70,571 | | 77,609 | | | 44,162 | | 42,385 | | | 25,202,180 | | 24,336,744 | |
| Nebraska Gas | | 170,447 | | 183,827 | | | 122,140 | | 111,828 | | | 56,857,061 | | 57,815,316 | |
| Wyoming Gas | | 81,844 | | 77,291 | | | 60,191 | | 52,850 | | | 25,554,900 | | 26,506,059 | |
| Total Gas Revenue & Gross Margin (non-GAAP) | | $ | 665,812 | | $ | 707,293 | | | $ | 438,794 | | $ | 410,006 | | | 174,684,635 | | 181,605,055 | |
Our Gas Utilities are highly seasonalDepreciation and sales volumes vary considerably with weather and seasonal heating and industrial loads. Approximately 70% of our Gas Utilities’ revenue and margins are expectedamortization was comparable to the same period in the firstprior year due to lower depreciation rates approved in the Nebraska Gas and fourth quarters of each year. Therefore, revenue for,Colorado Gas rate reviews mostly offset by increased depreciation due to a higher asset base driven by prior and certain expenses of, these operations fluctuate significantly among quarters. Depending upon the geographic location in which our Gas Utilities operate, the winter heating season begins around November 1 and ends around March 31.current year capital expenditures.
Operating Statistics | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Revenue (in thousands) | | | | Gross Margin (non-GAAP) (in thousands) | | | | Gas Utilities Quantities Sold & Transported (Dth) | | |
| | Three Months Ended
June 30, | | | Three Months Ended
June 30, | | | Three Months Ended
June 30, | | |
| | 2021 | 2020 | | | | 2021 | 2020 | | | | 2021 | 2020 | | |
| | | | | | | | | | | | | | | |
| Residential | | $ | 98,370 | | $ | 83,240 | | | | | $ | 60,388 | | $ | 56,368 | | | | | 8,575,051 | | 8,501,835 | | | |
| Commercial | | 36,888 | | 27,441 | | | | | 16,964 | | 15,336 | | | | | 4,493,931 | | 3,965,529 | | | |
| Industrial | | 5,811 | | 6,059 | | | | | 1,400 | | 2,140 | | | | | 1,337,672 | | 2,036,553 | | | |
| Other | | (418) | | 828 | | | | | (418) | | 827 | | | | | — | | — | | | |
| Total Distribution | | 140,651 | | 117,568 | | | | | 78,334 | | 74,671 | | | | | 14,406,654 | | 14,503,917 | | | |
| | | | | | | | | | | | | | | |
| Transportation and Transmission | | 31,814 | | 30,864 | | | | | 31,814 | | 30,851 | | | | | 34,074,214 | | 30,243,501 | | | |
| | | | | | | | | | | | | | | |
| Total Regulated | | 172,465 | | 148,432 | | | | | 110,148 | | 105,522 | | | | | 48,480,868 | | 44,747,418 | | | |
| | | | | | | | | | | | | | | |
| Non-regulated Services | | 13,585 | | 12,678 | | | | | 12,787 | | 10,966 | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Gas Revenue & Gross Margin (non-GAAP) | | $ | 186,050 | | $ | 161,110 | | | | | $ | 122,935 | | $ | 116,488 | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Three Months Ended September 30, |
| 2020 | | | | 2019 |
| Heating Degree Days | Actual | | Variance
from Normal | | | | Actual | | Variance
from Normal |
Arkansas Gas (a) | 24 | | (44)% | | | | — | | (100)% |
| Colorado Gas | 159 | | (26)% | | | | 68 | | (68)% |
| Iowa Gas | 140 | | 1% | | | | 43 | | (69)% |
Kansas Gas (a) | 70 | | 27% | | | | — | | (101)% |
| Nebraska Gas | 109 | | (1)% | | | | 22 | | (80)% |
| Wyoming Gas | 245 | | (20)% | | | | 183 | | (37)% |
Combined (b) | 125 | | (13)% | | | | 53 | | (62)% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | Revenue (in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Gas Utilities Quantities Sold & Transported (Dth) |
| | Six Months Ended
June 30, | | Six Months Ended
June 30, | | Six Months Ended
June 30, |
| | 2021 | 2020 | | 2021 | 2020 | | 2021 | 2020 |
| | | | | | | | | |
| Residential | | $ | 332,767 | | $ | 290,471 | | | $ | 170,536 | | $ | 159,489 | | | 39,143,789 | | 36,732,630 | |
| Commercial | | 127,977 | | 107,677 | | | 52,448 | | 48,855 | | | 18,306,252 | | 16,800,332 | |
| Industrial | | 10,713 | | 11,259 | | | 3,189 | | 4,183 | | | 2,235,961 | | 3,097,605 | |
| Other | | (890) | | (415) | | | (890) | | (415) | | | — | | — | |
| Total Distribution | | 470,567 | | 408,992 | | | 225,283 | | 212,112 | | | 59,686,002 | | 56,630,567 | |
| | | | | | | | | |
| Transportation and Transmission | | 79,975 | | 75,337 | | | 79,975 | | 75,308 | | | 79,388,652 | | 75,299,008 | |
| | | | | | | | | |
| Total Regulated | | 550,542 | | 484,329 | | | 305,258 | | 287,420 | | | 139,074,654 | | 131,929,575 | |
| | | | | | | | | |
| Non-regulated Services | | 38,027 | | 37,554 | | | 27,146 | | 34,480 | | | | |
| | | | | | | | | |
| Total Gas Revenue & Gross Margin (non-GAAP) | | $ | 588,569 | | $ | 521,883 | | | $ | 332,404 | | $ | 321,900 | | | | |
| | | | Nine Months Ended September 30, | | Revenue (in thousands) | | Gross Margin (non-GAAP) (in thousands) | | | Gas Utilities Quantities Sold & Transported (Dth) | |
| | 2020 | | | 2019 | | Three Months Ended
June 30, | | | Three Months Ended
June 30, | | | Three Months Ended
June 30, | |
| Heating Degree Days | Actual | | Variance
from Normal | | | Actual | | Variance
from Normal | |
Arkansas Gas (a) | 2,036 | | (18)% | | | 2,347 | | (5)% | |
| | | 2021 | 2020 | | | 2021 | 2020 | | | 2021 | 2020 | |
| | Arkansas Gas | | Arkansas Gas | | $ | 32,994 | | $ | 28,733 | | | | $ | 22,902 | | $ | 21,906 | | | | 5,718,417 | | 4,906,236 | | |
| Colorado Gas | Colorado Gas | 3,797 | | (7)% | | | 4,115 | | —% | Colorado Gas | | 34,190 | | 28,613 | | | | 20,610 | | 18,807 | | | | 5,957,285 | | 5,046,844 | | |
| Iowa Gas | Iowa Gas | 4,104 | | (2)% | | | 4,611 | | 10% | Iowa Gas | | 29,831 | | 21,407 | | | | 16,009 | | 14,355 | | | | 7,016,613 | | 5,521,119 | | |
Kansas Gas (a) | 2,851 | | (4)% | | | 3,204 | | 8% | |
| Kansas Gas | | Kansas Gas | | 21,163 | | 18,486 | | | | 12,744 | | 12,460 | | | | 7,155,427 | | 6,722,914 | | |
| Nebraska Gas | Nebraska Gas | 3,636 | | (4)% | | | 4,169 | | 10% | Nebraska Gas | | 43,037 | | 40,466 | | | | 32,095 | | 30,719 | | | | 15,822,880 | | 13,822,478 | | |
| Wyoming Gas | Wyoming Gas | 4,678 | | (1)% | | | 5,093 | | 9% | Wyoming Gas | | 24,835 | | 23,405 | | | | 18,575 | | 18,241 | | | | 6,810,246 | | 8,727,827 | | |
Combined (b) | 3,731 | | (4)% | | | 4,297 | | 7% | |
| Total Gas Revenue & Gross Margin (non-GAAP) | | Total Gas Revenue & Gross Margin (non-GAAP) | | $ | 186,050 | | $ | 161,110 | | | | $ | 122,935 | | $ | 116,488 | | | | 48,480,868 | | 44,747,418 | | |
___________
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | Revenue (in thousands) | | Gross Margin (non-GAAP) (in thousands) | | Gas Utilities Quantities Sold & Transported (Dth) |
| | Six Months Ended
June 30, | | Six Months Ended
June 30, | | Six Months Ended
June 30, |
| | 2021 | 2020 | | 2021 | 2020 | | 2021 | 2020 |
| | | | | | | | | |
| Arkansas Gas | | $ | 119,988 | | $ | 103,578 | | | $ | 74,851 | | $ | 70,761 | | | 19,025,151 | | 15,869,184 | |
| Colorado Gas | | 113,312 | | 101,219 | | | 58,822 | | 56,813 | | | 19,323,300 | | 18,143,249 | |
| Iowa Gas | | 86,585 | | 76,231 | | | 38,640 | | 35,683 | | | 21,330,586 | | 19,801,392 | |
| Kansas Gas | | 61,226 | | 51,980 | | | 31,510 | | 31,063 | | | 17,618,224 | | 16,637,772 | |
| Nebraska Gas | | 136,135 | | 124,132 | | | 82,027 | | 82,385 | | | 43,106,981 | | 40,331,514 | |
| Wyoming Gas | | 71,323 | | 64,743 | | | 46,554 | | 45,195 | | | 18,670,412 | | 21,146,464 | |
| Total Gas Revenue & Gross Margin (non-GAAP) | | $ | 588,569 | | $ | 521,883 | | | $ | 332,404 | | $ | 321,900 | | | 139,074,654 | | 131,929,575 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Three Months Ended June 30, |
| 2021 | | 2020 |
| Heating Degree Days | Actual | | Variance
from Normal | | Actual | | Variance
from Normal |
Arkansas Gas (a) | 383 | | 16% | | 353 | | 7% |
| Colorado Gas | 865 | | (9)% | | 809 | | (15)% |
| Iowa Gas | 691 | | 1% | | 783 | | 14% |
Kansas Gas (a) | 493 | | 10% | | 477 | | 7% |
| Nebraska Gas | 624 | | (1)% | | 692 | | 9% |
| Wyoming Gas | 1,200 | | (1)% | | 1,216 | | —% |
Combined Gas (b) | 739 | | 1% | | 688 | | 2% |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | | | 2020 |
| Heating Degree Days: | Actual | | Variance
from Normal | | | | Actual | | Variance
from Normal |
Arkansas Gas (a) | 2,504 | | 3% | | | | 2,012 | | (17)% |
| Colorado Gas | 3,830 | | (1)% | | | | 3,638 | | (6)% |
| Iowa Gas | 4,113 | | 1% | | | | 3,964 | | (2)% |
Kansas Gas (a) | 3,069 | | 5% | | | | 2,781 | | (4)% |
| Nebraska Gas | 3,721 | | 1% | | | | 3,527 | | (4)% |
| Wyoming Gas | 4,625 | | 5% | | | | 4,433 | | 1% |
Combined Gas (b) | 3,925 | | 2% | | | | 3,606 | | (4)% |
__________
(a) Arkansas Gas and Kansas Gas have weather normalization mechanisms that mitigate the weather impact on gross margins.
(b) The combined heating degree days are calculated based on a weighted average of total customers by state excluding Kansas Gas due to its weather normalization mechanism. Arkansas Gas is partially excluded based on the weather normalization mechanism in effect from November through April.
Regulatory Matters
For more information on recent regulatory activity and enacted regulatory provisions with respect to the states in which our Utilities operate, see Note 52 of the Notes to Condensed Consolidated Financial Statements and Part I, Items 1 and 2 and Part II, Item 8 of our 20192020 Annual Report on Form 10-K filed with the SEC.10-K.
Power Generation
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) |
| Revenue | $ | 26,518 | | $ | 25,811 | | $ | 707 | | $ | 78,606 | | $ | 75,764 | | $ | 2,842 | |
| | | | | | |
| Fuel expense | 2,320 | | 2,283 | | 37 | | 6,692 | | 6,933 | | (241) | |
| Operations and maintenance | 10,539 | | 6,946 | | 3,593 | | 24,886 | | 20,817 | | 4,069 | |
| Depreciation and amortization | 4,921 | | 4,760 | | 161 | | 15,539 | | 14,069 | | 1,470 | |
| Total operating expense | 17,780 | | 13,989 | | 3,791 | | 47,117 | | 41,819 | | 5,298 | |
| | | | | | |
| Adjusted operating income | $ | 8,738 | | $ | 11,822 | | $ | (3,084) | | $ | 31,489 | | $ | 33,945 | | $ | (2,456) | |
Our Power Generation segment operating results were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | Variance | 2021 | 2020 | Variance |
| |
| Revenue | $ | 25,348 | | $ | 26,122 | | $ | (774) | | $ | 54,511 | | $ | 52,088 | | $ | 2,423 | |
| | | | | | |
| Fuel expense | 2,621 | | 2,087 | | 534 | | 5,292 | | 4,372 | | 920 | |
| Operations and maintenance | 9,322 | | 7,350 | | 1,972 | | 16,680 | | 14,347 | | 2,333 | |
| Depreciation and amortization | 5,155 | | 5,283 | | (128) | | 10,020 | | 10,618 | | (598) | |
| Total operating expense | 17,098 | | 14,720 | | 2,378 | | 31,992 | | 29,337 | | 2,655 | |
| | | | | | |
| Adjusted operating income | $ | 8,250 | | $ | 11,402 | | $ | (3,152) | | $ | 22,519 | | $ | 22,751 | | $ | (232) | |
Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020:
The decrease in current year operating income was primarily driven by a current year planned outage at Pueblo Airport Generation and the timing of current year and prior year planned outages at the Gillette, Wyoming energy complex.
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020:
Operating income was comparable to the same period in the prior year due to negative impacts of a current year planned outage at Pueblo Airport Generation mostly offset by $1.7 million of favorable Winter Storm Uri impacts realized under Black Hills Wyoming’s Economy Energy PSA.
Operating Statistics
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenue (in thousands) | Quantities Sold (MWh) (a) | Revenue (in thousands) | Quantities Sold (MWh) (a) |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 |
| Black Hills Colorado IPP | $ | 13,981 | | $ | 14,211 | | 204,065 | | 263,701 | | $ | 28,235 | | $ | 28,390 | | 443,259 | | 528,926 | |
Black Hills Wyoming (b) | 10,141 | | 10,488 | | 141,809 | | 156,866 | | 23,574 | | 20,646 | | 306,766 | | 313,218 | |
| Black Hills Electric Generation | 1,226 | | 1,423 | | 88,724 | | 92,629 | | 2,702 | | 3,052 | | 185,018 | | 189,908 | |
| Total Power Generation Revenue and Quantities Sold | $ | 25,348 | | $ | 26,122 | | 434,598 | | 513,196 | | $ | 54,511 | | $ | 52,088 | | 935,043 | | 1,032,052 | |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
Quantities Generated and Purchased (MWh) (a) | Fuel Type | 2021 | 2020 | | 2021 | 2020 |
| Generated | | | | | | |
| Black Hills Colorado IPP | Natural Gas | 204,065 | | 263,701 | | | 443,259 | | 528,926 | |
Black Hills Wyoming (b) | Coal | 128,270 | | 142,747 | | | 264,374 | | 269,232 | |
| Black Hills Electric Generation | Wind | 88,724 | | 92,629 | | | 185,018 | | 189,908 | |
| Total Generated | | 421,059 | | 499,077 | | | 892,651 | | 988,066 | |
| | | | | | |
| Purchased | | | | | | |
Black Hills Wyoming (b) | Various | 15,102 | | 14,160 | | | 44,616 | | 44,093 | |
| Total Purchased | | 15,102 | | 14,160 | | | 44,616 | | 44,093 | |
Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019:
Revenue increased in the current year driven primarily by increased MWh sold from new wind assets and additional Black Hills Colorado IPP fired-engine hours. Operating expenses increased primarily due to a $3.1 million expense related to the early retirement of certain assets and higher generation costs and depreciation from new wind assets.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019:
Revenue increased in the current year driven by an increase in MWh sold from new wind assets and additional Black Hills Colorado IPP fired-engine hours. Operating expenses increased primarily due to a $3.1 million expense related to the early retirement of certain assets and higher generation costs and depreciation from new wind assets. COVID-19 impacts to operations and maintenance expense included $0.4 million of expenses related to the sequestration of essential employees.
Operating Statistics
| | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | 2020 | 2019 |
Quantities Sold, Generated and Purchased (MWh) (a) | | | | |
| Sold | | | | |
| Black Hills Colorado IPP | 301,934 | | 275,867 | | 830,860 | | 692,156 | |
Black Hills Wyoming (b) | 157,855 | | 162,668 | | 471,073 | | 476,430 | |
| Black Hills Electric Generation | 65,697 | | 30,912 | | 255,605 | | 112,461 | |
| Total Sold | 525,486 | | 469,447 | | 1,557,538 | | 1,281,047 | |
| | | | |
| Generated | | | | |
| Black Hills Colorado IPP | 301,934 | | 275,867 | | 830,860 | | 692,156 | |
Black Hills Wyoming (b) | 139,313 | | 142,219 | | 408,545 | | 407,001 | |
| Black Hills Electric Generation | 65,697 | | 30,912 | | 255,605 | | 112,461 | |
| Total Generated | 506,944 | | 448,998 | | 1,495,010 | | 1,211,618 | |
| | | | |
| Purchased | | | | |
| | | | |
Black Hills Wyoming (b) | 18,004 | | 16,865 | | 62,097 | | 56,205 | |
| | | | |
| Total Purchased | 18,004 | | 16,865 | | 62,097 | | 56,205 | |
_______________________
(a) Company uses and losses are not included in the quantities sold, generated, and purchased.
(b) Under the 20-year economy energy PPAEconomy Energy PSA with the City of Gillette effective September 2014, Black Hills Wyoming purchases energy on behalf of the City of Gillette and sells that energy to the City of Gillette. MWh sold may not equal MWh generated and purchased due to a dispatch agreement that Black Hills Wyoming has with South Dakota Electric to cover energy imbalances.
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
Contracted generating facilities availability by fuel type (a) | 2021 | 2020 | | 2021 | 2020 |
| | | | | |
Coal (b) | 89.3 | % | 98.2 | % | | 93.1 | % | 93.7 | % |
Natural gas (b) | 87.6 | % | 99.7 | % | | 93.1 | % | 99.6 | % |
| Wind | 97.2 | % | 93.1 | % | | 95.7 | % | 94.0 | % |
| Total availability | 91.4 | % | 97.0 | % | | 94.1 | % | 96.6 | % |
| | | | | |
| Wind capacity factor | 26.5 | % | 27.5 | % | | 27.7 | % | 28.9 | % |
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Contracted Power Plant Fleet Availability (a) | 2020 | 2019 | | 2020 | 2019 |
| | | | | |
| Coal-fired plant | 96.1 | % | 98.0 | % | | 94.5 | % | 95.2 | % |
Natural gas-fired plants (b) | 99.8 | % | 97.6 | % | | 99.6 | % | 98.4 | % |
| Wind | 90.6 | % | 81.9 | % | | 92.8 | % | 93.4 | % |
| Total Availability | 95.8 | % | 93.6 | % | | 96.3 | % | 96.5 | % |
| | | | | |
| Wind Capacity Factor | 19.4 | % | 15.0 | % | | 25.7 | % | 22.1 | % |
_______________________________
(a) Availability and Wind Capacity Factor are calculated using a weighted average based on capacity of our generating fleet.
(b) 20192021 included a planned outageoutages at Wygen I and Pueblo Airport Generation.
Mining
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) |
| Revenue | $ | 15,236 | | $ | 15,552 | | $ | (316) | | $ | 45,857 | | $ | 45,026 | | $ | 831 | |
| | | | | | |
| Operations and maintenance | 8,923 | | 9,900 | | (977) | | 28,481 | | 28,988 | | (507) | |
| Depreciation, depletion and amortization | 2,808 | | 2,278 | | 530 | | 7,384 | | 6,687 | | 697 | |
| Total operating expenses | 11,731 | | 12,178 | | (447) | | 35,865 | | 35,675 | | 190 | |
| | | | | | |
| Adjusted operating income | $ | 3,505 | | $ | 3,374 | | $ | 131 | | $ | 9,992 | | $ | 9,351 | | $ | 641 | |
Our Mining segment operating results were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | Variance | 2021 | 2020 | Variance |
| |
| Revenue | $ | 14,429 | | $ | 15,416 | | $ | (987) | | $ | 29,101 | | $ | 30,621 | | $ | (1,520) | |
| | | | | | |
| Operations and maintenance | 8,415 | | 9,732 | | (1,317) | | 17,612 | | 19,558 | | (1,946) | |
| Depreciation, depletion and amortization | 2,370 | | 2,326 | | 44 | | 4,584 | | 4,576 | | 8 | |
| Total operating expenses | 10,785 | | 12,058 | | (1,273) | | 22,196 | | 24,134 | | (1,938) | |
| | | | | | |
| Adjusted operating income | $ | 3,644 | | $ | 3,358 | | $ | 286 | | $ | 6,905 | | $ | 6,487 | | $ | 418 | |
Three and Six Months Ended June 30, 2021 Compared to the Three and Six Months Ended June 30, 2020:
Current year revenue decreased due to fewer tons sold driven primarily by planned and unplanned outages at the Gillette, Wyoming energy complex. Operating expenses decreased primarily due to lower overburden costs, royalties and production taxes on decreased revenues.
Operating Statistics
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in thousands, except for Revenue per ton) | 2020 | 2019 | | 2020 | 2019 |
| Tons of coal sold | 940 | | 969 | | | 2,808 | | 2,720 | |
| Cubic yards of overburden moved | 1,595 | | 2,341 | | | 6,073 | | 6,380 | |
| | | | | |
| Revenue per ton | $ | 15.60 | | $ | 15.47 | | | $ | 15.64 | | $ | 15.90 | |
The following table provides certain operating statistics for our Mining segment (in thousands, except for Revenue per ton):
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | 2020 | | 2021 | 2020 |
| Tons of coal sold | 856 | | 972 | | | 1,731 | | 1,868 | |
| Cubic yards of overburden moved | 1,609 | | 2,211 | | | 3,431 | | 4,478 | |
| | | | | |
| Revenue per ton | $ | 16.18 | | $ | 15.27 | | | $ | 16.14 | | $ | 15.66 | |
Corporate and Other
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) |
| Adjusted operating income (loss) | $ | (239) | | $ | (34) | | $ | (205) | | $ | (108) | | $ | (439) | | $ | 331 | |
Corporate and Other operating results were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | Variance | 2021 | 2020 | Variance |
| |
| Adjusted operating income (loss) | $ | (181) | | $ | (29) | | $ | (152) | | $ | (3,303) | | $ | 131 | | $ | (3,434) | |
Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020:
Adjusted operating income was comparable to the same period in the prior year.
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020:
The variance in Adjusted operating income (loss) was primarily due to a prior year favorable true-up of employee costs which was allocated to our subsidiaries in the current year. This allocation was offset in our business segments and had no impact to consolidated results.
Consolidated Interest Expense, Impairment of Investment, Other Income (Expense) and Income Tax (Expense)
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| 2020 | 2019 | Variance | 2020 | 2019 | Variance |
| (in thousands) | (in thousands) |
| Interest expense, net | $ | (36,041) | | $ | (33,487) | | $ | (2,554) | | $ | (107,039) | | $ | (102,469) | | $ | (4,570) | |
| Impairment of investment | — | | (19,741) | | $ | 19,741 | | (6,859) | | (19,741) | | $ | 12,882 | |
| Other income (expense), net | (1,193) | | 580 | | $ | (1,773) | | (703) | | 55 | | $ | (758) | |
| Income tax (expense) | (4,651) | | (2,508) | | $ | (2,143) | | (25,484) | | (22,078) | | $ | (3,406) | |
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| 2021 | 2020 | Variance | 2021 | 2020 | Variance |
| (in thousands) |
| Interest expense, net | $ | (38,202) | | $ | (35,545) | | $ | (2,657) | | $ | (75,802) | | $ | (70,998) | | $ | (4,804) | |
| Impairment of investment | — | | — | | $ | — | | $ | — | | $ | (6,859) | | $ | 6,859 | |
| Other income (expense), net | (191) | | (1,863) | | $ | 1,672 | | $ | 75 | | $ | 490 | | $ | (415) | |
| Income tax (expense) | (586) | | (4,831) | | $ | 4,245 | | $ | (1,080) | | $ | (20,833) | | $ | 19,753 | |
Three Months Ended SeptemberJune 30, 20202021 Compared to the Three Months Ended SeptemberJune 30, 2019.2020:
Interest expense, netExpense
The increase in Interest expense, net was due to higher debt balances driven by the February 2021 term loan and the June 2020 senior unsecured notes partially offset by lower interest rates.
Other Income (Expense)
The decrease in Other (expense) was primarily due to lower non-service pension costs driven by a lower discount rate and lower costs for our non-qualified benefit plans which were driven by market performance.
Income Tax (Expense)
For the three months ended SeptemberJune 30, 2020,2021, the effective tax rate was 2.0% compared to 16.4% for the same period in 2020. See Note 11 of the prior year,Notes to Condensed Consolidated Financial Statements for discussion of effective tax rate variances.
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020:
Interest Expense
The increase in Interest expense, net was due to higher debt balances driven by higher debt balancesthe February 2021 term loan and the June 2020 senior unsecured notes partially offset by lower interest rates.
Impairment of Investment
ForIn the three months ended September 30, 2019,prior year, we recorded a pre-tax non-cash write-down of $20$6.9 million in our investment in equity securities of a privately held oil and gas company. The impairment was triggered by continued adverse changes in future natural gas prices and liquidity concerns at the privately held oil and gas company. The remaining book value of our investment is $1.5 million, and this is our only remaining investment
Income Tax (Expense)
For the six months ended June 30, 2021, the effective tax rate was 0.8% compared to 14.6% for the same period in oil and gas exploration and production activities.2020. See Note 1511 of the Notes to Condensed Consolidated Financial Statements for additional details.
Other Income (Expense)
The variance in Other income (expense), net for the three months ended September 30, 2020, compared to the same period in the prior year, was primarily due to increased costs for our non-qualified benefit plans which were driven by market performance on plan assets and increased non-service pension costs resulting from a change in accounting principle for our defined benefit pension plan effective January 1, 2020.
Income Tax (Expense)
For the three months ended September 30, 2020, thediscussion of effective tax rate was 10.3% compared to 14.0% for the same period in 2019. The lower effective tax rate is primarily due to increased tax benefits from federal production tax credits associated with new wind assets and reversal of accrued excess deferred income taxes as part of resolving the last of the Company’s open dockets seeking approval of its TCJA plans.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended September 30, 2019.
Interest expense, net
The increase in Interest expense, net for the nine months ended September 30, 2020, compared to the same period in the prior year was driven by higher debt balances partially offset by lower interest rates.
Impairment of Investment
For the nine months ended September 30, 2020, we recorded a pre-tax non-cash write-down of $6.9 million in our investment in equity securities of a privately held oil and gas company, compared to a $20 million write-down for the same period in the prior year. The impairments in both years were triggered by continued adverse changes in future natural gas prices and liquidity concerns at the privately held oil and gas company. The remaining book value of our investment is $1.5 million, and this is our only remaining investment in oil and gas exploration and production activities. See Note 15 of the Notes to Condensed Consolidated Financial Statements for additional details.variances.
Income Tax (Expense)
The effective tax rate was 13.6% for both the nine months ended September 30, 2020 and 2019, primarily due to increased tax benefits from forecasted federal production tax credits associated with new wind assets and reversal of accrued excess deferred income taxes as part of resolving the last of the Company’s open dockets seeking approval of its TCJA plans offset by a prior year discrete tax benefit related to repairs and certain indirect costs.
Critical Accounting Policies Involving Significant Accounting Estimates
There have been no material changes in our critical accounting estimates from those reported in our 2019 Annual Report on Form 10-K filed with the SEC except for Pension and Other Postretirement Benefits provided below. We continue to closely monitor the rapidly evolving and uncertain impact of COVID-19 on our critical accounting estimates including, but not limited to, collectibility of customer receivables, recoverability of regulatory assets, impairment risk of goodwill and long-lived assets, valuation of pension assets and liabilities, and contingent liabilities. For more information on our critical accounting estimates, see Part II, Item 7 of our 2019 Annual Report on Form 10-K.
Pension and Other Postretirement Benefits
As described in Note 18 of the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K filed with the SEC, we have one defined benefit pension plan, one defined post-retirement healthcare plan and several non-qualified retirement plans. A Master Trust holds the assets for the pension plan. A trust for the funded portion of the post-retirement healthcare plan has also been established.
Accounting for pension and other postretirement benefit obligations involves numerous assumptions, the most significant of which relate to the discount rates, healthcare cost trend rates, expected return on plan assets, compensation increases, retirement rates and mortality rates. The determination of our obligation and expenses for pension and other postretirement benefits is dependent on the assumptions determined by management and used by actuaries in calculating the amounts. Although we believe our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our pension and other postretirement obligations and our future expense.
Effective January 1, 2020, the Company changed its 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 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 re-measurement.
See Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information.
Liquidity and Capital Resources
There have been no material changes in Liquidity and Capital Resources from those reported in Item 7 of our 20192020 Annual Report on Form 10-K filed with the SEC except as described belowbelow.
For the six months ended June 30, 2021, we did not experience significant impacts to our liquidity or financial condition due to the COVID-19 pandemic.
In response to the February 2021 Winter Storm Uri, we took steps to maintain adequate liquidity to operate our businesses and within the “COVID-19 Pandemic” discussionfund our capital investment program as discussed in the Executive SummaryRecent Developments section above.
Collateral Requirements
Our utilities maintain wholesale commodity contracts for the purchasesabove and
sales of electricity and natural gas which have performance assurance provisions that allow the counterparty to require collateral postings under certain conditions, including when requested on a reasonable basis due to a deterioration in
our financial condition or nonperformance. A significant downgradefurther detail in
our credit ratings, such as a downgrade to a level below investment grade, could result in counterparties requiring collateral postings under such adequate assurance provisions. The amount of credit support that we may be required to provide at any point in the future is dependent on the amountNote 5 of the initial transaction, changes in the market price, open positions and the amounts owed by orNotes to the counterparty. At September 30, 2020, we had sufficient liquidity to cover collateral that could be required to be posted under these contracts. For the nine months ended September 30, 2020, we did not experience any requests to post additional collateral, including for concerns over a potential deterioration of our financial condition due to COVID-19.Condensed Consolidated Financial Statements.
Cash Flow Activities
The following table summarizes our cash flows for the ninesix months ended SeptemberJune 30, (in millions)thousands):
| | Cash provided by (used in): | Cash provided by (used in): | 2020 | 2019 | Variance | Cash provided by (used in): | 2021 | 2020 | Variance |
| Operating activities | Operating activities | $ | 419.5 | | $ | 386.1 | | $ | 33.4 | | Operating activities | $ | (250,173) | | $ | 309,006 | | $ | (559,179) | |
| Investing activities | Investing activities | $ | (529.7) | | $ | (593.3) | | $ | 63.6 | | Investing activities | $ | (309,737) | | $ | (349,725) | | $ | 39,988 | |
| Financing activities | Financing activities | $ | 107.8 | | $ | 199.8 | | $ | (92.0) | | Financing activities | $ | 554,905 | | $ | 62,774 | | $ | 492,131 | |
Year-to-Date 2020Six Months Ended June 30, 2021 Compared to Year-to-Date 2019the Six Months Ended June 30, 2020
Operating ActivitiesActivities:
Net cash provided by operating activities was $419$559 million for the nine months ended September 30, 2020, compared to net cash provided by operating activities of $386 million forlower than the same period in 2019, for an increase of $33 million.2020. The variance to the prior year was primarily attributable to:
•Cash earnings (net income plus non-cash adjustments) were $22$13 million higherlower for the ninesix months ended SeptemberJune 30, 20202021 compared to the same period in the prior year primarily driven by higher operating income at the Gas Utilities segment;expenses and higher interest expenses;
•Net cash inflows from changes in certain operating assets and liabilities were $27$556 million for the nine months ended September 30, 2020, compared to net cash inflows of $15 million in the same period in the prior year. This $12 million increase waslower, primarily dueattributable to:
◦Cash inflows decreased by $46 million primarily as a result of changes in accounts receivable driven by lower commodity prices and increased materials and supplies purchases;
◦Cash outflows decreased by $72 million as a result of changes in accounts payable and accrued liabilities driven by the impact of lower commodity prices, lower outside services expenses, timing of interest payments, deferral of payroll taxes under the CARES Act and other working capital requirements; and
◦Cash outflows increased by $13$572 million primarily as a result of changes in our regulatory assets and liabilities primarily driven by timingincremental costs from Winter Storm Uri;
◦Cash inflows increased by $12 million as a result of recoverychanges in accounts receivable and returns for fuel costs adjustments partially offsetother current assets primarily driven by the TCJA tax rate change that was returnedhigher collections of accounts receivable; and
◦Cash outflows decreased by $3.4 million as a result of increases in accounts payable and accrued liabilities primarily driven by working capital requirements.
•Cash outflows decreased by $13 million due to customerspension contributions made in the prior year.
•Cash outflows increased by $1.7 million for other operating activities.
Investing Activities:
Net cash used in investing activities was $40 million lower than the same period in 2020. The variance to the prior year was primarily attributable to:
•Capital expenditures of $319 million for the six months ended June 30, 2021 compared to $348 million for the same period in the prior year. Lower current year expenditures are driven by lower programmatic safety, reliability and integrity spending at our Gas Utilities and Electric Utilities segments and the prior year Corriedale wind project at our Electric Utilities segment.
•Cash inflows increased by $11 million for other investing activities which was primarily driven by the sales of transmission assets and facilities, none of which were individually significant.
Financing Activities:
Net cash provided by financing activities was $492 million higher than the same period in 2020. The variance to the prior year was primarily attributable to:
•Cash inflows increased $550 million due to short-term and long-term borrowings in excess of repayments. This increase was primarily driven by $600 million net borrowings from our term loan partially offset by prior year net proceeds from the June 17, 2020 debt transaction;
•Cash inflows decreased $59 million due to lower issuances of common stock;
•Cash outflows increased $4.7 million due to increased dividends paid on common stock; and
•Cash inflows increased by $6.8 million for other financing activities driven by the prior year financing costs incurred in the June 17, 2020 debt transaction.
Capital Sources
Term Loan
See Note 5 of the Notes to Condensed Consolidated Financial Statements for information relating to our term loan.
Revolving Credit Facility and CP Program
On July 19, 2021, we amended and restated our corporate Revolving Credit Facility under similar terms and conditions, See Note 5 of the Notes to Condensed Consolidated Financial Statements for more information.
Investing ActivitiesOur Revolving Credit Facility and CP Program had the following borrowings, outstanding letters of credit and available capacity (in millions):
| | | | | | | | | | | | | | | | | |
| | Current | Short-term borrowings at | Letters of Credit (a) at | Available Capacity at |
| Credit Facility | Expiration | Capacity | June 30, 2021 | June 30, 2021 | June 30, 2021 |
| Revolving Credit Facility and CP Program | July 19, 2026 | $ | 750 | | $ | 230 | | $ | 13 | | $ | 507 | |
__________
(a) Letters of credit are off-balance sheet commitments that reduce the borrowing capacity available on our corporate Revolving Credit
Net cash used in investing activitiesThe weighted average interest rate on short-term borrowings related to our Revolving Credit Facility and CP Program at June 30, 2021 was $530 million0.19%. Short-term borrowing activity related to our Revolving Credit Facility and CP Program for the ninesix months ended SeptemberJune 30, 2020, compared to net cash used in investing activities of $593 million for the same period in 2019, a decrease of $64 million primarily due to the following:2021 was:
| | | | | |
| (dollars in millions) |
| Maximum amount outstanding (based on daily outstanding balances) | $ | 311 | |
| Average amount outstanding (based on daily outstanding balances) | $ | 200 | |
| Weighted average interest rates | 0.23 | % |
Covenant Requirements
•The Revolving Credit Facility and Wyoming Electric’s financing agreements contain covenant requirements. We were in compliance with these covenants as of June 30, 2021. See Capital expenditures of $536 million for the nine months ended September 30, 2020 compared to $593 million for the same period in the prior year. Higher prior year expenditures were driven by large prior year projects such as the Natural Bridge pipeline project, the Busch Ranch II wind project and constructionNote 5 of the final segment of the 175-mile transmission line from Rapid City, South DakotaNotes to Stegall, Nebraska. These large prior year expenditures were partially offset by the current year Corriedale wind project at our Electric Utilities segment.Condensed Consolidated Financial Statements for more information.
Future Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2020 was $108 million, compared to $200 million of net cash provided by financing activities for the same period in 2019, a decrease of $92 million primarily due to the following:Plans
•$374We will continue to assess debt and equity needs to support our capital investment plans and other key strategic objectives. In the second half of 2021, we expect to fund our capital plan and strategic objectives by using cash generated from operating activities, our Revolving Credit Facility and CP Program and issuing an additional $60 million to $80 million of higher repayments of short-term debt;
•Increase of $297 million in net proceeds due to issuances of long-term debt in excess of maturities;
•Cash dividends on common stock of $100 million were paidunder the ATM. As discussed in the current year comparedRecent Developments above and in further detail in Note 5 of the Notes to $92Condensed Consolidated Financial Statements, on February 24, 2021, we entered into an $800 million paidterm loan maturing on November 24, 2021. We repaid $200 million of this term loan in the prior year;
•Cash outflows for other financing activities increased $4.5 million driven primarily by current year financing costs infirst quarter of 2021. We expect to refinance a portion of the June 17, 2020 debt offering; and
•Decrease of $2.0 million in net proceeds from the issuance of common stock;term loan with longer-term debt.
Credit Ratings
After assessing the current operating performance, liquidity and credit ratings of the Company, management believes that the Company will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.
The following table represents the credit ratings and outlook and risk profile of BHC at June 30, 2021:
| | | | | | | | |
| Rating Agency | Senior Unsecured Rating | Outlook |
S&P (a) | BBB+ | Stable |
Moody’s (b) | Baa2 | Stable |
Fitch (c) | BBB+ | Stable |
__________
(a) On April 10, 2020, S&P reported BBB+ rating and maintained a Stable outlook.
(b) On December 21, 2020, Moody’s reported Baa2 rating and maintained a Stable outlook.
(c) On August 20, 2020, Fitch reported BBB+ rating and maintained a Stable outlook.
The following table represents the credit ratings of South Dakota Electric at June 30, 2021:
| | | | | |
| Rating Agency | Senior Secured Rating |
S&P (a) | A |
Moody’s (b) | A1 |
Fitch (c) | A |
__________
(a) On April 16, 2020, S&P reported A rating.
(b) On December 21, 2020, Moody’s reported A1 rating.
(c) On August 20, 2020, Fitch reported A rating.
Capital Requirements
Capital Expenditures
| | | | | | | | | | | | | | | | | | | | | | | |
| Actual | | Forecasted |
| Capital Expenditures by Segment | Six Months Ended June 30, 2021 (a) | | 2021 (b) | 2022 | 2023 | 2024 | 2025 |
| (in millions) | | | | | | | |
| Electric Utilities | $ | 114 | | | $ | 240 | | $ | 180 | | $ | 143 | | $ | 156 | | $ | 154 | |
| Gas Utilities | 179 | | | 377 | | 347 | | 339 | | 330 | | 326 | |
| Power Generation | 7 | | | 10 | | 9 | | 6 | | 4 | | 5 | |
| Mining | 2 | | | 9 | | 9 | | 9 | | 9 | | 10 | |
| Corporate and Other | 3 | | | 11 | | 5 | | 13 | | 13 | | 13 | |
Incremental Projects (c) | — | | | — | | 50 | | 100 | | 100 | | 100 | |
| $ | 305 | | | $ | 647 | | $ | 600 | | $ | 610 | | $ | 612 | | $ | 608 | |
__________
(b) Includes actual capital expenditures for the six months ended June 30, 2021.
(c) These represent projects that are being evaluated by our segments for timing, cost and other factors.
Dividends
Dividends paid on our common stock totaled $100$71 million for the ninesix months ended SeptemberJune 30, 2020,2021, or $0.535$0.565 per share per quarter. On October 27, 2020,July 26, 2021, our board of directors declared a quarterly dividend of $0.565 per share payable DecemberSeptember 1, 2020,2021, equivalent to an annual dividend of $2.26 per share. The amount of any future cash dividends to be declared and paid, if any, will depend upon, among other things, our financial condition, funds from operations, the level of our capital expenditures, restrictions under our Revolving Credit Facility and our future business prospects.
Financing Transactions and Short-Term Liquidity
Revolving Credit Facility and CP Program
Our Revolving Credit Facility and CP Program had the following borrowings, outstanding letters of credit, and available capacity (in millions):
| | | | | | | | | | | | | | | | | | | | |
| | Current | Revolver Borrowings at | CP Program Borrowings at | Letters of Credit (a) at | Available Capacity at |
| Credit Facility | Expiration | Capacity | September 30, 2020 | September 30, 2020 | September 30, 2020 | September 30, 2020 |
| Revolving Credit Facility and CP Program | July 30, 2023 | $ | 750 | | $ | — | | $ | 84 | | $ | 25 | | $ | 641 | |
_______________
(a) Letters of credit are off-balance sheet commitments that reduce the borrowing capacity available on our corporate Revolving Credit Facility.
Revolving Credit Facility and CP Program borrowing activity for the nine months ended September 30, 2020 was (dollars in millions):
| | | | | |
| For the Nine Months Ended September 30, 2020 |
Maximum amount outstanding - Revolving Credit Facility (based on daily outstanding balances) | $ | 220 | |
Maximum amount outstanding - CP Program (based on daily outstanding balances) | $ | 366 | |
Average amount outstanding - Revolving Credit Facility (based on daily outstanding balances) | $ | 109 | |
Average amount outstanding - CP Program (based on daily outstanding balances) | $ | 170 | |
Weighted average interest rates - Revolving Credit Facility | 1.75 | % |
Weighted average interest rates - CP Program | 1.10 | % |
Covenant RequirementsUnconditional Purchase Obligations
The Revolving Credit Facility contains customary affirmative and negative covenants, such as limitations on certain liens, restrictions on certain transactions, and maintenance of a certain Consolidated Indebtedness to Capitalization Ratio. Subject to applicable cure periods, a violation of any of these covenants would constitute an event of default that entitles the lenders to terminate their remaining commitments and accelerate all principal and interest outstanding. We were in compliance with these covenants as of September 30, 2020. See Note 73 of the Notes to Condensed Consolidated Financial Statements for more information.recent updates to our purchase obligations.
Covenants within Wyoming Electric’s financing agreements require Wyoming Electric to maintain a debt to capitalization ratio of no more than 0.60 to 1.00. As of September 30, 2020, we were in compliance with these covenants.
Financing Activities
Critical Accounting Policies Involving Significant Estimates
See Notes 7There have been no material changes in our critical accounting estimates from those reported in our 2020 Annual Report on Form 10-K. We continue to closely monitor the impacts of COVID-19 and 8Winter Storm Uri on our critical accounting estimates including, but not limited to, collectibility of the Notes to Condensed Consolidated Financial Statements forcustomer receivables, cost recoverability through regulatory assets, impairment risk of goodwill and long-lived assets, valuation of pension assets and liabilities and contingent liabilities. For more information concerning significant financing activities for the nine months ended September 30, 2020.on our critical accounting estimates, see Part II, Item 7 of our 2020 Annual Report on Form 10-K.
Future Financing Plans
We will continue to assess debt and equity needs to support our capital expenditure plan.
Credit Ratings
After assessing the current operating performance, liquidity and the credit ratings of the Company, management believes that the Company will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.
The following table represents the credit ratings and outlook and risk profile of BHC at September 30, 2020:
| | | | | | | | |
Rating Agency | Senior Unsecured Rating | Outlook |
S&P (a)
| BBB+ | Stable |
Moody’s (b)
| Baa2 | Stable |
Fitch (c)
| BBB+ | Stable |
__________
(a) On April 10, 2020, S&P affirmed our BBB+ rating and maintained a Stable outlook.
(b) On December 20, 2019, Moody’s affirmed our Baa2 rating and maintained a Stable outlook.
(c) On August 20, 2020, Fitch affirmed our BBB+ rating and maintained a Stable outlook.
The following table represents the credit ratings of South Dakota Electric at September 30, 2020:
| | | | | |
Rating Agency | Senior Secured Rating |
S&P (a)
| A |
Moody’s (b)
| A1 |
Fitch (c)
| A |
__________
(a) On April 16, 2020, S&P affirmed A rating.
(b) On December 20, 2019, Moody’s affirmed A1 rating.
(c) On August 20, 2020, Fitch affirmed A rating.
Capital Requirements
Capital Expenditures
| | | | | | | | | | | | | | | | | | | | |
| Actual | Planned | Planned | Planned | Planned | Planned |
| Capital Expenditures by Segment | Nine Months Ended September 30, 2020 (a) | 2020 (b) | 2021 | 2022 | 2023 | 2024 |
| (in millions) | | | | | | |
| Electric Utilities | $ | 179 | | $ | 262 | | $ | 240 | | $ | 180 | | $ | 143 | | $ | 156 | |
| Gas Utilities | 329 | | 434 | | 363 | | 334 | | 327 | | 317 | |
| Power Generation | 12 | | 10 | | 10 | | 9 | | 6 | | 4 | |
| Mining | 6 | | 8 | | 9 | | 9 | | 9 | | 9 | |
| Corporate and Other | 10 | | 19 | | 11 | | 5 | | 12 | | 13 | |
| $ | 536 | | $ | 733 | | $ | 633 | | $ | 537 | | $ | 497 | | $ | 499 | |
__________
(a) Expenditures for the nine months ended September 30, 2020 include the impact of accruals for property, plant and equipment.
(b) Includes actual capital expenditures for the nine months ended September 30, 2020.
We are monitoring supply chains, including lead times for key materials and supplies, availability of resources, and statuses of large capital projects. To date, there have been limited impacts from COVID-19 on supply chains including the availability of supplies and 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 ready to be executed if significant disruption to supply chain occurs; however, we currently do not anticipate a significant impact from COVID-19 on our capital investment plan for 2020.
Contractual Obligations
There have been no significant changes in contractual obligations from those previously disclosed in Note 19 of our Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K except for the items described in Note 13 of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Commitments
There have been no significant changes to off-balance sheet commitments from those previously disclosed in Item 7 of our 2019 Annual Report on Form 10-K filed with the SEC except for the items described in Note 7 of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
New Accounting Pronouncements
Other than the pronouncements reported in our 20192020 Annual Report on Form 10-K filed with the SEC and those discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, there have been no new accounting pronouncements that are expected to have a material effect on our financial position, results of operations or cash flows.
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 and 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 the statement was made. 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 was 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 our 2019 Annual Report on Form 10-K including statements contained within Item 1A - Risk Factors of our 2019 Annual Report on Form 10-K, Part II, Item 1A of this Quarterly Report on Form 10-Q and other reports that we file with the SEC from time to time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regardingThere have been no material changes to our quantitative and qualitative disclosures about market risk ispreviously disclosed in Item 7A of our Annual Report on Form 10-K. See Note 9 of the Notes to Condensed Consolidated Financial Statements for updates to market risks during the nine months ended September 30, 2020.
ITEM 4. CONTROLS AND PROCEDURES
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, as amended (the “Exchange Act”)) as of SeptemberJune 30, 2020.2021. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective at SeptemberJune 30, 2020.2021.
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 Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’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 SeptemberJune 30, 2020,2021, there have been no changes in our internal controls 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.
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 193 in Item 8 of our 20192020 Annual Report on Form 10-K and Note 133 in Item 1 of Part I of this Quarterly Report on Form 10-Q, which information from Note 13 is incorporated by reference into this item.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 20192020 Annual Report on Form 10-K filed with the SEC except as shown below:10-K.
Our business, results of operations, financial condition and cash flows could be adversely affected by the recent coronavirus (COVID-19) pandemic.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We have responded toThe following table contains monthly information about our acquisitions of equity securities for the global pandemic of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread.
For the ninethree months ended SeptemberJune 30, 2020,2021:
| | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs |
| | | | |
| | | | |
| | | | |
| April 1, 2021 - April 30, 2021 | 2 | $ | 66.69 | | — | | — | |
| May 1, 2021 - May 31, 2021 | 805 | $ | 68.43 | | — | | — | |
| June 1, 2021 - June 30, 2021 | 1 | $ | 65.97 | | — | | — | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Total | 808 | | $ | 68.42 | | — | | — | |
_____________
(a) Shares were acquired under the COVID-19 pandemic had a limited financial impact on our business, operations, financial condition and cash flows. In particular, we experienced:share withholding provisions of the Omnibus Incentive Plan for payment of taxes associated with the vesting of various equity compensation plans.
•Increased allowance for credit losses and bad debt expense due to anticipated customer non-payment as a result of suspended disconnections;
•Increased costs due to sequestration of mission-critical and essential employees;
•Lower commercial and certain transport volumes partially offset by higher electric and natural gas residential usage;
•Reduced availability of our employees;
•Increased costs for personal protection equipment and cleaning supplies;
•Limited 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;
•Minimal impacts to the availability of our third-party resources;
•Minimal decline in the funded status of our pension plan;
•Minimal interest expense increase due to disruptions in the Commercial Paper markets; and
•Reduced training, travel, employee, outside services and employee related expenses.
Should the COVID-19 pandemic continue for a prolonged period or impact the areas we serve more significantly than it has to date, 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 and natural gas demand from our customers, particularly from commercial and industrial customers;
•Further reduction in the availability 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 could 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 triggering potential damages under our power purchase agreements;
•Deterioration of the credit quality of our counterparties, including gas commodity contract counterparties, power purchase agreement counterparties, contractors or retail customers, that could result in credit losses;
•Impairment of goodwill or long-lived assets;
•Adverse impacts on our ability to develop, construct and operate facilities;
•Inability to meet the requirements of the covenants in our existing credit facilities, including covenants regarding Consolidated Indebtedness to Capitalization Ratio;
•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;
•Adverse impact on our liquidity position and cost of and ability to access funds from financial institutions and capital markets;
•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 difficult to predict with certainty the potential impact of COVID-19 on our business, results of operations, financial condition and cash flows.
ITEM 4. MINE SAFETY DISCLOSURES
Information concerning mine safety violations or other regulatory matters required by Sections 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 95 of this Quarterly Report on Form 10-Q.
ITEM 6. EXHIBITS
Exhibits filed herewithin are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated.
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| Exhibit Number | Description |
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Exhibit 3.1*3.1 | |
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Exhibit 3.2*3.2 | |
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Exhibit 4.1*4.1 | |
| 4.1.1 | |
| 4.1.2 | |
| 4.1.3 | |
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| 4.1.4 | |
| 4.1.5 | |
| 4.1.6 | |
| 4.1.7 | |
| 4.1.8 | |
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Exhibit 4.2*4.2 | |
| 4.2.1 | |
| 4.2.2 | |
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| 4.2.3 | |
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Exhibit 4.3*4.3 | |
| 4.3.1 | |
| 4.3.2 | |
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Exhibit 4.4*4.4 | |
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Exhibit 10.1 | |
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Exhibit 31.131.1* | |
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Exhibit 31.231.2* | |
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Exhibit 32.132.1* | |
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Exhibit 32.232.2* | |
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Exhibit 9595* | |
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101.INS101.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.SCH101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
| |
104104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
__________
* 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 CORPORATION
| | | | | | | | |
| | /s/ Linden R. Evans |
| | Linden R. Evans, President and |
| | Chief Executive Officer |
| | |
| | /s/ Richard W. Kinzley |
| | Richard W. Kinzley, Senior Vice President and |
| | Chief Financial Officer |
| | |
| Dated: | November 3, 2020August 4, 2021 | |