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BKH Black Hills

Participants
Jerome Nichols Director, IR
Linn Evans President & CEO
Rich Kinzley SVP & CFO
Brian Russo Sidoti
Ryan Greenwald Bank of America
Brandon Lee Mizuho
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Black Hills Corporation Third Quarter 2021 Earnings Conference Call. My name is Josh, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Jerome Nichols, Director of Investor Relations of Black Hills Corporation. sir. proceed, Please

Jerome Nichols

good Third and Welcome Black to Thank XXXX morning, Earnings Corporation's Quarter Conference Hills you, everyone. Call.

the website You can call www.blackhillscorp.com, our our materials and heading. under at find our this earnings morning release Investor Relations for at

on today like for Before note Hills will our EEI Conference investor that the in are X our Senior posted to discussion our to start quarterly starting Executive the Chief we meetings of attending we November Vice be Chief Hollywood, Financial Kinzley, Black Leading Evans, today, website Officer. conference. Financial Linn Officer; prior the begin and would will Rich Florida. be and President Materials earnings and President

by discussion the Commission, some of Exchange earnings number may and comments there our are contain uncertainties today, comments. Securities as such the inherent in a and make During defined of we forward-looking statements

and with that I Securities the the and you over actual recent XX-Q materially. may believe results differ our we filed Form our release, Although X are earnings could expectations assumptions, reasonable our to XX-K differ Evans. based future website, a our the results presentation factors on our the some turn Form and that cause for Exchange to from materially list will Slide and direct on now We of most beliefs to expectations. Commission investor of of Linn call

Linn Evans

customer that joining our on up by last us. and start quarter, financial delivered we delivered XX% Thank compared you, key strong like third begin quarter-over-quarter Jerome. we the earnings I working everyone, and Good for were dedicated I'd I'll our morning, team, recognizing we for Black serve X. peak record and Hills results, to year. you achievements loads, But together, operational thank Slide and before discuss to

great value very have We team, and and I them much. appreciate a

in on represents a naturally, our X.X% of it the Board approved XX this proud streaks reflects. This of and increases. increase that longest one years we're accomplishment of quite growth our dividend achieving Our industry. dividend, recently the consecutive And

also reviews Uri excellent early recovery. updated this regulatory and on quarter, including along We Winter with Storm corporate on And report, X slide, our sustainability finally and expanded initiatives, our disclosures. published comprehensive rate we progress cost our in our made our ESG new the and

We our focus, the continue our for lays and goals future. out make to our Slide solid X strides outlook. sustainability communicating including financial our achievements

performance per guidance increasing end Given quarters in regulatory share. in our $X.XX third financial lower success strong range second a by delivering earnings XXXX our were operational, and and the of

anticipate continue at We’re guidance XXXX our X% final reviews, X% on reached will this in rate strategies parties progress outcomes. effective XXXX, We constructive regulatory new settlement our gas and maintaining X% Uri requests through Slide year, achieving good provide growth. our with the approval earnings Storm our made range, review rate focus X all with rates new cost recovery. annual progress a X, regulatory earnings productive lays on out we unanimous least regulatory dividend a for our XXXX settlement. natural being rider and XXXX of for and to January to Winter average that million agreement annual investment $X.X revenue. target growth pending Colorado and a We've We've

impact. neutral renewal which we includes for our reached X-year through the reliable rate gas Colorado capital help rider, safe a new is and The which service rider. We integrity settlement benefits review, base In our to Kansas, unanimous customers customers us also for to years investment safety system net our of focused and ongoing a critical received approval provide for agreement settlement safety to rate a come. X-year also mechanism a

our to of for to quarter XXXX. benefits through by the reform settlement and pleased we're with commodity Shifting we're hope timely all states in Electric, related already Wyoming the Nebraska current through Arkansas, quarter. and regulatory Iowa, Kansas their a At the year-end, our natural customers process. adjustment high provides to flow working our Uri cost will given and rates federal We've in and We rates cost tax interim addition, state recovery first effective recovery achieve and customers, resolution process In Uri prices. benefit approvals Storm South filed mechanism. that normal Winter gas a In final Gas second costs collecting by were plans Dakota Iowa the Gas. Electric, obtained for Wyoming for

in also engaged settlement Wyoming we're Gas discussions recently positive Gas. and received for Kansas settlement for currently We a

recovery We confident Uri year, remain in we submitted expect first fourth costs the will in quarter applications. the or our quarter our to next the we recover and cost complete filings during either of

mid-year settlement preparing prior for Arkansas planning will forward, we're gas several next years rate for We're file reviews rate review Arkansas ago. and Gas XXXX, Looking by required this a as agreement by Electric. our for a to year for Electric Wyoming file from Wyoming late

to enable calling, project Wyoming, we're transmission Ready X. in continuing Moving growth that excited XXX-mile announce Wyoming. to Slide electric expansion a To we're

benefits and existing As customers. South and the providing through resources. Electric access expanding additional Wyoming are for energy transmission resiliency our proposed, renewable systems, to interconnection further project those third-party Dakota benefits enhancing markets and access to new will our Among of provide many systems

wind through construct quarter phases for solar the Cheyenne We're working new existing expansion renewable project region. for growing XXXX also overall and for expanded project renewable we growth data serve increase like allowing to approval toward following I'll detail slide. a both through in blockchain transmission projects access approval, and plan or technology in community. discuss Cheyenne project and allow and segments the will And XXXX. which will in filing the of and to later to expanded in will in us also capacity The the better centers and enable serve the project businesses project's miners, the resources more The crypto us Importantly, XXXX. several benefit of spanning access energy in capacity, first

X. Slide to Moving

and Integrated plan others to be our from in Ready our we investment cost the This capital-light $XXX nearly pursuing, energy derive investment refreshed to renewable may help not that that last through opportunities for certain and $X.X In customers, million Resource arise. does note Colorado to assets Western total clean XXXX or generation opportunities opportunities from South Plan the forecast. year. U.S. we're we a that capital in incremental there robust $XXX additional To transmission several current I'll in million, filed transmission form lower next for Wyoming forecast joined potential to projects Western our a in in up our increased doing wholesale have Wyoming Dakota project. grid Group. investment group of other the strong growth expansion the firmed call quarter's by transmission explore plan, potential continue XXXX from Market other other or and aggressively and Exploratory were This solutions. interconnect including and billion we billion. are Cheyenne, capital possible potential including placeholders This base growth include is $X.X program experience market related forecast while reviewing We also opportunities includes data developing projects centers what may so, that an In will load the growth, Western organized for and businesses. to evaluate we

to demand increase approach, With That's in about during Ready a megawatts technology-oriented XXX For project, perspective, transmission Wyoming. entrepreneurial recruiting past we're Electric optimistic increased combined our XX% peak the our this Cheyenne into Wyoming from period. that for and day summer. XXX Wyoming XXXX more with megawatts businesses

requests serve As received team crypto mining an businesses. numerous example, this to summer, our growth

RFP a have August. robust early the an in very was mining we leader multitude crypto already bidders proposals recently support Wyoming recall In mining we and service selected to for response. may in inquiries, in request crypto contract We place. for You interruptible legislation passing approved tariff blockchain resulted of a reverse list response an blockchain we've issued and negotiations. businesses, in finalists and the to That narrowed

We also customer territories trends. Both are gas customer accelerating population very about ongoing electric ongoing service witness we and continue utility our be seeing and into growth, continue service migration territories. growth to our to optimistic

innovation throughout discipline manage Winter and pandemic Uri ongoing we're to the through after and continuous also Finally, demonstrated savings Storm and we fostering sustainable cost our costs, improvement.

discuss near forward we efforts program. the more company-wide You'll as in about energy hear these future our

X. Slide We for made XXXX, reduction progress to electric achieved already we fully XX% engaged in our our goals operations XX% our communities. toward XXXX. reduction intensity We're listed a on slide. utility our at since In carbon reduction Moving significant sustainability this a gas and on

that Our aggressive or doesn't currently not based assumptions technology exist. goals forward emission are on

carbon current to are we technology, to expect Our or in reduction have assets reliant goals upside be exceed on existing there's our to current true that technologies published potential we and for acceleration is our because goals. Midwest word, based our meet goals upon and culture

emissions As for confident our decline storage, accelerate which emission and goals. watching goals. We're existing technologies achieving from potentially could technologies also emissions battery renewables cost our our and advance, we're reducing plants, as for carbon in

One XXXX of meet goals. of renewable We'll our the gas. achieve Neil our Simpson resources our plant operations XX% our to reduction steps coal-fired by also our II conversion within goal generation natural to emissions to defined will storage be electric add and power battery

gas and natural service system Methane reach as gas methane such in expect renewable Challenge we in efficiency. lead and and committed continued additionally, more adopting improvements in energy integrating Future through already For reduce damage we that many reduction the to also expanded process through We're by with strategies XX% replacement voluntarily our in and coalition. to vacuum prevention, blowdowns. natural We'll system projects more our development. pipeline participation And technology such a ONE do utilities, emission reduction gas programs for EPA the several as emissions our detection XXXX. We're

feasibility and research and the our participating to also in test Station. would program We're turbine emissions. study Cheyenne gas capture using the carbon technologies. project of invested hydrogen for future, generation energy natural at a clean technologies we're firing in a Looking the reduce We've research reduction alongside further technologies. Wyoming's emissions other University our advance emerging We're research peers supporting to to Prairie viability of Generating supporting that

Our and our our lower ways we more innovation investor graphic We've new and as to the the other communities and older SASB with efficient been energy for published visit upgrading fleet our our in goal link fleet. trends a will generation on X August, our find our and XXX sustainability reports XXX with commitments. in deliver read decarbonizing is beginning sustainability refreshed with encourage website XXXX which retirement more NGSI of fostering agreements you purchase and benefit power flight. megawatts and well projects a emissions, our in stakeholders. time, comprehensive affordable as is to number I XXX wind to In about that disclosures. and XXXX other and to megawatts progress disclosures more through in of we've added power of of energy Since decade, renewable coal-fired XXXX. another our of owned plants nearly a XX megawatts generation shows Slide that the wind sustainability

our converting power I time Simpson team's emission and technology Looking gas as experience improving advances stated reduction workplace already to no the of X in our meet be when recent capacity as influenced previously, Uri demonstrated available, outages. line with carbon coal-fired in power we immediately decades. lists Slide forward, is we continuously time by operations, regard must, by absolute Storm natural plant II easily culture. toward and the declines. converted and very how in team, to experienced the cold generation mindset that to In the reliability and over remaining Winter achievements Neil will announced expect XX remainder goals The our could be weather customer engaged we next XXXX. pleased plants our shows by and or line and dispatchable coal-fired replacing safety, having cost This our especially during we generation geography the an reliable I'm

customer-focused Generating X joining recently this safety this leader recognized We're with also Wyoming note team audit multiyear awarded reliability leaders of industry our strategy. for by recognized approval task. leaders in is safety. team Generating the the recognition, measured time Star continue support recognition rigorous operations to of upper on electric of team is continuous our done, our in OSHA This as worksite Station It dedicated utilities top at remarkable Pueblo Cheyenne investment recently the and status. Prairie achievement and Our second was I'm process Colorado listed team SAIDI. half required those improvement safety to as by management quartile the in reliability, a to happy well focus our systems. reflects a all Cheyenne, and executing in in Station Airport all health This prevention diligent achieving Very in with no supported highest who and simple industry as Prairie and and Cheyenne be the OSHA's recognition to thank the hazards, efforts. and in years team a you of effort of

was also the South achieving a strong returned We regard management safety, to we Net our customer ranking region. for to XX in our team. consecutive approximately We I mentioned gas as Most months a an workplace team. scores understand effectiveness. improve of to of a JD is XX through utility improvement This Achiever's year-to-date second our and ago. already survey and from report and XXXX overall we're Promoter to score Score by engaged to values XX, mid-October notable by in years the about pleased our we continue I'm compared second X experience, can from in improvement Power especially and our every Engaged year XX as and XX Also, party a company named employees Workplaces. anonymous survey doing to improve how how industry, conducted great were our third

slide, in veterans our supports recruiting, in honored a the a XXXX Wyoming's at on and The we're recognized and providing the that this for of success recognition the and Safety we Year workforce, experience and their Summit. hiring were Veteran-Friendly award an and for our our focus respect thanks have valuable Finally, to Employer discipline. Workforce service of environment veterans in named

over as for strong it and strategic and financial comments, made all forward the to see, our strong it financial to and Rich? finishing you turn operational update. we've excellent delivered results, Rich, completes Before deliver and look I progress the year to That we results over to for can stakeholders. Rich I'll my turn

Rich Kinzley

our unfavorable Very mark-to-market customer change consolidated of to year increase. XXXX, a major gains. from by tax. We benefit in Slide quarter-over-quarter. share are normal. illustrates XX a strong and everyone. was growth morning, natural increased the QX margin XX for was compared million quarter. commodity and new million good. per a slide main to compared customer, of driver and utilities. to XXXX, Thanks, financial improvement normal, basis, for of QX rates amounts mark-to-market the and riders, last of were compared XX% to $X.X usage electric margin rates, per to $X.XX in income summarizes detailed $X.X experienced higher third growth $X.X not after new And gas both EPS Linn, earnings compared usage On from net of which results in earnings especially customer this on weather The compared but drivers million a of gains $X.XX and gross Slide $X.XX listed Positive wholesale driven delivered and were energy All good drivers contracts.

The mainly We investment debt with balances continue increased closely capital quarter-over-quarter higher as to due minimal DD&A a to manage result our O&M of the lower increase. costs, a program a interest was expense from income expense increased result impacts and other over of as compensation of benefit expense year impact driven benefits from nonqualified life insurance. in improvement deferred by Winter the Storm prior company-owned market and Uri.

be earnings filed second can flexibility. position capital through our margin you Slide Additional yesterday’s financial later changes details detail expenses our on found appendix. quarter will and of and be the lens XX also structure, credit find in can that on segment gross shows ratings in in And XX-Q year-over-year release financial in and earnings operating today. the additional

July, amended investment-grade pay terms our the facility had providing credit plans credit from manageable available plans. we July Winter the notes we million maintaining is to than short-term $XXX have The were X notes we loan profile committed due requested issued facility. increased and after our extended of are XXXX. end flexibility repay we credit Proceeds And In maturity on of our balance a through length from average regulatory to months, other At of revolving $XXX Storm our and weighted cost repayable to million our in in more with are alongside X.X ratings. in revolving The cash similar liquidity XXXX. We recovery solid notes debt and Uri indebtedness. September, flows used August, proportionately new recovery years. down of term

fuel Uri deferred and of at Winter March, increased total end debt temporarily through ratio to our for capitalization recovery to the cost remained XX% New end September. of Storm it debt that level at of and the

to program, and offering reduce expect debt storm on we execute repay As total debt our to we equity recover capitalization costs, ratio. our

within We in debt to ratio next years. total continue X the to cap mid-XXs target to X the a

at-the-market issued equity million $XX a we through program of million total quarter, third offering $XX our year-to-date. the During for

issue in mainly in XXXX. The in of $XXX related to both total disclosed the previously our to forecast. is compared increase XXXX XXXX capital to million expect a we $XXX million We increases to what and

on with on delivered Moving our growth we on to dividend increase Slide in week, dividend. our quarterly a approving our Board X.X% XX. our Last dividend target

XXXX, quarterly dividend records proud For record increases, XX consecutive quite the industry of we’re achieved of. in of a one longest dividend years track the and our

Hills. Over X% payout closing, we our have we ratio. while the XX% by increasing last our increased to maintaining X.X%, interest our and dividend you In we XXXX, for average rate XX% anticipate years, at X your through of thank an annually than more dividend in annual Black

We’ve to take pleased again, regulatory team disclosures. agility shown and investment our meeting our overcoming we’re third and your with and how progress. delivering happy activities, results made questions. financial capital program Winter our clarified progress the and solid increased our ability excellent and strategic ESG our to with we’ve continue enhanced by that, Once objectives And We’re challenges presented in Uri. the our second financial on responded in and quarters Storm

Operator

of with comes America. Our first Instructions] question Ryan from [Operator Bank Greenwald

Ryan Greenwald

about bit can of this peers overall Ready scale talk drive you more the contribution could a projects to start, and regional the interrelate to for Wyoming, business? how and Maybe

Linn Evans

line loop essentially X Gillette a in our our also and in South will Dakota a and transmission utilities systems two that It’s we Complex. Yes, interconnect can. those closes between Energy XXX-mile that transmission Wyoming

we And good have we a with opportunity where help going will very either or resiliency will in other support in also customers’ areas open interconnect a by the ourselves Dakota future, regions costs for we projects geographic could, South new will So parties we in new do it Wyoming. resources and help to renewable us and third us bit. forward. our the of quite It control that IRP rates up and think hopefully, importantly,

So we to see opportunity for improve as customers, help reliability for and our well. provide it us opportunity as a shareholders really great an and our resiliency

Ryan Greenwald

Great. load this you to color RFP? interest of Cheyenne any And point the in then can the of provide that blockchain magnitude additional at terms guys relating

Linn Evans

Not Ryan. yet,

in We’re still negotiations.

keep here to response So those very we’d to for a probably reverse our had We ourselves strong RFP. bit. a

the began if crypto when onshore, to to that stop the will, in to lot was Our U.S. China, of opinion starting Chinese you mining come a or

indicated so opening And direct or comments, a comments in as getting summer, we calls. this were quite my few I past

was best we’re this thought a to do the back And the with. we get and that to to way that down now so responses negotiating manage reverse the narrow then RFP, list

excited the So opportunity. we’re about

legislation put Wyoming that I crypto in has my You a place and said again place great nature. miners might things really for recall, comments, of it years makes as ago, they pieces a few X in of

where optimistic this about take So us. might we’re

Operator

Mizuho. [Operator Instructions] from comes Lee with Our Brandon next question

Brandon Lee

conversion of in end doing the gas the rates? year? you your are convert Neil plants the to change I Simpson gas. on dispatch change of guess, to thoughts heat on what you expect remaining that to Do any at And the plant? coal Any question a coal your Could from Just the the fleet? in

Linn Evans

of can it don’t rate. et be in continue will we generation, a the any we with make this No, it cold we up backing change cetera. an real We heat dispatchable other unit, live units, that And in and renewable to climate opportunity. in support expect terms think climate

could far convert We would have that, that plants as would believe do other likely But not it’s to say we that so possible. studied we or that to not certainly go completely well. And it’s whether those those. I we

Brandon Lee

into to just any that, do purchase you Arkansas will given Okay. impact power bills the increased impact going question Great. impact I year rate seek lately. – winter? also, also will much kind which in gas then in And filing of think think that cost you customer and that looking Winter the well, another Storm how Do your have that on then that any next state? you’re And have of Uri way, recovery on that does costs,

Linn Evans

you for Brandon. question, Thank that Yes.

something rates. focused We’re we’re very It’s always that focused very customer on on.

we’re why that’s we what we cetera. with fact, et capital, In careful spend, capital that prioritize

term, customers the aggressive themselves winter. impact they increasing with about We prepare likely gas the that in this that near prices, are very We’ve of for especially can certainly aware particular reality. so our that been communicating

be a prices high also I’ve bit. cures back Board around We’re further in that industry. pulling our than gas here noticing that to nothing prices that out like seem this prices with and high a phrase had

manner. with happens customers now, rate we and with So safe necessary and we we those serve planned, invested continue what right forward have are long-term a the have capital that prices. in go to to think because will that reliable those we see those the those But reviews we’ll

closely. be prudent Forward Energy very cost watch my we’ll We our mentioned as So comments, In program. always. we direct

program us the because a And now kind organization, We years those are of with want gearing X those for because formal costs then this we’ve on muscles very secondly, long-term Uri, we pretty of convert pandemic cost customers. of that to some to opportunities within aggressive control hard. and up poison muscles cutting have of exercised and very after into we us

as us give are to as sure possibly well make So that opportunity rates can. they think as we low our to going that’s

our in and money. have people rates a one earn are we pretty serve and good our fairly And territory. denominator is our really dramatically that can paying anyone for opinion, the who, also my unemployment, increasing in We where have job very territory growing the wants territories low

real the basics see remaining business our this and fundamentals strong for territories. for the and still we So

Operator

Russo Brian Sidoti. from comes question next with Our

Brian Russo

Could in you your the approval greater some that capital X-year some point, might to key maybe looking of you some be have IRP of plan? that outline should for add at that milestones level we to the investment of confidence process a

Linn Evans

the later and Well, some battery and to XXXX. as XXXX storage you IRP, adding on, might recall we’re from renewables be going some

watch So for start we for I next year, would issue would to RFPs those.

I see step think that there. have be our input We’ll hearings any had in we’ve the will front if commissions. not understand any public comments. we I first of or

it’s you So not South Commission. entirely will, Dakota the sure Wyoming we’ll have before if a hearing, nor the Commission

think next input any might expect to the be will of RFPs, we be or start could us kind I So doing which hearing step next we’d year. public barring have issuing

Brian Russo

the different I’m demand And was rather it. curious Wyoming announced just versus what it Ready Ready you or need to Wyoming than Just project IRP? this the there. in what Got do that IRP? it timing Is was Okay. in include outlined strategy the and curious, – what’s with first

Linn Evans

them see separate projects. of kind We as

our give transmission the shareholder stand-alone will customers. great us out, cost It and rates to benefit our take provide project for So stable third-party is to a keep opportunity. that customers a allows

that So are are they separate the influence but are certainly while and for will us, be one -- projects related, other. we see they can they

Operator

back to now the showing remarks. turn this further And Linn time. call questions any further I’m would to like any Evans for not I over at

Linn Evans

great team. up, quarters. years you of want I Josh, proud our X past time pause more you, say Uri. Black to We thank X through the thank especially I’m very a just to they in and for pandemic, how Well, Storm your one have and thank folks, stepped Hills. delivered a solid you, extremely interest

of operational progresses, to financial to their you focus, your fact outcomes. focus forecast. regulatory and we continue that capital excellent Real clarify increase proud and for thank our your them So the

many you the team advancing to regulatory doing So thank to very also very just our take very working that. regulatory initiatives. recognize time a much nice hard I And for want job

QX and So we the we’re very -- the and the forward in appreciate future, QX delivery of look -- QX just earnings. we confident our and

We’re there looking to our Please meetings XXXX at on we’re presentation to to there. putting Safe have soon. look very will looking the if forward already, safe travels that. to of time forward out see take EEI, to those focused interest EEI be the an you go and we’ll website, you who relatively

So thank Hills Energies and day. much, you very a safe have Black great

Operator

you. gentlemen, call. Ladies Thank for you Thank today's conference and participating. this concludes

may You now disconnect.