Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Black Hills Corp (BKH, Financial) delivered solid financial performance in Q2 2024, with disciplined expense management and improved credit quality.
- The company remains on track with its $800 million capital investment plan for 2024, including the Ready Wyoming Electric Transmission project.
- Black Hills Corp (BKH) announced a significant partnership with Meta to power their first data center in Cheyenne, Wyoming, expected to benefit the local community and shareholders.
- The company is confident in achieving its long-term EPS growth target of 4% to 6%, supported by strong growth opportunities and continued execution of strategic initiatives.
- Black Hills Corp (BKH) has a strong liquidity position with full availability under its $750 million revolving credit facility and $625 million in cash.
Negative Points
- Quarterly earnings per share (EPS) decreased slightly to $0.33 from $0.35 in Q2 2023, impacted by weather and prior year income tax benefits.
- The company continues to experience inflationary pressures, including higher insurance premiums, which affect overall expenses.
- Unplanned generation outages negatively impacted revenue during the quarter.
- Weather conditions negatively impacted EPS by $0.07 per share for the quarter compared to normal weather.
- Income taxes increased due to a $0.12 prior year benefit resulting from a reduction in Nebraska's state income tax rate.
Q & A Highlights
Q: Can you talk about the parameters reflected in the 10% EPS growth target from data centers and how it fits into the capital budget?
A: Linden Evans, President, Chief Executive Officer, Director: The 10% EPS growth target includes loads from Meta and Microsoft, among others. Our innovative tariff allows us to serve these customers rapidly and efficiently. The growth is capital-light, primarily involving substations. Future investments may include transmission and generation to support this growth.
Q: How do you think about the rate case cadence and its reflection in earnings vis-a-vis novel tariffs?
A: Linden Evans, President, Chief Executive Officer, Director: We file integrated resource plans that include and exclude data center loads to understand the impact on our service territory. This helps us manage the system cohesively for all customers and stakeholders.
Q: Are there opportunities for long-term contracts with evolving loads outside the traditional utility construct?
A: Linden Evans, President, Chief Executive Officer, Director: Yes, we are considering all approaches, including long-term contracts directly with customers to meet their energy needs effectively.
Q: What are the key drivers behind the Q2 EPS of $0.33 compared to $0.35 last year?
A: Kimberly Nooney, Chief Financial Officer, Senior Vice President: Higher margins from new rates and customer growth were offset by unplanned generation outages and weather impacts. Expense management helped mitigate these factors.
Q: Can you provide an update on the Ready Wyoming transmission project?
A: Marne Jones, Senior Vice President - Utilities: The 260-mile line is on track to be in service by year-end 2025, with the first segment expected later this year. This project will enhance capacity, market access, and cost stability for customers.
Q: What progress has been made on the Colorado Electric resource plan?
A: Marne Jones, Senior Vice President - Utilities: The Colorado Public Utilities Commission reviewed our preferred portfolio, including solar and battery projects. We provided additional details and proposed changes, awaiting a final decision later this year.
Q: How is the South Dakota Electric resource plan progressing?
A: Marne Jones, Senior Vice President - Utilities: We are pursuing 100 megawatts of utility-owned natural gas-fired generation, targeting mid-2026 for in-service. We plan to file necessary applications in the second half of 2024.
Q: What are the financial targets for 2024, and how are you managing expenses?
A: Kimberly Nooney, Chief Financial Officer, Senior Vice President: We are on track to achieve our 2024 financial targets despite weather impacts. Expense management and new margins have offset these challenges. We aim to keep O&M increases to approximately 3.5% for the year.
Q: How is Black Hills Corp addressing wildfire management and risk mitigation?
A: Marne Jones, Senior Vice President - Utilities: We use a layered approach, including asset programs, integrity programs, and operational response. We disclosed our comprehensive Wildfire Mitigation Plan and are working with stakeholders to formalize our Public Safety Power Shutoff program.
Q: What is the outlook for dividend growth?
A: Kimberly Nooney, Chief Financial Officer, Senior Vice President: We anticipate growing our dividend at a rate comparable to earnings growth. A dependable and increasing dividend is a key component of our long-term value strategy for shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
