Black Hills Corporation (BKH) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with a 5% EPS increase, a consistent dividend increase, and a robust capital investment plan. The Q&A revealed positive sentiment towards data center demand and merger progress, although some management responses lacked clarity. The reaffirmed guidance and strong partnerships with Microsoft and Meta suggest optimism. Given the market cap of $3.7 billion, the stock is likely to react positively, within the 2% to 8% range, over the next two weeks.
Key Financial Performance
GAAP EPS $3.98, which included $0.12 of merger-related transaction costs. Adjusting for these costs, adjusted EPS was $4.10 for 2025, an increase of 5% compared to $3.91 per share in 2024. The increase was driven by new rates, rider recovery margin, and customer growth, offsetting higher operating, financing, and depreciation expenses.
O&M Expenses Increased by $0.36 per share year-over-year, including $0.12 of merger-related transaction costs. Excluding merger costs, O&M expenses increased $0.24 per share, primarily due to $0.13 of higher employee and outside service expense, $0.08 of higher insurance costs, and $0.05 of unplanned generation outages.
Financing Costs Increased by $0.33 per share, including $0.25 of higher interest expense, $0.19 of share dilution, and a benefit of $0.12 per share from AFUDC driven by large construction projects.
Depreciation Increased by $0.15 per share, reflecting new assets placed in service.
Dividend Increased for the 55th consecutive year in 2025 and extended to 56 years in 2026, targeting a 55% to 65% payout ratio.
Capital Investment Plan $900 million in 2025, efficiently funded while maintaining a strong investment-grade credit rating.
Equity Issuance $220 million issued in 2025, with a forecasted lower equity need of $50 million to $70 million for 2026 due to stronger cash flows.
Debt Offering $450 million of 4.55% notes issued in October 2025, partially used to pay off $300 million 3.95% notes maturing in January 2026.
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Operating Highlights
Data Center Pipeline: Tripled data center pipeline to over 3 gigawatts, with Meta and Microsoft demand growing. Expected to contribute over 10% to EPS by 2028.
Ready Wyoming Transmission Project: Completed 260-mile transmission project on schedule, enhancing system interconnection and reliability.
Lange II Generation Project: Constructing a 99-megawatt generation project in Rapid City to replace aging resources with modern technology.
Merger with NorthWestern Energy: Announced strategic merger to create a stronger utility company with increased scale and improved customer diversity. Pursuing a merger to unlock value creation opportunities, enhance financial profile, and expand strategic investments.
Data Center Demand: Serving growing demand from Meta and Microsoft, with plans to serve 600 megawatts by 2030.
Regulatory Progress: Completed 3 rate reviews, gaining $52 million in new annual revenue and advancing strategic project approvals.
Emergency Public Safety Program: Established a power shutoff program to mitigate wildfire risks.
Customer-Centric Strategy: Focused on capital investments, regulatory progress, and meeting growing customer demand.
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Risk or Challenges
Merger with NorthWestern Energy: The merger involves regulatory approvals in multiple states (Montana, Nebraska, South Dakota) and the discovery phase is ongoing. Delays or denials in regulatory approvals could impact the merger timeline and strategic benefits.
Data Center Demand: Serving the growing data center demand (3 GW pipeline) requires a mix of energy resources, including market energy procurement, contracted generation, and utility-owned investments. Each resource has distinct risks, including operational and financial risks, and the need for significant infrastructure investments.
Regulatory Challenges: The company is involved in multiple rate reviews and regulatory filings, including Arkansas Gas and South Dakota rate reviews. Delays or unfavorable outcomes could impact revenue recovery and financial performance.
Wildfire Risks: The company has implemented a wildfire mitigation plan in Wyoming and is supporting similar legislation in South Dakota. Non-compliance or increased wildfire incidents could lead to liability and operational disruptions.
Operational Costs: Higher O&M expenses, including employee and service costs, insurance, and unplanned generation outages, have increased operational costs, impacting financial performance.
Financing Costs: Higher interest expenses and share dilution have increased financing costs, which could pressure financial performance if not offset by revenue growth.
Weather-Related Risks: Weather conditions, such as extreme wind events, have caused operational disruptions and increased restoration costs, posing risks to reliability and financial performance.
Supply Chain and Infrastructure: The construction of projects like Lange II and Ready Wyoming requires timely procurement and deployment of resources. Delays or cost overruns could impact project timelines and financial outcomes.
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Guidance & Outlook
2026 Earnings Guidance: The company anticipates achieving earnings growth in the upper half of its long-term growth target, with a 6% year-over-year growth reflected in its 2026 earnings guidance.
Data Center Pipeline: The company has a pipeline of more than 3 gigawatts of data center demand, with Meta and Microsoft expected to contribute approximately 600 megawatts by 2030. This demand is projected to contribute more than 10% of consolidated EPS starting in 2028.
Capital Plan: The company has a $4.7 billion capital plan focused on safety, reliability, and growth. This includes minimal investments to support 600 megawatts of data center demand, with potential additional investments in generation and transmission to meet further demand.
Merger with NorthWestern Energy: The merger is expected to create a stronger utility company with increased scale, improved customer diversity, and enhanced financial profile. The merger is anticipated to finalize in the second half of 2026.
Lange II Generation Project: The 99-megawatt natural gas-fired generation project in Rapid City is on track to be operational by Q4 2026, replacing aging facilities and enhancing reliability.
Colorado Clean Energy Plan: The company is advancing its 50-megawatt utility-owned battery storage project, expected to be operational in 2027, and negotiating a 200-megawatt solar PPA.
Regulatory Progress: The company plans to file multiple rate reviews in 2026, including for Arkansas Gas and South Dakota, to recover investments and address increased costs.
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Shareholder Return Plan
Dividend Increase: Increased dividend for the 55th consecutive year in 2025 and extended the track record to 56 years in 2026.
Dividend Payout Ratio: Targeted a 55% to 65% payout ratio.
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Key Q&A
Q:Can you provide details on the 3-gigawatt pipeline and its timeline within the 5-year plan?
A:The 3-gigawatt pipeline includes existing customers like Microsoft and Meta. The company estimates 600 megawatts by 2030, with the most aggressive negotiations targeting service in the 2027 timeframe. Service will ramp up gradually as data centers expand.
Q:Can CPCNs be filed in advance to secure equipment queues?
A:The CPCN process typically requires as many facts as possible. The company is navigating new territory to expedite CPCN filings while ensuring recovery mechanisms are in place. Both the company and its customers are in equipment queues.
Q:What is the status of the NorthWestern merger and interactions with the Montana Commission?
A:The company is in the discovery phase, receiving expected questions and information requests from the Montana Commission. The process is proceeding as anticipated.
Q:Can you provide details on the scale and number of data centers in the pipeline?
A:The pipeline includes large hyperscale data centers, with Microsoft and Meta as key customers. Wyoming and Cheyenne are attractive locations due to available and inexpensive land.
Q:How does the Crusoe-Tallgrass project interconnection and LPCS tariff work?
A:The microgrid management fee is applied to peak demand, with different fees for different resource types. Negotiations are ongoing, and much of the energy is tied to the company's system.
Q:How do generation needs and fuel cells fit into the fee structure for the Crusoe-Tallgrass project?
A:The resource mix is still being evaluated. Pricing depends on whether resources are market-reliant, contracted, or co-located. Risk-adjusted utility returns are considered for regulated rate base investments.
Q:Are there plans to fast-track other transmission assets for data center customers?
A:Additional investments beyond the current plan are anticipated for the 500-600 megawatts in the pipeline. More filings like the Robinson substation may be expected.
Q:What is the timeline for signing an energy service agreement for the Crusoe project?
A:The customer intends to begin service in Q1 2027. The company is working to align with this timeline and meet mutual goals.
Q:What is the breakdown of the 600 megawatts in the plan, and how does it relate to the interconnection queue?
A:The 600 megawatts include contributions from Microsoft and Meta, but specific allocations are not disclosed. Meta's data center is in Wyoming County, and interconnection queue filings include 1,150 megawatts. However, not all megawatts in the queue directly connect to the plan.
Q:Does the 4%-6% EPS CAGR through 2028 include the 10% EPS contribution?
A:Yes, the 4%-6% EPS CAGR includes the 10% EPS contribution.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the exact breakdown of the 600 megawatts between Microsoft and Meta, as well as the precise timeline for signing the energy service agreement for the Crusoe project. Additionally, responses about the resource mix and interconnection queue lacked clarity and specificity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Energy Slide
NorthWestern Energy
Rapid City
Slide update
accomplishment
achievement
approval merger
approval plan
center gigawatts
combination
commitment
community
company
consistency
construction
customer investment
dedication
demand load
diversity
energy procurement
energy resource
engine
example
expense share
generation utility
investment generation
investment plan
legislation
merger NorthWestern
merger transaction
mix resource
note
partner
procurement market
project contract
rate rider
resource demand
rider recovery
risk utility
scale demand
state
term base
BKH Transcript
Black Hills Corporation (BKH) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call summary indicates strong financial performance with a 5% EPS increase, a consistent dividend increase, and a robust capital investment plan. The Q&A revealed positive sentiment towards data center demand and merger progress, although some management responses lacked clarity. The reaffirmed guidance and strong partnerships with Microsoft and Meta suggest optimism. Given the market cap of $3.7 billion, the stock is likely to react positively, within the 2% to 8% range, over the next two weeks.
Black Hills Corporation (BKH) Q3 2025 Earnings Call Transcript
Positive11-6
The earnings call highlights strong financial performance with a 28.6% YoY EPS increase, driven by regulatory efforts. Despite weather and cost headwinds, the company maintained positive guidance, supported by strong demand and strategic projects. The Q&A revealed no major concerns, with management confident in regulatory processes and economic conditions. The reaffirmed growth guidance and capital plan, alongside a dividend strategy, further bolster sentiment. Given the market cap, the stock is likely to see a positive movement, albeit not exceedingly strong, due to the absence of groundbreaking announcements.
Black Hills Corporation (BKH) Q2 2025 Earnings Call Transcript
Positive7-31
The company reported a strong EPS increase and reaffirmed its earnings guidance, suggesting financial stability. The dividend track record and new partnerships with major companies like Meta and Microsoft are positive indicators. The Q&A revealed confidence in growth, particularly in data centers, despite some uncertainties. The stable insurance costs and recovery from outages further support a positive outlook. Given the market cap, the stock is likely to experience a moderate positive movement of 2% to 8%.
Black Hills Corporation (BKH) Q1 2025 Earnings Call Transcript
Unknown5-8
The earnings call presents mixed signals: positive elements include a strong dividend track record, new revenue from rate adjustments, and optimistic guidance. However, there are concerns about increased O&M expenses and equity issuance, which may dilute shares. The Q&A reveals uncertainties around the capital structure and potential litigation impacts. The market cap suggests moderate volatility, leading to a neutral prediction. Despite positive long-term growth targets, immediate factors like equity needs and cost increases balance the outlook.
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BKH Report
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