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BH

BLACK HILLS CORP /SD/ (BKH)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 diluted EPS was $1.87, up 8% year over year; net income available to common rose to $127.9M as new rates, rider recovery and lower O&M offset warmer weather and lower off-system sales .
  • Consolidated revenue was $726.4M, down 21% YoY primarily on lower pass-through gas commodity costs; operating income increased to $193.3M, reflecting stronger utility margins and cost control .
  • 2024 EPS guidance was reaffirmed at $3.80–$4.00; management highlighted accelerating load from data center and blockchain customers and a $4.3B five-year capital plan (2024–2028) as medium-term growth catalysts .
  • Near-term catalysts: Iowa Gas rate review filed with interim rates effective mid-May, Colorado Electric rate review planned for June, and Colorado Clean Energy Plan 120-day report recommending 400 MW of renewables with a Phase 2 decision expected in Q3 2024 .

What Went Well and What Went Wrong

What Went Well

  • “Earnings per share for the quarter increased 8% compared to the same period last year. New margins and expense management more than offset headwinds from warm weather, inflation and interest rates.” — CEO Linn Evans .
  • Utility margin expansion: Gas margin +$10.9M (new rates/riders +$13.1M; M2M commodity +$3.7M), Electric margin +$4.1M (new rates +$8.8M) .
  • Strong liquidity and improving credit metrics: ~$120M cash and ~$750M revolver availability; focus on reaching 55% debt-to-total-capital by year-end .

What Went Wrong

  • Weather headwind: Heating degree days down ~10% vs Q1 2023; weather reduced EPS by ~$0.10 YoY (and ~$0.07 vs normal) .
  • Electric off-system sales declined (-$2.3M impact to margin) and wind capacity factor dropped to 39.8% from 48.1%, pressuring non-regulated wind results .
  • Revenue decline (-$198.2M in Gas segment revenue YoY) driven by lower commodity pass-through; though margin increased, top-line optics were weak .

Financial Results

Consolidated Results by Quarter (oldest → newest)

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$407.1 $591.7 $726.4
Diluted EPS ($)$0.67 $1.17 $1.87

Notes:

  • QoQ growth: Revenue +22.8% and EPS +59.8% from Q4 to Q1, driven by seasonal gas margin, new rates/rider recovery and lower O&M .
  • Consensus estimates from S&P Global were unavailable due to data access limitations; comparisons to Street are omitted.

Q1 Year-over-Year Comparison

MetricQ1 2023Q1 2024
Revenue ($USD Millions)$921.2 $726.4
Operating Income ($USD Millions)$174.9 $193.3
Net Income Available to Common ($USD Millions)$114.1 $127.9
Diluted EPS ($)$1.73 $1.87
Net Income Margin (%)12.4% (114.1/921.2) 17.6% (127.9/726.4)
EBIT Margin (%)19.0% (174.9/921.2) 26.6% (193.3/726.4)

Drivers:

  • Electric margin +$4.1M (new rates), Gas margin +$10.9M (new rates, M2M), O&M decreased at Gas (-$8.5M) .
  • Weather reduced margins (Electric -$1.2M, Gas -$7.4M) and HDD down vs normal .

Segment Breakdown (Q1 2024 vs Q1 2023)

Segment Metric ($USD Millions)Electric Q1 2023Electric Q1 2024Gas Q1 2023Gas Q1 2024
Revenue$218.7 $222.2 $706.9 $508.7
Utility Margin (non-GAAP)$163.3 $167.4 $235.9 $246.8
Operating Income$61.1 $64.6 $114.6 $130.8

KPIs

KPIQ1 2023Q1 2024
Heating Degree Days (Electric)3,099; +7% vs normal 2,820; -7% vs normal
Heating Degree Days (Gas)3,196; +4% vs normal 2,865; -8% vs normal
Electric Retail Sales (GWh)1,396.4 1,488.4
Gas Distribution Volumes (Dth, mm)45.0 41.7
Wind Capacity Factor (%)48.1% 39.8%
Diluted Wtd Avg Shares (mm)66.1 68.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (Diluted)FY 2024$3.80–$4.00 (initiated Feb 7, 2024) $3.80–$4.00 (reaffirmed May 8, 2024) Maintained
Equity Issuance (ATM)FY 2024$170M–$190M $170M–$190M Maintained
Production Tax CreditsFY 2024~ $18M ~ $18M Maintained
Quarterly DividendQ2 2024$0.65/share payable Mar 1, 2024 $0.65/share payable Jun 1, 2024 Maintained

Assumptions reiterated: normal weather/operations, constructive regulatory outcomes, no significant unplanned outages, and financing consistent with current rate environment .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’23 and Q4’23)Current Period (Q1’24)Trend
Data center & blockchain load (capital-light)Q3’23: Placed assets in service supporting data center expansion . Q4’23: ~5% EPS early plan; ~10% by end; capital-light tariffs in Cheyenne .~5% of EPS today; on pace to 10%+ by end of plan; no commodity risk to contracts .Accelerating contribution
Regulatory cadence (rate reviews)Q3’23: WY Gas settlement filed; RMNG settlement approved . Q4’23: CO/WY gas settlements; AR filed; planned IA & CO electric filings 2024 .IA Gas filed May 1 (interim mid-May); AR progressing; CO Electric filing planned for June .Consistent 2–3 filings/year
Clean Energy Plan (CO) & SD resource planQ3’23: CO RFP for 400 MW; SD pursued 100 MW . Q4’23: CO bids evaluation; 120-day report planned Q2 .120-day report filed recommending 400 MW; preferred portfolio 250 MW utility-owned; PUC decision expected Q3 .Advancing toward approvals
Ready Wyoming transmissionQ3’23: Progress highlighted . Q4’23: Construction underway; 260 miles multi-phase .Construction continued; completion phases in 2024–2025 .On schedule
RNG initiativesQ4’23: Acquired Dubuque landfill RNG facility; 10 interconnects targeted in 2024 .First nonregulated RNG production in Dubuque; ongoing interconnect expansion .Expanding
Weather/macroQ3’23: Weather headwinds; HDD variances . Q4’23: Severe cold operations; reliability emphasis .Warmer than normal; HDD -10% YoY; EPS impact -$0.10 vs Q1’23 .Headwind this quarter
Credit & liquidityQ4’23: Debt-to-cap improved to 57.3%; target 55% .~$120M cash; ~$750M revolver; targeting 55% by YE .Improving

Management Commentary

  • “We’re off to a good start… Earnings per share for the quarter increased 8%… New margins and expense management more than offset headwinds from warm weather, inflation and interest rates.” — CEO Linn Evans .
  • “We continued to improve our debt ratio due to strong operating cash flows and expect to achieve our long-term target of 55% by year-end.” — CFO Kimberly Nooney .
  • “Our preferred portfolio… includes a 200-megawatt build-transfer solar project, a 50-megawatt build-transfer battery project, and 150 megawatts of wind through a PPA.” — Management on CO Clean Energy Plan .
  • “This capital-light business currently represents approximately 5% of total EPS… and is on pace to contribute 10% plus by the end of our five-year plan.” — On data center/blockchain .

Q&A Highlights

  • Colorado Clean Energy Plan ownership: Analyst asked about utility ownership >50%; management emphasized customer value of utility ownership and regulatory process; portfolio subject to PUC review .
  • CapEx trajectory post-2026: Management reaffirmed conservative approach; suggested modeling ~$700–$750M run rate in 2027–2028 with upside additions as projects solidify .
  • Data center growth specifics: Strong interest and expanding load; ~5% EPS contribution currently; targeted 10%+ by end of plan; contracts structured to avoid commodity exposure .
  • Financing/interest: Expect refinancing of part of $600M notes in 2024; guidance assumes rates consistent with current environment; strong operating cash flows including Storm Uri recoveries .
  • Equity financing mix: Roughly $0.25–$0.30 of equity per $1 of incremental CapEx as a heuristic; focus remains on BBB+ credit quality .

Estimates Context

  • Street consensus (S&P Global) for Q1 2024 EPS and Revenue was unavailable due to data access limitations at time of analysis; therefore, estimate comparisons are not provided. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • EPS strength despite weather: Non-GAAP margin expansion and O&M discipline overcame HDD-driven headwinds; QoQ seasonal uplift and structural rate recovery support trajectory .
  • Reaffirmed FY 2024 EPS guidance and a clearer multi-year growth path from rate cases, renewables, and Ready Wyoming transmission; expect acceleration as assets enter service .
  • Capital-light data center/blockchain revenue stream is increasingly material, mitigating capital intensity while boosting margins; management indicates no commodity risk in these contracts .
  • Regulatory cadence (2–3 filings/year) reduces timing lag and embeds inflation into rates; near-term catalysts from Iowa interim rates and Colorado Electric filing .
  • Credit and liquidity improving with strong cash flows and active financing strategy; management targets 55% debt-to-total-cap by YE 2024, supporting valuation and dividend sustainability .
  • Watch operational KPIs: HDD variance remains a swing factor; wind capacity factor variability impacts non-regulated wind; off-system sales can be a modest negative .
  • Non-GAAP disclosure: Utility margin highlights rate/rider recovery impacts and underlying profitability trends, but investors should cross-check with GAAP operating income and margins .