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BH

BLACK HILLS CORP /SD/ (BKH)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 EPS of $0.35 and revenue of $401.6M; year-over-year decline versus Q3 2023 ($0.67 EPS; $407.1M revenue) as new rates and rider recovery and customer growth were offset by higher O&M, depreciation, unplanned generation outages, and higher interest expense .
  • Guidance reaffirmed: FY 2024 EPS $3.80–$4.00; CFO tightened O&M outlook to “no more than 2.5%” YoY increase versus prior ~3.5%, a positive surprise for expense discipline .
  • Regulatory momentum: Arkansas Gas final rates (+$25.4M new annual revenue) took effect in October; Iowa Gas settlement filed (+$15M new annual revenue), final rates expected Q1 2025 .
  • Strategic growth catalysts: progressing Ready Wyoming 260-mile transmission, Colorado Clean Energy Plan resource additions, and expected data center EPS contribution to rise from ~5% in 2023 to ≥10% by 2028; serving Meta’s new AI data center by 2026 .

What Went Well and What Went Wrong

What Went Well

  • Expense discipline and guidance confidence: “We are on track to deliver on our earnings guidance… despite mild weather and other unexpected cost pressures” and O&M increase held to ≤2.5% YoY in 2024 .
  • Regulatory wins: Arkansas Gas rates effective October; Iowa settlement advancing; Colorado Electric rate review on schedule—supporting margin growth and recovery timeliness .
  • Strategic load growth: “We look forward to serving Meta’s new AI data center in Cheyenne… by 2026,” with data center EPS contribution expected to grow to ≥10% by 2028 .

What Went Wrong

  • Unplanned outages and lower market sales pressured results: Electric Utilities operating income down $17.9M YoY; off-system sales down, and generating fleet availability impacted by Wygen I and Colorado IPP outages .
  • Higher costs: O&M up (insurance premiums, employee costs, outage-related expenses), depreciation higher with assets placed in service, and net interest expense up $4.2M YoY .
  • Gas distribution revenue headwinds: commodity price declines weighed on reported revenues (mitigated by pass-through mechanisms), quantities sold modestly down YoY .

Financial Results

Consolidated Results vs Prior Periods and Estimates

MetricQ3 2023Q2 2024Q3 2024Vs. YoYVs. QoQVs. Estimates
Revenue ($USD Millions)$407.1 $402.6 $401.6 -1.4%-0.2%N/A (S&P Global consensus unavailable)
Diluted EPS ($USD)$0.67 $0.33 $0.35 -47.8%+6.1%N/A (S&P Global consensus unavailable)
Operating Income ($USD Millions)$97.8 $70.6 $75.8 -22.5%+7.4%N/A

Notes: Estimates were not retrievable at time of request and are therefore not included (S&P Global data unavailable).

Profitability (Operating Margin % – calculated)

MetricQ3 2023Q2 2024Q3 2024
Operating Income ($MM)$97.8 $70.6 $75.8
Revenue ($MM)$407.1 $402.6 $401.6
Operating Margin % (Operating Income / Revenue)24.0%17.5%18.9%

Footnote: Operating Margin % is computed from cited revenue and operating income values.

Segment Performance – Q3 2024 vs Q3 2023

SegmentRevenue Q3 2023 ($MM)Revenue Q3 2024 ($MM)Operating Income Q3 2023 ($MM)Operating Income Q3 2024 ($MM)
Electric Utilities$237.3 $232.5 $83.0 $65.1
Gas Utilities$174.3 $173.6 $15.4 $10.9
Corporate & Other$(4.5) $(4.5) $(0.6) $(0.2)
Total$407.1 $401.6 $97.8 $75.8

KPIs

KPIQ3 2023Q3 2024
Electric Quantities Sold (GWh)1,861.6 1,907.3
Contracted Generating Facilities Availability – Total94.7% 95.1%
Coal Availability96.3% 90.7% (impacted by outages)
Wind Capacity Factor31.3% 32.0%
Gas Quantities Sold & Transported (Dth, MM)44.8 44.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EPS (Diluted)FY 2024$3.80–$4.00 (affirmed in Q1/Q2) $3.80–$4.00 (reaffirmed) Maintained
O&M YoY IncreaseFY 2024~3.5% YoY increase expected (Q2 commentary) ≤2.5% YoY increase expected (Q3 update) Lowered
Equity IssuanceFY 2024$170–$190M via ATM $170–$190M; executed $182M YTD Maintained (execution achieved)
Production Tax CreditsFY 2024~$18M PTCs ~$18M PTCs (no change) Maintained
DividendQ4 2024$0.65/share (declared Oct 28) $0.65/share payable Dec 1 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Data Centers & BlockchainData center/blockchain ~5% EPS; targeting ≥10% by 2028; Meta AI data center announced; capital-light LPCS tariff supports growth Serving Meta by 2026; continued inbound interest in WY/CO/SD; EPS contribution path reiterated Strengthening demand visibility
Supply Chain & Insurance CostsOngoing inflationary pressures on costs and insurance; disciplined O&M Higher insurance premiums cited; O&M maintained ≤2.5% increase Cost pressure managed
Regulatory/Rate ReviewsAR advancing; IA filed; CO Electric review planned/ filed AR approved; IA settlement filed; CO Electric rebuttal and Dec hearing Constructive outcomes
Generation Outages & ReliabilityUnplanned outages impacted Integrated Generation (Wygen I, Pueblo APG #4-5) Outage effects continued early Q3; maintenance pulled forward; fleet availability still strong (nat gas 98%; total 95%) Operational mitigation improving
Capex & Capital Structure5-year ~$4.3B; 2026 peak ~$1.3B; target BBB+; equity issuance plan Liquidity strong; net debt/cap at 55%; 5-year plan reiterated; upside arrows for 2027–2028 Balanced funding; credit metrics improving
Wildfire MitigationPlan disclosed; PSPS program to be formalized Continued multi-layered approach; PSPS expected H1 2025 Execution progressing

Management Commentary

  • CEO on guidance and strategy: “We remain confident in our financial outlook… We’re on track to deliver on our earnings guidance range of $3.80 to $4 per share… successfully met the impacts of mild weather, unplanned generation outages and increased insurance expense” .
  • CEO on strategic projects: “Our 260-mile Ready Wyoming transmission project remains on track… We… look forward to serving Meta’s new AI data center in Cheyenne, Wyoming by 2026” .
  • CFO on expense management: “We are delivering new margins and managing our costs… expect our annual O&M cost increase in 2024 to be no more than 2.5% over 2023” .
  • Utilities SVP on resources: “Colorado Commission… authorized 100 MW utility-owned solar, 50 MW utility-owned battery, and a 200 MW solar PPA… expect a final written decision before year-end” .

Q&A Highlights

  • Unplanned outages impact: Outages carried over from Q2 to early Q3; CFO quantified EPS impact at ~$0.03 for the quarter and ~$0.05 YTD for O&M component, with total impact including margins shown on slides .
  • Guidance cadence: Management reaffirmed FY EPS range but declined to indicate positioning within the range .
  • Large load/customer cadence: Data centers ramp “relatively smooth,” Meta to begin in late 2026, continued land purchases and expansion imply multi-year growth .
  • AI demand: Interest strengthening; potential to serve AI centers beyond Cheyenne; interties support reliability and flexibility .
  • O&M into Q4: O&M favored earlier in year; focus remains on covering outages, insurance; diligence on capital investments supports 4–6% LT EPS growth .
  • Maintenance pull-forward: Leveraged outage windows to bring forward longer-term maintenance, potentially benefiting future periods .
  • Tariff replication: Management flexible in adopting similar large-load tariffs in CO/SD to balance customer and shareholder interests .

Estimates Context

  • Wall Street consensus estimates from S&P Global were unavailable at retrieval time, so explicit “vs. estimates” comparisons are not provided. Expect sell-side models to incorporate: tighter O&M growth (≤2.5% vs ~3.5% prior), regulatory rate outcomes, continued mild weather assumptions, outage normalization, and incremental data center load ramp .

Key Takeaways for Investors

  • Expense discipline improved: O&M guidance lowered to ≤2.5% YoY, countering weather, interest, and outage headwinds—supportive for near-term EPS delivery within the reaffirmed range .
  • Margin visibility rising: Arkansas and Iowa rate outcomes, Colorado Electric case, and data center loads provide multi-year margin drivers .
  • Outage headwinds likely transient: Fleet availability remained robust; maintenance advanced during outages should reduce future risk .
  • Capital plan intact, funding de-risked: Achieved 55% debt to capitalization target; completed equity issuance within guidance range; liquidity solid .
  • Structural AI/data center growth: Meta service by 2026; EPS contribution path to ≥10% by 2028 under capital-light model improves ROIC profile .
  • Regulatory cadence sustainable: Expect 3–4 rate reviews annually to reduce lag and support investment recovery .
  • Dividend dependability: $0.65/share quarterly; 54 consecutive years of increases, aligned with earnings growth .

Cross-References and Disclosures

  • All quantitative results and operational details are drawn from Black Hills’ Q3 2024 8-K and press release, Q3 2024 earnings call transcript, and relevant Q1/Q2 2024 documents: .
  • Operating margin figures are computed from cited revenue and operating income values.
  • S&P Global consensus estimates were unavailable at time of retrieval; therefore, “vs estimates” cells are shown as N/A.