Business Context and Reporting Period
This Form 8-K filing by Black Hills Corporation (a South Dakota corporation) covers events occurring on February 12, 2016. The report details the completion of a major acquisition, the termination of a bridge financing agreement, the assumption of new debt obligations, and the announcement of a pending asset sale.
Key Financial Metrics and Transactions
Acquisition of SourceGas Holdings LLC
- Total Consideration: Approximately $1.89 billion.
- Debt Assumed: $760 million.
- Financing Sources: Equity common shares and units issued on November 23, 2015; a debt offering completed on January 13, 2016; and short-term borrowings.
Debt Obligations Assumed
| Obligor | Description | Year Due | Interest Rate | Amount Outstanding |
|---|---|---|---|---|
| SourceGas LLC | Senior Notes, unsecured | 2017 | Fixed 5.90% | $325,000,000 |
| Black Hills Corporation | Term Loan, unsecured | 2017 | Variable LIBOR+0.875% (Effective ~1.30%) | $340,000,000 |
| SourceGas Holdings LLC | Senior Secured Notes, unsecured | 2019 | Fixed 3.98% | $95,000,000 |
| Total | $760,000,000 |
Pending Asset Sale
- Asset: 49.9% member equity interest in Black Hills Colorado IPP, LLC.
- Buyer: AIA Energy North America LLC.
- Sale Price: $215 million.
- Expected Closing: April 2016 (pending FERC approval).
- Use of Proceeds: Pay down short-term debt and other corporate purposes.
Material Changes Versus Prior Period
- Termination of Bridge Financing: The Bridge Term Loan Credit Agreement dated August 6, 2015, was terminated on February 12, 2016, as the SourceGas acquisition was financed through permanent capital (equity and long-term debt) rather than the bridge facility.
- Balance Sheet Impact: The company's debt load increased by $760 million due to the assumption of SourceGas debt, offset by the issuance of new equity and debt instruments.
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding the expected closing of the Colorado IPP sale in April 2016. Management notes that actual results may differ materially due to risks and uncertainties, including regulatory approvals (specifically the Federal Energy Regulatory Commission) and industry conditions. The company explicitly states it assumes no obligation to update these forward-looking statements.
Pro forma financial information and financial statements of the acquired business are not included in this initial report but will be filed by amendment within 71 days.
Investor Verification Checklist
- Verify the final closing date of the Colorado IPP sale and confirm receipt of FERC approval.
- Review the upcoming amendment to this 8-K for the required pro forma financial information and financial statements of SourceGas.
- Monitor the effective interest rate on the variable rate Term Loan ($340 million) as LIBOR fluctuates.
- Confirm the actual use of proceeds from the Colorado IPP sale to ensure alignment with the stated plan to pay down short-term debt.