Black Hills Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Black Hills operates electric and gas utilities across eight states, serving more than 1.3 million customers. Interim results are seasonal and may not indicate full-year performance.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $726.4 million | $921.2 million | Down $194.8 million |
| Operating income | $193.3 million | $174.9 million | Up $18.4 million |
| Net income | $131.6 million | $117.4 million | Up $14.2 million |
| Net income available to common stock | $127.9 million | $114.1 million | Up $13.8 million |
| Diluted EPS | $1.87 | $1.73 | Up $0.14 |
| Cash from operating activities | $233.4 million | $328.7 million | Down $95.3 million |
Revenue declined principally with lower natural gas commodity prices and related pass-through costs. Operating expenses fell $213.2 million, largely reflecting lower fuel, purchased power and natural gas costs. Interest expense, net, was $44.0 million versus $43.5 million; the effective tax rate was 11.4%, versus 11.1%.
Electric Utility margin, a non-GAAP measure, increased to $167.4 million from $163.3 million; Gas Utility margin increased to $246.8 million from $235.9 million. Segment operating income rose to $64.6 million from $61.1 million for Electric Utilities and to $130.8 million from $114.6 million for Gas Utilities.
Cash and cash equivalents were $123.0 million at quarter-end; including restricted cash, total cash was $129.7 million. The $750 million revolving credit facility had no borrowings and $746.3 million available, after letters of credit. Capital expenditures were $176.2 million, compared with $119.1 million; operating cash flow therefore exceeded reported capital expenditures by $57.2 million before dividends and other investing items.
Total debt carrying value, including current maturities, was $4.403 billion. Current maturities were $600 million, consisting of senior unsecured notes due August 23, 2024. The company said it plans to refinance these notes at or before maturity. The consolidated indebtedness-to-capitalization ratio was 0.57, below the 0.65 covenant limit; the company reported compliance with its covenants.
Material changes and management commentary
- Electric Utilities operating income increased $3.5 million, primarily from new rates and rider recovery in Wyoming and lower operating expenses; the comparison was partly offset by a prior-year one-time gain from the sale of Northern Iowa Windpower.
- Gas Utilities operating income increased $16.2 million, driven mainly by new rates and rider recovery in Colorado and Wyoming, favorable commodity-contract mark-to-market adjustments and lower operating expenses. Unfavorable weather partially offset these factors.
- Cash from operations declined despite higher earnings, reflecting less favorable working-capital and regulatory-asset/liability cash movements.
- The company issued 0.6 million shares under its at-the-market program for $31.2 million net proceeds. Common dividends paid were $0.65 per share; the board declared another $0.65 quarterly dividend payable June 1, 2024.
Outlook, developments and risks
- The filing provides no numeric full-year earnings guidance. Forecast capital expenditures are $840 million for 2024, including first-quarter actual spending, and $803 million for 2025; additional projects under evaluation are excluded from those annual totals.
- Colorado Electric proposed 400 MW of clean-energy resources—200 MW solar, 150 MW wind under a power purchase agreement and 50 MW battery storage—with expected service in 2026–2027. The proposal is subject to regulatory review, expected in Q3 2024.
- In April 2024, the EPA issued final power-sector greenhouse-gas rules. Black Hills is evaluating the impact and expects most resulting costs to be recoverable through regulatory mechanisms.
- Rate proceedings include Arkansas Gas’s request for $44.1 million in annual revenue, with final rates sought in Q4 2024; Colorado Gas’s approved increase is expected to add $20.2 million annually, with final rates effective May 1, 2024; Wyoming Gas’s $13.9 million annual increase took effect February 1, 2024. Iowa Gas filed a $20.7 million annual-revenue request on May 1, 2024.
- The company acquired a landfill renewable natural gas production facility in Dubuque, Iowa, in January 2024. Its output is sold under long-term contracts to a third party.
- Key stated risks include regulatory cost recovery and timing, execution and financing of the capital program, interest rates, inflation and volatile energy prices, supply-chain availability and cost, environmental regulation, and achieving emissions goals. The company reported no material changes to previously disclosed risk factors or commitments, contingencies and guarantees.
Important facts for investors to verify
- Whether the planned refinancing of the $600 million notes due in August 2024 is completed, and its cost and effect on interest expense.
- Regulatory outcomes and timing for pending rate requests, and whether approved increases translate into expected earnings and cash recovery.
- Actual capital spending, funding needs and project approvals, particularly for the Clean Energy Plan and Ready Wyoming transmission expansion.
- Whether operating cash flow improves after the quarter’s weaker working-capital and regulatory cash movements.
- The eventual cost and recoverability of compliance with the EPA greenhouse-gas rules.