Black Hills Corporation · NYSE:BKH
Black Hills — Q2 2023 Earnings Presentation
35 slides from Black Hills's earnings presentation, Aug 3, 2023
Slide 1: 2023 Second Quarter Review
2023 Second Quarter Review Aug. 3, 2023
Slide 2: Forward-looking Statements
Forward-looking Statements COMPANY This presentation includes “forward-looking statements” as defined by the Securities and Exchange Commission. We make these forward- INFORMATION looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Ac
Slide 3: Q2 2023 Key Takeaways
Q2 2023 Key Takeaways Reaffirmed 2023 guidance Delivered reliable and safe operational performance Strengthened balance sheet and liquidity Advanced regulatory and growth initiatives BKH | 2023 Second Quarter Review | Aug. 3, 2023 | 3
Slide 4: Financial Outlook
Financial Outlook 2023 Guidance of $3.65 to $3.85 EPS Long-term 4% to 6% growth target off 2023 base EPS Growth Dividend 55% to 65% payout ratio target * Capital $3.5 billion five-year forecast (2023 to 2027) Investment * Future dividends subject to board approval Note: 2024 earnings guidance, 2024
Slide 5: Q2 2023 Financial Review
Q2 2023 Financial Review
Slide 6: Q2 2023 Financial Review
Q2 2023 Financial Review EPS Operating Income (millions) $152 $2.50 $2.33 $132 $2.06 $2.00 $108 $96 $1.50 $1.00 $45 $47 $0.52 $28 $0.50 $0.35 $18 $0.00 Q2 2022 Q2 2023 YTD 2022 YTD 2023 Electric Gas Electric Gas Utilities Utilities Utilities Utilities Q2 2022 Q2 2023 YTD 2022 YTD 2023 BKH | 2023 Sec
Slide 7: Q2 2023 Earnings Drivers
Q2 2023 Earnings Drivers Change in Net Income Available for Common Stock Other Electric Natural Gas Interest Income Q2 2022 Margin 1, 2 Margin 1, 2 O&M DD&A Expense (Expense) Taxes Q2 2023 (millions) $6.9 $40 New rates and rider recovery ($3.6) $35 $33.4 State income tax benefit Higher employe
Slide 8: Strengthened Balance Sheet and Liquidity
Strengthened Balance Sheet and Liquidity YTD Progress Through Robust Cash Flows, Capital Discipline and Financing Execution Strong operating 2021 Winter Storm Uri recovery cash flows Elevated natural gas commodity cost recovery New rates and rider recovery Capital investment Disciplined mana
Slide 9: Solid Financial Position
Solid Financial Position Committed to BBB+ Equivalent Credit Ratings Credit Ratings Liquidity and Cash Flow (millions) S&P Moody’s Fitch $1,000 FFO $250 million accordion feature Adjusted BBB+ Baa2 BBB+ $750 (with bank consent) $750 million revolving credit facility FFO / Debt Leverage Stable outloo
Slide 10: Dividend Track Record
Dividend Track Record 52 Consecutive Years of Annual Increases and 80 Consecutive Years Paid $2.41 55%-65% long-term payout target 5.9% CAGR 2017-2022 Dividend growth rate in line with EPS* 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 Annual Dividend Per Share * Future divid
Slide 11: Business Update
Business Update
Slide 12: Operational Excellence
Operational Excellence Safety-Focused Team Better Every Day Cheyenne Prairie Generating Station and Pueblo Generating Station Geographic Information System (GIS) Team Recognized Recognized for OSHA’s VPP Star Status Extensions by American Gas Association’s Best Practices Program for Natural Gas Syst
Slide 13: Advancing Electric Resource Plans
Advancing Electric Resource Plans Total of 520 MW by 2030 Colorado Clean Energy Plan • Unanimous settlement agreement approved in • Issued RFP July 31, 2023 400 MW of clean energy resources 2026 to 2029 80% by 2030 plan achieves Q1 2023 • 200-250 MW solar • Colorado legislation allows Mix of resourc
Slide 14: Growth and Strategy Update
Growth and Strategy Update
Slide 15: Rate Review Progress
Rate Review Progress • Settlement approved for new rates in Colorado for Rocky Mountain Natural Gas intrastate pipeline • Filed natural gas rate reviews in Colorado and Wyoming in May • Preparing to file a natural gas rate review in Arkansas later this year Annual Filing Revenue Jurisdiction Date In
Slide 16: Disciplined Growth Plan with Upside
Disciplined Growth Plan with Upside Capital Incremental Other Earnings Investment Projects Drivers $3.5 billion 2023-2027 Infrastructure Development Pursuing Profitable Growth (millions) $900 $800 Electric generation and Data center, blockchain and $700 transmission projects technology growth $6
Slide 17: Customer-focused Initiatives
Customer-focused Initiatives Transmission Data Centers Blockchain Renewable Moving Energy and Storage Natural Gas Forward • Ready Wyoming • Attractive data center • New crypto-mining • 6 interconnects in • Advancing culture of electric transmission service territory in customer in service in service
Slide 18: Responsibly Reducing GHG Emissions
Responsibly Reducing GHG Emissions Achieved Greater than One-third Reduction Since 2005 1 2 33% since 2005 Retired 123.3 MW of coal generation Added 288.8 MW of owned renewable 33% since 2005 Replaced at-risk and aging pipeline materials across natural gas system since 2005 wind resources _
Slide 19: Strong Long-term Growth Outlook
Strong Long-term Growth Outlook $3.5 Capital Investment 2023-2027 billion 4% to 6% 55% to 65% Dividend payout target with • Incremental projects likely Long-term EPS growth target 1 long-term growth rate in line • Additional growth opportunities with EPS 2 • Integrated pure-play utility profile • Di
Slide 20: Questions
Questions
Slide 21: Appendix
Appendix
Slide 22: Ready Wyoming Electric Transmission Initiative
Ready Wyoming Electric Transmission Initiative WYOMING 260-mile Project to Further Interconnect and Expand Wyoming SOUTH DAKOTA Electric System • Maintain long-term cost stability for customers • Enhance system resiliency to withstand stress events • Expand access to power markets and provide flexib
Slide 23: 2023 Earnings Guidance Assumptions
2023 Earnings Guidance Assumptions Black Hills reaffirmed its guidance for 2023 EPS available for common stock to be in the range of $3.65 to $3.85 based on the following update assumptions: • Normal weather conditions within our utility service territories including temperatures, precipitation leve
Slide 24: Income Statement
Income Statement (in millions, except earnings per share) Second Quarter Year-to-Date 2022 2023 2022 2023 Revenue $ 474.2 $ 411.3 $ 1,297.8 $ 1,332.4 Fuel, purchased power and cost of natural gas sold (188.2) (121.2) (625.1) (647.5) Operations and maintenance expense (149.5) (161.8) (302.3) (320.2)
Slide 25: Capital Structure
Capital Structure ($ in millions) Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Capitalization Short-term Debt $ 335 $ 501 $ 1,061 $ 525 $ 525 Long-term Debt 4,130 4,131 3,607 3,954 3,956 Total Debt 4,465 4,632 4,668 4,479 4,481 Equity* 2,885 2,887 2,995 3,098 3,110 Total Capitalization $ 7,350 $ 7,519 $ 7,663
Slide 26: Utility Weather and Demand
Utility Weather and Demand Electric - Degree Days Electric Utility -Total Gas - Degree Days* Gas Utility - Total Total for all electric service areas weighted by customer count MWh Sales Total for all natural gas service areas weighted by customer count Dth Sales (in millions) (in millions) 1.8 1.9
Slide 27: Electric Generation Capacity and Performance
Electric Generation Capacity and Performance Owned Generation Capacity Electric Generation Availability 1,600 1,394 MW 100% 1,400 90% 1,210 MW 15% 1,200 80% 6% 70% 1,000 60% 807 MW Percent of Total Capacity 800 57% 62% 50% 37% 40% 600 30% 400 20% 63% 200 32% 28% 10% 0% 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q
Slide 28: Normalized EPS Seasonality
Normalized EPS Seasonality EPS, as adjusted* Q1 Q2 Q3 Q4 FY / YTD EPS, as Adjusted, Normalized for Impacts of 2019* $1.73 $0.24 $0.44 $1.13 $3.53 2020* $1.59 $0.33 $0.58 $1.23 $3.73 Weather, Mark-to-Market and Winter Storm Uri * 2021 $1.54 $0.40 $0.70 $1.11 $3.74 2022 $1.82 $0.52 $0.54 $1.11 $3.97 2
Slide 29: Winter Storm Uri Recovery Approved and Progressing
Winter Storm Uri Recovery Approved and Progressing ($ in millions) Winter Storm Uri Estimated Cost Recovery* Recovery Recovery Recovery (millions) Jurisdiction Amount * Period Completion $600 100% 120% 94% 99% Arkansas Gas $137.5 5 years Q2 2026 $500 84% $512 $543 $546 100% $400 66% $457 80% Colorad
Slide 30: Last Approved Utility Rate Review Results by Jurisdiction
Last Approved Utility Rate Review Results by Jurisdiction Authorized Authorized Effective Return on Authorized Capital Rate Base Jurisdiction Utility Date Equity Structure (in millions) Arkansas Arkansas Gas Oct. 2022 9.60% 55% debt / 45% equity $674.6 Colorado Colorado Electric Jan. 2017 9.37% 47.6
Slide 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures Gas and Electric Utility Margin Gas and Electric Utility margin (revenue less cost of sales) is considered a non-GAAP financial measure due to the exclusion of operation and maintenance expenses, depreciation and amortization expenses, and property and production taxes fr
Slide 32: Non-GAAP Financial Measures
Non-GAAP Financial Measures Net Income Available for Common Stock and EPS, as adjusted We have provided non-GAAP earnings data reflecting adjustments for special items as specified in the GAAP to non-GAAP adjustment reconciliation table in this presentation. Operating Income (loss), as adjusted, Inc
Slide 33: Non-GAAP Financial Measures
Non-GAAP Financial Measures Earnings before Interest, Income Taxes, Depreciation and Amortization EBITDA, as adjusted (a Non-GAAP Measure) (in thousands) Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2022 2023 2022 2023 Net income $ 35,846 $ 26,544 $ 156,870 $ 143,924 Deprecia
Slide 34: Vision, Mission and Company Values
Vision Be the energy partner of choice. Mission Improving life with energy. Company Values BKH | 2023 Second Quarter Review | Aug. 3, 2023 | 34
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