Black Hills Corporation · NYSE:BKH
Black Hills — Q1 2023 Earnings Presentation
34 slides from Black Hills's earnings presentation, May 4, 2023
Slide 1: 2023 First Quarter Review
2023 First Quarter Review May 4, 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: First Quarter 2023 Review
First Quarter 2023 Review
Slide 4: Q1 2023 Key Takeaways
Q1 2023 Key Takeaways Reaffirmed 2023 guidance Reliable and safe operational performance Strengthened balance sheet and liquidity Advanced growth initiatives BKH | 2023 First Quarter Review | May 4, 2023 | 4
Slide 5: 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 BKH | 2023 First Quarter Review | M
Slide 6: Rate Review Progress
Rate Review Progress • Settlement agreement filed for Rocky Mountain Natural Gas intrastate pipeline rate review; seeking new rates by Q3 2023 • Preparing to file natural gas rate reviews in Colorado and Wyoming in Q2 2023 and an additional natural gas rate review later in 2023 Annual Filing Revenue
Slide 7: Advancing Electric Resource Plans
Advancing Electric Resource Plans Total of 520 MW by 2030 Colorado Clean • Opted in to 80% by • Issue “all source” RFP mid-year 2023 Energy Plan 2030 legislation 400 MW of clean 80% by 2030 plan achieves • Received approval of • Settlement and 200-250 MW 100 MW 50 MW battery Colorado legislation sol
Slide 8: 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 9: Customer-focused Growth Initiatives
Customer-focused Growth 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 electric transmission service territory in customer in service in ser
Slide 10: Strong Customer Growth
Strong Customer Growth Total 5-year Population and Customer Growth Top Growth Areas: Year-end 2017-2022, ranked by BKH growth Ongoing population migration into our states Colorado 11.1% Colorado Front Range growth and development 4.0% Arkansas 8.2% Northwest Arkansas industry and community expansion
Slide 11: Q1 2023 Financial Review
Q1 2023 Financial Review
Slide 12: Q1 2023 Financial Review
Q1 2023 Financial Review EPS Operating Income (millions) $2.30 $2.20 $2.10 $140.0 $2.00 $1.82 $124 $1.90 $1.73 $1.80 $120.0 $115 $1.70 $1.60 $1.50 $100.0 $1.40 $1.30 $1.20 $80.0 $1.10 $1.00 $61 $0.90 $60.0 $51 $0.80 $0.70 $0.60 $40.0 $0.50 $0.40 $0.30 $20.0 $0.20 $0.10 $0.00 $0.0 Q1 2022 Q1 2023 Ele
Slide 13: Q1 2023 Earnings Drivers
Q1 2023 Earnings Drivers Change in Net Income Available for Common Stock Other Electric Natural Gas Interest Income Q1 2022 Margin 1, 2 Margin 1, 2 O&M DD&A Expense (Expense) Taxes Q1 2023 (millions) $125 $7.1 New rates and rider recovery ($0.5) Gain on sale of non-core wind asset $120 ($4.5)
Slide 14: Strengthening Balance Sheet and Liquidity
Strengthening Balance Sheet and Liquidity Q1 Cash Flows Utilized to Fully Repay Commercial Paper Borrowings Strong operating ✓ 2021 Winter Storm Uri recovery cash flows ✓ Elevated natural gas commodity cost recovery ✓ New rates and rider recovery ✓ Customer growth Capital investment ✓ Disciplined ma
Slide 15: 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 $250 million accordion feature FFO (with bank consent) Adjusted $750 BBB+ Baa2 BBB+ $750 million revolving credit facility FFO / Debt Leverage (maturing Jul
Slide 16: 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 17: Strong Long-term Growth Outlook
Strong Long-term Growth Outlook $3.5 billion 4% to 6% 55% to 65% Capital Investment 2023-2027 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 18: Questions
Questions
Slide 19: Appendix
Appendix
Slide 20: 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 $3.85 based on the following update assumptions: • Normal weather conditions within our utility service territories including temperatures, precipitation leve
Slide 21: Winter Storm Uri Recovery Approved and Progressing
Winter Storm Uri Recovery Approved and Progressing ($ 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 22: Responsibly Reducing GHG Emissions
Responsibly Reducing GHG Emissions Achieved Greater than One-third Reduction Since 2005 2 1 ✓ 33%+ by 2021 ✓ Retired 123.3 MW of coal generation ✓ Added 288.8 MW of owned renewable ✓33%+ by 2021 ✓ Replaced at-risk and aging pipeline materials across natural gas system since 2005 wind resources _redu
Slide 23: Ready Wyoming Electric Transmission Initiative
Ready Wyoming Electric Transmission Initiative WYOMING SOUTH DAKOTA 260-mile Project to Further Interconnect and Expand Wyoming 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 24: Income Statement
Income Statement (in millions, except earnings per share) First Quarter 2022 2023 Revenue $ 823.6 $ 921.2 Fuel, purchased power and cost of natural gas sold (436.9) (526.3) Operations and maintenance expense (152.8) (158.4) Depreciation, depletion and amortization (60.5) (61.6) Operating income 173.
Slide 25: Capital Structure
Capital Structure ($ in millions) Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Capitalization Short-term Debt $ 342 $ 335 $ 501 $ 1,061 $ 525 Long-term Debt 4,128 4,130 4,131 3,607 3,954 Total Debt 4,470 4,465 4,632 4,668 4,479 Equity* 2,872 2,885 2,887 2,995 3,098 Total Capitalization $ 7,342 $ 7,350 $ 7,519
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 MWh Sales Total for all natural gas service areas Dth Sales weighted by customer count weighted by customer count (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 2019* $1.73 $0.24 $0.44 $1.13 $3.53 EPS, as Adjusted, Normalized for Impacts of 2020* $1.59 $0.33 $0.58 $1.23 $3.73 2021 $1.54 $0.40 $0.70 $1.11 $3.74 Weather, Mark-to-Market and Winter Storm Uri * 2022 $1.82 $0.52 $0.54 $1.11 $3.97 2
Slide 29: 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 30: 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 31: Non-GAAP Financial Measures
Non-GAAP Financial Measures Earnings before Interest, Income Taxes, Depreciation and Amortization Three Months Ended Mar. 31 (in thousands) 2022 2023 Net income $ 121,024 $ 117,380 Depreciation, depletion and amortization 60,463 61,643 Interest expense, net 38,545 43,504 Income tax expense (benefit)
Slide 32: Non-GAAP Financial Measures
Non-GAAP Financial Measures Earnings, as adjusted (in millions) Earnings Per Share, as adjusted YTD YTD Annual Earnings and EPS, as adjusted 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 2023 2023 Net income (loss) available for common stock $ 177.0 $ 258.4 $ 199.3 $ 227.6 $ 236.7 $ 25
Slide 33: Vision, Mission and Company Values
Vision Be the energy partner of choice. Mission Improving life with energy. Company Values BKH | 2023 First Quarter Review | May 4, 2023 | 33
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