BKH — Black Hills Corporation

Black Hills Corporation (BKH) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• GAAP EPS: Reported at $3.98, including $0.12 of merger-related costs; adjusted EPS was $4.10, a 5% increase from $3.91 in 2024.
• New Rates and Rider Recovery: Contributed $0.95 per share, offsetting higher operating expenses.
• Operating and Financing Costs: O&M expenses rose by $0.36 per share, with $0.12 attributed to merger costs. Financing costs increased by $0.33 per share, primarily due to higher interest expenses.
• Dividend: Increased for the 56th consecutive year, maintaining a target payout ratio of 55% to 65%.
• Capital Investment: Successfully funded a $900 million capital investment plan while maintaining strong credit metrics.

2. Strategic Updates and Business Highlights

• Merger with NorthWestern Energy: Announced in August, aimed at creating a stronger utility with enhanced scale and improved customer diversity. Regulatory applications have been submitted, with approvals expected in the second half of 2026.
• Data Center Pipeline: Expanded to over 3 gigawatts, with significant demand from Microsoft and Meta. Expected to contribute over 10% to consolidated EPS starting in 2028.
• Operational Achievements: Completed the 260-mile Ready Wyoming transmission project on schedule, enhancing service reliability and market access.
• New Projects: Broke ground on the Lange II 99-megawatt generation project in Rapid City, set to replace aging resources.

3. Forward Guidance and Outlook

• 2026 Adjusted EPS Guidance: Projected in the range of $4.25 to $4.45, reflecting a 6% growth at the midpoint compared to 2025.
• Capital Plan: $4.7 billion capital plan focused on safety, reliability, and growth, with expectations of strong customer growth and regulatory progress.
• Long-Term Growth Target: Maintained a long-term EPS growth target of 4% to 6%, with confidence driven by ongoing customer demand and strategic investments.

4. Bad News, Challenges, or Points of Concern

• Higher Operating Costs: Increased O&M and financing costs are a concern, particularly with rising interest rates impacting profitability.
• Weather Impact: While weather was favorable in 2025, it still posed a headwind when compared to normal conditions, affecting earnings.
• Regulatory Risks: The merger and ongoing rate reviews present uncertainties, particularly in navigating regulatory approvals across multiple states.

5. Notable Q&A Insights

• Data Center Pipeline: Management indicated that the 600 megawatts of demand expected by 2030 will primarily come from existing customers, with negotiations ongoing for additional capacity.
• Merger Progress: In the discovery phase with regulators, management expressed confidence in the process, aligning with expectations.
• CPCN Filings: Discussions on the need for timely filings to secure equipment and manage risks associated with the growing demand from data centers.
• Resource Mix: Management is evaluating the mix of energy resources needed to serve the data center demand, emphasizing flexibility in pricing and contracts.

Overall, Black Hills Corporation demonstrated solid financial performance in 2025, with strategic initiatives aimed at growth and efficiency, despite facing challenges related to rising costs and regulatory complexities. The outlook for 2026 remains positive, bolstered by strong customer demand and ongoing projects.