BLACK HILLS CORP /SD/ Q3 FY2025 earnings call

Linn Evans started by mentioning fulfilling commitments in 3 key areas: delivering financial commitments, executing regulatory/growth initiatives (including $1B capital plan), and providing excellent operational performance. Reaffirmed 2025 earnings guidance with adjusted EPS range $4 to $4.20. Secured rate settlements in Nebraska, advanced projects like Ready Wyoming transmission expansion and Lange II generation project. Customer growth from data centers and large load customers. Kimberly Nooney provided financial update, reaffirmed 2025 EPS guidance, discussed balance sheet health, financing activities. Marne Jones talked about industry-leading reliability, data center interest and progress, regulatory progress including Nebraska rate review settlement, and projects like Colorado battery storage.

Reaffirmed 2025 adjusted EPS range of $4 to $4.20, 5% growth at midpoint over 2024. Plan to deliver upper half of 4% to 6% long-term EPS growth starting in 2026. Anticipate updated financial outlook in February 2026 including 2026 guidance and capital plans 2026-2030.

Uncertainties in weather affecting earnings, regulatory approval process for merger with NorthWestern Energy could be extended, market conditions impacting data center negotiations and economic weakness in service territories.

Q: Given your pipeline for data center potential resource requirements, have you guys done anything to put in options or reservations on any important critical equipment at this point?

A: Chris, thanks for the question. We're obviously very excited about the pipeline that we're building. And much to your point, it is going to require some generation. But we have -- we do have some reservations, and we also continue to use our LPCS tariff, which allows us to serve it through that mix of utility-owned, contracted as well as market purchases. And so really providing us a lot of flexibility in how we serve this growing pipeline.

Q: Given the activity in the Montana commissions in the last couple of months, have you got any concerns or thoughts about the approval process in Montana? And are you thinking that, that could be extended given what's been happening there?

A: Chris, this is Linn. We're watching that closely with our friends at NorthWestern. NorthWestern, of course, does a lot of business for a long time in Montana. We're taking a lot of guidance from them in terms of the politics, et cetera. To be blunt, we're not worried. In fact, some of the things that have happened recently arguably can be helpful to the process. We're watching it closely, staying highly engaged with that commissions through our application. We'll be starting discovery here quite soon. We'll look forward to the procedural schedule that will tell us a lot, too. So we're aware and we're managing our way through it.

Q: Given the good third quarter results and sort of where consensus expectations are for the fourth quarter, that sort of implies towards the upper end of your guidance range for the year, but you didn't really address where you think you're falling in the range so far. Are there any fourth quarter issues that you'd highlight that might be on the more negative side?

A: Yes, Chris, it's Kimberly here. I don't think there's anything that we would highlight. Everything operationally, financially, we're really hitting on all cylinders. We're obviously always focused on the weather. And I'd just remind listeners that our earnings guidance is based on normal weather. So that's the thing that we watch and are probably most concerned about, but it's outside of our control. Operationally, we're in a really good place. So overall, there's just nothing else that I would highlight. And again, I'd just remind listeners that we did reaffirm our guidance for the year. So we're really feeling good about where we're at.

Q: There's been some data points on some economic issues, some weakness here and there and lots of layoffs of late. Have you seen any indicators of weakness in your service areas at this point?

A: We monitor that closely, Chris. And I'd say the short answer is no. We're watching that closely. But in our particular service territories, the economic conditions seem to continue to be strong, maybe not as strong as they've been in the past, but they're still -- they're certainly not weak, put it that way.

Q: Try to quantify the EPS upside from the Crusoe-Tallgrass data center project.

A: Andrew, it's Kimberly. What I generally say is your theory and your mathematical calculation is directionally correct. It's really important to understand that we negotiate with each of these data centers. And so the nuances of those contractual agreements will be different between each of the respective hyperscalers, whether it's our existing customer base with Microsoft and Meta, whether it's the forecasted opportunities with some of the hyperscalers that we're currently negotiating with. So in general, each megawatt is going to look a little different. But from a theoretical perspective, you're absolutely right. This is going to be a significant opportunity from Black Hills' long-term growth perspective.

Q: Should that happen before the merger closes, would you address the growth outlook? Or is the 4% to 6% more or less frozen, so to speak, until the deal closes?

A: Andrew, yes, this is Kimberly again. So obviously, we're very focused on achieving our current growth rate, and we're on target to do that. We've obviously guided to the upper end of that range as a result of a lot of the projects our teams are working on that will go into service, Ready Wyoming, our Lange II project, et cetera. So as we think about data center growth, obviously, it would be a significant upside to our plan. And we would obviously provide an update at the point that we're going to close or sign these contracts. And at that point, we'll assess whether it's the right time to change our earnings guidance range, our long-term earnings guidance range for any reason. So that's really how we're thinking about it at this point.

Q: You own a coal mine, which has not gotten a lot of investor attention recently. But in today's environment, it might be worth more than it has been in the past. How are you thinking about that asset? Is it something that you could potentially monetize?

A: We're keeping our options open, I suppose, Andrew. You might know my background is mining engineering. So I'm aware of what this could be and what it could not be. We are aware we have rare earth minerals in our coal, in our fly ash, et cetera. It'd be my personal opinion, probably not enough to monetize, but stranger things have happened. We'll watch what's happening at the Washington, D.C. region, especially if there was a price floor or something of that nature. We're all aware that the Chinese can flood the market very quickly if they choose to in that regard, et cetera. So we're keeping an eye on it, I suppose. Our coal has been tested, analyzed. So we're kind of aware of what's there, but we don't think there's anything that we need to be really happy or concerned about in the near term.