Black Hills Corp’s Earnings Call Highlights Growth and Challenges

Black Hills ((BKH)) has held its Q1 earnings call. Read on for the main highlights of the call.

Black Hills Corporation’s recent earnings call conveyed a generally positive sentiment, highlighting significant progress toward strategic objectives. The company is experiencing strong customer growth and successful regulatory execution, although challenges such as increased operational costs and regulatory decisions in Colorado present concerns. Despite these hurdles, the overall outlook remains optimistic, driven by robust data center demand and strategic capital investments.

Strategic Objectives and Growth

Black Hills Corporation is on track with its strategic objectives, achieving a 5% year-over-year earnings growth. The company has been executing regulatory initiatives effectively, with a $1 billion capital plan in place. Through five rate reviews since 2024, they have implemented new rates, reflecting the recovery of over $1.3 billion in new system investments.

Customer Growth and Demand

The company is witnessing strong customer growth, particularly in Wyoming Electric, where two new all-time customer peak loads were recorded. This marks a 10% increase over the previous peak and represents 19 consecutive years of rising demand, largely driven by the expansion of data centers and blockchain.

Data Center Expansion

Black Hills Corporation forecasts approximately 500 megawatts of data center demand by the end of 2029. The expected EPS contribution from this sector is projected to double to more than 10% by 2028. The company has successfully partnered with tech giants like Microsoft and Meta, with Meta expected to start service in 2026.

Financial and Dividend Stability

The company reaffirmed its 2025 earnings guidance range of $4 to $4.20, maintaining a 5% growth rate. Black Hills boasts a strong balance sheet, with a 55% to 65% dividend payout ratio and 55 consecutive years of dividend increases, underscoring its financial stability.

Ready Wyoming Electric Transmission Expansion

The Ready Wyoming Electric Transmission Expansion, the largest capital project in the company’s history, is set to be completed by year-end. This $350 million project aims to enhance system resiliency and reduce reliance on third-party transmission systems.

Increased Operational Costs

Operational and maintenance expenses have risen by $0.24 due to higher employee costs, outside services, and insurance costs. Efforts to mitigate the impacts of mild weather in 2024 have adversely affected year-over-year comparisons.

Equity Issuance and Capital Needs

In Q1 2025, Black Hills Corporation issued less equity ($46 million) compared to their annual target of $215 million to $235 million. This shortfall was attributed to the timing of capital projects and cash flow needs.

Regulatory Challenges in Colorado

The Colorado electric rate case resulted in a lower equity ratio than requested (48% vs. 52.4%), which could impact financial performance. The company is currently reviewing this outcome and considering future steps.

Potential Data Center Delays

There are concerns about potential delays in Microsoft’s data center expansion plans. However, Black Hills remains confident in its five-year outlook, supported by historical engagements.

Forward-Looking Guidance

During the Q1 2025 earnings call, Black Hills Corporation reaffirmed its 2025 earnings guidance range of $4 to $4.20 per share, indicating a 5% growth rate at the midpoint compared to 2024 EPS. The company highlighted several key metrics driving growth, including successful regulatory initiatives and a $1 billion capital plan focused on infrastructure expansion. Additionally, Black Hills anticipates investing $4.7 billion over a five-year period through 2029, confident in achieving long-term EPS growth of 4% to 6%.

In summary, Black Hills Corporation’s earnings call reflects a positive outlook, with strong customer growth and strategic investments driving future performance. While challenges such as increased operational costs and regulatory hurdles in Colorado exist, the company’s robust data center demand and financial stability provide a solid foundation for continued growth.