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    BKH
    Earnings call· Mar 2026(Q1 FY26)

    BLACK HILLS CORP /SD/ Q1 FY26 earnings call BKH

    May 7, 2026 Source

    Executive summary

    Black Hills Corporation Q1 FY26 — Strong Start with Reaffirmed Guidance and Data Center Growth

    Black Hills Corporation reported a solid start to FY26, reaffirming its full-year adjusted EPS guidance despite significant weather headwinds in Q1. The company is actively pursuing substantial large load opportunities, including over 3 GW of potential data center demand, and made progress on its planned merger with NorthWestern Energy. Regulatory initiatives and ongoing capital projects underpin the company's confidence in achieving its long-term growth targets.

    Highlights

    5

    • Reaffirmed full-year adjusted EPS guidance range of $4.25 to $4.45, representing 6% growth at the midpoint over 2025.

    • Delivered $0.24 per share of new rates and rider recovery margin in Q1 FY26.

    • Reduced O&M expenses by $0.10 per share year-over-year in Q1 FY26, excluding merger costs.

    • Secured $201 million in refundable contributions from a prospective customer for generation equipment for a 1.8 GW data center project.

    • Increased dividend for the 56th consecutive year, targeting a 55% to 65% payout ratio.

    Concerns

    3

    • Q1 FY26 adjusted EPS of $1.79 was lower than Q1 FY25 adjusted EPS of $1.87.

    • Unfavorable weather impact reduced Q1 FY26 EPS by $0.18 per share compared to Q1 FY25, and $0.13 per share compared to normal weather.

    • Higher financing and depreciation costs impacted Q1 FY26 EPS by $0.16 per share.

    Guidance & targets

    12
    CategoryTargetConfidence
    Adjusted EPS
    $4.25 to $4.45
    high materiality
    High
    Long-term EPS growth target
    Upper half of 4% to 6%
    high materiality
    High
    Large load demand contribution to consolidated EPS
    More than 10%
    medium materiality
    High
    Large load demand
    600 megawatts
    medium materiality
    High
    Equity need
    $50 million to $70 million
    medium materiality
    High
    Dividend payout ratio
    55% to 65%
    medium materiality
    High
    Lange II generation project in-service
    Q4 FY26
    medium materiality
    High
    Battery storage project in-service
    Late 2027
    medium materiality
    High
    Arkansas Gas rate review new rates
    Second half of this year
    medium materiality
    High
    South Dakota Electric interim rates
    Within 180 days of filing
    medium materiality
    High
    Kansas abbreviated rate review rates
    Early in the third quarter
    medium materiality
    High
    Wyoming wildfire mitigation plan approval
    Expected in the second quarter
    low materiality
    High

    Operational metrics

    14
    Adjusted EPS
    $1.79vs $1.87 in Q1 FY25
    Q1 FY26

    Adjusted for $0.05 of merger-related transaction costs.

    Merger-related transaction costs
    $0.05
    Q1 FY26

    Impact on GAAP EPS.

    Weather impact on EPS
    $0.18vs Q1 FY25
    Q1 FY26

    Record warm temperatures in Wyoming and Colorado weighed on demand.

    New rates and rider recovery margin impact on EPS
    $0.24
    Q1 FY26

    Positive driver for Q1 EPS.

    Lower O&M impact on EPS
    $0.10year-over-year
    Q1 FY26

    Excluding $0.05 per share of merger-related costs.

    Higher financing and depreciation costs impact on EPS
    $0.16
    Q1 FY26

    Financing costs included $0.09 from new shares and $0.01 higher interest expense net of AFUDC. Depreciation driven by new assets placed in service.

    FFO to debt target
    14% to 15%100 bps above downgrade threshold of 13%
    Long-term

    Target for maintaining healthy balance sheet and credit quality.

    Net debt to total capitalization target
    55%at or better than
    Long-term

    Target for maintaining healthy balance sheet and credit quality.

    Equity issued under ATM program
    $41 million
    Q1 FY26

    Positions the company well with minimal equity needs for the remainder of the year.

    Liquidity available under revolving credit facility
    $500 million
    Q1 FY26

    Maintained strong liquidity at quarter end.

    Dividend increase streak
    56
    FY26

    Based on current annualized dividend.

    Colorado emissions reduction goal
    80%
    By 2030

    Supported by battery storage project and solar PPA.

    Wildfire liability legislation
    significant liability protectionssimilar to Wyoming and Montana
    Effective July 1, 2026

    For utilities in compliance with their wildfire plan filed with and published by the commission.

    Wildfire mitigation plan approval
    expected
    Q2 FY26

    Awaiting approval.

    Industry KPIs

    6
    MetricValueDetails
    Adjusted operating EPS$1.79USD
    Multi year capital plan$4.7 billionUSD
    Dividend per share growthIncreased
    Allowed ROE equity layer rate cases10.5% ROE%
    Combined electric gas framework mandates—
    Major regulated project construction progressOn schedule

    Orderbook & backlog

    6
    Large load potential demandMore than 3 gigawattsQ1 FY26

    Includes 600 MW by 2030 within current 5-year financial plan; negotiating with high-quality partners.

    Data center demand in financial plan600 megawattsQ1 FY26

    By 2030; primarily driven by Microsoft and Meta's growth; served mostly through market energy procurement.

    Additional large load opportunitiesMore than 2.5 gigawattsQ1 FY26

    Represents significant upside to current financial plan; pursuing negotiations.

    Specific data center project1.8-gigawattQ1 FY26

    Being developed in Cheyenne; generation reservation agreement executed; working through several agreements with counterparties.

    Microsoft land acquisition for future data center expansion3,200 acresQ1 FY26

    In Cheyenne, Wyoming; represents future upside potential.

    Meta AI data center rampprogressingQ1 FY26

    Expected to begin ramping later this year in Cheyenne.

    Deals & partnerships

    3
    NorthWestern EnergyPlanned merger to create a larger regional electric and natural gas utility company.

    Received favorable shareholder votes on April 2. Hart-Scott-Rodino Act antitrust waiting period expired on April 20. Settlements reached with certain key intervenors in Montana, Nebraska, and South Dakota.

    Prospective 1.8 GW data center customerShort-term generation reservation agreement for company-owned generation equipment.$201 millionshort-term (through June 30, 2026, with potential extensions)

    Agreement provides for customer-funded milestone payments. Intended to transition into a long-term definitive generation facilities agreement. Focus on reliability, resiliency, and customer protections.

    Undisclosed solar resource providerPower Purchase Agreement (PPA) for solar resources.

    200-megawatt PPA to serve Colorado customers, previously approved by the Colorado PUC. Supports progress towards the state's clean energy plan.

    Capital programs

    5
    5-year capital planunderway$4.7 billion

    Invests in natural gas and electric customers' core needs for safety, reliability, and growth. Includes minimal investments for 600 MW of data center demand.

    Lange II generation projectunderway

    Benefit: 99-megawatt

    Construction continues on schedule. Will serve customers in Western South Dakota and Northeastern Wyoming. Recovery will be requested through South Dakota generation rider and Wyoming rate review.

    Battery storage project (Colorado)underway
    Start: Q4 2025

    Benefit: 50-megawatt

    Utility-owned project as part of the clean energy plan in Colorado.

    Ready Wyoming transmission projectcompleted$350 million

    Placed in service at the end of 2025, contributing to depreciation expenses.

    Generation reservation agreementunderway
    Period spend: $201 million
    Funding: customer-funded milestone payments

    Benefit: generation equipment for 1.8 GW data center project

    Executed with a prospective customer to support long lead-time generation equipment. Intended to transition into a long-term definitive generation facilities agreement.

    Risks & headwinds

    3
    Weather impact on demandQ1 FY26

    $0.18 per share impact on Q1 FY26 EPS compared to Q1 FY25; $0.13 per share unfavorability compared to normal weather.

    Mitigation: Optimizing O&M, timing capital investments, working with regulators for weather normalization (e.g., Nebraska pilot).

    Higher financing and depreciation costsQ1 FY26

    $0.16 per share impact on Q1 FY26 EPS.

    Mitigation: Managing balance sheet, evaluating refinancing options for debt maturity in January 2027.

    Complexity of large load agreementsOngoing

    Project of 1.8 GW involves multiple parties and interrelated contractual components.

    Mitigation: Carefully structuring agreements to protect customers and appropriately manage operational and financial risk; ensuring no stranded assets.

    What to watch in Q2 FY26

    5

    Merger regulatory approvals

    Second half of this year
    CurrentFavorable shareholder votes, HSR expired, settlements in MT, NE, SD
    TargetAll state regulatory approvals and FERC approval

    Why it matters

    Merger completion will provide increased scale and new opportunities, impacting the company's long-term value proposition.

    We anticipate securing all state regulatory approvals and FERC approval to finalize the merger within the second half of this year.

    Q&A highlights

    7

    Clarification on the nature of the $201 million generation reservation agreement, specifically if it's utility-owned, rate-based, and the type of return expected.

    The $201 million is for customer-funded milestone payments to procure long lead-time generation equipment. It's a short-term financing bridge for utility-owned assets that would ultimately be part of a long-term definitive agreement. The return would be a negotiated, risk-adjusted rate, specific to the customer, and not part of the overall rate base for retail customers in Wyoming, ensuring no stranded assets for existing customers.

    “It would be specific to this ultimately end-use customer. And so we think about the rate base of that and the return of that based on that customer and the unique needs for that specific customer as we talk about risk-adjusted returns. This would not be part of overall rate base for retail customers in Wyoming.”

    asked by Andrew Weisel · answered by Marne Jones

    2 min read7 chapters

    Detailed Narrative

    01

    Q1 Performance & Strategic Progress

    Black Hills Corporation reported Q1 FY26 GAAP EPS of $1.73 and adjusted EPS of $1.79, compared to $1.87 in Q1 FY25. Despite significant weather impact🌐s reducing EPS by $0.18 per share, the company reaffirmed its full-year adjusted EPS guidance of $4.25 to $4.45. Strategic achievements include advancing regulatory reviews in Arkansas and South Dakota, and continued construction on the 99-megawatt Lange II generation project and a 50-megawatt battery storage project in Colorado.

    02

    Large Load Opportunities & Data Centers

    The company is actively pursuing over 3 gigawatts of potential large load demand, including 600 megawatts by 2030 already in its 5-year financial plan. This includes a 1.8-gigawatt data center in Cheyenne, for which a generation reservation agreement has been executed, securing $201 million in customer-funded milestone payments for long lead-time equipment. Microsoft's acquisition of 3,200 acres in Cheyenne for future data center expansion represents significant upside potential beyond current plans.

    03

    Capital Plan & Investments

    Black Hills outlined a $4.7 billion 5-year capital plan focused on safety, reliability, and growth for natural gas and electric customers. The plan includes minimal investments for the 600 megawatts of data center demand, primarily served through market energy procurement. However, additional opportunities for generation and transmission builds to serve growing large load demand are being developed and would be additive to the current plan.

    04

    NorthWestern Energy Merger Update

    Solid progress has been made on the planned merger with NorthWestern Energy, including favorable shareholder votes and the expiration of the Hart-Scott-Rodino Act antitrust waiting period. The company has also reached settlements with key intervenors in Montana, Nebraska, and South Dakota. Management anticipates securing all state regulatory approvals and FERC approval to finalize the merger within the second half of this year.

    05

    Regulatory Initiatives

    The company continues to execute its regulatory plan with 3 to 4 rate reviews annually across its 8-state service territory. The Arkansas Gas rate review is progressing, with new rates expected in the second half of the year. New rate review requests were filed for South Dakota Electric, seeking $50.6 million in annual revenue, and an abbreviated review in Kansas. Wildfire liability legislation was enacted in South Dakota, providing significant protections, and similar efforts are underway in Wyoming and Colorado.

    06

    Financial Position & Credit Quality

    Black Hills maintains a strong financial position with investment-grade credit ratings and robust liquidity, including approximately $500 million available under its revolving credit facility. The company targets 14% to 15% FFO to debt and at or better than 55% net debt to total capitalization. A significantly lower total equity need of $50 million to $70 million is projected for 2026, with $41 million already issued under the ATM program in Q1.

    07

    Dividend Policy

    The company increased its dividend in January, extending its track record of increases to 56 consecutive years. Black Hills continues to target a 55% to 65% payout ratio, emphasizing a dependable and increasing dividend as a core component of its strategy to deliver long-term shareholder value.

    AI-generated summary of the company’s earnings call. Not investment advice.