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    BKH
    Earnings call· Jun 2026(Q2 FY26)

    BLACK HILLS CORP /SD/ Q2 FY26 earnings call BKH

    Aug 6, 2026 Source

    Executive summary

    Black Hills Corporation Q2 FY26 — Strong Earnings and Advancing Large Load Opportunities

    Black Hills Corporation reported strong Q2 FY26 earnings, driven by new rates and rider recovery, offsetting higher financing and depreciation costs. The company is on track to meet its full-year adjusted EPS guidance, supported by a robust large load demand pipeline, particularly from hyperscale data centers. Strategic regulatory activities are progressing, and the planned merger with NorthWestern Energy is nearing completion, awaiting final approval from Montana.

    Highlights

    5

    • Delivered Q2 FY26 adjusted EPS of $0.54, up from $0.38 in Q2 FY25.

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

    • Maintained solid financial position with FFO to debt target of 14%-15% and over $650 million liquidity.

    • Advanced large load demand pipeline with over 3 GW of data center opportunities, including 600 MW in current plan and 2.5 GW under active negotiation.

    • Extended dividend increase track record to 56 consecutive years in 2026.

    Concerns

    4

    • Q2 FY26 GAAP EPS of $0.50 included $0.04 of merger-related transaction costs.

    • Higher financing and depreciation costs impacted Q2 FY26 EPS by $0.12.

    • Weather was $0.03 unfavorable compared to normal in Q2 FY26.

    • Awaiting final regulatory approval from Montana for the NorthWestern Energy merger, with a decision expected by mid-November.

    Guidance & targets

    4
    CategoryTargetConfidence
    Adjusted EPS
    $4.25-$4.45
    high materiality
    High
    Long-term EPS growth target
    upper half of 4%-6%
    high materiality
    High
    Dividend payout ratio
    55%-65%
    medium materiality
    High
    Large Customer Transmission Cost Adjustment Mechanism (LCTCAM) effectiveness
    effective
    medium materiality
    High

    Operational metrics

    26
    Adjusted EPS
    $0.54up from $0.38 in Q2 FY25
    Q2 FY26

    GAAP EPS was $0.50, including $0.04 of merger-related transaction costs.

    Adjusted EPS
    $2.33compared to $2.24 during H1 FY25
    YTD FY26

    GAAP EPS was $2.23, including $0.10 of merger-related transaction costs.

    New rates and rider recovery impact on EPS
    $0.21YoY
    Q2 FY26

    More than offset higher financing and depreciation costs.

    Higher financing and depreciation costs impact on EPS
    $0.12YoY
    Q2 FY26

    Combined impact.

    Weather impact on EPS
    $0.01favorable over Q2 FY25
    Q2 FY26

    Despite being $0.03 unfavorable compared to normal.

    O&M costs
    flatYoY
    Q2 FY26

    After excluding $0.04 of merger costs.

    Employee costs reduction impact on EPS
    $0.04YoY
    Q2 FY26

    Compared to the same period last year.

    Financing costs impact on EPS
    $0.06YoY
    Q2 FY26

    Total financing costs impact.

    Depreciation expenses impact on EPS
    $0.06YoY
    Q2 FY26

    As a result of new assets placed in service, including Ready Wyoming transmission project.

    New rates and rider recovery impact on EPS
    $0.45YoY
    YTD FY26

    Positive driver.

    Lower O&M impact on EPS (adjusted)
    $0.11YoY
    YTD FY26

    Adjusted for merger costs.

    Positive drivers impact on EPS
    $0.56YoY
    YTD FY26

    Combined impact of new rates/rider recovery and lower O&M.

    Combined higher financing and depreciation costs impact on EPS
    $0.29YoY
    YTD FY26

    Offset by positive drivers.

    Weather impact on EPS
    $0.18YoY
    YTD FY26

    Unfavorable compared to last year.

    FFO to debt target
    14%-15%
    long-term

    100 basis points above downgrade threshold of 13%.

    Net debt to total capitalization target
    better than 55%
    long-term

    Target for maintaining a healthy balance sheet.

    Equity issued under ATM program
    $50M
    YTD FY26

    To support capital investment plans.

    Next debt maturity
    $400M
    January 2027

    Evaluating refinancing options for later this year.

    Revolving credit facility availability
    $650M
    Q2 FY26

    At quarter end, maintaining strong liquidity.

    Wyoming electric peak system load increase
    16%over last year's peak
    July

    A key driver of growth.

    Wyoming electric peak system load growth since acquisition
    183%
    since 2005

    Representing 20 consecutive years of increasing peak system loads.

    Interruptible blockchain demand
    —
    current

    Provides additional opportunities for margins as customers are served through efficient access to market energy.

    Large Customer Transmission Cost Adjustment Mechanism (LCTCAM)
    —
    January 2027

    Tariff designed to directly recover transmission-related investments and expenses from large load customers benefiting from those facilities.

    Colorado Electric new annual revenue requested
    $26.7M
    annual

    Filed a new rate review request.

    Wyoming IRP near-term capacity need
    95MW
    near-term

    Recommended to be served through a mix of natural gas generation, battery storage and market energy purchases.

    Customer count
    1.4 million
    current

    Across 8 states.

    Industry KPIs

    6
    MetricValueDetails
    Adjusted operating EPS$4.25-$4.45USD
    Multi year capital plan$1BUSD
    Dividend per share growth56 consecutive yearsyears
    Allowed ROE equity layer rate cases10.5%%
    Combined electric gas framework mandatescompleted regulatory requirements
    Major regulated project construction progresson schedule

    Orderbook & backlog

    6
    Total data center opportunities3 GWQ2 FY26

    Potential load.

    Data center load included in current financial plan600 MWQ2 FY26

    Through 2030, primarily Microsoft and Meta.

    Data center load under active negotiation (additive to current plan)2.5 GWQ2 FY26

    Includes a 1.8 GW data center project.

    Specific 1.8 GW data center project1.8 GWQ2 FY26

    In advanced negotiations for commercial agreements; generation reservation agreement extended through August 31, provides for up to $377 million of refundable customer advances.

    75 MW data center opportunity75 MWQ2 FY26

    Different customer, part of the 2.5 GW pipeline, advancing nicely.

    Potential upside from existing and new customersunquantifiedQ2 FY26

    Includes Microsoft's purchase of over 3,000 acres in Cheyenne for future expansion, among other exploratory customer projects.

    Deals & partnerships

    1
    NorthWestern EnergyPlanned merger to create a larger electric and natural gas utility company.

    Received approval from FERC and unanimous approvals of settlements in Nebraska and South Dakota. Awaiting decision in Montana, expected mid-October to mid-November.

    Capital programs

    3
    Annual Capital Planunderway$1B
    Start: FY26

    Nearly $1 billion capital plan for the year to serve energy needs of customers.

    Lang II Generation Projectunderway

    Benefit: 99 MW

    On schedule to be placed in service later this year in South Dakota. Final long lead equipment (generation step-up transformer) was safely delivered to the site.

    Ready Wyoming Transmission Projectcompleted$350M

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

    Risks & headwinds

    4
    Merger-related transaction costsQ2 FY26, YTD FY26

    $0.04 per share in Q2 FY26; $0.10 per share YTD FY26

    Higher financing and depreciation costsQ2 FY26, YTD FY26

    $0.12 per share in Q2 FY26; $0.29 per share YTD FY26

    Mitigation: Offset by new rates and rider recovery.

    Weather impactQ2 FY26, YTD FY26

    $0.03 per share unfavorable compared to normal in Q2 FY26; $0.18 per share unfavorable YTD FY26 compared to last year

    Regulatory approval for NorthWestern Energy mergerDecision expected mid-October to mid-November

    Awaiting decision in Montana

    Mitigation: Reached settlements with many key interveners in Montana; final briefs submitted July 13.

    What to watch in Q3 FY26

    5

    1.8 GW data center project definitive agreements

    Q3 FY26
    CurrentIn advanced negotiations, generation reservation agreement extended through August 31
    TargetDefinitive agreements finalized

    Why it matters

    Securing these agreements is crucial for realizing a significant portion of the large load growth pipeline and future capital investments.

    We're in advanced negotiations for a series of commercial agreements that would support a diversified portfolio of resources to reliably serve the customers' needs... we continue to make encouraging progress across all work streams and remain optimistic about achieving definitive agreements during the third quarter.

    Q&A highlights

    3

    Inquires about the impact of Crusoe's exit on negotiations for the 1.8 GW data center project, its effect on customer deposits, and overall process speed.

    Linn Evans states Crusoe's exit had no impact, as negotiations have always been with the hyperscale end-user. Negotiations are on track for definitive agreements by Q3 end, emphasizing doing it right over speed.

    “I would say at the highest level, the exit of Crusoe has not had any impact on the negotiations. In fact, it's been important to us from essentially day 1 to ensure that we're negotiating with the hyperscale end user.”

    asked by Andrew Weisel · answered by Linden Evans

    2 min read4 chapters

    Detailed Narrative

    01

    Strategic Progress and Achievements

    Black Hills Corporation reported strong progress in the first half of 2026, delivering solid earnings and remaining on track to achieve its full-year guidance. The company maintained a healthy financial position and credit ratings while executing on its nearly $1 billion capital plan, which includes the 99-megawatt Lang II generation project slated for Q4 2026 in-service. Regulatory activities are advancing with rate reviews in Arkansas Gas and South Dakota Electric, and a new filing for Colorado Electric, alongside completed wildfire liability protections in South Dakota and Wyoming.

    02

    Large Load Demand Pipeline

    The company is experiencing significant large load demand, primarily driven by hyperscale data centers, with a pipeline exceeding 3 gigawatts. Approximately 600 megawatts of this demand, including Microsoft's ongoing expansion and Meta's new AI data center, is already incorporated into the financial plan through 2030. An additional 2.5 gigawatts, including a 1.8 gigawatt project, is under active negotiation, with definitive agreements for the 1.8 GW project targeted for Q3 completion. The company emphasizes a cautious approach, ensuring existing retail customers are protected through mechanisms like the proposed Large Customer Transmission Cost Adjustment Mechanism (LCTCAM).

    03

    NorthWestern Energy Merger Update

    Progress on the planned merger with NorthWestern Energy continues, with approvals secured from FERC, Nebraska, and South Dakota. The final regulatory hurdle is a decision from Montana, where final briefs were submitted on July 13. A decision is anticipated between mid-October and mid-November, aligning with initial expectations for a second-half 2026 closing. Management expressed confidence in the collaborative efforts between the two companies to build a stronger combined entity.

    04

    Regulatory and Capital Project Updates

    Beyond the merger, Black Hills is actively managing its regulatory agenda, with an abbreviated rate review approved in Kansas and interim rates effective in South Dakota Electric. The Colorado Electric rate review requests $26.7 million in new annual revenue based on a 10.5% ROE. The Wyoming Integrated Resource Plan, submitted on June 30, identifies a near-term capacity need of 95 megawatts, recommending a mix of natural gas generation, battery storage, and market energy purchases. The Lang II generation project is on schedule, with key equipment delivered.

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