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Black Hills (BKH) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Utilities· Aug 6, 2026

Source: earnings call transcript

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

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

Orderbook & backlog

Total data center opportunities 3 GW Q2 FY26

Potential load.

Data center load included in current financial plan 600 MW Q2 FY26

Through 2030, primarily Microsoft and Meta.

Data center load under active negotiation (additive to current plan) 2.5 GW Q2 FY26

Includes a 1.8 GW data center project.

Specific 1.8 GW data center project 1.8 GW Q2 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 opportunity 75 MW Q2 FY26

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

Potential upside from existing and new customers unquantified Q2 FY26

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

Deals & partnerships

NorthWestern Energy Planned 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

Annual Capital Plan underway $1B
Start: FY26

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

Lang II Generation Project underway

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 Project completed $350M

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

Risks & headwinds

Merger-related transaction costs Q2 FY26, YTD FY26

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

Higher financing and depreciation costs Q2 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 impact Q2 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 merger Decision 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

1.8 GW data center project definitive agreements

Q3 FY26
Current In advanced negotiations, generation reservation agreement extended through August 31
Target Definitive 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.

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Q&A highlights

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 read 4 chapters

Detailed narrative

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.

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).

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.