Black Hills Corporation (BKH)

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Black Hills Corp (BKH)

Q4 2012 Earnings Call

February 1, 2013 11:00 am ET

Executives

Jerome Nichols – Investor Relations

David R. Emery – President, Chief Executive Officer and Chairman

Anthony S. Cleberg – Executive Vice President and Chief Financial Officer

Analysts

Kevin Cole – Credit Suisse

Michael Bates – D.A. Davidson & Co.

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Black Hills Corporation 2012 Fourth Quarter and Full Year Earnings Conference Call. My name is Towanda and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session.

(Operator Instructions) In order to get as many questions answered as possible, we ask the participants re-enter the queue after asking one initial question and one follow-up question. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr. Jerome Nichols, Director of Investor Relations of Black Hills Corporation. Please proceed sir.

Jerome Nichols

Thank you, Towanda. Good morning, everyone and welcome to the Black Hills Corporation 2012 fourth quarter and full year earnings call. With me today are David Emery, Chairman, President and Chief Executive Officer; and Tony Cleberg, Executive Vice President and Chief Financial Officer.

Before I turn over the call, I need to remind you that during the course of this call, some of the comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission and there are a number of uncertainties inherent in such comments. Although, we believe that our expectations and beliefs are based on reasonable assumptions, actual results may differ materially.

We direct you to our earnings release Slide 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations.

I will now turn the call over to David Emery.

David R. Emery

Thank you, Jerome. Good morning, everyone. Thanks for joining us. I will be speaking from our webcast presentation deck that was on the website. Those of you who don’t have it shouldn’t have any problem following along starting on Slide 3. Our discussion will be similar in format to previous quarters. I will cover highlights from the quarter and the year, Tony Cleberg, our CFO, will cover financial highlights for both the quarter and the year; and then I’ll have a discussion on forward strategic issues and objectives.

Moving on to Slide 5, fourth quarter highlights. Several things of note, on the business environment front, little bit colder than normal weather in our utilities service territories this fall was helpful and continued low gas, natural gas prices, that’s been a persistent, consistent theme throughout the entire year and we'll talk more about that as we get into financials and other things.

On the utility front, lots of highlights there, a lot of activity in the fourth quarter. Black Hills Power filed a request with the South Dakota PUC seeking approval for a construction financing rider for our Cheyenne Prairie Generating Station. In South Dakota, we're the first company to file for such a rider, and so we are working our way through that process very co-operatively with the South Dakota PUC staff. They did approve on January 17 interim rates related to that rider which will be effective April 1 subject to refund while we work our way through the process of getting a final approval for that rider. We hope to receive a final ruling from the commission sometime on or before the third quarter.

Black Hills Power also filed a rate request with South Dakota PUC asking for about 9.94% or $13.7 million revenue increase related to increase in costs of serving customers since our last case in 2010. And then the Wyoming Public Service Commission approved construction financing rider for the Cheyenne plant very similar to the one that we're seeking in South Dakota. The Wyoming PSC approved that for Wyoming customers of Cheyenne Light and Black Hills Power.

Moving on to Slide 6, continued highlights for the quarter. In Colorado, our Electric Utility completed our 29 megawatt Busch Ranch wind project and there was also $17 million electric transmission line completed in association with that project. Both were placed in service in mid-October on budget and about two and a half months ahead of schedule, so we are very pleased with that result.

We also received a letter from the U.S. Treasury Department on January 30, basically awarding our tax credit grant in the amount of $8.4 million, which is related to our $25 million investment for our 50% share in the Busch Ranch wind project.

Also in Colorado, we completed what we call our Portland West transmission project, about an $11 million project was completed during the quarter. And then finally at Colorado, we did suspend operations on our W.N. Clark 42 megawatt coal-fired plant that in compliance with the Colorado Clean Air-Clean Jobs Act that we've spoken about quite a bit over the last several years, we plan to permanently retire that plant December 31 of 2013, this year.

Slide 7 highlights on our non-regulated businesses. For our Coal Mining segment, we revised our mine plan, which resulted in reduced mining costs and significantly improved profitability for the year compared to 2011. On the Oil and Gas front, we continue to be encouraged by the results of our three Mancos test wells that we drilled and completed in late 2011 and early 2012, as well as some of the results of some offset operators in that area as well. We recorded a little less than $2 million additional gain on the sale really related to post close accounting true-ups of the sale of our Williston Basin assets during the quarter as well.

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