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May and June 2016 Investor Meetings – Black Hills Corporation

Black Hills Corporation · Jun 2, 2016 · 58 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. May and June 2016 Investor Meetings – Black Hills Corporation – slide 1
    Investor Meetings May / June 2016
  2. May and June 2016 Investor Meetings – Black Hills Corporation – slide 2
    Investment Highlights Customer-focused, vertically integrated Utility company Committed to continuing strong earnings growth 46 consecutive annual dividend increases with solid yield Committed to strong investment grade…
  3. May and June 2016 Investor Meetings – Black Hills Corporation – slide 3
    Company Overview Cheyenne Prairie Generating Station Cheyenne, Wyoming Investor Meetings May / June 2016 5
  4. May and June 2016 Investor Meetings – Black Hills Corporation – slide 4
    Black Hills Corporation Today Legacy company started serving electric customers in Deadwood, South Dakota, in 1883 Black Hills Power & Light incorporated 1941 BHC listed on NYSE in 1980 under symbol BKH Market capitalization of…
  5. May and June 2016 Investor Meetings – Black Hills Corporation – slide 5
    Financial Reporting and Rebranding Financial Reporting Reflects Increased Utility Focus Reporting results through five segments: Electric Utilities Gas Utilities Power Generation Mining Oil and Gas No longer reporting by the…
  6. May and June 2016 Investor Meetings – Black Hills Corporation – slide 6
    Black Hills Corporation Overview A customer-focused, growth-oriented, vertically-integrated utility company with a tradition of exemplary service and a vision to be the energy partner of choice. Based in Rapid City, South Dakota, the…
  7. May and June 2016 Investor Meetings – Black Hills Corporation – slide 7
    Electric and Gas Utilities Electric Utilities* Natural Gas Utilities** Distributes natural gas to approximately 1,021,000 customers Generates, transmits and distributes electricity to approximately 207,000 customers Operations…
  8. May and June 2016 Investor Meetings – Black Hills Corporation – slide 8
    Other Business Segments Power Generation* Owns interests in two power generation facilities Wygen I - 69 MW of a 90 MW coal-fired facility in Gillette, WY Pueblo Airport 50.1 percent ownership interest in Colorado IPP which owns the…
  9. May and June 2016 Investor Meetings – Black Hills Corporation – slide 9
    Q1 2016 Highlights Electric and Gas Utilities Closed purchase of SourceGas on Feb. 12 for 1.89 billion, adding 429,000 utility customers in Arkansas, Colorado, Nebraska and Wyoming Colorado Electric continued construction on a 65…
  10. May and June 2016 Investor Meetings – Black Hills Corporation – slide 10
    Q1 2016 Highlights Power Generation Closed sale on April 14 of a 49.9 percent minority interest in Colorado IPPs 200-megawatt, combined-cycle, natural gas-fired generating units for 215 million; Black Hills will continue to be…
  11. May and June 2016 Investor Meetings – Black Hills Corporation – slide 11
    SourceGas Integration Completion Expected by Year-end 2016 Activity Completed or Well Underway Investor information website (www.blackhillscorp.com/sourcegas) Customer information website (www.SourceGasIsBlackHills.com) Communication…
  12. May and June 2016 Investor Meetings – Black Hills Corporation – slide 12
    Integration Progress Investor Meetings May / June 2016 14
  13. May and June 2016 Investor Meetings – Black Hills Corporation – slide 13
    Sale of Minority Interest in Black Hills Colorado IPP Transaction Summary Colorado IPP, a Black Hills Corp. power generation subsidiary, owns and operates a 200-megawatt, natural gas generating facility contracted to provide capacity…
  14. May and June 2016 Investor Meetings – Black Hills Corporation – slide 14
    Strategic Overview Busch Ranch Wind Farm near Pueblo, Colorado Investor Meetings May / June 2016 16
  15. May and June 2016 Investor Meetings – Black Hills Corporation – slide 15
    Strategic Objectives Utility-centered energy company well positioned to build upon a track record of successful utility growth EARNINGS: Lead industry peers in CUSTOMER: Provide quality OPERATIONAL PERFORMANCE: ENGAGEMENT: Achieve…
  16. May and June 2016 Investor Meetings – Black Hills Corporation – slide 16
    Capital Investment by Segment (in millions) 2011 2012 2013 2014 2015A 2016F 2017F 2018F Generation 85 72 130 75 67 142 17 14 Transmission 20 38 32 31 36 71 40 44 Distribution 44 44 48 87 54 40 42 49 Other 24 13 12 0 46 71 42 41 Subtotal…
  17. May and June 2016 Investor Meetings – Black Hills Corporation – slide 17
    Pueblo Airport Generating Station Overview: New 65 million, 40-megawatt, natural gas-fired combustion turbine for Colorado Electric at existing Pueblo Airport Generating Station; expect turbine to be in service by end of 2016 Received…
  18. May and June 2016 Investor Meetings – Black Hills Corporation – slide 18
    Peak View Wind Project Overview: New 109 million, 60-megawatt wind generating project for Colorado Electric adjacent to existing Busch Ranch Wind Project Existing BHCOE Busch Ranch Wind Project Executed Build Transfer Agreement…
  19. May and June 2016 Investor Meetings – Black Hills Corporation – slide 19
    Utility Growth Opportunity - COSG Cost of service gas program - potential for direct investment in natural gas reserves provides long-term price stability and a reasonable expectation of long-term lower costs for customers, while…
  20. May and June 2016 Investor Meetings – Black Hills Corporation – slide 20
    Dividend Growth Dividend Increased for 46 Consecutive Years Dividend yield 2.7% on May 4, 2016 1.70 1.68* 1.65 1.62 1.60 1.56 Annual Dividend 1.55 1.52 Per Share 1.50 1.48 1.46 1.45 1.44 1.42 1.40 1.35 1.30…
  21. May and June 2016 Investor Meetings – Black Hills Corporation – slide 21
    Credit Rating Upon closing of the SourceGas acquisition on Feb. 12, Black Hills ratings were affirmed by all three credit rating agencies Black Hills Corporation S&P Moodys Fitch Corporate Credit Rating BBB Baa1 BBB+ Senior…
  22. May and June 2016 Investor Meetings – Black Hills Corporation – slide 22
    Operational Excellence Safety Performance Employee Recognition It took a tremendous amount of effort from individuals and teams throughout the company to successfully integrate SourceGas into Black Hills Corp. Theres still work left…
  23. May and June 2016 Investor Meetings – Black Hills Corporation – slide 23
    Financial Update Lyn Wright of Kansas Gas Investor Meetings May / June 2016 25
  24. May and June 2016 Investor Meetings – Black Hills Corporation – slide 24
    Income Statement (in millions, except earnings per share) 1st Qtr 2016 2015 Revenue 450.0 442.0 Gross Margin 278.1 236.6 Operating Expenses (122.0) (105.1) DD&A (44.4) (39.0) Subtotal 111.7 92.5 Asset impairment (14.5) (22.0)…
  25. May and June 2016 Investor Meetings – Black Hills Corporation – slide 25
    Q1 Revenue/Operating Income Total Revenue, as adjusted* (in millions) Total Operating Income, as adjusted* (in millions) 450.0 442.0 111.7 92.5 Q1 2016 Q1 2015 Q1 2016 Q1 2015 167.3 42.6 Electric Util Electric Util 169.9…
  26. May and June 2016 Investor Meetings – Black Hills Corporation – slide 26
    SourceGas Acquisition Financing Equity and Equity-linked Securities Issued 6.325 million common shares for net proceeds of 246 million issued on Nov. 23, 2015 5.980 million three-year mandatory convertible equity units for net…
  27. May and June 2016 Investor Meetings – Black Hills Corporation – slide 27
    Capital Structure (In millions, except for ratios) Mar. 31 Dec. 31, Sep. 30, Jun. 30, Mar. 31, 2016 2015 2015 2015 2015 Capitalization Short-term Debt 216 77 118 106 103 Long-term Debt 3,159 1,854 1,553 1,556 1,531 Total Debt 3,375…
  28. May and June 2016 Investor Meetings – Black Hills Corporation – slide 28
    Future Financing Overview Debt Evaluate extending and upsizing our existing 500 million Revolving Credit Facility and implementing commercial paper program Evaluate alternatives for refinancing over 1 billion of near-term debt…
  29. May and June 2016 Investor Meetings – Black Hills Corporation – slide 29
    Future Financing Overview Long-term Debt Maturities by Year 1,000 900 5.9% Notes 800 700 600 3.98% Notes Term Loan In Millions 500 400 4.25% Notes BHP FMB CLFP FMB 300 CLFP FMB CLFP IR Bond BHP…
  30. May and June 2016 Investor Meetings – Black Hills Corporation – slide 30
    Creating Shareholder Value through Growth Operating Income and EPS, as Adjusted 450 3.70 400 2009 2015 EPS CAGR = 13.7% 3.30 2.93 2.98 Operating Income, as Adjusted* in millions 2.90 350 EPS as Adjusted* in per share…
  31. May and June 2016 Investor Meetings – Black Hills Corporation – slide 31
    2016 Scorecard Strategy Construct cost effective rate-base Construct additional utility Achieve top-tier operational Be the safest company in the generation and transmission to serve infrastructure that supports growing performance…
  32. May and June 2016 Investor Meetings – Black Hills Corporation – slide 32
    Questions Pueblo Airport Generating Station near Pueblo, Colorado Investor Meetings May / June 2016 34
  33. May and June 2016 Investor Meetings – Black Hills Corporation – slide 33
    Appendix Dory Batka and Jerry Likewise monitor the energy supply at our Neil Simpson Complex in Gillette, Wyoming Investor Meetings May / June 2016 35
  34. May and June 2016 Investor Meetings – Black Hills Corporation – slide 34
    Appendix - Table of Contents History Organizational Structure Utility Naming Conventions Capital Expenditures Utilities Power Generation Mining Non-GAAP slides Investor Meetings May / June 2016 36
  35. May and June 2016 Investor Meetings – Black Hills Corporation – slide 35
    Black Hills Corporation History Originating company started in Deadwood in 1883 (133 years ago) Company was soon sold to new investors to introduce lights into all the towns and cities of the Hills and the name Black Hills Electric…
  36. May and June 2016 Investor Meetings – Black Hills Corporation – slide 36
    Post Acquisition Corporate Structure Black Hills Corporation Non-Regulated Electric Utilities Natural Gas Utilities Service Company Businesses Regulatory, Black Hills Energy Black Hills Energy Black Hills Electric Governmental…
  37. May and June 2016 Investor Meetings – Black Hills Corporation – slide 37
    Black Hills Utility Naming Conventions State(s) Formerly Common Name Legal Name Abbreviation Trade Name Arkansas SourceGas Arkansas Gas Black Hills Energy Arkansas, Inc. ARG Black Hills Energy Colorado Colorado Gas Black Hills/Colorado…
  38. May and June 2016 Investor Meetings – Black Hills Corporation – slide 38
    Capital Expenditures Historical and Forecasted Capital Expenditures (in millions)* 511 24 449 382 342 369 163 340 23 323 177 19 84 118 127 63 69 71 179 156 46 324 222 193 203 167 140 148 2012 2013 2014 2015 2016F 2017F…
  39. May and June 2016 Investor Meetings – Black Hills Corporation – slide 39
    Select Major Utility Projects Forecasted Capital Expenditures * Projected Excludes routine capital for maintenance of 2017 - In-service Pre-2016 2016F Total assets 2020F Date (in millions) Utilities South Dakota Electric Rapid…
  40. May and June 2016 Investor Meetings – Black Hills Corporation – slide 40
    Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 95.0 Q1 2016 93.9 2,449 Q1 2016 95.8 Q4 2015 (Total for all gas service* areas weighted by 89.2 1,996 Q4 2015 Gas…
  41. May and June 2016 Investor Meetings – Black Hills Corporation – slide 41
    Estimated Utility Rate Base Estimated Rate Base* 2011 2012 2013 2014 2015 by Utility Segment (in millions) Electric Utilities 1,007 1,272 1,248 1,487 1,515 Gas Utilities 443 450 454 489 493 Total 1,450 1,722 1,702 1,976…
  42. May and June 2016 Investor Meetings – Black Hills Corporation – slide 42
    Utility Regulatory Results Authorized Effective Return on Rate Base Jurisdiction Utility Date Equity Capital Structure (in millions) Arkansas Arkansas Gas Feb. 2015 9.40% 52% debt / 48% equity 299.4 Colorado Colorado Electric Jan.…
  43. May and June 2016 Investor Meetings – Black Hills Corporation – slide 43
    Optimizing Regulatory Recovery Cost Recovery Mechanisms Electric Utility Environme DSM/ Trans- Fuel Cost Trans- Purchased Fixed Cost Financing Jurisdiction ntal Cost Energy mission mission Power Recovery* Cost Rider Efficiency Cap-Ex…
  44. May and June 2016 Investor Meetings – Black Hills Corporation – slide 44
    Optimizing Regulatory Recovery Cost Recovery Mechanisms Gas Utility DSM/ Integrity Bad Debt Weather Pension Fuel Cost Revenue Fixed Cost Jurisdiction Energy Additions Normal Recovery Decoupling Recovery* Efficiency Colorado Gas 47%…
  45. May and June 2016 Investor Meetings – Black Hills Corporation – slide 45
    EPA Clean Power Plan Evaluating potential impacts EPAs goal: Reduce carbon dioxide emissions from the electric generating sector through a shift to natural gas and increased use of renewables Plan delegated to states; State…
  46. May and June 2016 Investor Meetings – Black Hills Corporation – slide 46
    per ton 0.38 18 16 14 12 10 Exp/Ton 1.30 Q1 2016 8 6 4 2 0 (Units = tons sold plus cubic yards of overburden Revenue and Expense per Ton Sold Q1 2016 Q4 2015 Average Nat Gas Price Received Q4 2015 Q3…
  47. May and June 2016 Investor Meetings – Black Hills Corporation – slide 47
    Coal Contracts Summary Approximately 50% of coal production sold under contracts that include price adjustments based on actual mining costs plus a return on mine capital investments Most of the remaining 50% of coal production sold…
  48. May and June 2016 Investor Meetings – Black Hills Corporation – slide 48
    Use of Non-GAAP Financial Measures Gross Margin Our financial information includes the financial measure Gross Margin, which is considered a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a…
  49. May and June 2016 Investor Meetings – Black Hills Corporation – slide 49
    Use of Non-GAAP Financial Measures Segment Revenue, Operating Income, Income from Continuing Operations and EPS, as adjusted We have provided non-GAAP earnings data reflecting adjustments for special items as specified in the GAAP to…
  50. May and June 2016 Investor Meetings – Black Hills Corporation – slide 50
    Use of Non-GAAP Financial Measures Revenue / Gross Margin, as adjusted (in thousands) Electric Power Corporate - QTD - March 31, 2016 Utilities Gas Utilities Generation Mining Oil and Gas I/C Elim Total Revenue 163,531 268,667 1,852…
  51. May and June 2016 Investor Meetings – Black Hills Corporation – slide 51
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power QTD - March 31, 2016 Utilities Gas Utilities Generation Mining Oil and Gas Corporate Total Operating income (loss) (GAAP) 40,587…
  52. May and June 2016 Investor Meetings – Black Hills Corporation – slide 52
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Gas Power YTD Dec. 31, 2015 Utilities Utilities Generation Mining Oil and Gas Corporate Total Operating income (loss) (GAAP) 174,347…
  53. May and June 2016 Investor Meetings – Black Hills Corporation – slide 53
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power YTD Dec. 31, 2012 Utilities Gas Utilities Generation Mining Oil and Gas Corporate Total Operating income (loss) (GAAP) 131,721…
  54. May and June 2016 Investor Meetings – Black Hills Corporation – slide 54
    Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power YTD Dec. 31, 2010 Utilities Gas Utilities Generation Mining Oil and Gas Corporate Total Operating income (loss) (GAAP) 99,292…
  55. May and June 2016 Investor Meetings – Black Hills Corporation – slide 55
    Use of Non-GAAP Financial Measures Net Income, as adjusted (in thousands, after-tax) Electric Power QTD - March 31, 2016 Utilities Gas Utilities Generation Mining Oil and Gas Corporate Total Net Income (Loss) (GAAP) 19,215 31,975 8,582…
  56. May and June 2016 Investor Meetings – Black Hills Corporation – slide 56
    Use of Non-GAAP Financial Measures Depreciation, Depletion & Amortization, adjusted for Intercompany Capital Lease* (in thousands, pre-tax) Electric Gas Total Power Total Non- YTD Dec. 31, 2015 Utilities Utilities Utilities…
  57. May and June 2016 Investor Meetings – Black Hills Corporation – slide 57
    Use of Non-GAAP Financial Measures EBITDA For the Three Months Ended March 31, (in thousands) 2016 2015 Net Income 40,050 33,850 Depreciation, depletion and amortization 44,407 39,002 Asset impairment (Oil & Gas ceiling test)…
  58. May and June 2016 Investor Meetings – Black Hills Corporation – slide 58
    Use of Non-GAAP Financial Measures Earnings Per Share, as adjusted Earnings Per Share, as adjusted 2009 2010 2011 2012 2013 2014 2015 Net income (GAAP) 2.11 1.87 1.34 2.32 2.64 2.93 (0.71) Discontinued Operations (0.11) (0.14) (0.23)…

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