Nathan Woods, Black Hills Power 2013 Third Quarter Review November 5, 2013
Discussion Agenda Third Quarter Review David Emery Chairman, President and CEO Financial Update Tony Cleberg Executive Vice President and CFO Strategic Overview David Emery Chairman, President and CEO Q&A Third…
Q3 2013 Review Pueblo Airport Generating Station near Pueblo, Colo. Third Quarter Review Nov 5, 2013 4
Q3 2013 Highlights Business Environment Cooler weather in electric utility service territories compared to same period last year Utilities Black Hills Power received approval from South Dakota Public Utilities Commission for general…
Q3 2013 Highlights Power Generation Colorado Public Utilities Commission denied Colorado Electrics application for approval of a wind solicitation that would have awarded the 30 MW wind project to Power Generation Oil and Gas…
Q3 2013 Highlights Corporate Activities Moodys Investors Service raised its corporate credit rating on Black Hills Corp. to Baa2 from Baa3, with a positive outlook Standard & Poors Rating Services raised its corporate credit rating on…
Q3 2013 Financial Highlights 12% Growth in EPS, as adjusted Income from Continuing Operations, as adjusted* (in millions) (per share) Key Earnings Drivers 21.1 0.47 New electric rates 18.7 0.42 Financing riders for Cheyenne…
Q3 2013 Financial Highlights Change in Income from Continuing Operations, as adjusted*, from Prior Year Q3 2012 18.7 0.4 Electric Utilities (1.5) Gas Utilities 1.6 Power Generation 0.5 Coal Mining (1.3) Oil & Gas 2.7…
Financial Update Stan Lindholm of Exploration & Production Third Quarter Review Nov 5, 2013 10
Earnings Per Share Analysis Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Net income (loss) (GAAP) 0.52 0.69 0.97 0.70 0.78 Loss (income) from discontinued operations - - - - - Income (loss) from continuing ops (GAAP) 0.52 0.69 0.97 0.70…
Q3 Revenue/Op Income 171.4 Total Revenue, as adjusted* Electric Util 155.0 (in millions) 67.8 259.8 Gas Util 63.4 246.8 Power Gen 22.4 21.4 Q3 2013 15.3 Q3 2012 Coal Mining 14.7 14.4 Oil & Gas 24.7 (31.5) Corporate,…
Income Statement (in millions, except earnings per share) 3rd QTR Comments 2013 2012 Revenue 259.9 246.8 Gross margin* 188.4 184.2 Operating expenses 96.7 88.9 Higher labor & benefits - cost containment in 2012 DD&A 36.1 41.4…
Q3 Utilities - Revenue/Op Income Electric Utilities (in millions) Change Q3 Key Performance Drivers 171.4 155.0 Q3 2013 New rates Q3 2012 Financing riders at CLFP and BHP for Cheyenne Prairie Generating Station 40.8 37.5 Higher…
Q3 Non-Regulated Energy - Revenue/Op Income Power Generation (in millions) Change Q3 Key Performance Drivers 22.4 21.4 Q3 2013 Q3 2012 Higher off-system sales from Wygen I (5 MW) 11.7 Higher fired-hours from Pueblo 9.4 Airport…
Q3 Non-Regulated Energy - Revenue/Op Income Oil & Gas (in millions) Change Q3 Key Performance Drivers 24.7 Lower O&M and depletion due to 2012 Williston Basin asset sale Q3 2013 14.4 Higher average hedged price Q3 2012 received…
Capital Structure (In millions, except for ratios) Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 2013 2013 2013 2012 2012 Capitalization Short-term Debt 394.0 355.5 349.6 381.0 553.3 Long-term Debt 956.0 958.6 936.5 938.9 943.0…
In Millions 50 0 100 150 200 250 300 2013 BHW Proj. Fin. 2014 250MM 9% Note BHW Proj. Fin. 2015 275MM Term Loan BHW Proj. Fin. 2016 BHW Proj. Fin. Third Quarter Review Nov 5, 2013 2017 2018 Debt…
Earnings Guidance 2013 2014 Black Hills raised the lower end of its Black Hills expects 2014 earnings per expected 2013 earnings from continuing share from continuing operations, as operations, as adjusted, from a range of adjusted,…
2014 Earnings Guidance Assumptions Capital spending of 447 million, including oil and gas capital expenditures of 118 million; Normal operations and weather conditions within our utility service territories that impact customer usage,…
Growth Operating Income and EPS, as Adjusted (in millions, except per share amount) 2.50 350 2.34 2.50 2009 2014 EPS CAGR = 12.6% 2.09 300 2.00 250 1.67 1.69 36.1 1.38 1.50 200 5.3 19.0 150 19.9 1.00 100 210.4 185.8…
Strategic Overview Busch Ranch Wind Farm near Pueblo, Colo. Third Quarter Review Nov 5, 2013 22
Strategic Objectives Utility-centered energy company well positioned to build upon a track record of successful utility growth Achieve top-tier operational performance in a culture of continuous improvement Lead industry peers in…
Strategic Objective Operating Performance 2012 IEEE Reliability Benchmarking Study Safety Performance Total Annual Outage Minutes BHC 2013 data is YTD through Sept.; TCIR is defined as the average number of work- related…
Strategic Objective Operating Performance Power Plant Fleet Availability by Fuel Type Natural Gas Turbine Starting Reliability 100% 100% BHC Industry BHC Industry 96% 96% 92% 92% 88% 88% 84% 84% 80% 80% Coal (61%*) Gas…
Strategic Objectives Operating Performance Generation Capacity by Fuel Type Generation Capacity by Fuel Type 1,200 % of Generation by Fuel type 80% 1,000 70% MW of Generation 60% 800 50% 600 40% 30% 400 20% 200 10%…
Strategic Objective Earnings Growth Select Major Utility Projects Forecasted Capital Expenditures * Projected Excludes routine capital expenditures for maintenance of assets In-service 2016F (in millions) Date 2013F 2014F 2015F -…
Strategic Objective Earnings Growth Cheyenne Prairie Generating Station New Generation Helps Meet Growing Demand and New Environmental Regulations Overview: New 222 million, 132 MW generating plant jointly owned by Cheyenne Light and…
Strategic Objective Earnings Growth Utilities Regulatory Updates Black Hills Power South Dakota Public Utilities Commission approved rate case settlement on Sept. 18 authorizing 8.8 million, or 6.4%, increase in annual electric revenue,…
Strategic Objective Earnings Growth Utilities Regulatory Updates continued Colorado Electric Colorado Public Utilities Commission on Oct. 16 denied application for approval to acquire up to 30 MW of wind energy; commission stated…
Strategic Objective Value Upside Oil and Gas Growth Strategy Prove up and capture value of existing oil and gas properties Prove up probable and possible reserves Capture value through optionality Participate in limited exploration…
Strategic Objective Value Upside Oil and Gas Mancos Shale Strategy Three successful test wells drilled in 2011 affirmed potential in San Juan and Southern Piceance Basins; second Southern Piceance Basin test well produced condensate and…
Strategic Objective Dividend Growth Dividend Increased for 43 Consecutive Years 1.55 Dividend yield was 3.1% on Sept. 30, 2013* 1.52 1.50 1.48 1.46 1.45 1.44 Annual Dividend 1.42 1.40 Per Share 1.40 1.35 1.30…
Strategic Objective Credit Rating Moodys Investors Service raised its corporate credit rating on Black Hills Corp. to Baa2 from Baa3 in Sept. 2013; issued with a positive outlook Standard & Poors raised its corporate credit ratings on…
2013 Scorecard Strategy 2013 Progress and Future Initiatives UTILITIES + Acquire regulated utility properties in our geographic region Commence construction on Cheyenne Prairie Generating Station (CPGS) (Q2) + Construct additional cost…
Questions Harney Peak , Black Hills, SD Third Quarter Review Nov 5, 2013 38
Appendix Natural gas line installation near White Creek, Neb. Third Quarter Review Nov 5, 2013 39
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…
Use of Non-GAAP Financial Measures (continued) 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…
Use of Non-GAAP Financial Measures Revenue, as adjusted Electric Gas Power Coal Oil and QTD Sept. 30, 2013 Revenue, as adjusted Utilities Utilities Generation Mining Gas Corporate Total (in thousands) Revenue (GAAP) 169,401 67,792…
Use of Non-GAAP Financial Measures EBITDA (in thousands) Q3 2013 Q3 2012 Income from continuing operations 23,124 34,623 Depreciation, depletion and amortization 36,135 41,408 Interest expense, net 22,655 25,810 Unrealized (gain)…
Use of Non-GAAP Financial Measures Operating Income, as adjusted Use of non-GAAP Financial Measures Operating Income, as Adjusted YTD 31-Dec-09 Regulated non-Regulated Corporate Power (in thousands, pre-tax) Electric Utilities Gas…
Use of Non-GAAP Financial Measures Operating Income, as adjusted Use of non-GAAP Financial Measures Operating Income, as Adjusted YTD 31-Dec-11 Regulated non-Regulated Corporate Power (in thousands, pre-tax) Electric Utilities Gas…
Use of Non-GAAP Financial Measures Operating Income, as adjusted (in thousands, pre-tax) Electric Power QTD Sept. 30, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Operating income (loss) (GAAP)…
Use of Non-GAAP Financial Measures Income from Continuing Operations, as adjusted (in thousands, after-tax) Electric Power QTD Sept. 30, 2013 Utilities Gas Utilities Generation Coal Mining Oil and Gas Corporate Total Income (loss) from…
Use of Non-GAAP Financial Measures DD&A, adjusted for Intercompany Capital Lease 31-Dec-12 Regulated Non-Regulated Corporate Electric Power Non- (in thousands) Utilities Gas Utilities Total Utilities Generation Coal Mining Oil and Gas…
Use of Non-GAAP Financial Measures EPS, as adjusted Earnings Per Share, as adjusted 2009 2010 2011 2012 Net income (GAAP) 2.11 1.76 1.24 1.85 Discontinued Operations (0.11) (0.14) (0.23) 0.16 Income from Cont. Ops., (GAAP) 2.00…
Black Hills Corporation Overview A growth-oriented, vertically-integrated energy company with a tradition of exemplary service and a vision to be the energy partner of choice. Based in Rapid City, SD, the company serves 769,000 electric…
Electric and Gas Utilities Black Hills Power Cheyenne Nebraska Light Gas Iowa Cheyenne Black Hills Gas Light Power Colorado Gas Kansas Colorado Gas Electric Electric Utilities* Natural Gas Utilities* Generates, transmits…
Electric Utility Generation Availability(%) * Excludes KS HDD data since state has weather normalization 95.8 97.6 Q3 2013 79 Q3 2013 95.5 (Total for all gas service* areas weighted by 96.0 Q2 2013 842 Q2 2013 Gas…
Mitigating Regulatory Recovery Risk Mechanisms reduce regulatory lag and the risk of non-recovery Electric Utility Cost Recovery Mechanisms Jurisdiction Environmental DSM/ Trans- Fuel Cost Trans- Purchased Fixed Cost Financing Cost…
Non-Regulated Energy Power Generation* Owns interests in three power generation facilities totaling 309 MW Wygen I - 69 MW of a 90 MW coal-fired facility in Gillette, WY CT II - 40 MW combustion turbine in Gillette, WY (will be sold…
Q3 2013 Non-Regulated Update IPP Generation Contract Availability (%) Coal Production Revenue and Expense per Ton Sold Coal-fired plants (Coal in millions of tons and overburden in millions (Units = tons sold plus cubic yards of…
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…
Oil & Gas Exploration & Development Program Note: approximate areas of geologic basins does not reflect BHEP acreage Third Quarter Review Nov 5, 2013 57
Reserve Data and Net Present Value Reserve calculation at Dec. 31, 2012 Average Average Net Oil Net Gas Net Equiv PV10 Price Oil Price Nat Gas (MBO)** (BCF)** (BCFE)** (MM) Per BBL per MCF PDP* 3.9 54.1 77.5 140.7 85.39 2.25 PNP*…
Southern Piceance Basin Western Colorado Third Quarter Review Nov 5, 2013 59
Southern Piceance Basin Mancos Drilling Program 2013-2015 Third Quarter Review Nov 5, 2013 60
Southern Piceance Basin Mancos Production Piceance Basin Type Curve 10,000 10,000' Lateral Type Curve 9.5 BCFE GAS, Mcf/D 5,000' Lateral Type Curve 5.4 BCFE 1,000 100 1 11 21 31 41 51 61 MONTHS Note:…
San Juan Basin Mancos Shale 16 miles 45 miles Encana Five Mancos horizontal wells drilled. One reported completion 786 BOPD 838 MCFD Nine additional locations staked Third Quarter Review Nov 5, 2013 62
San Juan Basin Mancos Production Production Rates in Mcf/D 10,000 EUR 6.9 BCFE Gas Flow in Mcf/D 1,000 100 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 MONTHS WPX - Rosa Unit…
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