Black Hills Q2 2025 Earnings Report

Black Hills EPS Results

• Actual EPS: $0.38
• Consensus EPS: $0.39
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.33

Black Hills Revenue Results

• Actual Revenue: $439.00 million
• Expected Revenue: $412.69 million
• Beat/Miss: Beat by +$26.32 million
• YoY Revenue Growth: +8.90%

Black Hills Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 11:00AM ET

Black Hills (NYSE:BKH), through its subsidiaries, operates as an electric and natural gas utility company in the United States. The company operates in two segments: Electric Utilities and Gas Utilities. The Electric Utilities segment generates, transmits, and distributes electricity to approximately 222,000 electric utility customers in Colorado, Montana, South Dakota, and Wyoming; and owns and operates 1,394 megawatts of generation capacity and 9,106 miles of electric transmission and distribution lines. The Gas Utilities segment distributes natural gas to approximately 1,116,000 natural gas utility customers in Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming; owns and operates 4,663 miles of intrastate gas transmission pipelines; 42,514 miles of gas distribution mains and service lines; seven natural gas storage sites; and approximately 50,000 horsepower of compression and 516 miles of gathering lines. It also constructs and maintains customer owned gas infrastructure facilities for gas transportation customers; and provides appliance repair services to residential utility customers, as well as electrical system construction services to large industrial customers. In addition, the company produces electric power through wind, natural gas, and coal-fired generating plants; and coal at its coal mine located near Gillette, Wyoming. Black Hills Corporation was incorporated in 1941 and is headquartered in Rapid City, South Dakota.

Black Hills Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Black Hills reaffirmed its 2025 earnings guidance of $4.00 to $4.20 per share, representing 5% growth at midpoint, and expects to achieve the upper half of its 4%–6% long-term EPS growth target starting in 2026.
• Positive Sentiment: The company has executed seven rate reviews since 2024, recovering over $1.3 billion in system investments through new base rates and rider mechanisms to support customer growth.
• Positive Sentiment: Black Hills is advancing a $4.7 billion capital plan, including the $350 million Ready Wyoming transmission expansion, the 99 MW Lang II gas project, and Colorado Clean Energy Plan renewables and battery storage.
• Positive Sentiment: Rapid data center and blockchain demand drove Wyoming Electric’s all-time peak of 379 MW in June, and the company expects tech loads to exceed 10% of EPS by 2028 with a pipeline targeting over 1 GW.
• Negative Sentiment: Second-quarter results were offset by headwinds of $0.05 per share from higher O&M costs (including insurance and unplanned outages) and $0.08 per share of increased financing expenses.

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Second Quarter twenty twenty five Black Hills Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session.

[Operator]

I would now like to hand the conference over to your speaker today, Sal Diaz, Director of Investor Relations.

[Sal Diaz, Director - IR at Black Hills]

Thank you, operator. Good morning, and welcome to Black Hills Corporation's second quarter twenty twenty five earnings conference call. You can find our earnings release and materials for our call this morning on our website at blackhillscorp.com under an Investor Relations heading. Leading our quarterly earnings call are Lynn Evans, President and Chief Executive Officer Kimberly Nooney, Senior Vice President and Chief Financial Officer and Marni Jones, Senior Vice President and Chief Utility Officer. During our earnings discussion today, 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.

[Sal Diaz, Director - IR at Black Hills]

Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, Slide two of the investor presentation on our website and our most recent Form 10 ks and 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. With that, I will now turn the call over to Lynn Evans. Lynn?

[Linden Evans, President & CEO at Black Hills]

Thank you, Sal. Good morning and thank you all for joining us today. I'll begin on Slide three with a summary of our quarter and our strategic outlook. Kimberly will provide our financial update, and Marni will discuss our operational performance and strategic progress. Among our key stakeholder commitments for the year are: first, deliver on our financial commitments, including a year over year earnings growth of 5% at the midpoint of guidance.

[Linden Evans, President & CEO at Black Hills]

Second, execute on our regulatory and growth initiatives, including our $1,000,000,000 capital plan to support key projects that serve the growing needs of our customers. And third, provide excellent operational performance, including top quartile reliability and above industry average safety performance. I'm pleased to report we made strong progress on these three commitments in the second quarter, and I'm proud of the relentless drive of our team as we execute our customer focused strategy. Together, we delivered on our financial commitments and made great progress on several large initiatives through the 2025. We're on track to achieve our earnings guidance for the full year due to three primary drivers, new base rates, rider recovery and customer growth.

[Linden Evans, President & CEO at Black Hills]

And we continue to maintain a healthy balance sheet to help us execute on our strategic growth plan. We continue to make excellent progress in our regulatory strategy, including our recently approved Kansas Gas rate review and our active rate review in Nebraska, our seven rate reviews since the 2024 reflect the strength and skill within our team to execute multiple rate reviews annually. Collectively, these rate reviews represent the recovery of over $1,300,000,000 of new system investments made to serve our customers. Our rider mechanisms are also instrumental in recovering investments in a timely manner and support our path to achieve our earnings guidance. We also made strong progress on near term projects that will drive growth, including our Ready Wyoming transmission expansion, our Lang two generation project, and our Colorado Clean Energy Plan.

[Linden Evans, President & CEO at Black Hills]

Additionally, customer growth, including growing demand from data center and blockchain customers and economic development in our service territories are providing solid contributions to earnings. Representing that customer growth, Wyoming Electric recorded four distinct all time peak loads during the first half of this year. The newest peak of three seventy nine megawatts set in June is a 21% increase over the peak recorded in 2024 and a 10% increase over a peak customer load that was set earlier in the second quarter, reflecting ongoing growth in data center and blockchain demand. As we leverage our growth opportunities, we're also mitigating risk for our business and our customers. At the June, we established an emergency public safety power shutoff program across all three of our electric utilities to mitigate wildfire risk and keep our customers safe.

[Linden Evans, President & CEO at Black Hills]

The program reflects extensive engagement with a variety of stakeholders to craft the framework for a plan that makes sense in our local service territories. In summary, our team continues to deliver consistent results for our stakeholders on our regulatory and growth initiatives, while keeping customer safety and reliability top of mind. Thank you to our employees and partners listening today. I'm proud of what we have achieved together, and I'm grateful for your dedication to our mission of improving life with energy every day. Our financial outlook is provided on slide four.

[Linden Evans, President & CEO at Black Hills]

With earnings meeting our expectations to date and strong ongoing customer demand opportunities ahead, we are reaffirming our 2025 earnings guidance range of $4 to $4.2 which is a 5% growth rate at the midpoint over our 2024 EPS. Looking ahead, with excellent progress on our regulatory and growth initiatives, we are successfully executing on our plan to deliver in the upper half of our 4% to 6% long term EPS growth target starting in 2026. Our confidence in our long term growth target is driven by our $4,700,000,000 capital plan and further reinforced by strong customer demand, including data center and blockchain demand opportunities. Slide five helps illustrate our $4,700,000,000 capital plan. The base investment level in our business currently ranges from 700 to $750,000,000 annually, prioritizing the core needs of our customers for safety, reliability, and supporting growth.

[Linden Evans, President & CEO at Black Hills]

In addition, our transformative infrastructure expansion investments will cost effectively enhance the resiliency of our system and support growing demand and evolving system requirements. Our ongoing capital projects include our Ready Wyoming transmission expansion that is on target to be completed by year end, our 99 megawatt Lang two generation project in South Dakota that we expect to place in service in the 2026, and our solar and battery projects to comply with the Colorado Clean Energy Plan to be placed in service in 2027 to 2028. These investments further capitalize on our strength as a vertically integrated electric and gas infrastructure company operating in eight constructive states. Our confidence in our earnings guidance and our long term growth is reinforced by the tech driven industrial demand we are witnessing as outlined on slide six. For more than a decade, we have served Microsoft's increasing hyperscale data center demand on top of our core residential and commercial customer growth.

[Linden Evans, President & CEO at Black Hills]

Meta, which we announced last year as a customer, is now in the process of constructing its new data center site, which we expect to begin taking data center load beginning in 2026. As Meta ramps up and as Microsoft continues its growth, we expect data centers to contribute more than 10% of our total EPS in 2028. By the 2029, our current forecast includes approximately 500 megawatts of data center demand being served through our innovative tariffs and market energy procurement model that provide valuable speed to market advantages for our customers. And looking ahead, our pipeline of data center demand continues to solidify and grow. We are developing our plans to serve more than one gigawatt of demand.

[Linden Evans, President & CEO at Black Hills]

We are engaging in meaningful conversations with a growing and diverse group of select customers that recognize the value of our unique offerings and the ideal attributes of our service territory as a choice location for our data center operations. As an example, we are engaged with multiple potential data center customers, including a recent announcement by Crusoe and Tallgrass for a data center to be located in Southeast Wyoming. To be clear, this would be additive to the 500 megawatts of data center load in our current five year financial forecast. Keeping with our normal practices, we would announce additional details when contracted. This pipeline of demand will further drive growth in revenues from our innovative tariff using our minimal capital model and create traditional investment opportunities, both of which generate utility like returns.

[Linden Evans, President & CEO at Black Hills]

Marni's comments will address our operational construct and capabilities to serve this tech driven demand. With that update, I'll turn it over to Kimberly for our financial update. Kimberly?

[Kimberly Nooney, CFO & SVP at Black Hills]

Thank you, Lynn, and good morning, everyone. Echoing Lynn's introduction, we had a great quarter, and I'm proud of our team's execution to deliver strong results. The progress we made over the last quarter continues to lay the foundation for success in 2026 and beyond, with transformative projects and regulatory progress supporting strong confidence in our ability to deliver on our earnings guidance and long term growth target. Slide eight compares Q2 twenty twenty five to Q2 twenty twenty four. We delivered $0.38 per share this quarter compared to $0.33 per share for the same period last year.

[Kimberly Nooney, CFO & SVP at Black Hills]

New margins more than overcame the impact of higher operating expenses and financing costs to achieve quarterly earnings within our expectations. We delivered $0.22 per share of new margins, including $0.17 of new rates and rider recovery. These margins more than offset $05 per share of higher O and M, driven by increased insurance premiums and the impact of unplanned outages, dollars $0.08 per share of higher financing costs and $04 of higher depreciation expense from new assets placed in service. Comparing this quarter to Q2 twenty twenty four, our year over year weather impact resulted in $03 of positive weather. When compared to normal, weather drove $04 per share of unfavorability during Q2 twenty twenty five.

[Kimberly Nooney, CFO & SVP at Black Hills]

Turning to the year to date EPS drivers on slide nine, earnings per share increased to $2.24 from $2.19 for the same period last year. Our year to date margins are benefiting from the successful execution of our regulatory strategy, which delivered $0.49 of new rates and rider recovery. Along with weather favorability of $0.14 driven by very mild weather in the prior year, these benefits more than offset $0.29 per share of higher O and M, $0.02 4 of higher financing costs and $07 of higher depreciation expense. Year to date, we experienced approximately $5,000,000 in additional pre tax O and M costs or $06 per share related to unplanned generation outages, which were materially offset by benefits related to these outages recognized in margin and non controlling interest. Excluding these unplanned generation outage expenses from O and M, we expect to manage our 2025 O and M costs to a compounded annual growth rate of approximately 3.5% off 2023 O and M expense.

[Kimberly Nooney, CFO & SVP at Black Hills]

We are reaffirming and expect to achieve our full year earnings guidance. Further details on year over year changes can be found in our earnings release and our 10 Q to be filed with the SEC later today. Slide 10 displays our solid financial position through the lens of credit quality, capital structure and liquidity. Balance sheet strength remains one of our top priorities. We remain focused on sustaining our FFO to debt target of 14% to 15% and net debt to total capitalization target of 55%, which we maintained during the quarter.

[Kimberly Nooney, CFO & SVP at Black Hills]

Using our rating agencies methodologies, we expect to maintain these credit metric targets throughout our long range financial plan, providing a healthy cushion above our downgrade threshold of 13%. Our liquidity remains strong at quarter end at more than $600,000,000 of availability under our revolving credit facility. We are evaluating timing and refinancing options for our next debt maturity of $300,000,000 which is due in January 2026. We are investing $1,000,000,000 in capital during the year and as previously guided, we plan to issue approximately two fifteen million dollars to $235,000,000 of new equity to finance these investments in 2025 and have issued $65,000,000 of equity year to date. The timing of our equity issuances during the year is driven by forecasted cash flow, of which a significant driver is capital investments.

[Kimberly Nooney, CFO & SVP at Black Hills]

Based on the execution of our strategic projects, we expect to issue equity within our earnings guidance assumption for the remainder of the year. With several strategic capital projects and regulatory rate reviews driving stronger operating cash flows, our planned annual equity needs in 2026 and beyond are expected to be lower than 2025. We will continue to fund our accretive growth with the most efficient, cost effective capital available while maintaining credit quality. Slide 11 shows our earnings growth trajectory beginning in 2023 along with our 2025 earnings guidance assumptions. For 2025, we expect EPS to be between $4 and $4.2 per share, which at the midpoint represents a 5% increase over 2024 earnings.

[Kimberly Nooney, CFO & SVP at Black Hills]

As Lynn mentioned, looking forward, our long term earnings growth will be driven by new rates in Ryder on strategic investments like Ready Wyoming, Lang II, and the Colorado Clean Energy Plan that will provide long term benefits to customers, ongoing customer growth we continue to experience within our jurisdictions and data center and blockchain growth opportunities within our footprint. We believe we are well positioned to achieve the upper half of our long term EPS growth target of 4% to 6% beginning in 2026. Slide 12 illustrates our industry leading dividend track record of fifty five consecutive years. We continue to target a 55% to 65 payout ratio. A dependable and increasing dividend is an important component of our strategy to deliver long term value for our shareholders.

[Kimberly Nooney, CFO & SVP at Black Hills]

I will now turn the call over to Marni for a business update.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Thank you, Kimberly, and good morning, everyone. Through the first half of the year, our team continued to deliver safe, reliable, and cost effective energy to our 1,350,000 customers and made solid progress in executing our strategic priorities. Operationally, we are particularly excited about the opportunities in serving data centers that Lynn highlighted in his remarks. Given we are a vertically integrated utility operating in a franchise service territory with an obligation to serve, we are well positioned to deliver value through both our current minimal capital service model and through a more traditional utility model, including investments in generation and transmission. Moving to slide 14, our two sixty mile, $350,000,000 Ready Wyoming Transmission Project, the largest capital project in our company's history, is on track for completion by year end.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

This expansion strengthens our system by reducing reliance on third party transmission, enhancing resiliency, and increasing access to market energy, including renewables. By building a more interconnected and robust transmission network, we are supporting long term price stability for our customers and enabling continued growth across our service territory. Approximately $40,000,000 of project costs placed in service last year are currently being recovered through our Wyoming transmission rider, with the remaining costs to be recovered through the same rider starting in January 2026. Moving to slide 15. We continue to execute on our Colorado Clean Energy Plan.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

In 2024, we received approval for three fifty megawatts of renewable resources to reduce emissions for Colorado customers by 80% by 02/1930. This includes a utility owned 100 megawatt solar project, a utility owned 50 megawatt battery storage project, and a 200 megawatt solar power purchase agreement. In June, we requested a Certificate of Public Convenience and Necessity, or CPCN, for the battery project and expect approval by year end, and we continue to negotiate with the developers of the two solar projects. The utility owned investments are included in our twenty six through '28 capital plan, and as final contracts are signed, we may update our capital plan for any material shifts in timing or costs. Slide 16 outlines our South Dakota Electric Resource Plan.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

During the second quarter, we received regulatory approval in Wyoming for our Lang-two project, a 99 megawatt utility owned natural gas fired generation resource located in Rapid City, South Dakota. We expect to begin construction in the third quarter and place our new resource in service in the 2026. Slide 17 summarizes our regulatory progress. We received approval from the Kansas Commission on a constructive black box settlement for new base rates last week. The settlement results in an increase in annual revenue of $10,800,000 with new rates effective tomorrow, August 1.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

The settlement renews our safety and reliability focused rider and allows for a new insurance cost tracker with deferred accounting treatment. Additionally, it includes approval for the company to file a capital only, abbreviated case in 2026. The abbreviated case will allow us to recover capital placed in service through December 31 based on the Black Box settlement terms. Our only active rate review is in Nebraska, where we requested $35,000,000 of new annual revenue based on a return on equity of 10.5% and a capital structure of approximately fiftyfifty debt to equity. Interim rates are effective tomorrow, August 1, and final rates are expected by 2026.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Lastly, in the fourth quarter, we are preparing to file a rate review request for Arkansas Gas. This is consistent with our cadence of three to four rate reviews annually. As we wrap up our call, and before I turn it back to Lynn, I'll provide an update on wildfire risk mitigation on slides eighteen and nineteen. Wildfire mitigation begins with the strength of our systems and our decades of experience in proactive prevention. The potential impact of an event in our electric service territories is reduced by the geographic diversity of our high risk areas and low population density across our broad and mostly rural service territory.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Our industry leading reliability results in fewer outage events, which in turn lowers the potential for ignitions that may cause a wildfire. We are proud of our low vegetation cost outage rate of just 3.5% compared to a 20% industry average. With decades of experience operating in challenging weather environments, our systems are built and maintained to withstand the high winds and severe conditions that can be typical of our region. On June 30, we launched our new Emergency Public Safety Power Shutoff Program, or PSPS. As one component of our broader operational response plan and comprehensive wildfire medication plan.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

The program involves selectively and proactively de energizing power lines in high risk areas as a last resort safety measure under extreme conditions. To our team and stakeholders, I'd like to say thank you for your thoughtful engagement. Delivering dependable energy is a responsibility we take seriously, and we remain committed to working collaboratively to balance safety with the need for reliable service. Together, we've developed a program that makes sense in our communities as we execute on our collective priority of safety alongside the need for excellent reliability and resiliency. We look forward to working with our key stakeholders to further enhance our wildfire mitigation efforts and to align with legislative bodies on the standard of care that improves safety and reduces business risk.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Legislation has already been inactive in Wyoming, and we continue to work with utility partners and legislative bodies in 2026 that will advance wildfire safety and prevention in South Dakota and Colorado. With that, I will now turn the call back to Lynn.

[Linden Evans, President & CEO at Black Hills]

Thank you, Marni. Our solid second quarter financially and operationally provides strong confidence in achieving our 2025 guidance and our ability to deliver in the upper half of our long term EPS CAGR starting next year. Through our robust pipeline of strategic opportunities, we are investing in safely and reliably serving our customers and mitigating risks. We're successfully and routinely executing on our regulatory plan, and we are innovatively developing customer solutions to enable data center and blockchain load growth. This concludes our prepared remarks, and we're happy to take your questions.

[Operator]

Thank you. Our first question comes from Chris Ellinghaus with Seabird Williams Bank. You may proceed. Chris, your line is now open.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Sorry. Hey, everybody. How are you? The industrial growth for the quarter was 19%. Can you give us any kind of color on how we should anticipate that digital growth to proceed?

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Is it going to stay in that 20% -plus range on a linear basis? Or can you give us any color on what the shape looks like?

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Good morning, Chris. This is Marnie.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Hey, Marnie.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Thanks for the question. So, yeah, on the industrial growth side of it, so, yeah, we did see some good growth. And what we've seen in the past is it's not necessarily linear. We see different ramp rates depending on the type of the data center, as well as the type of the blockchain load that's coming on. Really good growth that we saw this quarter.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

You noticed that with the peak in Cheyenne. And while we expect to continue to see significant growth from data centers as well as blockchain going forward, I don't expect it to be just strictly linear.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Okay. And Lynn, you talked about the new announcements for Wyoming. Was that part of the sort of incremental 500,000,000 that was in your sort of pipeline or was that incremental to what your prior thinking was?

[Linden Evans, President & CEO at Black Hills]

Good morning, Chris. Thanks for the question. It's incremental to our pipeline in total. This is relatively new announcement, so we're in discussions with the counterparties. We've to date not included anything other than to acknowledge it's part of our pipeline now, and we're going to take a very disciplined approach.

[Linden Evans, President & CEO at Black Hills]

When we have agreements that are executed and signed, then we'll move that into our load forecast and move it into our financial forecast as well perhaps.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Okay. So your sort of 1,000 megawatt ten year sort of outlook, do you expect that that will sort of get updated over time as you get closer to MOUs or whatever even contracts, whatever your comfort level is?

[Linden Evans, President & CEO at Black Hills]

Yes. We do, Chris. Thank you for that. We're we're cautious. We're conservative.

[Linden Evans, President & CEO at Black Hills]

We're very happy with the with the with the counterparties that we have agreements with today, that being Microsoft and Meta, watching them continue to grow. Meta's building their data center now. We're serving the construction load. We have not transitioned to the data center load, but that's coming, as we said in our comments, in 2026. So as these data centers, through our unique tariff, because we can serve them in many different ways, As Marni pointed out in her prepared remarks, is a service territory that's franchised to us, so we can serve it in some very unique ways, and that's why we believe our at least kind of customers are coming to us.

[Linden Evans, President & CEO at Black Hills]

It's a great service territory for lots of different reasons, including the tariffs that we provide and allow our customers to take advantage of with us. We're very close, very watchful on how it impacts the shareholder, how it impacts our customers, how it impacts our communities. So we're being very disciplined and thoughtful about our counterparties.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

Okay, great. Kimberly, your insurance expenses, were particularly high in the first quarter. Is the second quarter sort of down to the incremental rate that you expect through the rest of the year?

[Kimberly Nooney, CFO & SVP at Black Hills]

Yes, thank you. Good morning, Chris. From an insurance perspective, we renew insurance rates July 1 through June 30. So as we talked to last year, we had some pretty significant increases. We just completed our renewals and what we're seeing is flat year over year insurance costs when you compare 07/01/2025 through 06/30/2026.

[Kimberly Nooney, CFO & SVP at Black Hills]

When you compare that period to last year, we see flat insurance rates, insurance expense going forward. That will be a nice benefit as we look through the 2025 going into 2026.

[Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.]

All right, thanks guys. Appreciate it.

[Linden Evans, President & CEO at Black Hills]

Thank you, Chris. Have a good day.

[Operator]

You. Our next question comes from Andrew Weisel with Scotiabank. You may proceed.

[Andrew Weisel, Director at Scotia Howard Weil]

Hey. Good morning, everyone. My first question for Kimberly. You're pointing to the upper half of the 4% to 6% range starting next year. Can you elaborate on what specifically is driving that?

[Andrew Weisel, Director at Scotia Howard Weil]

Does it mean more like 5% to 6% each year or on average depending on rate cases? Or is it generally or gradually accelerating as some of the large load customers ramp up? Just help us understand a little bit behind the thinking of that, please.

[Kimberly Nooney, CFO & SVP at Black Hills]

Yeah, Andrew, thank you for the question and good morning. So as we've talked about being in the upper end of our growth guidance range of 4% to 6% starting next year, there are actually several drivers that are providing us the confidence to be able to achieve that upper half. So starting with some of the projects you heard Marni speak to, we have Ready Wyoming which is a $350,000,000 transmission investment. That will start full recovery of oneonetwenty twenty six, so that's a very beneficial driver. We have Lang two and Colorado CEP being put into service to some degree in '26 through '28, So there's benefits from those specific projects as well.

[Kimberly Nooney, CFO & SVP at Black Hills]

We continue to see customer growth within our jurisdictions. Arkansas continues to grow. We're seeing growth here in South Dakota, The Front Range Of Colorado, those areas continue to grow as we've talked about in the past. And then Lynn and Marni just talked about from a data center perspective, are continuing. Meta ramps up in 'twenty six.

[Kimberly Nooney, CFO & SVP at Black Hills]

And as we look for and are working with additional data centers to the extent that that load is accelerated or comes to fruition in our five year plan, which we expect it to be, that would be additive. So when we say upper half it doesn't include the data center growth that I just spoke to, but in general it's going to be all those capital projects along with regulatory efforts that Marni talked about in Nebraska and Kansas when we get full year of rates next year. So lots of great things happening that give us confidence to support that upper half of our growth range.

[Andrew Weisel, Director at Scotia Howard Weil]

That's very helpful and I appreciate that you clarified that that does not include the data center growth including this new customer that you were referring to. So thank you for clarifying that. My other question was, you mentioned some unplanned outages. Can you get a little more specific what happened there? And are those plants backed online?

[Andrew Weisel, Director at Scotia Howard Weil]

And were there any issues that might have impacts looking forward?

[Kimberly Nooney, CFO & SVP at Black Hills]

Yeah, I'll let Marni talk about the operational side and I'll address the financial side.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

Yeah, Andrew. So I'll say all of our generation is up and online and serving customers today. As you know, we've had some impacts from some outages over the course of this year, but our generation availability really continues to be in line with industry benchmarks. Our maintenance schedules are on track. And here we've had the opportunity recently to really, I think, even mitigate some future risk with some spare turbines as well as a spare combustor.

[Marne Jones, SVP & Chief Utility Officer at Black Hills]

So we've had these, but I think we have hopefully successfully mitigated some of the impacts that we could see going forward. Like I said, All Generation is up and running today, so we're very proud of that.

[Kimberly Nooney, CFO & SVP at Black Hills]

Yeah, and Andrew, as you think about the financial side, we tried to call out that impact to O and M just because we provided that earnings guidance run rate. So the $5,000,000 is going to increase our overall O and M assumption. However, within the total financial package, when you look at EPS impact year to date, it's immaterial and the big drivers are offsets related to non controlling interest because one of the outages was related to a facility that is partially owned by a third party and then we had some negative margin last year that obviously when you're comparing year over year became a benefit. So those items are offsetting the $5,000,000 of pretax O and M. So when you look at the total O and M rate that we've provided, if you exclude the $5,000,000 we are on target to achieve that compounded annual growth rate of 3.5% of O and M off of our 2023. So overall, an immaterial impact.

[Andrew Weisel, Director at Scotia Howard Weil]

Okay. And it sounds like no impact going forward. Is that right?

[Kimberly Nooney, CFO & SVP at Black Hills]

Read. And yes. And we've assumed no unplanned outages for the remainder of the year.

[Andrew Weisel, Director at Scotia Howard Weil]

Got it. Okay. Thank you so much for all the details. Appreciate it.

[Linden Evans, President & CEO at Black Hills]

Thank you, Andrew.

[Operator]

Thank you. I would now like to turn the call back over to Lynn Evans for any closing remarks.

[Linden Evans, President & CEO at Black Hills]

Well, thank you very much for your interest in Black Hills and your time today. I want to once again extend my gratefulness to our employee team, our business partners We delivered an excellent second quarter that's going to help us through the next several quarters in delivering on upon our promises to our shareholders, our customers, and our communities. You may hear the rumble in the background. The Sturgis rally is starting soon. So if you're in the area on your motorcycle or otherwise, stop by and say hello, and enjoy a Black Hills Energy safe day. Thank you again.

[Operator]

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Participants

Executives

• Sal Diaz, Director - IR
• Linden Evans, President & CEO
• Kimberly Nooney, CFO & SVP
• Marne Jones, SVP & Chief Utility Officer

Analysts

• Chris Ellinghaus, MD & Senior Equity Analyst - Electric, Natural Gas Utilities & Alternative Energy at Siebert Williams Shank.
• Andrew Weisel, Director at Scotia Howard Weil