Black Hills (BKH) - 2024 Q4 - Annual Report

Customer Growth - As of December 31, 2024, the total electric retail customers increased to 225,088, up from 222,340 in 2023, representing a growth of 1.6%[30] - As of December 31, 2024, the total natural gas retail customers increased to 1,128,355, up from 1,116,393 in 2023, representing a growth of approximately 1.1%[48] Energy Supply and Demand - The system peak demand for Colorado Electric in summer 2024 was 394 MW, a decrease of 4.1% from 411 MW in summer 2023[30] - The power supply from coal decreased to 32.5% in 2024 from 35.0% in 2023, while natural gas increased to 29.4% from 26.4%[32] - Renewable energy purchases increased in 2024 due to new wind and solar power purchase agreements (PPAs) effective December 2023 and March 2024, respectively[33] - Seasonal variations significantly impact demand for natural gas, with higher demand typically observed during the winter months[50] Financial Performance - Revenue for the year ended December 31, 2024, was $2,127.7 million, a decrease of 8.7% from$ 2,331.3 million in 2023[308] - Operating income increased to $503.1 million in 2024, up 6.8% from$ 472.7 million in 2023[308] - Net income available for common stock was $273.1 million, representing an increase of 4.0% compared to$ 262.2 million in 2023[308] - Basic earnings per share remained stable at $3.91 for both 2024 and 2023[308] - Comprehensive income available for common stock was$ 278.5 million in 2024, compared to $263.0 million in 2023, an increase of 5.8%[311] - Net income for the year ended December 31, 2024, was$ 283.7 million, an increase of 2.5% from $276.0 million in 2023[321] Costs and Expenses - The total weighted average fuel and purchased power cost decreased to$ 24.66 per MWh in 2024 from $25.39 in 2023[34] - The average price paid for natural gas was$ 15.64 per MWh in 2024, down from $20.20 in 2023[34] - The weighted average cost of coal used for electricity generation was$ 13.87 per MWh in 2024, compared to $13.40 in 2023[34] - The company reported a decrease in fuel, purchased power, and cost of natural gas sold to$ 730.3 million in 2024 from $982.9 million in 2023, a decline of 25.6%[308] - Increased costs associated with healthcare plans and employee benefits may adversely affect financial operating results, including earnings and cash flow[121] Capital Structure and Debt - Long-term debt increased to$ 4,250.2 million in 2024, up from $3,801.2 million in 2023, indicating a rise of 11.8%[318] - Long-term debt issuance in 2024 was$ 450.0 million, compared to $800.0 million in 2023, indicating a decrease of 43.8%[321] - As of December 31, 2024, 96.9% of the company's debt is fixed rate, limiting exposure to variable interest rate fluctuations[279] - The senior unsecured debt rating is Baa2 (Stable outlook) by Moody's and BBB+ (Stable outlook) by S&P, with a potential downgrade impacting capital access and increasing interest expenses[117] Regulatory Environment - The company’s electric utilities face limited competition in retail generation and distribution, with potential impacts from legislative restructuring initiatives[42] - The regulatory environment allows the company to recover prudently incurred costs of natural gas through various cost recovery mechanisms, ensuring stable revenue streams[55] - The company is subject to oversight by multiple regulatory bodies, including state public utility commissions and the FERC, which influence its operational and financial decisions[56] - Regulated natural gas and electric utility services tariffs are subject to regulatory-approved tariffs, with service revenues varying based on quantities delivered, influenced by seasonal business and weather patterns[341] Workforce and Employee Relations - Total employees as of December 31, 2024, are 2,841, with 423 in Electric Utilities and 1,175 in Gas Utilities[80] - The turnover rate for the year ended December 31, 2024, is 11%, down from 12% in the previous year[79] - The percentage of women in executive leadership positions increased from 29% in 2023 to 32% in 2024[79] - The company has a collective bargaining agreement covering 716 employees across Electric and Gas Utilities, with no labor stoppages experienced in decades[81] Environmental and Safety Regulations - The company is subject to significant state and federal environmental regulations aimed at reducing GHG emissions and promoting clean energy technologies[74] - The EPA proposed new GHG emission limits for existing coal and natural gas power plants, with compliance costs expected to be recoverable through regulatory mechanisms[75] - The company reported a Days Away, Restricted, or Transferred incident rate of 1.0 per 200,000 hours worked for the year ended December 31, 2024[85] - 91.5% of injuries were reported within one day, indicating a strong focus on safety and compliance[85] Strategic Initiatives and Risks - The company has significant capital investment programs planned over the next five years, including a 99 MW natural gas-fired generation addition in South Dakota and a renewable generating facility acquisition as part of the Colorado Clean Energy Plan[88] - The company faces risks related to regulatory outcomes, which could adversely impact earnings, cash flow, and liquidity due to potential unfavorable rate decisions[89] - Supply chain challenges could negatively impact operations, with risks including unanticipated price increases and disruptions from geopolitical unrest[104] - Cybersecurity incidents pose a risk to operations, with potential disruptions leading to loss of service and significant repair costs[105] - Legislative changes regarding federal income tax policy could adversely affect the company's financial condition and cash flows[97] Financial Instruments and Market Risks - The company uses derivative financial instruments to hedge against commodity price risks, which could result in material financial losses if market conditions change unfavorably[125][126] - The company is exposed to various market risks, including commodity price risk and interest rate risk, which may impact financial performance[272][275] - The company has adopted hedging programs to mitigate natural gas price volatility, utilizing futures, options, and swaps[273][276] - Certain derivative contracts approved by regulatory authorities are either recovered or refunded through customer rates, with changes in fair value deferred as a regulatory asset or liability[368] Asset Management - Total assets increased to$ 10,022.6 million as of December 31, 2024, compared to $9,620.4 million in 2023, reflecting a growth of 4.2%[315] - The company’s retained earnings rose to$ 1,249.1 million in 2024, compared to $1,158.2 million in 2023, an increase of 7.8%[324] - Goodwill balances remained unchanged since 2016, totaling$ 1,299.5 million as of December 31, 2024, with $257.3 million attributed to Electric Utilities and$ 1,042.2 million to Gas Utilities[358]