Black Hills (US:BKH)2026-02-11 17:58Electric Demand and Capacity - System Peak Demand for Colorado Electric in Summer 2025 is 396 MW, a slight increase from 394 MW in Summer 2024, while Winter demand decreased from 311 MW in 2024 to 299 MW in 2025[34] - Total electric generating capacity owned by Electric Utilities as of December 31, 2025, is 1,386.4 MW, with significant contributions from natural gas and coal sources[35] - Coal accounted for 25.5% of the total power supply in 2025, down from 32.5% in 2024, while natural gas remained stable at 29.3%[38] Fuel Costs and Production - The weighted average cost of coal increased to $16.59 per MWh in 2025 from $13.87 in 2024, while the total weighted average fuel and purchased power cost rose to $26.98 per MWh[39] - The company produced approximately 3.3 million tons of low-sulfur coal in 2025, with recoverable reserves estimated at 172 million tons, providing a reserve life of about 51 years[40][42] Infrastructure and Service Capabilities - Electric Utilities own 2,214 miles of transmission lines and 7,264 miles of distribution lines as of December 31, 2025, enhancing their service capabilities[45] - The company operates 4,581 miles of transmission pipelines and 30,861 miles of gas distribution mains across various states, with a total of 13,979 service lines[57] - The company has a significant amount of infrastructure in place, including 875 miles of transmission pipelines in Arkansas and 1,313 miles in Nebraska[57] Customer Base and Demand Trends - The total number of natural gas retail customers increased to 1,138,152 in 2025, up from 1,128,355 in 2024, indicating a growth trend in customer base[54] - The demand for natural gas is significantly higher during the winter months, with a substantial portion of revenue recognized in the heating season, particularly in the first and fourth quarters[57] Regulatory and Competition Landscape - Competition in the electric utility sector remains limited, with potential regulatory changes aimed at increasing competition not yet having a material impact[48] - Regulatory oversight includes various federal and state commissions, which influence rates, service quality, and capital expenditures[60] - The company faces limited competition in retail natural gas distribution, although electrification initiatives could impact future demand[58] Financial Management and Cost Recovery - The company has implemented cost recovery mechanisms, such as the Gas Cost Adjustment (GCA) and Energy Efficiency Cost Recovery (EECR), to manage fluctuations in commodity costs[61] - The company has implemented various cost recovery mechanisms across its Gas Utilities, allowing for the passing of prudently incurred costs to customers[70] - The company has entered into commission-approved hedging programs to mitigate natural gas price volatility for its utility customers[312] Environmental Goals and Emissions - The company aims to reduce GHG emissions intensity for Electric Utilities by 40% by 2030 and 70% by 2040, with a target of 50% reduction for Gas Utilities by 2035, based on a 2005 baseline[83] - The company reported a 38% reduction in electric utility emissions since 2005 and is on track to meet its 2030 and 2040 emission reduction goals[84] - The company has a goal of achieving "Net Zero by 2035" for Gas Utilities, which includes all Scope 1 sources of methane emissions[83] Workforce and Labor Relations - As of December 31, 2025, the total number of employees is 2,795, with 421 in Electric Utilities and 1,184 in Gas Utilities[90] - The turnover rate for the year ended December 31, 2025, was 12%, up from 11% in the previous year[88] - Approximately 18% of total employees are eligible for retirement as of December 31, 2025[90] - The company has not experienced any labor stoppages in decades, indicating stable labor relations[91] Financial Risks and Credit Management - Commodity price risk is associated with retail natural gas services and wholesale electric power marketing, influenced by factors such as weather and geopolitical events[315] - As of December 31, 2025, 99.8% of the company's debt is fixed rate, limiting exposure to variable interest rate fluctuations[319] - A hypothetical 100 basis point increase in the benchmark rate on variable rate debt would not materially impact pre-tax interest expense for the years ended December 31, 2025, and 2024[319] - The company has no interest rate swaps in place as of December 31, 2025, to manage interest rate risk[318] - Credit risk is managed through guidelines established by the Black Hills Corporation Credit Policy, focusing on high credit quality entities[321] - The company conducts periodic credit evaluations and adjusts credit limits based on payment history and current creditworthiness[322] - A portion of over-the-counter swaps has been designated as cash flow hedges to mitigate commodity price risk for fixed price forward contracts[316] - Changes in interest rates impact pension and post-retirement benefit obligations, potentially increasing cash contribution requirements[320] - A 10% change in market prices for derivative instruments would not materially impact pre-tax income or fair values as of December 31, 2025[317] - The company maintains a provision for estimated credit losses based on historical experience and current market conditions[322]