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Black Hills’ Coal Generation Becomes Welcome Asset

Black Hills Corporation (NYSE:BKH) is an South Dakota-headquartered holding company with an eight-state service area shown below and 1.3 million natural gas and electric utility customers.

In the map above, natural gas service areas are orange and electricity service areas are gray.

Last year I rated Black Hills “a buy” and am keeping this ranking, albeit at a slightly more modest level due to inflation risks for all utilities. Black Hills is a residential/commercial (weather-variable) gas utility with a potentially increasing growth trajectory in electric generation and delivery: in particular, the company notes significant interest from data centers and bitcoin miners.

At a time when coal assets and coal generation suddenly became more valuable, Black Hills has both. Yet its generation base is also diversified across natural gas and wind.

Third Quarter 2021 Results and Projections
In the third quarter of 2021, Black Hills’ net income was $44.1 million, or $0.70/share compared to $36.3 million, or $0.58/share for 3Q20. Nine months’ net income was $165.6 million, or $2.63/share compared to $150.4 million or $2.41/share for the same period in 2020.

The company increased full-year 2021 earnings per share (EPS) guidance to $3.85-$4.00 and projects 2022 EPS at $3.95-$4.15. Per CEO Linn Evans, Black Hills is targeting 5-7% average earnings growth for 2023-2025 and at least 5% annual dividend growth

Planned capital expenditures for 2021-2025 are $3.2 billion.

Black Hills Corporation is headquartered in Rapid City, South Dakota. Its 1.3 million customers divide as 1,083,000 natural gas customers and 216,000 electric customers.

Operationally, it divides into four business segments: electric utilities, gas utilities, power generation, and mining.

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