Black Hills Corporation

Good day and thank you for standing by. Welcome to the first quarter 2023 Black Hills Corporation earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dave Soderquist, Manager of Investor Relations.

Thank you, and good morning, everyone. Welcome to Black Hills Corporation's first quarter 2023 earnings conference call. You can find our earnings release and materials for this call on our website at www.blackhillscorp.com under the Investor Relations heading. Leading our quarterly earnings discussions today are Lynn Evans, President and Chief Executive Officer, and Kimberly Nooney, Senior Vice President, Chief Financial Officer, and Treasurer. Also in attendance today are Marnie Jones, Vice President of Electric Utilities, and Todd Jacobs, Vice President of Growth and Strategy. Before we begin today, we would like to note that Black Hills will be attending the American Gas Association Financial Forum the week of May 21st. Our leadership team will be meeting with investors at the conference, and the investor presentation will be posted on our website prior to the conference. During our earnings discussion today, some of the 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. 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-K and Form 10-Q filed with the SEC for a list of some of the factors that could cause future results to differ materially from our expectations. I will now turn the call over to Lynn Evans.

Thank you, Dave. Good morning, everyone, and thank you for joining us. Before I begin my comments, I also want to welcome Marnie and Todd this morning. Going forward, they will be participating in our earnings calls and will help respond to your questions. They are great leaders, and I'm confident you will appreciate their perspectives. I'm starting on slide four. Our team delivered a solid quarter. We're reaffirming our guidance, and we have four key takeaways for you today. We're managing O&M to achieve our guidance range. Our operational performance continues to be excellent. We're strengthening our balance sheet, and we're advancing our growth initiatives. As also indicated on this slide, our triple R theme for this year is resilient, reliable, and ready, with each being emblematic of Black Hills and our team. First, I'm especially proud of our team's operational performance for safety and reliability. Our team and systems continue to perform outstandingly, reliably serving customers during record cold temperatures and through continued customer growth, while supporting our ability to deliver solid financial results. Our generation availability and reliability enabled strong wholesale energy sales that benefited customers and shareholders. Second, we made excellent progress strengthening our balance sheet and enhancing our liquidity. With strong cash flows and our financing activities, we fully repaid our commercial paper borrowings. Kimberly will cover our financial progress in her update, so I won't steal all of her thunder. And third, we successfully advanced our growth initiatives. Those initiatives included success on our 2023 capital program, and we started providing energy to the largest blockchain customer in the state of Wyoming while advancing our transmission project, Ready Wyoming. We also achieved key milestones as we advanced our electric resource plans in Colorado and South Dakota. Our financial outlook on slide five is consistent with our fourth quarter disclosures. We reaffirmed 2023 earnings guidance in the range of $3.65 to $3.85 per share, and we remain confident in our long-term EPS growth rate of 4% to 6% and our target dividend payout ratio of 55% to 65%. Slide 6 provides our regulatory update. We have one active rate review for our Rocky Mountain natural gas pipeline in Colorado, where we filed a settlement agreement for an annual revenue increase of $8.2 million, with an ROE range of 9.5 to 9.7%, and a capital structure of 50 to 52% equity. We're waiting for the administrative law judge's decision on the settlement, and we anticipate new rates will be in place during the third quarter. We're currently preparing rate reviews for Colorado gas, and Wyoming gas to file during the second quarter, and we expect to file an additional natural gas rate review later this year for a jurisdiction that we'll announce following our discussions with regulators. At Wyoming Electric, we also put new rates in place along with a new transmission investment and expense rider. This new rider will be beneficial as we start the construction of our 260-mile Ready Wyoming transmission line later this year. Slide 7 describes our electric resource plans for Colorado and our plans for our jointly dispatched South Dakota and Wyoming system. In total, approximately 500 megawatts of new renewable and battery storage resources are planned. These additions will support our goals to reduce electric utility emissions 40% by 2030 and 70% by 2040 off a 2005 base. We achieved key milestones for both plans during the quarter. Starting with South Dakota, at the end of March, we issued a request for proposals for 100 megawatts of renewable generation to be in service by mid-2026 with initial bids due this month. The RFP is structured as a bill transfer providing for utility ownership. This aligns with our informed view that customers are better served over the long term when the utility owns the generation assets, providing customers with the benefit of depreciation and keeping the obligation to serve close to home. In Colorado, we received commission approval of a unanimous settlement agreement for our Clean Energy Plan. We will begin the RFP process by mid-year for 400 megawatts of renewable resources to be in service between 2026 and year-end 2029. Our approved settlement allows for Black Hills to own up to 50% of the new resources, or 200 megawatts. By our next earnings call in August, we expect our bidding process to be underway in Colorado and to have received initial bids for South Dakota. This should give us a realistic idea of the capital investment that will be added to our base capital plan. Slide eight illustrates our base capital forecast and summarizes our long-term growth plan. We're investing in the core needs of our customers, enhancing our infrastructure with incremental projects, and pursuing other profitable growth opportunities. Our base capital forecast remains consistent at $3.5 billion through 2027, or an average of $700 million per year. In 2023, we're managing CapEx to approximately $600 million as we strengthen our balance sheet and make investments to maintain a safe and reliable system. Our 2024 capital plan is currently about $800 million reflecting ready Wyoming transmission construction and intentional project deferrals. Please note that space does not include additional projects from our electric resource plans that I just mentioned. The capstone to our growth plan is our pursuit of capitalized opportunities, new margin streams and innovative solutions, and efficiencies in how we do business. And slide nine lays out those customer-focused growth initiatives in five key areas, transmission and storage, data centers, blockchain, RNG, and a culture of organizational effectiveness and efficiency. An example of a strategic infrastructure project is our Ready Wyoming transmission expansion, our 260-mile project in southeastern Wyoming. We continue to pursue other incremental transmission opportunities, and we're always evaluating other needs such as natural gas pipelines and storage projects. Data centers and blockchain are capital light projects that provide recurring earning streams. We're especially optimistic about long-term growth in serving hyperscale data centers. Our existing and new potential data center customers have communicated robust energy demand growth plans for operations in the Cheyenne, Wyoming area and especially attractive data center location. Also in Cheyenne, our first blockchain customer is in service. and continues to ramp up their energy intake. We're optimistic that success with this blockchain mining customer will be a scalable model for other prospects going forward. Renewable natural gas is another sweet spot of growth for us in our agriculture rich territories. We've already placed six RNG interconnects into service, and we're nearing the finish line on three additional interconnects this year, with an additional interconnect expected to be online in 2024. Our team is also actively working with counterparties on a variety of projects to expand our RNG offerings and business. And as we continue to integrate more RNG into our system, this will help our gas utilities achieve our net zero by 2035 target. We're also fostering ongoing sustainable cost savings through innovation and continuous improvement in how we do business and how we serve our customers through our Energy Forward initiatives. Slide 10 illustrates the strong customer and population growth in our service territories versus the overall state population growth in the United States average. The ongoing population migration into and across our service territories continues to drive organic growth, with 5.8% growth in customer counts since year-end 2017. The strongest regions of growth in our territories include the Colorado Front Range, the prime growth areas of Northwest Arkansas, Rapid City and the surrounding Black Hills region, and Cheyenne, Wyoming. Cheyenne also boasts excellent commercial growth from data center and blockchain activity that are above and beyond what is reflected in these growth rates. You'll also note that our other states are experiencing similar steady customer growth. In closing, I'm pleased with the results of our team's strategic execution, including operational excellence, a stronger balance sheet, and progress on our resource plans and growth initiatives. Our financial results have us on track to achieve our 2023 guidance, and we're already hard at work towards second quarter progress. With that, I'll turn the call over to Kimberly for the financial review. Kimberly?