Black Hills Corporation

Good day and thank you for standing by. Welcome to the Black Hills Corporation Q4 and full year 2024 earnings webcast and 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 speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Sal Diaz, Director of Investor Relations.

Thank you, Operator. Good morning and welcome to Black Hills Corporation's fourth quarter and full year 2024 earnings conference call. You can find our earnings release and materials for our call this morning on our website at www.blackhillscorp.com under the Investor Relations headings. Leading our quarterly earnings call are Lynn Evans, President and Chief Executive Officer, Kimberly Nooney, Senior Vice President and Chief Financial Officer, and Marnie Jones, Senior Vice President, Utilities. 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. 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 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? Thank you, Sal. Good morning and thank you all for joining us today. I'll begin my comments with a brief overview of our successful 2024 and long-term outlook. Kimberly will provide our financial update and Marnie will provide more detail on our team's operational performance and our strategic progress. Diving in on slide three, we delivered on our key objectives in 2024, advancing our customer focus strategy. I'm very proud of our team who delivered excellent service to our customers, delivered on our financial commitments and advanced our regulatory and growth initiatives. In 2024, we made strong progress on our strategic growth plan with industry leading reliability while successfully serving the 19th consecutive year of increasing peak loads for Wyoming Electric, recently recording a new peak demand of 318 megawatts. We also invested over $800 million for the core energy needs of our customers and the communities across our growing footprints. We delivered on our earnings guidance, and we are well positioned to achieve our long-term EPS growth target. Even through challenges from mild weather and unplanned generation outages, our team's relentless focus on expense management put us right down the middle of the fairway with our guidance range. EPS growth was 4.3% in 2024, off our 2023 guidance midpoint of $3.75, And we expect to deliver approximately 5% EPS growth in 2025 off of 2024 as reflected in our earnings guidance for the year. Our financial position remains solid. During the year, we achieved our capitalization target, successfully completed our financing plan, and maintained our solid investment grade credit ratings. Our team also demonstrated notable progress managing our diversified multi-state service territory, continuing our cadence of approximately three rate reviews annually as we recover investments for our customers and the inflationary impacts on our cost to serve. In 2024, we implemented constructive settlements for Arkansas Gas and Iowa Gas. We also continued to make solid progress in our growth initiatives. In 2024, we added further clarity to our data center growth plan. and announced our service to support META's new AI data center beginning to ramp in 2026. And as we look to serve the growing needs of our customers, we obtained final approval for our clean energy plan for Colorado Electric, and we're finalizing plans for new electric generation for South Dakota Electric. In Wyoming, we energized the initial phase of our Ready Wyoming electric transmission expansion, a remarkable achievement in only two years after receiving approval for the project. We're excited about this project as it enhances our ability to cost-effectively deliver energy for our customers. It also opens up additional opportunities for strategic growth in Wyoming. And as we announced a couple of weeks ago, we increased our dividend by 4%, representing 55 consecutive years of dividend increases. Our updated financial outlook is provided on slide four. In 2025, we are guiding to earnings in a range of $4 to $4.20 per share. Looking ahead, We are confident in our strong capital forecast, incremental investment potential, and growth opportunities highlighted by increasing demand from our industry-leading data center customers. Building on our solid financial position and our growing data center demand, we have confidence in our long-term EPS growth target of 4% to 6%. Slide 5 displays our updated five-year capital investment plan for 2025 to 2029. Over our five-year plan period, we expect to invest $4.7 billion, an increase of approximately 10% or more than $400 million compared to the prior five-year plan. The increase is driven by clarity of timing and cost of projects, including various other customer-focused opportunities throughout the plan period. As a reminder, our previous and current forecasts include our Ready Wyoming transmission project, dispatchable generation resources in South Dakota, and renewable generation investments for our clean energy plan in Colorado. Our capital plan is designed to incorporate investments to support customer needs for safe, reliable, and cost-effective service and support long-term growth. As our team continues to identify and develop project opportunities, we fully expect to incorporate incremental investments into our plan. Moving to slide six, in addition to our capital plan, We are delivering earnings contribution through our data center demand, and we are optimistic about the upside potential. We have successfully served data centers and similar customers such as supercomputers in Cheyenne, Wyoming for more than a decade. Customers like Microsoft and soon to be Meta are served through our innovative tariff and service model that requires minimal capital investment. Through this unique tariff, our customers are served efficiently through market energy, providing us utility-like earnings in lieu of new generation investment. This is a triple win. First, it provides us earnings that are comparable to that of building generation to serve growing data center demand. Second, it protects our broader customer base from the risk of stranded assets. And third, the communities we serve benefit from local economic support and infrastructure enhancements that help grow the community and improve overall reliability and resiliency. Based upon our customers' consistent execution on load forecasts for more than a decade, and given future demand forecasts, we have a pipeline of over one gigawatt of data center demand within the next 10 years from existing customers. We expect to serve approximately 500 megawatts of this one gigawatt demand by the end of 2029 with minimal capital investment. We expect EPS contribution from data centers to more than double to 10% or more of total EPS by 2029, giving us further confidence in our EPS growth target. Data center demand above and beyond what we have included in our current five-year plan may drive additional infrastructure expansion in a more traditional utility service model, which would be incremental to our current capital plan. We also continue to evaluate opportunities in Colorado and South Dakota, which could bring future upside. Slide seven illustrates our ongoing strong customer growth. Over the last five years, customer count in our service jurisdictions has grown more than 1% annually on average, which is more than double the national average population growth of four-tenths of a percent. This organic growth is led by our Arkansas and Colorado service territories, which are nearly triple the average population growth for their respective states. We're also witnessing strong growth in our Western South Dakota service territory,