Black Hills Corp. Reports 2012 Fourth Quarter and Full Year Results and Announces 43rd Consecutive Annual Dividend Increase
Black Hills Corp. Reports 2012 Fourth Quarter and Full Year Results and
Announces 43rd Consecutive Annual Dividend Increase
Business Wire
RAPID CITY, S.D. -- January 31, 2013
Black Hills Corp. (NYSE: BKH) today announced 2012 fourth quarter and
full-year financial results and the 43rd consecutive annual increase in the
company’s dividend. Adjusted income from continuing operations, a non-GAAP
measure,* for the fourth quarter of 2012 was $30.0 million, or $0.68 per
share, compared to $19.7 million, or $0.46 per share, for the same period in
2011. For the 12 months ending Dec. 31, 2012, adjusted income from continuing
operations was $92.2 million, or $2.09 per share, compared to $67.7 million,
or $1.69 per share, for the same period in 2011.
The quarterly dividend was increased by $0.01 per common share to $0.38 per
share, equivalent to an annual increase of $0.04 and dividend rate of $1.52
per share. Common shareholders of record at the close of business on Feb. 15,
2013, will receive $0.38 per share, payable on March 1, 2013.
“Considering the warm winter temperatures and low natural gas prices
throughout 2012, we are very pleased with our earnings and operating results,”
said David R. Emery, chairman, chief executive officer and president of Black
Hills Corp. “Prudent management of our businesses, successful execution of our
continuous improvement and cost-reduction initiatives, and increased earnings
in most of our businesses largely offset the negative impacts of weather and
gas prices.”
Three Months Ended Dec. 31, Twelve Months Ended Dec.
31,
(in millions,
except per 2012 2011 2012 2011
share amounts)
Non-GAAP:*
Income from
continuing $ 30.0 $ 19.7 $ 92.2 $ 67.7
operations, as
adjusted
Income (loss)
from (0.2 ) 6.8 (7.0 ) 9.4
discontinued
operations
Net income, as
adjusted $ 29.8 $ 26.5 $ 85.2 $ 77.1
(Non-GAAP)
Earnings per
share from
continuing $ 0.68 $ 0.46 $ 2.09 $ 1.69
operations, as
adjusted,
diluted
Earnings per
share, — 0.16 (0.16 ) 0.23
discontinued
operations
Earnings per
share, as $ 0.68 $ 0.62 $ 1.93 $ 1.92
adjusted
(Non-GAAP)
GAAP:
Income from
continuing $ 30.9 $ 18.8 $ 88.5 $ 40.4
operations
Income (loss)
from (0.2 ) 6.8 (7.0 ) 9.4
discontinued
operations
Net income $ 30.8 $ 25.6 $ 81.5 $ 49.7
Earnings per
share from
continuing $ 0.70 $ 0.44 $ 2.01 $ 1.01
operations,
diluted
Income (loss)
from — 0.16 (0.16 ) 0.23
discontinued
operations
Earnings per $ 0.70 $ 0.60 $ 1.85 $ 1.24
share, diluted
* An accompanying schedule for the GAAP to Non-GAAP adjustment reconciliation
is provided below.
“Despite the financial challenges in the first quarter, the company delivered
adjusted earnings of $2.09 per share for 2012, up 24 percent compared to 2011,
and toward the upper end of our revised guidance range,” Emery said. “The
electric utilities and power generation businesses posted solid earnings
growth driven by the significant investments in our new power plant complex in
Pueblo, Colo. The coal mining business also improved, with a $6.0 million
earnings increase year-over-year. The gas utilities performed very well
against the backdrop of warm winter temperatures, with solid operational
performance, including zero controllable outages during 2012.
“We are proud of our 130 years of service to our communities. We thank our
customers and employees for their ongoing partnership. During 2012, we
invested in our utility infrastructure and systems, improving the safe,
reliable and affordable service our communities and utility customers depend
on. We placed the Pueblo Airport Generating Station into service, completed
the Busch Ranch wind project, built two major electric transmission lines in
Colorado, and began development of the Cheyenne Prairie Generating Station.
Our employee team accomplished all of this safely, reducing reportable
accidents by 29 percent compared to 2011.
“We completed two major transactions in 2012 that reduced our company’s risk
profile, improved our credit metrics and reduced our future equity financing
needs. In February, we sold our energy marketing business, netting cash
proceeds of $166 million. In September, our oil and gas business captured
substantial value for shareholders by selling most of its Williston Basin oil
and gas assets for $228 million. We used the proceeds to redeem $225 million
of senior unsecured, 6.5 percent notes and will allow us to finance the
Cheyenne Prairie Generating Station without the issuance of additional equity.
“In October, two credit rating agencies improved their ratings outlook for
Black Hills Corp. from stable to positive. We believe the improved outlook
recognizes the strength of our future earnings and cash flow, as well as the
risk reduction and balance sheet benefits resulting from our two major sales
transactions.
“On Jan. 31, 2013, we announced an increase in our quarterly dividend for the
43rd consecutive year, doubling the amount of increase from the previous year.
Only two other electric or gas utility companies in the United States have a
longer history of annual dividend increases. We take great pride in this
record. It highlights the confidence we have in our business strategy,
well-defined growth plans, ability to increase earnings and employee team.
“We are excited about our future. We have strong growth opportunities in our
utilities and are encouraged by the potential of our Mancos Shale gas assets,
based on our test well results and other operators’ recent announcements. By
focusing on strong growth, a superior customer experience, and being a great
workplace, we will continue our track record of creating shareholder value for
years to come.”
Black Hills Corp. highlights for the fourth quarter and full year 2012, recent
regulatory filings, updates and other events include:
Utilities
* On Dec. 31, Colorado Electric suspended operations at its W.N. Clark
coal-fired power plant in Cañon City, Colo. On Aug. 31, Black Hills Power
suspended operations at its Ben French coal-fired power plant in Rapid
City, S.D. These plants, along with several other previously identified
plants, are planned for permanent retirement because of new state and
federal environmental regulations. The affected plants are listed in the
table below with their operations suspension date (if applicable) and
their ultimate retirement date (if identified):
Type Age of
of Plant
Plant Company Megawatts Plant Suspend Retirement (in
Date Date years)
Black Oct. 1, March 21,
Osage Hills 34.5 Coal 2010 2014 64
Power
Ben Black Aug. March 21,
French Hills 25.0 Coal 31, 2014 52
Power 2012
Neil Black March 21,
Simpson Hills 21.8 Coal NA 2014 43
I Power
W.N. Colorado Dec. Dec. 31,
Clark Electric 42.0 Coal 31, 2013 57
2012
Pueblo Colorado Dec. to be
Unit #5 Electric 9.0 Gas 31, determined 71
2012
Pueblo Colorado Dec. to be
Unit #6 Electric 20.0 Gas 31, determined 63
2012
Total MW 152.3
* On Dec. 17, Black Hills Power filed a request with the South Dakota Public
Utilities Commission seeking a 9.94 percent, or $13.7 million, increase in
annual electric revenues.
* On Dec. 17, Black Hills Power filed a request with the South Dakota Public
Utilities Commission to use a construction financing rider for Cheyenne
Prairie Generating Station in lieu of the traditional allowance for funds
used during construction. This rider request, filed under recently amended
state legislation, is a first in South Dakota. The rider will allow Black
Hills Power to earn and collect a rate of return during the construction
period on approximately a 40 percent share of the total project cost,
while also lowering the overall cost of the project to customers. On Jan.
17, 2013, the commission approved a stipulation with interim rates
effective April 1, 2013, subject to refund. The company anticipates a
final commission ruling about the construction financing rider during the
third quarter.
* On Oct. 30, Cheyenne Light and Black Hills Power received approval from
the Wyoming Public Service Commission to use a construction financing
rider for Cheyenne Prairie Generating Station in lieu of the traditional
allowance for funds used during construction. The rider allows Cheyenne
Light and Black Hills Power to earn and collect a rate of return during
the construction period on approximately a 60 percent share of the total
project cost, while also lowering the overall cost of the project to
customers.
* On Oct. 16, Colorado Electric’s 29 megawatt Busch Ranch wind project
commenced commercial operations. Colorado Electric’s share of the
project’s cost was approximately $25 million. On Sept. 18, the company
completed the sale of a 50 percent undivided ownership interest in the
project. On Jan. 30, 2013, Colorado Electric received approval
notification from the United States Treasury for an award letter grant in
the amount of $8.4 million for our share of the Busch Ranch wind project.
* On Sept. 27, Cheyenne Light and Black Hills Power received the final air
permit for the Cheyenne Prairie Generating Station, finalizing all
approvals and permits required for the new plant. The Wyoming Public
Service Commission previously approved the certificate of public
convenience and necessity authorizing the construction, operation and
maintenance of the new 132 megawatt, $237 million natural gas-fired
electric generating facility in Cheyenne, Wyo. The company has ordered all
major equipment for the project and commencement of construction is
expected this spring. Project costs for plant construction and associated
transmission are estimated at $222 million, with up to $15 million of
construction financing, for a total of $237 million.
* On July 30, Colorado Electric filed its electric resource plan with the
Colorado Public Utilities Commission. The company is seeking to develop
and own replacement capacity for the retirement of the coal-fired W.N.
Clark power plant, consistent with a previous commission order that had
mandated the plant be retired per the requirements of the Colorado Clean
Air – Clean Jobs Act. The commission dismissed the initial filing without
prejudice. It directed Colorado Electric to refile the resource plan and
address alternatives for not just the replacement capacity for its
coal-fired W.N. Clark power plant, but also for the retirement of the
aging natural gas-fired steam turbines at Pueblo Units 5 and 6. On review,
the commission confirmed Colorado Electric’s right to own the replacement
capacity for the W.N. Clark power plant and extended the date to refile
the resource plan to May 1, 2013.
* On June 18, the Wyoming Public Service Commission approved settlement
agreements increasing base rates for Cheyenne Light’s electric and natural
gas customers effective July 1. The PSC approved increases of $2.7 million
in annual electric revenue and $1.6 million in annual natural gas revenue.
The settlements included a return on equity of 9.6 percent and a capital
structure of 54 percent equity and 46 percent debt.
* On June 4, Colorado Gas filed a request with the Colorado Public Utilities
Commission for an increase in annual gas revenues to recover capital
investments and increased operation and maintenance expenses. The filing
was required by the commission as part of a 2008 rate case settlement. The
commission approved a $0.2 million revenue increase with new rates
effectives Dec. 10. The settlement included a return on equity of 9.6
percent and a capital structure of 50 percent equity and 50 percent debt.
* On Jan. 1, Colorado Electric’s new 180 megawatt power plant near Pueblo,
Colo. began commercial operations and started serving utility customers.
New rates for Colorado Electric reflecting the new power plant investment
were also implemented on Jan. 1. This plant was operational with
availability greater than 95 percent during 2012.
Non-Regulated Energy
* On Sept. 27, Oil and Gas sold approximately 85 percent of its Williston
Basin assets for net cash proceeds of approximately $228 million.
* In the third quarter, the company’s coal mining business commenced
operations under its revised mine plan. Mining operations moved to an area
with lower overburden ratios, which should reduce mining costs for the
next several years.
* In the second quarter, Oil and Gas recorded a $17.3 million after-tax,
non-cash ceiling test impairment to the book value of its crude oil and
natural gas properties, due to low natural gas prices.
* On Jan. 1, Black Hills Colorado IPP’s new $261 million, 200 megawatt power
plant near Pueblo, Colo., began commercial operations. Its output was sold
to affiliate Colorado Electric under a 20-year power purchase agreement.
This plant was operational with contract availability greater than 99
percent during 2012.
Corporate
* On Oct. 31, the company redeemed $225 million of senior unsecured, 6.5
percent notes scheduled to mature on May 15, 2013.
* In October, Standard & Poor’s Ratings Services and Moody’s Investors
Service changed their credit ratings outlook for Black Hills Corp. from
stable to positive.
* On June 24, the company extended for one year its $150 million term loan
at favorable terms.
* On Feb. 1, the company entered into a new $500 million corporate revolving
credit facility for five years at favorable terms.
Discontinued Operations
* On Feb. 29, the company sold the outstanding stock of its energy marketing
business, Enserco Energy Inc. Cash proceeds from the transaction were $166
million.
BLACK HILLS CORPORATION
CONSOLIDATED FINANCIAL RESULTS
(Minor differences may result due to rounding.)
(in millions) Three Months Ended Dec. 31, Twelve Months Ended Dec.
31,
2012 2011 2012 2011
Net income
(loss):
Utilities:
Electric ^(a) $ 14.1 $ 13.0 $ 51.6 $ 47.7
Gas 11.6 9.9 28.0 34.2
Total Utilities 25.7 22.9 79.6 81.9
Group
Non-regulated
Energy:
Power 5.4 0.9 21.3 3.0
generation
Coal mining 1.7 0.7 5.6 (0.4 )
Oil and gas — (1.2 ) (2.2 ) (1.7 )
^(b)
Total
Non-regulated 7.1 0.4 24.7 0.9
Energy Group
Corporate and
Eliminations (1.9 ) (4.7 ) (15.8 ) (42.4 )
^(a) (c) (d)
Income from
continuing 30.9 18.6 88.5 40.4
operations
Income (loss)
from
discontinued (0.2 ) 6.8 (7.0 ) 9.4
operations, net
of tax
Net income $ 30.7 $ 25.5 $ 81.5 $ 49.8
Financial results for the 12 months ended Dec. 31, 2011 include a $0.5
(a) million after-tax gain on sale to a related party which is eliminated
in consolidation.
Oil and Gas financial results for the three and 12 months ended Dec.
31, 2012 include an after-tax gain on sale of the Williston Basin
(b) assets of $1.2 million and $18.9 million, respectively. Oil and Gas
financial results for the 12 months ended Dec. 31, 2012 include a
non-cash after-tax ceiling test impairment of $17.3 million.
Financial results for the three and 12 months ended Dec. 31, 2012
include a non-cash after-tax gain related to mark-to-market adjustment
(c) on certain interest rate swaps of $3.1 million and $1.2 million
respectively, and the three and 12 months ended Dec. 31, 2011 include a
$0.9 million and a $27.3 million after-tax non-cash loss, respectively,
for those same interest rate swaps.
Financial results of our Energy Marketing segment have been classified
as discontinued operations in accordance with GAAP. When preparing this
reclassification, certain indirect corporate costs and inter-segment
interest expenses previously charged to our Energy Marketing segment
(d) could not be reclassified to discontinued operations and accordingly
have been presented within Corporate in the after-tax amounts of $0.7
million for the three months ended Dec. 31, 2011, and $0.6 million and
$2.2 million for the 12 months ended Dec. 31, 2012 and 2011,
respectively.
Three Months Ended Dec. 31, Twelve Months Ended Dec.
31,
2012 2011 2012 2011
Weighted
average common
shares
outstanding (in
thousands):
Basic 43,903 42,119 43,820 39,864
Diluted 44,214 42,341 44,073 40,081
Earnings per
share:
Basic -
Continuing $ 0.70 $ 0.45 $ 2.02 $ 1.01
Operations
Discontinued — 0.16 (0.16 ) 0.24
Operations
Total Basic
Earnings Per $ 0.70 $ 0.61 $ 1.86 $ 1.25
Share
Diluted -
Continuing $ 0.70 $ 0.44 $ 2.01 $ 1.01
Operations
Discontinued — 0.16 (0.16 ) 0.23
Operations
Total Diluted
Earnings Per $ 0.70 $ 0.60 $ 1.85 $ 1.24
Share
EARNINGS GUIDANCE
Black Hills reaffirms its guidance for 2013 earnings from continuing
operations, as adjusted, to be in the range of $2.20 to $2.40 per share as
most recently issued on Nov. 13, 2012.
CONFERENCE CALL AND WEBCAST
The company will host a live conference call and webcast at 11 a.m. EST on
Friday, Feb. 1, 2013, to discuss the company’s financial and operating
performance.
To access the live webcast and download a copy of the investor presentation,
go to the Black Hills website at www.blackhillscorp.com and click on “Webcast”
in the “Investor Relations” section. The presentation will be posted on the
website before the webcast. Listeners should allow at least five minutes for
registering and accessing the presentation. Those interested in asking a
question during the live broadcast or those without internet access can call
800-706-7749 if calling within the United States. International callers can
call 617-614-3474. All callers need to enter the pass code 30113710 when
prompted.
For those unable to listen to the live broadcast, a replay will be available
on the company’s website or by telephone through Friday, Feb. 15, 2013, at
888-286-8010 in the United States and at 617-801-6888 for international
callers. The replay pass code is 60073704.
USE OF NON-GAAP FINANCIAL MEASURE
As noted in this news release, in addition to presenting its earnings
information in conformity with Generally Accepted Accounting Principles, the
company has provided non-GAAP earnings data reflecting adjustments for special
items as specified in the GAAP to Non-GAAP adjustment reconciliation table
below. Income (loss) from continuing operations, as adjusted, and Net income
(loss), as adjusted, is defined as Income (loss) from continuing operations
and Net income (loss), adjusted for expenses and gains that the company
believes do not reflect the company’s core operating performance. The company
believes that non-GAAP financial measures are useful to investors because the
items excluded are not indicative of the company’s continuing operating
results. The company’s management uses these non-GAAP financial measures as an
indicator for planning and forecasting future periods. These non-GAAP measures
have limitations as analytical tools and should not be considered in isolation
or as a substitute for analysis of our results as reported under GAAP. Our
presentation of these Non-GAAP financial measures should not be construed as
an inference that our future results will be unaffected by other income and
expenses that are unusual, non-routine or non-recurring.
GAAP TO NON-GAAP ADJUSTMENT RECONCILIATION
Three Months Ended Dec. 31, Twelve Months Ended Dec. 31,
(In
millions,
except per 2012 2011 2012 2011
share
amounts)
(after-tax) Income EPS Income EPS Income EPS Income EPS
Income
(loss) from
continuing $ 30.9 $ 0.70 $ 18.8 $ 0.44 $ 88.5 $ 2.01 $ 40.4 $ 1.01
operations
(GAAP)
Adjustments,
after-tax:
Unrealized
(gain) loss
on certain (3.1 ) (0.07 ) 0.9 0.02 (1.2 ) (0.03 ) 27.3 0.68
interest
rate swaps
Asset
impairment - — — — — 17.3 0.39 — —
ceiling test
Gain on sale
of Williston (1.2 ) (0.03 ) — — (18.9 ) (0.43 ) — —
Basin assets
Incentive
compensation
- Williston 0.4 0.01 — — 2.6 0.06 — —
Basin assets
sale
Credit
facility fee — — — — 1.0 0.02 — —
write off
Make-whole
provision 3.0 0.07 — — 3.0 0.07 — —
payment
Rounding — — — — (0.1 ) — — —
Total (0.9 ) (0.02 ) 0.9 0.02 3.7 0.08 27.3 0.68
adjustments
Income
(loss) from
continuing 30.0 0.68 19.7 0.46 92.2 2.09 67.7 1.69
operations,
as adjusted
(Non-GAAP)
Income
(loss) from
discontinued (0.2 ) — 6.8 0.16 (7.0 ) (0.16 ) 9.4 0.23
operations,
net of tax
Net income
(loss) $ 29.8 $ 0.68 $ 26.5 $ 0.62 $ 85.2 $ 1.93 $ 77.1 $ 1.92
(Non-GAAP)
BUSINESS UNIT PERFORMANCE SUMMARY
Business Group highlights for the three months and 12 months ended Dec. 31,
2012, compared to the three months and 12 months ended Dec. 31, 2011, are
discussed below. The following business group and segment information does not
include certain inter-company eliminations or discontinued operations. Minor
differences in comparative amounts may result due to rounding. All amounts are
presented on a pre-tax basis unless otherwise indicated. Prior period
information has been revised to reclassify information related to discontinued
operations.
Utilities Group
Income from continuing operations for the Utilities Group for the three months
ended Dec. 31, 2012, was $25.7 million, compared to $22.9 million for the same
period in 2011 while income from continuing operations for the 12 months ended
Dec. 31, 2012, was $79.6 million, compared to $81.9 million in 2011.
Electric Utilities
Three Months Ended Increase Twelve Months Ended Increase
Dec. 31, (Decrease) Dec. 31, (Decrease)
2012 2011 2012 vs. 2012 2011 2012 vs.
2011 2011
(in millions)
Gross margin $ 91.8 $ 79.4 $ 12.4 $ 353.5 $ 304.0 $ 49.5
Operations
and 36.4 36.7 (0.3 ) 146.5 142.8 3.7
maintenance
Gain on sale
of operating — — — — (0.8 ) 0.8
assets
Depreciation
and 18.8 13.4 5.4 75.2 52.5 22.7
amortization
Operating 36.6 29.3 7.3 131.7 109.5 22.2
income
Interest (12.9 ) (9.2 ) (3.7 ) (51.0 ) (39.0 ) (12.0 )
expense, net
Other
(expense) (0.1 ) (0.1 ) — 1.2 0.5 0.7
income, net
Income tax
benefit (9.5 ) (6.9 ) (2.6 ) (30.3 ) (23.3 ) (7.0 )
(expense)
Income
(loss) from $ 14.1 $ 13.0 $ 1.1 $ 51.6 $ 47.7 $ 3.9
continuing
operations
Three Months Ended Dec. 31, Twelve Months Ended Dec.
31,
Operating 2012 2011 2012 2011
Statistics:
Retail sales - 1,122,604 1,133,960 4,598,080 4,590,800
MWh
Contracted
wholesale 90,648 92,962 340,036 349,520
sales - MWh
Off-system 481,751 534,620 1,652,949 1,788,005
sales - MWh
Total electric 1,695,003 1,761,542 6,591,065 6,728,325
sales - MWh
Total gas
sales - 1,478,517 1,575,334 4,261,788 4,813,607
Cheyenne Light
- Dth
Regulated
power plant
availability:
Coal-fired 95.6 % 90.1 % 90.8 % 91.3 %
plants ^(a)
Other plants 97.2 % 98.5 % 96.9 % 96.4 %
Total 96.4 % 93.2 % 93.9 % 93.1 %
availability
(a) 2011 reflects a major overhaul and an unplanned outage at the
PacifiCorp-operated Wyodak plant.
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Gross margin increased primarily due to a $9.1 million increase related to
rate adjustments that include a return on significant capital investments at
Colorado Electric and Cheyenne Light, a $2.1 million construction savings
incentive for Colorado Electric, a $0.8 million increase from the TCA, and a
$0.8 million increase in wholesale and transmission margins as a result of
increased prices. These are partially offset by a $0.9 million decrease for
off-system sales margins impacted by recognizing $0.7 million of deferred
margins upon settlement of Colorado Electric’s power marketing sharing
mechanism with the Colorado Public Utilities Commission in 2011 and $0.9
million from the 2012 expiration of a reserve capacity agreement with
PacifiCorp.
Operations and maintenance is consistent with the same period in the prior
year primarily due to costs associated with operating the new 180 megawatt
generating facility in Pueblo, Colo., and allocation of corporate costs driven
by an increased asset base in the Electric Utility, offset by a decrease in
off-system sales costs, which were higher in 2011 as a result of recognizing
$1.2 million of deferred off-system sales marketing costs in the fourth
quarter of 2011 upon settlement with the Colorado Public Utilities Commission.
Depreciation and amortization increased primarily due to a higher asset base
associated with the new 180 megawatt generating facility constructed in
Pueblo, Colo., and the capital lease assets associated with the 200 megawatt
generating facility providing capacity and energy from Colorado IPP.
Interest expense, net increased primarily due to debt associated with the
financing of the Pueblo generating facility for which interest was capitalized
during construction in 2011.
Income tax: The effective tax rate increased in 2012 due to a lower adjustment
for flow-through treatment related to a repairs deduction and a lower benefit
from AFUDC - equity than in the same period in the prior year.
Full Year 2012 Compared to Full Year 2011
Gross margin increased primarily due to a $36 million increase related to rate
adjustments that include a return on significant capital investments at
Colorado Electric, a $3.5 million increase from the TCA, a $4.4 million
increase from wholesale and transmission margins from increased pricing, a
$2.1 million construction savings incentive related to the new 180 megawatt
generating facility in Pueblo, Colo., a $1.6 million increase from an
Environmental Improvement Cost Recovery Adjustment rider at Black Hills
Power,partially offset by a decrease of $1.5 million from the expiration of a
reserve capacity agreement with PacifiCorp.
Operations and maintenance increased primarily due to the costs associated
with operating the new 180 megawatt generating facility in Pueblo, Colo.,
including increased corporate allocations, partially offset by a $2.1 million
reduction of major maintenance accruals related to the power plants announced
for retirement and cost reduction initiatives.
Gain on sale of operating assets in 2011 relates to the sale of assets to a
related party. The gain was eliminated in the consolidation.
Depreciation and amortization increased primarily due to a higher asset base
associated with the new 180 megawatt generating facility in Pueblo, Colo., and
the capital lease assets associated with the 200 megawatt generating facility
providing capacity and energy from Colorado IPP.
Interest expense, net increased primarily due to debt associated with
financing of the new 180 megawatt generating facility for which interest was
capitalized during construction in 2011.
Income tax: The effective tax rate increased due to a lower income tax true up
adjustment in 2012, while the prior year reflected an increased benefit for a
repairs deduction taken for tax purposes and the flow-through treatment of
such tax benefit.
Gas Utilities
Three Months Ended Increase Twelve Months Ended Increase
Dec. 31, (Decrease) Dec. 31, (Decrease)
2012 2011 2012 vs. 2012 2011 2012 vs.
2011 2011
(in millions)
Gross margin $ 59.0 $ 59.2 $ (0.2 ) $ 208.7 $ 222.6 $ (13.9 )
Operations
and 29.3 30.8 (1.5 ) 117.4 122.0 (4.6 )
maintenance
Depreciation
and 6.4 6.3 0.1 25.2 24.3 0.9
amortization
Operating 23.3 22.1 1.2 66.2 76.3 (10.1 )
income
Interest (6.3 ) (6.3 ) — (24.0 ) (26.0 ) 2.0
expense, net
Other
(expense) — — — 0.1 0.2 (0.1 )
income, net
Income tax (5.4 ) (5.9 ) 0.5 (14.3 ) (16.4 ) 2.1
(expense)
Income
(loss) from $ 11.6 $ 9.9 $ 1.7 $ 28.0 $ 34.2 $ (6.2 )
continuing
operations
Three Months Ended Dec. 31, Twelve Months Ended Dec. 31,
Operating 2012 2011 2012 2011
Statistics:
Total gas 15,939,040 15,805,353 47,358,505 55,764,154
sales - Dth
Total
transport 14,471,439 14,705,259 60,480,822 59,216,132
volumes - Dth
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Gross margin was comparable to the same period in the prior year reflecting a
$0.8 million increase from favorable weather in the fourth quarter of 2012
compared to the same period in the prior year and $0.8 million from improved
non-regulated margins. Also, $2.0 million of costs in 2012 were recorded as a
reduction of gross margin, while in 2011 these costs had been recorded in
operations and maintenance.
Operations and maintenance decreased primarily due to reduced bad debt expense
and cost reduction initiatives, partially offset by increased compensation and
benefits. Also, $2.0 million of costs that in 2011 had been recorded in
operations and maintenance were recorded as a reduction of gross margin in
2012.
Income tax: The effective tax rate for the fourth quarter of 2012 decreased
compared to the same period in the prior year, primarily as a result of a
favorable flow-through tax adjustment at Iowa Gas benefiting 2012.
Full Year 2012 Compared to Full Year 2011
Gross margin decreased primarily due to an $8.7 million impact from milder
weather compared to the same period in the prior year. Heating degree days in
2012 were 14 percent lower than the prior year and 13 percent lower than
normal. Also, $6.8 million of costs in 2012 were recorded as a reduction of
gross margin, while these costs in 2011 had been recorded in operations and
maintenance.
Operations and maintenance decreased primarily due to a reduction in bad debt
expense, partially offset by increased compensation and benefits. Also, $6.8
million of costs that in 2011 had been recorded in operations and maintenance
were recorded as a reduction of gross margin in 2012.
Interest expense, net decreased primarily due to lower interest rates and
decrease in inter-company debt and associated expenses.
Income tax: The effective tax rate increased as a result of an unfavorable
state tax true-up adjustment in 2012. Additionally, the 2011 period was
favorably impacted as a result of federal research and development credits and
a flow-through tax adjustment at Iowa Gas.
Non-Regulated Energy Group
Income from continuing operations from the Non-regulated Energy group for the
three months ended Dec. 31, 2012, was $7.1 million, compared to a loss from
continuing operations of $0.5 million for the same period in 2011. Income from
continuing operations from the Non-regulated Energy group for the 12 months
ended Dec. 31, 2012, was $24.7 million, compared to $0.9 million for the same
period in 2011.
Power Generation
Three Months Ended Increase Twelve Months Ended Increase
Dec. 31, (Decrease) Dec. 31, (Decrease)
2012 2011 2012 vs. 2012 2011 2012 vs.
2011 2011
(in millions)
Revenue $ 20.1 $ 8.2 $ 11.9 $ 79.4 $ 31.7 $ 47.7
Operations
and 7.5 3.7 3.8 30.0 16.5 13.5
maintenance
Depreciation
and 1.2 1.0 0.2 4.6 4.2 0.4
amortization
Operating 11.4 3.5 7.9 44.8 10.9 33.9
income
Interest (3.0 ) (1.9 ) (1.1 ) (14.8 ) (7.4 ) (7.4 )
expense, net
Other income
(expense), — (0.1 ) 0.1 — 1.1 (1.1 )
net
Income tax
benefit (3.0 ) (0.5 ) (2.5 ) (8.7 ) (1.6 ) (7.1 )
(expense)
Income
(loss) from $ 5.4 $ 0.9 $ 4.5 $ 21.3 $ 3.0 $ 18.3
continuing
operations
Three Months Ended Dec. 31, Twelve Months Ended Dec.
31,
Contracted Fleet
Power Plant 2012 2011 2012 2011
Availability
Gas-fired plants 99.6 % 97.0 % 99.4 % 98.4 %
Coal-fired plants 99.6 % 100.0 % 99.6 % 100.0 %
Total 99.6 % 98.1 % 99.4 % 99.0 %
availability
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Revenue increased due to the commencement of commercial operation of the new
200 megawatt generating facility in Pueblo, Colo., which began serving
customers on Jan. 1, 2012.
Operations and maintenance increased primarily due to the costs to operate our
new 200 megawatt generating facility in Pueblo, Colo., which began serving
customers on Jan. 1, 2012.
Depreciation and amortization was comparable to the prior year. The new
generating facility’s PPA to supply capacity and energy to Colorado Electric
is accounted for as a capital lease under GAAP; as such, depreciation expense
for the facility is recorded at Colorado Electric for segment reporting
purposes.
Interest expense, net increased primarily due to interest expense associated
with the financing of the Pueblo generating facility, which was capitalized
during construction in 2011, partially offset by lower inter-company debt.
Income tax: The effective tax rate for the fourth quarter of 2012 increased
compared to the same period in the prior year primarily due to a tax true-up
adjustment.
Full Year 2012 Compared to Full Year 2011
Revenue increased due to the commencement of commercial operation of our new
200 megawatt generating facility in Pueblo, Colo., which began serving
customers on Jan. 1, 2012.
Operations and maintenance increased primarily due to the costs to operate our
new 200 megawatt generating facility in Pueblo, Colo., which began serving
customers on Jan. 1, 2012.
Depreciation and amortization were comparable to the same period in the prior
year. The new generating facility’s PPA to supply capacity and energy to
Colorado Electric is accounted for as a capital lease under GAAP;as such,
depreciation expense for the facility is recorded at Colorado Electric for
segment reporting purposes.
Interest expense, net increased primarily due to interest expense associated
with the financing of the Pueblo generating facility, which was capitalized
during construction in 2011, partially offset by lower inter-company debt.
Other income (expense), net included a gain on sale of ownership interest in
the partnership that held the Idaho generating facilities in 2011.
Income tax: The effective tax rate in 2012 was favorably impacted by a state
tax true-up that included certain research and development tax credits.
Coal Mining
Three Months Ended Increase Twelve Months Ended Increase
Dec. 31, (Decrease) Dec. 31, (Decrease)
2012 2011 2012 vs. 2012 2011 2012 vs.
2011 2011
(in millions)
Revenue $ 15.0 $ 18.0 $ (3.0 ) $ 57.8 $ 66.9 $ (9.1 )
Operations
and 10.4 14.9 (4.5 ) 42.6 56.6 (14.0 )
maintenance
Depreciation,
depletion and 3.5 4.3 (0.8 ) 13.1 18.7 (5.6 )
amortization
Operating 1.1 (1.2 ) 2.3 2.2 (8.4 ) 10.6
income (loss)
Interest
(expense) (0.2 ) 1.0 (1.2 ) 0.9 3.9 (3.0 )
income, net
Other income 0.5 0.5 — 2.6 2.2 0.4
(expense)
Income tax
benefit 0.3 0.3 — (0.1 ) 1.9 (2.0 )
(expense)
Income (loss)
from $ 1.7 $ 0.7 $ 1.0 $ 5.6 $ (0.4 ) $ 6.0
continuing
operations
Three Months Ended Dec. 31, Twelve Months Ended Dec.
31,
2012 2011 2012 2011
Operating (in thousands)
Statistics:
Tons of coal sold 1,055 1,538 4,246 5,692
Cubic yards of 1,580 4,473 8,329 14,735
overburden moved
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Revenue decreased primarily due to a 31 percent decrease in tons sold as a
result of the expiration of an unprofitable train load-out contract at Dec.
31, 2011 and a utility plant suspension, partially offset by a 21 percent
increase in average price per ton. The higher average sales price reflects the
impact of price escalators and adjustments in certain of our sales contracts.
In 2012, approximately 50 percent of our coal production was sold under
contracts that include price adjustments based on actual mining costs.
Operations and maintenance decreased primarily from reduced overburden moved
associated with lower sales volumes related to the expiration of an
unprofitable train load-out contract at Dec. 31, 2011. Additionally, a revised
mine plan resulted in fuel cost and headcount reductions.
Depreciation, depletion and amortization decreased primarily due to lower
equipment usage and lower depreciation of mine reclamation asset retirement
costs.
Interest (expense) income, net reflected repayment of an inter-company note
receivables and inter-company debt upon payment of a dividend to our parent.
Income tax: The effective tax rate decreased primarily due to tax benefits
generated by percentage depletion.
Full Year 2012 Compared to Full Year 2011
Revenue decreased primarily due to a 25 percent decrease in tons sold as a
result of the expiration of an unprofitable train load-out contract on Dec.
31, 2011, partially offset by increased tons sold to the Wyodak plant that
experienced an outage in 2011. Approximately 50 percent of our current coal
production is sold under contracts that include price adjustments based on
actual mining cost increases.
Operations and maintenance decreased due to reduced overburden moved
associated with lower sales volumes related to the expiration of an
unprofitable train load-out contract on Dec. 31, 2011. Additionally, a revised
mine plan resulted in fuel cost and headcount reductions.
Depreciation, depletion and amortization decreased primarily due to lower
equipment usage and lower depreciation of mine reclamation asset retirement
costs.
Interest income, net decreased primarily due to a decrease in inter-company
notes receivable upon payment of a dividend to the parent.
Income tax: The low effective tax rate in 2012 was primarily due to the impact
of percentage completion and a tax return true-up,while 2011 was impacted by a
favorable research and development credit.
Oil and Gas
Three Months Ended Increase Twelve Months Ended Increase
Dec. 31, (Decrease) Dec. 31, (Decrease)
2012 2011 2012 vs. 2012 2011 2012 vs.
2011 2011
(in millions)
Revenue $ 12.1 $ 23.9 $ (11.8 ) $ 79.1 $ 79.8 $ (0.7 )
Operations
and 9.9 11.1 (1.2 ) 43.3 41.4 1.9
maintenance
Gain on sale
of operating (1.8 ) — (1.8 ) (29.1 ) — (29.1 )
assets
Depreciation,
depletion and 3.7 13.1 (9.4 ) 38.5 35.7 2.8
amortization
Impairment of
long-lived — — — 26.9 — 26.9
assets
Operating 0.3 (0.3 ) 0.6 (0.4 ) 2.7 (3.1 )
income
Interest (0.1 ) (1.7 ) 1.6 (3.9 ) (5.9 ) 2.0
expense, net
Other
(expense) — (0.2 ) 0.2 0.2 (0.2 ) 0.4
income, net
Income tax
benefit (0.2 ) 0.9 (1.1 ) 1.9 1.7 0.2
(expense),
net
Income (loss)
from $ — $ (1.2 ) $ 1.2 $ (2.2 ) $ (1.7 ) $ (0.5 )
continuing
operations
Three Months Ended Dec. 31, Percentage Twelve Months Ended Dec. 31, Percentage
Increase Increase
Operating 2012 2011 (Decrease) 2012 2011 (Decrease)
Statistics:
Bbls of
crude oil 74,709 148,422 (50 )% 559,971 451,823 24 %
sold
Mcf of
natural gas 1,567,104 2,261,960 (31 )% 8,686,191 8,526,420 2 %
sold
Gallons of 734,105 827,803 (11 )% 3,485,514 3,674,814 (5 )%
NGL sold
Mcf
equivalent 2,120,230 3,270,750 (35 )% 12,543,948 11,762,331 7 %
sales
Depletion $ 1.44 $ 3.73 (61 )% $ 2.87 $ 2.76 4 %
expense/Mcfe
Dec. 31, 2012 Dec. 31, 2011
Oil and Crude Natural Crude Natural
Gas Total Oil Gas Total Oil Gas Total
Proved
Reserves: (Mbbl) (MMcf) (MMcfe) (Mbbl) (MMcf) (MMcfe)
^(a)
Total
proved 4,116 55,985 80,683 6,223 95,904 133,242
reserves
Average
hedged $ 83.27 $ 3.33 $ 79.74 $ 4.29
price
Well-head
reserve $ 85.31 $ 2.24 $ 88.49 $ 3.59
prices
(a) Oil and gas reserve information is based on reports prepared by Cawley,
Gillespie & Associates, Inc. an independent consulting and engineering firm.
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Revenue decreased primarily due to a 50 percent decrease in crude oil volumes
sold, a 54 percent decrease in natural gas volumes sold partially due to a
natural production decline at our Mancos formation test wells completed in
late 2011 and early 2012, and a 7 percent decrease in the average hedged price
received for natural gas sales, partially offset by an 8 percent increase in
the average hedged price received for crude oil sales. Crude oil production
decreases reflect the sale of our Williston Basin assets.
Operations and maintenance decreased primarily as a result of decreased
production taxes related to lower revenue.
Gain on sale of operating assets represents a post-closing adjustment to the
gain on sale of our Williston Basin assets. We follow the full-cost method of
accounting for oil and gas activities, which typically does not allow for gain
on sale recognition unless such adjustments would significantly alter the
relationship between capitalized costs and proved reserves. The remainder of
the sales amount, not recognized as gain, reduced the full-cost pool and
should significantly decrease the future depreciation, depletion and
amortization rate.
Depreciation, depletion and amortization decreased primarily due to a lower
depletion rate per Mcfe resulting from the sale of our Williston Basin assets.
Interest expense, net decreased due to lower inter-company debt.
Income tax benefit (expense): The effective tax rate in the fourth quarter of
2012 was impacted by an unfavorable property related deferred income tax
true-up adjustment.
Full Year 2012 Compared to Full Year 2011
Revenue was comparable to prior year. Crude oil volumes sold increased 24
percent along with a 4 percent increase in the average price received for
crude oil sales, partially offset by a 5 percent decrease in natural gas and
NGL volumes sold and a 22 percent decrease in average price received for
natural gas. Crude oil production increases reflect volumes from new wells in
our drilling program in the Bakken shale formation prior to the sale of a
majority of those assets on Sept. 27, 2012.
Operations and maintenance increased primarily due to higher costs from
non-operated wells and higher compensation and benefit costs.
Gain on sale of operating assets represents the gain on the sale of our
Williston Basin assets. We follow the full-cost method of accounting for oil
and gas activities, which typically does not allow for gain on sale
recognition unless such adjustments would significantly alter the relationship
between capitalized costs and proved reserves. The remainder of the sale
amount not recognized as gain reduced the full-cost pool and should
significantly decrease the future depreciation, depletion and amortization
rate.
Depreciation, depletion and amortization increased primarily due to the
year-to-date impact from adjusting our expected 2012 reserves. This was caused
by commodity price reserve revisions, as well as higher cost reserves
associated with our remaining Bakken activities and a higher depletion rate
per Mcfe on higher volumes prior to the sale of most of our Bakken shale
formation assets.
Impairment of long-lived assets represents a write-down in the value of our
natural gas and crude oil properties driven by low natural gas prices in the
second quarter of 2012. The write-down reflected a 12-month average NYMEX
price of $3.15 per Mcf, adjusted to $2.66 per Mcf at the wellhead, for natural
gas, and $95.67 per barrel, adjusted to $85.36 per barrel at the wellhead, for
crude oil.
Interest expense, net decreased primarily due to decreased debt as a result of
the sale of the Williston Basin assets along with lower interest rates.
Income tax (expense) benefit: The effective tax rate for 2011 was positively
impacted by a research and development credit and the benefit generated by
percentage depletion had a lesser impact on the effective tax rate in 2012.
Corporate
Fourth Quarter 2012 Compared to Fourth Quarter 2011
Loss from continuing operations for the three months ended Dec. 31, 2012, was
$1.8 million compared to loss from continuing operations of $4.6 million for
the same period in the prior year. Results for the fourth quarter of 2012
reflect a $4.8 million non-cash unrealized mark-to-market gain related to
certain interest rate swaps compared to the fourth quarter of 2011, which
included a $1.4 million non-cash unrealized mark-to-market loss related to
these same interest rate swaps. Corporate results for 2012 include a $7.1
million make-whole penalty for early repayment of debt, while 2011 includes
$1.1 million of costs originally allocated to our Energy Marketing segment
which could not be reclassified to discontinued operations in accordance with
GAAP.
Full Year 2012 Compared to Full Year 2011
Loss from continuing operations for the 12 months ended Dec. 31, 2012, was
$15.8 million compared to a loss from continuing operations of $42.4 million
for the same period in the prior year. Results for the year ended Dec. 31,
2012 reflect a $1.9 million non-cash unrealized mark-to-market gain related to
certain interest rate swaps compared to 2011, which included a $42.0 million
non-cash unrealized mark-to-market loss related to these same interest rate
swaps. Corporate results for 2012 include a $7.1 million make-whole penalty
for early repayment of debt and $0.9 million in costs originally allocated to
our Energy Marketing segment which could not be reclassified to discontinued
operations in accordance with GAAP, while 2011 also includes $3.4 million of
costs originally allocated to our Energy Marketing segment and could not be
reclassified to discontinued operations in accordance with GAAP.
Discontinued Operations
On Feb. 29, 2012, we sold the outstanding stock of Enserco, our Energy
Marketing segment. The transaction was completed through a stock purchase
agreement and certain other ancillary agreements. Net cash proceeds on the
date of the sale were approximately $166.3 million, subject to final
post-closing adjustments. The proceeds represent $108.8 million received from
the buyer and $57.5 million cash retained from Enserco before closing.
Income (loss) from discontinued operations was $(7.0) million and $9.4 million
for the twelve months ended Dec. 31, 2012 and Dec. 31, 2011, respectively.
Results for 2012 include an after-tax loss on sale of $2.5 million.
Pursuant to the provisions of the Stock Purchase Agreement, the buyer
originally requested purchase price adjustments totaling $7.2 million. We
contested this proposed adjustment, reached a partial settlement and paid $1.4
million. If we do not reach a negotiated agreement with the buyer regarding
the remaining amount, resolution will occur through the dispute resolution
provision of the Stock Purchase Agreement.
ABOUT BLACK HILLS CORP.
Black Hills Corp. (NYSE: BKH) – a diversified energy company with a tradition
of exemplary service and a vision to be the energy partner of choice – is
based in Rapid City, S.D., with corporate offices in Denver and Papillion,
Neb. The company serves 765,000 natural gas and electric utility customers in
Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. The
company’s non-regulated businesses generate wholesale electricity, and produce
natural gas, crude oil and coal. Black Hills employees partner to produce
results that improve life with energy. More information is available at
www.blackhillscorp.com.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release includes “forward-looking statements” as defined by the
Securities and Exchange Commission, or SEC. We make these forward-looking
statements in reliance on the safe harbor protections provided under the
Private Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, included in this news release that address
activities, events or developments that we expect, believe or anticipate will
or may occur in the future are forward-looking statements. This includes,
without limitations, our 2013 earnings guidance. These forward-looking
statements are based on assumptions which we believe are reasonable based on
current expectations and projections about future events and industry
conditions and trends affecting our business. However, whether actual results
and developments will conform to our expectations and predictions is subject
to a number of risks and uncertainties that, among other things, could cause
actual results to differ materially from those contained in the
forward-looking statements, including without limitation, the risk factors
described in Item 1A of Part I of our 2011 Annual Report on Form 10-K filed
with the SEC, and other reports that we file with the SEC from time to time,
and the following:
* The accuracy of our assumptions on which our earnings guidance is based;
* Our ability to obtain adequate cost recovery for our utility operations
through regulatory proceedings and favorable rulings in periodic
applications to recover costs for fuel, transmission and purchased power
and the timing in which the new rates would go into effect;
* Our ability to complete our capital program in a cost-effective and timely
manner, including our ability to successfully develop our Mancos shale gas
reserves located in the San Juan and Piceance Basins;
* Our ability to provide accurate estimates of proved crude oil and gas
reserves and future production and associated costs;
* Our ability to successfully resolve the purchase price adjustments
relating to the sale of Enserco Energy Inc.; and
* Other factors discussed from time to time in our filings with the SEC.
New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time-to-time, and it is
not possible for us to predict all such factors, or the extent to which any
such factor or combination of factors may cause actual results to differ from
those contained in any forward-looking statement. We assume no obligation to
update publicly any such forward-looking statements, whether as a result of
new information, future events or otherwise.
Consolidating Income Statement
Electric Power
Three Months Electric Gas Power Coal Oil and Utility Generation Other Inter-
Ended Dec. Utilities Utilities Generation Mining Gas Corporate Inter- Inter-Co Co Total
31, 2012 Co Lease Lease Eliminations
Elim* Elim*
(in millions)
Revenue $ 158.8 $ 139.7 $ 1.0 $ 7.3 $ 12.1 $ — $ — $ — $ — $ 318.9
Inter-company 4.3 — 19.1 7.7 — 52.5 — 0.4 (84.0 ) —
revenue
Fuel,
purchased
power and 71.3 80.7 — — — — 0.8 — (29.0 ) 123.9
cost of gas
sold
Gross Margin 91.8 59.0 20.1 15.0 12.1 52.5 (0.8 ) 0.4 (55.0 ) 195.0
Operations
and 36.4 29.3 7.5 10.4 10.0 43.9 — — (49.1 ) 88.4
maintenance
Gain on sale
of operating — — — — (1.8 ) — — — — (1.8 )
asset
Depreciation,
depletion and 18.8 6.4 1.2 3.5 3.7 2.9 (3.3 ) 2.9 (2.9 ) 33.2
amortization
Operating 36.6 23.3 11.4 1.1 0.3 5.7 2.4 (2.5 ) (3.1 ) 75.3
income (loss)
Interest (14.3 ) (6.6 ) (3.1 ) (0.2 ) (0.7 ) (28.7 ) — — 22.1 (31.5 )
expense, net
Interest rate
swaps - — — — — — 4.8 — — — 4.8
unrealized
(loss) gain
Interest 1.4 0.3 0.1 — 0.6 16.7 — — (18.6 ) 0.5
income
Other income — — — 0.6 — 18.5 — — (18.8 ) 0.2
(expense)
Income tax
benefit (9.5 ) (5.4 ) (3.0 ) 0.3 (0.2 ) (0.5 ) (0.9 ) 0.9 — (18.3 )
(expense)
Income (loss)
from $ 14.1 $ 11.6 $ 5.4 $ 1.7 $ — $ 16.5 $ 1.5 $ (1.6 ) $ (18.3 ) $ 30.9
continuing
operations
* The new generating facility constructed by Black Hills Colorado IPP at our
Pueblo Airport Generation site which sells energy and capacity under a 20-year
PPA to Colorado Electric is accounted for as a capital lease. Therefore,
revenue and expenses of the Electric Utilities and Power Generation segments
reflect adjustments for lease accounting which are eliminated in
consolidations.
Consolidating Income Statement
Three Months Electric Gas Power Coal Oil and Inter-Co
Ended Dec. Utilities Utilities Generation Mining Gas Corporate Eliminations Total
31, 2011
(in millions)
Revenue $ 169.3 $ 151.7 $ 1.3 $ 9.7 $ 23.9 $ — $ — $ 356.0
Inter-company 3.5 — 6.9 8.3 — 50.2 (68.8 ) —
revenue
Fuel,
purchased
power and 93.4 92.6 — — — — (16.7 ) 169.3
cost of gas
sold
Gross Margin 79.4 59.2 8.2 18.0 23.9 50.1 (52.1 ) 186.7
Operations
and 36.7 30.9 3.7 14.9 11.1 45.2 (45.9 ) 96.4
maintenance
Gain on sale
of operating — — — — — — — —
assets
Depreciation,
depletion and 13.4 6.3 1.0 4.3 13.1 3.0 (2.9 ) 38.2
amortization
Operating 29.2 22.1 3.5 (1.1 ) (0.2 ) 2.0 (3.3 ) 52.1
income (loss)
Interest (13.2 ) (7.6 ) (2.3 ) — (1.7 ) (24.3 ) 26.8 (22.4 )
expense, net
Interest rate
swaps - — — — — — (1.4 ) — (1.4 )
unrealized
(loss) gain
Interest 4.1 1.3 0.4 1.0 — 17.5 (23.7 ) 0.5
income
Other income (0.1 ) — (0.1 ) 0.5 (0.2 ) 13.6 (13.6 ) 0.2
(expense)
Income tax
benefit (6.9 ) (5.9 ) (0.5 ) 0.3 0.9 1.8 — (10.3 )
(expense)
Income (loss)
from $ 13.0 $ 9.9 $ 0.9 $ 0.7 $ (1.2 ) $ 9.2 $ (13.8 ) $ 18.8
continuing
operations
Consolidating Income Statement
Electric Power
Twelve Months Electric Gas Power Coal Oil and Utility Generation Other Inter-
Ended Dec. Utilities Utilities Generation Mining Gas Corporate Inter-Co Inter-Co Co Total
31, 2012 Lease Lease Eliminations
Elim* Elim*
(in millions)
Revenue $ 610.7 $ 454.1 $ 4.2 $ 25.8 $ 79.1 $ — $ — $ — $ — $ 1,173.9
Inter-company 16.2 — 75.2 32.0 — 196.5 — 1.6 (321.5 ) —
revenue
Fuel,
purchased
power and 273.5 245.3 — — — — 3.2 — (115.0 ) 407.1
cost of gas
sold
Gross Margin 353.5 208.7 79.4 57.8 79.1 196.5 (3.2 ) 1.6 (206.5 ) 766.8
Operations
and 146.5 117.4 30.0 42.6 43.3 179.1 — — (188.1 ) 370.7
maintenance
Gain on sale
of operating — — — — (29.1 ) — — — — (29.1 )
asset
Depreciation,
depletion and 75.2 25.2 4.6 13.1 38.5 10.9 (13.0 ) 11.1 (10.9 ) 154.6
amortization
Impairment of
long-lived — — — — 26.9 — — — — 26.9
assets
Operating 131.7 66.2 44.8 2.2 (0.4 ) 6.5 9.8 (9.4 ) (7.6 ) 243.7
income (loss)
Interest (59.2 ) (26.7 ) (15.5 ) (0.2 ) (4.5 ) (92.7 ) — — 85.2 (113.6 )
expense, net
Interest rate
swaps - — — — — — 1.9 — — — 1.9
unrealized
(loss) gain
Interest 8.2 2.8 0.7 1.2 0.6 64.7 — — (76.1 ) 2.0
income
Other income 1.2 0.1 — 2.6 0.2 48.8 — — (49.9 ) 3.0
(expense)
Income tax
benefit (30.3 ) (14.3 ) (8.7 ) (0.1 ) 1.9 3.2 (3.6 ) 3.4 — (48.4 )
(expense)
Income (loss)
from $ 51.6 $ 28.0 $ 21.3 $ 5.6 $ (2.2 ) $ 32.3 $ 6.3 $ (6.0 ) $ (48.4 ) $ 88.5
continuing
operations
* The new generating facility constructed by Black Hills Colorado IPP at our
Pueblo Airport Generation site which sells energy and capacity under a 20-year
PPA to Colorado Electric is accounted for as a capital lease. Therefore,
revenue and expenses of the Electric Utilities and Power Generation segments
reflect adjustments for lease accounting which are eliminated in
consolidations.
Consolidating Income Statement
Twelve Months Electric Gas Power Coal Oil and
Ended Dec. Utilities Utilities Generation Mining Gas Corporate Eliminations Total
31, 2011
(in millions)
Revenue $ 600.9 $ 554.6 $ 4.1 $ 32.8 $ 79.8 $ — $ — $ 1,272.2
Inter-company 13.4 — 27.6 34.1 — 192.3 (267.3 ) —
revenue
Fuel,
purchased
power and 310.4 332.0 — — — 0.1 (67.4 ) 575.0
cost of gas
sold
Gross Margin 304.0 222.6 31.7 66.9 79.8 192.2 (199.9 ) 697.2
Operations
and 142.8 122.0 16.5 56.6 41.4 170.9 (174.9 ) 375.4
maintenance
Gain on sale
of operating (0.8 ) — — — — — 0.8 —
assets
Depreciation,
depletion and 52.5 24.3 4.2 18.7 35.7 11.2 (11.0 ) 135.6
amortization
Operating 109.5 76.3 10.9 (8.4 ) 2.7 10.0 (14.8 ) 186.2
income (loss)
Interest (53.8 ) (31.6 ) (8.9 ) — (5.9 ) (93.3 ) 102.1 (91.4 )
expense, net
Interest rate
swaps - — — — — — (42.0 ) — (42.0 )
unrealized
(loss) gain
Interest 14.8 5.6 1.5 3.9 — 64.3 (88.1 ) 2.0
income
Other income 0.5 0.2 1.1 2.2 (0.2 ) 46.5 (46.6 ) 3.7
(expense)
Income tax
benefit (23.3 ) (16.4 ) (1.6 ) 1.9 1.7 19.3 0.3 (18.2 )
(expense)
Income (loss)
from $ 47.7 $ 34.2 $ 3.0 $ (0.4 ) $ (1.7 ) $ 4.8 $ (47.1 ) $ 40.4
continuing
operations
Contact:
Black Hills Corp.
Jerome Nichols, 605-721-1171
or
Media Relations Line, 866-243-9002
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