# Black Hills Corp: Form 10-Q for the period ended Sep 30, 2023

- Company: [Black Hills Corp](/companies/bkh.md) (CIK 1130464)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 16:15 ET
- Period: 2023-09-30
- Accession: 0000950170-23-057904
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1130464/000095017023057904/bkh-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1130464/000095017023057904/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $400.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $1.72bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $97.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $336.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $7.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $15.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $45.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $182.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.67 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $2.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.67 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $2.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 67,389,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 66,725,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $756.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $421.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $125.4m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2023-09-30 | $594.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.24bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $9.93bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $1.60bn | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $3.80bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $1.13bn | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2023-09-30 | $0 | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $3.17bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,184 characters.

The following discussions should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2022 Form 10-K.

### Executive Summary

We are a customer-focused energy solutions provider with a mission of *Improving Life with Energy* for more than 1.3 million customers and 800+ communities we serve. Our vision to be the *Energy Partner of Choice* directs our strategy to invest in the safety, sustainability and growth of our eight-state service territory, including Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming, and to meet our essential objective of providing safe, reliable and cost-effective electricity and natural gas.

We conduct our business operations through two operating segments: Electric Utilities and Gas Utilities. Certain unallocated corporate expenses that support our operating segments are presented as Corporate and Other. We conduct our utility operations under the name Black Hills Energy predominantly in rural areas of the Rocky Mountains and Midwestern states. We consider ourself a domestic electric and natural gas utility company.

We have provided energy and served customers for 139 years, since the 1883 gold rush days in Deadwood, South Dakota. Throughout our history, the common thread that unites the past to the present is our commitment to serve our customers and communities. By being responsive and service focused, we can help our customers and communities thrive while meeting rapidly changing customer expectations.

### Recent Developments

### Business Segment Recent Developments

#### Electric Utilities

- See Note 2 of the Condensed Notes to Consolidated Financial Statements for recent rate review activity for Wyoming Electric.
- On July 31, 2023, Colorado Electric issued a request for proposals for 400 MW of new resources to be in service between 2026 and 2029 to achieve objectives in its Clean Energy Plan. In March 2023, the CPUC approved a unanimous settlement for Colorado Electric's Clean Energy Plan filed May 25, 2022. The Clean Energy Plan supports Colorado Electric's voluntary election to reduce carbon emissions 80% from 2005 levels by 2030. Final bids were due in October 2023, and we received a diverse project proposal response. We are evaluating bids and expect a publicly available bid summary in the 30-day report on November 19, 2023, and will select finalists as part of a 120-day report to be submitted to the CPUC during the first quarter of 2024.
- On July 24, 2023, Wyoming Electric set a new all-time and summer peak load of 312 MW, surpassing the previous peak of 294 MW set on July 21, 2022.

#### Gas Utilities

- See Note 2 of the Condensed Notes to Consolidated Financial Statements for recent rate review activity for Colorado Gas, RMNG and Wyoming Gas.

#### Corporate and Other

- See Note 3 of the Condensed Notes to Consolidated Financial Statements for recent updates regarding the GT Resources, LLC v. Black Hills Corporation lawsuit.
- See Note 5 of the Condensed Notes to Consolidated Financial Statements for information regarding our March 7, 2023 and September 15, 2023 debt offerings.
- See Note 5 of the Condensed Notes to Consolidated Financial Statements for information regarding our new shelf registration with the SEC and our new Equity Distribution Sales Agreement.

### Results of Operations

Certain lines of business in which we operate are highly seasonal, and revenue from, and certain expenses for, such operations may fluctuate significantly among quarterly periods. Demand for electricity and natural gas is sensitive to seasonal cooling, heating and industrial load requirements. In particular, the normal peak usage season for our Electric Utilities is June through August while the normal peak usage season for our Gas Utilities is November through March. Significant earnings variances can be expected between the Gas Utilities segment’s peak and off-peak seasons. Due to this seasonal nature, our results of operations for the three and nine months ended September 30, 2023 and 2022, and our financial condition as of September 30, 2023 and December 31, 2022, are not necessarily indicative of the results of operations and financial condition to be expected as of or for any other period or for the entire year.

Segment information does not include inter-segment eliminations and all amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences in amounts may result due to rounding.

### Consolidated Summary and Overview

*(in thousands, except per share amounts)*

| Operating income (loss): | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Electric Utilities | $83,016 | $69,483 | $190,695 | $165,455 |
| Gas Utilities | 15,400 | 10,583 | 147,750 | 162,318 |
| Corporate and Other | (645) | (587) | (2,275) | (2,552) |
| Operating income | 97,771 | 79,479 | 336,170 | 325,221 |
| Interest expense, net | (40,998) | (40,019) | (126,023) | (117,328) |
| Other income (expense), net | (647) | 464 | (1,513) | 2,731 |
| Income tax (expense) | (7,366) | (2,090) | (15,950) | (15,920) |
| Net income | 48,760 | 37,834 | 192,684 | 194,704 |
| Net income attributable to non-controlling interest | (3,377) | (2,861) | (10,164) | (8,790) |
| Net income available for common stock | $45,383 | $34,973 | $182,520 | $185,914 |
| Total earnings per share of common stock, Diluted | $0.67 | $0.54 | $2.74 | $2.86 |

#### Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022:

The variance to the prior year included the following:

- Electric Utilities' operating income increased $13.5 million primarily due to a one-time recovery from our business interruption insurance related to the 2021 Wygen I unplanned outage, a gain on a strategic sale of land in Wyoming to a customer to support continued load growth, and new rates and rider recovery, partially offset by unfavorable weather;
- Gas Utilities' operating income increased $4.8 million primarily due to new rates and rider recovery and lower operating expenses;
- Income tax expense increased $5.3 million driven by higher pre-tax income and an effective tax rate of 13.1% compared to 5.2% for the same period in 2022. The higher effective tax rate was primarily due to decreased tax benefits from various current and prior year state rate changes.

#### Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022:

The variance to the prior year included the following:

- Electric Utilities’ operating income increased $25.2 million primarily due to new rates and rider recovery, increased transmission services revenue and off-system excess energy sales, a one-time gain on the planned sale of Northern Iowa Windpower assets, a gain on a strategic sale of land in Wyoming to a customer to support continued load growth, and a one-time recovery from our business interruption insurance related to the 2021 Wygen I unplanned outage partially offset by higher employee-related expenses and unfavorable weather;
- Gas Utilities’ operating income decreased $14.6 million primarily due to higher employee-related expenses, a prior year one-time true-up of carrying costs accrued on Winter Storm Uri regulatory assets and unfavorable mark-to-market adjustments on wholesale commodity contracts partially offset by new rates and rider recovery and retail customer growth and demand;
- Interest expense, net increased $8.7 million due to higher interest rates partially offset by increased interest income on higher cash and cash equivalents balances; and
- Other expense, net increased $4.2 million primarily due to higher non-service benefit plan costs driven by higher discount rates and higher costs for our non-qualified benefit plans driven by market performance.

### Segment Operating Results

A discussion of operating results from our business segments follows.

### Non-GAAP Financial Measures

The following discussion includes financial information prepared in accordance with GAAP, as well as another financial measure, Electric and Gas Utility margin, that is considered a “non-GAAP financial measure.” Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Electric and Gas Utility margin (revenue less cost of sales) is a non-GAAP financial measure due to the exclusion of operation and maintenance expenses, depreciation and amortization expenses, and property and production taxes from the measure.

Electric Utility margin is calculated as operating revenue less cost of fuel and purchased power. Gas Utility margin is calculated as operating revenue less cost of natural gas sold. Our Electric and Gas Utility margin is impacted by the fluctuations in power and natural gas purchases and other fuel supply costs. However, while these fluctuating costs impact Electric and Gas Utility margin as a percentage of revenue, they only impact total Electric and Gas Utility margin if the costs cannot be passed through to our customers.

Our Electric and Gas Utility margin measure may not be comparable to other companies’ Electric and Gas Utility margin measures. Furthermore, this measure is not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

### Electric Utilities

Operating results for the Electric Utilities were as follows (in thousands):

| Revenue: | Three Months Ended September 30, 2023 | 2022 | Variance | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Electric - regulated | $221,715 | $245,269 | $(23,554) | $611,238 | $635,190 | $(23,952) |
| Other - non-regulated | 15,614 | 13,401 | 2,213 | 37,873 | 34,396 | 3,477 |
| Total revenue | 237,329 | 258,669 | (21,340) | 649,111 | 669,586 | (20,475) |
| Cost of fuel and purchased power: |  |  |  |  |  |  |
| Electric - regulated | 54,974 | 84,309 | (29,335) | 145,662 | 191,511 | (45,849) |
| Other - non-regulated | 454 | 1,644 | (1,190) | 1,586 | 3,484 | (1,898) |
| Total cost of fuel and purchased power | 55,428 | 85,953 | (30,525) | 147,248 | 194,995 | (47,747) |
| Electric Utility margin (non-GAAP) | 181,901 | 172,716 | 9,185 | 501,863 | 474,591 | 27,272 |
| Operations and maintenance | 63,114 | 68,896 | (5,782) | 204,487 | 207,565 | (3,078) |
| Depreciation and amortization | 35,771 | 34,337 | 1,434 | 106,681 | 101,571 | 5,110 |
|  | 98,885 | 103,233 | (4,348) | 311,168 | 309,136 | 2,032 |
| Operating income | $83,016 | $69,483 | $13,533 | $190,695 | $165,455 | $25,240 |

30

#### Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022:

Electric Utility margin increased as a result of the following:

*(in millions)*

|  |  |
| --- | ---: |
| New rates and rider recovery | $5.7 |
| Wygen I revenue recovery under business interruption insurance (a) | 5.0 |
| Weather | (2.3) |
| Other | 0.8 |
|  | $9.2 |

(a) In 2021, Wygen I experienced an unplanned outage which resulted in lost revenue. A claim for these losses was submitted under our business interruption insurance policy. During the third quarter of 2023, we recovered $5.0 million from our business interruption insurance which was recognized as Revenue. See Note 3 of the Condensed Notes to Consolidated Financial Statements for further information.

Operations and maintenance expense decreased primarily due to a $3.9 million gain on a strategic sale of land in Wyoming to a customer to support continued load growth.

Depreciation and amortization increased primarily due to a higher asset base driven by current year and prior year capital expenditures.

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022:

Electric Utility margin increased as a result of the following:

*(in millions)*

|  |  |
| --- | ---: |
| New rates and rider recovery | $15.9 |
| Wygen I revenue recovery under business interruption insurance (a) | 5.0 |
| Integrated Generation (b) | 5.0 |
| Transmission services | 2.8 |
| Off-system excess energy sales | 1.1 |
| Weather | (4.5) |
| Other | 2.0 |
|  | $27.3 |

(a) In 2021, Wygen I experienced an unplanned outage which resulted in lost revenue. A claim for these losses was submitted under our business interruption insurance policy. During the third quarter of 2023, we recovered $5.0 million from our business interruption insurance which was recognized as Revenue. See Note 3 of the Condensed Notes to Consolidated Financial Statements for further information.

(b) Primarily driven by favorable mining volumes due to a prior year planned outage, mining contract pricing and increased Black Hills Colorado IPP fired-engine hours.

Operations and maintenance expense decreased primarily due to a one-time $7.7 million gain on the planned sale of Northern Iowa Windpower assets and a $3.9 million gain on a strategic sale of land in Wyoming to a customer to support continued load growth partially offset by $5.5 million of higher employee-related expenses and $3.5 million of higher mining and generation expenses driven by planned outages, higher fuel costs and higher materials costs.

Depreciation and amortization increased primarily due to a higher asset base driven by current year and prior year capital expenditures.

#### Operating Statistics

|  | Revenue (in thousands) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | Quantities Sold (MWh) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Residential | $63,107 | $72,115 | $170,279 | $187,217 | 393,830 | 421,782 | 1,090,579 | 1,137,139 |
| Commercial | 69,508 | 77,314 | 195,110 | 210,423 | 567,111 | 581,239 | 1,576,141 | 1,581,487 |
| Industrial | 42,988 | 47,090 | 116,455 | 120,688 | 553,481 | 483,223 | 1,511,569 | 1,411,919 |
| Municipal | 4,731 | 6,093 | 13,202 | 15,660 | 42,782 | 46,745 | 116,118 | 122,290 |
| Subtotal Retail Revenue - Electric | 180,334 | 202,612 | 495,046 | 533,989 | 1,557,204 | 1,532,989 | 4,294,407 | 4,252,835 |
| Contract Wholesale | 6,839 | 8,378 | 15,449 | 18,639 | 140,547 | 160,070 | 403,682 | 492,922 |
| Off-system/Power Marketing Wholesale | 9,580 | 16,769 | 31,663 | 32,590 | 138,438 | 131,469 | 518,552 | 436,335 |
| Other (a) | 24,962 | 17,509 | 69,080 | 49,972 | - | - | - | - |
| Total Regulated | 221,715 | 245,269 | 611,238 | 635,190 | 1,836,189 | 1,824,528 | 5,216,641 | 5,182,092 |
| Non-Regulated (b) | 15,614 | 13,401 | 37,873 | 34,396 | 25,369 | 59,745 | 102,563 | 221,609 |
| Total Revenue and Quantities Sold | $237,329 | $258,669 | $649,111 | $669,586 | 1,861,558 | 1,884,273 | 5,319,204 | 5,403,701 |
| Other Uses, Losses or Generation, net (c) |  |  |  |  | 97,709 | 125,613 | 345,642 | 337,222 |
| Total Energy |  |  |  |  | 1,959,267 | 2,009,886 | 5,664,846 | 5,740,923 |

(a) Primarily related to transmission revenues from the Common Use System.

(b) Includes Integrated Generation and non-regulated services to our retail customers under the Service Guard Comfort Plan and Tech Services.

(c) Includes company uses and line losses.

|  | Revenue (in thousands) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | Quantities Sold (MWh) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Colorado Electric | $80,771 | $96,380 | $216,904 | $243,022 | 653,166 | 647,532 | 1,794,464 | 1,836,010 |
| South Dakota Electric | 83,024 | 94,281 | 240,588 | 249,073 | 622,670 | 684,059 | 1,876,714 | 1,928,454 |
| Wyoming Electric | 58,429 | 55,058 | 155,039 | 144,293 | 560,353 | 492,938 | 1,545,463 | 1,417,629 |
| Integrated Generation | 15,105 | 12,950 | 36,580 | 33,198 | 25,369 | 59,744 | 102,563 | 221,608 |
| Total Revenue and Quantities Sold | $237,329 | $258,669 | $649,111 | $669,586 | 1,861,558 | 1,884,273 | 5,319,204 | 5,403,701 |

| Quantities Generated and Purchased by Fuel Type (MWh) Generated: | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Coal | 704,227 | 736,181 | 2,000,126 | 1,989,057 |
| Natural Gas and Oil | 540,927 | 457,790 | 1,493,230 | 1,016,369 |
| Wind | 138,527 | 143,278 | 519,873 | 641,302 |
| Total Generated | 1,383,681 | 1,337,249 | 4,013,229 | 3,646,728 |
| Purchased: |  |  |  |  |
| Coal, Natural Gas, Oil and Other Market Purchases | 459,141 | 609,699 | 1,369,994 | 1,805,904 |
| Wind and Solar | 116,445 | 62,938 | 281,623 | 288,291 |
| Total Purchased | 575,586 | 672,637 | 1,651,617 | 2,094,195 |
| Total Generated and Purchased | 1,959,267 | 2,009,886 | 5,664,846 | 5,740,923 |

32

| Quantities Generated and Purchased (MWh) Generated: | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Colorado Electric | 211,420 | 127,090 | 491,995 | 324,638 |
| South Dakota Electric | 489,160 | 510,443 | 1,500,696 | 1,333,984 |
| Wyoming Electric | 221,999 | 236,761 | 667,730 | 667,079 |
| Integrated Generation | 461,102 | 462,955 | 1,352,808 | 1,321,027 |
| Total Generated | 1,383,681 | 1,337,249 | 4,013,229 | 3,646,728 |
| Purchased: |  |  |  |  |
| Colorado Electric | 116,234 | 251,076 | 442,216 | 807,442 |
| South Dakota Electric | 177,341 | 221,872 | 438,646 | 667,560 |
| Wyoming Electric | 267,583 | 174,946 | 723,542 | 551,683 |
| Integrated Generation | 14,428 | 24,743 | 47,213 | 67,510 |
| Total Purchased | 575,586 | 672,637 | 1,651,617 | 2,094,195 |
| Total Generated and Purchased | 1,959,267 | 2,009,886 | 5,664,846 | 5,740,923 |

| Degree Days Heating Degree Days: | Three Months Ended September 30, 2023 Actual | Variance from Normal | 2022 Actual | Variance from Normal | Nine Months Ended September 30, 2023 Actual | Variance from Normal | 2022 Actual | Variance from Normal |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Colorado Electric | 26 | (42)% | 25 | (66)% | 3,365 | 5% | 3,296 | 4% |
| South Dakota Electric | 140 | (15)% | 91 | (57)% | 4,621 | 2% | 4,560 | ---% |
| Wyoming Electric | 152 | (12)% | 119 | (60)% | 4,534 | 4% | 4,410 | (2)% |
| Combined (a) | 91 | (19)% | 66 | (60)% | 4,031 | 4% | 3,952 | 1% |
| Cooling Degree Days: |  |  |  |  |  |  |  |  |
| Colorado Electric | 909 | 6% | 1,028 | 28% | 1,040 | (10)% | 1,361 | 27% |
| South Dakota Electric | 460 | (11)% | 707 | 38% | 496 | (21)% | 814 | 35% |
| Wyoming Electric | 315 | (20)% | 580 | 72% | 329 | (30)% | 701 | 77% |
| Combined (a) | 635 | (2)% | 828 | 36% | 710 | (15)% | 1,041 | 34% |

(a) Degree days are calculated based on a weighted average of total customers by state.

| Contracted generating facilities availability by fuel type (a) | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Coal (b) | 96.3% | 96.5% | 93.7% | 89.7% |
| Natural gas and diesel oil | 94.2% | 97.0% | 94.0% | 95.8% |
| Wind | 93.4% | 94.4% | 93.4% | 94.6% |
| Total Availability | 94.7% | 96.4% | 93.8% | 94.0% |
| Wind Capacity Factor | 31.3% | 22.9% | 37.9% | 34.7% |

(a) Availability and Wind Capacity Factor are calculated using a weighted average based on capacity of our generating fleet.

(b) 2022 included planned outages at Neil Simpson II and Wyodak Plant.

### Gas Utilities

Operating results for the Gas Utilities were as follows (in thousands):

| Revenue: | Three Months Ended September 30, 2023 | 2022 | Variance | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Natural gas - regulated | $159,481 | $192,104 | $(32,623) | $1,041,017 | $1,046,910 | $(5,893) |
| Other - non-regulated | 14,804 | 16,184 | (1,380) | 62,904 | 56,938 | 5,966 |
| Total revenue | 174,285 | 208,288 | (34,003) | 1,103,921 | 1,103,849 | 73 |
| Cost of natural gas sold: |  |  |  |  |  |  |
| Natural gas - regulated | 43,329 | 77,590 | (34,261) | 578,860 | 588,007 | (9,147) |
| Other - non-regulated | 3,599 | 5,187 | (1,588) | 23,989 | 11,242 | 12,747 |
| Total cost of natural gas sold | 46,928 | 82,778 | (35,850) | 602,849 | 599,249 | 3,600 |
| Gas Utility margin (non-GAAP) | 127,357 | 125,510 | 1,847 | 501,072 | 504,600 | (3,528) |
| Operations and maintenance | 82,922 | 85,311 | (2,389) | 268,972 | 255,441 | 13,531 |
| Depreciation and amortization | 29,035 | 29,616 | (581) | 84,350 | 86,841 | (2,491) |
|  | 111,957 | 114,927 | (2,970) | 353,322 | 342,282 | 11,040 |
| Operating income | $15,400 | $10,583 | $4,817 | 147,750 | $162,318 | $(14,568) |

#### Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022:

Gas Utility margin increased as a result of the following:

*(in millions)*

|  |  |
| --- | ---: |
| New rates and rider recovery | $2.6 |
| Retail customer growth and demand | 2.4 |
| Mark-to-market on non-utility natural gas commodity contracts | (1.4) |
| Weather | (1.3) |
| Other | (0.5) |
|  | $1.8 |

Operations and maintenance expense decreased primarily due to $2.4 million of lower outside services expenses.

Depreciation and amortization was comparable to the same period in the prior year.

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022:

Gas Utility margin decreased as a result of the following:

*(in millions)*

|  |  |
| --- | ---: |
| Prior year true-up of Winter Storm Uri carrying costs (a) | $(10.3) |
| Mark-to-market on non-utility natural gas commodity contracts | (5.4) |
| Weather | (4.3) |
| New rates and rider recovery | 10.3 |
| Retail customer growth and demand | 7.1 |
| Other | (0.9) |
|  | $(3.5) |

(a) In certain jurisdictions, we have commission approval to recover carrying costs on Winter Storm Uri regulatory assets which offset increased interest expense. During the second quarter of 2022, we accrued a one-time, $10.3 million true-up of these carrying costs to reflect commission authorized rates.

Operations and maintenance expense increased primarily due to $12.3 million of higher employee-related expenses.

Depreciation and amortization was comparable to the same period in the prior year.

#### Operating Statistics

|  | Revenue (in thousands) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | Quantities Sold and Transported (Dth) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Residential | $75,153 | $85,398 | $620,306 | $604,568 | 3,546,242 | 3,572,971 | 41,078,623 | 43,910,976 |
| Commercial | 28,629 | 36,819 | 255,430 | 256,643 | 2,399,834 | 2,374,179 | 20,462,092 | 21,505,127 |
| Industrial | 9,848 | 26,155 | 26,156 | 52,268 | 2,129,492 | 3,153,641 | 4,576,537 | 6,468,756 |
| Other | 3,057 | 2,566 | 7,305 | 7,638 | - | - | - | - |
| Total Distribution | 116,687 | 150,937 | 909,197 | 921,117 | 8,075,568 | 9,100,791 | 66,117,252 | 71,884,859 |
| Transportation and Transmission | 42,794 | 41,166 | 131,820 | 125,794 | 36,773,895 | 35,302,591 | 118,180,078 | 117,971,404 |
| Total Regulated | 159,481 | 192,104 | 1,041,017 | 1,046,910 | 44,849,463 | 44,403,382 | 184,297,330 | 189,856,263 |
| Non-regulated Services (a) | 14,804 | 16,184 | 62,904 | 56,938 | - | - | - | - |
| Total Revenue and Quantities Sold | $174,285 | $208,288 | $1,103,921 | $1,103,849 | 44,849,463 | 44,403,382 | 184,297,330 | 189,856,263 |

(a) Includes Black Hills Energy Services and non-regulated services under the Service Guard Comfort Plan, Tech Services and HomeServe.

|  | Revenue (in thousands) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | Quantities Sold and Transported (Dth) Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Arkansas Gas | $27,166 | $30,663 | $189,034 | $210,287 | 4,372,453 | 4,396,388 | 21,098,256 | 22,769,574 |
| Colorado Gas | 31,503 | 32,239 | 227,852 | 202,620 | 3,588,228 | 3,408,420 | 23,283,092 | 23,192,881 |
| Iowa Gas | 18,784 | 24,580 | 168,137 | 187,209 | 5,790,254 | 5,103,212 | 27,193,172 | 28,658,007 |
| Kansas Gas | 22,724 | 38,029 | 118,478 | 132,362 | 9,084,974 | 9,202,701 | 27,382,033 | 28,954,575 |
| Nebraska Gas | 55,297 | 61,588 | 277,861 | 258,159 | 16,968,376 | 17,237,325 | 59,774,008 | 61,287,579 |
| Wyoming Gas | 18,811 | 21,189 | 122,559 | 113,212 | 5,045,178 | 5,055,336 | 25,566,769 | 24,993,647 |
| Total Revenue and Quantities Sold | $174,285 | $208,288 | $1,103,921 | $1,103,849 | 44,849,463 | 44,403,382 | 184,297,330 | 189,856,263 |

| Heating Degree Days | Three Months Ended September 30, 2023 Actual | Variance from Normal | 2022 Actual | Variance from Normal | Nine Months Ended September 30, 2023 Actual | Variance from Normal | 2022 Actual | Variance from Normal |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Arkansas Gas (a) | -- | (100)% | 16 | (63)% | 1,944 | (18)% | 2,386 | (4)% |
| Colorado Gas | 91 | (22)% | 84 | (61)% | 4,078 | 7% | 3,847 | (6)% |
| Iowa Gas | 37 | (59)% | 92 | (34)% | 3,867 | (10)% | 4,474 | 7% |
| Kansas Gas (a) | 6 | (78)% | 23 | (58)% | 2,749 | 6% | 3,043 | 3% |
| Nebraska Gas | 21 | (67)% | 48 | (56)% | 3,591 | (5)% | 3,768 | ---% |
| Wyoming Gas | 180 | 5% | 140 | (55)% | 4,953 | 14% | 4,738 | 1% |
| Combined (b) | 56 | (35)% | 70 | (53)% | 3,926 | 1% | 4,003 | ---% |

(a) Arkansas Gas and Kansas Gas have weather normalization mechanisms that mitigate the weather impact on gross margins.

(b) The combined heating degree days are calculated based on a weighted average of total customers by state excluding Kansas Gas due to its weather normalization mechanism. Arkansas Gas is partially excluded based on the weather normalization mechanism in effect from November through April.

### Corporate and Other

Corporate and Other operating results were as follows (in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Variance | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Operating (loss) | $(645) | $(587) | $(58) | $(2,275) | $(2,552) | $277 |

#### Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022:

Operating loss was comparable to the same period in the prior year.

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022:

Operating loss was comparable to the same period in the prior year.

### Consolidated Interest Expense, Other Income and Income Tax Expense

*(in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Variance | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest expense, net | $(40,998) | $(40,019) | $(979) | $(126,023) | $(117,328) | $(8,695) |
| Other income (expense), net | (647) | 464 | (1,111) | (1,513) | 2,731 | (4,244) |
| Income tax (expense) | (7,366) | (2,090) | (5,276) | (15,950) | (15,920) | (30) |

#### Three Months Ended September 30, 2023, Compared to the Three Months Ended September 30, 2022:

#### Interest expense, net

Interest expense, net was comparable to the same period in the prior year.

#### Other income (expense), net

Other expense, net was comparable to the same period in the prior year.

#### Income tax (expense)

Income tax expense increased primarily due to higher pre-tax income and a higher effective tax rate. For the three months ended September 30, 2023, the effective tax rate was 13.1% compared to 5.2% for the same period in 2022. See Note 11 of the Condensed Notes to Consolidated Financial Statements for discussion of effective tax rate variances.

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022:

#### Interest expense, net

Interest expense, net increased due to higher interest rates partially offset by increased interest income on higher cash and cash equivalents balances.

#### Other income (expense), net

Other expense, net increased primarily due to higher non-service benefit plan costs driven by higher discount rates and higher costs for our non-qualified benefit plans which were driven by market performance.

#### Income tax (expense)

Income tax expense and the effective tax rate were comparable to the same period in the prior year. See Note 11 of the Condensed Notes to Consolidated Financial Statements for further information on the effective tax rate.

### Liquidity and Capital Resources

There have been no material changes in Liquidity and Capital Resources from those reported in Item 7 of our 2022 Annual Report on Form 10-K except as described below.

### CASH FLOW ACTIVITIES

The following tables summarize our cash flows for the nine months ended September 30, 2023, (in thousands):

### Operating Activities:

|  | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: |
| Cash earnings (net income plus non-cash adjustments) | $413,354 | $406,019 | $7,335 |
| Changes in certain operating assets and liabilities: |  |  |  |
| Accounts receivable and other current assets | 346,310 | (24,125) | 370,435 |
| Accounts payable and accrued liabilities | (186,500) | 5,963 | (192,463) |
| Regulatory assets and liabilities | 199,093 | 118,330 | 80,763 |
|  | 358,903 | 100,168 | 258,735 |
| Other operating activities | (16,205) | (11,900) | (4,305) |
| Net cash provided by operating activities | $756,052 | $494,287 | $261,765 |

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022

Net cash provided by operating activities was $261.8 million higher than the same period in 2022. The variance to the prior year was primarily attributable to:

- Cash earnings (net income plus non-cash adjustments) were $7.3 million higher for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to increased Electric and Gas Utility margins driven by new rates and increased rider revenues partially offset by higher operating expenses and higher interest expense.
- Net inflows from changes in certain operating assets and liabilities were $258.7 million higher, primarily attributable to:
- Cash inflows increased by $370.4 million as a result of changes in accounts receivable and other current assets primarily driven by higher collections on pass-through revenues and lower natural gas in storage inventories driven by fluctuations in commodity prices and timing of injections and withdrawals;
- Cash outflows increased by $192.5 million as a result of decreases in accounts payable and accrued liabilities primarily driven by fluctuations in commodity prices, payment timing of natural gas and power purchases and changes in other working capital requirements; and
- Cash inflows increased by $80.8 million as a result of changes in our regulatory assets and liabilities primarily due to higher recoveries of deferred gas and fuel cost adjustments driven by fluctuations in commodity prices and higher recoveries of Winter Storm Uri costs from customers.
- Cash outflows increased by $4.3 million for other operating activities primarily due higher cloud computing licensing costs.

### Investing Activities:

|  | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: |
| Capital expenditures | $(421,770) | $(466,302) | $44,532 |
| Other investing activities | 17,985 | (19) | 18,004 |
| Net cash (used in) investing activities | $(403,785) | $(466,321) | $62,536 |

37

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022

Net cash used in investing activities was $62.5 million lower than the same period in 2022. The variance to the prior year was primarily attributable to:

- Cash outflows decreased by $44.5 million as a result of lower capital expenditures which were driven by lower programmatic safety, reliability and integrity spending at our Gas and Electric Utilities; and
- Cash inflows increased by $18.0 million for other investing activities primarily due to proceeds from the sale of Northern Iowa Windpower assets.

### Financing Activities:

|  | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: |
| Dividends paid on common stock | $(125,446) | $(115,850) | $(9,596) |
| Common stock issued | 107,380 | 20,027 | 87,353 |
| Short-term and long-term debt borrowings, net | 264,400 | 81,170 | 183,230 |
| Distributions to non-controlling interests | (12,891) | (11,678) | (1,213) |
| Other financing activities | (12,193) | 1,647 | (13,840) |
| Net cash provided by (used in) financing activities | $221,250 | $(24,684) | $245,934 |

#### Nine Months Ended September 30, 2023, Compared to the Nine Months Ended September 30, 2022

Net cash provided by financing activities was $245.9 million higher than the same period in 2022. The variance to the prior year was primarily attributable to:

- Cash inflows increased $183.2 million due to current year long-term borrowings from the March 7, 2023 and September 15, 2023 debt offerings in excess of current and prior year short-term debt borrowings (repayments), net;
- Cash inflows increased $87.4 million due to higher issuances of common stock;
- Cash outflows increased $9.6 million due to increased dividends paid on common stock; and
- Cash outflows increased by $13.8 million for other financing activities primarily due to financing costs from the March 7, 2023 and September 15, 2023 debt offerings.

### CAPITAL RESOURCES

See Note 5 of the Condensed Notes to Consolidated Financial Statements for recent financing updates regarding our shelf registration, Revolving Credit Facility and CP Program, long-term debt and equity.

### Covenant Requirements

The Revolving Credit Facility and Wyoming Electric’s financing agreements contain covenant requirements. We were in compliance with these covenants as of September 30, 2023. See Note 5 of the Condensed Notes to Consolidated Financial Statements for more information.

### Future Financing Plans

We will continue to assess debt and equity needs to support our capital investment plans and other strategic objectives. We plan to fund our capital plan and strategic objectives by using cash generated from operating activities and various financing alternatives, which could include our Revolving Credit Facility, our CP Program, the issuance of common stock under our ATM program or in an opportunistic block trade. Proceeds from the September 15, 2023 debt offering, along with cash on hand, will be used to repay our $525 million, 4.25%, senior unsecured notes due November 30, 2023 on their maturity date. We also plan to re-finance our $600 million, 1.04%, senior unsecured notes due August 23, 2024, at or before maturity date.

### CREDIT RATINGS

After assessing the current operating performance, liquidity and credit ratings of the Company, management believes that the Company will have access to the capital markets at prevailing market rates for companies with comparable credit ratings.

The following table represents the credit ratings and outlook and risk profile of BHC at September 30, 2023:

|  |  |  |
| --- | --- | --- |
| Rating Agency | Senior Unsecured Rating | Outlook |
| S&P (a) | BBB+ | Stable |
| Moody's (b) | Baa2 | Stable |
| Fitch (c) | BBB+ | Stable |

(a) On February 17, 2023, S&P reported BBB+ rating and maintained a Stable outlook.

(b) On December 20, 2022, Moody’s reported Baa2 rating and maintained a Stable outlook.

(c) On October 6, 2022, Fitch reported BBB+ rating and maintained a Stable outlook.

The following table represents the credit ratings of South Dakota Electric at September 30, 2023:

|  |  |
| --- | --- |
| Rating Agency | Senior Secured Rating |
| S&P (a) | A |
| Fitch (b) | A |

(a) On February 17, 2023, S&P reported A rating.

(b) On October 6, 2022, Fitch reported A rating.

### CAPITAL REQUIREMENTS

### Capital Expenditures

*(in millions)*

| Capital Expenditures by Segment | Actual Nine Months Ended September 30, 2023 (a) | Forecasted 2023 (b) | 2024 | 2025 | 2026 | 2027 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Electric Utilities | $156 | $212 | $348 | $268 | $184 | $163 |
| Gas Utilities | 261 | 386 | 452 | 412 | 393 | 444 |
| Corporate and Other | 4 | 17 | 19 | 20 | 19 | 18 |
| Incremental Projects (c) | - | - | - | - | 104 | 75 |
|  | $421 | $615 | $819 | $700 | $700 | $700 |

(a) Includes accruals for property, plant and equipment as disclosed in supplemental cash flow information in the Consolidated Statements of Cash Flows in the Consolidated Financial Statements.

(b) Includes actual capital expenditures for the nine months ended September 30, 2023.

(c) These represent projects that are being evaluated by our segments for timing, cost and other factors.

### Dividends

Dividends paid on our common stock totaled $125.4 million for the nine months ended September 30, 2023, or $0.625 per share per quarter. On October 23, 2023, our board of directors declared a quarterly dividend of $0.625 per share payable December 1, 2023, equivalent to an annual dividend of $2.50 per share. The amount of any future cash dividends to be declared and paid, if any, will depend upon, among other things, our financial condition, funds from operations, the level of our capital expenditures, restrictions under our Revolving Credit Facility and our future business prospects.

### Funding Status of Employee Benefit Plans

Based on the fair value of assets and estimated discount rate used to value benefit obligations as of September 30, 2023, we estimate the unfunded status of our employee benefit plans to be approximately $38 million compared to $35 million at December 31, 2022. We have implemented various de-risking strategies including lump sum buyouts, the purchase of annuities and the reduction of return-seeking assets over time to a more liability-hedged portfolio. As a result, recent capital markets volatility had a limited impact to our funded status and does not require interim re-measurement of our pension plan assets or defined benefit obligations.

### Critical Accounting Estimates

A summary of our critical accounting estimates is included in our 2022 Annual Report on Form 10-K. There were no material changes made as of September 30, 2023.

### New Accounting Pronouncements

Other than the pronouncements reported in our 2022 Annual Report on Form 10-K and those discussed in Note 1 of the Condensed Notes to Consolidated Financial Statements, there have been no new accounting pronouncements that are expected to have a material effect on our financial position, results of operations or cash flows.

## Market risk

As filed, 173 characters.

There have been no material changes to our quantitative and qualitative disclosures about market risk previously disclosed in Item 7A of our 2022 Annual Report on Form 10-K.

## Controls and procedures

As filed, 1,201 characters.

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2023. Based on their evaluation, they have concluded that our disclosure controls and procedures were effective at September 30, 2023.

Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2023, there have been no changes in our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 131 characters.

There are no material changes to the risk factors previously disclosed in Item 1A of Part I in our 2022 Annual Report on Form 10-K.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-057904. Last ingested by Listed: Oct 24, 2026, 15:05 ET. No prices; not investment advice.