BLACK HILLS CORPORATION Executive Summary
We are a customer-focused, growth-oriented utility company operating in
Electric Utilities : OurElectric Utilities segment generates, transmits and distributes electricity to approximately 214,000 customers inColorado ,Montana ,South Dakota andWyoming . Our electric generating facilities and power purchase agreements provide for the supply of electricity principally to our distribution systems. Additionally, we sell excess power to other utilities and marketing companies, including our affiliates. We also provide non-regulated services through our Tech Services product lines.Gas Utilities : OurGas Utilities segment conducts natural gas utility operations through ourArkansas ,Colorado ,Iowa ,Kansas ,Nebraska andWyoming subsidiaries. OurGas Utilities segment distributes and transports natural gas through our pipeline network to approximately 1,066,000 natural gas customers. Additionally, we sell contractual pipeline capacity and gas commodities to other utilities and marketing companies, including our affiliates, on an as-available basis.Black Hills Energy Services provides natural gas supply to approximately 49,000 retail distribution customers under the Choice Gas Program inNebraska andWyoming . Additionally, we provide services under the Service GuardComfort Plan and Tech Services and also offer HomeServe products.
Power Generation: Our Power Generation segment produces electric power from its non-regulated generating plants and sells the electric capacity and energy primarily to our utilities under long-term contracts.
Mining: Our Mining segment extracts coal at our mine near
Our reportable segments are based on our method of internal reporting, which is generally segregated by differences in products, services and regulation. All of our operations and assets are located withinthe United States . All of our non-utility business segments support our utilities. Certain unallocated corporate expenses that support our operating segments are presented as Corporate and Other. Certain industries 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 ourElectric Utilities is June through August while the normal peak usage season for ourGas Utilities is November through March. Significant earnings variances can be expected between theGas Utilities segment's peak and off-peak seasons. Due to this seasonal nature, our results of operations for the three and six months endedJune 30, 2020 and 2019, and our financial condition as ofJune 30, 2020 andDecember 31, 2019 , 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.
See Forward-Looking Information in the Liquidity and Capital Resources section of this Item 2, beginning on Page 59 .
COVID-19 Pandemic
One of the Company's core values is safety. The COVID-19 pandemic has given us
an opportunity to demonstrate our commitment to the health and safety of our
customers, employees, business partners and the communities we serve. We have
executed our business continuity plans across all of our jurisdictions with the
goal of continuing to provide safe and reliable service during the COVID-19
pandemic.
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For the three and six months endedJune 30, 2020 , we have experienced limited impacts to our financial results and operational activities due to COVID-19. Estimated decreases to gross margins driven primarily by lower volumes, increased costs due to sequestration of mission critical and essential employees and increased bad debt expense were partially offset by decreased training, travel and outside services related expenses. During the three months endedJune 30, 2020 , COVID-19 had a limited impact on revenues and customer loads, as the decline in volumes from commercial and certain industrial and transport customers was partially offset by higher residential usage. Decline in revenues and customer loads for the six months endedJune 30, 2020 , when compared to the same period in the prior year, were driven primarily by weather. We continue to closely monitor loads in our states as updated executive orders and recommendations associated with COVID-19 are provided. We have continued to proactively communicate with various commercial and industrial customers in our service territories to understand their needs and forecast the potential financial implications. We have increased our allowance for credit losses and bad debt expense by$1.5 million and$2.0 million for the three and six months endedJune 30, 2020 , respectively, after considering the potential economic impact of the COVID-19 pandemic in forward looking projections related to write-off and recovery rates. All of our jurisdictions temporarily suspended disconnections for a period of time. State orders lifting those restrictions have been issued in some of our jurisdictions; however, we expect the status of restrictions will continue to fluctuate for the next several months. We continue to monitor customer loads, accounts receivable arrears balances, disconnects, cash flows and bad debt expense. We are proactively working with customers to establish payment plans and find available payment assistance resources. We continue to maintain adequate liquidity to operate our businesses and fund our capital investment program. InFebruary 2020 , the Company issued$100 million in equity to support its 2020 capital investment program. InJune 2020 , the Company issued$400 million of long-term debt which was used to repay short-term debt and for working capital and general corporate purposes. For the six months endedJune 30, 2020 , the Company also utilized a combination of its$750 million Revolving Credit Facility and CP Program to meet its funding requirements. Disruptions in the commercial paper markets at the outset of the COVID-19 pandemic in theU.S. have since improved. The Company has no material debt maturities until late 2023 and as ofJune 30, 2020 , had$770 million of liquidity which included$32 million of cash and$738 million of available capacity on its Revolving Credit Facility. We continue to meet our debt covenant requirements. We also continue to monitor the funding status of our employee benefit plan obligations, which did not materially change during the six months endedJune 30, 2020 . We are monitoring supply chains, including lead times for key materials and supplies, availability of resources, and statuses of large capital projects. To date, there have been limited impacts from COVID-19 on supply chains including the availability of supplies, materials and lead times. Capital projects are ongoing without material disruption to schedules. Our third party resources continue to support our business plans without disruption. Contingency plans are ready to be executed if significant disruption to supply chain occurs; however, we currently do not anticipate a significant impact from COVID-19 on our capital investment plan for 2020. We continue to work closely with local health, public safety and government officials to minimize the spread of COVID-19 and its impact to our employees and the services we provide to our customers. Some of the actions the Company has taken include implementing protocols for our field operations personnel to continue to safely and effectively interact with our customers, asking employees to work from home to the extent possible, quarantining employees if they have traveled to an at-risk area, limiting travel to only mission-critical purposes and sequestering essential employees.
As we look forward to the second half of 2020, we anticipate that our operating results could potentially be further affected by COVID-19, as discussed in detail in our Risk Fact ors .
We provide periodic status updates and maintain ongoing dialogue with the
regulatory commissions in our jurisdictions. We are working with regulators in
each of our service territories to preserve our right for deferred regulatory
treatment for certain COVID-19 related costs and to seek recovery of these costs
at a later date.
During these uncertain times, we remain highly focused on the safety and health
of our customers, employees, business partners and communities. We continue to
monitor load, customers' ability to pay, the potential for supply chain
disruption that may impact our capital and maintenance project plans, the
availability of resources to execute our plans and the capital markets to ensure
we have the liquidity necessary to support our financial needs.
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2020 Business Segment Highlights and Corporate Activity
•South Dakota Electric andWyoming Electric continued construction of the$79 million ,Corriedale project. The wind project will be jointly owned by the two electric utilities to deliver renewable energy for large commercial, industrial and governmental agency customers. The project is on schedule and on budget and expected to be in service by year-end 2020.
•On
•OnJune 19, 2020 ,Colorado Electric submitted its 120-day report to the CPUC, which provided a detailed analysis of the proposals received during its competitive solicitation and outlined its preferred bid, a 200 MW solar project, along with several back-up options, in the Renewable Advantage plan. The bidding process for new renewable energy projects concluded inFebruary 2020 , attracting interest from developers in southernColorado and across theU.S. In total,Colorado Electric received 54 bids from 25 bidders for renewable energy projects at varying sizes, prices, technology types and locations, with the majority of projects to be sited in the city ofPueblo andPueblo County . A hearing to review the 120-day report with the CPUC is scheduled forAugust 18, 2020 . The project is scheduled to be in service in 2023. •OnJune 1, 2020 ,Black Hills Wyoming and Wyoming Electric filed a settlement agreement with theFERC . The agreement represents a resolution of all issues in the joint application filed with theFERC onAugust 2, 2019 for approval of a new 60 MW PPA. OnJuly 10, 2020 , a judge certified the settlement to theFERC and a decision is expected by the end of 2020. If approved,Wyoming Electric will continue to receive 60 MW of capacity and energy from the Wygen I power plant. The new agreement would commence onJanuary 1, 2022 , replacing the existing PPA and would continue for 11 years. •OnMay 5, 2020 , citizens inPueblo, Colorado voted overwhelmingly to retainColorado Electric as its electric utility provider by 75.6% of votes cast. The current franchise agreement continues through 2030.
•OnJanuary 1, 2020 ,Nebraska Gas completed the legal consolidation of its two natural gas utilities, having received approval from the NPSC onOctober 29, 2019 . OnJune 1, 2020 ,Nebraska Gas filed a rate review with the NPSC to consolidate rates, tariffs, and services of its two existing gas distribution territories. The rate review requests$17 million in new revenue, as well as an extension of the SSIR, to recover investments in safety, reliability and system integrity. The rate review requests a capital structure of 50% equity and 50% debt and a return on equity of 10% for investmentsNebraska Gas made in its natural gas pipeline system.Nebraska statute allows for implementation of interim rates 90 day after filing a rate review. New rates are expected to be effective in early 2021. •OnFebruary 1, 2019 ,Colorado Gas filed a rate review with the CPUC requesting$2.5 million in new revenue to recover investments in safety, reliability and system integrity and approval to consolidate rates, tariffs, and services of its two existing gas distribution territories.Colorado Gas also requested a new rider mechanism to recover future safety and integrity investments in its system. OnApril 14, 2020 the CPUC deliberated on the application and onMay 19, 2020 issued a final order. The order denied the new system integrity recovery mechanism and consolidation of rate territories. In addition, the order resulted in an annual revenue decrease of$0.6 million and a return on equity of 9.2%. New rates were effectiveJuly 3, 2020 . In accordance with the final order,Colorado Gas will file a new system integrity rider proposal prior to the end of 2020.Colorado Gas also plans to file a new rate review by the end of 2020. •Wyoming Gas's new single statewide rate structure was effectiveMarch 1, 2020 . OnDecember 11, 2019 ,Wyoming Gas received approval from the WPSC to consolidate the rates, tariffs and services of its four existing gas distribution territories. New rates are expected to generate$13 million in new annual revenue based on a return on equity of 9.40% and a capital structure of 50.23% equity and 49.77% debt. The approval also allows for a rider to recover integrity investments for system safety and reliability. 38
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Power Generation
•OnJune 1, 2020 ,Black Hills Wyoming and Wyoming Electric filed a settlement agreement with theFERC . The agreement represents a resolution of all issues in the joint application filed with theFERC onAugust 2, 2019 for approval of a new 60 MW PPA. See additional information in the Electric Utilities Segment highlights above.
Corporate and Other
•OnAugust 3, 2020 , we filed a shelf registration and DRSPP with theSEC . In conjunction with these shelf filings, we renewed the ATM. The renewed ATM program, which allows us to sell shares of our common stock, is the same as the prior program other than the aggregate value increased from$300 million to$400 million and a forward sales option was incorporated. •OnJune 17, 2020 , we completed a public debt offering of$400 million principal amount in senior unsecured notes. The debt offering consisted of$400 million of 2.50%, 10-year senior notes dueJune 15, 2030 . The proceeds were used to repay short-term debt and for working capital and general corporate purposes.
•On
•On
•On
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Results of Operations
Segment information does not include intercompany eliminations and all amounts
are presented on a pre-tax basis unless otherwise indicated. Minor differences
may result due to rounding.
Consolidated Summary and Overview
Six Months Ended June
Three Months Ended June 30, 30,
(in thousands, except per share amounts) 2020 2019 2020 2019
Revenue
Revenue$ 365,848 $ 369,576 $ 941,931 $ 1,005,257 Inter-company eliminations (38,934) (35,688) (77,967) (73,559)$ 326,914 $ 333,888 $ 863,964 $ 931,698 Adjusted operating income (a) Electric Utilities$ 33,993 $ 33,546 $ 69,643 $ 74,566 Gas Utilities 18,209 8,557 121,106 111,871 Power Generation 11,402 10,156 22,751 22,123 Mining 3,358 1,640 6,487 5,977 Corporate and Other (29) 102 131 (405) Operating income 66,933 54,001 220,118 214,132 Interest expense, net (35,545) (34,264) (70,998) (68,981) Impairment of investment - - (6,859) - Other income (expense), net (1,863) 263 490 (526) Income tax (expense) (4,831) (2,307) (20,833) (19,570) Net income 24,694 17,693 121,918 125,055 Net income attributable to noncontrolling interest (3,728) (3,110) (7,778) (6,664)
Net income available for common stock
Earnings per share, Basic$ 0.34 $ 0.24 $ 1.84 $ 1.97 Earnings per share, Diluted$ 0.33 $ 0.24
__________
(a) Adjusted operating income recognizes intersegment revenues and costs forColorado Electric's PPA with Black Hills Colorado IPP on an accrual basis rather than as a finance lease. This presentation of segment information does not impact consolidated financial results.
Three Months Ended
The variance to the prior year included the following:
•COVID-19 related impacts to consolidated results included$2.4 million of lower gross margin driven primarily by lower volumes,$2.0 million of costs due to sequestration of mission-critical and essential employees and$1.5 million of additional bad debt expense which were partially offset by$3.4 million of lower travel, training, and outside services expenses; •Electric Utilities' adjusted operating income increased$0.4 million primarily due to favorable spring weather and lower operating expenses mostly offset by a rider true-up and COVID-19 impacts to margin from lower commercial volumes; •Gas Utilities' adjusted operating income increased$9.7 million primarily due to new customer rates inWyoming , prior year direct and indirect impacts from significant rainfall and flooding in our service territories, mark-to-market gains on non-utility natural gas commodity contracts and lower operating expenses partially offset by COVID-19 impacts to margin from lower volumes from certain industrial and transport customers; •Power Generation's adjusted operating income increased$1.2 million primarily due to increased MWh sold driven by new wind assets and strong availability; 40 -------------------------------------------------------------------------------- Table of Contents •Mining's adjusted operating income increased$1.7 million primarily due to higher tons sold driven by prior year planned and unplanned facility outages; •Interest expense increased$1.3 million primarily due to higher debt balances partially offset by lower rates; •Other expense increased$2.1 million primarily due to increased costs for our non-qualified benefit plan driven by market performance on plan assets; and •Income tax expense increased$2.5 million primarily due to a prior year discrete tax benefit related to repairs and certain indirect costs.
Six Months Ended
The variance to the prior year included the following:
•COVID-19 related impacts to consolidated results included$2.4 million of lower gross margin driven primarily by lower volumes,$2.0 million of costs due to sequestration of mission-critical and essential employees and$2.0 million of additional bad debt expense which were partially offset by$3.4 million of lower travel, training, and outside services expenses; •Electric Utilities' adjusted operating income decreased$4.9 million primarily due to COVID-19 impacts to margin from lower commercial volumes, lower power marketing margins and higher operating expenses partially offset by increased mark-to-market on wholesale energy contracts; •Gas Utilities' adjusted operating income increased$9.2 million primarily due to new customer rates inWyoming , prior year amortization of excess deferred income taxes, customer growth, mark-to-market gains on non-utility natural gas commodity contracts and lower operating expenses partially offset by lower heating demand from warmer winter weather and COVID-19 impacts to margin from lower volumes from certain industrial and transport customers; •Interest expense increased$2.0 million primarily due to higher debt balances partially offset by lower rates; and •A$6.9 million pre-tax non-cash impairment of our investment in equity securities of a privately held oil and gas company.
Operating Results by Segment
A discussion of operating results from our segments and Corporate activities follows in the sections below. Revenues for operating segments in the following sections are presented in total and by retail class. For disaggregation of revenue by contract type and operating segment, see Note 2 of the Notes to Condensed Consolidated Financial Statements for more information. Non-GAAP Financial Measure The following discussion includes financial information prepared in accordance with GAAP, as well as another financial measure, gross 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. Gross margin (revenue less cost of sales) is a non-GAAP financial measure due to the exclusion of depreciation and amortization from the measure. The presentation of gross margin is intended to supplement investors' understanding of our operating performance. Gross margin for ourElectric Utilities is calculated as operating revenue less cost of fuel and purchased power. Gross margin for ourGas Utilities is calculated as operating revenue less cost of natural gas sold. Our gross margin is impacted by the fluctuations in power and natural gas purchases and other fuel supply costs. However, while these fluctuating costs impact gross margin as a percentage of revenue, they only impact total gross margin if the costs cannot be passed through to our customers. Our gross margin measure may not be comparable to other companies' gross margin measure. Furthermore, this measure is not intended to replace operating income, as determined in accordance with GAAP, as an indicator of operating performance. 41
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Table of ContentsElectric Utilities Six Months Ended June Three Months Ended June 30, 30, 2020 2019 Variance 2020 2019 Variance (in thousands) Revenue$ 163,200 $ 166,354 $ (3,154) $ 337,339 $ 349,281 $ (11,942) Total fuel and purchased power 59,053 62,128
(3,075) 123,513 135,411 (11,898)
Gross margin (non-GAAP) 104,147 104,226 (79) 213,826 213,870 (44) Operations and maintenance 47,031 48,733 (1,702) 97,530 95,877 1,653 Depreciation and amortization 23,123 21,947 1,176 46,653 43,427 3,226 Total operating expenses 70,154 70,680
(526) 144,183 139,304 4,879
Adjusted operating income$ 33,993 $ 33,546 $
447
Three Months Ended
Gross margin for the three months ended
(in millions)
COVID-19 impacts (a) $ (1.5)
Rider recovery and true-up (b) (1.3)
Weather 2.4
Other 0.3
Total decrease in Gross margin (non-GAAP) $ (0.1) ____________________
(a) The impacts to
Operations and maintenance expense decreased primarily due to lower generation expenses driven by timing of planned outages and lower employee costs. COVID-19 impacts to operations and maintenance expense included$1.6 million of expenses related to the sequestration of essential employees and$0.5 million of additional bad debt expense which were offset by$2.0 million of lower travel, training and outside services related expenses.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
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Six Months Ended
Gross margin for the six months ended
(in millions)
COVID-19 impacts (a) $ (1.5)
Off-system power marketing (1.2)
Rider recovery and true-up (b) (0.3)
Mark-to-market on wholesale energy contracts 1.2
Weather 0.6
Residential customer growth 0.4
Other 0.8
Total change in Gross margin (non-GAAP) $ -
____________________
(a) The impacts toElectric Utilities gross margin from COVID-19 were driven by reduced commercial volumes partially offset by higher residential usage. (b) Gross margin decreased due to a$2.5 million rider true-up, which was mostly offset by$2.2 million of increased rider recovery. Operations and maintenance expense increased primarily due to$1.4 million of expenses related to the municipalization efforts inPueblo, Colorado . COVID-19 impacts to operations and maintenance expense included$1.6 million of expenses related to the sequestration of essential employees and$0.6 million of additional bad debt expense which were offset by$2.0 million of lower travel, training and outside services related expenses.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
Operating Statistics
Electric Revenue Quantities Sold
(in thousands) (MWh)
Three Months Ended Six Months Ended Three Months Ended Six Months Ended
June 30 , June 30 , June 30 , June 30,
2020 2019 2020 2019 2020 2019 2020 2019
Residential $ 50,148 $ 45,700 $ 104,653 $ 103,338 334,682 301,481 707,832 690,659
Commercial 56,400 59,739 114,223 120,702 459,632 490,329 953,940 995,902
Industrial 31,896 31,697 64,065 64,137 459,533 445,837 920,165 872,451
Municipal 4,020 4,253 7,898 8,392 38,372 38,283 74,771 74,919
Subtotal Retail Revenue - Electric 142,464 141,389 290,839
296,569 1,292,219 1,275,930 2,656,708 2,633,931
Contract Wholesale (a) 3,470 6,781 9,023 15,124 87,253 194,222 219,031 417,242
Off-system/Power Marketing Wholesale 3,537 3,448 8,404
10,140 136,311 135,091 302,096 275,941
Other 13,729 14,736 29,073 27,448 - - - -
Total Revenue and Energy Sold 163,200 166,354 337,339 349,281 1,515,783 1,605,243 3,177,835 3,327,114
Other Uses, Losses or Generation,
net (b) - - - - 85,185 89,866 176,056 186,866
Total Revenue and Energy 163,200 166,354 337,339 349,281 1,600,968 1,695,109 3,353,891 3,513,980
Less cost of fuel and purchased
power 59,053 62,128 123,513 135,411
Gross Margin (non-GAAP) $ 104,147 $ 104,226 $ 213,826 $ 213,870
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Electric Revenue Gross Margin (non-GAAP)
(in thousands) (in thousands) Quantities Sold (MWh) (b)
Three Months Ended June 30, 2020 2019 2020 2019 2020 2019
Colorado Electric $ 57,897 $ 55,412 $ 32,455 $ 31,051 547,814 485,346
South Dakota Electric (a) 62,587 69,246 49,973 50,865 570,528 757,640
Wyoming Electric 42,716 41,696 21,719 22,310 482,626 452,123
Total Electric Revenue, Gross
Margin (non-GAAP), and Quantities
Sold $ 163,200 $ 166,354 $ 104,147 $ 104,226 1,600,968 1,695,109
Electric Revenue Gross Margin (non-GAAP)
(in thousands) (in thousands) Quantities Sold (MWh) (b)
Six Months Ended June 30, 2020 2019 2020 2019 2020 2019
Colorado Electric $ 116,455 $ 115,259 $ 64,725 $ 62,495 1,098,585 977,028
South Dakota Electric (a) 134,198 148,287 105,597 107,173 1,255,752 1,602,641
Wyoming Electric 86,686 85,735 43,504 44,202 999,554 934,311
Total Electric Revenue, Gross
Margin (non-GAAP), and Quantities
Sold $ 337,339 $ 349,281 $ 213,826 $ 213,870 3,353,891 3,513,980
________________
(a) Revenue and purchased power for the three and six months ended June 30, 2020
as well as associated quantities, for certain wholesale contracts have been
presented on a net basis. Amounts for the three and six months ended June 30,
2019 , were presented on a gross basis and, due to their immaterial nature, were
not revised. This presentation change has no impact on Gross margin.
(b) Includes company uses, line losses, and excess exchange production.
Three Months Ended Six Months Ended
June 30, June 30,
Quantities Generated and Purchased (MWh) 2020 2019 2020 2019
Coal-fired 572,030 471,840 1,119,859 1,057,135
Natural Gas and Oil 86,798 86,475 254,542 211,132
Wind 63,628 56,505 137,178 111,924
Total Generated 722,456 614,820 1,511,579 1,380,191
Purchased (a) 878,512 1,080,289 1,842,312 2,133,789
Total Generated and Purchased 1,600,968 1,695,109 3,353,891 3,513,980
Three Months Ended Six Months Ended
June 30, June 30,
Quantities Generated and Purchased (MWh) 2020 2019 2020 2019
Generated:
Colorado Electric 80,456 91,886 174,507 192,416
South Dakota Electric 442,566 315,925 915,532 773,294
Wyoming Electric 199,434 207,009 421,540 414,481
Total Generated 722,456 614,820 1,511,579 1,380,191
Purchased:
Colorado Electric 467,358 393,460 924,078 784,612
South Dakota Electric (a) 127,962 441,715 340,220 829,347
Wyoming Electric 283,192 245,114 578,014 519,830
Total Purchased 878,512 1,080,289 1,842,312 2,133,789
Total Generated and Purchased 1,600,968 1,695,109 3,353,891 3,513,980
________________
(a) Purchased power quantities for the three and six months endedJune 30, 2020 , for certain wholesale contracts have been presented on a net basis. Amounts for the three and six months endedJune 30, 2019 , were presented on a gross basis and, due to their immaterial nature, were not revised. This presentation change has no impact on Gross margin. 44
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Three Months Ended June 30,
Degree days 2020 2019
Variance from Variance from
Actual Normal Actual Normal
Heating Degree Days:
Colorado Electric 518 (18) % 603 (5) %
South Dakota Electric 1,127 10 % 1,279 25 %
Wyoming Electric 1,149 (4) % 1,359 12 %
Combined (a) 853 (3) % 986 12 %
Cooling Degree Days:
Colorado Electric 382 83 % 147 (30) %
South Dakota Electric 120 21 % 38 (62) %
Wyoming Electric 101 102 % 29 (42) %
Combined (a) 236 69 % 86 (38) %
Six Months Ended June 30,
Degree days 2020 2019
Variance from Variance from
Actual Normal Actual Normal
Heating Degree Days:
Colorado Electric 2,974 (9) % 3,152 (4) %
South Dakota Electric 4,238 - % 5,195 23 %
Wyoming Electric 4,148 (1) % 4,557 3 %
Combined (a) 3,642 (4) % 4,132 8 %
Cooling Degree Days:
Colorado Electric 382 83 % 147 (30) %
South Dakota Electric 120 21 % 38 (62) %
Wyoming Electric 101 102 % 29 (42) %
Combined (a) 236 69 % 86 (38) %
____________________(a) Combined actuals are calculated based on the weighted average number of total customers by state.
Six Months Ended
Three Months Ended June 30, June 30,
Contracted Power Plant Fleet Availability
(a) 2020 2019 2020 2019
Coal-fired plants (b) 94.1 % 79.2 % 92.5 % 87.7 %
Natural gas-fired plants and Other plants
(c) 78.3 % 89.3 % 80.9 % 90.0 %
Wind 98.1 % 94.5 % 98.6 % 95.6 %
Total Availability 85.0 % 86.4 % 86.0 % 89.7 %
Wind Capacity Factor 39.0 % 34.8 % 42.3 % 38.7 %
____________________
(a) Availability and Wind Capacity Factor are calculated using a weighted
average based on capacity of our generating fleet.
(b) 2019 included planned outages at Neil Simpson II and Wygen III and unplanned
outages at Wyodak Plant.
(c) 2020 included an unplanned outage at Pueblo Airport Generation.
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Table of ContentsGas Utilities Six Months Ended June Three Months Ended June 30, 30, 2020 2019 Variance 2020 2019 Variance (in thousands) Revenue: Natural gas - regulated$ 148,432 $ 149,942 $ (1,510) $ 484,329 $ 533,817 $ (49,488) Other - non-regulated services 12,678 15,527 (2,849) 37,554 42,732 (5,178) Total revenue 161,110 165,469 (4,359) 521,883 576,549 (54,666) Cost of sales: Natural gas - regulated 42,910 51,108 (8,198) 196,909 252,158 (55,249) Other - non-regulated services 1,712 5,876 (4,164) 3,074 12,105 (9,031) Total cost of sales 44,622 56,984 (12,362) 199,983 264,263 (64,280) Gross margin (non-GAAP) 116,488 108,485
8,003 321,900 312,286 9,614
Operations and maintenance 72,415 77,131 (4,716) 149,709 155,069 (5,360) Depreciation and amortization 25,864 22,797 3,067 51,085 45,346 5,739 Total operating expenses 98,279 99,928 (1,649) 200,794 200,415 379 Adjusted operating income$ 18,209 $ 8,557 $ 9,652 $ 121,106 $ 111,871 $ 9,235
Three Months Ended
Gross margin for the three months endedJune 30, 2020 increased as a result of: (in millions) New rates$ 3.6 Weather 2.8 Mark-to-market on non-utility natural gas commodity contracts
1.6
Customer growth - distribution
0.6
COVID-19 impacts (a)
(0.9)
Decreased transport and transmission
(0.8)
Other
1.1
Total increase in Gross margin (non-GAAP) $
8.0
____________________
(a) The impacts to
Operations and maintenance expense decreased primarily due to$1.5 million of lower employee costs and$1.5 million of lower outside service expenses. COVID-19 impacts to operations and maintenance expense included$1.4 million of lower travel, training and outside services related expenses which were partially offset by$1.0 million of additional bad debt expense. Various other expenses comprised the remainder of the difference when compared to the same period in the prior year.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
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Six Months Ended
Gross margin for the six months endedJune 30, 2020 increased as a result of: (in millions) New rates$ 9.2 Prior year amortization of excess deferred income taxes
2.7
Customer growth - distribution
2.1
Mark-to-market on non-utility natural gas commodity contracts 2.4 Weather (7.6) COVID-19 impacts (a) (0.9) Other 1.7 Total increase in Gross margin (non-GAAP) $
9.6
____________________
(a) The impacts to
Operations and maintenance expense decreased primarily due to$3.4 million of lower outside services expenses,$1.9 million of lower employee costs partially offset by$0.9 million of higher property taxes due to a higher asset base. COVID-19 impacts to operations and maintenance expense included$1.4 million of lower travel, training and outside services related expenses which were offset by$1.4 million of additional bad debt expense. Various other expenses comprised the remainder of the difference when compared to the same period in the prior year.
Depreciation and amortization increased primarily due to a higher asset base driven by prior year and current year capital expenditures.
Operating Statistics
Gross Margin Gas Utilities
Gas Revenue (non-GAAP) Quantities Sold &
(in thousands) (in thousands) Transported (Dth)
Three Months Three Months
Three Months Ended Ended Ended
June 30, June 30, June 30,
2020 2019 2020 2019 2020 2019
Residential $ 83,240 $ 85,093 $ 56,368 $ 52,670 8,501,835 7,919,158
Commercial 27,441 30,984 15,336 14,926 3,965,529 4,194,879
Industrial 6,059 3,980 2,140 1,320 2,036,553 997,942
Other 828 887 827 887 - -
Total Distribution 117,568 120,944 74,671 69,803 14,503,917 13,111,979
Transportation and Transmission 30,864 28,998 30,851 29,031 30,243,501 32,767,310
Total Regulated 148,432 149,942 105,522 98,834 44,747,418 45,879,289
Non-regulated Services 12,678 15,527 10,966 9,651
Total Gas Revenue & Gross Margin
(non-GAAP) $ 161,110 $ 165,469 $ 116,488 $ 108,485
47
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Gross Margin Gas Utilities
Gas Revenue (non-GAAP) Quantities Sold &
(in thousands) (in thousands) Transported (Dth)
Six Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30,
2020 2019 2020 2019 2020 2019
Residential $ 290,471 $ 326,222 $ 159,489 $ 157,727 36,732,630 40,757,176
Commercial 107,677 127,123 48,855 50,084 16,800,332 19,185,727
Industrial 11,259 9,994 4,183 3,337 3,097,605 2,180,469
Other (415) (3,467) (415) (3,467) - -
Total Distribution 408,992 459,872 212,112 207,681 56,630,567 62,123,372
Transportation and Transmission 75,337 73,945 75,308 73,978 75,299,008 79,083,470
Total Regulated 484,329 533,817 287,420 281,659 131,929,575 141,206,842
Non-regulated Services 37,554 42,732 34,480 30,627
Total Gas Revenue & Gross Margin
(non-GAAP) $ 521,883 $ 576,549 $ 321,900 $ 312,286
Gross Margin Gas Utilities
Gas Revenue (non-GAAP) Quantities Sold &
(in thousands) (in thousands) Transported (Dth)
Three Months Three Months
Three Months Ended Ended Ended
June 30, June 30, June 30,
2020 2019 2020 2019 2020 2019
Arkansas Gas $ 28,733 $ 26,236 $ 21,906 $ 18,617 4,906,236 4,542,917
Colorado Gas 28,613 36,713 18,807 19,755 5,046,844 6,067,353
Iowa Gas 21,407 23,714 14,355 14,588 5,521,119 7,484,272
Kansas Gas 18,486 17,379 12,460 11,957 6,722,914 6,290,716
Nebraska Gas 40,466 39,315 30,719 27,709 13,822,478 14,816,996
Wyoming Gas 23,405 22,112 18,241 15,859 8,727,827 6,677,035
Total Gas Revenue & Gross
Margin (non-GAAP) $ 161,110 $ 165,469 $ 116,488 $ 108,485 44,747,418 45,879,289
Gross Margin Gas Utilities
Gas Revenue (non-GAAP) Quantities Sold &
(in thousands) (in thousands) Transported (Dth)
Six Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30,
2020 2019 2020 2019 2020 2019
Arkansas Gas $ 103,578 $ 105,627 $ 70,761 $ 62,899 15,869,184 16,967,113
Colorado Gas 101,219 113,184 56,813 57,355 18,143,249 19,244,278
Iowa Gas 76,231 89,355 35,683 37,638 19,801,392 23,147,959
Kansas Gas 51,980 58,596 31,063 30,076 16,637,772 16,733,986
Nebraska Gas 124,132 148,112 82,385 83,782 40,331,514 43,816,014
Wyoming Gas 64,743 61,675 45,195 40,536 21,146,464 21,297,492
Total Gas Revenue & Gross Margin
(non-GAAP) $ 521,883 $ 576,549 $ 321,900 $ 312,286 131,929,575 141,206,842
Our Gas Utilities are highly seasonal, and sales volumes vary considerably with
weather and seasonal heating and industrial loads. Approximately 70% of our Gas
Utilities' revenue and margins are expected in the first and fourth quarters of
each year. Therefore, revenue for, and certain expenses of, these operations
fluctuate significantly among quarters. Depending upon the geographic location
in which our Gas Utilities operate, the winter heating season begins around
November 1 and ends around March 31 .
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Three Months Ended June 30,
2020 2019
Variance Variance
Heating Degree Days Actual from Normal Actual from Normal
Arkansas Gas (a) 353 7% 246 (25)%
Colorado Gas 809 (15)% 1,017 6%
Iowa Gas 783 14% 738 8%
Kansas Gas (a) 477 7% 425 (5)%
Nebraska Gas 692 9% 664 5%
Wyoming Gas 1,216 -% 1,397 15%
Combined (b) 688 2% 795 5%
Six Months Ended June 30,
2020 2019
Variance Variance
Heating Degree Days: Actual from Normal Actual from Normal
Arkansas Gas (a) 2,012 (17)% 2,347 (4)%
Colorado Gas 3,638 (6)% 4,047 4%
Iowa Gas 3,964 (2)% 4,568 13%
Kansas Gas (a) 2,781 (4)% 3,204 10%
Nebraska Gas 3,527 (4)% 4,147 13%
Wyoming Gas 4,433 1% 4,910 11%
Combined Gas (b) 3,606 (4)% 4,244 10%
___________
(a) Arkansas and Kansas 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 due to its weather normalization
mechanism. Arkansas is excluded based on the weather normalization mechanism in
effect from November through April.
Regulatory Matters
For more information on recent regulatory activity and enacted regulatory provisions with respect to the states in which our Utilities operate, see Note 5 of the Notes to Condensed Consolidated Financial Statements and Part I, Items 1 and 2 and Part II, Item 8 of our 2019 Annual Report on Form 10-K filed with theSEC . 49
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Power Generation
Six Months Ended June
Three Months Ended June 30, 30,
2020 2019 Variance 2020 2019 Variance
(in thousands)
Revenue $ 26,122 $ 24,708 $ 1,414 $ 52,088 $ 49,953 $ 2,135
Fuel expense 2,087 2,024 63 4,372 4,650 (278)
Operations and maintenance 7,350 7,809 (459) 14,347 13,871 476
Depreciation and amortization 5,283 4,719 564 10,618 9,309 1,309
Total operating expense 14,720 14,552 168 29,337 27,830 1,507
Adjusted operating income$ 11,402 $ 10,156
Three Months Ended
Revenue increased in the current year driven primarily by increased MWh sold from new wind assets and additional Black Hills Colorado IPP fired-engine hours. Operating expenses increased primarily due to higher depreciation from new wind assets and COVID-19 impacts of$0.4 million of expenses related to the sequestration of essential employees partially offset by lower maintenance costs due to a prior year planned outage at Pueblo Airport Generation.
Six Months Ended
Revenue increased in the current year driven by an increase in MWh sold from new wind assets and additional Black Hills Colorado IPP fired-engine hours. Operating expenses increased primarily due to higher depreciation from new wind assets. COVID-19 impacts to operations and maintenance expense included$0.4 million of expenses related to the sequestration of essential employees. 50 -------------------------------------------------------------------------------- Table of Contents The following table summarizes MWh for our Power Generation segment: Six Months Ended June Three Months Ended June 30, 30, 2020 2019 2020 2019 Quantities Sold, Generated and Purchased (MWh) (a) Sold Black Hills Colorado IPP 263,701 210,316 528,926 416,289 Black Hills Wyoming (b) 156,866 149,713 313,218 313,762 Black Hills Electric Generation 92,629 47,796 189,908 81,549 Total Sold 513,196 407,825 1,032,052 811,600 Generated Black Hills Colorado IPP 263,701 210,316 528,926 416,289 Black Hills Wyoming (b) 142,747 132,189 269,232 264,782 Black Hills Electric Generation 92,629 47,796 189,908 81,549 Total Generated 499,077 390,301 988,066 762,620 Purchased Black Hills Wyoming (b) 14,160 13,761 44,093 39,340 Total Purchased 14,160 13,761 44,093 39,340 ___________ (a) Company uses and losses are not included in the quantities sold, generated, and purchased. (b) Under the 20-year economy energy PPA with theCity of Gillette effectiveSeptember 2014 , Black Hills Wyoming purchases energy on behalf of theCity of Gillette and sells that energy to theCity of Gillette . MWh sold may not equal MWh generated and purchased due to a dispatch agreement Black Hills Wyoming has withSouth Dakota Electric to cover energy imbalances. Six Months Ended Three Months Ended June 30, June 30, Contracted Power Plant Fleet Availability (a) 2020 2019 2020 2019 Coal-fired plant 98.2 % 95.8 % 93.7 % 95.3 % Natural gas-fired plants (b) 99.7 % 88.7 % 99.6 % 92.1 % Wind 93.1 % 94.1 % 94.0 % 92.3 % Total Availability 97.0 % 91.5 % 96.6 % 92.8 % Wind Capacity Factor 27.5 % 23.1 % 28.9 % 25.7 % ___________
(a) Availability and Wind Capacity Factor are calculated using a weighted average based on capacity of our generating fleet. (b) 2019 included a planned outage at Pueblo Airport Generation.
51
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Mining
Six Months Ended June
Three Months Ended June 30, 30,
2020 2019 Variance 2020 2019 Variance
(in thousands)
Revenue $ 15,416 $ 13,045 $ 2,371 $ 30,621 $ 29,474 $ 1,147
Operations and maintenance 9,732 9,175 557 19,558 19,088 470
Depreciation, depletion and amortization 2,326 2,230 96
4,576 4,409 167
Total operating expenses 12,058 11,405 653 24,134 23,497 637
Adjusted operating income $ 3,358 $ 1,640 $ 1,718 $ 6,487 $ 5,977 $ 510 Three Months Ended
Current year revenue increased due to 29% higher tons sold driven primarily by prior year planned and unplanned facility outages partially offset by a 7% decrease in price per ton sold driven by contract price adjustments based on actual mining costs.
Six Months Ended
Current year revenue increased due to 7% higher tons sold driven primarily by prior year planned and unplanned facility outages partially offset by a 3% decrease in price per ton sold driven by contract price adjustments based on actual mining costs.
The following table provides certain operating statistics for our Mining segment (in thousands, except for Revenue per ton):
Six Months Ended June
Three Months Ended June 30, 30,
2020 2019 2020 2019
Tons of coal sold 972 754 1,868 1,751
Cubic yards of overburden moved 2,211 2,045 4,478 4,039
Revenue per ton $ 15.27 $ 16.48 $ 15.66 $ 16.14
Corporate and Other
Six Months Ended June
Three Months Ended June 30, 30,
2020 2019 Variance 2020 2019 Variance
(in thousands)
Adjusted operating income (loss)
$ 131 $ (405) $ 536 Consolidated Interest Expense, Impairment of Investment, Other Income (Expense) and Income Tax (Expense) Six Months Ended June Three Months Ended June 30, 30, 2020 2019 Variance 2020 2019 Variance (in thousands) (in thousands) Interest expense, net$ (35,545) $ (34,264) $ (1,281) $ (70,998) $ (68,981) $ (2,017) Impairment of investment - - $ - (6,859) -$ (6,859) Other income (expense), net (1,863) 263$ (2,126) 490 (526)$ 1,016 Income tax (expense) (4,831) (2,307)$ (2,524) (20,833) (19,570)$ (1,263) 52
-------------------------------------------------------------------------------- Table of Contents Three Months EndedJune 30, 2020 Compared to the Three Months EndedJune 30, 2019 . Interest expense, net
The increase in Interest expense, net for the three months ended
Other Income (Expense)
The variance in Other income (expense), net for the three months endedJune 30, 2020 , compared to the same period in the prior year, was primarily due to increased costs for our non-qualified benefit plans which were driven by market performance and increased non-service pension costs resulting from a change in accounting principle for our defined benefit pension plan effectiveJanuary 1, 2020 . Income Tax (Expense) For the three months endedJune 30, 2020 , the effective tax rate was 16.4% compared to 11.5% for the same period in 2019. The higher effective tax rate is primarily due to a prior year discrete tax benefit related to repair costs and certain indirect costs.
Six Months Ended
Interest expense, net
The increase in Interest expense, net for the six months endedJune 30, 2020 , compared to the same period in the prior year was driven by higher debt balances partially offset by lower interest rates.
Impairment of Investment
For the six months endedJune 30, 2020 , we recorded a pre-tax non-cash write-down of$6.9 million in our investment in equity securities of a privately held oil and gas company. The impairment was triggered by continued adverse changes in future natural gas prices and liquidity concerns at the privately held oil and gas company. The remaining book value of our investment is$1.5 million , and this is our only remaining investment in oil and gas exploration and production activities. See Note 15 of the Notes to Condensed Consolidated Financial Statements for additional details.
Other Income (Expense)
The variance in Other income (expense), net for the six months endedJune 30, 2020 , compared to the same period in the prior year, was primarily due to reduced costs for our non-qualified benefit plans which are driven by market performance partially offset by increased non-service pension costs resulting from a change in accounting principle for our defined benefit pension plan effectiveJanuary 1, 2020 . Income Tax (Expense) For the six months endedJune 30, 2020 , the effective tax rate was 14.6% compared to 13.5% for the same period in 2019. The higher effective tax rate is primarily due to a prior year discrete tax benefit related to repair costs and certain indirect costs and a current year discrete tax adjustment related to the impairment of our investment in equity securities of a privately held oil and gas company partially offset by increased tax benefits from forecasted federal production tax credits associated with new wind assets. 53
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Critical Accounting Policies Involving Significant Accounting Estimates
There have been no material changes in our critical accounting estimates from those reported in our 2019 Annual Report on Form 10-K filed with theSEC except for Pension and Other Postretirement Benefits provided below. We continue to closely monitor the rapidly evolving and uncertain impact of COVID-19 on our critical accounting estimates including, but not limited to, collectibility of customer receivables, recoverability of regulatory assets, impairment risk of goodwill and long-lived assets, valuation of pension assets and liabilities, and contingent liabilities. For more information on our critical accounting estimates, see Part II, Item 7 of our 2019 Annual Report on Form 10-K.
Pension and Other Postretirement Benefits
As described in Note 18 of the Notes to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K filed with theSEC , we have one defined benefit pension plan, one defined post-retirement healthcare plan and several non-qualified retirement plans. AMaster Trust holds the assets for the pension plan. A trust for the funded portion of the post-retirement healthcare plan has also been established. Accounting for pension and other postretirement benefit obligations involves numerous assumptions, the most significant of which relate to the discount rates, healthcare cost trend rates, expected return on plan assets, compensation increases, retirement rates and mortality rates. The determination of our obligation and expenses for pension and other postretirement benefits is dependent on the assumptions determined by management and used by actuaries in calculating the amounts. Although we believe our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our pension and other postretirement obligations and our future expense. EffectiveJanuary 1, 2020 , the Company changed its method of accounting for net periodic benefit cost. Prior to the change, the Company used a calculated value for determining market-related value of plan assets which amortized the effects of gains and losses over a five-year period. Effective with the accounting change, the Company will use a calculated value for the return-seeking assets (equities) in the portfolio and fair value for the liability-hedging assets (fixed income). The Company considers the fair value method for determining market-related value of liability-hedging assets to be a preferable method of accounting because asset-related gains and losses are subject to amortization into pension cost immediately. Additionally, the fair value for liability-hedging assets allows for the impact of gains and losses on this portion of the asset portfolio to be reflected in tandem with changes in the liability which is linked to changes in the discount rate assumption for re-measurement.
See Note 12 of the Notes to Condensed Consolidated Financial Statements for additional information.
Liquidity and Capital Resources
There have been no material changes in Liquidity and Capital Resources from
those reported in Item 7 of our 2019 Annual Report on Form 10-K filed with the
SEC except as described below and within the "COVID-19 Pandemic" discussion in
the Ex ecutive Summary section above.
Collateral Requirements
Our utilities maintain wholesale commodity contracts for the purchases and sales
of electricity and natural gas which have performance assurance provisions that
allow the counterparty to require collateral postings under certain conditions,
including when requested on a reasonable basis due to a deterioration in our
financial condition or nonperformance. A significant downgrade in our credit
ratings, such as a downgrade to a level below investment grade, could result in
counterparties requiring collateral postings under such adequate assurance
provisions. The amount of credit support that we may be required to provide at
any point in the future is dependent on the amount of the initial transaction,
changes in the market price, open positions and the amounts owed by or to the
counterparty. At June 30, 2020 , we had sufficient liquidity to cover collateral
that could be required to be posted under these contracts. For the six months
ended June 30, 2020 , we did not experience any requests to post additional
collateral, including for concerns over a potential deterioration of our
financial condition due to COVID-19.
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Cash Flow Activities
The following table summarizes our cash flows for the six months ended
Cash provided by (used in): 2020 2019 Variance
Operating activities $ 309.0 $ 289.8 $ 19.2
Investing activities $ (349.7) $ (317.3) $ (32.4)
Financing activities $ 62.8 $ 13.6 $ 49.2 Year-to-Date 2020 Compared to Year-to-Date 2019
Operating Activities
Net cash provided by operating activities was$309 million for the six months endedJune 30, 2020 , compared to net cash provided by operating activities of$290 million for the same period in 2019, for an increase of$19 million . The variance was primarily attributable to: •Cash earnings (net income plus non-cash adjustments) were$7.3 million higher for the six months endedJune 30, 2020 compared to the same period in the prior year primarily driven by higher operating income at theGas Utilities segment; •Net cash inflows from changes in operating assets and liabilities were$26 million for the six months endedJune 30, 2020 , compared to net cash inflows of$14 million in the same period in the prior year. This$12 million increase was primarily due to: •Cash inflows decreased by$34 million primarily as a result of changes in accounts receivable driven by lower commodity prices and increased materials and supplies purchases; •Cash outflows decreased by$44 million as a result of changes in accounts payable and accrued liabilities driven by the impact of lower commodity prices, lower employee costs, lower outside services expenses and other working capital requirements; •Cash inflows increased by$12 million primarily as a result of changes in our regulatory assets and liabilities driven by timing of recovery from fuel costs adjustments and the TCJA tax rate change that was returned to customers in the prior year; and
•Cash outflows increased by
Investing Activities
Net cash used in investing activities was$350 million for the six months endedJune 30, 2020 , compared to net cash used in investing activities of$317 million for the same period in 2019, for a variance of$32 million . The variance was primarily attributable to: •Capital expenditures of$348 million for the six months endedJune 30, 2020 compared to$318 million for the same period in the prior year. Higher current year expenditures were driven by higher programmatic safety, reliability and integrity spending at ourGas Utilities and Electric Utilities segments and theCorriedale wind project at ourElectric Utilities segment. 55 -------------------------------------------------------------------------------- Table of Contents Financing Activities Net cash provided by financing activities for the six months endedJune 30, 2020 was$63 million , compared to$14 million of net cash provided by financing activities for the same period in 2019, an increase of$49 million primarily due to the following:
•Cash dividends on common stock of
•Increase of
•$266 million of higher repayments of short-term debt;
•Increase of
•Cash outflows for other financing activities increased
Dividends Dividends paid on our common stock totaled$66 million for the six months endedJune 30, 2020 , or$0.535 per share per quarter. OnJuly 27, 2020 , our board of directors declared a quarterly dividend of$0.535 per share payableSeptember 1, 2020 , equivalent to an annual dividend of$2.14 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.
Financing Transactions and Short-Term Liquidity
Revolving Credit Facility and CP Program
Our Revolving Credit Facility and CP Program had the following borrowings, outstanding letters of credit, and available capacity (in millions):
Current Revolver Borrowings at CP Program Borrowings at Letters of Credit (a) at Available Capacity at Credit Facility
Expiration Capacity June 30, 2020 June 30, 2020 June 30, 2020 June 30, 2020
Revolving Credit
Facility and CP
Program July 30, 2023 $ 750 $ - $ - $ 12 $ 738
_______________(a) Letters of credit are off-balance sheet commitments that reduce the borrowing capacity available on our corporate Revolving Credit Facility.
Revolving Credit Facility and CP Program borrowing activity for the six months
ended
For the Six Months
Ended June 30,
2020 Maximum amount outstanding - Revolving Credit Facility (based on daily outstanding balances)
$ 220
Maximum amount outstanding - CP Program (based on daily outstanding balances)
$ 366
Average amount outstanding - Revolving Credit Facility (based on daily outstanding balances)
$ 109
Average amount outstanding - CP Program (based on daily outstanding balances)
$ 243
Weighted average interest rates - Revolving Credit Facility 1.75 %
Weighted average interest rates - CP Program 1.48 %
56
-------------------------------------------------------------------------------- Table of Contents Covenant Requirements The Revolving Credit Facility contains customary affirmative and negative covenants, such as limitations on certain liens, restrictions on certain transactions, and maintenance of a certain Consolidated Indebtedness to Capitalization Ratio. Subject to applicable cure periods, a violation of any of these covenants would constitute an event of default that entitles the lenders to terminate their remaining commitments and accelerate all principal and interest outstanding. We were in compliance with these covenants as of June 30, 2020. See Note 7 of the Notes to Condensed Consolidated Financial Statements for more information.
Covenants within
See Notes 7 and 8 of the Notes to Condensed Consolidated Financial
Statements for information concerning significant financing activities for the
six months ended
Future Financing Plans
We will continue to assess debt and equity needs to support our capital expenditure plan.
Credit Ratings
After assessing the current operating performance, liquidity and the 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
Rating Agency Senior Unsecured Rating Outlook
S&P (a) BBB+ Stable
Moody's (b) Baa2 Stable
Fitch (c) BBB+ Stable
__________
(a) On April 10, 2020 , S&P affirmed our BBB+ rating and maintained a Stable
outlook.
(b) On December 20, 2019 , Moody's affirmed our Baa2 rating and maintained a
Stable outlook.
(c) On August 29, 2019 , Fitch affirmed our BBB+ rating and maintained a Stable
outlook.
The following table represents the credit ratings of South Dakota Electric at
June 30, 2020 :
Rating Agency Senior Secured Rating
S&P (a) A
Moody's (b) A1
Fitch (c) A
__________
(a) On
57
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Capital Requirements
Capital Expenditures
Actual Planned Planned Planned Planned Planned
Capital Expenditures by Six Months Ended June 30,
Segment 2020 (a) 2020 (b) 2021 2022 2023 2024
(in millions)
Electric Utilities $ 117 $ 246 $ 203 $ 170 $ 137 $ 152
Gas Utilities 209 391 309 285 316 293
Power Generation 6 7 9 11 6 6
Mining 6 8 12 9 9 9
Corporate and Other 10 17 22 11 12 10
$ 348 $ 669 $ 555 $ 486 $ 480 $ 470
__________
(a) Expenditures for the six months ended June 30, 2020 include the impact of
accruals for property, plant and equipment.
(b) Includes actual capital expenditures for the six months ended June 30, 2020 .
We are monitoring supply chains, including lead times for key materials and
supplies, availability of resources, and statuses of large capital projects. To
date, there have been limited impacts from COVID-19 on supply chains including
the availability of supplies and materials and lead times. Capital projects are
ongoing without material disruption to schedules. Our third party resources
continue to support our business plans without disruption. Contingency plans are
ready to be executed if significant disruption to supply chain occurs; however,
we currently do not anticipate a significant impact from COVID-19 on our capital
investment plan for 2020.
Contractual Obligations
There have been no significant changes in contractual obligations from those
previously disclosed in Note 19 of our Notes to the Consolidated Financial
Statements in our 2019 Annual Report on Form 10-K except for the items described
in Note 13 of the Notes to Condensed Consolidated Financial Statements in
this Quarterly Report on Form 10-Q.
Off-Balance Sheet Commitments
There have been no significant changes to off-balance sheet commitments from those previously disclosed in Item 7 of our 2019 Annual Report on Form 10-K filed with the SEC except for the items described in Note 7 of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
New Accounting Pronouncements
Other than the pronouncements reported in our 2019 Annual Report on Form 10-K
filed with the SEC and those discussed in Note 1 of the Notes to Condensed
Consolidated Financial Statements in this Quarterly Report on Form 10-Q, 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.
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FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements as
defined by the SEC . Forward-looking statements are all statements other than
statements of historical fact, including, without limitation, those statements
that are identified by the words "anticipates," "estimates," "expects,"
"intends," "plans," "predicts" and similar expressions and include statements
concerning plans, objectives, goals, strategies, future events or performance,
and underlying assumptions and other statements that are other than statements
of historical facts. From time to time, the Company may publish or otherwise
make available forward-looking statements of this nature, including statements
contained within Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Forward-looking statements involve risks and uncertainties, which could cause
actual results or outcomes to differ materially from those expressed. The
Company's expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including, without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties.
Nonetheless, the Company's expectations, beliefs or projections may not be
achieved or accomplished.
Any forward-looking statement contained in this document speaks only as of the
date the statement was made. The Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances that
occur after the date on which the statement was made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, such
as the COVID-19 pandemic, and it is not possible for management to predict all
of the factors, nor can it assess the effect of each factor on the Company's
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking
statement. All forward-looking statements, whether written or oral and whether
made by or on behalf of the Company, are expressly qualified by the risk factors
and cautionary statements described in our 2019 Annual Report on Form 10-K
including statements contained within Item 1A - Risk Factors of our 2019 Annual
Report on Form 10-K, Part II, Item 1A of this Quarterly Report on Form 10-Q
and other reports that we file with the SEC from time to time.
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