Black Hills Corp. Reports 2012 Fourth Quarter and Full Year Results and Announces 43rd Consecutive Annual Dividend Increase
RAPID CITY, S.D.--(BUSINESS WIRE)-- Black Hills Corp. (NYS: BKH) today announced 2012 fourth quarter and full-year financial results and the 43rd consecutive annual increase in the company's dividend. Adjusted income from continuing operations, a non-GAAP measure,* for the fourth quarter of 2012 was $30.0 million, or $0.68 per share, compared to $19.7 million, or $0.46 per share, for the same period in 2011. For the 12 months ending Dec. 31, 2012, adjusted income from continuing operations was $92.2 million, or $2.09 per share, compared to $67.7 million, or $1.69 per share, for the same period in 2011.
The quarterly dividend was increased by $0.01 per common share to $0.38 per share, equivalent to an annual increase of $0.04 and dividend rate of $1.52 per share. Common shareholders of record at the close of business on Feb. 15, 2013, will receive $0.38 per share, payable on March 1, 2013.
"Considering the warm winter temperatures and low natural gas prices throughout 2012, we are very pleased with our earnings and operating results," said David R. Emery, chairman, chief executive officer and president of Black Hills Corp. "Prudent management of our businesses, successful execution of our continuous improvement and cost-reduction initiatives, and increased earnings in most of our businesses largely offset the negative impacts of weather and gas prices."
|Three Months Ended Dec. 31,||Twelve Months Ended Dec. 31,|
|(in millions, except per share amounts)||2012||2011||2012||2011|
|Income from continuing operations, as adjusted||$||30.0||$||19.7||$||92.2||$||67.7|
|Income (loss) from discontinued operations||(0.2||)||6.8||(7.0||)||9.4|
|Net income, as adjusted (Non-GAAP)||$||29.8||$||26.5||$||85.2||$||77.1|
|Earnings per share from continuing operations, as adjusted, diluted||$||0.68||$||0.46||$||2.09||$||1.69|
|Earnings per share, discontinued operations||—||0.16||(0.16||)||0.23|
|Earnings per share, as adjusted (Non-GAAP)||$||0.68||$||0.62||$||1.93||$||1.92|
|Income from continuing operations||$||30.9||$||18.8||$||88.5||$||40.4|
|Income (loss) from discontinued operations||(0.2||)||6.8||(7.0||)||9.4|
|Earnings per share from continuing operations, diluted||$||0.70||$||0.44||$||2.01||$||1.01|
|Income (loss) from discontinued operations||—||0.16||(0.16||)||0.23|
|Earnings per share, diluted||$||0.70||$||0.60||$||1.85||$||1.24|
|* An accompanying schedule for the GAAP to Non-GAAP adjustment reconciliation is provided below.|
"Despite the financial challenges in the first quarter, the company delivered adjusted earnings of $2.09 per share for 2012, up 24 percent compared to 2011, and toward the upper end of our revised guidance range," Emery said. "The electric utilities and power generation businesses posted solid earnings growth driven by the significant investments in our new power plant complex in Pueblo, Colo. The coal mining business also improved, with a $6.0 million earnings increase year-over-year. The gas utilities performed very well against the backdrop of warm winter temperatures, with solid operational performance, including zero controllable outages during 2012.
"We are proud of our 130 years of service to our communities. We thank our customers and employees for their ongoing partnership. During 2012, we invested in our utility infrastructure and systems, improving the safe, reliable and affordable service our communities and utility customers depend on. We placed the Pueblo Airport Generating Station into service, completed the Busch Ranch wind project, built two major electric transmission lines in Colorado, and began development of the Cheyenne Prairie Generating Station. Our employee team accomplished all of this safely, reducing reportable accidents by 29 percent compared to 2011.
"We completed two major transactions in 2012 that reduced our company's risk profile, improved our credit metrics and reduced our future equity financing needs. In February, we sold our energy marketing business, netting cash proceeds of $166 million. In September, our oil and gas business captured substantial value for shareholders by selling most of its Williston Basin oil and gas assets for $228 million. We used the proceeds to redeem $225 million of senior unsecured, 6.5 percent notes and will allow us to finance the Cheyenne Prairie Generating Station without the issuance of additional equity.
"In October, two credit rating agencies improved their ratings outlook for Black Hills Corp. from stable to positive. We believe the improved outlook recognizes the strength of our future earnings and cash flow, as well as the risk reduction and balance sheet benefits resulting from our two major sales transactions.
"On Jan. 31, 2013, we announced an increase in our quarterly dividend for the 43rd consecutive year, doubling the amount of increase from the previous year. Only two other electric or gas utility companies in the United States have a longer history of annual dividend increases. We take great pride in this record. It highlights the confidence we have in our business strategy, well-defined growth plans, ability to increase earnings and employee team.
"We are excited about our future. We have strong growth opportunities in our utilities and are encouraged by the potential of our Mancos Shale gas assets, based on our test well results and other operators' recent announcements. By focusing on strong growth, a superior customer experience, and being a great workplace, we will continue our track record of creating shareholder value for years to come."
Black Hills Corp. highlights for the fourth quarter and full year 2012, recent regulatory filings, updates and other events include:
- On Dec. 31, Colorado Electric suspended operations at its W.N. Clark coal-fired power plant in Cañon City, Colo. On Aug. 31, Black Hills Power suspended operations at its Ben French coal-fired power plant in Rapid City, S.D. These plants, along with several other previously identified plants, are planned for permanent retirement because of new state and federal environmental regulations. The affected plants are listed in the table below with their operations suspension date (if applicable) and their ultimate retirement date (if identified):
Age of Plant
|Osage||Black Hills Power||34.5||Coal||Oct. 1, 2010||March 21, 2014||64|
|Ben French||Black Hills Power||25.0||Coal||Aug. 31, 2012||March 21, 2014||52|
|Neil Simpson I||Black Hills Power||21.8||Coal||NA||March 21, 2014||43|
|W.N. Clark||Colorado Electric||42.0||Coal||Dec. 31, 2012||Dec. 31, 2013||57|
|Pueblo Unit #5||Colorado Electric||9.0||Gas||Dec. 31, 2012||to be determined||71|
|Pueblo Unit #6||Colorado Electric||20.0||Gas||Dec. 31, 2012||to be determined||63|
- On Dec. 17, Black Hills Power filed a request with the South Dakota Public Utilities Commission seeking a 9.94 percent, or $13.7 million, increase in annual electric revenues.
- On Dec. 17, Black Hills Power filed a request with the South Dakota Public Utilities Commission to use a construction financing rider for Cheyenne Prairie Generating Station in lieu of the traditional allowance for funds used during construction. This rider request, filed under recently amended state legislation, is a first in South Dakota. The rider will allow Black Hills Power to earn and collect a rate of return during the construction period on approximately a 40 percent share of the total project cost, while also lowering the overall cost of the project to customers. On Jan. 17, 2013, the commission approved a stipulation with interim rates effective April 1, 2013, subject to refund. The company anticipates a final commission ruling about the construction financing rider during the third quarter.
- On Oct. 30, Cheyenne Light and Black Hills Power received approval from the Wyoming Public Service Commission to use a construction financing rider for Cheyenne Prairie Generating Station in lieu of the traditional allowance for funds used during construction. The rider allows Cheyenne Light and Black Hills Power to earn and collect a rate of return during the construction period on approximately a 60 percent share of the total project cost, while also lowering the overall cost of the project to customers.
- On Oct. 16, Colorado Electric's 29 megawatt Busch Ranch wind project commenced commercial operations. Colorado Electric's share of the project's cost was approximately $25 million. On Sept. 18, the company completed the sale of a 50 percent undivided ownership interest in the project. On Jan. 30, 2013, Colorado Electric received approval notification from the United States Treasury for an award letter grant in the amount of $8.4 million for our share of the Busch Ranch wind project.
- On Sept. 27, Cheyenne Light and Black Hills Power received the final air permit for the Cheyenne Prairie Generating Station, finalizing all approvals and permits required for the new plant. The Wyoming Public Service Commission previously approved the certificate of public convenience and necessity authorizing the construction, operation and maintenance of the new 132 megawatt, $237 million natural gas-fired electric generating facility in Cheyenne, Wyo. The company has ordered all major equipment for the project and commencement of construction is expected this spring. Project costs for plant construction and associated transmission are estimated at $222 million, with up to $15 million of construction financing, for a total of $237 million.
- On July 30, Colorado Electric filed its electric resource plan with the Colorado Public Utilities Commission. The company is seeking to develop and own replacement capacity for the retirement of the coal-fired W.N. Clark power plant, consistent with a previous commission order that had mandated the plant be retired per the requirements of the Colorado Clean Air - Clean Jobs Act. The commission dismissed the initial filing without prejudice. It directed Colorado Electric to refile the resource plan and address alternatives for not just the replacement capacity for its coal-fired W.N. Clark power plant, but also for the retirement of the aging natural gas-fired steam turbines at Pueblo Units 5 and 6. On review, the commission confirmed Colorado Electric's right to own the replacement capacity for the W.N. Clark power plant and extended the date to refile the resource plan to May 1, 2013.
- On June 18, the Wyoming Public Service Commission approved settlement agreements increasing base rates for Cheyenne Light's electric and natural gas customers effective July 1. The PSC approved increases of $2.7 million in annual electric revenue and $1.6 million in annual natural gas revenue. The settlements included a return on equity of 9.6 percent and a capital structure of 54 percent equity and 46 percent debt.
- On June 4, Colorado Gas filed a request with the Colorado Public Utilities Commission for an increase in annual gas revenues to recover capital investments and increased operation and maintenance expenses. The filing was required by the commission as part of a 2008 rate case settlement. The commission approved a $0.2 million revenue increase with new rates effectives Dec. 10. The settlement included a return on equity of 9.6 percent and a capital structure of 50 percent equity and 50 percent debt.
- On Jan. 1, Colorado Electric's new 180 megawatt power plant near Pueblo, Colo. began commercial operations and started serving utility customers. New rates for Colorado Electric reflecting the new power plant investment were also implemented on Jan. 1. This plant was operational with availability greater than 95 percent during 2012.
- On Sept. 27, Oil and Gas sold approximately 85 percent of its Williston Basin assets for net cash proceeds of approximately $228 million.
- In the third quarter, the company's coal mining business commenced operations under its revised mine plan. Mining operations moved to an area with lower overburden ratios, which should reduce mining costs for the next several years.
- In the second quarter, Oil and Gas recorded a $17.3 million after-tax, non-cash ceiling test impairment to the book value of its crude oil and natural gas properties, due to low natural gas prices.
- On Jan. 1, Black Hills Colorado IPP's new $261 million, 200 megawatt power plant near Pueblo, Colo., began commercial operations. Its output was sold to affiliate Colorado Electric under a 20-year power purchase agreement. This plant was operational with contract availability greater than 99 percent during 2012.
- On Oct. 31, the company redeemed $225 million of senior unsecured, 6.5 percent notes scheduled to mature on May 15, 2013.
- In October, Standard & Poor's Ratings Services and Moody's Investors Service changed their credit ratings outlook for Black Hills Corp. from stable to positive.
- On June 24, the company extended for one year its $150 million term loan at favorable terms.
- On Feb. 1, the company entered into a new $500 million corporate revolving credit facility for five years at favorable terms.
- On Feb. 29, the company sold the outstanding stock of its energy marketing business, Enserco Energy Inc. Cash proceeds from the transaction were $166 million.
|BLACK HILLS CORPORATION|
|CONSOLIDATED FINANCIAL RESULTS|
(Minor differences may result due to rounding.)
|(in millions)||Three Months Ended Dec. 31,||Twelve Months Ended Dec. 31,|
|Net income (loss):|
|Total Utilities Group||25.7||22.9||79.6||81.9|
|Oil and gas (b)||—||(1.2||)||(2.2||)||(1.7||)|
|Total Non-regulated Energy Group||7.1||0.4||24.7||0.9|
|Corporate and Eliminations (a) (c) (d)||(1.9||)||(4.7||)||(15.8||)||(42.4||)|
|Income from continuing operations||30.9||18.6||88.5||40.4|
|Income (loss) from discontinued operations, net of tax||(0.2||)||6.8||(7.0||)||9.4|
|(a)||Financial results for the 12 months ended Dec. 31, 2011 include a $0.5 million after-tax gain on sale to a related party which is eliminated in consolidation.|
|(b)||Oil and Gas financial results for the three and 12 months ended Dec. 31, 2012 include an after-tax gain on sale of the Williston Basin assets of $1.2 million and $18.9 million, respectively. Oil and Gas financial results for the 12 months ended Dec. 31, 2012 include a non-cash after-tax ceiling test impairment of $17.3 million.|
|(c)||Financial results for the three and 12 months ended Dec. 31, 2012 include a non-cash after-tax gain related to mark-to-market adjustment on certain interest rate swaps of $3.1 million and $1.2 million respectively, and the three and 12 months ended Dec. 31, 2011 include a $0.9 million and a $27.3 million after-tax non-cash loss, respectively, for those same interest rate swaps.|
|(d)||Financial results of our Energy Marketing segment have been classified as discontinued operations in accordance with GAAP. When preparing this reclassification, certain indirect corporate costs and inter-segment interest expenses previously charged to our Energy Marketing segment could not be reclassified to discontinued operations and accordingly have been presented within Corporate in the after-tax amounts of $0.7 million for the three months ended Dec. 31, 2011, and $0.6 million and $2.2 million for the 12 months ended Dec. 31, 2012 and 2011, respectively.|
|Three Months Ended Dec. 31,||Twelve Months Ended Dec. 31,|
|Weighted average common shares outstanding (in thousands):|
|Earnings per share:|