Good day and thank you for standing by. Welcome to the First Quarter 2023 Black Hills Corporation earnings Conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today. Dave Soderquist, manager of Investor Relations.

Thank you and good morning, everyone. Welcome to Black Hills Corporation’s First quarter 2023 Earnings Conference Call. You can find our earnings release and materials for this call on our website at www.blackhillscorp.com under the Investor Relations heading. leading our quarterly earnings discussions today are Linn Evans, president and Chief Executive Officer and Kimberly Nuni, Senior Vice President, Chief Financial Officer and Treasurer; also, in attendance today are Marne Jones, vice President of Electric Utilities and Todd Jacobs, Vice President of Growth and Strategy. Before we begin today, we would like to note that Black Hills will be attending the American Gas Association Financial Forum in the week of May 21st. Our leadership team will be meeting with investors at the conference and the investor presentation will be posted on our website prior to the conference. During our earnings discussion today, some of the comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, slide two of the investor presentation on our website and our most recent form 10-K and Form 10-Q filed with the SEC for a list of some of the factors that could cause future results to differ materially from our expectations. I will now turn the call over to Linn Evans.

Thank you, Dave. Good morning, everyone and thank you for joining us. Before I begin my comments, I also want to welcome Marne and Todd this morning. going forward, they will be participating in our earnings calls and will help respond to your questions. They’re great leaders and I’m confident you will appreciate their perspectives. I’m starting on slide four. Our team delivered a solid quarter. We’re reaffirming our guidance and we have four key takeaways for you today. We’re managing O&M to achieve our guidance range. Our operational performance continues to be excellent. We’re strengthening our balance sheet and we’re advancing our growth initiatives. As also indicated on this slide, our RRR theme for this year is resilient, reliable and ready with each emblematic of Black Hills and our team. first, I’m especially proud of our team’s operational performance for safety and reliability. Our team and systems continue to perform outstandingly, reliably serving customers during record cold temperatures and through continued customer growth while supporting our ability to deliver solid financial results. Our generation availability and reliability enabled strong wholesale energy sales that benefited customers and shareholders. Second, we made excellent progress strengthening our balance sheet and enhancing our liquidity. with strong cash flows at our financing activities, we fully repaid our commercial paper borrowings. Kimberly will cover our financial progress and her update. So, I won’t steal all of her thunder. And third, we successfully advanced our growth initiatives. Those initiatives included success on our 2023 Capital Program and we started providing energy to the largest blockchain customer in the state of Wyoming while advancing our transmission project, Ready Wyoming. We also achieved key milestones as we advanced our electric resource plans in Colorado and South Dakota. Our financial outlook on slide five is consistent with our fourth…

Thank you, Linn and good morning, everyone. I’ll begin my comments on slide 12. With earnings per share compared to the same period last year, we delivered EPS for the first quarter of $1.73, compared to $1.82 last year. Results were driven by new rates and rider recovery revenue, a planned gain on sale of our non-core Northern Iowa Windpower assets, customer growth and wholesale energy sales. These results were tempered by negative mark-to-market adjustments on our non-utility natural gas commodity contracts, higher operating costs, increased interest expense due to higher interest rates and impacts from the issuance of new shares. Slide 13 highlights the after-tax drivers of change in net income year-over-year for Q1 2023 compared to Q1 2022. higher utility margins were driven by $0.12 of EPS from new rates and investment riders, $0.05 of EPS from customer growth and usage, $0.03 of EPS from wholesale energy sales, which were reduced by $0.08 per share of mark-to-market losses on non-utility commodity contracts within our natural gas utilities. Compared to normal, weather provided a $0.03 EPS benefit in Q1 2023, compared to a $0.06 benefit in the same period last year. O&M expenses increased 3.6% year-over-year, driven by the inflationary impacts on labor costs and benefits, higher materials, fuel and outside services, and planned maintenance for our electric generation assets. These impacts were partially offset by the gain on sale of the Northern Iowa Windpower assets. while total debt was consistent with last year, interest expense increased due to higher interest rates. Additional details regarding our financial results are available in our earnings release and 10-Q released yesterday. Slide 14 summarizes our progress during the quarter to strengthen our credit metrics and liquidity through strong operating cash flows, disciplined capital investment and execution on our financing plan, significantly higher…

Thank you. Good morning, everyone.

Good morning, Andrew.

Good morning, Andrew.

A couple of questions for you here. The first one is FFO to debt. I know you’re at 12% last year and the target is 14% to 15%. Can you tell us what the trailing 12 months would look like after 1Q, how soon you expect to get to 14% and what are the biggest drivers will be to get there?

Yes, absolutely. So, we have, as you know, three agencies within our portfolio; Moody’s, S&P and Fitch. We’ve hit our targets for two of the three as of the end of March 31. So, we’re in excellent shape there. So, we’re in good standing with Fitch and Moody’s. We’re working towards achieving S&P’s targets by the end of this year.

Okay, meaning 14% or higher by the end of 2023?

Yes. our focus is early – late this year, early next year, getting to the 14% for S&P.

Okay. and the biggest drivers of the improvement there?

Yes. the cash position that we’re in has been a significant benefit to those calculations.

Okay, great. Next one, just to clarify something, South Dakota in Wyoming, IRP, the clean energy resources are now showing mid-2026 versus previously 2025. What explains that delay there? Is that timing of the RFP or supply chain delays, or what’s going on there?

I don’t think there’s any real significant thing causing that particular delay. That’s the timing of when we think we’ll have approval of the RFPs and the plan that we will propose to the commission. We anticipate the Colorado PUC, Andrew will make that decision in early 2024, late first quarter, maybe even in the early second quarter. So, we will be issuing those RFPs mid this year. We’ll get those RFPs back and then we start the process of then getting the approved plan through – with the commission. We anticipate again, that approval will be kind of first quarter 2024 and then we’ll start construction thereafter. And so this timing of all that would probably put us right into that early 2026.

Okay, very good. Then, if I could squeeze one last one in here on O&Ms, you talked about cost cutting to achieve the guidance range. Can you give some examples and how much of that would be one-time versus recurring in nature?

Well, it’ll be a little bit of both, Andrew. We do have levers that we have pulled and that we are pulling with respect to internal costs, external costs, we’re being very cost conscious. Some of the more lasting elements that will take us into the future, or the elements, or the spot savings that we are finding efficiencies through our energy forward program. We have a number of things, what we call quick wins that we put in place; in other words, a low hanging fruit, where we can help ourselves be more efficient and unlock those efficiencies. And then we have teams of people, who are unlocking efficiencies that will be more longer term. So, we believe we have sufficient levers that we will be within our guidance and well, our team – all of our team is focused on making sure that happens.

Okay. Thank you very much for the time.

Thank you, Andrew.

Thank you, Andrew.

Thank you. Our next question comes from Brandon Lee with Mizuho. you may proceed.

Hey. good morning, Linn and good morning, Kim. Thanks for taking my questions.

Good morning, Brandon.

Good morning, Brandon.

Good morning. Just a quick question on the Windpower asset that you sold, does that reduce your equity need for the year? Is that what the goal was?

it is not.

Okay.

Yes. it is not. it was roughly an $18 million of cash impact. So, pretty immaterial to the overall portfolio, especially when you think about our credit quality and credit metrics.

And can you talk about the process, was it an inbound inquiry or were you kind of shopping that asset around?

It’s something that we started a couple, well, probably more than a year ago. We had it in our guidance for last year that we thought we’d actually sell that asset. We did essentially a reverse RFP. We put it up for sale, had a strong interest in it. We thought we might close that transaction last year, but due to some closing requirements, rights of away things of that, nature of that and other approvals that we needed, that moved into first quarter of this year.

Okay. Great. That’s all I had. Thanks a lot.

Thank you, Brandon.

Thank you. And this concludes the Q&A session. I’d now like to turn the call back over to Linn Evans for any closing remarks. Well, thank you very much for joining us this morning. We appreciate your interest in our organization. We had made great progress in Q1 serving our customers with reliability and safety. Thank you to my team for doing that, our team. we strengthened our balance sheet and we executed very well on our growth opportunities, and we’ll look forward to seeing several of you, if not many of you at the AGA Financial Forum later this month. And again, thank you for your interest in us and have a Black Hills Energy safe day. Thank you.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.