Good day, and thank you for standing by. Welcome to the Q2 2024 Black Hills Corporation Earnings Conference Call. At this time all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jerome Nichols, Director of Investor Relations.

Thank you. Good morning, and welcome to Black Hills Corporation's second quarter 2024 earnings conference call. You can find our earnings release and materials for our call this morning on our website at www.blackhillscorp.com under the Investor Relations heading. Leading our quarterly earnings discussion today are Linn Evans, President and Chief Executive Officer; Kimberly Nooney, Senior Vice President and Chief Financial Officer; and Marne Jones, Senior Vice President, Utilities. During our earnings discussion today, 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 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission 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, Jerome. Good morning, and thank you all for joining us today. Before we share our comments about our quarter, on behalf of the Black Hills team, I would like to thank Jerome for his 20 years of service to our company with the last 13 years as our Director of Investor Relations. Many of you know Jerome well, and I ask that you join us in wishing him all the best as he enjoys his well-deserved retirement. And as we say thank you to Jerome, we're pleased to welcome Sal Diaz to our team as our new Director of Investor Relations. Congratulations, Jerome, and Sal, welcome to the team. I'll begin my comments with a brief overview of the quarter. Kimberly will provide our financial update, and Marne will provide more detail on our team's operational performance and our strategic progress. Turning to Slide 3. We continue to execute our customer-focused strategy during the second quarter. Once again, I'm pleased to share that our team delivered excellent service to our customers, continued to execute on our financial targets and advanced our regulatory and growth initiatives. I'm very proud of our team as we continue to dependably serve our customers, living out our Ready to Serve commitment. Our thoughts are certainly with our customers who faced severe storms and flooding in recent months across several of our communities. Marne and I witnessed firsthand the impact on neighborhoods and businesses. And we appreciate the admirable response and service of our team, who quickly responded to the needs of our customers and are supporting the restoration efforts in our impacted communities. As we continue to support those impacted, I'd like to say a huge thank you to our colleagues listening in today across our service territory for exemplifying our values and…

Thank you, Linn, and good morning, everyone. We delivered a solid second quarter. We remain focused on our objective to carefully manage our expenses and improve credit quality and we achieved those goals for the first half of the year. Slide 9 shows second quarter EPS drivers compared to the same period last year. We reported $0.33 per share compared to $0.35 per share in Q2 2023. Quarterly earnings were primarily driven by new margins and expense management by our team, which largely offset the impacts of weather and a prior year income tax benefit. We realized $0.13 of higher margins from new rates in rider recovery, including data center margins, and $0.03 of customer growth and usage. These positive results were partially offset by impacts to revenue due to unplanned generation outages. Through continued cost management, we delivered lower O&M of $0.04 per share compared to Q2 2023 primarily due to lower labor costs. We continue to experience the impacts of inflation within our business, including additional expenses associated with increasing insurance premiums. Given these factors, coupled with the mild weather we experienced during the first half of the year, we will continue to manage our O&M to an increase of approximately 3.5% for the full year to achieve our 2024 financial targets. As a reminder, our earnings guidance assumes normal weather. For the quarter, compared to normal, weather negatively impacted EPS by $0.07 per share. Compared to Q2 2023, weather negatively impacted earnings by $0.04 per share. Income taxes increased due to a $0.12 prior year benefit, resulting from a reduction in Nebraska’s state income tax rate. Slide 10 displays the earnings drivers through the first half of 2024. We are on track to achieve our 2024 financial targets despite unfavorable weather of $0.14 per share compared to…

Thank you, Kimberly. We had another strong quarter of serving our 1.3 million families and businesses across our footprint. Through windstorms, tornadoes and flooding, our team of operational experts proactively managed our systems to keep our customers safe with system reliability and resiliency top of mind. I will start my comments on Slide 14 with a regulatory update. We have demonstrated our ability to reach constructive results with three or more rate reviews annually in recent years. We are in the final stages for our Arkansas Gas rate review and continue to anticipate new rates in the fourth quarter. Our Iowa Gas rate review continues as planned with interim rates in place since May 11 and final rates expected in early 2025. In June, we filed a rate review for Colorado Electric, our first since 2016. Over the past eight years, we have kept base rates unchanged while incurring increased costs and necessary system investments of approximately $470 million, which support a safe, reliable, resilient and clean energy system. Nearly one third of that capital is currently recovered through our transmission rider. Our request includes $36.7 million in new annual revenue, a capital structure of 53% equity and a 10.5% return on equity. We are requesting new rates by the first quarter of next year. Slide 15 provides an update on our enhanced disclosures and engagement on wildfire management and risk mitigation, a key safety and reliability priority of ours for more than a decade. Operationally, we use a layered approach to wildfire mitigation, which can be summarized into three broad categories: asset programs, integrity programs and operational response. In June, we disclosed our comprehensive Wildfire Mitigation Plan, which provides deeper insight into the practices, policies and procedures we carry out every day. We continue to engage broad stakeholder groups,…

Thank you, Marne. I'll summarize our quarter by expressing my thanks to our team for how they continued strong progress on our strategic initiatives as we invest in and maintain our systems for our customers, successfully execute our regulatory plan, tirelessly develop and execute our strategic growth opportunities and creatively serve our expanding data center and blockchain load growth. And with that, we'll take your questions.

Thank you. [Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Jefferies. You may proceed. Julian, your line is now open. If you're on mute, please unmute.

All right, I'm picking up the handset here. Let's make sure it works. Hey, good morning, team. How you guys doing?

Good, Julian, good. Welcome back to the game.

Hey, thank you so much. Congrats, Jerome, on your retirement. It's been a great line. It's been a real pleasure.

Thank you very much. Appreciate that.

Absolutely. Look, guys, nice updates and continued success here. And I give you guys kudos for being early in adapting to data centers in this conversation early on with these novel tariffs. To that end, this 10% number by the end of the five year plan, can you talk a little bit about the parameters that are reflected versus perhaps maybe not necessarily reflected in the capital budget here? I know this is a fluid conversation, but what's in, what's not in, in terms of how you get there? And then also related to that, focusing on a tariff conversation, how do you think about the rate case cadence and how that gets reflected in earnings vis-a-vis some of the novel tariffs that you guys have had in place?

Yes. Thank you for that question, Julien, and we appreciate being able to focus on our data center successes. As you know, we've had this LPCS, a Large Power Contract Service tariff in place since about 2016. So it's been an important part of our growth model and our strategy for the last several years especially as we had the good fortune of serving Microsoft and some other blockchain customers. We're very excited to have announced Meta here very recently in June, and that's a project we have been working on for some time with them. And so the Meta and the Microsoft loads and other loads that we anticipate are reflected in that 10% - or perhaps greater 10% of our EPS towards the outer part of the year – of the plan in around 2028. We're very fortunate to serve a great service territory for data centers, starting with the weather that we have there, the elevation, the fiber. There's lots of things that attract people or customers to that region. And then we have a very innovative tariff that I just mentioned that allows us to serve customers relatively rapidly. It provides protection for customers or normal customers, if you will. It allows us to serve these growing data center loads as rapidly – fairly rapidly, if you will, so they can come to us pretty quickly. And we're excited about that service. And we called these in the past, and we still call them capital-light kind of projects. Yes, we invest some capital for them in terms of substations, things of that nature, but they're relatively capital-light. But if you look at our Slide 6, we got the green carets. There is potential, and there's lots of moving parts, if you will. We'll see what happens…

Got it. Excellent. Thank you guys very much. Appreciate it. And actually, just to elaborate on what you just said a second ago when you were talking about other opportunities, energy capacity, et cetera, I mean, you guys have done previously sort of contracted capacity outside of the traditional vertically integrated utility construct. Is that another avenue here that when you think about serving your evolving loads in novel ways, is that something you could be looking to do is to have long-term contracts with them directly? Or it would be...

Yes, we could do that.

Okay. Excellent.

Yes, it could be – it's kind of all the above approach, yes, and that would be one of them.

Got it. Yep. Awesome. All right, I'll leave it there. Speak to you guys soon.

Thank you, Julien.

Thank you, Julien.

Thank you. [Operator Instructions] And I'm not showing any further questions. I would now like to turn the call back over to Linn Evans for any closing remarks.

Well, thank you, Josh. Appreciate your help this morning. I just want to pause for a moment and really thank our team. Marne's comments about the storms, the flooding, the tornadoes that our customers have endured, our hearts certainly go out to those communities. And I really just thank our team and how well they represented our values, represented our culture and came to the rescue, if you will, to make sure we have safe, reliable and resilient energy and energy for our customers. So thank you for that. I want to emphasize our positive results for the Q2 and for the first half of the year. We're off to a great start for 2024. Again, thank you to our team. I'm excited about our growth initiatives. Our Ready Wyoming project, our largest capital project in our company's history, is on track. Our customer growth continues. We're very excited, as you can tell, about continuing to serve data centers and blockchain loads. And then our capital plan across our gas utilities, electric utilities being executed very, very well. You may be able to hear a little thunder in the background. We have the Sturgis Motorcycle Rally that officially starts tomorrow. So if any of you happen to be in Sturgis, riding your motorcycles or otherwise over the next week, please stop by and say hello. And with that, again, thank you to our team, and enjoy a Black Hills Energy safe day.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.