Good day and thank you for standing by. Welcome to the Q3 2024 Black Hills Corporation Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today Sal Diaz, Director of Investor Relations.

Thank you. Good morning and welcome to Black Hills Corporation's third 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. Before we begin today we would like to note that Black Hills will be attending the Edison Electric Institute's Financial Conference on November 10th through November 12th. Our leadership team will be meeting with investors and analysts at the conference and the investor presentation will be posted on our website prior to the event. 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. Linn?

Thank you, Sal. Good morning and thank you all for joining us today. 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. Starting on Slide 3, I'm pleased with our progress on our customer-focused strategy, which is reflected in new margins and the advancement of our growth projects. As a team we delivered excellent service to our customers, continue to execute on our financial targets, and advanced our regulatory and growth initiatives. We continue to deliver on our commitment to provide our customers with safe and reliable service during the quarter, including dependable energy delivery through near-peak demand levels for our South Dakota electric system. Despite unplanned generation outages, total availability for our fleet remained above the industry standard with 98% availability for our natural gas units and 95% total availability across our generation facilities. We also took the opportunity to bring forward and complete some future major maintenance on units that experienced unplanned outages. The reliability we deliver to our utility customers this quarter was excellent. Our focus on reliability is delivering value for all of our customers and is a key value driver in attracting new customers to our service territories. During the third quarter, we announced our plans to serve Meta's first data center in Cheyenne, Wyoming, starting in the 2026 timeframe. As we look to the future, we are excited to serve demand for hyperscalers with our capital-light model and continue to receive inbound requests to expand load beyond Cheyenne. We remain on track with our $800 million capital plan for the year. Our ongoing capital investment plan is critical to delivering upon the commitments we made to serve our customers and communities…

Thank you, Linn and good morning, everyone. As Linn mentioned, third quarter results were in line with our expectations and we are on track to deliver on our earnings guidance and financial targets for the year. We completed our key financing activities and achieved our net debt to capitalization target of 55%. We are executing on our strategy to deliver on the financial commitment we made to grow our compounded annual EPS growth rate by 4% to 6%. Despite mild weather and other unexpected cost pressures this year, we are delivering new margins and managing our costs to achieve our financial objectives. Slide 8 shows third quarter EPS drivers compared to the same period last year. We reported $0.35 per share compared to $0.67 per share in Q3 2023. New margins were offset by higher operating expenses, unplanned generation outages, lower off-system sales and prior year onetime benefits. We delivered $0.16 of new margins, including new rates and rider recovery of $0.10 per share from our electric utilities, $0.05 from our gas utilities and $0.01 per share of customer growth and usage. These positive margin drivers offset unplanned generation outages, lower off-system sales and a prior year benefit from insurance proceeds. O&M increased $0.23 comprised of $0.15 from higher insurance premiums, employee costs and outside services, $0.03 of expenses associated with unplanned generation outages and $0.05 due to a prior year gain on sale of land to a data center customer. Interest expense increased $0.05 per share driven primarily by higher interest rates, while new shares lowered EPS by $0.02. Depreciation expense increased $0.05 per share, due to new assets placed in service. Slide 9 displays the earnings drivers year-to-date through Q3 2024. Through three quarters, we delivered a total of $0.57 per share of new margins, driven by the…

Thank you, Kimberly, and good morning everyone. I'll start my comments on Slide 13. As Linn mentioned, we continue to demonstrate our strong culture of operational excellence during the third quarter. We upheld our reputation for industry-leading electric liability as reflected recently by EEI with all three of our electric utilities in the top quartile of reliability for the three-year average through 2023. And while reliability is critically important to our customers, it also supports our growing data center demand. During the quarter, we also advanced our plans for new generation resources to serve growth and meet our Colorado Clean Energy plan requirements, all while maintaining strong reliability and enhancing our resiliency. I'm also proud to share that last week the U.S. Department of Labor awarded Black Hills with the higher Vets Medallion award for the fifth consecutive year. This award recognizes organizations with employer efforts in recruiting employing and retaining our nation's veterans. We value our veteran colleagues and the dedication and leadership they bring to our team and culture. On Slide 14, I'll provide a status update on our rate reviews. We continued to reach constructive results during the quarter. In Arkansas, we received approval for new rates effective in October. The approved settlement allowed $25.4 million of new annual revenue, which includes a return on equity of 9.85% based on 46% equity. In Iowa, we reached a settlement for our rate review request pending approval by the IO Utility Commission the confidential settlement allows $15 million of new annual revenue based on a 7.1% weighted average cost of capital. The settlement provides for implementation of final rates in the first quarter of 2025, which will replace the interim rates. Our other active rate review is for Colorado Electric. We received answer testimony from the interveners in October…

Thank you, Marne. Once again our team made strong progress on our strategic initiatives as we invest in safe, reliable and resilient energy delivery for our customers. We continue to execute our regulatory plan and aggressively pursue our strategic growth opportunities including serving data center and blockchain load growth. Finally, I want to express my sincere appreciation to the Black Hills team for effectively and efficiently serving our customers while managing through unexpected challenges of the year. And with that, we'll be happy to take your questions.

Thank you. [Operator Instructions] Our first question comes from Andrew Weisel with Scotiabank. You may proceed.

Hi. Good morning, everyone. My first question is you mentioned the unplanned outages a couple of times there. Can you give a little more detail on what exactly were the issues? And what was the O&M impact to earnings?

Good morning. Andrew, this is Marne and thanks for the question. I'll get us kicked off, and I'll let Kimberly jump in on the financial side of it. So this quarter, we had a rollover. Last quarter, we announced that we had a couple of outages driven by some components that failed. And one of those outages just rolled over into the early part of Q3. And so that was the impact. There was no additional outages this quarter. And I'll turn it over to Kimberly from the financial impact side of it.

Yeah. Are you asking for the quarter or for the year, Andrew?

Both if you can share that.

Yes, they're on the slides that you can look at, I believe it's $0.03 and $0.05, respectively. But when you look at it in total, you include the impact from the margin side as well. And so if you look at the slides, you can see the collective both from the margin impact and the O&M impact from the implanted outages. Hopefully, that will get you what you need.

Perfect. Yeah. Great. I appreciate that. And then along those lines, I believe you're reiterating the guidance for the year. You mentioned those negatives and you're mitigating that with some better-than-expected O&M trends are you able to comment where within the range you might be trending high, middle, or low end?

Great question, Andrew. No, we don't comment on where we're at in the range. Just the fact that we have reaffirmed the range and we expect to achieve the financial objectives that we've laid out for the year.

Okay. Fair enough. Mix is a high-level question, and I realize it's only been a little more than 24 hours since we've known the election results, but you guys are very well positioned in terms of crypto and bitcoin and blockchain and all that. And obviously, President-elect Trump has made it clear that he supports those industries, and we've seen a huge spike in the price of crypto. Any early level thoughts on what the incoming administration might mean for that industry and how you and your service territory might be uniquely positioned to benefit.

Andrew, this is Linn. Thank you for that question. We appreciate it. I'd like to -- I guess I like our strategy because it's really focused on our customers and what's best for our customers with respect to how we help them grow serve their energy needs. And so we're -- I would say we're fairly agnostic to what federal policy might be in that regard. However, our states certainly have a lot of say in our policy and how we serve our customers. That's where we tend to focus the most. But I think your sentiment is indeed right and correct. We've been serving data centers for more than a decade. We're particularly good at it. And we think that, yes, it could have a benefit for us going forward, or we know it will for having going forward.

Okay. You said data centers. I think you meant these other customers, though, right?

I did. It's just in general, we treat them all largely the same. We have different tariffs for each one, but we understand that reliability is critical to them. The service quality that we provide them is critical, et cetera. So we kind of serve them all kind of the same way, if you will, but obviously, different forms of tariffs and things of that nature.

That makes a lot of sense. Thank you very much.

Thank you, Andrew.

Thank you, Andrew.

Thank you. Our next question comes from Chris Ellinghaus with SWS. You may proceed.

Yeah, everybody, how are you? Linn, you've sort of persistently talked about the upside from the large load customers. Is there any kind of cadence to what you're expecting? Are there particular years you're expecting new loads? Can you give us any sort of insights on that?

Yeah. Thank you, Chris, for that question. The beauty of having served one of our, what I'll call, our anchor tenants for over a decade is we understand their cadence, they inform us where they're headed and they meet those measurements just kind of lockstep. So that goes very well full. It's actually kind of relatively smooth with the data center we're serving currently. We announced Meta last quarter. They come on the end of 2026. And so that will be -- they'll come on kind of gradually as well. So I think that's the beauty, frankly, of these calls that the data centers that we're serving is that they come on and then they have a cadence as they grow and as they expand. And I can say -- I can tell you that they have bought land around Cheyenne, et cetera. So we see expansion going on for some time.

Are you seeing any acceleration given the investment in AI computing at this point?

I don't know if we've seen acceleration. We've seen stronger interest in terms of the inbound calls that we take. And historically for us, Cheyenne has been such a great place for data center still is because of the fiber optic network that is very rich in the Cheyenne region. And my understanding is with the AI there's less fiber dependent. And so we're actually encouraged by the possibility of having data centers and particularly AI centers in other parts of our service territory and then bringing our skill set that we've gained over the last decade we think that can give us some advantage.

The new intertie also factor into that?

Didn't quite understand the new -- the ACDC tie, I'm sorry?

Yeah. Are there reliability thinking?

It certainly impacts our reliability thinking. It always does for any kind of a customer, yes. It gives us some flexibility to take energy back and forth across to two separate grids. The grid boundary is right here at Rapid City. So we're accustomed to that to know how to deal with that.

Okay. The upside to the CapEx slide, have you got any color that you want to add to that in terms of the types of investments that you're thinking about?

The types of investments tend to be right down the center of the fairway for us to use the golf analogy transmission on both electric and gas side. We have perhaps some gas storage opportunities. We've got frankly more capital projects and maybe you could argue that our customers could afford. So it's always a balance of what's best for customer, what allows us to serve them effectively that costs us effectively and then make sure we generate that return for the shareholder.

Okay. And Kimberly can I ask the guidance question a little differently? Given the third quarter results and where the range is suggests a pretty strong fourth quarter. Can you address any of the bigger issues that you are expecting to drive the fourth quarter? And is that O&M number for the year part of that factor?

Yeah. So when you think about our full year, you look back at Q1 and Q2, our O&M was actually favorable comparative to the prior year quarters. And so we've been managing O&M. Our year started out with pretty mild weather and that's continued. And so that's really how we're focused on managing O&M to cover unplanned outages, address some of the insurance, expense increases that we've experienced. And so as you look forward, we're really trying to manage that O&M as we started the year it was about a 3.5% year-over-year increase that we planned for. But with some of these what I'd call unexpected challenges with weather, insurance, et cetera that's really how we're focused on managing it right now, as well as making sure we're really diligent on how we think about our capital investments -- I'm sorry capital investments on behalf of our customers. So I think the guidance that we've given you here should help you achieve how we're thinking about that 4% to 6% growth and how we're thinking about earnings guidance for the year.

And Chris this is Linn. I could not be more proud of how our team has stepped up an incredible way very laser focused on how we control costs on behalf of customers and then provide the shareholders that return as well. So I just want to take a moment to say a big shout out to our team and how focused they've been and how helpful they've been this past year and going into the fourth quarter.

I don't recall who -- it was probably Marne, I'm not sure. Somebody mentioned that you took advantage of the outages to do some longer term maintenance. Does that have an effect on say 2025? Or what period was some of that maintenance O&M drawing forward from?

Yeah, this is Marne. So when we do have these larger outages where we're opening up more of the machine, it's an opportunity to pull forward some of that maintenance. Typically you're looking out one to two years of pulling that forward. It's really dependent on what we find when we open that up.

Okay. I appreciate it. Thanks for the color.

Thanks, Chris.

Thanks, Chris.

Thank you. [Operator Instructions] Our next question comes from Julien Dumoulin-Smith with Jefferies. You may proceed.

Hi, it's Brian Russo on for Julien.

Hey, Brian.

Hi.

Is there any opportunity given your commentary around these data center growth, the 5% of current EPS contribution growing to 10% by 2028? Is that really just the anchor tenant? And also, the Meta project announced a month or two ago? Or is there more projects that are driving that now?

Yes, Brian, this is Kimberly, a couple of comments there. I would generally say it's an anchor tenant. It includes Microsoft and Meta. But as Marne mentioned, those and Linn mentioned, those data center loads continue to evolve over time. Their -- Linn mentioned the land that they're purchasing. So there are future opportunities. But at this point we're focused on that 5% to 10% growth. We obviously work with both Meta and Microsoft to evaluate what their forecasts are and we will be updating that as we go into Q4 and announced all of our capital and earnings guidance in February. One other thing I'd note is, we are getting additional inbounds not just in Wyoming, including conversations that we're having both in Colorado and South Dakota. So that will also inform our future EPS growth, as we continue to partner with potential other data centers in our territory.

Yes, that was actually going to be my next question outside of Wyoming. A lot of these customers you mentioned are very active in the Dakotas and Colorado as well. Will you look to set up some sort of a similar kind of LPCS or BCIS tariff structure that these customers are receptive to that in Wyoming in these other states?

Brian, this is Linn. Thanks for that question. I'd say the answer is maybe, we pride ourselves in doing what we think is really good for customers and shareholders. So we'll be flexible. We have lots of different -- we have multiple tariffs that we could use, multiple avenues that we can serve them. And for us because of our size and our ability to be agile, we can modify and do what we think is -- does well for the customer, but making sure we also protect the shareholder. So that's my approach to that.

Okay. Thank you very much.

Thank you, Brian.

Thank you. I would now like to turn the call back over to Linn Evans for any closing remarks.

Well, good morning again and thank you for joining us today and especially thank you for your interest in Black Hills. We'll be seeing a number of you starting this weekend at EEI, so please travel safe. We look forward to engaging with you there. And once again, I want to say a sincere thank you to the Black Hills team. I just really appreciate how all of us has stepped up this year to make sure we serve our customers and our shareholders excellently. And you've done that. So thank you so much. I encourage everybody to have a Black Hills Energy safe day. Take care.

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