Good day, and thank you for standing by. Welcome to the Black Hills Corporation Q4 and full year 2024 Earnings Webcast and 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. I would now like to hand the conference over to your speaker today, Sal Diaz, Director of Investor Relations. Thank you, operator.

Good morning, and welcome to Black Hills Corporation's fourth quarter and full year 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 call 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 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 Securities and Exchange Commission, for a list of some of the factors that could cause future results to differ materially from our expectations. With that, 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 our success for 2024 and long-term outlook. Kimberly will provide our financial update, and Marne will provide more detail on our team's operational performance and our strategic progress. Diving in on slide three, we delivered on our key objectives in 2024, advancing our customer-focused strategy. I'm very proud of our team who delivered excellent service to our customers, delivered on our financial commitments, and advanced our regulatory and growth initiatives. In 2024, we made strong progress on our strategic growth plan with industry-leading reliability while successfully serving the nineteenth consecutive year of increasing peak loads for Wyoming Electric, recently recording a new peak demand of 318 megawatts. We also invested over $800 million for the core energy needs of our customers and the communities across our growing footprints. We delivered on our earnings guidance, and we are well-positioned to achieve our long-term EPS growth target. Even through challenges from mild weather and unplanned generation outages, our team's relentless focus on expense management put us right down the middle of the fairway with our guidance range. EPS growth was 4.3% in 2024, off our 2023 guidance midpoint of $3.75, and we expect to deliver approximately 5% EPS growth in 2025 off of 2024, as reflected in our earnings guidance for the year. Our financial position remains solid. During the year, we achieved our capitalization target, successfully completed our financing plan, and maintained our solid investment-grade credit ratings. Our team has also demonstrated notable progress managing our diversified multi-state service territory, continuing our cadence of approximately three rate reviews annually, as we recover investments for our customers and the inflationary impacts in our cost to serve. In 2024, we implemented…

Thank you, Linn, and good morning, everyone. I want to start by thanking our team for their agility and resiliency in delivering strong financial results despite some unexpected challenges we experienced during the year. From a financial perspective, through our team's hard work, we delivered on our earnings guidance and financial targets for 2024, and we remain on track to deliver on our long-term strategic growth and financial objectives. Slide nine illustrates our success in 2024, displaying year-over-year earnings drivers as compared to 2023. Results were in line with our expectations, including new margins, which more than offset capital investment costs reflected in financing and depreciation. We overcame mild weather, two unplanned generation outages, and higher insurance costs through significant expense management, including reduced spending on outside services and managing headcount, which helped us achieve our financial targets for the full year. In 2024, we delivered $0.74 per share of new margins driven by the successful execution of our regulatory strategy and $0.08 per share driven by customer growth. This margin growth was partially offset by lower off-system sales, unplanned generation outages, and an insurance recovery payment received in 2023. During 2024, exceptionally mild weather reduced EPS by $0.20 compared to normal and $0.15 compared to 2023. Mark-to-market adjustments provided a gain of $0.01 per share for the year and $0.06 compared to 2023. Moving to O&M, I'm extremely proud of our team's success in managing our expenses well below our projected 3.5% year-over-year increase. Our actions assisted in offsetting the $0.15 of mild weather discussed earlier, $0.09 due to rising insurance costs, $0.05 associated with unplanned generation outages, and $0.13 related to one-time gains from sales of assets and land completed in 2023. Overall, our O&M management efforts substantially reduced the year-over-year O&M increase to less than 1% or…

Thank you, Kimberly, and good morning, everyone. Starting on slide fourteen, I'm proud of our operational execution in 2024 as we delivered excellent electric and natural gas service to our 1.35 million customers across our eight states. We delivered on key operational objectives, including providing top quartile reliability. Linn mentioned earlier that our customer count is growing at a robust pace across our service territories. In Wyoming, we have served nearly two decades of consecutive annual increases in our electric system peak load. As we serve this increasing demand, the expectations of our customers are also expanding. We are listening and working to be ready for the future by advancing our strategic initiatives, which in the near term includes our Ready Wyoming electric transmission project, our Colorado Clean Energy Plan renewable generation addition, which will add 99 megawatts of dispatchable generation for South Dakota Electric. I will also provide an update on our regulatory progress and wildfire management and mitigation plans. Slide fifteen highlights our success in managing over a decade of growth in data center load. Our anchor customers are respected leaders in the technology industry and have recognized Cheyenne, Wyoming's ideal attributes for data center operations and future expansion opportunities. Collectively, our existing data center customers project a total load exceeding one gigawatt. We take pride in our track record as a trusted energy partner delivering customized and innovative solutions to meet our customers' unique needs. Our distinctive market energy procurement model provides utility-like returns without the need for material capital investment, providing benefits for our other customers. Consequently, our current service model generally requires minimal capital investment as compared to traditional utility rate-based projects. It's important to note that our data center customers are served through approved tariffs, with the earnings separated from our retail customers for…

Thank you, Marne. We had an excellent year delivering on our strategy. We continue to cost-effectively serve customers with industry-leading reliability. We demonstrated success in constructive rate reviews. We achieved our financial objectives, including earnings guidance, our long-term EPS growth target, and a strengthened balance sheet. We have confidence in our earnings growth potential given a 10% increase in our capital plan of $4.7 billion and over one gigawatt of total data center demand from existing customers. Our team's focus continues to be to provide safe, reliable, and cost-effective energy for our customers. Finally, I want to express my sincere appreciation to the Black Hills team for safely, effectively, and efficiently serving our customers while managing through unexpected challenges throughout the year. And with that, we're happy to take your questions.

Thank you. As a reminder, to ask a question, please press star one one on your telephone. One moment for questions. Our first question comes from Anthony Crowdell with Mizuho. You may proceed.

Hey. Good morning, team. Hope all is well. Appreciate the disclosures. If I could just ask two hopefully quick ones on slide five. The company gives the CapEx forecast. When I compare that to the CapEx forecast on the third quarter call, there was previously a spike in CapEx in 2026 that has since come down. Just want to know if you could give some clarity on the changing of the CapEx spread.

Yes. This is Kimberly. Good morning, Anthony. A few different things going on here. You know, originally, when we set our previous capital forecast last year, we had some significant projects that were assumed to go into service in 2026. Since then, we've had some updated outcomes that have redistributed those costs within the plan. And so that's why you'll see maybe higher capital expense or capital investments in 2025 versus some of the other years. You know, the other comment I'd like to make is we have added, you know, $400 million to the overall plan from last year. There's a combination of things going on there. We continue to see a lot of really good organic growth within our service territories. We're continuing to invest in safety and reliability investments on behalf of our customers. And then, you know, some of the large projects that we have going on, specifically, you know, we have Ready Wyoming, focused on the length two that Marne mentioned. We've seen increases in inflation and financing costs related to those projects. So those are components that help drive the additional $400 million of capital investments that you're seeing in the plan.

Great. And then I don't mean to just maybe I'm looking too deep into it. I'm curious. On slide six, you guys talk about the expectation of no more than, I guess, 10% plus of contribution from the data center load to capital out opportunities. In this updated slide deck, you say that 10% plus by 2029. In your previous disclosures, you were actually getting 10% plus by 2028. Is there a delay in the plan, or am I just reading too far into the plus sign there?

No, Anthony. Great question. So maybe just a couple of thoughts around that. You know, we have a compounded annual growth rate of 4% to 6%. You know, what we've said is we're, you know, we're extremely confident in that growth rate, and we expect to grow, you know, to the higher end of that range in the latter part of the plan. When you think about that growth rate and then you specifically think about our 10% plus related to the data centers, we still have, you know, great organic growth within our business model, so it's not a static or linear calculation. So as you think about our EPS continuing to grow over the long term, you know, the component of the data center growth based on our current customers and their projected growth will be that 10% plus. So I think it's a combination of both our continued organic growth combined with our data center growth that still gets you to that relative 10% plus. But just think about that as an increasing percentage over the long term and getting us to the higher end of that 4% to 6% growth rate.

And I just want to make sure I'm on the same page. So when I think about the growth rate, it really hasn't changed, or is there a material change between 2028 and 2029? And if it's taken up too much, I might pick it up offline.

No. And, Anthony, it's a great question. I think, you know, others may have it, so thank you for asking. You know, we set our base year as off of 2023. So that's how we think about that 4% to 6% growth. We think about it long term. So we've always said, you know, at the front end of the plan that was in 2023 that we were gonna grow a little bit slower just because of some things going on. We've also indicated that the back end of the plan, we'd be growing fast and at the higher end of that rate. And so as you think about 2028 and 2029, with the addition of the 2029 year, you can think about us growing at the higher end, if not exceeding that rate on an annual year-over-year basis. That's how we think about it.

Great. Thanks for taking my questions.

Thank you, Anthony.

Thank you. Our next question goes to Andrew Weisel with Scotiabank. You may proceed.

Hi. Good morning, everyone. First, I just want to clarify one. You removed the comment in the slides that you're, quote, committed to triple B plus equivalent credit ratings. Can I just clarify, are you trying to indicate any change in messaging there?

Absolutely not. We are very focused on solid investment-grade credit ratings. Our targets have not changed. You heard Linn mention that we achieved our debt to total cap of 55%, which was our target. We are very close to maintaining our 14% to 15% FFO to debt, so nothing has changed. It's still part of our core assumptions as we devise our financial objectives.

Very good. I thought that would be the case. Just wanted to clarify. And that's one thing. Forgive me if I missed this, but in 2024, your actual CapEx was a hair under $800 million. I think you were targeting $840 million. Can you explain the shortfall? Was it just timing, or was there something else going on there?

Hi, Andrew. This is Marne. Yes. Thanks for the question. You're spot on. It's just a little bit of timing in major projects between the two years. So nothing changed materially besides timing.

Would it be fair to assume that just spilled into early 2025 then?

That's correct. Those dollars will be spent in 2025.

Okay. So that's part of the roll forward then into the new 2025 to 2029 plan?

Correct.

Okay. Got it. Then lastly, just maybe I'm being too No. Looking for something that's not there. But the clean energy plan in Colorado, the timing of new resources entering service now looks like 2027 to 2028. It was previously 2026 through 2028. I believe the key is to have them in service by 2030. But is there anything to look into as far as the slight slippage in timing there?

So, Andrew, this is Marne again. So when we initiated the clean energy plan, it was really unknown on what we would get for bids and associated timing. As we talked over the course of 2024 and we're, you know, bids have come through and we're now negotiating contracts, we have, you know, deeper insight into that timing, and that's really what's driven the change in movement. When we initially talked about 2026, we knew that likely was not gonna be the case, but that's kind of the best information we had at the time. And as again, as we've worked through those through the process and through the bids, that's where we're seeing some change in that timing.

Understood. Thank you very much.

Yep. Thanks, Andrew.

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

Yeah. Hi. It's Brian Russo, on for Julien. Hi, Brian. Hey. I'm just curious. Know, how actively you're involved in Colorado wildfire risk mitigation legislation? You know, what would you characterize as priorities, have there been any bills proposed?

Brian, yes. We are working through wildfire legislation in each of our electric utilities. You know, specific to your question on Colorado, we have not yet had a bill or a bill taken up by the legislation. We are working with our peers in the state, obviously, focused on how do we mitigate risk on the back end at the utility level. How do we mitigate non-economic damages? Also focused on, you know, can we create a standard of care? So those are all of the conversations that are ongoing. At this time, unfortunately, we don't have anything introduced but continue to work that, educate our stakeholders, and we'll continue working through that and progressing through the system. I will say, though, however, in South Dakota and Wyoming, we have had legislation introduced, and it is stepping through the process, most aggressively in Wyoming. So feel really good about where we're headed there.

Okay. Great. And then the one gigawatt of data center load with your two existing customers, are you what states are is that in? And is there a way to specify that?

Right now, most of that is in Wyoming, Brian. We're talking to other potential customers in South Dakota and Colorado. But we feel very good about the one gigawatt forecast we have in Wyoming alone.

Got it. Understood. Thank you very much.

Welcome. Thank you.

Thank you. And as a reminder, to ask a question, please press star one one. Our next question comes from Chris Ellinghaus with Seaport William Shank. You may proceed.

Sorry, guys. The data center growth sort of post-2029 where you talked about, you know, needing some incremental resources or CapEx there. You got any sense of what kind of magnitude that might be? And are you talking about dispatchable resources there?

Good question, Chris. This is Linn. Yeah. We're talking potentially dispatchable resources and transmission assets as well. We're constantly evaluating what capacity is out there for these customers to take advantage of through the energy market program that we have with them. We believe as we get closer to 2029, these loads continue to grow. There could be an opportunity for us to serve them in different ways beyond our tariff that we have in place today and be more of a traditional model, if you will.

Sure. Hey, Chris. This is Kimberly. The other thing I'd add to that is, you know, you mentioned that it's beyond 2029. Some of the efforts that we're looking at could also potentially positively impact the capital investments that we have within the five-year plan, those are not incorporated in there today.

Gotcha. Given that these might be dispatchable resources, does that also maybe suggest some clean energy to sort of balance the portfolio might also be required?

Very good question, Chris. This is Linn. You know, I'd say very much so. These customers are highly interested in renewables and clean energy. And so, yes, I think that's the beauty of how we've been able to work with these customers. They have certain needs, and we've been able, as an agile organization, to find ways to serve them effectively. I think that's why they continue to grow.

Okay. That's helpful. So this could really be something rather consequential from a capital perspective in that 2029 plus time period.

It may be. Yes.

Okay. Vis a vis your state conversation about the wildfire mitigation legislation, given the changes in Washington, it would seem like this is maybe a fortuitous time for some national legislation. Do you guys foresee any potential there?

Chris, again, yes. Good question. This is Linn again. The short answer is yes. In fact, some legislation has been introduced at the House of Representatives at the federal level. That's coming primarily through partners. And so, yes, we believe we can have some success at the federal level as well.

Okay. And lastly, also given the executive orders that we've seen so far, there's sort of some positives and negatives in terms of thinking about new infrastructure. One being helpful in terms of dispatchable permitting and things like that. Sort of somewhat nebulous details at this point. But do you feel like there's anything material from the federal side that would help you on permitting, there and also, like, say the Colorado clean energy plan, you know, there's some roadblocks for clean energy at this point also. So does that give you some concern about the timelines you have for your capital there?

Good questions, Chris. We'll also unpack there again. This is Linn. I would start by suggesting we're very early into the administration as you indicated in your question. We'll see where these executive orders actually take us. I would suggest that in the prior Trump administration, we thrived as an organization, and I would believe in this administration, we could as well. With respect to permitting, I think it can be very helpful to us, especially around transmission building here in the west, so much of our land is owned by the Feds, if you will. It's federal land, and therefore, any kind of permitting that allows us to be more efficient and streamlined on federal land would be very helpful. You mentioned the clean energy plan in Colorado. We'll watch that closely. Right now, Colorado is very clear about the plan they want to take. They've been on this road for a decade or more. I don't think there'll be huge changes there. However, there could be something that happens to some of the bids we might receive as an example. Things of that nature based on tax credits, etcetera. So that's why we're continuing to negotiate those contracts. We'll see where they take us, but I think it's a little too early to tell for sure.

Okay. Great. Thanks for your details. Appreciate it.

Thank you, Chris.

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

Well, thank you, everyone, for joining us today. Thank you very much for your interest in Black Hills. Once again, I want to thank our team for a fantastic year and what they delivered for 2024 on behalf of customers and for shareholders. We appreciate your interest in our company. Encourage you to have a Black Hills Energy safe day.

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