Black Hills Corp. (NYSE: BKH) said Aug. 5 that it is making progress on several power projects, at the same time as it reported income from continuing operations in the second quarter, as adjusted, was $18.3m, compared with $15.1m for the same period in 2012.
“We achieved solid earnings growth in the second quarter,” said David Emery, chairman, president and CEO of Black Hills Corp. “Adjusted earnings per share increased 21 percent over the same period in the prior year, reflecting higher earnings at our gas utilities, power generation and coal mining segments combined with lower interest expense. Gas utilities realized higher sales volumes and gross margins due to colder spring weather as compared to the relatively warm spring last year. Power generation reported higher contract revenues while coal mining benefited from continued efficiency efforts. Interest expense was lower due to reduced outstanding debt.
He added: “We made excellent progress on two key strategic initiatives during the quarter. Construction commenced in April on the $237 million, 132 megawatt Cheyenne Prairie Generating Station. This project will meet our customers’ growing demand for electricity at Cheyenne Light and replace generating capacity at Black Hills Power that is being closed due to U.S. Environmental Protection Agency regulations. Our oil and gas segment drilled two horizontal wells in the Mancos Shale formation in the Piceance Basin. We expect both wells to be completed and producing prior to year-end. The wells are part of a transaction through which we will earn approximately 20,000 net acres of Mancos Shale leasehold in the Piceance Basin in exchange for drilling and completing the two wells.”
Highlights for the utilities operations included:
- On April 30, Colorado Electric filed its electric resource plan with the Colorado Public Utilities Commission, addressing resource requirements through 2019. The plan identified a 40-MW, simple-cycle, natural gas-fired turbine as the replacement capacity for the retirement of the coal-fired, 42-MW W.N. Clark plant, consistent with the requirements of the Colorado Clean Air-Clean Jobs Act. A request for a certificate of public convenience and necessity (CPCN) was submitted to the commission requesting approval for the new capacity. If approved, the plant will be constructed at the Pueblo Airport Generating Station and placed into service in the first quarter of 2017. The resource plan also recommended the retirement of the natural gas-fired Pueblo Units 5 and 6 by Dec. 31, 2013. A CPCN request was submitted to the Colorado commission seeking approval to retire these plants, which total 29 MW. A hearing is scheduled for Nov. 12-15 regarding the resource plan and the two CPCNs.
- On April 23, Colorado Electric issued a request for proposals (RFP) for up to 30 MW of wind for its system in southern Colorado. Bids have been received, an independent evaluation has been completed and bid results have been submitted to the commission. The power generation segment elected to bid into this RFP. A hearing with the commission is scheduled for Sept. 4-6, and an initial decision is anticipated in early October.
- On April 8, construction and infrastructure work commenced on the 132-MW Cheyenne Prairie Generating Station in Cheyenne, Wyo. Project costs for plant construction and associated transmission are estimated at $222m, with up to $15m of construction financing costs, for a total of $237m. Construction is expected to be completed by the fourth quarter of 2014. The project is currently on schedule and within budget.
- On Dec. 17, 2012, 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 typical allowance for funds used during construction. The requested rider will allow Black Hills Power to earn and collect a rate of return during construction on its 40% share of the total project cost, while also lowering the overall cost of the project to customers. Interim rates, subject to refund, were implemented April 1. A hearing with the commission is scheduled for Sept. 16-20.
Black Hills Corp. is a diversified energy company based in Rapid City, S.D., with corporate offices in Denver and Papillion, Neb. The company serves 769,000 natural gas and electric utility customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming.