Black Hills to begin construction of 230-kV line in February, CEO says

After receiving approval from the Wyoming Public Service Commission (PSC) at the end of January, Black Hills Power (BHP) plans to begin construction this month on the 144-mile Teckla-to-Rapid City transmission line, Black Hills Corp. (NYSE:BKH) Chairman and CEO David Emery said Feb. 3.

The 144-mile, 230-kV project is among the growth in transmission infrastructure spending Black Hills expects to undertake in the coming years, officials said during the company’s 4Q15 earnings conference call.

In its presentation for the earnings call, Black Hills said transmission investment in 2016 is expected to reach $71m, with projections for $40m and $44m in 2017 and 2018, respectively. Those figures would follow transmission investment of $31m in 2014, and $36m in 2016, according to the presentation.

Black Hills, which has electric and natural gas utility assets spanning seven states, in addition to upstream coal, oil, natural gas and power generation operations, is implementing a strategy around core utility operations, including transmission and distribution investments to support reliable utility service, Emery said during the call.

In its earnings statement, Black Hills said BHP received approval on Jan. 25 from the Wyoming PSC to begin construction of the Teckla-to-Rapid City line.

Construction had been planned to begin in 2015, but the PSC had not authorized construction. When the PSC approved a certificate of public convenience and necessity on July 23, 2015, it did not authorize construction of the transmission line.

South Dakota regulators approved a permit to build the line in 2014, Black Hills noted in previous statements.

The Teckla-to-Rapid City project involves construction of a single-circuit, 230-kV line from the existing Teckla substation in northeast Wyoming to the existing Osage substation in Wyoming, with the line ending at the Lange substation in Rapid City, S.D.

According to TransmissionHub data, the project is designed to increase transmission capacity from generation facilities in Wyoming to population centers in western South Dakota.

“We’ve had strong industrial load growth” at utility Cheyenne Light, Fuel & Power, Emery said during the call, mentioning new data centers in Wyoming driving that growth.

A strong performance from Black Hills’ electric utilities and power generation assets during 4Q15 nearly offset the negative affect of warmer weather and low oil and natural gas prices on Black Hills’ other operations, Emery said.

Discussing generation assets, Emery said construction was about 27% complete as of Dec. 31, 2015, on the new 40 MW gas-fired combustion turbine for Colorado Electric at the Pueblo Airport generating station. That $65m project is expected to be in service by the end of 2016, he said.

Black Hills late last year began a process to explore the possible sale of a minority interest in its independent power production assets in Colorado, which include 200 MW of gas-fired generation units.

That process is ongoing and a decision is expected in 1Q16, Emergy said. Black Hills has engaged an investment banking firm and received interest from “multiple bidders,” he said during the call. Final bidding and negotiations may not result in a sale, but “we’re encouraged by what we’ve seen so far,” Emery said.

With the warm 4Q15 weather affecting gas utility operations and low commodity prices affecting Black Hills’ oil and gas production sector, the company reported adjusted net income of $34m, or 71 cents per share, for the quarter, compared with $35m, or 77 cents per share, for 4Q14.

Black Hills in 2015 announced its plan to acquire SourceGas Holdings LLC, which operates gas utilities in four states and an intrastate gas pipeline in Colorado.

State regulators in Arkansas, Nebraska and Wyoming have approved the deal, with a decision from regulators in Colorado pending, Emergy noted. Black Hills expects a decision from Colorado regulators to allow the deal to close in 1Q16, he said.