Black Hills Corporation (BKH)

Black Hills Corporation: A Comprehensive Overview

Company Profile:

History:

Black Hills Corporation (BKH) is a holding company with a rich history dating back to 1883. It emerged from the Homestake Mining Company, which played a significant role in the Black Hills gold rush. Today, BKH owns and operates electric utilities in South Dakota, Wyoming, and Montana, providing electricity to over 184,000 customers.

Core Business Areas:

• Electric Utilities: The primary business, accounting for most of BKH's revenue and income.
• Renewable Energy: Investing in wind and solar projects to diversify its energy portfolio.
• Diversified Businesses: Non-utility operations, including natural gas distribution, real estate, and oil and gas exploration.

Leadership:

• Jerome P. Griswold: Chairman, President, and CEO.
• David G. Ellingson: Chief Operating Officer.
• David G. Keck: Executive Vice President and Chief Financial Officer.

Corporate Structure:

BKH is a holding company with four main subsidiaries:

• Black Hills Power: Electric utility serving South Dakota and Wyoming.
• Cheyenne Light, Fuel & Power: Electric utility serving Wyoming.
• Black Hills Energy: Natural gas distribution company operating in Colorado, Iowa, Kansas, and Nebraska.
• Black Hills Ammunition: Manufacturer of small caliber ammunition.

Top Products and Market Share:

Top Products: Electricity, natural gas, and ammunition.

Market Share:

• Electric Utilities: BKH holds a significant market share in its service territories, with an estimated 75% share in South Dakota and 40% in Wyoming.
• Natural Gas: BKH's natural gas distribution business serves approximately 717,000 customers across its service territories.
• Ammunition: BKH is a leading manufacturer of small caliber ammunition, with a strong presence in the commercial and law enforcement markets.

Product Performance and Market Reception:

BKH's electric utilities are known for their reliability and customer service. The company has received positive reviews for its commitment to renewable energy and environmental sustainability. BKH's ammunition is also highly regarded for its quality and performance.

Total Addressable Market:

The total addressable market for BKH's electric utilities is estimated to be around $100 billion, with the US electricity market being valued at over $400 billion. The natural gas market in the US is valued at over $200 billion. The ammunition market is estimated to be worth over $5 billion.

Financial Performance:

Recent Financial Highlights (2022):

• Revenue: $1.2 billion
• Net Income: $77.9 million
• Profit Margin: 6.5%
• Earnings per Share (EPS): $2.77

Year-over-Year Performance:

BKH's financial performance has been relatively stable in recent years. Revenue has grown modestly, while net income and EPS have remained relatively flat.

Cash Flow and Balance Sheet:

BKH has a strong cash flow position and a healthy balance sheet. The company has limited debt and generates significant free cash flow.

Dividends and Shareholder Returns:

Dividend History:

BKH has a long history of paying dividends, with a current annual dividend yield of approximately 3.2%. The company has increased its dividend annually for the past 10 years.

Shareholder Returns:

BKH has generated strong shareholder returns over the past 5 and 10 years, outperforming the S&P 500 index.

Growth Trajectory:

Historical Growth:

BKH has experienced modest growth in recent years, with revenue and earnings increasing at a low single-digit rate.

Future Growth Projections:

BKH's future growth is expected to be driven by continued demand for electricity and natural gas, along with investments in renewable energy and strategic acquisitions.

Market Dynamics:

Industry Trends:

The electric utility industry is facing challenges from the increasing adoption of distributed generation and the development of new technologies, such as battery storage. However, the industry is also benefiting from the growing demand for clean energy.

BKH's Positioning:

BKH is well-positioned to benefit from the trend of increasing demand for clean energy, given its investments in wind and solar projects. The company is also focused on improving operational efficiency and reducing costs.

Competitors:

Key Competitors:

• Avista (AVA)
• Xcel Energy (XEL)
• Black Hills (BKH)
• NorthWestern (NWE)
• PNM Resources (PNM)

Competitive Advantages:

• Strong customer service and reliability
• Commitment to renewable energy
• Diversified business model
• Strong financial position

Competitive Disadvantages:

• Limited geographic footprint
• Exposure to commodity prices
• Regulatory risks

Potential Challenges and Opportunities:

Challenges:

• Increasing competition from renewable energy sources
• Regulatory uncertainty
• Economic downturns

Opportunities:

• Continued growth in demand for electricity and natural gas
• Expansion into new markets
• Development of new technologies

Recent Acquisitions (2020-2023):

• 2020: Black Hills Corporation acquired the assets of Cheyenne Light, Fuel & Power for $300 million.
• 2021: BKH acquired the natural gas distribution assets of SourceGas for $1.2 billion.
• 2022: BKH acquired the electric distribution assets of the City of Powell, Wyoming for $18 million.

These acquisitions have expanded BKH's service territory and diversified its business portfolio.