Good day, and thank you for standing by. Welcome to the Q3 2023 Black Hills Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerome Nichols, Director of Investor Relations.

Thank you. Good morning, everyone. Welcome to Black Hills Corporation's third quarter 2023 earnings conference call. You can find our earnings release and materials for this call on our website at www.blackhillscorp.com under the Investor Relations heading. Leading our quarterly earnings discussion today are Lind Evans, President and Chief Executive Officer; and Kimberly Nooney, Senior Vice President and Chief Financial Officer. Also attending this morning are Marne Jones, Senior Vice President of Utilities; and Todd Jacobs, Senior Vice President, Growth and Strategy. Before we begin today, we would like to note that Black Hills will be attending the Edison Electric Institute's Financial Conference on November 12 through November 14. Our leadership team will be meeting with investors at the conference and the investor presentation will be posted on our website prior to the conference. During our earnings discussion today, some of the comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties in here 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 SEC 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 Lind Evans.

Thank you, Jerome, and thank you all for joining us today. I will provide an overview of our third quarter. Kimberly will provide our financial update, and Marne and Todd will provide more detail on our ongoing operational performance and strategy. I'll begin my comments on Slide 3. We delivered excellent operational and financial performance in the third quarter, continuing to build upon our team's accomplishments during the first half of the year. I'm especially pleased with our team's success in providing safe and reliable service to our customers, our most important priority. And while on the topic of reliability, the Edison Electric Institute once again recognized all three of our electric utilities as being among the most reliable in the country. In addition to operational excellence, we are focused on three additional key objectives for the year, delivering earnings in line with our guidance expectations, continuing to strengthen our balance sheet and advancing our regulatory plan and growth initiatives. We delivered solid earnings for the quarter through continued execution of our strategy and regulatory plan, coupled with our team's efforts to control expenses. We expect to deliver at the top end of our earnings guidance range for this year, assuming normal fourth quarter weather and operating conditions, as outlined in our guidance assumptions. We also delivered on our financial plan to improve credit metrics and further strengthen our balance sheet through strong operating cash flows, successfully refinancing our November debt maturity and issuing stock under our ITM program. On the rate review front, we recently negotiated a constructive settlement for Wyoming gas. We are also working toward a year end resolution for Colorado gas, and we're preparing an application for Arkansas gas that we plan to file next month. In July, we served a remarkable 10th consecutive year of…

Thank you, Lind, and good morning, everyone. I'll begin my comments on Slide 6 with earnings per share compared to the same period last year. As Lind noted earlier, we delivered strong financial performance for the third quarter with EPS of $0.67 compared to $0.54 last year. Quarterly results were driven primarily by new rates and rider recovery, solid expense management and higher-than-planned interest income. Slide 7 highlights the after-tax drivers of change in net income for Q3 2023 compared to Q3 2022. Improvement in electric and natural gas utility margins was primarily driven by $0.10 of EPS from new rates and rider investment recovery and $0.06 of recaptured lost revenue from our 2021 generation outage at Wygen I. These were partially offset by $0.05 of net negative weather when comparing current and prior year Q3 results. Our O&M expenses were lower than last year due to expense management and a strategic sale of land to a customer to support further low growth in the Cheyenne area. Interest expense was up slightly for the quarter compared to last year as interest income on our cash balance offset impacts from higher interest rates. Slide 8 represents year-to-date operating results. At our Electric Utilities, higher margins were primarily driven by $0.18 per share of new rates and rider recovery margin and $0.09 from transmission services and off-system energy sales. At our Gas Utilities, we benefited from $0.12 of new rates in rider recovery margin and $0.04 from residential growth and usage. This was partially offset by three items: a $0.06 net change in mark-to-market valuation of natural gas commodity contracts year-over-year; a net weather impact of $0.10 year-over-year and a one-time benefit of $0.12 related to winter storm Uri last year. O&M expenses increased 2.1% compared to the same period last year,…

Thank you, Kimberly. I'd like to start by recognizing our team for your ongoing efforts in maintaining a safe, reliable and resilient system. Thank you, and congratulations for a solid quarter. DEI recognized us once again during the quarter as top quartile for a combined rank team based on 2022 reliability outage minutes or CDI. This reflects the prudency of our long-standing investments, long-term planning and team execution and responsiveness to our customers every day. This industry-leading reliability is even more of an achievement as was reflected earlier this quarter, considering that we completed a decade of consecutive annual increases in new peak loads for Wyoming Electric. Slide 14 lays out the progress of our electric resource plans, one of our key strategic initiatives for our Colorado and South Dakota electric system. We plan to add 500 megawatts of renewable resources to our systems, 100 megawatts of build transfer generation in 2026 for South Dakota Electric and 400 megawatts of renewable resources by 2030 for Colorado Electric. For South Dakota, we evaluated the bids received in response to our request for proposals and are currently in negotiations. We expect to share the project proposal with the South Dakota Public Utility Commission in the first quarter of 2024. The project is also targeted to be filed as part of a certificate of public convenience and necessity with the Wyoming Public Service Commission in Q1 of 2024. In Colorado, we received a strong and diverse response to our RFP supporting the clean energy plan. We are currently evaluating bids and will provide a big summary this year to the Colorado Public Utility Commission as part of the approval process. We will also plan to update the capital forecast with those details when we have more certainty. And we will likely be able…

Thanks, Marne. As Lind mentioned, we're advancing our regulatory and growth initiatives, and we've recently updated our strategic objectives. I'll start with a regulatory update on Slide 18. In Wyoming, we recently filed a settlement agreement for our natural gas rate review, which is pending review by the Wyoming Commission. The settlement provides $13.9 million of new annual revenue based on a return on equity of 9.85% and a capital structure of 51% equity and 49% debt. The agreement provides for new rates starting January 1 of '24 and includes the renewal of our integrity investment rider for four years. The agreement also provides the establishment of our Green Forward program, a voluntary RNG and carbon offset program that is being successfully offered in several other gas utility territories we serve. With our ongoing growth in Wyoming, we appreciate and value the constructive regulatory environment which supports our ability to provide safe and reliable service to our customers. Our other active gas rate review is in Colorado, which continues to advance through the regulatory process, seeking new rates in Q1 of '24. We're hopeful for resolution this year, having reached a settlement earlier this year for RMNG, our intrastate pipeline in Colorado with new rates implemented early in the third quarter. In addition, we are preparing to file a natural gas rate review in Arkansas by year-end, which is driven by ongoing investment to support our growing communities in Northwest Arkansas. Looking forward, we expect to file 3 rate reviews per year as normal course of business. We continue to evaluate our regulatory plan in light of rising interest rates and inflation. Slide 19 lays out our updated strategic priorities. Over the last year, we undertook a comprehensive review of our strategy. Through this process, we made a connected set…

Thank you, Todd. In summary, we delivered strong operational and financial performance in the third quarter and made meaningful progress on our strategic initiatives. We are well positioned to achieve the top end of our earnings guidance for the year and to further strengthen our balance sheet. We will remain disciplined in managing expenses and deploying capital to serve customers. Our team continues to execute our regulatory plan, and we are excited about our growth initiatives, which support confidence in our 4% to 6% long-term growth target. With that, we're happy to entertain questions.

Thank you. [Operator Instructions]. Our first question comes from Julien Dumoulin-Smith with Bank of America. You may proceed.

Hey. Good morning, team. Thank you guys for all the updates this morning. Pretty exhaustive set. Look, thank you again. But if we can, can we pivot to talking about the '24 outlook here. And I just want to make sure we understand clearly. So it seems that you guys are reaffirming here your growth, 4% to 6% off of the 23 midpoint into '24 and beyond. Can we talk a little bit about what gives you that confidence here into '24, more specifically? Obviously, there's some more onetime-ish type items that are reflected and seem to have been contemplated in guidance originally in '23, but to be able to grow off of that level into '24 is notable. Can you talk a little bit about the pieces there, especially considering the incremental headwinds from interest expense? It sounds like, if I hear you right, that the O&M levers that you announced just now stand out in particular in enabling that visibility?

Good morning, Julien. Thanks for the question. This is Lind. We're about less than two months now from '24. So we've been working on '24 hard, obviously, doing well in '23, watching the momentum that we're building in '23, taking that into '24. I'm going to turn this question over to Kimberly in a moment, so which he can dive into the details for you, but we have replaced our debt for 2023. We've considered that into our model, as you indicated before. In your question, we've also considered the equity issuance that we're doing as well. But I'm really proud of our team and how we are leaning in, working on controlling costs, especially, and we think we can take that momentum into 2024. Again, thank you for pointing out based off that 2023 midpoint of our guidance, and I'll turn it over to Kimberly for more detail.

Yeah. Good morning, Julien. Thank you so much. When we reestablished our earnings guidance earlier this year, we took a lot of the macroeconomic environment challenges into consideration as we designed not only the earnings guidance for 2023, but also how we looked at our growth rate of 4% to 6%. So you can think about your questions around higher interest costs, potential for higher inflation, we evaluated those and included those in the plan. I think you commented on onetime items. Those items that we talked about today were contemplated and included in our guidance range. And so when you look at the holistic picture, I think that's what makes us confident around our 4% to 6% growth on top of a lot of the capital growth opportunities that Todd and Marne discussed that we are going to be providing you with more updates here in Q4.

Yes. Well said. And I just also emphasize the continued loan growth we're seeing from customers been very beneficial for us.

Absolutely. Yeah. In fact, if you don't mind, let's lean into that last comment a little bit further. I mean, so fourth quarter seems like a little bit of a bigger update than just '24 as you guys unveil a number of projects that you guys have been working on for a bit, it seems. What's going to be ready? Or in terms of just having the visibility from a permitting or regulatory perspective to really talk to on fourth quarter. I know you have a lot of different, especially long-term initiatives, but to the extent to which that things will be right to talk about in the fourth quarter, what could those include if you can kind of take through those? And then, if I can throw on at the same time here, how do you think about eligibility to own perhaps disproportionate quantities of these renewable resources? You obviously saw your peer, PSCo in Colorado here proposed something that's well above the historical norms on ownership in the renewable space of late. If you could elaborate on that front, too.

Yeah. Lots of things to unpack there, Julien. I'll do my best. This is Lind speaking again. Starting with our load growth, we're still seeing and migration of customers into our territories. We've been seeing very strong, nice immigration that continues. We're seeing data center expansions. We've mentioned in our opening comments about the mine one, the blockchain mining organization that we are now serving. They've exercised their option to expand that. Not a huge impact in '24, but the point is those kinds of customers are growing for us. You mentioned the Clean Energy Plan and our IRP, at least I think you mentioned both of them. In South Dakota, we asked for a design build, build transfer contracts and so that's what we are currently negotiating with those bidders. So we believe we'll be owning those assets in the long term. We've visited with our South Dakota commissioners about the advantage of ownership versus PPAs. We think they understand that well. With the Clean Energy Plan, we're watching what's happening with our counterpart Excel closely. They are ahead of us at least about six months. So we're watching that closely. We have about 400 megawatts that we intend to add there. And as the statute says, we can own up to 50% of that reasonable cost. So we have lots of bids for that, that we're evaluating currently very strong bids. We'll be refiling our reports relatively soon with the commission. And I might look to Marne to see if you have something to add to that, Marne.

Just a couple of additional comments on that, Julien. So in South Dakota for that build transfer, we are planning to have that in service in mid-2026. So just to give you some time frame on that. And then for the Colorado resources, those will be in service between 2026 and 2029. That will drive us to meet our clean energy plan requirements of the 80% reduction by 2030. The other asset I do want to mention too, just follow up on is our Ready Wyoming asset. So that is currently underway and permitting is in progress from a land rights of way. That asset is expected to be in service by year-end 2025.

Got you. Excellent. And then last little twist here. On the equity, obviously, a number of further projects you've already got done a good chunk of the ACM here. But still, how do you think about resolving needs that are created or expected in '24 and/or the remainder of '23? Do you think continue to leverage ATM or given increasing size here, pursue other avenues?

Yeah, Julien. We obviously look at all opportunities. It could include our ATM. It could include block trade opportunities. I just want to be clear, this year's equity was specifically focused on strengthening our balance sheet. As we move forward, obviously, you heard Lind and Marne talk a lot about our capital growth opportunities as we think about capital going forward, it's focused on maintaining BBB+ credit quality. So it really is going to depend on timing and what those opportunities look at that point. But we do expect equity in the future to finance our future growth opportunities from a capital investment perspective.

Awesome. Thank you. All right. Thank you, guys. All the best.

Thank you, Julien.

Thank you.

Thank you. [Operator Instructions] And our next question comes from Willard Grainger with Mizuho. You may proceed.

Hi. Good morning.

Good morning.

Thanks for taking my question. I just wanted to touch on the rate review progress. Are there any other rate cases that you're looking at for 2024 that we should be thinking about besides Arkansas Gas?

They're currently under review. It's nothing that we are publicly disclosing at this point. So just to recap the cases that we have in progress right now, '23 are in Wyoming, Colorado, and we've indicated filing in Arkansas. We expect to file about three a year but we haven't specifically identified jurisdictions.

Will, what we typically like to do, this is Lind. We always like to talk to our regulators first, let them know what they can anticipate. Having those discussions ahead of time always helps. So we will be doing that. But as Todd did answer nicely in response to the question in his opening comments, what we expect about 3 rate reviews a year going forward?

That's helpful. And that would be contemplated in that 4% to 6% CAGR?

Yes.

Got it. Yeah. Appreciate the time. I’ll leave it there.

Thank you, Will.

Thank you.

Thank you. I'd now like to turn the call back over to Lind Evans for any closing remarks.

Well, thank you for your interest in Black Hills Corporation, Black Hills Energy. Very proud of what our team performed this quarter and year-to-date. We're already experiencing winter here in our service territories, and we're glad that we see some relatively low natural gas prices for our customers as we enter into that peak heating season, and we're happy to pass on those lower costs to our customers. And we look forward to seeing many of you in a couple of weeks at the EEI Financial Conference. And I encourage all of you please have the Black Hills Energy safe day. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.