Black Hills: The 1.8-GW Prize and the Merger Clock

Large-load growth and a pending merger define BKH's Q2 — but the data center negotiation is the swing factor.

BKH · Earnings Call · 2026-08-06

An Earnings Beat Built on Execution

Black Hills Corporation delivered a solid Q2, with adjusted EPS of $0.54 versus $0.38 a year ago, beating by a penny on the back of new rates and rider recovery that more than offset higher financing and depreciation. Management reaffirmed the $4.25–$4.45 guidance, signaling confidence in the upper half of the long-term growth range. “We continue to be on track to achieve our earnings guidance for the year.” — Linden R. Evans, President and Chief Executive Officer · 2026-08-06 But the real pulse of this call is the forward story: a >3 GW data center pipeline, a pending merger with NorthWestern Energy, and the complex negotiation that could reset the company's growth trajectory.

The Data Center Prize

The company's Large load demand is now the central growth narrative. Approximately 600 MW is embedded in the current plan (Microsoft and Meta), but the pipeline extends to over 2.5 GW of incremental opportunity, including the 1.8-GW project — likely the largest single load in its territory. “We have successfully served Microsoft's hyperscale data center growth for more than a decade, primarily through market energy procurement.” — Marne J1s, Executive (likely in operations or project management) · 2026-08-06 The LCT CAM mechanism filed in Wyoming is designed to ensure that large-load customers bear the costs of transmission upgrades, protecting existing ratepayers and providing a clear recovery path. Management was careful to emphasize that the negotiation involves multiple parties and interconnected agreements, but the teaser of a 75-MW separate customer deal underlines the breadth of interest. The exit of Crusoe has been the topic of much investor confusion, but management was unequivocal:

The exit of Crusoe has not had any impact on the negotiations. In fact, it is been important to us, from essentially day 1 to ensure that we are negotiating with a hyperscale end user.
Linden R. Evans, President and Chief Executive Officer · 2026-08-06

This is the cleanest signal yet that the demand is real and that the company is negotiating directly with the ultimate customer. The generation reservation agreement, extended through August 31 with up to $377 million of customer-funded advances, is the tangible proof of commitment.

Merger and Regulatory Cadence

On the merger front, six of seven required approvals are in hand, with Montana the last hurdle. The 90-day decision window triggered by briefs filed on July 13 places an executive decision around mid-October, with a possible 30-day extension. “We are awaiting a decision in Montana as the last approval required for a successful closing.” — Linden R. Evans, President and Chief Executive Officer · 2026-08-06 The partial settlement with key interveners should bode well. The regulatory cadence remains 3–4 rate reviews per year across its eight states, with Arkansas Gas and South Dakota Electric advancing and a new Colorado Electric request seeking $26.7 million.

Financial Wherewithal

The execution story is underpinned by a robust balance sheet. Capital expenditure has climbed steadily, up over 178% in a decade, with 2026 expected to be near $1 billion. Debt stands at $4.0 billion, but the company maintains a self-imposed FFO-to-debt target of 14–15%, 100 bps above its downgrade threshold. The equity issuance of $50 million under the ATM program and $650 million of revolver availability provide ample liquidity for the capital plan and the merger integration. Non-current debt has hovered around $4 billion, with the next maturity not until January 2027. The prior quarters laid the groundwork for these themes. At the February call, management suggested the pipeline could push service into 2027 and that they were in equipment queues. In May, they detailed the reservation agreement as a "financing bridge" and reaffirmed the discipline around customer protections. “Yes, it is a short-term agreement really meant to provide some financing, or a financing bridge, as we think about serving long-term generation needs.” — Marne M. Jones, Business or Operations Executive · 2026-05-07 The consistency of messaging reinforces that the 1.8-GW negotiation has been a marathon, not a sprint. With the merger decision pending and the data center contracts potentially close, Black Hills is a name where the near-term binary could be significant. The stock has been flat over the past 90 days, trading off 6.7% from its peak, but any definitive agreement would likely reprice the equity. The company's disciplined approach — only counting demand under active negotiation, protecting existing customers, and securing cost recovery — suggests the upside is being managed carefully. As management put it on the last call: “We take a cautious approach to what we include in our growth pipeline.” — Andrew Marc Weisel, Analyst · 2026-05-07 That caution is now about to be rewarded or deferred.