Black Hills Signed the Google Deal — Then Asked Investors to Stop Counting Megawatts
A year of "do it right, not just fast" ends with $2.4B of contracted cash flow, a nonregulated generation build, and two confidences too many for the sell side
BKH · Earnings Call · 2026-11-05
The deadline that finally held
For three consecutive quarters, Black Hills' answer to "when does the hyperscaler agreement close" was a masterclass in patient deflection. In August, Linn Evans told Andrew Weisel the team wanted “to do it right, not just fast” — Linden R. Evans, President and Chief Executive Officer · 2026-08-06 and that if the June 30 milestone slipped, shareholders should “not panic in any way” — Linden R. Evans, President and Chief Executive Officer · 2026-05-07. In May, he was openly hedging on hard dates: “I do not know that it would be an absolute date” — Linden R. Evans, President and Chief Executive Officer · 2026-05-07. On this call the hedging is gone. “After more than a year of active and constructive negotiations, we are thrilled to have successfully executed definitive agreements to serve Google's planned data center in Wyoming” — Linden Evans, President and Chief Executive Officer · 2026-11-05. The Google keyword now sits atop the company's keyword leaderboard by a wide margin — the single largest momentum gain in Black Hills' own keyword history — with Google data center and agreements with Google riding alongside it. This is genuinely new for the company, not sector boilerplate: for two years the story was a pipeline and a tariff; as of this quarter it is a signed 2048 maturity contract."Please think about this differently"
The most revealing moment was not the disclosure but the instruction that came with it. Kimberly Nooney, asked whether the Google economics are a fair per-unit proxy for future deals, pushed back hard: “the material elements of this contract really are predicated -- they're not predicated upon load... maybe if I could ask the investors to start thinking differently about this opportunity compared to some of the other opportunities that we've discussed in the past” — Kimberly Nooney, Chief Financial Officer · 2026-11-05. That is a deliberate reversal of the framing the Street built. In November 2025, when Weisel floated an "EPS per megawatt" heuristic, the same CFO replied that “your theory and your mathematical calculation is directionally correct” — Kimberly Nooney, Executive · 2025-11-06. Megawatt math was the endorsed lens for a year. Now it is being retired — because the deal's economics are contractual, not volumetric. Two analysts in a row tried to decompose the $150 million of 2030 net income into generation returns versus the microgrid management fee, and both were told “those factors are confidential” — Kimberly Nooney, Chief Financial Officer · 2026-11-05. Generous on totals, stingy on composition: $150 million of net income in 2030 and roughly $2.4 billion of unlevered free cash flow through 2048 were disclosed, but the split that would let anyone model the next deal was withheld.The structure is the actual novelty
Strip out the headline and what Black Hills has engineered is an ownership model. 564 MW of new gas generation at Cheyenne Prairie will be built and owned by a nonregulated affiliate and sold to the regulated utility under a PPA, earning "a risk-adjusted utility-like return on a rate base model" billed directly to Google. A further 2.1 GW of third-party capacity sits behind long-term PPAs inside a private microgrid, managed for a fee that ramps on a confidential schedule and runs to 2048. The LPCS tariff is the enabler, and the load ramp is the earnings engine — not the peak load, which remains confidential. This is a meaningful strategic pivot away from the language of 2025. Two years ago the company was selling investors on a capital light strategy; today's structure is $1.8 billion of balance-sheet generation plus roughly $700 million of transmission. Notably, the words "capital structure" and "higher financing" are among the company's sharpest keyword decliners this quarter even as the financing burden jumps — a discursive tell. interest coverage of 1.9x is a shadow of the 4.4x reached in early 2024, and non-current debt stands at $4.0 billion. With capex at $218M against $195M of operating cash flow, the $70 million of year-to-date equity issued under the ATM looks less like opportunism and more like a permanent feature. Management's answer is that Google's contract passes debt costs through and lets them “begin earning a cash return on our generation investment during construction” — Kimberly Nooney, Chief Financial Officer · 2026-11-05 — an unusual pre-completion yield, and the real financial innovation here.Two clocks running at once
Clock one is regulatory and days away: six of seven merger approvals are in hand, and the Montana Commission's extended window closes November 12. Clock two is the pipeline. Marne Jones confirmed the 600 MW embedded in the current plan (Microsoft and Meta, the latter now taking service in early 2027), with Google layered on top, another 600 MW in active negotiation, and “credible opportunities to at least another 2.5 gigawatts and potentially growing demand” — Marne Jones, Senior Vice President or similar executive role (business/regulatory update) · 2026-11-05 in exploratory stages. The analyst pushback was sharp and fair — has the pipeline actually grown, or was Google simply reclassified out of it? Jones conceded Google was always in the 3 GW pipeline, then cited the 2.5 GW as additive.That small 75 MW project, first flagged a year ago as "a different customer," is the tell that the machine works beyond hyperscalers. But the broader theme is no longer proprietary: this week's utility reporters — American Electric Power, Avista, DTE, Public Service Enterprise, Atmos — all carry large load and data center language. Riding a sector wave earns a multiple; the tariff architecture is what would earn a premium. Finally, the tape. Black Hills is up 14.9% in 90 days in one unbroken leg, much of it the 7% pop on the October announcement, while the merchant AI-infrastructure complex is being marked down hard — AI data centers as a global price cluster is down roughly 30% over the last month, with semiconductors and miners leading the decline. That divergence is the market's verdict in miniature: it is paying for contracted, utility-like data-center exposure and de-rating merchant compute risk. At 18.4x trailing earnings, with a binary Montana decision six days out and the updated 2027-2031 plan due in February, the next real information is not a megawatt count. It is whether the commission's answer, and the equity funding mix behind $2.5 billion of new capital, let the contracted-cash-flow story arrive without a discount.So the 700 -- the 75 megawatt, let's start there, 75-megawatt project, we continue to work closely with our customer and expect to have an LPCSA by year-end and begin serving that customer in early 2027.