x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2014 | |
OR | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934 | |
For the transition period from __________ to __________. | |
Commission File Number 001-31303 |
Black Hills Corporation | |
Incorporated in South Dakota | IRS Identification Number 46-0458824 |
625 Ninth Street | |
Rapid City, South Dakota 57701 | |
Registrant’s telephone number (605) 721-1700 | |
Former name, former address, and former fiscal year if changed since last report | |
NONE |
Yes x | No o |
Yes x | No o |
Large accelerated filer x | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company o |
Yes o | No x |
Class | Outstanding at October 31, 2014 | ||
Common stock, $1.00 par value | 44,655,369 | shares |
TABLE OF CONTENTS | |||
Page | |||
Glossary of Terms and Abbreviations | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | ||
Condensed Consolidated Statements of Income (Loss) - unaudited | |||
Three and Nine Months Ended September 30, 2014 and 2013 | |||
Condensed Consolidated Statements of Comprehensive Income (Loss) - unaudited | |||
Three and Nine Months Ended September 30, 2014 and 2013 | |||
Condensed Consolidated Balance Sheets - unaudited | |||
September 30, 2014, December 31, 2013 and September 30, 2013 | |||
Condensed Consolidated Statements of Cash Flows - unaudited | |||
Nine Months Ended September 30, 2014 and 2013 | |||
Notes to Condensed Consolidated Financial Statements - unaudited | |||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | ||
Item 4. | Controls and Procedures | ||
PART II. | OTHER INFORMATION | ||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 4. | Mine Safety Disclosures | ||
Item 5. | Other Information | ||
Item 6. | Exhibits | ||
Signatures | |||
Index to Exhibits |
AFUDC | Allowance for Funds Used During Construction |
AOCI | Accumulated Other Comprehensive Income (Loss) |
ASU | Accounting Standards Update issued by the FASB |
Bbl | Barrel |
BHC | Black Hills Corporation; the Company |
Black Hills Electric Generation | Black Hills Electric Generation, LLC, a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
Black Hills Energy | The name used to conduct the business of Black Hills Utility Holdings, Inc., and its subsidiaries |
Black Hills Non-regulated Holdings | Black Hills Non-regulated Holdings, LLC, a direct, wholly-owned subsidiary of Black Hills Corporation |
Black Hills Power | Black Hills Power, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation |
Black Hills Utility Holdings | Black Hills Utility Holdings, Inc., a direct, wholly-owned subsidiary of Black Hills Corporation |
Black Hills Wyoming | Black Hills Wyoming, LLC, a direct, wholly-owned subsidiary of Black Hills Electric Generation |
Btu | British thermal unit |
Cheyenne Light | Cheyenne Light, Fuel and Power Company, a direct, wholly-owned subsidiary of Black Hills Corporation |
Cheyenne Prairie | Cheyenne Prairie Generating Station is a 132 MW natural gas-fired generating facility jointly owned by Black Hills Power and Cheyenne Light in Cheyenne, Wyoming. Cheyenne Prairie was placed into commercial service on October 1, 2014. |
Colorado Electric | Black Hills Colorado Electric Utility Company, LP (doing business as Black Hills Energy), an indirect, wholly-owned subsidiary of Black Hills Utility Holdings |
Colorado IPP | Black Hills Colorado IPP, LLC a direct wholly-owned subsidiary of Black Hills Electric Generation |
Cooling degree day | A cooling degree day is equivalent to each degree that the average of the high and low temperature for a day is above 65 degrees. The warmer the climate, the greater the number of cooling degree days. Cooling degree days are used in the utility industry to measure the relative warmth of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations over a 30-year average. |
CPCN | Certificate of Public Convenience and Necessity |
CPUC | Colorado Public Utilities Commission |
CT | Combustion turbine |
CVA | Credit Valuation Adjustment |
De-designated interest rate swaps | The $250 million notional amount interest rate swaps that were originally designated as cash flow hedges under accounting for derivatives and hedges but subsequently de-designated in December 2008. These swaps were settled in November 2013. |
Dodd-Frank | Dodd-Frank Wall Street Reform and Consumer Protection Act |
Dth | Dekatherm. A unit of energy equal to 10 therms or one million British thermal units (MMBtu) |
EPA | United States Environmental Protection Agency |
FASB | Financial Accounting Standards Board |
FERC | United States Federal Energy Regulatory Commission |
Fitch | Fitch Ratings |
GAAP | Accounting principles generally accepted in the United States of America |
Heating Degree Day | A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The colder the climate, the greater the number of heating degree days. Heating degree days are used in the utility industry to measure the relative coldness of weather and to compare relative temperatures between one geographic area and another. Normal degree days are based on the National Weather Service data for selected locations over a 30-year average. |
IPP | Independent power producer |
IRS | United States Internal Revenue Service |
IUB | Iowa Utilities Board |
Kansas Gas | Black Hills Kansas Gas Utility Company, LLC (doing business as Black Hills Energy), a direct, wholly-owned subsidiary of Black Hills Utility Holdings |
KCC | Kansas Corporation Commission |
kV | Kilovolt |
LIBOR | London Interbank Offered Rate |
LOE | Lease Operating Expense |
Mcf | Thousand cubic feet |
Mcfe | Thousand cubic feet equivalent. |
MMBtu | Million British thermal units |
Moody’s | Moody’s Investors Service, Inc. |
MW | Megawatts |
MWh | Megawatt-hours |
NGL | Natural Gas Liquids (7 Gallons equals 1 Mcfe) |
NOAA | National Oceanic and Atmospheric Administration |
NOAA Climate Normals | This dataset is produced once every 10 years. This dataset contains daily and monthly normals of temperature, precipitation, snowfall, heating and cooling degree days, frost/freeze dates, and growing degree days calculated from observations at approximately 9,800 stations operated by NOAA’s National Weather Service. |
NOL | Net Operating Loss |
OTC | Over-the-counter |
PCA | Purchased Cost Adjustment - Adjustments passed through to the customer based on purchased fuel costs that are higher or lower than costs approved in the rate case. |
PPA | Power Purchase Agreement |
Revolving Credit Facility | Our $500 million credit facility used to fund working capital needs, letters of credit and other corporate purposes, which matures in 2019. |
SDPUC | South Dakota Public Utilities Commission |
SEC | U. S. Securities and Exchange Commission |
S&P | Standard and Poor’s, a division of The McGraw-Hill Companies, Inc. |
TCA | Transmission Cost Adjustment -- adjustments passed through to the customer based on transmission costs that are higher or lower than the costs approved in the rate case. |
WPSC | Wyoming Public Service Commission |
WRDC | Wyodak Resources Development Corp., a direct, wholly-owned subsidiary of Black Hills Non-regulated Holdings |
(unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
(in thousands, except per share amounts) | ||||||||||||
Revenue | $ | 272,087 | $ | 259,907 | $ | 1,015,493 | $ | 920,404 | ||||
Operating expenses: | ||||||||||||
Utilities - | ||||||||||||
Fuel, purchased power and cost of natural gas sold | 84,674 | 71,503 | 416,473 | 338,848 | ||||||||
Operations and maintenance | 64,245 | 66,061 | 201,546 | 196,728 | ||||||||
Non-regulated energy operations and maintenance | 20,170 | 20,484 | 63,852 | 62,703 | ||||||||
Depreciation, depletion and amortization | 37,463 | 36,135 | 110,258 | 106,068 | ||||||||
Taxes - property, production and severance | 11,082 | 10,068 | 32,462 | 30,517 | ||||||||
Other operating expenses | 49 | 90 | 323 | 1,091 | ||||||||
Total operating expenses | 217,683 | 204,341 | 824,914 | 735,955 | ||||||||
Operating income | 54,404 | 55,566 | 190,579 | 184,449 | ||||||||
Other income (expense): | ||||||||||||
Interest charges - | ||||||||||||
Interest expense incurred (including amortization of debt issuance costs, premiums and discounts and realized settlements on interest rate swaps) | (17,919 | ) | (23,840 | ) | (53,665 | ) | (70,881 | ) | ||||
Allowance for funds used during construction - borrowed | 319 | 347 | 845 | 831 | ||||||||
Capitalized interest | 231 | 273 | 734 | 811 | ||||||||
Unrealized gain (loss) on interest rate swaps, net | — | 3,144 | — | 29,393 | ||||||||
Interest income | 575 | 565 | 1,541 | 1,325 | ||||||||
Allowance for funds used during construction - equity | 297 | 85 | 828 | 327 | ||||||||
Other income (expense), net | 261 | 318 | 1,262 | 1,197 | ||||||||
Total other income (expense), net | (16,236 | ) | (19,108 | ) | (48,455 | ) | (36,997 | ) | ||||
Income (loss) before earnings (loss) of unconsolidated subsidiaries and income taxes | 38,168 | 36,458 | 142,124 | 147,452 | ||||||||
Equity in earnings (loss) of unconsolidated subsidiaries | — | — | (1 | ) | (86 | ) | ||||||
Income tax benefit (expense) | (11,332 | ) | (13,334 | ) | (47,349 | ) | (50,527 | ) | ||||
Net income (loss) available for common stock | $ | 26,836 | $ | 23,124 | $ | 94,774 | $ | 96,839 | ||||
Earnings (loss) per share of common stock: | ||||||||||||
Earnings (loss) per share, Basic - | ||||||||||||
Total income (loss) per share, Basic | $ | 0.60 | $ | 0.52 | $ | 2.14 | $ | 2.19 | ||||
Earnings (loss) per share, Diluted - | ||||||||||||
Total income (loss) per share, Diluted | $ | 0.60 | $ | 0.52 | $ | 2.13 | $ | 2.18 | ||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 44,415 | 44,201 | 44,382 | 44,143 | ||||||||
Diluted | 44,608 | 44,457 | 44,584 | 44,395 | ||||||||
Dividends declared per share of common stock | $ | 0.39 | $ | 0.38 | $ | 1.17 | $ | 1.14 |
(unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||
(in thousands) | ||||||||||||
Net income (loss) available for common stock | $ | 26,836 | $ | 23,124 | $ | 94,774 | $ | 96,839 | ||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Fair value adjustments on derivatives designated as cash flow hedges (net of tax (expense) benefit of $(1,840) and $964 for the three months ended 2014 and 2013 and $582 and $(93) for the nine months ended 2014 and 2013, respectively) | 3,145 | (2,083 | ) | (1,071 | ) | 134 | ||||||
Reclassification adjustments for cash flow hedges settled and included in net income (loss) (net of tax (expense) benefit of $(732) and $(586) for the three months ended 2014 and 2013 and $(1,931) and $(1,469) for the nine months ended 2014 and 2013, respectively) | 1,328 | 1,426 | 3,511 | 3,095 | ||||||||
Benefit plan liability adjustments - net gain (loss) (net of tax of $0 and $0 for the three months ended 2014 and 2013 and $2 and $0 for the nine months ended 2014 and 2013, respectively) | — | — | (2 | ) | — | |||||||
Benefit plan liability tax adjustments - net gain (loss) | — | — | (394 | ) | — | |||||||
Benefit plan liability adjustments - prior service cost (net of tax of $0 and $0 for the three months ended 2014 and 2013 and $(90) and $0 for the nine months ended 2014 and 2013, respectively) | — | — | 164 | — | ||||||||
Reclassification adjustments of benefit plan liability - prior service cost (net of tax of $17 and $22 for the three months ended 2014 and 2013 and $60 and $66 for the nine months ended 2014 and 2013, respectively) | (31 | ) | (41 | ) | (110 | ) | (123 | ) | ||||
Reclassification adjustments of benefit plan liability - net gain (loss) (net of tax of $(86) and $(242) for the three months ended 2014 and 2013 and $(262) and $(729) for the nine months ended 2014 and 2013, respectively) | 160 | 458 | 485 | 1,361 | ||||||||
Other comprehensive income (loss), net of tax | 4,602 | (240 | ) | 2,583 | 4,467 | |||||||
Comprehensive income (loss) available for common stock | $ | 31,438 | $ | 22,884 | $ | 97,357 | $ | 101,306 |
(unaudited) | As of | ||||||||||
September 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||||
(in thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 11,939 | $ | 7,841 | $ | 13,637 | |||||
Restricted cash and equivalents | 1,918 | 2 | 6,782 | ||||||||
Accounts receivable, net | 123,399 | 177,573 | 114,137 | ||||||||
Materials, supplies and fuel | 105,726 | 88,478 | 95,230 | ||||||||
Derivative assets, current | — | 717 | 126 | ||||||||
Income tax receivable, net | 1,268 | 1,460 | 4,539 | ||||||||
Deferred income tax assets, net, current | 34,756 | 18,889 | 37,163 | ||||||||
Regulatory assets, current | 68,444 | 24,451 | 30,208 | ||||||||
Other current assets | 26,502 | 25,877 | 27,075 | ||||||||
Total current assets | 373,952 | 345,288 | 328,897 | ||||||||
Investments | 17,144 | 16,697 | 16,612 | ||||||||
Property, plant and equipment | 4,493,696 | 4,259,445 | 4,152,097 | ||||||||
Less: accumulated depreciation and depletion | (1,338,509 | ) | (1,269,148 | ) | (1,258,450 | ) | |||||
Total property, plant and equipment, net | 3,155,187 | 2,990,297 | 2,893,647 | ||||||||
Other assets: | |||||||||||
Goodwill | 353,396 | 353,396 | 353,396 | ||||||||
Intangible assets, net | 3,231 | 3,397 | 3,453 | ||||||||
Regulatory assets, non-current | 140,422 | 138,197 | 183,119 | ||||||||
Derivative assets, non-current | — | — | — | ||||||||
Other assets, non-current | 29,930 | 27,906 | 22,116 | ||||||||
Total other assets, non-current | 526,979 | 522,896 | 562,084 | ||||||||
TOTAL ASSETS | $ | 4,073,262 | $ | 3,875,178 | $ | 3,801,240 |
(unaudited) | As of | ||||||||||
September 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||||
(in thousands, except share amounts) | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 100,444 | $ | 130,416 | $ | 77,077 | |||||
Accrued liabilities | 163,374 | 151,277 | 152,911 | ||||||||
Derivative liabilities, current | 3,397 | 3,474 | 65,944 | ||||||||
Regulatory liabilities, current | 828 | 10,727 | 14,707 | ||||||||
Notes payable | 184,000 | 82,500 | 138,300 | ||||||||
Current maturities of long-term debt | 275,000 | — | 255,694 | ||||||||
Total current liabilities | 727,043 | 378,394 | 704,633 | ||||||||
Long-term debt, net of current maturities | 1,107,519 | 1,396,948 | 955,979 | ||||||||
Deferred credits and other liabilities: | |||||||||||
Deferred income tax liabilities, net, non-current | 506,166 | 432,287 | 403,772 | ||||||||
Derivative liabilities, non-current | 3,273 | 5,614 | 11,388 | ||||||||
Regulatory liabilities, non-current | 118,856 | 109,429 | 131,730 | ||||||||
Benefit plan liabilities | 108,924 | 111,479 | 169,448 | ||||||||
Other deferred credits and other liabilities | 144,089 | 133,279 | 133,341 | ||||||||
Total deferred credits and other liabilities | 881,308 | 792,088 | 849,679 | ||||||||
Commitments and contingencies (See Notes 7, 8, 13, 14 and 15) | |||||||||||
Stockholders’ equity: | |||||||||||
Common stock equity — | |||||||||||
Common stock $1 par value; 100,000,000 shares authorized; issued 44,696,670; 44,550,239; and 44,532,245 shares, respectively | 44,697 | 44,550 | 44,532 | ||||||||
Additional paid-in capital | 746,575 | 742,344 | 740,209 | ||||||||
Retained earnings | 582,800 | 540,244 | 539,030 | ||||||||
Treasury stock, at cost – 41,552; 50,877; and 41,127 shares, respectively | (1,841 | ) | (1,968 | ) | (1,801 | ) | |||||
Accumulated other comprehensive income (loss) | (14,839 | ) | (17,422 | ) | (31,021 | ) | |||||
Total stockholders’ equity | 1,357,392 | 1,307,748 | 1,290,949 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,073,262 | $ | 3,875,178 | $ | 3,801,240 |
(unaudited) | Nine Months Ended September 30, | |||||
2014 | 2013 | |||||
Operating activities: | (in thousands) | |||||
Net income (loss) available for common stock | $ | 94,774 | $ | 96,839 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
Depreciation, depletion and amortization | 110,258 | 106,068 | ||||
Deferred financing cost amortization | 1,608 | 3,209 | ||||
Derivative fair value adjustments | 2,136 | 275 | ||||
Stock compensation | 6,978 | 9,100 | ||||
Unrealized (gain) loss on interest rate swaps, net | — | (29,393 | ) | |||
Deferred income taxes | 48,007 | 54,865 | ||||
Employee benefit plans | 11,109 | 16,644 | ||||
Other adjustments, net | 2,016 | 9,434 | ||||
Changes in certain operating assets and liabilities: | ||||||
Materials, supplies and fuel | (17,248 | ) | (12,522 | ) | ||
Accounts receivable, unbilled revenues and other operating assets | (61 | ) | 28,762 | |||
Accounts payable and other operating liabilities | (14,307 | ) | (23,774 | ) | ||
Contributions to defined benefit pension plans | (10,200 | ) | (12,500 | ) | ||
Other operating activities, net | 4,087 | 4,759 | ||||
Net cash provided by (used in) operating activities | 239,157 | 251,766 | ||||
Investing activities: | ||||||
Property, plant and equipment additions | (290,299 | ) | (239,485 | ) | ||
Proceeds from sale of assets | 22,342 | — | ||||
Other investing activities | (2,364 | ) | 2,846 | |||
Net cash provided by (used in) investing activities | (270,321 | ) | (236,639 | ) | ||
Financing activities: | ||||||
Dividends paid on common stock | (52,218 | ) | (50,678 | ) | ||
Common stock issued | 2,393 | 3,606 | ||||
Short-term borrowings - issuances | 396,250 | 269,600 | ||||
Short-term borrowings - repayments | (294,750 | ) | (408,300 | ) | ||
Long-term debt - issuances | — | 275,000 | ||||
Long-term debt - repayments | (12,200 | ) | (106,180 | ) | ||
Other financing activities | (4,213 | ) | — | |||
Net cash provided by (used in) financing activities | 35,262 | (16,952 | ) | |||
Net change in cash and cash equivalents | 4,098 | (1,825 | ) | |||
Cash and cash equivalents, beginning of period | 7,841 | 15,462 | ||||
Cash and cash equivalents, end of period | $ | 11,939 | $ | 13,637 |
Three Months Ended September 30, 2014 | External Operating Revenue | Inter-company Operating Revenue | Net Income (Loss) | |||||||||
Utilities: | ||||||||||||
Electric | $ | 171,395 | $ | 3,156 | $ | 18,154 | ||||||
Gas | 78,735 | — | 1,597 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 1,602 | 20,419 | 7,829 | |||||||||
Coal Mining | 6,884 | 8,689 | 2,638 | |||||||||
Oil and Gas | 13,471 | — | (3,110 | ) | ||||||||
Corporate activities | — | — | (272 | ) | ||||||||
Inter-company eliminations | — | (32,264 | ) | — | ||||||||
Total | $ | 272,087 | $ | — | $ | 26,836 |
Three Months Ended September 30, 2013 | External Operating Revenue | Inter-company Operating Revenue | Net Income (Loss) | |||||||||
Utilities: | ||||||||||||
Electric | $ | 169,401 | $ | 2,003 | $ | 15,097 | ||||||
Gas | 67,792 | — | (1,450 | ) | ||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 1,575 | 20,393 | 6,707 | |||||||||
Coal Mining | 6,713 | 8,604 | 2,142 | |||||||||
Oil and Gas | 14,426 | — | (1,682 | ) | ||||||||
Corporate activities (a) | — | — | 2,310 | |||||||||
Inter-company eliminations | — | (31,000 | ) | — | ||||||||
Total | $ | 259,907 | $ | — | $ | 23,124 |
Nine Months Ended September 30, 2014 | External Operating Revenues | Intercompany Operating Revenues | Net Income (Loss) | |||||||||
Utilities: | ||||||||||||
Electric | $ | 508,230 | $ | 10,307 | $ | 44,156 | ||||||
Gas | 440,571 | — | 28,289 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 4,138 | 62,211 | 23,096 | |||||||||
Coal Mining | 19,085 | 26,637 | 7,118 | |||||||||
Oil and Gas | 43,469 | — | (6,792 | ) | ||||||||
Corporate activities | — | — | (1,093 | ) | ||||||||
Inter-company eliminations | — | (99,155 | ) | — | ||||||||
Total | $ | 1,015,493 | $ | — | $ | 94,774 |
Nine Months Ended September 30, 2013 | External Operating Revenues | Intercompany Operating Revenues | Net Income (Loss) | |||||||||
Utilities: | ||||||||||||
Electric | $ | 482,222 | $ | 9,844 | $ | 38,063 | ||||||
Gas | 373,440 | — | 20,225 | |||||||||
Non-regulated Energy: | ||||||||||||
Power Generation | 3,628 | 58,825 | 17,382 | |||||||||
Coal Mining | 19,530 | 23,688 | 5,180 | |||||||||
Oil and Gas | 41,584 | — | (3,699 | ) | ||||||||
Corporate activities (a) | — | — | 19,688 | |||||||||
Inter-company eliminations | — | (92,357 | ) | — | ||||||||
Total | $ | 920,404 | $ | — | $ | 96,839 |
(a) | Corporate activities include a $2.0 million and a $19 million after-tax non-cash mark-to-market gain on certain interest rate swaps for the three and nine months ended September 30, 2013, respectively. |
Total Assets (net of inter-company eliminations) as of: | September 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||
Utilities: | |||||||||||
Electric (a) | $ | 2,671,601 | $ | 2,525,947 | $ | 2,464,123 | |||||
Gas | 827,069 | 805,617 | 757,746 | ||||||||
Non-regulated Energy: | |||||||||||
Power Generation (a) | 64,359 | 95,692 | 102,331 | ||||||||
Coal Mining | 74,130 | 78,825 | 82,155 | ||||||||
Oil and Gas | 330,781 | 288,366 | 264,785 | ||||||||
Corporate activities | 105,322 | 80,731 | 130,100 | ||||||||
Total assets | $ | 4,073,262 | $ | 3,875,178 | $ | 3,801,240 |
(a) | The PPA under which Black Hills Colorado IPP provides generation to support Colorado Electric customers from the Pueblo Airport Generation Station is accounted for as a capital lease. As such, assets owned by our Power Generation segment are recorded at Colorado Electric under accounting for a capital lease. |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
September 30, 2014 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 53,717 | $ | 21,485 | $ | (724 | ) | $ | 74,478 | |||
Gas Utilities | 23,409 | 13,218 | (740 | ) | 35,887 | |||||||
Power Generation | 1,368 | — | — | 1,368 | ||||||||
Coal Mining | 2,563 | — | — | 2,563 | ||||||||
Oil and Gas | 7,657 | — | (13 | ) | 7,644 | |||||||
Corporate | 1,459 | — | — | 1,459 | ||||||||
Total | $ | 90,173 | $ | 34,703 | $ | (1,477 | ) | $ | 123,399 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
December 31, 2013 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 52,437 | $ | 23,823 | $ | (666 | ) | $ | 75,594 | |||
Gas Utilities | 49,162 | 41,195 | (558 | ) | 89,799 | |||||||
Power Generation | 1,722 | — | — | 1,722 | ||||||||
Coal Mining | 1,711 | — | — | 1,711 | ||||||||
Oil and Gas | 8,156 | — | (13 | ) | 8,143 | |||||||
Corporate | 604 | — | — | 604 | ||||||||
Total | $ | 113,792 | $ | 65,018 | $ | (1,237 | ) | $ | 177,573 |
Accounts | Unbilled | Less Allowance for | Accounts | |||||||||
September 30, 2013 | Receivable, Trade | Revenue | Doubtful Accounts | Receivable, net | ||||||||
Electric Utilities | $ | 49,254 | $ | 20,153 | $ | (648 | ) | $ | 68,759 | |||
Gas Utilities | 20,693 | 11,877 | (542 | ) | 32,028 | |||||||
Power Generation | 3 | — | — | 3 | ||||||||
Coal Mining | 2,677 | — | — | 2,677 | ||||||||
Oil and Gas | 8,463 | — | (19 | ) | 8,444 | |||||||
Corporate | 2,226 | — | — | 2,226 | ||||||||
Total | $ | 83,316 | $ | 32,030 | $ | (1,209 | ) | $ | 114,137 |
Maximum | As of | As of | As of | |||||||
Amortization (in years) | September 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||
Regulatory assets | ||||||||||
Deferred energy and fuel cost adjustments - current (a)(d) | 1 | $ | 26,211 | $ | 16,775 | $ | 17,925 | |||
Deferred gas cost adjustments and natural gas price derivatives (a)(d) | 7 | 49,870 | 12,366 | 16,845 | ||||||
AFUDC (b) | 45 | 12,411 | 12,315 | 12,398 | ||||||
Employee benefit plans (c) | 13 | 64,908 | 67,059 | 114,386 | ||||||
Environmental (a) | subject to approval | 1,314 | 1,800 | 1,800 | ||||||
Asset retirement obligations (a) | 44 | 3,282 | 3,266 | 3,262 | ||||||
Bond issue cost (a) | 24 | 3,311 | 3,419 | 3,454 | ||||||
Renewable energy standard adjustment (a) | 5 | 12,007 | 14,186 | 14,936 | ||||||
Flow through accounting (c) | 35 | 25,157 | 20,916 | 19,222 | ||||||
Other regulatory assets (a) | 15 | 10,395 | 10,546 | 9,099 | ||||||
$ | 208,866 | $ | 162,648 | $ | 213,327 | |||||
Regulatory liabilities | ||||||||||
Deferred energy and gas costs (a) | 1 | $ | 5,535 | $ | 11,708 | $ | 14,032 | |||
Employee benefit plans (c) | 13 | 34,409 | 34,431 | 60,707 | ||||||
Cost of removal (a) | 44 | 71,362 | 64,970 | 62,069 | ||||||
Other regulatory liabilities (c) | 25 | 8,378 | 9,047 | 9,629 | ||||||
$ | 119,684 | $ | 120,156 | $ | 146,437 |
(a) | Recovery of costs, but we are not allowed a rate of return. |
(b) | In addition to recovery of costs, we are allowed a rate of return. |
(c) | In addition to recovery or repayment of costs, we are allowed a return on a portion of this amount or a reduction in rate base, respectively. |
(d) | Our deferred energy, fuel cost, and gas cost adjustments represent the cost of electricity and gas delivered to our electric and gas utility customers that is either higher or lower than current rates and will be recovered or refunded in future rates. Increases in the current year balances as of September 30, 2014 are primarily due to higher natural gas prices driven by demand and market conditions during our peak winter heating season. Our electric and gas utilities file periodic quarterly, semi-annual, and/or annual filings to recover these costs based on the respective cost mechanisms approved by their applicable state utility commissions. |
September 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||||
Materials and supplies | $ | 52,682 | $ | 50,196 | $ | 50,564 | |||||
Fuel - Electric Utilities | 7,108 | 6,213 | 6,384 | ||||||||
Natural gas in storage held for distribution | 45,936 | 32,069 | 38,282 | ||||||||
Total materials, supplies and fuel | $ | 105,726 | $ | 88,478 | $ | 95,230 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||
Net income (loss) available for common stock | $ | 26,836 | $ | 23,124 | $ | 94,774 | $ | 96,839 | |||||
Weighted average shares - basic | 44,415 | 44,201 | 44,382 | 44,143 | |||||||||
Dilutive effect of: | |||||||||||||
Equity compensation | 193 | 256 | 202 | 252 | |||||||||
Weighted average shares - diluted | 44,608 | 44,457 | 44,584 | 44,395 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||
2014 | 2013 | 2014 | 2013 | ||||||
Equity compensation | 99 | — | 75 | 9 | |||||
Anti-dilutive shares | 99 | — | 75 | 9 |
September 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||||||
Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | Balance Outstanding | Letters of Credit | |||||||||||||
Revolving Credit Facility | $ | 184,000 | $ | 31,726 | $ | 82,500 | $ | 22,100 | $ | 138,300 | $ | 53,137 |
As of September 30, 2014 | Covenant Requirement | |||
Recourse Leverage Ratio | 54% | Less than | 65% |
• | Commodity price risk associated with our natural long position in crude oil and natural gas reserves and production; and our fuel procurement for certain of our gas-fired generation assets; and |
• | Interest rate risk associated with our variable-rate debt. |
September 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||||||||
Crude Oil Futures, Swaps and Options | Natural Gas Futures and Swaps | Crude Oil Futures, Swaps and Options | Natural Gas Futures and Swaps | Crude Oil Futures, Swaps and Options | Natural Gas Futures and Swaps | |||||||||||||||
Notional (a) | 391,500 | 7,930,000 | 412,500 | 7,082,500 | 499,500 | 9,874,000 | ||||||||||||||
Maximum terms in months (b) | 1 | 1 | 3 | 1 | 3 | 1 | ||||||||||||||
Derivative assets, current | $ | — | $ | — | $ | 55 | $ | — | $ | 13 | $ | 113 | ||||||||
Derivative assets, non-current | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||
Derivative liabilities, current | $ | — | $ | — | $ | — | $ | — | $ | 98 | $ | 52 | ||||||||
Derivative liabilities, non-current | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
(a) | Crude oil in Bbls, natural gas in MMBtus. |
(b) | Refers to the tenor of the derivative instrument. Assets and liabilities are classified as current/non-current based on the production month hedged and the corresponding settlement of the derivative instrument. |
September 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
Notional (MMBtus) | Maximum Term (months) (a) | Notional (MMBtus) | Maximum Term (months) (a) | Notional (MMBtus) | Maximum Term (months) (a) | |||||||||
Natural gas futures purchased | 16,290,000 | 74 | 17,930,000 | 84 | 14,010,000 | 74 | ||||||||
Natural gas options purchased | 7,070,000 | 6 | 3,890,000 | 8 | 6,810,000 | 6 | ||||||||
Natural gas basis swaps purchased | 12,025,000 | 63 | 14,785,000 | 60 | 9,790,000 | 63 |
September 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||
Derivative assets, current | $ | — | $ | 662 | $ | — | |||
Derivative assets, non-current | $ | — | $ | — | $ | — | |||
Derivative liabilities, non-current | $ | — | $ | — | $ | — | |||
Net unrealized (gain) loss included in Regulatory assets or Regulatory liabilities | $ | 7,470 | $ | 7,567 | $ | 10,652 |
September 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
Interest Rate Swaps (a) | Interest Rate Swaps (a) | Interest Rate Swaps (b) | De-designated Interest Rate Swaps (c) | |||||||||||
Notional | $ | 75,000 | $ | 75,000 | $ | 150,000 | $ | 250,000 | ||||||
Weighted average fixed interest rate | 4.97 | % | 4.97 | % | 5.04 | % | 5.67 | % | ||||||
Maximum terms in years | 2.25 | 3.00 | 3.25 | 0.25 | ||||||||||
Derivative liabilities, current | $ | 3,397 | $ | 3,474 | $ | 7,039 | $ | 58,755 | ||||||
Derivative liabilities, non-current | $ | 3,273 | $ | 5,614 | $ | 11,388 | $ | — |
(a) | These swaps are designated to borrowings on our Revolving Credit Facility, and are priced using three-month LIBOR, matching the floating portion of the related debt. |
(b) | At September 30, 2013, $75 million of these interest rate swaps was designated to borrowings on our Revolving Credit Facility and $75 million was designated to borrowings on our project financing debt at Black Hills Wyoming. These swaps were priced using three-month LIBOR, matching the floating portion of the related debt. The portion of the swaps that was designated to Black Hills Wyoming was settled during the fourth quarter of 2013 upon repayment of the Black Hills Wyoming project financing. |
(c) | These swaps were settled during the fourth quarter of 2013. |
Three Months Ended September 30, 2014 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | 152 | Interest expense | $ | (925 | ) | $ | — | ||||||||
Commodity derivatives | 4,833 | Revenue | (1,135 | ) | — | |||||||||||
Total | $ | 4,985 | $ | (2,060 | ) | $ | — |
Three Months Ended September 30, 2013 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | (907 | ) | Interest expense | $ | (1,844 | ) | $ | — | |||||||
Commodity derivatives | (2,140 | ) | Revenue | (168 | ) | — | ||||||||||
Total | $ | (3,047 | ) | $ | (2,012 | ) | $ | — |
Nine Months Ended September 30, 2014 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | (277 | ) | Interest expense | $ | (2,745 | ) | $ | — | |||||||
Commodity derivatives | (1,376 | ) | Revenue | (2,697 | ) | — | ||||||||||
Total | $ | (1,653 | ) | $ | (5,442 | ) | $ | — |
Nine Months Ended September 30, 2013 | ||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | Amount of Gain/(Loss) Recognized in AOCI Derivative (Effective Portion) | Location of Gain/(Loss) Reclassified from AOCI into Income (Effective Portion) | Amount of Reclassified Gain/(Loss) from AOCI into Income (Effective Portion) | Location of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | Amount of Gain/(Loss) Recognized in Income on Derivative (Ineffective Portion) | |||||||||||
Interest rate swaps | $ | 141 | Interest expense | $ | (5,460 | ) | $ | — | ||||||||
Commodity derivatives | 86 | Revenue | 896 | — | ||||||||||||
Total | $ | 227 | $ | (4,564 | ) | $ | — |
• | The commodity option contracts for our Oil and Gas segment are valued using the market approach and can include calls and puts. Fair value was derived using quoted prices from third-party brokers for similar instruments as to quantity and timing. The prices are then validated through third-party sources and therefore support Level 2 disclosure. |
• | The commodity basis swaps for our Oil and Gas segment are valued using the market approach with the instrument’s current forward price strip hedged for the same quantity and date and discounted based on the three-month LIBOR. We utilize observable inputs which support a Level 2 disclosure. |
• | The commodity contracts for our Utilities Segments, valued using the market approach, include exchange-traded futures, options and basis swaps (Level 2) and OTC basis swaps (Level 3) for natural gas contracts. For Level 2 assets and liabilities, fair value was derived using broker quotes validated by the Chicago Mercantile Exchange pricing for similar instruments. For Level 3 assets and liabilities, fair value was derived using average price quotes from the OTC contract broker and an independent third-party market participant because these instruments are not traded on an exchange. |
• | The interest rate swaps are valued using the market approach. We establish fair value by obtaining price quotes directly from the counterparty which are based on the floating three-month LIBOR curve for the term of the contract. The fair value obtained from the counterparty is then validated by utilizing a nationally recognized service that obtains observable inputs to compute fair value for the same instrument. In addition, the fair value for the interest rate swap derivatives includes a CVA component. The CVA considers the fair value of the interest rate swap and the probability of default based on the life of the contract. For the probability of a default component, we utilize observable inputs supporting a Level 2 disclosure by using our credit default spread, if available, or a generic credit default spread curve that takes into account our credit ratings. |
As of September 30, 2014 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 322 | — | (322 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 1,545 | — | (1,545 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 4,029 | — | (4,029 | ) | — | ||||||||||
Total | $ | — | $ | 5,896 | $ | — | $ | (5,896 | ) | $ | — | |||||
Liabilities: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 487 | — | (487 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 865 | — | (865 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 8,679 | — | (8,679 | ) | — | ||||||||||
Interest rate swaps | — | 6,670 | — | — | 6,670 | |||||||||||
Total | $ | — | $ | 16,701 | $ | — | $ | (10,031 | ) | $ | 6,670 |
As of December 31, 2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 130 | — | (75 | ) | 55 | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 815 | — | (815 | ) | — | ||||||||||
Commodity derivatives —Utilities | — | 3,030 | — | (2,368 | ) | 662 | ||||||||||
Total | $ | — | $ | 3,975 | $ | — | $ | (3,258 | ) | $ | 717 | |||||
Liabilities: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Basis Swaps -- Oil | — | 1,229 | — | (1,229 | ) | — | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 531 | — | (531 | ) | — | ||||||||||
Commodity derivatives — Utilities | — | 9,100 | — | (9,100 | ) | — | ||||||||||
Interest rate swaps | — | 9,088 | — | — | 9,088 | |||||||||||
Total | $ | — | $ | 19,948 | $ | — | $ | (10,860 | ) | $ | 9,088 |
As of September 30, 2013 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Cash Collateral and Counterparty Netting | Total | ||||||||||||
(in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | 2 | $ | — | $ | — | $ | 2 | ||||||
Basis Swaps -- Oil | — | 51 | — | (40 | ) | 11 | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 1,752 | — | (1,639 | ) | 113 | ||||||||||
Commodity derivatives — Utilities | — | 2,351 | — | (2,351 | ) | — | ||||||||||
Total | $ | — | $ | 4,156 | $ | — | $ | (4,030 | ) | $ | 126 | |||||
Liabilities: | ||||||||||||||||
Commodity derivatives — Oil and Gas | ||||||||||||||||
Options -- Oil | $ | — | $ | 142 | $ | — | $ | (77 | ) | $ | 65 | |||||
Basis Swaps -- Oil | — | 1,318 | — | (1,284 | ) | 34 | ||||||||||
Options -- Gas | — | — | — | — | — | |||||||||||
Basis Swaps -- Gas | — | 232 | — | (181 | ) | 51 | ||||||||||
Commodity derivatives — Utilities | — | 10,747 | — | (10,747 | ) | — | ||||||||||
Interest rate swaps | — | 83,142 | — | (5,960 | ) | 77,182 | ||||||||||
Total | $ | — | $ | 95,581 | $ | — | $ | (18,249 | ) | $ | 77,332 |
As of September 30, 2014 | ||||||||
Balance Sheet Location | Fair Value of Asset Derivatives | Fair Value of Liability Derivatives | ||||||
Derivatives designated as hedges: | ||||||||
Commodity derivatives | Derivative assets — current | $ | 1,174 | $ | — | |||
Commodity derivatives | Derivative assets — non-current | 692 | — | |||||
Commodity derivatives | Derivative liabilities — current | — | 497 | |||||
Commodity derivatives | Derivative liabilities — non-current | — | 856 | |||||
Interest rate swaps | Derivative liabilities — current | — | 3,397 | |||||
Interest rate swaps | Derivative liabilities — non-current | — | 3,273 | |||||
Total derivatives designated as hedges | $ | 1,866 | $ | 8,023 | ||||
Derivatives not designated as hedges: |