Black Hills Corp. Reports 2023 Second-Quarter Results and Reaffirms 2023 Earnings Guidance

RAPID CITY, S.D. — Aug. 2, 2023 — Black Hills Corp. (NYSE: BKH) today announced financial results for the second quarter of 2023. Net income available for common stock and earnings per share for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022, were:

Earnings of $0.35 per share for the second quarter were driven by new rates, rider recovery and a state income tax true-up of $0.12 per share. Financial results reflected the impact of inflation on higher year-over-year operating expenses and higher interest expense.

“We strengthened our balance sheet, enhanced our liquidity and advanced our strategic initiatives in the first half of 2023,” said Linn Evans, president and CEO of Black Hills Corp. “I’m pleased with our excellent operational performance in delivering safe, reliable service to our customers.

“Our team continued to execute our regulatory plan with the approval of a settlement for new rates in Colorado for our intrastate natural gas pipeline, new rate review filings for our Colorado and Wyoming gas utilities and preparations for a rate review filing in Arkansas by year end. To achieve the goals of our Colorado Clean Energy Plan, we recently issued a request for proposals to add 400 megawatts of renewable and battery storage resources. For our South Dakota electric resource plan, we are currently evaluating bids to add 100 megawatts of rate based renewable resources.

“We are on pace to achieve our earnings guidance for the year. We expect strong cash flows combined with disciplined capital management will result in lower than forecasted interest expense for 2023. For the remainder of the year, we have sharpened our focus on managing expenses given the challenging macroeconomic environment. As we look to the future, we remain confident in our strategy and long-term growth trajectory as clarity around key opportunities continues to emerge,” concluded Evans.

SECOND-QUARTER 2023 HIGHLIGHTS AND UPDATES

Electric Utilities

Gas Utilities

Corporate and Other

2023 EARNINGS GUIDANCE REAFFIRMED

Black Hills reaffirms its guidance for 2023 earnings per share available for common stock to be in the range of $3.65 to $3.85 based on the follow assumptions:

* Guidance assumptions for interest expense and operating expense are being provided for only 2023 due to ongoing volatility in inflation and rising interest rate environments.

2024 EARNINGS GUIDANCE TO BE ANNOUNCED DURING YEAR-END 2023 EARNINGS

Black Hills will provide its annual financial update during its fourth quarter and full-year earnings call. This update in early 2024 will include earnings and dividend guidance for 2024 and the capital investment forecast for 2024 through 2028.

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BLACK HILLS CORPORATION

CONSOLIDATED FINANCIAL RESULTS

(Minor differences may result due to rounding)

CONFERENCE CALL AND WEBCAST

Black Hills will host a live conference call and webcast at 11 a.m. EDT on Thursday, Aug. 3, 2023, to discuss financial and operating performance.

To access the live webcast and download a copy of the investor presentation, go to the “Investor Relations” section of the Black Hills website at www.blackhillscorp.com and click on “News and Events” and then “Events & Presentation.” The presentation will be posted on the website before the webcast. Listeners should allow at least five minutes for registering and accessing the presentation. For those unable to listen to the live broadcast, a replay will be available on the company’s website.

To ask a question during the live broadcast, users can access dial-in information and a personal identification number by registering for the event at https://register.vevent.com/register/BI8142d9b423ae478a8dac026d4571f1e0.

A listen-only webcast player and presentation slides can be accessed live at https://edge.media-server.com/mmc/p/oi3c9i79 with a replay of the event available for up to one year.

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USE OF NON-GAAP FINANCIAL MEASURES

Gas and Electric Utility Margin

Gas and Electric Utility margin (revenue less cost of sales) is considered a non-GAAP financial measure due to the exclusion of operation and maintenance expenses, depreciation and amortization expenses, and property and production taxes from the measure. The presentation of Gas and Electric Utility margin is intended to supplement investors’ understanding of operating performance.

Electric Utility margin is calculated as operating revenue less cost of fuel and purchased power. Gas Utility margin is calculated as operating revenue less cost of gas sold. Our Gas and Electric Utility margin is impacted by the fluctuations in power purchases and natural gas and other fuel supply costs. However, while these fluctuating costs impact Gas and Electric Utility margin as a percentage of revenue, they only impact total Gas and Electric Utility margin if the costs cannot be passed through to customers.

Our Gas and Electric Utility margin measure may not be comparable to other companies’ Gas and Electric Utility margin measures. Furthermore, this measure is not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

SEGMENT PERFORMANCE SUMMARY

Operating results from our business segments for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022, are discussed below.

Certain lines of business in which we operate are highly seasonal, and revenue from, and certain expenses for, such operations may fluctuate significantly between quarterly periods. Demand for electricity and natural gas is sensitive to seasonal cooling, heating and industrial load requirements. In particular, the normal peak usage season for our electric utilities is June through August while the normal peak usage season for our gas utilities is November through March. Significant earnings variances can be expected between the Gas Utilities segment’s peak and off-peak seasons. Due to this seasonal nature, our results of operations for the three and six months ended June 30, 2023 and 2022 are not necessarily indicative of the results of operations to be expected for any other period or for the entire year.

Segment information does not include inter-company eliminations and all amounts are presented on a pre-tax basis unless otherwise indicated. Minor differences in amounts may result due to rounding.

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Electric Utilities

Three Months Ended June 30, 2023, Compared with Three Months Ended June 30, 2022

Electric Utility margin increased as a result of:

____________________

Operations and maintenance expense increased primarily due to $3.8 million of higher generation expenses driven by planned outages and higher materials costs and $1.9 million of higher employee-related expenses.

Depreciation and amortization increased primarily due to a higher asset base driven by current year and prior year capital expenditures.

Six Months Ended June 30, 2023, Compared with Six Months Ended June 30, 2022

Electric Utility margin increased as a result of:

____________________

Operations and maintenance expense increased primarily due to $6.2 million of higher mining and generation expenses driven

by planned outages and higher fuel and materials costs and $5.4 million of higher employee-related expenses partially offset by

a one-time $7.7 million gain on the planned sale of Northern Iowa Windpower assets. Other favorable variances, none of which

were individually significant, comprised the remainder of the difference when compared to the same period in the prior year.

Depreciation and amortization increased primarily due to a higher asset base driven by current year and prior year capital

expenditures.

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Gas Utilities

Three Months Ended June 30, 2023, Compared with Three Months Ended June 30, 2022

Gas Utility margin decreased as a result of:

____________________

Operations and maintenance expense increased primarily due to $6.0 million of higher employee-related expenses and $0.5 million of higher materials and outside services expenses.

Depreciation and amortization was comparable to the same period in the prior year.

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Six Months Ended June 30, 2023, Compared with Six Months Ended June 30, 2022

Gas Utility margin decreased as a result of:

____________________

Operations and maintenance expense increased primarily due to $11.9 million of higher employee-related expenses and $3.1 million of higher materials and outside services expenses.

Depreciation and amortization was comparable to the same period in the prior year.

Corporate and Other

Corporate and Other represents certain unallocated expenses for administrative activities that support our reportable operating segments. Corporate and Other also includes business development activities that are not part of our operating segments.

Three Months Ended June 30, 2023, Compared with Three Months Ended June 30, 2022

Operating (loss) was comparable to the same period in the prior year.

Six Months Ended June 30, 2023, Compared with Six Months Ended June 30, 2022

Operating (loss) was comparable to the same period in the prior year.

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Consolidated Interest Expense, Other Income and Income Tax Expense

Three Months Ended June 30, 2023, Compared with Three Months Ended June 30, 2022

Interest Expense, net

The increase in Interest expense, net was due to higher interest rates.

Other Income (Expense), net

Other expense, net increased due to higher costs for our non-qualified benefit plans which were driven by market performance and higher non-service benefit plan costs driven by higher discount rates.

Income Tax Benefit

Income tax benefit increased primarily due to lower pre-tax income and a lower effective tax rate. For the three months ended June 30, 2023, the effective tax rate was (29.8)% compared to (1.9)% for the same period in 2022. The lower effective tax rate was primarily due to a $8.2 million tax benefit from a Nebraska income tax rate decrease compared to a $3.8 million benefit from a similar Nebraska tax rate decrease in 2022 and $2.3 million of lower wind PTCs driven by the March 2023 sale of Northern Iowa Windpower assets.

Six Months Ended June 30, 2023, Compared with Six Months Ended June 30, 2022

Interest Expense, net

The increase in Interest expense, net was due to higher interest rates.

Other Income (Expense), net

Other expense, net increased primarily due to higher costs for our non-qualified benefit plans which were driven by market performance and higher non-service benefit plan costs driven by higher discount rates.

Income Tax Expense

Income tax expense decreased primarily due to lower pre-tax income and a lower effective tax rate. For the six months ended June 30, 2023, the effective tax rate was 5.6% compared to 8.1% for the same period in 2022. The lower effective tax rate was primarily due to a $8.2 million tax benefit from a Nebraska income tax rate decrease compared to a $3.8 million benefit from a similar Nebraska tax rate decrease in 2022 and $3.0 million of lower wind PTCs driven by the March 2023 sale of Northern Iowa Windpower assets.

ABOUT BLACK HILLS CORP.

Black Hills Corp. (NYSE: BKH) is a customer-focused, growth-oriented utility company with a tradition of improving life with energy and a vision to be the energy partner of choice. Based in Rapid City, South Dakota, the company serves 1.33 million natural gas and electric utility customers in eight states: Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. More information is available at www.blackhillscorp.com, www.blackhillscorp.com/corporateresponsibility and www.blackhillsenergy.com.

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CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This presentation includes “forward-looking statements” as defined by the Securities and Exchange Commission. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. This includes, without limitations, our 2023 earnings guidance. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation, the risk factors described in Item 1A of Part I of our 2022 Annual Report on Form 10-K and other reports that we file with the SEC from time to time, and the following:

New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time-to-time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.

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CONSOLIDATING INCOME STATEMENTS

(Minor differences may result due to rounding.)

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