Black Hills’ Earnings Call: Data Center Negotiations, Merger Timelines, and Reservation Payment Terms Don’t Match

Date of Call: Aug 6, 2026

Financials Results

• EPS: GAAP EPS of $0.50, which included $0.04 of merger-related transaction costs; Adjusted EPS of $0.54 compared to $0.38 in Q2 2025

Guidance:

• Reaffirmed guidance range of $4.25 to $4.45 of adjusted EPS for the year, representing 6% growth at the midpoint over 2025.
• On track to achieve earnings guidance and deliver in the upper half of the 4% to 6% long-term growth target.

Business Commentary:

Earnings and Financial Performance:

• Black Hills Corporation delivered GAAP EPS of $0.50 for Q2 2026, with adjusted EPS of $0.54 after excluding $0.04 of merger-related transaction costs, compared to $0.38 in Q2 2025.
• The increase in adjusted EPS was driven by new rates and rider recovery, offsetting higher financing and depreciation costs, and effective expense management.

Large Load Demand and Data Center Opportunities:

• The company has a large load demand pipeline exceeding 3 gigawatts, with 600 megawatts included in the current financial plan and is actively negotiating an additional 2.5 gigawatts.
• This growth is primarily driven by hyperscale data centers, including expansions by Microsoft and Meta, reflecting strong demand for data center services in the region.

Capital Projects and Regulatory Progress:

• The 99-megawatt Lang II generation project is on schedule for completion in Q4 2026, with the final equipment delivered recently.
• Regulatory advancements include approvals for rate reviews in Arkansas Gas, South Dakota Electric, and a new rate request for Colorado Electric, supporting capital investment and growth initiatives.

Strategic Merger with Northwestern Energy:

• Black Hills has received six of seven necessary approvals for the merger with Northwestern Energy, awaiting a decision from the Montana Commission.
• The merger is expected to close in the second half of 2026, enhancing the company's position as a larger utility provider across eight states.

Dividend and Financial Stability:

• The company has maintained a 56-year consecutive dividend increase record, with a target payout ratio of 55% to 65%.
• Financial stability is supported by strong liquidity, with over $650 million available under the revolving credit facility, and a focus on maintaining credit quality metrics.

Sentiment Analysis:

Overall Tone: Positive

• Strong second quarter earnings, on track to achieve financial commitments and growth guidance. Large load demand pipeline exceeds 3 gigawatts, with active negotiations for more than 2.5 gigawatts of additional opportunities. Received six of seven approvals for the Northwestern Energy merger, on schedule for closing in the second half of the year. 'I'm extremely proud of what our team has already accomplished' and 'we are truly living out our vision to be the energy partner of choice.'

Q&A:

• Question from Andrew Weisel (Scotiabank): First, does Crusoe exiting have any implications for the status of your negotiations? Second, any impact on the customer that made those cash deposits? Third, do you see Crusoe exiting as slowing down the process, accelerating it, or not having much impact overall?
  Response: Crusoe's exit has not impacted negotiations; they are still negotiating with a hyperscale end user. Negotiations are going well and on track, with multiple agreements being finalized. The process is not delayed.

• Question from Andrew Weisel (Scotiabank): You mentioned a 75 megawatt data center opportunity expected in the third quarter. Is that unrelated? Is that a different customer and could that lead to a broader deal?
  Response: The 75 megawatt opportunity is a different customer and is part of the 2.5 gigawatt pipeline of additional large load opportunities. It is advancing nicely.

• Question from Andrew Weisel (Scotiabank): On Montana, can you elaborate on the status and timing there, how the partial settlement might bode for overall approval, and give more specific timing thoughts?
  Response: Achieved settlements with multiple parties, including the Consumer Council, but not with two environmental-focused entities. The settlements provide a path for approval. The Montana Commission's decision is expected within the 90-day timeline triggered by July 13 briefs, potentially by mid-October, with a possible 30-day extension to mid-November.

Contradiction Point 1

Status of Negotiations for the 1.8 Gigawatt Data Center Project

Contradiction on whether negotiations are delayed or still on track.

Andrew Weisel (Scotiabank) - Andrew Weisel (Scotiabank)

2026Q2: Crusoe's exit has not impacted negotiations; they are still negotiating with a hyperscale end user. Negotiations are going well and on track. The goal is to finalize agreements by the end of the quarter. - Lynn Evans(CFO)

What implications does Crusoe's exit have on your negotiations, customers with cash deposits, and the overall process timeline? - Andrew Weisel (Scotiabank)

2026Q2: The exit of Caruso has had no impact on the negotiations, which are going well and on track. The process is not delayed. - Linn Evans(CFO)

Contradiction Point 2

Timeline for a Decision on the Montana Merger

Contradiction on the specific timing for a potential decision.

What were the key factors driving earnings performance this quarter? - Andrew Weisel (Scotiabank)

2026Q2: A decision is expected by mid-October, possibly extending to mid-November. - Lynn Evans(CFO)

Can you provide an update on Montana's status and timing, and how the partial settlement might influence overall approval and timing? - Andrew Weisel (Scotiabank)

2026Q2: A decision is hoped for by mid-October, or by mid-November at the latest. - Linn Evans(CFO)

Contradiction Point 3

Impact of Regulatory Settlements on Merger Approval Timeline

Contradiction on whether settlements accelerate or maintain the regulatory process timeline.

Andrew Weisel (Scotiabank) - Andrew Weisel (Scotiabank)

2026Q2: The settlements provide a favorable map... A decision is expected by mid-October, possibly extending to mid-November. - Lynn Evans(CEO)

Can you provide an update on Montana's status and timing, and how the partial settlement might impact overall approval and timing expectations? - Chris Ellinghaus (Siebert Williams Shank)

2026Q1: The settlements provide a solid foundation... which is still expected to close in the second half of the year. - Linn Evans(CEO)

Contradiction Point 4

Nature and Duration of the $201M Data Center Reservation Payment

Contradiction on whether the payment is a bridge/short-term deposit or part of a long-term agreement.

Andrew Weisel (Scotiabank) - Andrew Weisel (Scotiabank)

2026Q2: Crusoe's exit has not impacted negotiations; they are still negotiating with a hyperscale end user.... The goal is to finalize agreements by the end of the quarter. - Lynn Evans(CEO)

How does Crusoe's exit impact the status of negotiations, customer cash deposits, and the overall process timeline? - Paul Fremont (Ladenburg Thalmann)

2026Q1: The $201 million is a short-term agreement through June 30, with the goal of reaching a long-term agreement, but no absolute deadline. - Linn Evans(CEO)

Contradiction Point 5

Status and Impact of the Crusoe Project

Contradiction on whether project negotiations are ongoing or if a key partner has exited.

Andrew Weisel (Scotiabank) - Andrew Weisel (Scotiabank)

2026Q2: Crusoe's exit has not impacted negotiations; they are still negotiating with a hyperscale end user. - Lynn Evans(CEO)

What are the implications of Crusoe's exit on negotiations, customer cash deposits, and the overall process timeline? - Christopher Ellinghaus (Siebert Williams Shank & Co., L.L.C.)

2025Q4: The pipeline is largely dominated by Microsoft, Meta, and the Crusoe-Tallgrass project. - Marne Jones(SVP & Chief Utility Officer) & Linden Evans(CEO)