Black Hills Corporation in brief
We are a diversified energy company with retail and wholesale
operations in 12 states, extending from the Midwest to the West
Coast. Corporate headquarters are in Rapid City, SD with wholesale
energy subsidiary offices in Golden, CO.
Black Hills Power. Our legacy electric utility serves 65,000 customers
primarily located in western South Dakota, and also serves parts of
Wyoming and Montana.
Cheyenne Light, Fuel & Power. Acquired in 2005, this gas and electric
utility serves 39,000 electric and 33,000 gas customers in Cheyenne and
parts of Laramie County, WY.
Black Hills Exploration and Production. Our oil and gas operations had
~170 BCFE of proven natural gas and oil reserves
at YE 2005. About 82% of total reserves are gas. Production in
2005 was 13.7 BCFE. Primary operations are in San Juan Basin (NM),
Piceance Basin (CO) and Powder River Basin (WY).
Black Hills Generation. We operate 1000 MW of independent power
production (IPP), primarily in Wyoming, Colorado, Nevada and California.
Most of the fleet serves peaking and intermediate load. Over 95% is under
contract with load-serving utilities.
Wyodak Resources. Our coal mine has ~290 million tons of reserves in
the Powder River Basin of Wyoming. 2005 production was 4.7 million tons.
Most of the coal production fuels power plants at the mine.
Enserco Energy. Energy marketing is concentrated in the Rocky
Mountain region. We offer producer, origination, transportation and storage
services out of our Golden, CO office, with a branch office
in Calgary, Alberta. Average daily physical gas volumes in 2005 were
about 1.4 million MMBTU. Enserco also began oil marketing services in
2006.
DIVERSIFIED ENERGY ASSETS
BLACK HILLS CORPORATION
has agreed to acquire
AQUILA’S UTILITY OPERATIONS
IN COLORADO, KANSAS,
NEBRASKA AND IOWA
Transaction Overview
Black Hills to acquire utility properties
On February 7, 2007, Black Hills Corporation (NYSE: BKH)
announced definitive agreements to acquire certain Aquila utility
operations in Colorado, Kansas, Nebraska and Iowa, subject to
regulatory and other approvals and customary closing conditions.
The deal is expected to be completed in about a year, for a
purchase price of $940 million, subject to working capital
adjustments at closing.
Black Hills has obtained a bridge financing commitment in
advance of permanent financing. We expect to finance the deal
with a combination of equity, mandatory convertible securities,
corporate-level debt, and internally generated cash resources.
We expect to maintain our investment-grade credit rating.
(Based on recent public information)
Total assets ~ $3 Billion
Regulated customers:
Electric 197,000Customers
Gas 556,000Customers
Total regulated customers 753,000 Customers
Power generation resources:
Regulated, operated 537 MW
Regulated, contracted 398 MW
Regulated, under construction 90 MW
Independent power production 1,000 MW
Total generation resources 2,025 MW
Natural gas and oil reserves ~ 170 BCFE
Coal reserves ~ 290 Million tons
Natural gas marketing average
daily physical volume 1.4 Million MMBTU
Regulated utility operations in 7 states
Wholesale energy operations in 12 states
DEFINITIVE AGREEMENTS REACHED
A LOOK AT THE COMBINED COMPANY
February 2007
www.blackhillscorp.com
Black Hills Assets
Utility operations
Power generation
Gas production
Oil production
Coal mine
Energy marketing
We’re here to serve.
Black Hills Corporation has signed
definitive agreements to acquire
certain utility assets of Aquila, Inc.
located in Colorado, Kansas,
Nebraska and Iowa, with Great Plains
Energy, of Kansas City, Missouri,
separately acquiring Aquila’s other
utility assets in Missouri. The deal
is subject to various regulatory and
other approvals and customary closing conditions. We strongly
believe this transaction serves the interests of our customers,
communities, employees and investors alike.
The merits of the transaction are strategic, economic and public-
minded. Acquiring these assets will strengthen our utility
operations, enhance resource planning and utilization, increase
operating efficiency and help us improve financial performance.
Black Hills has a long history of successfully partnering with the
communities we serve. That record includes high levels of
customer service satisfaction and value-priced energy products.
It also speaks to our commitment to our friends and neighbors,
with whom we volunteer our time and efforts and make financial
contributions to make our communities’ civic, charitable and
philanthropic organizations successful.
We invest for the long run, and the proposed acquisition of
these fine utility assets will provide opportunities to grow and
to create value for shareholders while providing safe, reliable and
economical energy to our customers.
We look forward to serving more customers, in more ways, and
thereby creating more value for them, our shareholders and our
other constituents in the years ahead.
Thank you for your interest and support!
STRATEGIC RATIONALE
This brochure includes “forward-looking statements” as defined
by the Securities and Exchange Commission. These statements
concern our plans, expectations and objectives for future
operations. All statements, other than statements of historical facts,
included in the presentation that address activities, events or
developments that we expect, believe or anticipate will or may
occur in the future are forward-looking statements. They 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 conform to our
expectations and predictions is subject to a number of risks and
uncertainties which could cause actual results to differ materially
from those contained in the forward-looking statements. Please
refer to cautionary language provided in our February 7, 2007
press release on the proposed acquisition of assets, as well as
our SEC Form 10-K, Form 10-Q and other public disclosures.
Caution on forward-looking statements
COMBINED RETAIL PRESENCE
Expanded customer base and diverse contiguous geographic
territory enhances financial stability and operating efficiencies.
Proven Black Hills/Cheyenne business model applicable
in new service territories which have similar customer and
community profiles.
Lowers overall business risk through revenue and regulatory
diversification.
Benefits extend to customers, communities, employees and
investors.
Conservatively financed transaction with strong cash flow
and earnings from stable, risk-managed operations.
Longer-term upside potential from possible power generation
construction and integration opportunities in Colorado; up to
300 MW of additional base-load generation could be added to
serve growing needs of electric utility.
CHAIRMAN’S MESSAGE
DAVID R. EMERY
Chairman, President & CEO
Black Hills Corporation
$940 million all-cash deal; Black Hills expects to maintain
investment-grade credit rating with permanent financing through
a combination of equity, mandatory convertible securities, debt
and internally generated cash resources.
Solid balance sheet supports strong financial foundation.
Stable and predictable cash flows expected: earnings per share
break-even expected after a year of transitional costs, with EPS
accretion beginning in second full year.
Higher-growth utilities in Colorado reflect regional demographics;
stable-growth utilities in Kansas, Nebraska and Iowa.
FINANCIAL DETAILS AND RATIONALE
Acquired gas utilities in Colorado, Kansas,
Nebraska and Iowa
Acquired electric utility in Colorado
Seven utilities would serve
about 750,000 customers
in adjoining states in the
Midwest and Rocky Mountains.
Cheyenne
Light
WY
CO
NE
KS
IA
Rapid City
Black Hills Power
SD
MT
