Black Hills Corp. (BKH) Q3 2026 earnings review
Black Hills signs Google power deal, while Montana merger waits
Black Hills Corp., the electric and gas utility serving eight states, locked in its flagship data center contract while approved rate increases lifted summer profit. Revenue grew 8%, and profit per share excluding merger costs rose 27% on new electric and gas rates and hot summer weather. Chief executive Linn Evans kept the full-year outlook unchanged, which by our math leaves fourth-quarter profit growth slowing to about 4%.
| Revenue | $466.1M +8.3% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $0.57 +27% from a year ago |
| Google data center net income target | ~$150M in 2030 on $1.8B power-plant spend |
| Full-year profit per share outlook | Unchanged $4.25–4.45 (middle: +6.1%) |
⚖️ Verdict: 🟢 Bullish
The story got better because the utility turned its biggest negotiation risk into a signed contract through 2048 with Google. That deal removes the threat of refunding equipment advances and plans for $150 million of annual net income by 2030 from $1.8 billion of new power plants and management fees. One caution: the company still has not explained how much new stock it must sell to fund $2.5 billion of extra Wyoming generation and power-line projects, and Montana regulators still have not approved the NorthWestern Energy merger.
The question now is how much of the Google profit will reach shareholders on a per-share basis after the company raises equity and debt to build the plants. If customer fees and cash flow cover most of the bill, per-share growth will move above the current 4% to 6% target; if the buildout requires heavy stock sales, new shares will dilute the gain. The five-year financial update for 2027 to 2031 in February will settle it.
🐂 Bull Case
Google Data Center Contract Resolves the Biggest Risk
For three quarters, Black Hills Corp., the electric and gas utility serving eight western and midwestern states, carried a growing liability for equipment advances while contract talks dragged on. Some worried that relying on a few tech giants in Cheyenne, Wyoming created too much concentration risk, or that the deal might fall through.
"We are excited to have reached agreements to serve Google's planned data center in Wyoming, as previously announced," chief executive Linn Evans said. On September 30, the utility signed contracts running through 2048 to supply 2.7 gigawatts of power, which ended the risk of having to refund the advances.
- Company-owned power plants: $1.8 billion of planned spending for 564 megawatts of new generation
- Third-party power managed by Black Hills: 2.1 gigawatts, earning management fees
- Expected profit contribution: starting in mid-2027 and reaching about $150 million of net income in 2030
- Project cash generation: about $2.4 billion of cash flow before debt costs through 2048, after subtracting the $1.8 billion investment
This contract changes the long-term case because $150 million of net income equals more than half of the utility's current annual profit. Evans called the projects "significant upside to our current plan" because none of this profit sits inside the standing 4% to 6% annual earnings growth target.
What to watch: the five-year financial plan for 2027 to 2031, which arrives with fourth-quarter results in February. That update will show how much the new contract lifts the long-term earnings growth target.
Data Center Demand Lifted Industrial Power Volumes 21%
Before the new Google plants come online in 2027, existing data centers in Cheyenne are already pushing electricity usage higher. Black Hills serves these facilities under its Large Power Contract Service (LPCS) and Blockchain Interruptible Service (BCIS) pricing plans, which let the utility supply market power with minimal upfront spending.
Industrial electricity volumes rose 20.5% from a year ago to 770.1 gigawatt-hours in the third quarter, while industrial power revenue jumped 28.9% to $64.2 million. That demand pushed Wyoming Electric to four all-time usage records this year, reaching 439 megawatts in July, up 16% from last year's peak.
To connect the next wave of large customers without charging households, the utility requested state permits — Certificates of Public Convenience and Necessity (CPCNs) — for two power-line projects totaling $686 million: the $80 million South Cheyenne project and the $606 million Aeolus line. Both will use a proposed Large Customer Transmission Cost Adjustment Mechanism (LCTCAM), a special pricing rule that bills power-line costs directly to data centers.
What to watch: the Wyoming commission's ruling on the LCTCAM pricing rule in the first quarter of 2027. Approval would confirm that Black Hills can build $686 million of power lines with automatic cost recovery from large customers.
Operating Margin Expanded on Contained Maintenance Costs
Higher approved utility rates only help shareholders if day-to-day operating costs and power-plant financing costs do not eat up the extra revenue. This quarter, rate increases and hot summer weather added $0.21 per share to profit, and the utility kept its overhead in check.
Operating margin rose 2.8 percentage points from a year ago to 21.0% of revenue. Operations and maintenance — the day-to-day cost of running power lines, gas pipes and offices — rose 1.7% in dollars, so it fell by 2.1 percentage points as a share of revenue, to 32.9%.
Even after stripping out $0.06 per share of help from warmer summer cooling weather, profit per share excluding merger costs rose 13.3% from a year ago by our math. Lower merger expenses also helped reported results, dropping from $8.4 million before tax a year ago to $3.1 million this quarter.
What to watch: fourth-quarter operations and maintenance spending against the full-year plan of 3.5% growth. Because nine-month spending is flat from a year ago, the full-year forecast leaves room for an 18% jump in the fourth quarter by our math.
🐻 Bear Case
Funding $2.5 Billion of New Projects Is Unexplained
Evans highlighted $2.5 billion of new power-plant and transmission spending in Wyoming as a major boost to the current five-year plan. The release details the expected profits from Google through 2048, so the company frames the expansion as ready to drive per-share growth.
That framing leaves out how Black Hills will pay for the buildout. The $1.8 billion of new power plants and $686 million of power lines sit on top of an existing $4.7 billion five-year spending plan, and the utility has already used $69 million of its $50 million to $70 million stock-issuance allowance for 2026.
Borrowing costs are already rising before the new projects break ground, with nine-month net interest expense up $4.1 million to $153.7 million on higher debt balances and interest rates. Funding an extra $2.5 billion while keeping investment-grade credit ratings will require new stock and debt that dilute per-share gains.
What to watch: the 2027-to-2031 financing plan in the fourth-quarter earnings release. A big jump in planned stock sales would absorb much of the new net income before it reaches per-share profit.
Three Rate Settlements Delivered 58% of the Request
As a regulated utility, Black Hills must ask state commissions for permission to raise customer bills after it builds new pipes and power lines. Over recent quarters, settlements typically granted about two-thirds of what the utility asked for.
In October and November, the utility completed three rate reviews across South Dakota Electric and Arkansas Gas, receiving $49.3 million in total new annual revenue against $85.1 million requested — a 58% recovery rate by our math. In South Dakota, the utility also agreed to a four-year freeze on base rates "absent an extraordinary event, until August 2030".
- South Dakota Electric (South Dakota commission): $27.4 million approved vs $50.6 million requested, effective December 2026
- South Dakota Electric (Wyoming commission): $4.0 million approved vs $5.1 million requested, effective December 2026
- Arkansas Gas: $17.9 million approved vs $29.4 million requested, effective October 2026
The South Dakota freeze still allows separate surcharges — known as riders — such as the pending request to recover the $320 million Lange II gas plant opening this quarter. Even so, settling below 60% with a four-year base-rate lock makes cost control inside South Dakota critical through 2030.
What to watch: the Colorado Electric rate decision due in the first quarter of 2027, where Black Hills requested $26.7 million. Another sub-60% settlement would slow earnings growth before the data center plants open.
Montana Merger Approval and Winter Weather Stay Open
Two standing risks from earlier in the year remain unresolved heading into the final two months of 2026. First, the all-stock merger with NorthWestern Energy still aims to close by year-end, "subject to receipt of a satisfactory final regulatory approval from the Montana Public Service Commission".
Federal regulators, shareholders and commissions in Nebraska and South Dakota have already signed off, leaving Montana as the single hurdle. Second, while hot third-quarter weather — cooling degree days 28% above normal — added $0.06 per share, mild winter heating weather earlier in the year still left nine-month profit down $0.12 per share from weather.
What to watch: the Montana commission's final merger order before December 31, 2026. A delay into 2027 or tough conditions on power plants would push back the combined company's financial plan.
👓 Other Themes
Wildfire Liability Rules Completed in Two States
Western utilities face legal exposure when power lines spark wildfires, so Wyoming and South Dakota passed laws offering liability protections to utilities with approved safety plans. In July, Wyoming regulators approved Wyoming Electric's Wildfire Mitigation Plan and South Dakota regulators posted South Dakota Electric's plan, completing the steps needed for legal protection in both states.
💲 Other KPIs
Electric Utilities revenue grew 12.3% from a year ago, accelerating from 2.9% growth in the second quarter on new South Dakota interim rates, Wyoming transmission recovery and summer cooling demand. Gas Utilities revenue rose 2.9% during its quiet summer season, lifting its operating income by $4.2 million to $25.0 million.
Diluted shares rose 4.8% from a year ago, slowing slightly from 5.1% growth in the second quarter. The utility sold 1.0 million new shares during the first nine months for $69 million in net cash — including $19 million in the third quarter by our math — to help fund power-plant and pipeline construction.
Nine-month income tax expense was $28.5 million, or 11.6% of pre-tax profit by our math, down from 12.2% in the same period last year. Higher wind power generation earned more federal production tax credits, keeping the actual tax rate well below the full-year forecast of about 14%.
🔮 Guidance
Unchanged. The full-year plan still calls for about 6.1% growth at the $4.35 middle of the range, excluding NorthWestern merger costs. With $2.89 earned in the first nine months, the outlook leaves $1.46 for the fourth quarter by our math, or 3.5% growth over last year's fourth quarter. Black Hills hit the middle of its initial full-year range in both 2024 and 2025.
Unchanged. Management still plans for day-to-day operating costs — excluding merger bills, depreciation and non-income taxes — to rise about 3.5% to roughly $600 million. Because those costs were down slightly over the first nine months at $440.2 million by our math, hitting the full-year number implies fourth-quarter spending could rise up to 17.6% from a year ago.
Unchanged. The utility kept its full-year stock-sale plan at $50 million to $70 million. With $69 million of net proceeds already raised across 1.0 million shares in the first nine months, the program is effectively finished for 2026, leaving almost no stock issuance for the fourth quarter.
Unchanged. The plan continues to assume an effective tax rate near 14% for the full year. Because wind production tax credits held the nine-month tax rate down to 11.6% by our math, finishing near 14% would require a higher tax rate in the fourth quarter, or else a lower tax bill will give full-year profit a small boost.
❓ Key Questions
How will Black Hills finance the $2.5 billion Wyoming expansion?
The utility outlined $1.8 billion in power plants for Google and $686 million in transmission lines, all outside its current $4.7 billion capital plan. Investors need to know how much new stock the company must issue between 2027 and 2030 to fund that spending.
What happened to the $377 million in refundable customer advances?
Through July, a prospective data center customer had advanced $377 million for equipment under a reservation deal maturing August 31. Because the release lacks a balance sheet, management should clarify whether the September 30 Google contract converted those refundable advances into permanent project funding.
When will the Montana commission rule on the NorthWestern merger?
Montana is the final regulatory approval needed to close the all-stock merger with NorthWestern Energy by year-end 2026. With less than two months left in the year, any update on the commission's schedule or conditions will determine whether the close slips into 2027.
How will the 2027-to-2031 plan combine NorthWestern and Google?
Chief executive Linn Evans promised a full five-year update for 2027 to 2031 with the year-end earnings release. It remains unclear whether the standing 4% to 6% annual profit-per-share growth target will rise once Google's $150 million of 2030 net income and NorthWestern are folded in.