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InPublic 14-Mar-2018 5:52 PM
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Rapid City, S.D. - March 14, 2018- Black Hills Corp. (NYSE: BKH) today announced that it sent a letter to Reginal Rudolf, Chief Executive Officer of San Isabel Electric Association, and Jack Johnson, Chief Executive Officer of Southeast Colorado Power Association responding to the letter received on February 14, 2018. The complete text of the letter follows.
March 14, 2018
Mr. Reginal RudolphChief Executive OfficerSan Isabel Electric Association
Mr. Jack JohnstonChief Executive OfficerSoutheast Colorado Power Association
Mr. Rudolph and Mr. Johnston:
This acknowledges receipt of your letter expressing interest in acquiring Black Hills Energy's Colorado Electric utility. Jeff Berzina, our Vice President of Strategic Planning and Corporate Development has informed me of the limited discussions he has held with you and your financial advisor. I reiterate Mr. Berzina's previous message that a divestiture of utility assets is inconsistent with our corporate strategy.
As we considered your letter of interest, there were several areas of concern, with three particular areas I would like to address. Our first major concern is the negative impact the transaction would have on our customers in southern Colorado. As you are likely aware, residential customer rates for both San Isabel Electric and Southeast Colorado Power are comparable to Black Hills Energy's rates; and San Isabel's large commercial customer rates are higher than Black Hills Energy's. Black Hills Energy also is better positioned than any electric provider in the State to attain Colorado's aspirational climate goals. We own and operate the cleanest, most modern power generation fleet in the state, comprised entirely of renewable energy resources and highly efficient natural gas-fired plants. Further, electric system reliability is also critical to the future economic growth of the southern Colorado area. Black Hills is an industry leader in system reliability, with all three of our electric utilities ranking in the top quartile of the industry. Weighing these factors, your proposal is not in our customers' best interests.
The second major concern with your letter of interest relates to the relatively low valuation you assign to our assets and a total lack of evidence in the letter regarding your ability to finance and operate a utility the size of our operation in Southern Colorado. While we understand your various market valuation metrics, they are at, or below, market value. The $1.1 billion value indicated in your letter falls well short of our internal valuation of our Colorado system combined with Colorado IPP's electric generation assets.
Finally, a sales transaction would require approval of the Colorado Public Utilities Commission. We seriously question the ability to demonstrate benefits to customers which would be necessary to obtain approval for you to acquire our utility. Further, the Colorado Public Utilities Commission is likely to react negatively to a transaction involving any sale to an electric cooperative, which would ultimately remove the utility and its customers from the Commission's ratemaking authority.
Having contemplated the proposal outlined in your letter, we have no interest in selling our utility. With that said, we do concur with your negative sentiments regarding the potential for municipalization of the Pueblo utility assets, but disagree that the rural utility cooperative model would benefit customers. Black Hills Energy, with oversight from the Colorado Public Utilities Commission, is the superior energy provider to best ensure the long-term delivery of safe, reliable, and cost-effective utility service to our customers in southern Colorado.
David R. Emery
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 1.25 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
CAUTION REGARDING FORWARD LOOKING STATEMENTS This news release includes "forward-looking statements" as defined by the Securities and Exchange Commission, or SEC. 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 news release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, are forward-looking statements, which are subject to various risks and uncertainties. Factors that could cause actual results to differ from those in the forward-looking statements may accompany the statements themselves. In addition, our business and any offering may be influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our ability to control. These factors include, but are not limited to, evolving environmental requirements in Colorado and valuation of Colorado Electric and Colorado IPP's electric generation assets. All forward-looking statements, whether written or oral and whether made by or on behalf of us, are expressly qualified by the risk factors and cautionary statements set forth in the prospectus supplement and accompanying prospectus for the at-the-market equity offering program, Item 1A of Part I of our 2017 Annual Report on Form 10-K, and other reports that we file with SEC from time to time.
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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