Good day, ladies and gentlemen, and welcome to the Black Hills Corporation Second Quarter 2020 Earnings Conference Call. My name is Liz, and I will be your coordinator for today. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Jerome Nichols, Director of Investor Relations of Black Hills Corporation. Please proceed, sir.

Thank you, Liz. Good morning, everyone. Welcome to Black Hills Corporation's Second Quarter 2020 Earnings Conference Call. You can find materials for our earnings call this morning at our website at www.blackhillscorp.com under the Investor Relations heading. Leading our quarterly earnings discussion today are Linn Evans, President and Chief Executive Officer; and Rich Kinzley, Senior Vice President and Chief Financial Officer. During our earnings discussion today, some of the comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations and beliefs are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, slide two of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations. I will now turn the call over to Linn Evans.

Thank you, Jerome. Good morning, everyone, and thank you for joining us today. Turning to slide four. Since the onset of the pandemic in the United States almost five months ago, our team has continued to execute exceptionally well while adhering to best practices within a rapidly changing landscape. Regardless of the uncertainty we are all facing, we remain more confident than ever in our team, our business model and our strategy. We believe Black Hills is especially well positioned to successfully navigate the pandemic and the journey ahead for a number of reasons. First, our utilities are comprised of critical infrastructure operated by our team through a customer-focused culture that improves lives with energy for our customers and our communities, while also generating predictable and growing returns for our shareholders. Second, Black Hills operates primarily in states with constructive regulatory environments that support timely recovery mechanisms and reasonable returns. In addition, our operations across eight states provide geographic and regulatory diversity that reduces risk and provides a greater range of opportunities. Third, our capital allocation plan is balanced. And during the second quarter, we continued to invest free cash flow from operations into organic growth initiatives that will create long-term value. At the same time, we continue to reward our shareholders with a healthy and growing dividend. We are proud of our track record of increasing our annual dividends for the past 50 years. Fourth, we continue to strengthen our balance sheet, reflecting our commitment to maintaining an investment-grade credit rating. And while this is certainly not a complete list, I'll add that we have an experienced, engaged and committed team of leaders across our company dedicated to the long-term success of our business and doing well for all of our stakeholders. Moving to slide six for an overview of our second quarter results. The strength of our customer-focused strategy was on full display this quarter. We successfully managed through COVID-19 challenges to provide safe and reliable service to our customers while also advancing our key strategic initiatives and delivering solid financial results. First and foremost, the safety of our customers and coworkers has always been a top priority and has become even more critical during this health crisis. We deployed all the safety equipment, protocols, and processes recommended by the CDC to keep our coworkers and communities healthy. At the same time, we maintained our relentless focus on reliability to ensure that customers would have the uninterrupted and sufficient power and gas needed during these stay-at-home times, and we delivered. While we primarily serve rural territories that have been less impacted by this pandemic relative to large urban areas, many of our customers still face new hardships. We remain true to our values to help those with financial difficulties. During these trying times, we have deepened our relationships with our customers and communities through a variety of financial assistance programs and donations to local nonprofits. During the second quarter, we continued to execute plans that address the long-term needs of our customers while balancing that with our commitment to deliver strong results to shareholders. To that end, our 2020 capital investment plan remains on schedule, and at the same time, we enhanced our strong financial position and delivered solid quarterly results. At quarter end, our disciplined financial strategy provided us with excellent flexibility, liquidity, and access to capital. We further bolstered our liquidity in June with a $400 million debt issuance, taking advantage of the low interest rate environment. We also delivered solid financial performance in line with our expectations for the second quarter. Rich will cover the earnings drivers and COVID-19 impacts in detail, but at a high level, I am pleased to report that each of our business segments reported better financial results relative to last year's second quarter. I'm proud of the resilience that our team has demonstrated and our ability to deliver on key initiatives in the face of new challenges. During the quarter, we reached a settlement for the Wygen I FERC application to fulfill a 60-megawatt capacity need for our Wyoming Electric customers. Adding clarity to our long-term outlook, we advanced efforts on utility consolidation and requested recovery of investments in Nebraska. We continued to make progress on responsibly integrating renewable energy into our energy mix for customers in Colorado, South Dakota, and Wyoming. And in Colorado, we are working hard with our communities and regulators. We are encouraged by a favorable vote of confidence from the Pueblo community in May regarding our franchise and the recently announced strategic alignment of our leadership structure in Colorado. Overall, we delivered solid second quarter results while building the foundation for long-term growth. Now five months into this health and economic crisis, we are cautiously optimistic that our customers and communities are gradually recovering.

Thanks, Linn, and good morning, everyone. I'll start on slide nine. As Linn noted, we delivered solid financial performance that met our expectations for the quarter. Second quarter EPS as adjusted was $0.33, up from $0.24 last year. All our segments reported higher operating income compared to the same quarter last year driven primarily by new rates at our Gas Utilities and favorable weather at both our Electric and Gas Utilities. We also benefited from earnings on new wind assets at our Power Generation segment, higher tons sold at our Mining segment, and lower consolidated operating expenses. We estimate weather favorably impacted EPS by $0.02 compared to normal and by $0.06 compared to Q2 2019. If you'll recall, results at our utilities for the second quarter last year were tempered by unseasonably wet and cool weather conditions. Results for the second quarter of 2020 included negative COVID impacts of approximately $0.03 per share, in line with our expectations. Net income increased 44% quarter-over-quarter, while EPS increased 37% quarter-over-quarter. The difference was driven by dilution from additional common shares outstanding from our equity issuances in 2019 and earlier this year. With second quarter results meeting our expectations and COVID impacts trending as we expected, we reaffirmed our EPS guidance of $3.45 to $3.65 for 2020. Our earnings guidance assumptions are shown in more detail on slide 40.

Moving to slide 19. Our operating and business strategies and our solid planning by our teams allowed us to be ready and respond well to this pandemic. As we work through these near-term challenges, our commitment to our strategy drives success for now and over the long term. We believe our customer-focused strategy will deliver sustainable long-term value growth for customers and shareholders. We are investing in our customers' needs for safety, reliability, resiliency, growth, and overall positive experience. We are aligning our people, our processes, technology, and analytics to better and more safely serve our customers. Based on system needs across our expansive infrastructure, we expect to deliver long-term earnings growth above the utility average. We also expect to realize incremental growth opportunities from generation and other larger projects.

Considering the recent consolidation of leadership in Colorado and the Pueblo vote on the franchise situation, maybe you could talk a little bit about how those two things have improved or affected the operations there and their relationship with the regulators? And how it might be affecting, for instance, the filing that you have for Renewable Advantage going forward and when the next rate case might eventually come up on the electric side?

Thanks, Mike. I'll start out by saying thank you to Susan Bailey, who's retiring. She's our VP of Colorado Gas, been doing that job for quite some time, been with us more than 40 years. Just done a fantastic job, so we really appreciate what she's done. And when she announced her retirement that is coming up this early this fall here a couple of weeks actually, we began the process of looking at how we can manage Colorado, holistically, if you will, from lots of different perspectives: how we grow the electric load; how we also grow the gas load, especially in light of electrification and things of that nature. We determined it would be hopeful if we had a single obvious strategy across that state. And by executing a single strategy with a single leader, I thought we could be more successful. That was coupled with another decision to bring on a former commissioner from the IUB, the Iowa Utilities Board, Nick Gartner, as our VP of Colorado Regulatory Policy in Colorado. So you have the opportunity to be, frankly, cost-neutral in terms of adding an officer as one was retiring. That was another consideration for us. We're always looking at how we keep our costs as low as we possibly can for customers. And so a combination of those two leaders in that state, I think, are going to help us a great deal as we focus on continuing our partnership and our relationship, both with the commission, the staff, the OCC and, of course, with the customers that we have the opportunity to serve. You acknowledged you pointed out, we get a kind of shot in the arm, if you will, with respect to the franchise vote in Pueblo. Real pleased with that. We're very thankful to those customers. They voted in record numbers and turned out in record numbers and then voted overwhelmingly to keep us as the provider. So all that's working together in a positive way.

Maybe along the same lines, you guys used to say that you expect above-average earnings growth over the long term. And obviously, the COVID-19 situation adds a lot of uncertainty, and it's hard to make predictions like that. But aside from COVID-19, do you still see that going forward, above-average earnings growth?

We can do, Mike. Yes, we're still executing our strategy in that regard, yes. Our capital investment for this year is on track. Projects are on track this year, particularly at Corriedale, one that's acknowledged there. So we still see our growth trajectory in spite of COVID-19 as something that's going to happen. Our territories, despite COVID-19, continue to grow. We're on a record pace, once again, in the front range of Colorado and Northwest Arkansas as examples with record meter sets this year. So we continue to see migration to our territories. And frankly, at least some theory that COVID-19 might increase or accelerate that growth for us, as some people may want to leave the more urban populated areas and move to the rural territories that we currently serve. We're hearing information and seeing facts about people buying homes sight unseen within our service territories, which is something we've not seen in the past. We remain confident in that our growth story still remains intact despite COVID-19, and COVID might actually help us accelerate that in some respect.

If I can just start with the COVID impacts here. If I heard right, $0.03 of impact from COVID in the quarter. If I go back to my notes, for the first quarter here, you guys talked, I think, about initially reducing your guidance range by $0.05 to $0.10 for the cumulative remainder of the year. How are you thinking about that $0.03 versus the $0.05 to $0.10 overall that you talked about just a quarter ago? It seems, at least from my perspective, that you're trending certainly in the better end of that range. And maybe the subsequent question is, what does that mean also for your overall 2020 guidance as well if I can?

Yes. This is Rich, Julien. Obviously, if you assume the similar trend through the next two quarters, that would put us toward the upper end of that $0.05 to $0.10 range. But even in July, as we look at load information, we're seeing improvement from what we saw in May and June. So it is trending as we expect. We do expect the impact to lessen as the year goes. So hopefully, we can head toward the better end of that range but we're sticking with the $0.05 and $0.10. If you think at the midpoint of that, it's supportive of the midpoint of the guidance we put out earlier this year.

Given what we know year-to-date and not know what's coming in the future, we feel like we're down the middle of the fairway right now with respect to our forecast, Julien. That'd be both COVID and full year guidance.

Can we get a little bit of clarity on the equity needs? I know you don't need any this year, but is this something that you're are you looking to raise equity next year?

Yes. What I've said in the past on that, Brandon, is with the currently disclosed capex, we probably need $25 million to $50 million of equity next year. And then thereafter, probably little in the way of equity needs, again, based on the disclosed capex. But as Linn noted in his comments, we're likely to add to that capex as we approach those years, given some of the opportunities we have. And as we add capital to the what we've disclosed, we will likely need $0.25 to $0.30 on the dollar of equity to help fund that additional capex. Makes sense?

Just curious, the settlement in Colorado for incremental bad debt but a pretty all right.

Good question. It's... Thank you, Liz. Again, thanks to everyone for joining us this morning. We really appreciate your interest in Black Hills, and I just want to express my extreme pride for my coworkers and how well we performed this past quarter and frankly, the last five to six months as we worked through this pandemic. They've done a fantastic job of serving our customers and keeping our customers safe and keeping ourselves safe, and very proud of our team and how they continue to execute. Our 2020 capital plan remains on schedule, and our treasury team has done a fantastic job with their balance sheet and making sure we have liquidity to execute our strategy. Again I'll remind you that both Rich and I are always available to answer any questions you might have. And so please have a great day, and stay safe and stay well.