Black Hills Corporation (BKH) | The Buildout — AI Infrastructure
The Verdict
Black Hills Corporation is a regulated electric and gas utility that owns generation, transmission, and distribution serving customers across eight states. It is building a large-load electric service model under its Wyoming LPCS tariff that delivers power to hyperscale data centers near Cheyenne. The AI buildout reaches the company through electricity, not compute: data-center customers take regulated electric service, market energy procurement, and, as load grows, contracted or company-owned generation and transmission.
| Market Cap | — |
| Revenue (TTM) | $2.3B |
| Revenue Growth | +3.6% |
| EBITDA Margin (TTM) | 35.9% |
| Net Debt | $4.6B |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Wyoming Electric set an all-time peak load of 439 MW in July 2026, up 16% year over year, the 20th consecutive year of rising peak loads.
- The data-center opportunity pipeline is more than 3 GW; 600 MW is in the base plan by 2030, with more than 2.5 GW under active negotiation.
- The 1.8 GW Cheyenne project has $201 million of refundable customer advances received, with the agreement now providing for up to $377 million.
- Management expects large-load demand to contribute more than 10% of growing consolidated EPS beginning in 2028.
- The NorthWestern Energy merger is at 6 of 7 approvals, with only Montana remaining and close expected in H2 2026.
What We’re Watching
- Definitive agreements for the 1.8 GW project are targeted for Q3 2026, after the June 30 milestone passed and the reservation was extended through August 31.
- The reservation advances are refundable and the largest contract remains unsigned.
- Weather was still a swing factor: Q1 was -$0.13 per share versus normal and Q2 -$0.03 per share versus normal.
- Montana merger decision is expected mid-October to mid-November 2026; a delay could push the H2 2026 close.
The large-load thesis is strengthening but unfinished: peak load is accelerating, customer-funded equipment reservations expanded, and the pipeline is several times larger than what is in the plan. The open question is whether the 1.8 GW Cheyenne project reaches definitive agreements by the end of Q3 2026.
Earnings
Q2 2026 adjusted EPS was $0.54, up from $0.38 in Q2 2025; GAAP EPS was $0.50 and included $0.04 of merger-related costs. New rates and rider recovery added $0.21 per share, while higher financing and depreciation combined for a $0.12 drag. Q2 revenue and gross margin are not disclosed in the source material; the standout was Wyoming Electric's new all-time peak load of 439 MW, up 16% year over year.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $781M | $636M | $805M | −3.0% |
| Gross margin | 27.9% | 41.2% | 36.2% | -830bps |
| EBITDA | $275M | $245M | $274M | +0.2% |
| EPS | $1.73 | $1.39 | $1.87 | −7.4% |
| Customer advances on 1.8 GW reservation | up to $377M | $201M | n/a | — |
We are looking at finishing these agreements by the end of the quarter. We are on track to do that. If we do not do it by the end of the quarter, ask the shareholders certainly not panic in any way.— Management, 2026-08-06
Management tone: Management stayed disciplined and direct on counterparty and timing questions, but framed definitive-agreement deadlines as working milestones rather than contractual dates. They declined to quantify the 1.8 GW project's capex, megawatts, or negotiated return until negotiations are complete.
Management Guidance
FY2026 adjusted EPS guidance was held at $4.25–$4.45, excluding merger-related costs. The midpoint implies about 6% growth over 2025 adjusted EPS of $4.10. Long-term growth was reaffirmed in the upper half of 4%–6%, with large load expected to contribute more than 10% of consolidated EPS beginning in 2028 and 600 MW in the plan by 2030.
Trajectory
Consolidated Q1 2026 revenue was $780.7 million, down from $805.2 million a year earlier, driven mostly by gas revenue. Electric Utilities revenue rose to $241.6 million from $236.7 million, and electric industrial GWh rose to 707.4 from 609.8, attributed to Wyoming Electric LPCS and BCIS tariff customers. Trailing signals are mixed: revenue is decelerating and gross margin compressing, while operating margin is expanding and EBITDA margin is roughly stable. Rate and rider recovery plus O&M discipline are the near-term offsets; the main untested driver is further conversion of Wyoming large-load demand.
The Model
The model projects FY+1 revenue of $2,371M and EBITDA of $891M, a 37.6% margin. FY+2 revenue is projected at $2,558M with EBITDA of $975M, a 38.1% margin. Near-term projections are anchored by renewed rate and rider recovery and the 600 MW of data-center load already in the plan; FY+2 reflects continued regulated investment and early large-load conversion.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $2.3B | $2.4B | $2.6B |
| YoY Growth | — | +2.6% | +7.9% |
| EBITDA | $820M | $891M | $975M |
| EBITDA Margin | 35.5% | 37.6% | 38.1% |
Projections are the median of 5 independent model runs. The model’s revenue sits 13.1% below analyst consensus.
FY2026 adjusted EPS guidance was held at $4.25–$4.45, excluding merger-related costs. The midpoint implies about 6% growth over 2025 adjusted EPS of $4.10. Long-term growth was reaffirmed in the upper half of 4%–6%, with large load expected to contribute more than 10% of consolidated EPS beginning in 2028 and 600 MW in the plan by 2030.
What Could Go Right — and Wrong
- The 1.8 GW Cheyenne project signs definitive agreements in Q3 2026 and moves into CPCN and construction.
- The more than 2.5 GW negotiated pipeline, including the 75 MW opportunity, converts to signed contracts.
- Microsoft's 3,200-acre Cheyenne land position becomes additional contracted load beyond the 600 MW in the plan.
- Meta's Cheyenne AI data center ramps later in 2026 as guided.
- LCT-CAM is approved effective January 2027, giving direct transmission cost recovery.
- The 1.8 GW negotiation stalls or terminates after the August 31 reservation extension; advances are refundable.
- Adverse rate-case outcomes in South Dakota Electric or Colorado Electric reset the constructive regulatory path.
- Montana denies or delays the merger, pushing close beyond H2 2026.
- Supply-chain inflation on turbines, transformers, and generation units raises project costs.
- Weather volatility continues and rate and rider recovery is not enough to offset the drag.
Looking Ahead
The next twelve months pivot on definitive agreements for the 1.8 GW project, targeted for Q3 2026, and the Montana merger decision expected mid-October to mid-November 2026. Lange II's 99 MW in-service is scheduled for Q4 2026. LCT-CAM effectiveness is expected January 2027, and Meta's load ramp later in 2026 will test whether the second named hyperscale customer is moving from construction to operations.
- Aug 20, 2026Arkansas Gas rate hearing — Final order and new rates expected in H2 2026.
- Q3 20261.8 GW definitive agreements — Tests conversion of the largest pipeline item into contracted load.
- Q3 202675 MW data center opportunity — Signed agreement or definitive service arrangement.
- Mid-Oct to mid-Nov 2026Montana merger decision — Final approval gate; close expected second half 2026.
- Q4 2026Lange II in-service — 99 MW generation project reaches commercial operation.
- Jan 2027LCT-CAM effective — Transmission cost recovery from large-load customers begins.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $2.1B | $2.3B | $2.3B | +8.6% |
| Gross Margin | 39.5% | 38.6% | 35.6% | 93bps |
| EBITDA | $773M | $820M | $6.7B | +6.0% |
| EBITDA Margin | 36.3% | 35.5% | 35.9% | 85bps |
| Net Income | $273M | $292M | $288M | +6.7% |
| Free Cash Flow | −$25M | −$146M | −$1.2B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)35.6%
- EBITDA Margin (TTM)35.9%
- Net Margin (TTM)12.6%
- ROIC4.9%
- FCF Conversion-38.1%
- SBC / Revenue0.4%
The Company
Black Hills Corporation is a regulated electric and gas utility headquartered in Rapid City, South Dakota. It serves approximately 227,000 electric customers in Colorado, Montana, South Dakota, and Wyoming and approximately 1,138,000 gas customers across Arkansas, Colorado, Iowa, Kansas, Nebraska, and Wyoming. Its relevance to the AI buildout runs mainly through regulated electric service to large-load data centers in Wyoming under the Large Power Contract Service tariff.
The company operates as an electric generator, transmitter, distributor, and gas distributor. It runs 3 to 4 rate reviews per year across its footprint and owns a generation portfolio spanning coal, gas, and wind, with a Colorado battery storage project expected in service late 2027. It is pursuing a stock-for-stock merger with NorthWestern Energy that would create a combined company serving roughly 1.4 million customers across 8 states.
Business Segments
Competitive Landscape
The competitive dynamic is defined mainly by regulated franchise territory rather than direct commodity competition. Within its service territory, BKH is the incumbent electric utility, but the record flags inferred competitive overlap from AEP in the same Cheyenne corridor based on neighbor evidence, not BKH disclosure. Hyperscale customers have alternatives if BKH execution slips.
- AEPInferred geographic competitor in the Cheyenne corridor based on neighbor evidence; AEP disclosed a fuel-cell generation facility near Cheyenne. Not confirmed by BKH as a direct competitor.
Supply Chain
Black Hills sits at the physical delivery point for Wyoming data-center load, supplying electricity, transmission, and contracted generation rather than chips or buildings. Customer advances help fund long-lead generation equipment.
More on BKH: Earnings recap