00:00An AI data center needs chips.
00:03It also needs electricity.
00:05Google has contracted a utility to supply it,
00:08and that utility is putting $1.8 billion of its own capital into new generation.
00:15Black Hills expects that project to contribute
00:18about $150 million of annual net income by 2030.
00:24That is roughly half of the $299.8 million the whole company reported in 2025,
00:32an illustrative comparison to a year already closed.
00:37Black Hills is a relatively overlooked, publicly traded American utility,
00:42and this is one of the larger things it has ever agreed to build.
00:47The market noticed.
00:48The filing was accepted at 4, 19 in the afternoon on October 6,
00:54after the close, so after-hours trading could already react that evening.
00:59October 7 was the first full regular session after the announcement.
01:05Black Hills opened at 74.79 and finished that session up 7.21%.
01:11We are not claiming the filing caused the move, only that this is the sequence.
01:17At 76.25 million shares outstanding,
01:22that one session implies roughly $389 million of equity market value repricing.
01:28That is our calculation, not a company disclosure,
01:33and it does not say the project created $389 million of value.
01:38Resist the arithmetic.
01:41You cannot divide $389 million by $150 million and call the stock cheap.
01:47The project is not built,
01:49and one day of trading does not tell you what a contract to $2,048 is worth.
01:55For that you need to know who invests, who owns, and who collects.
01:59What was actually signed?
02:02Black Hills furnished this to the SEC on October 6.
02:06Furnished, not filed,
02:08everything forward-looking inside it is a company expectation,
02:12not an audited result.
02:14It names two agreements,
02:16one for the service,
02:17one for the generation itself,
02:19both running through 2048.
02:22Now the physical shape of it.
02:24This is Black Hills' own diagram of the project.
02:29Two separate paths feed one data center.
02:32On the first path,
02:34Black Hills will provide up to 590 megawatts
02:37of grid-connected energy service.
02:40That 590 is 564 megawatts of new natural gas generation
02:46it will build and own through a non-regulated affiliate,
02:50plus 26 megawatts from market purchases and retail service
02:55under an industrial tariff.
02:57Note that phrase,
02:59non-regulated affiliate.
03:01The plant is owned outside the regulated utility.
03:05On the second path sit approximately 2.1 gigawatts
03:09of Wyoming-based third-party resources.
03:12Black Hills does not own those.
03:14It manages their output through a private microgrid.
03:17The company describes a total resource mix
03:21of 2.7 gigawatts,
03:23including reserve margins.
03:25Note what none of those is.
03:27The document never states the data
03:29center's own electrical load.
03:32Now the money.
03:33Black Hills plans to invest $1.8 billion
03:37between 2027 and 2029
03:41to build that 564 megawatts.
03:44That is the company's own generation investment,
03:48not the value of the Google contract,
03:50and it excludes transmission.
03:53Google has provided $399 million of advances
03:57for long lead-time equipment,
04:00refundable,
04:00and Black Hills expects to reimburse them
04:03by June 30, 2027.
04:06So that is not money the utility keeps.
04:09The project is expected to provide
04:12approximately $150 million
04:14of net income in 2030.
04:18And across the full term,
04:20Black Hills expects approximately
04:22$2.4 billion of unlevered free cash flow
04:26through 2048.
04:28A figure the document says
04:30is already net of the $1.8 billion
04:33of capital expenditures.
04:35Refundable and reimbursed.
04:37That is what the sentence says.
04:40So how does a utility earn
04:42on power it does not own?
04:44The document describes two engines.
04:47First, a contracted return
04:49on the generation Black Hills does own,
04:52beginning when construction begins in 2027
04:55on an asset fully depreciated by 2048.
04:59Second, microgrid management fees
05:03for coordinating dispatch and reliability
05:05across the contracted portfolio,
05:08beginning late 2027
05:10and rising on a contractually defined ramp.
05:14What the document never gives is a rate.
05:17It says risk-adjusted return
05:19and it stops there.
05:21Those are the mechanics.
05:23Here is the clock.
05:25Service is planned to begin in late 2027,
05:29the $1.8 billion is spent
05:32across 2027 to 2029.
05:36The project is expected
05:37to reach peak load in 2030
05:39and the agreements run to 2048.
05:43How big is this for this company?
05:46Here is the company it belongs to.
05:49In fiscal 2025,
05:52Black Hills reported $299.8 million
05:55of net income.
05:57So a project expected to contribute
06:00approximately $150 million in 2030
06:03is about half of fiscal 2025
06:07consolidated net income.
06:09It spans different years,
06:11so it is scale, not a forecast.
06:14And consolidated is the right word.
06:17Net income available to common shareholders
06:19was a different line,
06:21$291.6 million.
06:24On capital,
06:25the 10K's own line
06:27is total capital expenditures.
06:30$889.8 million
06:32in fiscal 2025,
06:35a figure its own footnote says
06:37includes accruals,
06:38not only cash paid.
06:40The $1.8 billion
06:42is about 2.0 times that,
06:45a three-year program
06:46set against a single year.
06:47One caveat,
06:50Black Hills is itself
06:51mid-merger with Northwestern.
06:53So that comparison
06:55is a historical yardstick,
06:57not the combined company's base.
06:59And the part a press release
07:01leads with last.
07:03The agreements provide
07:04for full recovery
07:05of all-generation capital investment
07:08over the contract term.
07:10The release is specific
07:11about protections,
07:13so let's be specific back.
07:14It describes cost pass-through,
07:17stranded asset recovery,
07:19early termination,
07:21and collateral
07:21behind the data center's commitments.
07:24And the chief executive's
07:25quote goes further
07:26that Google bears
07:28all costs of serving it.
07:30What stays with Black Hills
07:32is named in its own
07:33forward-looking statement,
07:35approvals,
07:36counterparties,
07:36and construction.
07:38A release that describes protections
07:40is not a project without risk.
07:43The approvals say the same thing
07:45in dates.
07:46Two granted in 2026,
07:49the Robinson substation certificate,
07:52and the air quality permit.
07:54Three filed and waiting.
07:56And one,
07:57the company says it intends
07:59to file in the fourth quarter,
08:00which as of this release
08:02has not been filed at all.
08:04So here is what this release
08:06does not settle.
08:07One,
08:08how fuel and commodity price exposure
08:10is allocated.
08:12It describes cost pass-through protections
08:14in general terms,
08:16but does not separately detail
08:18the fuel cost formulas,
08:19which is not the same
08:21as leaving them unprotected.
08:23Two,
08:24what the 2.1 gigawatts
08:25of third-party resources
08:27actually are.
08:28Three,
08:29what return Black Hills
08:31earns on the $1.8 billion.
08:33It says risk-adjusted
08:35and gives no number.
08:37And four,
08:38how that $1.8 billion
08:39actually gets financed.
08:42Black Hills is not selling AI chips,
08:44and it is not running
08:45Google's data center.
08:47Its opportunity is supplying
08:49and managing the electricity
08:51those systems need.
08:53Whether that becomes shareholder value
08:55turns on three things
08:57you can actually check.
08:58Can it finance the $1.8 billion?
09:01Can it build and permit on schedule?
09:04And does the contribution
09:05approach $150 million by 2030?
09:09The real question
09:10is not whether AI needs more power.
09:13It is how much of that demand
09:15Black Hills
09:16can turn into lasting shareholder value.
09:19Where the filings were specific,
09:21we quoted them.
09:22Where they were not,
09:24that we said so.
09:25I don't know.
