After closing two deals since last Friday that greatly reduce its independent power generation holdings and greatly increase utility assets, Rapid City, SD-based Black Hills Corp. has an ideal base to make additional acquisitions in both the utility and independent power sectors, CEO David Emery told financial analysts Tuesday.

The bottom line is that Black Hills is going to continue to add rural utilities to its upper Midwest and western-based portfolio of companies, Emery said during a conference call. The call was focused on wrapping up the holding company’s $940 million purchase of a natural gas utility and four electric utilities spread over four states (Colorado, Kansas, Iowa and Nebraska) from Aquila, and the earlier close last Friday of Black Hills’ sale of seven independent power projects totaling 974 MW for $840 million ($756 million net pre-tax).

The two deals (see Daily GPI, July 15), along with several other growth opportunities on Black Hills’ radar right now considered together will “truly transform the company,” Emery said. “Going forward we have an excellent opportunity to add value for shareholders with a lot of different growth opportunities.”

Emery stressed that Black Hills is not exiting the independent power sector, despite the fact that the divestiture has shrunk its holdings from more than 1,000 MW of independent plants to 158 MW. “Going forward, this divestiture does not indicate we are exiting that business; we believe the planning, permitting, constructing and operating of generation facilities is a core strength of ours.”

He emphasized that additional opportunities might be available in the future, but he said they would be fewer and farther between because of “the recent trend among utilities for more self-building” of generation.

As part of the filings leading to Colorado regulators approving Black Hills’ purchase of the Aquila electric operations, the South Dakota company officials assured the state public utilities commission that they will file by mid-August their resource plan for the newly acquired utilities, and that plan will emphasize more utility self-built generation to replace a huge purchased power agreement (PPA) that the former Aquila utilities have with Xcel Energy’s Public Service of Colorado utility for 75% of its power supplies in the state. The PPA expires in 2011.

Emery said in response to analysts’ questions that some of the new Colorado generation longer term may come from baseload coal-fired generation, perhaps located in Wyoming for the Colorado market.

In response to other questions, Emery added a little more detail regarding his future acquisition plans. “Clearly, utility operations is a strength for us,” he said. “We are continuing to grow our utility purchase opportunities.

“We believe it makes a lot of sense for a lot of the smaller utilities, particularly in the Great Plains and northern Rockies region, to be consolidated together with more urban-serving larger utilities to the east and the west. Customer demographics and expectations are very similar, regulatory expectations and the way you conduct business is more similar.

“We believe this is right in our sweet spot in terms of our skill set. Clearly, we are interested in opportunities if they arise, and we do have a lot to do right now with the integration of the five [Aquila] utilities. But the opportunity to acquire other utility properties is always something we will be interested in,” said Emery, 44, who has been Black Hills CEO for the past four years.

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