Low natural gas prices adversely affected a number of Rapid City, SD-based Black Hills Corp.’s business units, resulting in the net loss the company reported Friday.

Offsetting the poor financial results in the third quarter, Black Hills CEO David Emery said “substantial progress” was made during the quarter on the company’s initiatives, resulting in a higher credit rating, a successful $180 million utility bond sale and commencement of construction on the Wygen III coal-fired power plant expansion near Gillette, WY.

“From an earnings perspective we are not happy with our third quarter results,” said Emery. The company posted a $3.9 million loss (minus 10 cents/share) for the period, compared with profits of $19.5 million (51 cents) for the same period in 2008. “Low natural gas prices affected us directly or indirectly in several different areas, with the most obvious impact coming on our oil and gas business where we posted a slight loss for the quarter.”

Low gas prices also impacted Black Hills’ energy marketing unit by lowering per-unit margins and Rocky Mountain basis differentials. There was also what Emery called a “large negative impact” on the company’s gas transportation operations. Finally, as a result of the lower natural gas prices, power prices have been much lower this year than last, negatively impacting off-system sales for the company’s electric utility, he said.

Emery stressed the announcement last Wednesday that the company won awards from the U.S. Department of Energy on all three of its applications for stimulus package funds to support smart grid projects. Black Hills got $16.7 million — $6.1 million in matching funds for its Colorado electric utility’s installation of 42,000 smart meters; $5.6 million for Black Hills Power’s installation of 69,000 smart meters in South Dakota and Wyoming; and $5 million for 38,000 smart meters and communications infrastructure in and around Cheyenne, WY.

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