BLACK HILLS CORP. REPORTS 2011 FOURTH QUARTER AND FULL YEAR RESULTS

2012-02-03 00:01:59 -

RAPID CITY, SD - Feb. 2, 2012 - Black Hills Corp. (NYSE: BKH) today announced
2011 fourth quarter and full-year financial results.

"Full year 2011 earnings per share, as adjusted,(* )were $1.92, up 6 percent, as
compared to $1.81, as adjusted,(*) the previous year," said David R. Emery,
chairman, chief executive officer and president. "We overcame a rough start to
the year and are pleased with these overall financial results. Earnings were
driven by stronger electric and gas utility results, which were up 19 percent,
as adjusted(*) (excluding prior year gains on sale of assets), for the year. Key
strategic initiatives were announced and advanced in 2011, including more than
$300 million of new utility growth projects to be completed in the 2012 to 2014
time frame. In addition, drilling

activity and results from our oil and gas
business delivered a 13 percent increase in fourth quarter volumes sold and a 4
percent increase for the full year.

Three Months
Ended Dec. 31, Twelve Months Ended Dec. 31,

(in millions, except per
share amounts) 2011 2010 2011 2010
--------------------------------------------------------------------------------
Non-GAAP *:

Income from continuing
operations, as adjusted $ 19.7 $ 17.4 $ 67.7 $ 64.8

Income (loss) from
discontinued operations 6.8 (1.1 ) 9.4 5.5
----------------------------------------------------
Net income, as adjusted
(Non-GAAP) $ 26.5 $ 16.3 $ 77.1 $ 70.3
----------------------------------------------------

Earnings per share from
continuing operations, as
adjusted, diluted $ 0.46 $ 0.44 $ 1.69 $ 1.67

Earnings per share,
discontinued operations 0.16 (0.03 ) 0.23 0.14
----------------------------------------------------
Earnings per share, as
adjusted (Non-GAAP) $ 0.62 $ 0.41 $ 1.92 $ 1.81
----------------------------------------------------

GAAP:

Income from continuing
operations $ 18.8 $ 34.6 $ 40.4 $ 63.1

Income (loss) from
discontinued operations 6.8 (1.1 ) 9.4 5.5
----------------------------------------------------
Net income $ 25.6 $ 33.5 $ 49.7 $ 68.7
----------------------------------------------------

Earnings per share from
continuing operations,
diluted $ 0.44 $ 0.88 $ 1.01 $ 1.62

Income (loss) from
discontinued operations 0.16 (0.03 ) 0.23 0.14
----------------------------------------------------
Earnings per share, diluted $ 0.60 $ 0.85 $ 1.24 $ 1.76
----------------------------------------------------

-----------------------------
* This is a Non-GAAP measure, an accompanying schedule for the GAAP to Non-GAAP
adjustment reconciliation is provided in "Use of Non-GAAP Financial Measures"
below.

"At year-end, we achieved a significant milestone with the commencement of
commercial operations at our new $491 million power plant complex near Pueblo,
Colo. Our 180 megawatt Colorado Electric utility and 200 megawatt Colorado IPP
generation projects- constructed and placed into service in record time, on
budget and with an industry-leading safety record - will provide long-term
benefits for our 94,000 southeastern Colorado customers. New rates were approved
by the Colorado Public Utilities Commission pertinent to the new utility
generation effective Jan. 1, 2012.
"We announced and advanced new utility growth projects during the year that will
be placed into service in 2012 to 2014. These projects include a 29 megawatt
wind project for Colorado Electric with a net utility investment of $27 million,
$31 million of transmission projects for Colorado Electric and a $237 million,
132 megawatt natural gas-fired generation facility for our Cheyenne Light, Fuel
& Power and Black Hills Power utilities. In our oil and gas segment, we were
encouraged by the results from our three Mancos Shale test wells in the San Juan
and Piceance basins. Additional Bakken Shale drilling activity in the Williston
Basin delivered a 39 percent increase in crude oil production for the fourth
quarter and a 20 percent increase for the year.
"Several important financings strengthened our balance sheet and provided
additional liquidity. We settled the equity forward agreements on Nov. 1, 2011,
for approximately $120 million in net cash proceeds. We also completed several
refinancings including two unsecured term loans totaling $250 million, and on
Feb. 1, 2012, we renewed our $500 million corporate revolving credit facility
for five years, all at favorable terms.
"On Jan. 18, 2012, we announced an agreement to divest our energy marketing
business for net cash proceeds of approximately $160 million to $170 million.
This divestiture will reduce the company's risk profile, improve our credit
metrics, enhance the stability of our cash flows and earnings and reduce our
equity financing needs.
"On Jan. 26, 2012, we announced an increase in our quarterly dividend for the
42nd consecutive year. Only two other electric or gas utility companies in the
United States have a longer history of annual dividend increases. We take great
pride in this record. It highlights the confidence we have in our business
strategy, well-defined growth plans and ability to increase earnings."
Black Hills Corp. highlights for the fourth quarter and full year 2011, recent
regulatory filings and updates and other events include:
Utilities
* Colorado Electric's 180 megawatt power plant near Pueblo, Colo. was
completed on schedule and on budget. The new $230 million plant started
serving Colorado Electric utility customers on Jan. 1, 2012.
* The Colorado Public Utilities Commission issued an order approving an
increase in annual base rates of $10.5 million, a return on equity from 9.8
percent to 10.2 percent and a capital structure of 49.1 percent equity for
Colorado Electric effective on Jan. 1, 2012. In addition, approximately
$17.5 million of other costs including fuel, purchased power and new
transmission will be recovered through normal cost adjustment mechanisms.
* The Colorado Public Utilities Commission approved on Aug. 12, 2011, Colorado
Electric's request to construct and rate base 50 percent ownership in a 29
megawatt wind turbine project south of Pueblo, Colo. The project will
require a net capital investment by the utility of $27 million and is
expected to be operational no later than Dec. 31, 2012.
* On March 14, 2011, Colorado Electric filed a request for a certificate of
public convenience and necessity with the Colorado Public Utilities
Commission to construct a third utility-owned, 88 megawatt natural gas-fired
turbine at the existing Pueblo generation location for an estimated $102
million. An initial settlement with intervenors was reached on Oct. 3, and a
settlement hearing occurred on Oct. 25, 2011. On Dec. 14, 2011, an
administrative law judge issued a recommendation to deny Colorado Electric's
request. Colorado Electric submitted an exceptions filing on Jan. 10, 2012,
and a ruling from the commission is expected in February 2012.
* On Nov. 1, 2011, Cheyenne Light and Black Hills Power filed a joint request
with the Wyoming Public Service Commission for a certificate of public
convenience and necessity to construct and operate a new $237 million, 132
megawatt natural gas-fired electric generation facility and related gas and
electric transmission. A hearing with the Wyoming Public Service Commission
is scheduled for July 31, 2012.
* On Dec. 1, 2011, Cheyenne Light filed requests for electric and natural gas
revenue increases with the Wyoming Public Service Commission. Cheyenne Light
is seeking a $5.9 million increase in annual electric revenue and a $2.6
million increase in annual natural gas revenue.
Non-regulated Energy
* Colorado IPP's $261 million, 200 megawatt power plant near Pueblo, Colo. was
completed on schedule and on budget. The facility began commercial
operations on Jan. 1, 2012, and the output is sold under a 20-year power
purchase agreement to Colorado Electric.
* The three test wells in the Mancos Shale horizontal test drilling program in
the San Juan and Piceance basins were completed and are on production.
Production test results and reserve estimates are encouraging.
* On Jan. 18, 2012, the company entered into a definitive agreement to sell
the outstanding stock of Enserco Energy Inc. Net cash proceeds from the
transaction are expected to total approximately $160 million to $170
million, subject to working capital and other closing adjustments. The sale
is subject to customary regulatory approvals and expected to close in the
first quarter of 2012.

Corporate
* On June 24, 2011, a $150 million, unsecured term loan with a cost of
borrowing of 125 basis points over LIBOR was closed. The proceeds were used
to refinance borrowings on our corporate revolving credit facility.
* On Sept. 30, 2011, a $100 million, one-year, unsecured term loan originally
executed Dec.15, 2010, with a cost of borrowing of 137.5 basis points over
LIBOR, was extended on the same terms for two years.
* On Nov. 1, 2011, the equity forward agreements were settled by issuing
4,413,519 shares of Black Hills Corp. common stock in return for
approximately $120 million in net cash proceeds.
* On Feb.1, 2012, the $500 million corporate revolving credit facility was
renewed for five years at favorable terms.

BLACK HILLS CORPORATION
CONSOLIDATED FINANCIAL RESULTS

(Minor differences may result due to rounding.
Prior period information has been revised to reclassify information related to
discontinued operations.)

Three Months Twelve Months
(in millions) Ended Dec. 31, Ended Dec. 31,

2011 2010 2011 2010
------------------- -------------------
Net income (loss):

Utilities:

Electric ((a)) $ 13.0 $ 11.9 $ 47.7 $ 47.5

Gas( (b)) 9.9 9.1 34.2 27.1
------------------- -------------------
Total Utilities Group 22.9 21.0 81.9 74.6
------------------- -------------------

Non-regulated Energy:

Power generation 0.9 0.9 3.0 2.2

Coal mining 0.7 1.6 (0.4 ) 7.7

Oil and gas ((c)) (1.2 ) (3.0 ) (1.7 ) 0.4
------------------- -------------------
Total Non-regulated Energy Group 0.4 (0.5 ) 0.9 10.3
------------------- -------------------

------------------- -------------------
Corporate and Eliminations ((c) (d) (e)) (4.6 ) 14.1 (42.4 ) (21.8 )
------------------- -------------------

------------------- -------------------
Income from continuing operations 18.7 34.6 40.4 63.1
------------------- -------------------

Income (loss) from discontinued
operations, net of tax ((e)) 6.8 (1.1 ) 9.4 5.5
------------------- -------------------
Net income $ 25.5 $ 33.5 $ 49.8 $ 68.6
------------------- -------------------

(a) Financial results for the 12 months ended Dec. 31, 2011 include a $0.5
million after-tax gain on sale to a related party which is eliminated in
consolidation. Financial results for the 12 months ended Dec. 31, 2010 include
a $4.1 million after-tax gain on the sale of a 23 percent ownership interest in
Wygen III.
(b) Financial results for the 12 months ended Dec. 31, 2010 include a $1.7
million after-tax gain on the sale of operating assets.
(c) Oil and Gas financial results for the 12 months ended Dec. 31, 2010
include a $0.4 million reduction in income taxes as a result of a re-measurement
of a previously reported uncertain tax position due to a settlement with the
IRS. Corporate financial results for the 12 months ended Dec. 31, 2010 also
include a $2.0 million reduction in income taxes as a result of a re-measurement
of a previously reported uncertain tax position due to the same settlement with
the IRS.
(d) Financial results for the fourth quarter and 12 months ended Dec.
31, 2011 include a non-cash after-tax loss related to mark-to-market adjustment
on certain interest rate swaps of $0.9 million and $27.3 million respectively,
and $17.2 million after-tax gain and a $9.9 million after-tax loss for the
fourth quarter and 12 months ended Dec. 31, 2010, respectively, for those same
interest rate swaps.
(e) Financial results of our Energy Marketing segment have been classified as
discontinued operations in accordance with GAAP. When preparing this
reclassification, certain indirect corporate costs and inter-segment interest
expenses previously charged to our Energy Marketing segment could not be
reclassified to discontinued operations and accordingly have been presented
within Corporate in the after-tax amounts of $0.7 million, $0.5 million, $2.2
million and $2.3 million for the fourth quarter and 12 months ended Dec.
31, 2011 and 2010, respectively.

Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,

2011 2010 2011 2010
--------------------- ----------------------

Weighted average common shares
outstanding (in thousands):

Basic 42,119 38,978 39,864 38,916

Diluted 42,341 39,438 40,081 39,091

Earnings per share:

Basic -

Continuing Operations $ 0.45 $ 0.89 $ 1.01 $ 1.62

Discontinued Operations 0.16 (0.03 ) 0.24 0.14
--------------------- ----------------------
Total Basic Earnings Per Share $ 0.61 $ 0.86 $ 1.25 $ 1.76
--------------------- ----------------------

Diluted -

Continuing Operations $ 0.44 $ 0.88 $ 1.01 $ 1.62

Discontinued Operations 0.16 (0.03 ) 0.23 0.14
--------------------- ----------------------
Total Diluted Earnings Per Share $ 0.60 $ 0.85 $ 1.24 $ 1.76
--------------------- ----------------------

EARNINGS GUIDANCE

Black Hills reaffirms its guidance for 2012 net income, as adjusted, from
continuing operations to be in the range of $2.00 to $2.20 per share as
previously issued on Jan. 18, 2012.

USE OF NON-GAAP FINANCIAL MEASURE
As noted in this news release, in addition to presenting its earnings
information in conformity with Generally Accepted Accounting Principles, the
company has provided non-GAAP earnings data reflecting adjustments for special
items as specified in the GAAP to Non-GAAP adjustment reconciliation table
below. Income (loss) from continuing operations, as adjusted, and Net income,
as adjusted, is defined as Income (loss) from continuing operations and Net
income, adjusted for expenses and gains that the company believes do not reflect
the company's core operating performance. The company believes that non-GAAP
financial measures are useful to investors because the items excluded are not
indicative of the company's continuing operating results. The company's
management uses these non-GAAP financial measures as an indicator for planning
and forecasting future periods. These Non-GAAP measures have limitations as
analytical tools and should not be considered in isolation or as a substitute
for analysis of our results as reported under GAAP. Our presentation of these
Non-GAAP financial measures should not be construed as an inference that our
future results will be unaffected by other income and expenses that are unusual,
non-routine or non-recurring.

GAAP TO NON-GAAP ADJUSTMENT RECONCILIATION

Three Months Ended Dec. 31, Twelve Months Ended Dec. 31,

(In
millions,
except per
share
amounts) 2011 2010 2011 2010
--------------------- --------------------- ---------------------
--------------------
(after-tax) Income EPS Income EPS Income EPS Income
EPS
--------------------- --------------------- ---------------------
--------------------
Income
(loss) from
continuing
operations
(GAAP) $ 18.8 $ 0.44 $ 34.6 $ 0.88 $ 40.4 $ 1.01 $
63.1 $ 1.62
--------------------- --------------------- ---------------------
--------------------
Adjustments,
after-tax:

Unrealized
(gain) loss
on certain
interest
rate swaps 0.9 0.02 (17.2 ) (0.44 ) 27.3 0.68
9.9 0.25

Gain on sale
of Gas
Utility
assets - - - - - -
(1.7 ) (0.04 )

Gain on
partial sale
of Electric
Utility
assets
(Wygen III) - - - - - -
(4.1 ) (0.10 )

Improved
effective
tax rate - - - - - -
(2.4 ) (0.06 )

Rounding - - - - - -
- -
--------------------- --------------------- ---------------------
--------------------
Total
adjustments 0.9 0.02 (17.2 ) (0.44 ) 27.3 0.68
1.7 0.05
--------------------- --------------------- ---------------------
--------------------

Income
(loss) from
continuing
operations,
as adjusted
(Non-GAAP) 19.7 0.46 17.4 0.44 67.7 1.69
64.8 1.67

Income
(loss) from
discontinued
operations,
net of tax 6.8 0.16 (1.1 ) (0.03 ) 9.4 0.23
5.5 0.14
--------------------- --------------------- ---------------------
--------------------
Net income
(loss) (Non-
GAAP) $ 26.5 $ 0.62 $ 16.3 $ 0.41 $ 77.1 $ 1.92 $
70.3 $ 1.81
--------------------- --------------------- ---------------------
--------------------

DIVIDENDS
On Jan. 26, 2012, our board of directors declared a quarterly dividend on common
stock. Common shareholders of record at the close of business on Feb.
16, 2012, will receive $0.37 per share, equivalent to an annual dividend rate of
$1.48 per share, payable on March 1, 2012.
CONFERENCE CALL AND WEBCAST
The company will host a live conference call and webcast at 11 a.m. EST on
Friday, Feb 3, 2012, to discuss the company's financial and operating
performance.
To access the live webcast and download a copy of the investor presentation, go
to the Black Hills website at www.blackhillscorp.com and click on "Webcast" in
the "Investor Relations" section. The presentation will be posted on the website
before the webcast. Listeners should allow at least five minutes for registering
and accessing the presentation. Those interested in asking a question during the
live broadcast or those without internet access can call 866-783-2144 if calling
within the United States. International callers can call 857-350-1603. All
callers need to enter the pass code 97273059 when prompted.
For those unable to listen to the live broadcast, a replay will be available on
the company's website or by telephone through Friday, Feb. 17, 2012, at
888-286-8010 in the United States and at 617-801-6888 for international callers.
The replay pass code is 19360028.

BUSINESS UNIT PERFORMANCE SUMMARY

Business Group highlights for the fourth quarter and 12 months ended Dec.
31, 2011, compared to the fourth quarter and 12 months ended Dec. 31, 2010, are
discussed below. The following business group and segment information does not
include certain intercompany eliminations or discontinued operations. Minor
differences in comparative amounts may result due to rounding. All amounts are
presented on a pre-tax basis unless otherwise indicated. Prior period
information has been revised to reclassify information related to discontinued
operations.

Utilities Group

Income from continuing operations for the Utilities Group for the fourth quarter
ended Dec. 31, 2011, was $22.9 million, compared to $21.0 million in 2010 while
income from continuing operations for the 12 months ended Dec. 31, 2011, was
$81.9 million, compared to $74.6 million in 2010.

Electric Utilities

Three Months Increase Twelve Months Ended Increase
Ended Dec. 31, (Decrease) Dec. 31, (Decrease)

2011 vs. 2011 vs.
2011 2010 2010 2011 2010 2010
-------------------------------- ---------------------------------
(in millions)

Gross margin $ 79.4 $ 72.8 $ 6.6 $ 304.0 $ 277.2 $ 26.8
-------------------------------- ---------------------------------

Operations and
maintenance 36.7 34.7 2.0 142.8 136.8 6.0

Gain on sale
of operating
assets - - - (0.8 ) (6.2 ) 5.4

Depreciation
and
amortization 13.4 11.7 1.7 52.5 47.3 5.2
-------------------------------- ---------------------------------
Operating
income 29.3 26.4 2.9 109.5 99.3 10.2

Interest
expense, net 9.2 9.8 (0.6 ) 39.0 37.0 2.0

Other (income)
expense, net 0.1 (0.4 ) 0.5 (0.5 ) (3.2 ) 2.7

Income tax
benefit
(expense) (6.9 ) (5.1 ) (1.8 ) (23.3 ) (18.0 ) (5.3 )
-------------------------------- ---------------------------------
Income (loss)
from
continuing
operations $ 13.0 $ 11.9 $ 1.1 $ 47.7 $ 47.5 $ 0.2
-------------------------------- ---------------------------------

Three Months Ended Dec. Twelve Months Ended
31, Dec. 31,

Operating Statistics: 2011 2010 2011 2010
------------------------- ------------------------

Retail sales - MWh 1,133,960 1,104,757 4,590,800 4,532,191

Contracted wholesale sales -
MWh 92,962 97,046 349,520 468,782

Off-system sales - MWh 534,620 382,438 1,788,005 1,749,524
------------------------- ------------------------
Total electric sales - MWh 1,761,542 1,584,241 6,728,325 6,750,497
------------------------- ------------------------

Total gas sales - Cheyenne
Light - Dth 1,575,334 1,449,845 4,813,607 4,876,539
------------------------- ------------------------

Regulated power plant
availability:
------------------------------------------------------- ------------------------
Coal-fired plants ((a)) 90.1 % 96.1 % 91.3 % 93.9 %

Other plants ((b)) 98.5 % 89.3 % 96.4 % 96.2 %

Total availability 93.2 % 93.6 % 93.1 % 94.8 %
------------------------------------------------------- ------------------------
(a) 2011 reflects a major overhaul and an unplanned outage at the PacifiCorp-
operated Wyodak plant.
(b) Reflects a planned, but extended outage for the combustion turbine at
Ben French during the fourth quarter of 2010.

Fourth Quarter 2011 Compared to Fourth Quarter 2010

Gross margin increased primarily due to a $2.1 million increase in MWh sold,
$2.6 million increase related to transmission cost adjustments for retail and
wholesale customers, $1.3 million increase for off-system sales margins impacted
by recognizing $0.7 million of deferred margins upon settlement of Colorado
Electric's power marketing sharing mechanism with the Colorado Public Utilities
Commission, $0.5 million increase for an energy efficiency bonus at Colorado
Electric and $0.7 million increase from the impact of an Environmental
Improvement Cost Recovery rider at Black Hills Power that went into effect on
June 1, 2011.

Operations and maintenance increased primarily due to higher allocation of
corporate costs driven by an increased asset base in the Electric Utility.
Additionally, deferred power marketing costs of $1.2 million were recognized in
the fourth quarter of 2011 upon settlement with the Colorado Public Utilities
Commission.

Depreciation and amortization increased primarily due to a higher asset base.

Interest expense, net decreased primarily due to higher AFUDC-borrowed
associated with recent construction projects at Colorado Electric.

Income tax: The effective tax rate increased as the 2010 rate reflects the
benefits of a research and development tax credit.

Full Year2011 Compared to Full Year 2010

Gross margin increased primarily due to a $17.1 million increase related to rate
adjustments that include a return on significant capital investments, $1.3
million increase from the impact of a new Environmental Improvement Cost
Recovery rider at Black Hills Power that went into effect on June 1, 2011, $3.1
million increase in retail MWh sold, $6.9 million increase for transmission cost
adjustments for retail and wholesale customers, and $0.3 million increase in
off-system sales impacted by recognition of $0.7 million of deferred margins
upon settlement of Colorado Electric's power marketing sharing mechanism with
the Colorado Public Utilities Commission.

Operations and maintenance increased primarily due to higher allocation of
corporate costs driven by an increased asset base in the Electric Utilities;
additional costs associated with Wygen III, which commenced commercial operation
on April 1, 2010; and approximately $1.1 million of deferred power marketing
costs that were recognized in 2011 upon settlement of an off-system sales
sharing mechanism with the Colorado Public Utilities Commission, partially
offset by suspension of the Osage plant.

Gain on sale of operating assets in 2011 relates to the sale of assets to a
related party. This gain was eliminated from the consolidated financial results
of the company. The gain on sale of operating assets in 2010 represents the
sale of a 23 percent ownership interest in the Wygen III generating facility to
the City of Gillette, Wyo.

Depreciation and amortization increased primarily due to a higher asset base
including additional depreciation associated with Wygen III, which began
commercial operations on April 1, 2010.

Interest expense, net increased due to higher borrowings related to recent
capital projects, partially offset by increased AFUDC-borrowed and interest
income. AFUDC-borrowed increased $5.1 million at Colorado Electric due to
construction of the Pueblo Airport Generating Station, offset by a decrease in
AFUDC-borrowed at Black Hills Power of $1.8 million, due to the commencement of
commercial operations of Wygen III.

Other income, net decreased primarily due to lower AFUDC-equity of $2.0 million,
which decreased upon the placement of Wygen III into commercial operations on
April 1, 2010.

Income tax: The effective tax rate increased compared to the prior year as the
prior year reflects a $2.2 million benefit for a repairs deduction taken for tax
purposes and the flow-through treatment of such tax benefit resulting from a
rate case settlement in 2010.

Gas Utilities

Three Months Increase Twelve Months Ended Increase
Ended Dec. 31, (Decrease) Dec. 31, (Decrease)

2011 vs. 2011 vs.
2011 2010 2010 2011 2010 2010
-------------------------------- ---------------------------------
(in millions)

Gross margin $ 59.2 $ 58.4 $ 0.8 $ 222.6 $ 217.0 $ 5.6
-------------------------------- ---------------------------------

Operations and
maintenance 30.8 32.1 (1.3 ) 122.0 125.4 (3.4 )

Gain on sale
of operating
assets - - - - (2.7 ) 2.7

Depreciation
and
amortization 6.3 5.7 0.6 24.3 25.3 (1.0 )
-------------------------------- ---------------------------------
Operating
income 22.1 20.6 1.5 76.3 69.0 7.3

Interest
expense, net 6.3 7.5 (1.2 ) 26.0 27.5 (1.5 )

Other expense
(income), net - - - (0.2 ) - (0.2 )

Income tax
(expense) (5.9 ) (4.0 ) (1.9 ) (16.4 ) (14.4 ) (2.0 )
-------------------------------- ---------------------------------
Income (loss)
from
continuing
operations $ 9.9 $ 9.1 $ 0.8 $ 34.2 $ 27.1 $ 7.1
-------------------------------- ---------------------------------

Three Months Ended Dec. Twelve Months Ended Dec.
31, 31,

Operating Statistics: 2011 2010 2011 2010
--------------------------- --------------------------

Total gas sales - Dth 15,805,353 16,041,456 55,764,154 55,265,630

Total transport volumes -
Dth 14,705,259 15,640,569 59,216,132 59,879,450

Fourth Quarter 2011 Compared to Fourth Quarter 2010

Gross margin increased primarily due to an increase in rates from rate case
settlements, partially offset by milder weather than in the same period in the
prior year.

Operations and maintenance decreased primarily due to decreases in employee
benefit costs, workers compensation insurance and litigation-related expenses.

Depreciation and amortization increased primarily due to capital expenditures
during the year.

Interest expense, net decreased primarily due to higher inter-company interest
income and allocation of debt service within the assigned capital structure.

Income tax: The effective tax rate for the fourth quarter of 2011 increased
compared to the same period in the prior year, primarily as a result of a flow-
through tax adjustment at Iowa Gas benefiting 2010.

Full Year2011 Compared to Full Year 2010

Gross margin increased primarily due to an increase in rates from rate case
settlements.

Operations and maintenance decreased primarily due to decreases in employee
benefit costs, workers compensation insurance, lower corporate allocations and
litigation-related expenses.

Gain on sale of operating assets was recognized on assets sold to the City of
Omaha, Neb. following annexation of a portion of our service territory by the
city in 2010.

Depreciation and amortization decreased primarily due to assets that became
fully depreciated during 2010, partially offset by increased depreciation on
recent capital expenditures during 2011.

Interest expense, net decreased primarily due to lower inter-company debt and
allocation of debt service within the assigned capital structure.

Income tax: The effective tax rate for the 12 months ended Dec. 31, 2011
decreased compared to the same period in the prior year primarily as a result of
a true-up adjustment as a result of the 2010 tax filing and a flow-through tax
adjustment at Iowa Gas.

Non-Regulated Energy Group

Income from continuing operations from the Non-regulated Energy group for the
three months ended Dec. 31, 2011, was $0.5 million, compared to a loss from
continuing operations of $0.5 million for the same period in 2010. Income from
continuing operations from the Non-regulated Energy group for the 12 months
ended Dec. 31, 2011, was $0.9 million, compared to $10.3 million for the same
period in 2010.

Power Generation

Three Months Increase Twelve Months Increase
Ended Dec. 31, (Decrease) Ended Dec. 31, (Decrease)

2011 vs. 2011 vs.
2011 2010 2010 2011 2010 2010
-------------------------------- --------------------------------
(in millions)

Revenue $ 8.2 $ 7.7 $ 0.5 $ 31.7 $ 30.3 $ 1.4
-------------------------------- --------------------------------

Operations and
maintenance 3.7 3.9 (0.2 ) 16.5 16.1 0.4

Depreciation
and
amortization 1.0 1.1 (0.1 ) 4.2 4.5 (0.3 )
-------------------------------- --------------------------------
Operating
income 3.5 2.7 0.8 10.9 9.7 1.2

Interest
expense, net 1.9 1.9 - 7.4 8.1 (0.7 )

Other (income)
expense, net 0.1 - 0.1 (1.1 ) (0.9 ) (0.2 )

Income tax
benefit
(expense) (0.5 ) 0.1 (0.6 ) (1.6 ) (0.3 ) (1.3 )
-------------------------------- --------------------------------
Income (loss)
from continuing
operations $ 0.9 $ 0.9 $ - $ 3.0 $ 2.2 $ 0.8
-------------------------------- --------------------------------

Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,

2011 2010 2011 2010
----------------------- -----------------------
Operating Statistics:

Contracted fleet power plant
availability -

Gas-fired plants 97.0 % 99.7 % 98.4 % 99.9 %

Coal-fired plants 100.0 % 98.1 % 100.0 % 98.5 %

Total availability 98.1 % 98.8 % 99.0 % 99.1 %

Fourth Quarter 2011 Compared to Fourth Quarter 2010

Revenue was comparable to the same period in the prior year.

Operations and maintenance was comparable to the same period in the prior year.

Income tax: The effective tax rate for the fourth quarter of 2011 increased
compared to the same period in the prior year primarily due to the benefit of
research and development credits in 2010.

Full Year2011 Compared to Full Year 2010

Revenue increased primarily due to higher sales from Wygen I, which incurred a
forced outage and major overhaul in the prior year.

Operations and maintenance increased primarily due to higher coal costs, higher
production from Wygen I which incurred a forced outage and major overhaul in the
prior year, and higher costs associated with Colorado IPP as employees prepared
for operations of the facilities.

Interest expense, net decreased primarily due to additional capitalized interest
related to the generation construction at Colorado IPP and increased inter-
company interest income at Black Hills Wyoming.

Income tax: The effective tax rate for the 12 months ended Dec. 31, 2011
increased compared to the same period in the prior year due to the benefit of
research and development credits in 2010.

Coal Mining

Three Months Increase Twelve Months Increase
Ended Dec. 31, (Decrease) Ended Dec. 31, (Decrease)

2011 vs. 2011 vs.
2011 2010 2010 2011 2010 2010
-------------------------------- --------------------------------
(in millions)

Revenue $ 18.0 $ 14.5 $ 3.5 $ 66.9 $ 57.8 $ 9.1
-------------------------------- --------------------------------

Operations and
maintenance 14.9 4.0 10.9 56.6 34.0 22.6

Depreciation,
depletion and
amortization 4.3 9.5 (5.2 ) 18.7 19.1 (0.4 )
-------------------------------- --------------------------------
Operating
income (loss) (1.2 ) 1.0 (2.2 ) (8.4 ) 4.7 (13.1 )

Interest
income, net 1.0 1.0 - 3.9 3.2 0.7

Other income
(expense) 0.5 0.6 (0.1 ) 2.2 2.2 -

Income tax
benefit
(expense) 0.3 (1.0 ) 1.3 1.9 (2.4 ) 4.3
-------------------------------- --------------------------------
Income (loss)
from continuing
operations $ 0.7 $ 1.6 $ (0.9 ) $ (0.4 ) $ 7.7 $ (8.1 )
-------------------------------- --------------------------------

Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,

2011 2010 2011 2010
-----------------------------------------------
Operating Statistics: (in thousands)

Tons of coal sold 1,538 1,590 5,692 5,931

Cubic yards of overburden moved 4,473 3,869 14,735 15,679

Fourth Quarter 2011 Compared to Fourth Quarter 2010

Revenue increased primarily due to a 28 percent increase in average price per
ton, partially offset by a 3 percent decrease in volumes sold as a result of
overhauls and unplanned outages at the PacifiCorp operated Wyodak plant. The
higher average sales price reflects the impact of price escalators and
adjustments in certain of our sales contacts. In 2011, approximately 40 percent
of our coal production was sold under contracts that include price adjustments
based on actual mining cost increases. Most of our remaining production is sold
under contracts where the sales price may escalate based on published indices.
These escalators have not kept up with actual mining cost increases, reducing
coal mine operating income and negatively impacting 2011 results. One of these
contracts was terminated at Dec. 31, 2011.

Operations and maintenance increases reflect longer haul distances and higher
overburden stripping costs in the current phase of our mining. Additionally, we
experienced higher costs associated with drilling and blasting, equipment
maintenance, clay parting removal, fuel, staffing levels for our train load-out
facility and weather conditions. As noted above, a portion of our production is
sold under contracts that have price escalators based on published indices.
These escalators have not kept up with actual mining cost increases, reducing
coal mine operating income and negatively impacting 2011 results. One of these
contracts was terminated at Dec. 31, 2011. Previous periods also include the
capitalization of certain costs associated with mine infrastructure, including
our in-pit conveyor system used to transport coal to mine-mouth generation
facilities.

Depreciation, depletion and amortization decreased primarily due to an
adjustment of the growth rate for asset retirement costs recorded in 2010 that
increased the asset base on which the unrestricted asset was depreciated.

Income tax: The effective tax rate decreased primarily due to increased tax
benefit generated by percentage depletion during the fourth quarter of 2011,
compared to the same benefit realized during the fourth quarter of 2010.

Full Year2011 Compared to Full Year 2010

Revenue increased primarily due to a 21 percent increase in average price per
ton partially offset by a 4 percent decrease in volumes sold as a result of
overhauls and unplanned outages at the PacifiCorp operated Wyodak plant. The
higher average sales price reflects the impact of price escalators and
adjustments in certain of our sales contracts. In 2011, approximately 40
percent of our coal production was sold under contracts that include price
adjustments based on actual mining costs. Most of our remaining production is
sold under contracts where the sales price may escalate based on published
indices. These escalators have not kept up with actual mining cost increases,
reducing coal mine operating income and negatively impacting 2011 results. One
of these contracts was terminated at Dec. 31, 2011.

Operations and maintenance increases are reflective of longer haul distances and
higher overburden stripping costs in the current phase of our mining.
Additionally, we experienced higher costs associated with drilling and
blasting, equipment maintenance, clay parting removal, fuel, staffing levels for
our train load-out facility and weather conditions. As noted above, a portion
of our production is sold under contracts that have price escalators based on
published indices. These escalators have not kept up with actual mining cost
increases, reducing coal mine operating income and negatively impacting 2011
results. One of these contracts was terminated at Dec. 31, 2011. Previous
periods also include the capitalization of certain costs associated with mine
infrastructure, including our in-pit conveyor system used to transport coal to
mine-mouth generation facilities.

Interest income, net increased primarily due to increased lending to affiliates.

Income tax: The effective tax rate decreased primarily due to an increased tax
benefit from percentage depletion and from a research and development credit.

Oil and Gas

Three Months Increase Twelve Months Increase
Ended Dec. 31, (Decrease) Ended Dec. 31, (Decrease)

2011 vs. 2011 vs.
2011 2010 2010 2011 2010 2010
-------------------------------- --------------------------------
(in millions)

Revenue $ 23.9 $ 16.4 $ 7.5 $ 79.8 $ 74.2 $ 5.6
-------------------------------- --------------------------------

Operations and
maintenance 11.1 9.3 1.8 41.4 39.3 2.1

Depreciation,
depletion and
amortization 13.1 10.0 3.1 35.7 30.3 5.4
-------------------------------- --------------------------------
Operating
income (0.3 ) (2.9 ) 2.6 2.7 4.6 (1.9 )

Interest
expense, net 1.7 1.6 0.1 5.9 5.4 0.5

Other (income)
expense 0.2 - 0.2 0.2 (0.8 ) 1.0

Income tax
benefit
(expense), net 0.9 1.5 (0.6 ) 1.7 0.4 1.3
-------------------------------- --------------------------------
Income (loss)
from continuing
operations $ (1.2 ) $ (3.0 ) $ 1.8 $ (1.7 ) $ 0.4 $ (2.1 )
-------------------------------- --------------------------------

Three Months Ended Dec. Percentage Twelve Months Ended Dec. Percentage
31, Increase 31, Increase

Operating
Statistics: 2011 2010 (Decrease) 2011 2010 (Decrease)
------------------------------------------------------------------------
Bbls of
crude oil
sold 148,422 106,878 39 % 451,823 375,646 20 %

Mcf of
natural gas
sold 2,380,218 2,252,627 6 % 9,051,393 9,046,493 - %

Mcf
equivalent
sales 3,270,750 2,893,895 13 % 11,762,331 11,300,369 4 %

Depletion
expense/Mcfe $ 3.73 $ 3.07 21 % $ 2.76 $ 2.36 17 %

Dec. 31, 2011 Dec. 31, 2010
------------------------------ -----------------------------
Oil and Gas Total Natural Natural
Proved Crude Oil Gas Total Crude Oil Gas Total

Reserves: ((a) ) (Mbbl) (MMcf) (MMcfe) (Mbbl) (MMcf) (MMcfe)
------------------------------ -----------------------------
Total proved
reserves 6,223 95,904 133,242 5,940 95,456 131,096

Average hedged price $ 79.74 $ 4.29 $ 75.59 $ 4.85

Well-head reserve
prices $ 88.49 $ 3.59 $ 70.82 $ 3.45

_______
(a) Oil and gas reserve information is based on reports prepared by Cawley,
Gillespie & Associates, Inc. an independent consulting and engineering firm.

Fourth Quarter 2011 Compared to Fourth Quarter 2010

Revenue increased primarily due to a 44 percent increase in the average hedged
price received for crude oil sales along with a 39 percent increase crude oil
volume sold. Crude oil production increases reflect activities from new wells
in the company's ongoing drilling program in the Bakken shale formation.

Operations and maintenance increased primarily as a result of increased
production taxes related to higher revenue and higher employee compensation and
benefit costs.

Depreciation, depletion and amortization increased primarily due to a higher
depletion rate per Mcfe. The increasing depletion rate is primarily driven by
the high cost of wells associated with our drilling activities in the Bakken
shale formation. Additionally, the fourth quarter of 2011 include a true-up
adjustment of $4.3 million to reflect the higher depletion rate for the annual
period compared to a true-up of $2.7 million in the fourth quarter of 2010.

Income tax benefit: The effective tax rate in the fourth quarter of 2010 was
impacted by an unfavorable state income tax true-up adjustment.

Full Year2011 Compared to Full Year 2010

Revenue increased primarily due to a 5 percent increase in the annual average
hedged price received for crude oil and a 20 percent increase in crude oil
production, partially offset by a 12 percent decrease in the annual average
hedged price received for natural gas. The increase in crude oil production is
primarily due to production from new wells in our ongoing Bakken drilling
program. Natural gas production increased slightly as production from new wells
has offset natural production declines in existing producing properties,
following reduced capital deployment during 2010 and 2009.

Operations and maintenance increased primarily as a result of higher production
taxes related to higher revenue.

Depreciation, depletion and amortization increased primarily due to a higher
depletion rate per Mcfe. The increasing depletion rate is primarily driven by
the high cost of wells associated with our drilling activities in the Bakken
shale formation.

Interest expense, net increased primarily due to increased debt used to finance
higher borrowings related to recent capital expenditures.

Other income (expense) decreased primarily due to lower earnings from our equity
investments.

Income tax (expense) benefit: The effective tax rate in 2010 includes a tax
benefit related to percentage depletion and a $0.4 million re-measurement of a
previously recorded uncertain tax position prompted by a settlement agreement
with the IRS Appeals Division.

Corporate

Fourth Quarter 2011 Compared to Fourth Quarter 2010

Loss from continuing operations for the three months ended Dec. 31, 2011 was
$4.6 million compared to income from continuing operations of $14.1 million for
the same period in the prior year. Results for the fourth quarter of 2011
reflect a $1.4 million non-cash unrealized mark-to-market loss related to
certain interest rate swaps compared to the fourth quarter of 2010, which
included a $26.5 million non-cash unrealized mark-to-market gain related to
these same interest rate swaps. Corporate also includes costs of $1.1 million
and $0.8 million for 2011 and 2010, respectively, which were originally
allocated to our Energy Marketing segment which could not be reclassified to
discontinued operations in accordance with GAAP.

Full Year2011 Compared to Full Year 2010

Loss from continuing operations for the 12 months ended Dec. 31, 2011 was $42.4
million compared to a loss from continuing operations of $21.6 million for the
same period in the prior year. Results for the year ended Dec. 31, 2011 reflect
a $42.0 million non-cash unrealized mark-to-market loss related to certain
interest rate swaps compared to 2010 which included a $15.2 million non-cash
unrealized mark-to-market loss related to these same interest rate swaps.
Additionally, the effective tax rate for 2010 was favorably impacted $2.0
million by a re-measurement of a previously recorded uncertain tax position
prompted by a settlement agreement with the IRS relating primarily to
depreciation method changes. Corporate also includes costs of $3.4 million and
$3.6 million for 2011 and 2010, respectively, which were originally allocated to
our Energy Marketing segment which could not be reclassified to discontinued
operations in accordance with GAAP.

Discontinued Operations

Fourth Quarter 2011 Compared to Fourth Quarter 2010

In January 2012, we entered into a definitive agreement to sell our Energy
Marketing segment, which resulted in this segment being reported as discontinued
operations as of Dec. 31, 2011. For comparative purposes, all prior results of
our Energy Marketing segment presented have been restated to reflect the
reclassification of this segment to discontinued operations on a consistent
basis.

Income from discontinued operations for the three months ended Dec. 31, 2011 was
$6.8 million compared to a loss from discontinued operations of $1.1 million for
the same period in the prior year. These results were driven by increased
realized margins for power marketing of $4.1 million and increased unrealized
margins for power marketing and coal marketing of $6.4 million and $9.0 million,
respectively, partially offset by lower realized margins for natural gas of
$12.3 million. The increase in power marketing was due to a long-term supply
contract while the decrease in natural gas was a result of lower gas prices.

Full Year 2011 Compared to Full Year 2010

Income from discontinued operations for the 12 months ended Dec. 31, 2011 was
$9.4 million compared to $5.5 million for the same period in the prior year.
These results were driven by increased realized margins for crude oil of $11.4
million and unrealized margins for power marketing of $8.1 million, partially
offset by lower unrealized margins for natural gas and crude oil of $3.5 million
and $4.5 million, respectively. The increase in power marketing was due to a
long-term supply contract while the decrease in natural gas was a result of
lower gas prices.

ABOUT BLACK HILLS CORP.

Black Hills Corp. (NYSE: BKH) - a diversified energy company with a tradition of
exemplary service and a vision to be the energy partner of choice - is based in
Rapid City, S.D., with corporate offices in Denver and Papillion, Neb. The
company serves 762,000 natural gas and electric utility customers in Colorado,
Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming. The company's non-
regulated businesses generate wholesale electricity, and produce natural gas,
crude oil and coal. Black Hills employees partner to produce results that
improve life with energy. More information is available
atwww.blackhillscorp.com.
Company Contact:
Jerome Nichols 605-721-1171
Media Relations Line 866-243-9002

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This news release includes "forward-looking statements" as defined by the
Securities and Exchange Commission, or SEC. We make these forward-looking
statements in reliance on the safe harbor protections provided under the Private
Securities Litigation Reform Act of 1995. All statements, other than statements
of historical facts, included in this news release that address activities,
events or developments that we expect, believe or anticipate will or may occur
in the future are forward-looking statements. This includes, without
limitations, our 2012 earnings guidance. These forward-looking statements are
based on assumptions which we believe are reasonable based on current
expectations and projections about future events and industry conditions and
trends affecting our business. However, whether actual results and developments
will conform to our expectations and predictions is subject to a number of risks
and uncertainties that, among other things, could cause actual results to differ
materially from those contained in the forward-looking statements, including
without limitation, the risk factors described in Item 1A of Part I of our 2010
Annual Report on Form 10-K filed with the SEC, and other reports that we file
with the SEC from time to time, and the following:

* Our ability to successfully complete the sale of Enserco Energy Inc. to Twin
Eagle Resource Management, LLC for net cash proceeds of approximately $160
million to $170 million, subject to working capital and other closing
adjustments;

* The impact of sale of our Energy Marketing segment on reducing our risk
profile, improving our credit metrics and enhancing the stability of cash
flows and earnings;

* The accuracy of our assumptions on which our earnings guidance is based;

* Our ability to obtain adequate cost recovery for our utility operations
through regulatory proceedings and favorable rulings in periodic
applications to recover costs for fuel, transmission and purchased power and
the timing in which the new rates would go into effect;

* Our ability to complete our capital program in a cost-effective and timely
manner, including our ability to successfully develop our Mancos shale gas
reserves located in the San Juan and Piceance Basins;

* Our ability to provide accurate estimates of proved crude oil and gas
reserves and future production and associated costs; and

* Other factors discussed from time to time in our filings with the SEC.

New factors that could cause actual results to differ materially from those
described in forward-looking statements emerge from time-to-time, and it is not
possible for us to predict all such factors, or the extent to which any such
factor or combination of factors may cause actual results to differ from those
contained in any forward-looking statement. We assume no obligation to update
publicly any such forward-looking statements, whether as a result of new
information, future events or otherwise.

Consolidating Income Statement

-------------------------------------------------------------------------------------------
Three Months
Ended Dec. Electric Gas Power Coal Oil and Intercompany
30, 2011 Utilities Utilities Generation Mining Gas Corporate Eliminations
Total

-------------------------------------------------------------------------------------------
(in millions)

Revenue $ 169,310 $ 151,746 $ 1,308 $ 9,739 $ 23,900 $ - $
- $ 356,003

Intercompany
revenue 3,495 - 6,864 8,284 - 50,160
(68,803 ) -

Fuel,
purchased
power and
cost of gas
sold 93,449 92,550 - - - 31
(16,685 ) 169,345

-------------------------------------------------------------------------------------------
Gross Margin 79,356 59,196 8,172 18,023 23,900 50,129
(52,118 ) 186,658

-------------------------------------------------------------------------------------------

Operations
and
maintenance 36,709 30,855 3,658 14,864 11,053 45,160
(45,935 ) 96,364

Gain on sale
of operating
asset - - - - - -
- -

Depreciation,
depletion and
amortization 13,424 6,275 1,030 4,306 13,053 2,989
(2,921 ) 38,156

-------------------------------------------------------------------------------------------
Operating
income 29,223 22,066 3,484 (1,147 ) (206 ) 1,980 (3,262
) 52,138

-------------------------------------------------------------------------------------------

Interest
expense, net (13,246 ) (7,638 ) (2,278 ) (1 ) (1,662 ) (24,325 ) 26,795
(22,355 )

Interest rate
swaps -
unrealized
(loss) gain - - - - - (1,402 )
- (1,402 )

Interest
income 4,050 1,303 364 1,022 - 17,467
(23,736 ) 470

Other income
(expense) (75 ) 43 (125 ) 541 (171 ) 13,616 (13,618
) 211

Income tax
benefit
(expense) (6,914 ) (5,879 ) (505 ) 284 871 1,834 -
(10,309 )

-------------------------------------------------------------------------------------------
Income (loss)
from
continuing
operations $ 13,038 $ 9,895 $ 940 $ 699 $ (1,168 ) $ 9,170 $
(13,821 ) $ 18,753

-------------------------------------------------------------------------------------------

Consolidating Income Statement

--------------------------------------------------------------------------------------------
Three Months
Ended Dec. Electric Gas Power Coal Oil and Intercompany
30, 2010 Utilities Utilities Generation Mining Gas Corporate Eliminations
Total

--------------------------------------------------------------------------------------------
(in millions)

Revenue * $ 139,525 $ 148,099 $ 1,031 $ 8,854 $ 16,409 $ - $
- $ 313,918

Intercompany
revenue * 3,770 - 6,716 5,682 - 48,270
(63,357 ) 1,081

Fuel,
purchased
power and
cost of gas
sold 70,473 89,662 - - - 124
(14,039 ) 146,220

--------------------------------------------------------------------------------------------
Gross Margin 72,822 58,437 7,747 14,536 16,409 48,146
(49,318 ) 168,779

--------------------------------------------------------------------------------------------

Operations
and
maintenance 34,723 32,038 3,920 3,987 9,335 42,223
(42,436 ) 83,790

Gain on sale
of operating
assets - - - - - -
- -

Depreciation,
depletion and
amortization 11,707 5,729 1,093 9,530 10,004 2,982
(2,912 ) 38,133

--------------------------------------------------------------------------------------------
Operating
income 26,392 20,670 2,734 1,019 (2,930 ) 2,941
(3,970 ) 46,856

--------------------------------------------------------------------------------------------

Interest
expense, net (12,431 ) (8,348 ) (2,301 ) (5 ) (1,634 ) (22,117 ) 23,134
(23,702 )

Interest rate
swaps -
unrealized
(loss) gain - - - - - 26,470
- 26,470

Interest
income 2,667 883 367 1,014 1 14,385
(19,182 ) 135

Other income
(expense) 372 5 (39 ) 536 50 10,730
(10,714 ) 940

Income tax
benefit
(expense) (5,133 ) (4,116 ) 151 (976 ) 1,465 (7,461 ) -
(16,070 )

--------------------------------------------------------------------------------------------
Income (loss)
from
continuing
operations $ 11,867 $ 9,094 $ 912 $ 1,588 $ (3,048 ) $ 24,948 $
(10,732 ) $ 34,629

--------------------------------------------------------------------------------------------

Consolidating Income Statement

---------------------------------------------------------------------------------------------------
Twelve Months
Ended Dec. Electric Gas Power Oil and
Intercompany
30, 2011 Utilities Utilities Generation Coal Mining Gas Corporate
Eliminations Total

---------------------------------------------------------------------------------------------------
(in millions)

Revenue $ 600,935 $ 554,584 $ 4,059 $ 32,802 $ 79,808 $ - $
- $ 1,272,188

Intercompany
revenue 13,396 - 27,613 34,090 - 192,250 �