•

Power generation income from continuing operations was $5.0 million, compared to income of $2.1 million in 2006. The increase in earnings was primarily the result of strong operational performance and availability. In the first three months of 2006, the Las Vegas II power plant operated in simple-cycle mode and incurred extensive operating and maintenance costs; in addition, the Las Vegas I power plant was out of service due to a planned maintenance outage.

•

Oil and gas income from continuing operations was $3.6 million in 2007, compared to $5.4 million in 2006. Revenues increased slightly as higher hedged prices received for both natural gas and crude oil were offset by an overall production decrease of 6 percent on an equivalent basis. Natural gas volumes sold decreased 9 percent, primarily due to weather impacts and lower well performance in the DJ Basin. Crude oil volumes sold increased 14 percent primarily due to the results of 2006 drilling activity and improved well availability. Total operating expenses increased 16 percent primarily due to industry-wide higher field service costs, increased depletion expense, and an increased number of producing wells. Depletion costs per Mcfe increased 26 percent to $2.04, due to higher capitalized costs, higher estimated future development costs, and the addition of higher average-cost reserves from recent development and acquisitions. Results were also impacted by increased interest expense due to higher borrowings to fund acquisition and development costs.

•

Coal mining income from continuing operations was $1.6 million in 2007 compared to $1.4 million in 2006. Results were affected by higher average coal prices received and lower taxes, offset partially by increased overburden removal costs, depreciation, and general and administrative costs. In 2006, mining taxes were impacted by production tax audit adjustments.

The following tables contain certain Wholesale Energy operating statistics:

Three months ended March 31,

2007

2006

Coal mining:

Tons of coal sold

1,212,300

1,222,600

Oil and gas production:

Mcf equivalent sales

3,298,780

3,501,860

Energy marketing
average daily volumes:

Natural gas physical-MMBtus

1,898,630

1,275,900

Crude oil physical-barrels^(a)

6,050

-

(a) Daily oil volumes represent the commencement of oil

marketing out of our Golden, Colorado energy marketing

operation beginning in May 2006.

Three months ended March 31,

Power generation:

2007

2006

Contracted fleet power
plant availability

96.1%

85.7%

•     The net dilutive effect of the issuance of 4.17 million shares of common stock on February 22, 2007 through a private placement; this effect, as a result of the use of a weighted average methodology to calculate number of shares outstanding, will increase as the year progresses;

•     An improved outlook for annual earnings from our energy marketing operations;

•     Oil and gas production growth approximating 4 to 6 percent on an Mcf-equivalent basis, as compared to production of approximately 14.4 Bcfe in 2006, based on expected 2007 capital deployment of approximately $70 million to $75 million;

•     Oil and gas anticipated production-weighted average NYMEX prices of $8.41 per MMBtu of natural gas and $67.42 per barrel of oil, average well-head prices for the remainder of 2007 of $6.30 per Mcf and $58.29 per barrel of oil, all based on recent forward strips, and average hedged prices for the remainder of 2007 of $6.60 per Mcf and $55.83 per barrel;

•     Increased earnings at our electric utility, Black Hills Power, through the successful completion of a rate settlement resulting in a $7.9 million rate increase effective January 1, 2007;

•     No significant unplanned outages at our regulated power plants;

•     Non-regulated power plant operations with fleet availability at contracted levels approximating 98 percent;

•     Slightly higher production and earnings from our coal mining operations, assuming no significant unplanned coal-fired power plant outages;

•     Completion of Wygen II for January 1, 2008 commercial operation;

•     Continued progress toward successful completion of the acquisition of the Aquila assets in 2008; and

•     No material change in the Company’s current business mix.

            This news release includes “forward-looking statements” as defined by the Securities and Exchange Commission,

•     Obtaining adequate cost recovery for our retail utility operations through regulatory proceedings, and receiving unfavorable rulings in the periodic applications to recover costs for fuel and purchased power in our regulated utilities;

•     The amount and timing of capital deployment in new investment opportunities or for the repurchase of debt or stock;

•     Our ability to successfully maintain or improve our corporate credit rating;

•     The permitting, construction, startup and operation of power generating facilities may involve unanticipated charges or delays that could negatively impact the Company’s business and its results of operations;

•     The completion of acquisitions for which definitive agreements have been executed could be delayed or may not occur;

•     Regulatory approval of acquisitions could impose financial and operating conditions or restrictions that could impact our results;

•     Our ability to meet production targets for our oil and gas properties, which may be dependent upon issuance by federal, state, and tribal governments, or agencies thereof, of drilling, environmental and other permits, and the availability of specialized contractors, work force, and equipment;

•     The extent of our success in connecting natural gas supplies to gathering, processing and pipeline systems;

•     The timing and extent of scheduled and unscheduled outages of power generation facilities;

•     Our ability to successfully integrate with and profitably operate any future acquisitions;

•     The possibility that we may be required to take impairment charges to reduce the carrying value of some of our long-lived assets when indicators of impairment emerge;

•     Numerous uncertainties inherent in estimating quantities of proved oil and gas reserves and actual future production rates and associated costs;

•     Changes in business and financial reporting practices arising from the enactment of The Energy Policy Act of 2005;

•     Our ability to remedy any deficiencies that may be identified in the review of our internal controls;

•     The timing, volatility and extent of changes in energy-related and commodity prices, interest rates, energy and commodity supply or volume, the cost and availability of transportation of commodities, and demand for our services, all of which can affect our earnings, liquidity position and the underlying value of our assets;

•     Our effective use of derivative financial instruments to hedge commodity, currency exchange rate and interest rate risks;

•     The creditworthiness of counterparties to trading and other transactions, and defaults on amounts due from counterparties;

•     The amount of collateral required to be posted from time to time in our transactions;

•     Changes in or compliance with laws and regulations, particularly those relating to taxation, safety and protection of the environment;

•     Changes in state laws or regulations that could cause us to curtail our independent power production;

•     Weather and other natural phenomena;

•     Industry and market changes, including the impact of consolidations and changes in competition;

•     The effect of accounting policies issued periodically by accounting standard-setting bodies;

•      The cost and effects on our business, including insurance, resulting from terrorist actions and natural disasters or responses to such actions and events;

•      The outcome of any ongoing or future litigation or similar disputes and the impact on any such outcome or related settlements;

•     Capital market conditions, which may affect our ability to raise capital on favorable terms;

•     Price risk due to marketable securities held as investments in benefit plans;

•     General economic and political conditions, including tax rates or policies and inflation rates; and

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