South Dakota

(State or other jurisdiction of incorporation)

001-31303

46-0458824

(Commission File Number)

(IRS Employer Identification No.)

625 Ninth Street, PO Box 1400

Rapid City, South Dakota

(Address of principal executive offices)

57709-1400

(Zip Code)

605.721.1700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02

Results of Operations and Financial Condition

Item 9.01  

Financial Statements and Exhibits

(d)

Exhibits

99

Press release dated August 9, 2007.

BLACK HILLS CORPORATION

By: /s/ Mark T. Thies

Mark T. Thies

Executive Vice President

and Chief Financial Officer

Date:  August 9, 2007

99

Press release dated August 9, 2007.

•

a $4.7 million, or $0.12 per share, increase in energy marketing earnings;

•

a $3.1 million, or $0.08 per share, increase in power generation earnings;

•

a $2.4 million, or $0.06 per share, increase in electric utility earnings; and

•

a $2.3 million, or $0.06 per share, increase in oil and gas earnings.

–

–Page 1 of 7 –

BLACK HILLS CORPORATION
(In thousands, except per share amounts)

Three months ended June 30,

Six months ended June 30,

2007

2006

2007

2006

Revenues:

Retail services

$66,039

$76,135

$149,758

$163,637

Wholesale energy

97,904

77,662

200,717

162,035

Corporate

-

16

1

32

$163,943

$153,813

$350,476

$325,704

Net income (loss) available
for common stock:
Continuing operations –

Retail services

$5,924

$3,300

$15,695

$9,596

Wholesale energy

20,126

9,453

42,970

24,597

Corporate

(819)

(385)

(933)

(3,264)

Income from continuing operations

25,231

12,368

57,732

30,929

Discontinued operations (a)

(133)

(611)

(181)

6,979

Net income

$25,098

$11,757

$57,551

$37,908

Weighted average common shares
outstanding:

Basic

37,588

33,164

36,387

33,142

Diluted

38,007

33,506

36,793

33,493

Earnings per share:

Basic –

Continuing operations

$ 0.67

$0.37

$1.59

$0.93

Discontinued operations

-

(0.02)

(0.01)

0.21

Total

$0.67

$0.35

$1.58

$1.14

Diluted –

Continuing operations

$0.66

$0.37

$1.57

$ 0.92

Discontinued operations

-

(0.02)

(0.01)

0.21

Total

$ 0.66

$0.35

$1.56

$1.13

(a)

2007 and 2006 discontinued operations reflect the after-tax results of operations at the Company’s oil marketing and transportation business. The assets of this business were sold in March 2006.

•

Electric utility segment income from continuing operations increased 100 percent to $4.9 million, compared to $2.4 million in 2006. The earnings increase reflected lower maintenance expense, as the Wyodak power plant was down for a scheduled major maintenance outage in 2006, and higher South Dakota electric rates, which went into effect January 1, 2007. Revenues decreased primarily due to a 30 percent decrease in off-system sales revenue on a 44 percent decrease in MWh sold. The decrease in off-system sales was attributed to storm damage related transmission constraints to the east of our AC-DC transmission tie and also to a reduction of surplus power resulting from an increased native load. Following transmission repairs, we were able to resume full utilization of the AC-DC tie in June 2007.

•

Electric and gas utility segment income from continuing operations increased 21 percent to $1.0 million compared to $0.9 million in 2006. Results reflect normal seasonal operations and an increase in income related to allowed funds used during construction (AFUDC) attributable to the construction of the Wygen II power plant. Operating expenses decreased slightly, offset in part by a small decrease in electric and gas gross margins.

The following tables provide certain Retail Services operating statistics:

Electric Utility (Black Hills Power)

Three months ended
June 30,

Six months ended
June 30,

2007

2006

2007

2006

Retail sales–MWh

385,062

379,515

810,566

789,988

Contracted wholesale sales – MWh

151,828

154,694

316,938

316,945

Off-system sales – MWh

150,363

268,174

284,212

448,337

687,253

802,383

1,411,716

1,555,270

Regulated power plant availability:
Coal-fired plants
Other plants
Total availability

93.9%

99.1%

96.2%

83.9%

99.5%

90.9%

94.6%

99.5%

96.8%

90.6%

99.4%

94.5%

Electric and Gas Utility
(Cheyenne Light, Fuel & Power)

Electric sales – MWh

222,459

218,795

464,289

451,622

Gas sales – Dekatherm (Dth)

881,983

823,868

2,851,568

2,694,322

•

Energy marketing income from continuing operations increased 110 percent to $8.9 million, compared to $4.3 million in 2006. Increased earnings were primarily the result of a $5.7 million after-tax increase in realized gas margins that were driven by continued strong volatility in natural gas markets, and a $1.7 million after-tax increase in net unrealized gains related to accounting mark-to-market impacts on our gas marketing positions. Natural gas physical volumes increased 5 percent compared to 2006. Results also reflected earnings from the addition of crude oil marketing as part of our Rocky Mountain producer services strategy. Operating expenses increased primarily due to increased compensation related to higher gross margins and an increase in bad debt provision.

•

Power generation income from continuing operations increased 128 percent to $5.4 million, compared to income of $2.4 million in 2006. The increase in earnings was primarily the result of the return of the Las Vegas facilities to normal operational levels. In the second quarter of 2006, the Las Vegas II power plant predominantly operated in simple-cycle mode due to repairs to the heat recovery units, and the Las Vegas I power plant was out of service for a portion of the second quarter of 2006 due to a planned maintenance outage. Interest costs were lower in 2007, offset in part by a 4 percent increase in operating expense.

•

Oil and gas income from continuing operations increased 114 percent to $4.4 million in 2007, compared to $2.0 million in 2006. Revenues increased 21 percent due to higher hedged prices received for both natural gas and crude oil and an overall production increase of 4 percent on an Mcf-equivalent basis. Natural gas volumes sold increased 3 percent, primarily due to higher production in the San Juan Basin. Crude oil volumes sold increased 7 percent, primarily due to continued strong production from wells drilled in 2006. Results in 2007 also reflect a tax benefit of $1.0 million from amended tax returns, partially offset by a $0.4 million accrual increase related to an ongoing royalty audit. Total operating expense increased 14 percent, due to increased field service costs and depletion expense.

•

Coal mining income from continuing operations increased 80 percent to $1.4 million in 2007, compared to $0.8 million in 2006. The earnings increase was due to higher average coal prices received and higher tons of coal sold resulting from a return to normal operations after the 2006 Wyodak plant outage, offset partially by the higher variable costs associated with increased production, and higher equipment repair costs.

The following tables contain certain Wholesale Energy operating statistics:

Three months ended June 30,

Six months ended June 30,

2007

2006

2007

2006

Coal mining:

Tons of coal sold

1,269,000

1,012,000

2,482,000

2,234,000

Oil and gas production:

Mcf equivalent sales

3,804,700

3,666,300

7,103,400

7,168,400

Energy marketing
average daily volumes:

Natural gas physical – MMBtus

1,581,000

1,504,300

1,738,900

1,390,700

Crude oil physical – barrels

10,803

8,945^(a)

8,442

8,945^(a)

(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 June 30,

Six months ended June 30,

Power generation:

2007

2006

2007

2006

Contracted fleet power
plant availability:
Coal-fired plant
Natural gas-fired plants

Total availability

94.0%

98.6%

98.2%

94.7%

89.8%

90.2%

93.8%

98.7%

98.3%

94.4%

88.3%

88.9%

•

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, using 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 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;

•

No significant unplanned outages at our regulated power plants;

•

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

•

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

•

Continued progress toward successful completion of the acquisition of the Aquila assets in 2008, including approximately $0.05 to $0.10 per share of incremental acquisition related costs expected to be expensed in the last half of 2007; 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,

•

Our ability to obtain adequate cost recovery for our retail utility operations through regulatory proceedings and receive favorable rulings in periodic applications to recover costs for fuel and purchased power in our regulated utilities;

•

Our ability to complete acquisitions for which definitive agreements have been executed;

•

Our ability to obtain regulatory approval of acquisitions which, even if approved, could impose financial and operating conditions or restrictions that could impact our expected results;

•

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

•

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;

•

Our ability to complete the permitting, construction, start up and operation of power generating facilities in a cost-effective and timely manner;

•

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;

•

Our ability to provide accurate estimates of proved oil and gas reserves, coal reserves and actual future production rates and associated costs;

•

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;

•

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;

•

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 ability to effectively use derivative financial instruments to hedge commodity, currency exchange rate and interest rate risks;

•

Our ability to minimize defaults on amounts due from counterparties with respect to trading and other transactions;

•

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 or responses to such actions or 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 and market uncertainties related to interest rates, 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.