UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

 

FORM 8-K

____________

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported) July 11, 2008

____________

 

BLACK HILLS CORPORATION

(Exact name of registrant as specified in its charter)

____________

 

____________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

 

 

 

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Item 2.01

Completion of Acquisition or Disposition of Assets

 

On July 11, 2008, Black Hills Corporation (the “Company”) completed the sale of certain independent power production assets (“IPP Assets”) with a total capacity of 974 megawatts for $840 million cash. Net pre-tax cash proceeds received were approximately $756 million, including the effects of approximately $67.5 million of associated project level debt repayment, estimated working capital adjustments and other costs. The sale was pursuant to the Purchase and Sale Agreement entered into on April 29, 2008, by and between our subsidiary, Black Hills Generation, Inc. and Southwest Generation Operating Company, LLC, the acquisition company formed by affiliates of Hastings Funds Management Ltd and IIF BH Investment LLC, a subsidiary of an investment entity advised by JPMorgan Asset Management, as described in the Form 8-K filed by the Company with the Securities and Exchange Commission on May 1, 2008.

 

The assets sold include the following gas-fired power plants:

 

Asset	State Located	Capacity (net megawatts)
Fountain Valley	Colorado	240
Las Vegas II	Nevada	224
Valencia	New Mexico	149
Arapahoe	Colorado	130
Harbor Cogeneration	California	98
Valmont	Colorado	80
Las Vegas I	Nevada	53
Total		974

 

The foregoing descriptions of the agreement and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to the Purchase and Sale Agreement, a copy of which was filed as Exhibit 10 to the Company’s Form 8-K filed on May 1, 2008 and is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits

(b)

Pro Forma Financial Information

The Unaudited Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 2007 and the three months ended March 31, 2008 have been prepared to present the Company’s results of operations as if the sale of the IPP Assets had occurred on January 1, 2007. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2008 has been prepared to present the Company’s financial position as if the sale of the IPP Assets had occurred on March 31, 2008. The Company’s Unaudited Pro Forma Condensed Consolidated Financial Statements are attached hereto as Exhibit 99 and are incorporated herein by reference.

The Unaudited Pro Forma Condensed Consolidated Financial Statements do not purport to be indicative of the financial position or results of operations of the Company as of the dates or for such periods, nor are they necessarily indicative of future results. The Unaudited Pro Forma Condensed Consolidated Financial Statements and the accompanying notes should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2007, and Management’s Discussion and Analysis included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

 

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(d)

Exhibits

99	Unaudited Pro Forma Condensed Consolidated Financial Statements, including:
	(i)         Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2008. (ii)        Unaudited Pro Forma Condensed Consolidated Statements of Income for the year ended December 31, 2007 and the three months ended March 31, 2008.

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	BLACK HILLS CORPORATION
	By: /s/ Steven J. Helmers
	Steven J. Helmers
	Senior Vice President
	and General Counsel
Date:  July 17, 2008

 

 

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Exhibit Index

 

Exhibit

Number

 

99	Unaudited Pro Forma Condensed Consolidated Financial Statements.

 

 

5

 

 

EXHIBIT 99

BLACK HILLS CORPORATION

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed financial statements present financial information to give effect of the July 11, 2008 sale of seven of Black Hills Corporation’s (the Company’s) independent power plants (the IPP Assets) to be accounted for in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144). The unaudited pro forma condensed consolidated financial statements are based on the Company’s historical consolidated financial statements, adjusted to give effect to the disposition of the IPP Assets in accordance with the underlying terms of the related sale agreement. The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 2007 and the three months ended March 31, 2008 have been prepared to present the consolidated results of continuing operations of the Company, assuming the sale occurred as of January 1, 2007. The unaudited pro forma condensed consolidated balance sheet presents our financial position assuming the sale of the IPP Assets had occurred on March 31, 2008. The unaudited pro forma condensed consolidated financial statements do not assume the use of any proceeds from the sale of the IPP Assets to invest in the Company, purchase a similar asset or reduce outstanding debt.

 

Management believes that the assumptions used to derive the unaudited pro forma condensed consolidated financial statements are reasonable under the circumstances and given the information available. Such pro forma financial data has been provided for informational purposes and is not necessarily indicative of the Company’s financial condition or results of operations that actually would have been attained had the transaction occurred at the dates indicated, and is not necessarily indicative of the Company’s financial position or results of operations that will be achieved in the future. As a result of the IPP Asset sale the historical operations of the IPP Assets will be shown as discontinued operations in the Company’s future consolidated financial statements beginning with the Form 10-Q for the second quarter of 2008. In addition, these unaudited pro forma financial statements have been presented on a basis to eliminate the effects of reporting discontinued operations. The unaudited pro forma condensed consolidated financial statements together with the notes thereto should be read in conjunction with the Company’s historical consolidated financial statements and accompanying notes thereto, which can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the Securities Exchange Commission (SEC) on February 29, 2008 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008, filed with the SEC on May 9, 2008.

 

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BLACK HILLS CORPORATION

CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET

(unaudited)

 

	As reported		Pro Forma			Restated Pro Forma
	March 31, 2008		Adjustments			March 31,2008
	(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	75,605	$	758,183	(1)	$	833,788
Restricted cash		5,484		—			5,484
Short-term investments		7,290		—			7,290
Receivables (net of allowance for doubtful
accounts of $4,213)		270,763		(16,585)	(1)		254,178
Materials, supplies and fuel		87,937		(7,404)	(1)		80,533
Derivative assets		46,337		—			46,337
Deferred income taxes		14,011		—			14,011
Other assets		16,048		(1,610)	(1)		14,438
Assets of discontinued operations		1,106		—			1,106
		524,581		732,584			1,257,165
Investments		16,745		—			16,745
Property, plant and equipment		2,564,259		(661,163)	(1)		1,903,096
Less accumulated depreciation and depletion		(689,997)		163,268	(1)		(526,729)
		1,874,262		(497,895)			1,376,367
Other assets:
Derivative assets		1,360		—			1,360
Goodwill		40,501		(26,501)	(1)		14,000
Intangible assets (net of accumulated amortization
of $28,865)		20,275		(20,272)	(1)		3
Other		47,343		(14,736)	(1)		32,607
		109,479		(61,509)			47,970
	$	2,525,067	$	173,180		$	2,698,247
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	242,048	$	(3,093)	(1)	$	238,955
Accrued liabilities		104,808		(6,407)	(1)		98,401
Derivative liabilities		72,526		—			72,526
Notes payable		73,000		—			73,000
Current maturities of long-term debt		143,187		(12,857)	(1)		130,330
Accrued income taxes		303		98,835	(1)		99,138
Liabilities of discontinued operations		757		—			757
		636,629		76,478			713,107
Long-term debt, net of current maturities		561,136		(57,857)	(1)		503,279
Deferred credits and other liabilities:
Deferred income taxes		209,272		—			209,272
Derivative liabilities		16,516		—			16,516
Other		131,032		(30)	(1)		131,002
		356,820		(30)			356,790
Minority interest in subsidiaries		5,244		—			5,244
Stockholders’ equity:
Common stock equity –
Common stock $1 par value; 100,000,000 shares
authorized; Issued 38,425,006 shares		38,425		—			38,425
Additional paid-in capital		578,742		—			578,742
Retained earnings		400,909		154,589	(1), (3)		555,498
Treasury stock at cost – 29,400 shares		(1,050)		—			(1,050)
Accumulated other comprehensive loss		(51,788)		—			(51,788)
		965,238		154,589			1,119,827
	$	2,525,067	$	173,180		$	2,698,247

 

The accompanying notes to condensed consolidated pro forma financial statements are an integral part of these

condensed consolidated pro forma financial statements.

 

2

BLACK HILLS CORPORATION

CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME

(unaudited)

 

	As Reported for the					Total Pro Forma for the
	Three Months Ended		Pro Forma			Three Months Ended
	March 31, 2008		Adjustments			March 31,2008
	(in thousands, except per share amounts)
Operating revenues	$	179,211	$	(26,361)	(1)	$	152,850
Operating expenses:
Fuel and purchased power		54,615		(904)	(1)		53,711
Operations and maintenance		26,203		(5,552)	(1)		20,651
Administrative and general		25,549		(1,490)	(1), (2)		24,059
Depreciation, depletion and amortization		25,644		(6,257)	(1)		19,387
Taxes, other than income taxes		10,636		(1,128)	(1)		9,508
		142,647		(15,331)			127,316
Operating income		36,564		(11,030)			25,534
Other income (expense):
Interest expense		(12,333)		3,139	(1)		(9,194)
Interest income		433		(7)	(1)		426
Allowance for funds used during
construction – equity		281		—			281
Other income, net		344		(8)	(1)		336
		(11,275)		3,124			(8,151)
Income from continuing operations
before equity in earnings of
unconsolidated subsidiaries, minority
interest and income taxes		25,289		(7,906)			17,383
Equity in earnings of unconsolidated
subsidiaries		232		—			232
Minority interest		(77)		—			(77)
Income tax expense		(8,872)		3,070	(1)		(5,802)
Income from continuing operations	$	16,572	$	(4,836)		$	11,736
Weighted average common shares
outstanding:
Basic		37,826					37,826
Diluted		38,399					38,399
Earnings per share from continuing operations:
Basic	$	0.43				$	0.31
Diluted	$	0.43				$	0.31

 

The accompanying notes to condensed consolidated pro forma financial statements are an integral part of these

condensed consolidated pro forma financial statements.

3

BLACK HILLS CORPORATION

CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME

(unaudited)

 

	Twelve Months					Total Pro Forma for
	Ended					the Twelve Months
	December 31, 2007		Pro Forma			Ended December 31,
	as Reported		Adjustments			2008
(in thousands, except per share amounts)
Operating revenues	$	695,914	$	(121,076)	(1)	$	574,838
Operating expenses:
Fuel and purchased power		175,919		(4,117)	(1)		171,802
Operations and maintenance		84,045		(26,086)	(1)		57,959
Administrative and general		115,568		(4,231)	(1), (2)		111,337
Depreciation, depletion and amortization		99,700		(27,933)	(1)		71,767
Taxes, other than income taxes		37,816		(4,873)	(1)		32,943
Impairment of long-lived assets		3,315		—			3,315
		516,363		(67,240)			449,123
Operating income		179,551		(53,836)			125,715
Other income (expense):
Interest expense		(40,953)		15,772	(1)		(25,181)
Interest income		3,609		(44)	(1)		3,565
Allowance for funds used during
construction – equity		4,803		—			4,803
Other expense		(423)		51	(1)		(372)
Other income, net		786		—			786
		(32,178)		15,779			(16,399)
Income from continuing operations
before equity in earnings of
unconsolidated subsidiaries, minority
interest and income taxes		147,373		(38,057)			109,316
Equity in earnings of unconsolidated
subsidiaries		(1,231)		—			(1,231)
Minority interest		(377)		—			(377)
Income tax expense		(45,641)		14,179	(1)		(31,462)
Income from continuing operations	$	100,124	$	(23,878)		$	76,246
Weighted average common shares
outstanding:
Basic		37,024					37,024
Diluted		37,414					37,414
Earnings per share from continuing operations:
Basic	$	2.70				$	2.06
Diluted	$	2.68				$	2.04

 

The accompanying notes to condensed consolidated pro forma financial statements are an integral part of these

condensed consolidated pro forma financial statements.

 

4

BLACK HILLS CORPORATION

 

Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements

 

On July 11, 2008, the Company completed a sale of seven independent power plants consisting of 974 megawatts for $840 million cash, subject to working capital adjustments. The net proceeds from the sale were approximately $762.8 million, reflecting the repayment of associated project debt financing and the effects of estimated working capital adjustments. Based on March 31, 2008 historical balances, the after-tax gain on the sale was approximately $154.6 million. Actual adjustments and balances will result in differences from the information presented. The accompanying unaudited pro forma condensed consolidated financial statements do not assume the use of any proceeds from the sale of the IPP Assets to invest in the Company, purchase similar assets or reduce outstanding debt. The unaudited pro forma condensed balance sheet presented herein assumes the sale occurred as of March 31, 2008. The unaudited pro forma condensed consolidated statements of income are presented as if the sale occurred as of January 1, 2007. Such pro forma information is based on the Company’s historical consolidated financial statements and accompanying notes thereto, which can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the Securities Exchange Commission (SEC) on February 29, 2008 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2008, filed with the SEC on May 9, 2008. The IPP Assets sold were previously reported within the Power Generation segment for reporting purposes within the Company’s historical consolidated financial statements and accompanying notes thereto.

 

Pro Forma adjustments are based on the following:

 

1.

The pro forma adjustments represent the discontinued operations of the IPP Assets. This presentation of discontinued operations has been prepared in accordance with SFAS 144. Additionally, interest expense has been presented within discontinued operations in accordance with Emerging Issues Task Force Issues 87-24, “Allocation of Interest to Discontinued Operations”.

2.

General indirect corporate overhead costs previously allocated to the IPP Assets and present within the related operating results of the Power Generation segment within the Company’s historical consolidated financial statements have been excluded from reclassification as discontinued operations. Historical amounts not reclassified to discontinued operations were $1.6 million for the three months ended March 31, 2008 and $6.1 million for the year ended December 31, 2007.

3.

The estimated after-tax gain of approximately $154.6 million is reflected as an adjustment to retained earnings. This estimate is based on the historical information as of March 31, 2008. Actual adjustments and balances will result in differences from the information presented.

 

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