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Black Hills Corp. to Acquire SourceGas Holdings LLC

  • Strategic acquisition accretive to EPS, beginning first calendar year after closing
  • Highly complementary fit enhances operating scale and efficiency of service delivery to customers
  • Increases customer base by 55%, to more than 1.2 million electric and natural gas utility customers in 790 communities in eight Rocky Mountain and Midcontinent states

July 12, 2015 – Black Hills Corp. (NYSE:BKH) today announced it entered into a definitive agreement to acquire SourceGas Holdings LLC from investment funds managed by Alinda Capital Partners and GE Unit (NYSE:GE) GE Energy Financial Services. SourceGas operates four regulated natural gas utilities serving approximately 425,000 customers in Arkansas, Colorado, Nebraska and Wyoming and a 512-mile regulated intrastate natural gas transmission pipeline in Colorado.

Black Hills Corp. is acquiring SourceGas for total consideration of $1.89 billion, including reimbursement of an estimated $200 million in capital expenditures through closing and the assumption of $720 million of debt projected at closing. The effective purchase price is $1.74 billion taking into account approximately $150 million of tax benefits resulting from the transaction. The transaction will add meaningfully to Black Hills’ earnings per share beginning the first calendar year after closing.

This combination brings together two well-regarded utility operators with complementary geographic footprints, creating a stronger utility with enhanced operational expertise and financial resources to meet the region’s future energy needs. The combined entity will serve more than 1.2 million electric and natural gas utility customers in 790 communities in eight Rocky Mountain and Midcontinent states. Black Hills Corp. will operate the acquired company under the name Black Hills Energy.

“This announcement delivers on our commitment to grow earnings and create long-term shareholder value,” said David R. Emery, chairman, president and chief executive officer of Black Hills Corp. “SourceGas is a great strategic fit, adding to our strong utility base and providing operational and financial benefits to all the customers and communities we serve. We are excited to significantly expand our presence in Colorado, Nebraska, and Wyoming, and look forward to serving customers and developing new relationships in Arkansas. The transaction continues our proven record of growth in the utility business through targeted acquisitions -- over the last decade, we have successfully integrated 19 electric and natural gas systems in support of this growth strategy.”

The purchase of SourceGas unites two companies with above industry average growth rates. The combination enhances Black Hills’ operating scale, which will help drive more efficient delivery of utility services, thereby benefitting customers. The acquisition provides additional capital investment opportunities in growing service territories and the ability to share best practices in support of organic growth initiatives. SourceGas enjoys attractive regulatory constructs in all states, allowing for timely recovery of capital expenditures and fair and reasonable allowed returns on equity.

In addition, the transaction increases Black Hills’ business, regulatory and geographic diversity to strengthen its “excellent” business risk profile and support continued solid investment grade credit ratings. It also provides increased cash flows and earnings to support further utility investments, fund future dividends and drive shareholder value.

The purchase is supported by a fully committed bridge facility from Credit Suisse. The company expects to permanently finance the acquisition with the aforementioned $720 million of assumed debt, $450 million to $550 million of new debt, $575 million to $675 million of equity and equity-linked securities, and the remainder with cash on hand and revolver draws.

During the integration planning process, staffing and facility decisions will be made to best optimize the continued safe and reliable delivery of natural gas to customers.

The acquisition is expected to be completed in the first half of 2016. The transaction is subject to customary closing conditions, regulatory approvals from the Arkansas Public Service Commission, Colorado Public Utilities Commission, Nebraska Public Service Commission and Wyoming Public Service Commission, and is also subject to the notification, clearance and reporting requirements under the Hart-Scott-Rodino Act.

Credit Suisse Securities (USA) LLC served as exclusive financial advisor and Faegre Baker Daniels served as legal advisor to Black Hills. J.P. Morgan served as exclusive financial advisor and Bracewell & Giuliani served as legal counsel to the sellers.

Tags: news

Showing 6 Comments (oldest to newest)

September 23, 2015
John Turk: Will Black Hills be adding employees to Source Gas in Denver? Will Black Hills be looking to do ROW (pipeline work)?
  • reply
September 24, 2015
Max@BlackHills: Thank you for the comment, John. It’s still too early for us to know what the combined company will look like, but you can stay tuned to www.blackhillscorp.com/sourcegas for the latest updates.
  • reply
May 03, 2016
Danny Foreman: Please e-mail the direction to pay my bills to BHE. Danny Foreman 498 Valley Ave., P.O. Box 223, Decatur, AR 72722.
  • reply
May 03, 2016
Kelsey@BlackHills: Hi Danny, if you were already a BHE customer, you can continue paying your bills as you always have. If you were a former SourceGas customer, visit this website: www.sourcegasisblackhills.com for more information about how your billing will change. Thanks!
  • reply
June 05, 2017
Jonathan Trotter : I am trying to apply for a position in the Ozark, AR site, and am having a hard time finding a way to do so, if there is any way for you to email me to let me know what I can do it would be much appreciated. jonathantrotter0@gmail.com
  • reply
June 05, 2017
Kelsey@BlackHills: Hi Jonathan, thank you for your interest in working with us. We post all of our open positions online at careers.blackhillscorp.com.
  • reply

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