BlackHills Corp and NorthWestern Merge in $14.5 Billion Deal

Two US-based power companies – Black Hills Corp. and NorthWestern Energy Group – on Tuesday said they have approved a definitive agreement to combine in an all-stock, tax-free merger that will create a premier regional regulated electric and natural gas utility company with a pro forma market capitalisation of approximately $7.8 billion and a combined enterprise value of $15.4 billion.

The transaction is expected to close in 12 to 15 months, subject to customary closing conditions, clearance under the Hart-Scott Rodino Act, approval from each company’s shareholders, and regulatory approvals, including approval from commissions in the three states in which both companies operate (Montana, Nebraska, South Dakota) and in Arkansas if required, as well as the Federal Energy Regulatory Commission.

Black Hills Corp. President and CEO, Linn Evans said that the merger of two companies will create significant long-term value for customers, employees, shareholders, and the communities they served.

He said that their future success will be driven equally by the people, assets, and capabilities of both organisations. The new entity will have greater scale and financial strength to consistently deliver for customers across our service territories and invest at the pace and scale that today’s energy transformation demands.

NorthWestern Energy President and CEO Brian Bird said that the merger with Black Hills will create a premier regional regulated utility company with a larger, more resilient platform consistent with mid-cap peers.

Together, they will be better positioned to meet rising demand, accelerate investment in energy and grid infrastructure, and support customers and communities through a rapidly evolving energy landscape.

“The two companies are best-in-class operators and we are confident that our closely aligned cultures and skilled workforces will enable us to successfully bring the companies together. We will remain a trusted energy partner to our customers and look forward to building a brighter future for the people, businesses, and communities we are privileged to serve,” Bird said.

Rationale Behind Merger

Pure-play, regulated, vertically integrated utility with enhanced scale and diverse customer and fuel mix. The combined company will serve approximately 2.1 million customers across eight contiguous states – Arkansas, Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota, and Wyoming.

Its electric utility will serve approximately 700,000 customers and operate approximately 38,000 miles of electric lines and approximately 2.9 GWs of owned generation capacity fuelled by a mix of thermal, hydro, and wind. Its natural gas utility will serve approximately 1.4 million customers and operate approximately 59,000 miles of natural gas lines.

The combination will double the size of each company’s rate base to a total of approximately $11.4 billion, with approximately $7 billion and $4.4 billion for electric and natural gas, respectively. Combined, the companies’ current investment plans from 2025 to 2029 exceed $7 billion and will be focused on building new electric and natural gas critical infrastructure to meet rising energy demand and advancing energy resilience in the regions where the combined company operates, while ensuring long-term competitive rates for customers.

This level of investment is expected to increase following the combination as the combined company leverages its enhanced resources to make strategic investments that foster economic development in its expansive territories, including addressing the growing demand from data centers.

The combined company supports a long-term target EPS growth rate of 5% to 7%, greater than both companies on a standalone basis. The combination is expected to be accretive to each company’s EPS in the first year following the close of the transaction. It is expected to have substantial cash flows to support a customer-focused capital investment program and an ongoing strong investment-grade credit quality.