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Black Hills (BKH) Unit to Build Pipelines, Seeks WPSC's Nod

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Black Hills Corp.‘s (BKH - Free Report) natural gas utility subsidiary announced that it has submitted a 35-mile natural gas pipeline construction proposal to the Wyoming Public Service Commission (WPSC) in the month of May 2018.

The extended Natural Bridge Pipeline will supply additional volumes of natural gas to provide efficient services to customers in Wyoming. The new 12-inch steel pipeline will be connected with the 750-mile transmission pipeline system which serves the Riverton and Casper areas. Subject to WPSC’s approval, $54 million will be spent for the construction purpose. The pipelines are expected to commence operation from late 2019.

Black Hills supplies natural gas and electric to nearly 1.2 million customers in eight states. These pipelines will increase the reliability of services for nearly 57,000 customers of Casper Division in central Wyoming. Along with the existing facilities, the pipeline will be able to cater to the rising demand.

The company has regulated as well as non-regulated business and files with utility commissions to recoup the regulated investments made to strengthen existing operations. If the commission approves the construction of the pipelines, the company will make the investments and is likely to file another rate case to recover the expenditures.

Incidentally, the company has already filed rate review requests for Arkansas, Colorado and Wyoming in late 2017. The company received approval to hike rates in Colorado and is waiting for the results of the two other cases.

Tax Reforms Benefits

Black Hills benefited from the tax reforms, effective Jan 1, 2018. Like other utility operators, the company wanted to pass the tax reform benefits to its customers through bill reduction. Black Hills received the required approval from the utility commissions to pass on the tax benefits in four states.

Recently, Duke Energy Corp (DUK - Free Report) announced to pass on $142-million annual tax savings to the electric bills of its Indiana-based customers.

Our View

Regulated utility companies need to invest consistently to upgrade and modernize existing infrastructures. Providing better service to the customers is very essential for these companies. Investment improves reliability of existing infrastructure and helps meet the rising demand.

Black Hills also invests to provide uninterrupted utility services. Spending for expansion and maintenance of existing assets are common in utility sector. The company plans to invest nearly $2.3 billion over the next five years. Recently, FirstEnergy Corp’s (FE - Free Report) subsidiaries completed the inspection of transmission lines and are likely to invest $1-$1.2 billion annually through 2021 for maintenance purpose. NiSource (NI - Free Report) intends to invest in the range of $1.6-$1.8 billion annually in its utility infrastructure programs through 2020.

Zacks Rank & Price Performance

Black Hills carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

In the last six months, shares of Black Hills have returned 5.7% against the industry’s decline of 1.0%.

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