Black Hills stock rises 5% in after-hours trading Tuesday after announcing definitive agreements to serve a planned Google data centre in Cheyenne, Wyoming.
The utility company will invest $1.8 billion in new natural gas generation between 2027 and 2029 to support the project. Black Hills will provide up to 590 megawatts of grid-connected energy service and manage 2.1 gigawatts of third-party contracted resources through a private microgrid under an agreement running through 2048.
Black Hills is planning to construct 564 MW of company-owned natural gas generation at its existing Cheyenne Prairie Generating Station. The remaining 26 MW will come from market energy purchases and retail utility service.
The project is expected to contribute about $150 million in net income in 2030 and generate about $2.4 billion in unlevered free cash flow through 2048, net of $1.8 billion in capital expenditures.
The agreement includes provisions ensuring no cost shifting to existing retail customers. Google will bear all costs of serving the data centre throughout the project’s life. It has provided Black Hills with $399 million in refundable advances to procure long-lead-time equipment, which the company expects to reimburse by June 30, 2027.
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When construction begins in 2027, the company expects to begin earning a return on its generation investment, while revenue from microgrid management fees is expected to start in late 2027. The company plans to finance the investment through a combination of project-generated cash flow, debt and other financing alternatives while maintaining investment-grade credit ratings. Energy service is planned to begin in late 2027 and will rise in 2030.
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