1130464--3/2/2009--BLACK_HILLS_CORP

related topics

{gas, price, oil}

{cost, contract, operation}

{cost, regulation, environmental}

{condition, economic, financial}

{operation, natural, condition}

{capital, credit, financial}

{tax, income, asset}

{acquisition, growth, future}

{loss, insurance, financial}

{debt, indebtedness, cash}

{cost, operation, labor}

{control, financial, internal}

The recent global financial crisis has made the credit markets less accessible and created a shortage of available credit. We may, therefore, be unable to obtain the financing needed to refinance debt, fund planned capital expenditures or otherwise execute our operating strategy. The recent global financial crisis has also increased our counterparty credit risk. National and regional economic conditions may cause increased late payments and uncollectible accounts, which would reduce earnings and cash flows. We may not be able to effectively integrate the utility operations acquired from Aquila into our existing businesses and operations, or achieve the anticipated results of the Aquila Transaction. Our credit ratings could be lowered below investment grade in the future. If this were to occur, it could impact our access to capital, our cost of capital and our other operating costs. Regulatory commissions may refuse to approve some or all of the utility rate increases we have requested or may request in the future, or may determine that amounts passed through to customers were not prudently incurred and are, therefore, not recoverable. We could incur additional and substantial write-downs of the carrying value of our natural gas and oil properties, which would adversely impact our earnings. We have deferred a substantial amount of gain associated with the assets sold in the IPP Transaction. If the Internal Revenue Service successfully challenges this deferral, our results of operations, financial position or liquidity could be adversely affected Estimates of the quantity and value of our proved oil and gas reserves may change materially due to numerous uncertainties inherent in estimating oil and natural gas reserves. Estimates of the quality and quantity of our coal reserves may change materially due to numerous uncertainties inherent in three dimensional structural modeling. Our current or future development, expansion and acquisition activities may not be successful, which could impair our ability to execute our growth strategy. We can provide no assurance that results from any acquisition will conform to our expectations. There may be additional risks associated with the operation of any newly acquired assets. Construction, expansion, refurbishment and operation of power generating and transmission and resource extraction facilities involve significant risks which could reduce revenues or increase expenses. Our operating results can be adversely affected by milder weather. Because prices for our products and services and operating costs for our business are volatile, our revenues and expenses may fluctuate. Our hedging activities that are designed to protect against commodity price and financial market risks may cause fluctuations in reported financial results. Our use of derivative financial instruments could result in material financial losses. Our Energy Marketing and Utility operations rely on storage and transportation assets owned by third parties to satisfy their obligations. Our business is subject to substantial governmental regulation and permitting requirements as well as environmental liabilities, including those we assumed in connection with certain acquisitions. We may be adversely affected if we fail to achieve or maintain compliance with existing or future regulations or requirements, or by the potentially high cost of complying with such requirements or addressing environmental liabilities. Federal and state laws concerning climate change and air emissions, including emission reduction mandates and renewable energy portfolio standards, may materially increase our generation and production costs and could render some of our generating units uneconomical to operate and maintain. Governmental authorities may assess penalties on us if it is determined that we have not complied with environmental laws and regulations. Our energy production, transmission and distribution activities involve numerous risks that may result in accidents and other operating risks and costs. Increased risks of regulatory penalties could negatively impact our business. Ongoing changes in the United States electric utility industry, including state and federal regulatory changes, a potential increase in the number or geographic scale of our competitors or the imposition of price limitations to address market volatility, could adversely affect our profitability. We rely on cash distributions from our subsidiaries to make and maintain dividends and debt payments. Our subsidiaries may not be able or permitted to make dividend payments or loan funds to us. Increasing costs associated with our defined benefit retirement plans may adversely affect our results of operations, financial position or liquidity. Increasing costs associated with health care plans may adversely affect our results of operations, financial position or liquidity. An effective system of internal control may not be maintained, leading to material weaknesses in internal control over financial reporting. We have recorded a substantial amount of goodwill associated with the Aquila Transaction. Any significant impairment of our goodwill would cause a decrease in our assets and a reduction in our net income and shareholders equity.

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1130464--3/2/2009--BLACK_HILLS_CORP_/SD/