Directors approve Basin Electric and subsidiary financial forecasts for 2022-2031

Basin Electric’s 10-year financial forecast for 2022-2031 was approved by directors at the August meeting.

Darla Jensen, Basin Electric manager of financial reporting and planning, said the forecast contains a number of key assumptions. “This forecast assumes a primary reformer is operational at the Great Plains Synfuels Plant in 2026, which would change the feedstock from coal to gas or ethane. It also accelerates the depreciation of Leland Olds Station Unit 1 to 2025 and Unit 2 to 2030, and assumes a five-year lease extension on the Antelope Valley Station Unit 2 to 2035. The forecast also moves the major outage cycle at our coal-based plants from an outage every three years to primarily every four years, with a boiler inspection conducted every three years,” Jensen said.

Cost of electric service expenses will range from $1.9 billion to $2.1 billion per year; annual operating revenues are projected to range from $1.9 billion to $2.1 billion per year. “The increase in cost of service and revenue can both be attributed to member growth because rates are held flat through the entire forecast,” Jensen said. “The member growth is being met primarily through purchased power. Each day, Basin Electric balances power available in the market through market purchases, long-term purchased power agreements and owned generation to serve its load at the lowest cost. With the continued deployment of renewables, in the marketplace we’ve had an opportunity to procure low-cost power. Our all-of-the-above energy strategy means we have a healthy generation mix which provides a physical backstop in the event of rising prices in the marketplace.”

“In 2020 with the COVID-19 global pandemic, we had reduced industrial, residential, and commercial loads, as well as mild weather. So, last year we had a decrease in member loads,” Jensen said. “As we moved into 2021, we do see recovery with the exception of the industrial loads. Through the end of the forecast, we still have growth that is greater than national averages but not as great as we’ve recently enjoyed.”

On a consolidated basis, the forecast includes spending of $1.7 billion for capital expenditures over the 10-year period. “For Basin Electric, $1.3 billion is estimated, with more than half of that going into existing transmission and generation facilities,” Jensen said. “The balance of that spend can attributed to additional transmission that is expected, with no additional generation resources included in this forecast. The remainder of the capital expenditures would be spend at Dakota Coal and Dakota Gas with the installation of a primary reformer.”

The targeted consolidated margin for Basin Electric and subsidiaries is $70-75 million. “We set that target so we can maintain our ‘A’ credit rating, but also so that we can execute strategic actions such as building the revenue deferral, accelerating depreciation on generation assets, and accelerating other expenses that have been deferred on our balance sheet,” she said. “Basin Electric is set to achieve our target for each year of the forecast.”

Dakota Gasification Company

A 10-year financial forecast was also approved by Dakota Gas directors.

With the revenue and expenses assumed in the financial forecast, Dakota Gas experiences losses for the first five years, and net income for the last five years of the forecast, according to Kimberly Miller, Basin Electric senior business analyst.

“The forecast contemplates the addition of a primary reformer in 2026. This would be a transition from gasifying coal to using either natural gas or ethane as a feedstock,” she said. “Through April 2026, revenues in the financial forecast include about 25% generated from natural gas, 43% coming from urea, diesel exhaust fluid, and anhydrous ammonia, and the remaining 32% from other byproducts. Starting in May 2026, our fertilizer revenue streams make up nearly 100% of our total revenues forecasted.”

Total expenses average $490 million annually through 2026. Miller said the primary drivers of operating expenses in the first half of the forecast are coal, utilities, labor benefits, and natural gas purchases. “This makes up about 60% of our total operating expenses through April 2026,” she said. “Starting in May 2026, about one-third of our expenses come from depreciation and interest expense.” The average expenses after 2026 are $219 million annually.

Miller said total capital expenditures through the financial forecast are about $288 million, of which $204 million is related to the primary reformer addition.

Dakota Coal Company

The 10-year financial forecast for Dakota Coal was approved by its directors.

According to Melissa Hatzenbuhler, Basin Electric business analyst III, the forecast predicts that average coal prices will range from $17.81 to $38.62 per ton.

Over the 10-year period, projected lignite coal deliveries from the Freedom Mine range from 13.1 million tons in the first half of the forecast to 4.6 million tons in the second half, over the 10-year period. 

Capital commitments are estimated to be $128.8 million for Dakota Coal’s coal, lime, and limestone operations for the 10-year period.

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