Directors authorize early amortization of up to $77.2 million

At their January board meeting, Basin Electric’s board of directors approved the early amortization of up to $77.2 million of Basin Electric’s loss on its investment in Dakota Gasification Company, a Basin Electric subsidiary. The action was possible due to strong margins realized by Basin Electric in 2021.

The expense deferral was initially made in 2018 following a write down of the non-fertilizer assets at Dakota Gas. “At the time, projections for depressed natural gas prices meant that the book value of Dakota Gas’ coal gasification assets were not recoverable. This was a determination done in accordance with required accounting guidance,” said Katrina Wald, Basin Electric vice president and controller. “Therefore the coal gasification assets were considered impaired and a loss of $298.8 million was recorded.”

The impairment loss resulted in Dakota Gas’ retained earnings being depleted and a loss on Basin Electric’s investment in Dakota Gas was recorded. “As Basin Electric has the ability to use regulatory accounting, the Basin Electric board approved deferral of a portion of the loss, or $113 million instead of letting the loss hit the Basin Electric books all in one year,” Wald said.

When the board approved the deferral, they authorized the amortization, or recording of the deferred loss over 20 years, with the option for early amortization. “In 2019 and 2020, and now again in 2021, the board approved an early amortization of a portion of the loss,” Wald said. “After the board action this month, the deferred loss will be amortized in its entirety.”