Directors approve Basin Electric and subsidiary financial forecasts

Basin Electric’s 10-year financial forecast for 2021-2030 was approved by directors at the September meeting.

According to Darla Jensen, Basin Electric manager of financial planning and forecasting, the forecast was delayed by a month due to the COVID-19 global pandemic.

“A number of key assumptions in the forecast had to be re-looked at in light of this pandemic. This includes the load forecast, the major outages that were planned for three of our units, and also the outlook pricing that was provided by external parties. Each of those providers, IHS Markit, S&P Global Platts, and CRU Group, reached out to Basin Electric and wanted an opportunity to refresh pricing due to the pandemic,” Jensen said.

Cost of electric service expenses will range from $1.8 billion to $2.5 billion per year, which represents a 3.61% average growth rate. “This increase can be attributed primarily to additional purchase power and wheeling for the growing load,” Jensen said. Annual operating revenues are projected to range from $1.9 billion to $2.6 billion per year.

“The Antelope Valley Station Unit 2 lease was extended for a period of 10 years, and Basin Electric will be supporting 100% of the cost and revenue associated with that unit,” Jensen said. “In the fall of 2021, we have Lonesome Creek Station Unit 6 coming into operation. Finally, we accelerated the depreciation of Leland Olds Station Units 1 and 2. That means we took the expenses associated with those units and compressed them into a shorter time period. Both units continue to operate throughout the entire period of the financial forecast.”

The forecast shows projected net margins averaging $88 million annually, with a total of $1.8 billion in excess margin over the period of the forecast. “Once Basin Electric has achieved $90 million in consolidated margin each year, any margin above that is considered excess. It gives us the opportunity to clean up our balance sheet: accelerate depreciation, accrue for decommissioning costs, and expense any deferred assets.”

The forecast includes spending of $1.4 billion for capital expenditures over the 10-year period.

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

The forecast shows net losses of about $63 million for each year of the forecast. “It’s all about pricing with Dakota Gas,” Jensen said. “The Ventura index, which is the index we sell natural gas on, is below $3/dekatherm through 2026. In addition, we are seeing the HSFO index, which is the index we sell tar oil on, at or below $60 for the entire forecast. Finally, we are seeing relatively flat urea, ammonia, and diesel exhaust fluid pricing.”

Revenues during the forecast average $452 million annually, which is approximately $60 million less than last year’s forecast. Through diversification efforts, about 70% of the plant’s revenue comes from products other than natural gas.

Operating expenses average $462 million annually, which is similar to previous years. Jensen said the primary drivers of operating expenses are coal, utilities, labor benefits, and natural gas purchases. “This makes up about 60-65% of our operating expenses,” she said.

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

According to Jensen, the forecast predicts that average coal prices will range from $17.80 to $25.53 per ton.

Projected lignite coal deliveries from the Freedom Mine range from 13.2 million to 13.6 million tons over the 10-year period. 

Capital commitments are estimated to be $336.7 million for Dakota Coal’s coal, lime, and limestone operations for the 10-year period.