Electric utility Black Hills Corporation (BKH) increased its 2014 earnings estimates higher, thanks to the recent financial activities of the company. The company increased its 2014 earnings per share guidance to a range of $2.50 to $2.70 from the prior $2.40 to $2.60.
In Nov 2013, the company issued $525 million senior notes due on Nov 30, 2023, bearing an interest rate of 4.25%. The net proceeds from the series will allow Black Hills Corp. to repay $250 million 9% notes due on May 15, 2014. The cash redemption of the notes is estimated to be $258 million.
In addition, the company paid back Black Hills Wyoming, LLC project debt and settled related interest rate swaps for $96 million, settled $250 million notional of de-designated interest rate swaps for approximately $64 million and also lowered its other corporate borrowing through the remaining proceeds.
One of the primary objectives of every business firm is to effectively lower its cost of capital and thus improve profitability. Black Hills Corp. with the issue of the new series has thus expanded its debt repayment period. The utility industry is capital intensive and the funds raised will allow the company to invest in infrastructure related programs for a longer period of time at a cheaper cost.
Black Hills Corp. maintained its 2013 earnings guidance in the range of $2.28 to $2.40 per share. The raised 2014 earnings guidance reflects an increase of 9.6% to 12.5% from the 2013 projections.
Other players in the utility industry, which look attractive at current levels, include Alliant Energy Corp. (LNT), Brookfield Infrastructure Partners L.P. (BIP) and Edison International (EIX). All these stocks carry the same Zacks Rank as Black Hills Corp.
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