MARK THIES - BLACK HILLS CORPORATION (BKH)
CEO Interview - published 12/03/2001

DOCUMENT # NAP616

MARK T. THIES is Senior Vice President and Chief Financial Officer of
Black Hills Corporation. He has nearly 15 years of finance and
accounting experience in the regulated and non-regulated energy
industry. Mr. Thies has raised over $2 billion in public equity and
public and private debt transactions and credit facilities and has
several industry and financial community contacts. He actively
participated in the growth at Black Hills Corporation, doubling assets
since 1997. Prior to Black Hills, he actively participated in the non-
energy growth at a large Midwestern utility. The $100 million equity
contribution resulted in over $500 million in value to the parent in
seven years. Mr. Thies began his career in the energy and communications
business in public accounting.

Sector: energy

TWST: Would you give us a general introduction to Black Hills
Corporation and discuss the key executives on your team?

Mr. Thies: I appreciate the opportunity to do this. Black Hills
Corporation is a diversified energy company built on two areas of
concentration. We have a strong local presence, with two major
businesses ' electric utility and broadband communications. Our electric
utility, Black Hills Power, has been in business for over 60 years with
predecessor companies dating back into the 1800s. It's an electric
utility serving 59,000 customers in Western South Dakota and Eastern
Wyoming. We continue to position ourselves as a growth company or a
growth utility. We have a very stable and diversified retail base with
industrial, commercial and residential customers that's growing,
typically for an electric utility, 1%-3% in our service territory. We
also benefit from the ability to sell power in wholesale markets, with
unique transmission access enabling us to get to both the Eastern and
Western electric grids. Generation resources total 458 megawatts and our
peak load is 392 with an average load of about 300. With the ability to
move generation off-system to higher markets, we can capitalize on the
benefits of our generation. We are a regulated company, and have a rate
freeze that's in place until January 1, 2005. Building off of the brand
equity of a strong local utility, in 1998 we began deploying a broadband
communications company, Black Hills FiberCom. it is a fully-integrated
broadband company providing local and long distance telephony services,
cable TV and high-speed Internet service, all in a bundled service
approach to both residential and business customers in a region that
comprises about 80% of our electric company's service territory. We have
had very strong customer penetration with our products due to a strong
local presence, quality customer service, and an enhanced state-of-the-
art, fiber-optic infrastructure. We have done well in its expansion and
expect to become profitable in 2004.  To recap, our local presence is
electric utility and broadband. On a national basis, we are advancing
our independent energy business unit, which is focused primarily in the
Western United States. There are three business segments in this
business unit. The fuel production segment includes an oil and gas
production company and a coal mine in Eastern Wyoming. The second
segment is independent power production, which has grown substantially
over the past 18 months. We integrate those business segments and
optimize these assets with the third business segment, energy marketing.
We market natural gas, coal and oil, and that optimizes our asset
companies. Our strategy is to create multiple revenue streams when we do
our deals. To focus first on the fuel-production companies, our oil and
gas company has grown through a recent acquisition to over 50 BCFE of
natural gas, and production has increased strongly this year. We expect
to focus on increasing natural gas, primarily in the Rockies. Our coal
mine provides fuel to our regulated coal rich power plants as well as to
another large plant at the mine site. We enjoy a transportation
advantage by having generation right at our mine site. We also are
constructing a nonregulated plant at that mine site ' a 90-megawatt
plant for our independent power segment. On the independent power side,
we've deployed substantial capital and thereby increased our generation
capacity. Our goal is 1,000 megawatts by 2003, and we currently have 625
megawatts in service. Another 400 megawatts are under construction that
will come online or are expected to come online in the next year and a
half, allowing us to attain that 1,000-megawatt goal. We have a
continued focus on new power projects, and in our projects we focus
primarily on long-term contracts. We don't have a substantial merchant
risk with respect to our independent power generation. We have 10- to
15-year contracts primarily, and many of those projects have tolling
arrangements where the purchaser of the electricity is responsible for
providing the fuel to the plants. We expect to grow both by deploying
capital in our independent power assets and by expanding our oil and gas
drilling and acquisition program, primarily focusing on natural gas
reserves. Optimizing our asset companies and improving our returns, we
also market fuel ' primarily, natural gas. Our marketing program began
in 1996 and has grown tremendously over the last five years and provided
us with good earnings. We take a risk-managed approach: we have
primarily a back-to-back trading strategy where we don't take
significant open positions. We simply work the supply basins in Canada
and the Rockies and move that to the demand bases of the Northwest,
California, and West Coast markets. Besides substantial earnings
potential the marketing function also provides fuel supply to the
companies that have the fuel contracts for our generation plants as well
as our own utility's gas supply needs for the gas turbines that the
utility has. We also market our own E&P production when possible
'thereby benefiting from multiple revenue streams. Our independent
energy unit target are workers primarily in the West. We expect, as a
corporation, to have baseline annual earnings growth of 10%-15% off a
year-2000 base earnings per share of $2.00. Over the past year, we have
tried to estimate the effect high prices had on earnings. We believe we
can grow, through efficient operations of our power plants and continued
deployment of capital and independent power as well as in the
acquisition and drilling for fuel reserves. To introduce myself, I
started in 1997 with Black Hills as a Controller. I was named Senior VP
and CFO in March 2000, so it's been a little over 18 months. Since 1997,
we've gone through tremendous change and growth. For example, in 1997
our earnings were nearly 70% electric utility and 30% other, and in
2001, we expect of our energy earnings that our independent energy will
be about 55% to 45% electric utility. I've been in the energy industry
with utilities or subsidiaries of utilities and in public accounting
since 1986 ' over 15 years. Our Chairman, Dan Landguth, has been with
Black Hills for over 30 years. He is an Engineer by training. He has
been Chairman since 1991, and has led us through our growth phases and
has provided the vision of growing our electric utility, the other
energy businesses as well as capitalizing on the brand equity of the
utility to do the communications overbuild.  Other key officers and
growth leaders include Everett Hoyt, our President and Chief Operating
Officer, who has been with Black Hills for over 10 years. Prior to that,
he was the General Counsel for Northwestern Corporation. Everett's focus
has been the electric utility primarily, and in January 2000 became the
President and Chief Operating Officer of the holding company, Black
Hills Corporation. He is very active in the growth of the corporation as
a whole. Heading our independent energy group is Tom Olmacher. Tom, who
is an engineer by training, has over 25 years of experience with Black
Hills in many capacities in his successful career. He ran the generation
business for Black Hills and has been very active in the expansion into
independent power on the nonregulated side and heads up Black Hills
Energy Ventures, our independent energy group. He also has been very
active with our gas marketing and oil-and-gas and coalmine operations.
Tom is key to our growth. Ron Schaible heads up our telecommunications
effort. Ron has over 25 years in deployment of capital and building
communications networks. He came to us in 1998 and has led the Black
Hills FiberCom project that bundles Internet, cable TV and telephony
services. Under Ron's leadership we've been able to continue to attract
customers and grow that business. Shawn McLaughlin heads up our gas
marketing business based out of Denver. Prior to that he worked at KN
Energy and as a bond trader on the Chicago Board of Trade. He's grown
that company into a very key business for us. On the independent power
side, John Salyer leads that effort. John came with an acquisition in
2000. John's got over 15 years' experience in financing and developing
power plants. Dave Emery leads our fuel resources segment. He's been
with Black Hills since the mid-1980s and has been a solid growth
contributor in his many roles. Expanding our fuel reserves ' especially
gas ' is an important element of our business strategy going forward.

TWST: Is cash or capital a limitation, as you look at the various unit
strategies and growth opportunities?

Mr. Thies: We believe we have sufficient capital and access to capital
and I think we've demonstrated that. We've deployed capital in power
plants and again, our strategy is long-term contracts with creditworthy
entities. That allows us to finance our non-regulated electric
generation on a non recourse basis. We've had several project financings
in this manner. We raised equity in the capital markets in April 2001,
and issued approximately 3.4 million shares at a stock price of $52. It
was a very strong offering and we raised approximately $165 million net
of equity, demonstrating our access to that market. On the corporate
debt side, we recently revised and increased our revolving credit
facility from just under $300 million to over $400 million. So we have a
very strong corporate revolving credit facility, which will allow us to
accommodate temporary financing of projects until we can get them
project-level financed. Assuming normal market conditions, we believe we
have very 'financeable' projects and access to capital that can fund our
growth strategy.

TWST: When you look at each of these units in its competitive space, are
there any critical mass issues or merger or acquisition issues to
address with respect to their own growth opportunities?

Mr. Thies: With respect to the utility ' no, we don't believe there are
any issues. It's a regulated entity, and we don't believe there are any
issues there. With respect to the communications business, it is a
competitive business. The incumbents are Qwest Communications ' which is
the former US West, and the former TCI Cable properties. We have not
seen any capital enhancement from Qwest, but we have seen some capital
enhancement from the TCI properties. However, we've had very strong
customer demand, we think our local presence and leveraging our brand
equity, customer service, and with the better product, we've been able
to demonstrate our ability to get customers. From a critical mass
perspective, our local companies are not a huge service territory by any
means. But that means there aren't going to be any other over builders
coming in because of the market size and we've believe, we've been able
to demonstrate in getting continued access to customers. On the
independent energy side, there are several points. With regard to our
coal operation, our major customers are located on-site, and we continue
to optimize that through onsite generation. We have moved some coal over
trains incrementally, but that's not a big competitive risk. The
drilling for oil and gas properties is very competitive. We've been in
that business since the mid-1980s and we've been able to compete
effectively. There is competition, but we've been successful in getting
drilling properties as well as acquisitions. So we believe we'll be able
to compete very favorably in that market. On the independent power side,
we tend to look for negotiated deals with long-term contracts. We enjoy
a reputation as a good service provider. We are not competing with the
Calpines or Mirants or other big players who are putting in huge plants
on a merchant basis. Our strategy is focused on the West and building on
relationships in load centers with economic growth potential. Our recent
focus has been Colorado and Las Vegas, which are two load growth centers
in the Western US and we've been successful in getting projects
developed in those areas. Our sites have expansion capability, so we
believe we have an ability to expand on our existing sites to continue
to grow our business in the independent power side. With respect to
marketing, that too is a very competitive business, but again, we've
demonstrated the ability to succeed. We compete everyday with all the
players in that marketing business, primarily in the Rockies, in the
Northwest, and the West and have done well.

TWST: In dealing with the analyst community, what is it that you see as
their misperceptions of BKH or what aspects of your strategy might they
not be fully appreciative of?

Mr. Thies: As our growth strategy has produced more activity and more
projects, the analyst and investment community have become more familiar
with Black Hills. We had a relatively thinly traded stock a year and a
half ago. As we've continued to grow and demonstrate our ability to
grow, that has created much more interest. Also, more activity in the
capital markets has made more people aware of Black Hills. Do I think
they understand the strategy? I really think that we have done a very
good job in explaining the strategy as to how we're going to grow. Where
we probably had some people or different types of investors look at us
in early 2001, energy markets had substantial volatility and huge price
changes ' mainly in the West and Northwest. When prices were favorable,
we were able to take advantage, but we are not market makers. We have an
ability to deliver electric power into that market and we're able to
capture some value there, as well as able to move natural gas from the
Rockies and Canada into the higher priced demand markets in the
Northwest and California. People looked at and may have misperceived
that as a risk. We  specifically highlighted in our earnings releases or
public materials as to what portions of earnings represented the kind of
the market upside due to high prices. As we return to a more stable or a
more normal price environment, our earnings have returned to normal and
I think people have understood that. So the challenge in getting the
value for our company has been to recognize the diversity of our
earnings streams and getting everybody to understand our integrated
approach.

TWST: What issues are you focusing on as you manage the debt of the
company in this environment ' economic downturn, low interest rates, and
some volatility?

Mr. Thies: From a debt perspective, most of our new debt has been
project-related and we've done that primarily with nonrecourse project
financing because we have strong long-term contracts on those plans.
From a corporate perspective, we have a capacity with our revolving
credit facility to continue our growth until we can establish payment
financing for those projects. We have been able to take advantage, to
some extent, of the current lower interest rate environment. The major
issues affecting our business going forward are going to be matters such
as an economic downturn ' what's the duration and how deep does that
economic downturn go? We have some political instability with the war on
terrorism and what's going on in Afghanistan and Middle East. How
quickly does that get settled? Weather is always an issue. The summer in
the West was very mild. So there was less demand for electrical power,
which allowed natural gas and storage to increase. So if you have a cold
winter and a hot summer, then that could have an impact on the commodity
prices.

TWST: What is on the agenda when you look at the next 12-24 months? What
specific accomplishments would make that time frame a success at BKH?

Mr. Thies: We would expect to continue the construction of our existing
plants and bring the 400 megawatts that are currently under construction
online and on time and at or under budget. We would expect to also
continue to grow and get new projects ' we have a strong backlog of
projects in electric generation and nonregulated independent power. We
would hope to continue to get projects that fit our investment criteria
in growth and deployment of capital. Also, to continue to grow our oil
and gas reserves, primarily gas and primarily in the Rockies with an
integrated approach to fuel and fuel production and independent power to
grow both of those businesses. We would expect to continue to add
communications customers and then through our marketing companies,
continue to optimize the assets of both the fuel production, but also in
delivering natural gas to the wholesale markets. It's really to continue
executing our strategy that we started, really, in earnest in the last
18 months. We've significantly grown and continue to grow in those
businesses.

TWST: What would be the key summary points that you would present today
to convince an investor to buy in?

Mr. Thies: Be a low-cost producer ' whether it's natural gas, whether
it's coal, whether it's electric generation ' be a low-cost producer. We
believe that low-cost producers, in the long run, will be successful.
Have balance and diversity among our energy businesses: we have, again,
the diversified approach of the fuel production on the coal, oil and
gas, electric power generation ' both regulated and non-regulated ' and
the optimization of the assets through the marketing companies. taking
advantage of marketing efficiencies. Having a risk-managed approach: we
have a solid growth record and continue to have the risk-managed
approach and long-term power contracts for our generation. We're not a
significant merchant player. we continue to look for opportunities to
develop additional power projects with long-term power contracts. Then,
combined with the stability in our foundation, a profitable, reliable
electric utility that provides strong cash flows, we are able to grow
our businesses successfully.

TWST: Thank you. (DWA)

MARK T. THIES
 Senior Vice President & CFO
 Black Hills Corporation
 625 9th Street
 Rapid City, SD 57701
 (605) 721-1700
 (605) 721-2599 - FAX
 www.blackhills.com
 e-mai: bhc@bh-corp.com

Each Executive who is the featured subject of a TWST Interview is
offered the opportunity to include an Investors Brief or other highlight
material to be provided and sponsored by and for the company. This
Interview with Mark T. Thies, Senior Vice President and CFO, Black Hills
Corporation, is accompanied by an Investors Brief containing corporate
information.

Copyright 2001 The Wall Street Transcript Corporation
All Rights Reserved


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