Utility Black Hills Corp. Acquires SourceGas for $1.2 Billion

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Josh Funk

OMAHA, Neb. (AP) — Regional utility Black Hills Corp. is buying natural gas provider SourceGas, which serves 425,000 customers in Nebraska, Arkansas, Colorado and Wyoming, for roughly $1.2 billion.

Black Hills is buying control of SourceGas from investment funds Alinda Capital Partners and GE Energy Financial. As part of the deal, Black Hills is also assuming $720 million of debt and expecting to receive $150 million in tax benefits.

Black Hills Chairman, President and CEO David Emery told investors Monday that this deal will strengthen the Rapid City, SD-based utility and increase its profits.

“It will supplement our strong earnings growth, improve our financial strength and help us create significant value both for customers and shareholders,” Emery said.

Shares of Black Hills stock declined $1, or 2.1%, to trade at $45.84 on Monday afternoon.

Black Hills will serve more than 1.2 million customers after the addition of SourceGas, which is based in Golden, Colorado. The deal is expected to close sometime in the first half of 2016, but it must be approved by state and federal regulators.

SourceGas was created in 2007 after Kinder Morgan agreed to sell its retail natural gas utility division to GE Energy Financial and Alinda.

Black Hills approached the investment funds selling SourceGas several times in the past five years before finally agreeing on this deal.

Emery said SourceGas is a good strategic fit for his company because of the territory it serves and its growth prospects.

“I think we see some great opportunities obviously to combine the two companies and make them very efficient,” Emery said. “Just looking at the footprint, that’s pretty obvious.”

In addition to SourceGas’ retail customers, it also operates a 512-mile interstate natural gas transmission pipeline in Colorado.

Black Hills already serves nearly 800,000 electricity and natural gas customers in Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming.