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Black Hills declines acquisition attempt for Colorado utility

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Black Hills declines acquisition attempt for Colorado utility

Black Hills Corp. CEO David Emery has sent a letter to the CEOs of two cooperatives, reiterating that the company is not interested in selling its Colorado electric utility, according to a March 14 news release.

Emery wrote the letter in response to an earlier correspondence sent by San Isabel Electric Association Inc. CEO Reginal Rudolf and Southeast Colorado Power Association CEO Jack Johnson which expressed interest in acquiring Black Hills Colorado Electric Utility Co. The CEOs of the cooperatives also had limited discussions with Jeff Berzina, Black Hills' vice president of strategic planning and corporate development, about the possibility of an acquisition.

In his letter, Emery stated that "a divestiture of utility assets is inconsistent with our corporate strategy."

Among the key reasons for rejecting the proposed deal, Emery asserted it would have a "negative impact" on customer rates in Southern Colorado, noting San Isabel's large commercial customer rates are higher than Black Hills. He also described Black Hills' strong positioning to meet "Colorado's aspirational climate goals."

Additionally, Emery cited the "relatively low" $1.1 billion valuation assigned to Black Hills' assets in the proposal and the low likelihood of securing deal approval from Colorado regulators.

"[T]he Colorado Public Utilities Commission is likely to react negatively to a transaction involving any sale to an electric cooperative, which would ultimately remove the utility and its customers from the Commission's ratemaking authority," Emery said in the letter.

"Having contemplated the proposal outlined in your letter, we have no interest in selling our utility. With that said, we do concur with your negative sentiments regarding the potential for municipalization of the Pueblo utility assets, but disagree that the rural utility cooperative model would benefit customers," he concluded.