블랙힐스(BKH) 2026년 3분기 실적 콘퍼런스콜: 구글 프로젝트가 대규모 성장 잠재력 견인

핵심 요약

• 블랙힐스(Black Hills Corporation)는 합병 관련 비용 주당 0.03달러를 포함해 2026년 3분기 GAAP 기준 EPS 0.54달러를 기록했다고 발표했다. 조정 EPS는 2025년 3분기 0.45달러에서 0.57달러로 상승했다.
• 경영진에 따르면 회사는 2026년 조정 EPS 가이던스로 4.25~4.45달러를 재확인했으며, 중간값 기준 2025년 대비 6% 성장을 나타낸다.
• 구글이 와이오밍주에 계획 중인 데이터센터에 전력을 공급하기 위한 계약에는 18억 달러 규모의 자체 발전 설비 투자와 약 2.1GW 규모의 제3자 자원 관리가 포함된다. 경영진은 이 프로젝트가 금융 비용을 차감한 후 2030년에 약 1억 5,000만 달러의 순이익을 기여할 것으로 예상한다.
• 블랙힐스는 18억 달러의 발전 설비 투자를 차감한 후, 구글 프로젝트가 2048년까지 약 24억 달러의 무부채 잉여현금흐름(unlevered free cash flow)을 창출할 것으로 예상하고 있다.
• 회사는 현재 계획에 약 600MW의 데이터센터 부하를 반영하고 있으며, 추가로 600MW에 대해 적극적인 협상을 진행 중이고 최소 2.5GW 규모의 초기 단계 또는 탐색적 기회를 확보하고 있다.
• 노스웨스턴 에너지(NorthWestern Energy)와의 합병 추진안은 필요한 7개 승인 중 6개를 획득했다. 몬태나주 승인만이 최종 관문으로 남아 있으며, 서면 결정은 2026년 11월 12일까지 나올 예정이다.

주요 재무 데이터

신규 요금 적용, 특약 요금 회수(rider recovery) 및 우호적인 분기 날씨에 따른 마진 개선이 운영·유지보수, 금융 및 감가상각 비용의 증가를 상쇄하고도 남았다. 연초 대비 누적 기준으로는 요금 회수와 고객 증가가 실적을 뒷받침한 반면, 금융 비용, 감가상각비 및 비우호적인 날씨는 부담 요인으로 작용했다.

사업 및 운영 실적

구글이 와이오밍주 남부에 계획 중인 데이터센터는 2027년 말 전력 공급 서비스를 시작해 2030년 말 완전 가동 단계에 도달할 것으로 예상된다. 블랙힐스는 비규제 계열사를 통해 샤이엔 프레리 발전소(Cheyenne Prairie Generating Station)에 564MW 규모의 천연가스 발전 설비를 건설해 소유할 계획이다. 회사는 2027년에 착공하여 2028년과 2029년에 걸쳐 해당 자산을 단계적으로 가동할 수 있을 것으로 보고 있다.

전체적인 공급 구조에는 장기 전력구매계약(PPA)에 따른 2.1GW 규모의 제3자 자원과 최대 590MW의 그리드 서비스가 포함된다. 명시된 총 2.7GW의 자원 규모에는 예비율이 포함되어 있으며, 계약된 최대 부하 및 부하 증가 일정은 기밀로 유지된다.

블랙힐스는 건설 기간 중인 2027년 중반부터 발전 설비 투자에 대한 현금 수익을 회수하기 시작할 것으로 예상한다. 마이크로그리드 관리 수수료 역시 2027년 말부터 발생하여 계약상 정해진 일정에 따라 2030년까지 증가할 것으로 전망된다. 계약된 수수료는 2048년까지 계속 발생한다.

회사는 또한 2029년까지 약 7억 달러 규모의 송전망 확충을 계획하고 있다. 최근 신청된 안건에는 약 125마일에 걸쳐 2개의 신규 230kV 송전선을 포괄하는 6억 600만 달러 규모의 에올루스 송전 프로젝트(Aeolus Transmission Project)와 8,000만 달러 규모의 사우스 샤이엔 프로젝트가 포함되어 있다.

구글 외에도 마이크로소프트와 메타를 비롯한 고객의 약 600MW 부하가 이미 2030년까지의 재무 계획에 반영되어 있다. 메타의 AI 데이터센터는 2027년 초부터 전력 공급 서비스를 받기 시작할 것으로 예상된다. 블랙힐스는 추가 600MW 규모의 사업 기회를 협상 중이며, 최소 2.5GW 규모의 추가 초기 단계 수요를 검토하고 있다.

99MW 규모의 랭 II(Lange II) 발전 프로젝트는 예정대로 2026년 4분기에 상업 가동에 들어갈 예정이다. 해당 설비는 사우스다코타주 서부와 와이오밍주 북동부 지역 고객에게 전력을 공급하게 된다.

해당 분기 규제 관련 주요 결정 사항은 다음과 같다:

• 아칸소 가스(Arkansas Gas): 자기자본이익률(ROE) 9.8% 기준 연간 1,790만 달러의 신규 매출 확보.
• 사우스다코타 전력(South Dakota Electric): 가중평균자본비용(WACC) 7.58% 기준 및 4년간 기본 요금 동결 조항을 조건으로 연간 2,740만 달러의 신규 매출 확보.
• 와이오밍 전력 사업부: 자기자본이익률(ROE) 9.6% 및 자기자본 비율 53% 기준 연간 400만 달러의 신규 매출 확보.

경영진 가이던스

블랙힐스는 2026년 조정 EPS 가이던스로 4.25~4.45달러를 재확인했다. 경영진은 사업 실행력, 계획된 대규모 부하 증가, 회사의 재무 상태가 장기 EPS 성장률 목표치인 4%~6%의 상단 수준 성장을 뒷받침한다고 밝혔다.

구글 프로젝트는 2030년에 약 1억 5,000만 달러의 순이익을 창출할 것으로 예상된다. 경영진은 계약상 부채 조달 비용이 전가되기 때문에 이 수치가 금융 비용을 차감한 순이익이라고 설명했다.

회사는 구글과의 계약 및 기타 대규모 부하 성장 기회를 반영한 2027~2031년 수정 재무 계획과 자본 전망을 2월에 발표할 계획이다.

리스크 및 주시 사항

• 노스웨스턴 에너지와의 합병은 여전히 몬태나주 위원회의 승인이 필요하다.
• 구글 프로젝트는 여전히 인허가, 규제 당국 승인 및 추가 계약 체결에 달려 있으며, 계획된 발전 및 송전 자산이 일정에 맞춰 완공·인도되어야 한다.
• 블랙힐스는 2027년 1월에 만기가 도래하는 4억 달러 규모의 3.15% 사채를 차환해야 한다. 경영진은 공모 채권 및 은행 대출 등 다양한 조달 방안을 검토하고 있다.
• 구글과의 계약에는 고객과 주주의 리스크 노출을 제한하기 위해 고안된 비용 전가 조항, 담보 및 금융 보증, 좌초자산 보호 장치, 조기 해지 조항이 포함되어 있다.
• 구글의 정확한 부하 증가 일정, 계약된 최대 부하, 발전 수익과 마이크로그리드 관리 수수료 간의 배분 비율은 기밀이다.

애널리스트 Q&A 주요 내용

경영진은 구글 프로젝트의 경제성이 실제 부하에 의존하기보다는 주로 계약에 기반한다고 강조했다. 수익에는 건설 기간 중의 현금 수익, 발전 자산 가동 후 유틸리티 수준의 위험조정수익, 그리고 협상을 통해 결정된 마이크로그리드 관리 수수료가 포함된다.

이익 기여도는 2027년부터 2030년까지 점진적으로 확대될 것으로 예상된다. 발전 자산은 2028년과 2029년에 가동을 시작해 2030년에 전면 가동될 예정이며, 이후 2048년까지 감가상각을 거치며 장부가액이 감소하게 된다.

경영진은 구글과의 최종 계약 체결에도 불구하고 대규모 부하 파이프라인이 다시 채워졌다고 밝혔다. 이전에 논의된 3GW 파이프라인이 여전히 최우선 순위로 유지되고 있으며, 최소 2.5GW의 추가 기회가 향후 파이프라인에 편입될 수 있다.

릴레이티드 디지털(Related Digital)의 75MW 프로젝트는 여전히 활발히 추진 중이다. 블랙힐스는 연말까지 대용량 전력 서비스 계약(Large Power Contract Service Agreement)을 체결하고, 해당 계약에 따라 2027년 초부터 고객에게 전력을 공급할 것으로 예상하고 있다.

경영진은 현재 추가적인 대규모 부하 성장에 정해진 한계가 없다고 보고 있다. 와이오밍주의 대규모 부하 요금제 하에서 자체 투자, 시장 구매, 인접 부지 발전, 제3자 PPA를 유연하게 결합할 수 있다는 점을 이유로 들었다.

실적 발표 콘퍼런스콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good day, and thank you for standing by. Welcome to the Q3 2026 Black Hills Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Sal Diaz, Director, Investor Relations.

Salvador Diaz

Thank you, operator. Good morning, and welcome to Black Hills Corporation's Third Quarter 2026 Earnings Conference Call. You can find our earnings release and materials for our call this morning on our website at blackhillscorp.com. Leading our earnings call are Linn Evans, President and Chief Executive Officer; Kimberly Nooney, Senior Vice President and Chief Financial Officer; and Marne Jones, Senior Vice President and Chief Utility Officer.

During today's earnings discussion, comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, Slide 2 of the investor presentation on our website and our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations.

With that, I will now turn the call over to Linn Evans. Linn?

Linden Evans

Thank you, Sal. Good morning, and thank you all for joining us today. I'll provide a summary of our strategic progress, including our success with large load customers and our pending merger with NorthWestern Energy. Kimberly will provide our financial update, and Marne will provide our business update.

I'll start my comments on Slide 3. I continue to be quite pleased that our team and our business are firing on all cylinders. We delivered excellent operational and financial results as we successfully advanced our strategic initiatives through the third quarter. We remain relentlessly focused on our primary purpose, serving our customers safely and reliably, while delivering on our mission of improving life with energy. To accomplish that purpose, we delivered strong earnings and remained on track to achieve our 2026 earnings guidance.

We maintained our solid financial position and credit ratings while executing our capital plan to serve the energy needs of our customers. This includes our 99-megawatt Lange II generation project in South Dakota, which is scheduled to be successfully placed in service on time in the fourth quarter. Our team continues to advance our regulatory initiatives. We completed our rate review for Arkansas Gas, and we reached constructive settlements for 2 rate reviews for our South Dakota electric utility in both South Dakota and Wyoming. And we made clear progress serving the needs of our customers, including our large load customers.

After more than a year of active and constructive negotiations, we are thrilled to have successfully executed definitive agreements to serve Google's planned data center in Wyoming, which is outlined in some detail on Slide 4. The project is planned to begin taking service by late 2027 and reach peak load in 2030. Leveraging our innovative Wyoming Large Power Contract Service, or LPCS, tariff, the agreements we executed with Google include our generation investment and our role in coordinating the delivery of energy from a total resource mix of 2.7 gigawatts to serve the project.

Achieving this key milestone for the company reflects a decade of strategic execution, innovation and a major growth opportunity that will benefit our customers, the State of Wyoming, the Cheyenne region and our shareholders. I'm very proud of our team's hard work over more than a year to ensure the executed agreements include critical protections and opportunities for our customers and shareholders.

Moving to Slide 5. We are working to serve significant additional large load growth. Again, driven by our unique large load LPCS tariff in Wyoming, our retail customers and shareholders benefit from our flexibility to serve large load customers with resources beyond traditional rate-based capital investments. For market energy or contracted resources, we earn a negotiated microgrid management fee. Interconnecting these resources to serve our large load customers provides important benefits of speed to market for growth and resource optionality and diversity, all while maintaining our right and obligation to serve our customers as the franchise utility provider.

This unique tariff supports strong large load demand in Wyoming. We included 600 megawatts of data center load in our current plan, driven largely by Microsoft's ongoing expansion and Meta's new AI data center, which we now expect to begin taking service in early 2027. In addition to our current plan, the planned Google data center represents significant upside to be added to our 2027 to 2031 plan. Moreover, we are actively negotiating 600 megawatts of other opportunities, which would be additive to our plan upon reaching definitive agreements.

Beyond these, there are a variety of other emerging opportunities within our Wyoming footprint that could represent 2.5 gigawatts or more of future large load expansion. As an example, we are assessing other opportunities, including Microsoft's recently announced purchase of more than 3,200 acres of land in Wyoming for future expansion, among other potential customer projects we are witnessing that are in exploratory stages within our service territory. We are also investing nearly $700 million in transmission to support current and future large load growth, unlocking additional opportunities. Marne will provide more detail about our large load progress in her update.

Moving to Slide 6 for an update on our merger with NorthWestern Energy. We are awaiting a decision in Montana as the last approval required for closing. We reached constructive settlements with many key interveners in Montana and completed a 4-day hearing before the Montana Commission in May. I note that the Montana Commission recently exercised the option to extend their decision 30 days, resulting in a deadline for a written decision by November 12.

With that, I'll turn the call over to Kimberly for our financial update.

Kimberly Nooney

Thank you, Linn, and good morning, everyone. I'm pleased to report strong third quarter earnings, the result of our team's continued focus on execution of our strategic initiatives as we deliver on our financial commitments. On Slide 8, we provide a bridge for EPS from Q3 2025 to Q3 2026. We reported GAAP EPS of $0.54, which included $0.03 of merger-related transaction costs in Q3 2026. Adjusting for these costs, we delivered $0.57 of adjusted EPS for the quarter compared to $0.45 in Q3 2025. We recorded $0.28 per share of increased margins, primarily driven by new rates and rider recovery and weather favorability compared to Q3 2025, which more than offset higher O&M, financing and depreciation costs.

Slide 9 provides our year-to-date bridge. GAAP EPS was $2.76 through September 2026, which included $0.13 of merger-related transaction costs. Adjusting for these costs, we delivered $2.89 of adjusted EPS compared to $2.68 during the same period in 2025. Comparing EPS as adjusted, we recorded strong margins driven by new rates and rider recovery and customer growth, which more than offset higher financing and depreciation costs and unfavorable weather compared to last year. We also benefited from cost management and tax planning compared to last year. We remain on track to achieve our earnings guidance for the year. Further details on year-over-year changes can be found in our earnings release and our 10-Q to be filed with the SEC later today.

Slide 10 presents our solid financial position through the lens of credit quality, capital structure and liquidity. We remain focused on maintaining a healthy balance sheet and our stated credit metric targets of 14% to 15% FFO to debt and at or better than 55% net debt to total capitalization. Year-to-date, we issued approximately $70 million of equity under our ATM program to support our over $900 million capital investment plan for the year, excluding recently announced generation and transmission to support growing data center load in Wyoming.

We maintained strong liquidity with $685 million of availability under our revolving credit facility at quarter end. Our next debt maturity is in January 2027 with $400 million of 3.15% notes to be refinanced. We are evaluating both the public and bank markets as refinancing alternatives.

Our financial outlook is listed on Slide 11. We reaffirmed our earnings guidance range of $4.25 to $4.45 of adjusted EPS for 2026, which represents 6% growth at the midpoint over 2025. Strong execution, planned large load growth and our solid financial position give us confidence in delivering in the upper half of our 4% to 6% long-term EPS growth rate.

Slide 12 highlights the significant upside potential to our current 5-year financial plan from large load growth opportunities driven by new capital investment and contracted microgrid management fees. We have recently announced approximately $2.5 billion of new generation and transmission investment to serve data center growth in Wyoming. This includes $1.8 billion of new generation investment through Black Hills' nonregulated affiliate contracted to our utility to serve Google's planned data center.

Our agreements with Google include contracted cost pass-through mechanisms, including debt costs, and allow us to begin earning a cash return on our generation investment during construction, which is expected to start in mid-2027. When construction is complete and as the assets are placed in service between 2028 and 2029, we will continue to earn a return on this investment with a declining book value to be fully depreciated by 2048.

In addition to returns from our company-owned generation investments, we will manage the output of approximately 2.1 gigawatts of additional resources to serve Google and anticipate earning a microgrid management fee beginning in late 2027, which will increase based upon a contractually defined load ramp schedule peaking in 2030, with fees continuing through 2048, the end of the contracted term.

Taken together, these earnings streams will ramp up and deliver approximately $150 million of net income in 2030. We further expect the planned Google data center to deliver an estimated $2.4 billion of unlevered free cash flows through 2048 after netting out our $1.8 billion of generation investment. We also expect approximately $700 million in transmission expansion by 2029 to serve large load opportunities, including Google's planned data center. The investment is expected to be recovered directly from large load customers through our proposed large load transmission tariff.

The returns on these investments and contracted cash flows will meaningfully strengthen our financial profile, allowing us to fund these investments with a combination of strong cash flows and a mix of debt and equity instruments while maintaining focus on earnings accretion and solid investment-grade credit ratings. In February, we look forward to sharing our updated 2027 through 2031 financial plan and capital forecast, incorporating our large load growth opportunities and other growth across our business.

Slide 13 illustrates our industry-leading dividend track record. In January, we increased our dividend, extending our track record of increases to 56 consecutive years in 2026 based on our current annualized dividend. A dependable and increasing dividend is an important component of our strategy to deliver long-term value for our shareholders.

I will now turn the call over to Marne for a business update.

Marne Jones

Thank you, Kimberly, and good morning, everyone. I will provide an update on our regulatory progress and current capital projects and finish with an update on serving our large load opportunities. Before I dive in, I want to recognize the commitment behind something our customers count on every day, safe and reliable energy. Our team brings that commitment to life day in and day out. Well done, team.

Supporting our commitment, our industry-leading reliability is illustrated on Slide 15. We achieved another year of excellent reliability with our combined electric utility in the first quartile of the recently published 2025 EEI SAIDI results. This outstanding service to our customers does not happen by chance. It takes a dedicated team effort and our aligned deployment of capital projects to reliably support our customers' energy needs.

We also continue to make strong progress on our regulatory agenda, as outlined on Slide 16. We continue to execute on our cadence of 3 to 4 rate reviews per year across our 8-state service territory. In October, we received approval from the Arkansas Public Service Commission for new annual revenues of $17.9 million based upon an ROE of 9.8%. New rates were effective October 12. We are also happy to have received approval of settlements for new rates for South Dakota Electric, which serves customers in both South Dakota and northeastern Wyoming.

In South Dakota, the settlement provides $27.4 million of new annual revenue based upon a WACC of 7.58%, subject to a 4-year base rate moratorium. Final rates will be effective December 1. In Wyoming, the commission-approved settlement provides $4 million of new annual revenues based upon a 9.6% return on equity and a 53% equity structure, with new customer rates also effective December 1. In Colorado, we continue the regulatory process for our Colorado Electric rate review, requesting recovery of $184 million of investments since our last rate review in 2024.

As you can see on this slide, our team has made remarkable progress this year on several key regulatory initiatives, including wildfire liability protections, long-term electric resource plans and continued development of large load opportunities, which I'll cover later in my remarks.

Moving to Slide 17. Our 99-megawatt Lange II generation project, which will serve our customers in Western South Dakota and northeastern Wyoming, is in the final stages of construction and is expected to be placed in service during the fourth quarter. Recovery of the South Dakota portion has been requested through a generation rider, and the Wyoming portion of the project was included in our recently approved Wyoming rate review settlement.

Turning to our large load opportunities on Slide 18. Cheyenne continues to be a prime location for large load customers given its climate, connectivity, railroads and interstates. Our unique large load tariff also gives us the flexibility to serve the individual needs of our customers and deliver speed to market. We are excited to have executed agreements to serve Google's planned data center in southern Wyoming, delivering on our goals to serve this large-scale customer while protecting our other customers and shareholders.

Kim has already touched on the key financial aspects of the project, so I'll provide some color regarding the opportunity, the time line and customer protections. This slide lays out the private microgrid structure that will serve the planned site. To deliver up to 590 megawatts of grid service, we expect to construct and own, through our nonregulated affiliate, 564 megawatts of new natural gas generation at our existing Cheyenne Prairie Generating Station. This investment is expected to earn a risk-adjusted utility-like return on a rate base model, which is separate from our base retail customers and billed directly to Google.

We are contracted to serve the remaining 26 megawatts through our industrial service tariff and market energy purchases. In addition to investment returns starting in 2027, we expect to earn microgrid management fees related to 2.1 gigawatts of third-party co-located resources. This energy is contracted through PPAs and will be managed through a private microgrid with total fees based on the contracted minimum peak load expected to begin with initial service in 2027 and increase throughout the project's ramp period.

I will note that the 2.7 gigawatts of total resources that are expected to serve the planned Google data center include reserve margins, and the contracted peak load and load ramp are confidential as set forth in the agreements. Our approach is designed to provide large load customers with a flexible energy solution while protecting our franchise, our existing customers and maintaining a utility-like risk profile for the company. This structure combines 564 megawatts of company-owned generation supplied by our nonregulated affiliate to a regulated utility under a PPA, with 2.1 gigawatts of third-party generation supplied under long-term PPAs with our regulated utility and Google.

These resources are interconnected through a private microgrid managed by us to serve the customer. Together with our innovative LPCS tariff, this allows us to tailor the mix of resources to the customer's individual energy needs and is designed to provide predictable, risk-adjusted utility-like returns and strong cash flows. We believe this flexible and disciplined approach is a unique advantage as we pursue and deliver additional large load opportunities in Wyoming.

Slide 19 lays out the planned time line for the project. The planned Google data center is expected to begin taking service in late 2027 and is targeting a full ramp in late 2030. To date, we have already achieved strong progress on a variety of requirements to support this project, with our team and project partners diligently focused on completing required permits, regulatory approvals and additional contracts. As we have previously shared, we have reserved long lead time equipment for our 564 megawatts of planned generation additions, which are targeted for construction beginning in 2027 and planned to be placed in service in multiple phases through the latter half of 2029.

Additionally, long-term third-party PPAs provide capacity and energy to support the data center's ramp and ongoing operations, complementing our company-owned generation and grid service. The terms of the agreements require phased delivery and ongoing availability standards. Beyond the energy and capacity needs, we are also planning to invest in expanding our transmission system to serve this project and our other large load demand in Cheyenne. These transmission projects are also expected to be placed in service in 2028 through 2029, including several new lines, substations and other equipment upgrades.

Slide 20 provides an update on our large load customer opportunities. Looking at the stage of development of these opportunities, approximately 600 megawatts are included in our current financial plan through 2030, driven primarily by Microsoft and Meta, both of which continue to require minimum capital investment as we previously disclosed. Layered on top of the 600 megawatts is the Google data center I just talked about, which is upside to the current plan and will be added to our financial plan when we share our 2027 through 2031 plan in February.

I'll note once again, the peak load for the Google data center is confidential. In addition to our current plan and the planned Google project, we continue to negotiate to serve an additional 600 megawatts of load. And this quarter, we are also highlighting additional opportunities that are early or exploratory stage projects with existing and potential new customers that we are still assessing and are not yet in active negotiations. As an example is the potential data center expansion from Microsoft based on their recent land purchase in the Cheyenne area. We currently estimate these exploratory stage opportunities to be at least 2.5 gigawatts and growing. We will continue to provide updates as we progress.

Slide 21 lays out the transmission side of serving large load opportunities. To support recovery of our transmission investment, we requested a Large Customer Transmission Cost Adjustment Mechanism, or LCTCAM. The tariff is designed to directly recover transmission-related investments and expenses solely from the large load customers benefiting from those facilities. We have recently requested CPCNs for 2 new projects. Just this week, we filed for a $606 million Aeolus Transmission Project, which is slated to add 2 new 230 kV lines spanning approximately 125 miles.

Importantly, these lines will be engineered to have capabilities to upgrade to 345 kV to support future growth. In September, we requested a CPCN for our $80 million South Cheyenne transmission project, which adds approximately 15 miles of lines in 2 new segments, along with other substation and equipment upgrades.

Before I finish my remarks, I'd like to underscore the key provisions in our agreements with Google to protect our customers and shareholders, as listed on Slide 22. These protections include cost pass-throughs, strong collateral and financial assurances, stranded asset risk protection and favorable early termination provisions. We believe these are industry-leading safeguards vital to delivering future large load growth in Wyoming. It was another busy and successful quarter, and I'm pleased with our progress.

With that, I will now turn the call back to Linn.

Linden Evans

Thank you, Marne. As I believe you can tell by our comments, we made excellent strategic progress through the first 3 quarters of 2026 on our customer-focused strategy. We delivered solid earnings, continued to advance our regulatory plan and growth initiatives and achieved a key milestone with our large load customer opportunities. Black Hills offers a compelling long-term value proposition driven by our customer-focused growth, competitive yield and the significant upside opportunities we described this morning.

Additionally, we have received 6 of 7 approvals required to complete our planned merger with NorthWestern Energy. We look forward to delivering an even brighter energy future to all our stakeholders with the potential advantages and opportunities as a larger regional electric and natural gas utility company. Thank you for your interest and your trust in the Black Hills team as we partner to grow long-term value for our customers and you, our shareholders.

This concludes our prepared remarks, and we're happy to answer your questions.

Operator

[Operator Instructions] Our first question comes from Julien Dumoulin-Smith with Jefferies.

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Paul Zimbardo

It's actually Paul Zimbardo on for Julien. The first one, I mean, a lot to ask, but the first one, just -- I know you don't want to disclose a lot on the Google, but whether the terms, the rate, the economics, is that kind of a fair proxy on a unit basis that investors should be thinking about on prospective data center deals?

Kimberly Nooney

Paul, it's Kimberly. So as we think about this project, we really focused on the contractual protections and the recovery mechanism. So one of the things, obviously, we get asked a lot is around load. And so when you think about how we've described this, the material elements of this contract really are predicated -- they're not predicated upon load. It's really the fact that we've contracted many of the economic components in this -- I'm sorry, within this contract with Google. So maybe if I could ask the investors to start thinking differently about this opportunity compared to some of the other opportunities that we've discussed in the past that really a lot of these factors are contracted-based.

Paul Zimbardo

Okay. Okay. And the other one I was to ask just to make sure I understand it right, it looks like the pipeline of opportunities is kind of effectively unchanged despite securing Google because that you're incorporating. It sounds like that Microsoft new opportunity. Just want to understand, it seems like you basically replenished that pipeline while converting Google, if I understand it right.

Marne Jones

Paul, this is Marne. I'll talk a little bit about it. So yes, we continue to focus on the 3-gigawatt pipeline that we've previously discussed. Google has always been part of that pipeline. And I think we're continuing to make some meaningful progress on delivering that 3-gigawatt pipeline and turning that into active load on our system. That's certainly been our priority. Additionally, we're looking at beyond the pipeline and assessing broader opportunities as we see emerging things happening in the Cheyenne area. Based upon our high-level view, we think that there are certainly some credible opportunities to at least another 2.5 gigawatts and potentially growing demand. We look at this through the lens of how do we continue to move and progress that 3 gigawatts and look at other opportunities that are up and coming that we could potentially move into that pipeline in the future.

Paul Zimbardo

Okay. Great. And then if I could sneak in one quick one. The $150 million in net income disclosure, is that net of financing costs or that's more at the project level for Google?

Kimberly Nooney

Yes. Think about financing costs as a pass-through, so it would be net of financing costs.

Operator

Our next question comes from Nicolas Woods with Bank of America.

Nicolas Woods

Just following up to what Paul was talking about. On the $150 million of the Google-related net income in 2030, could you kind of separate, if possible, the returns from generation, those that are driven by the microgrid management fee?

Kimberly Nooney

Those factors are confidential. But what we can say is, as you think about the microgrid management fee revenue, it's really based on a contractually negotiated pricing and ramp schedule. And as you think about the generation specifically for that project, as Marne mentioned, we start earning a cash return on that investment during construction and then it's placed in service, think about that utility-like risk-adjusted return. So if you take those factors into consideration, that's how you can think about the $150 million of net income in 2030.

Nicolas Woods

Got it. That was helpful. And then just a clarification real quick. I know before you guys have highlighted the Related Digital site being a potential customer to serve the load. And I don't know if that has been mentioned on the slide deck. I couldn't find it. So I'm wondering if that's still in the pipeline.

Marne Jones

Yes. This is Marne again. So the 700 -- the 75 megawatt, let's start there, 75-megawatt project, we continue to work closely with our customer and expect to have an LPCSA by year-end and begin serving that customer in early 2027. I'll also note, Related Digital today is taking service at that site under different tariffs. So we would certainly follow the LPCSA and grow that load in the future, but really, that starts in January.

Operator

Our next question comes from Andrew Weisel with Scotiabank.

Andrew Weisel

Congrats on getting the big deal done. My first question is on the Google deal, the ramp pace. I know you said the load is confidential, and that's not what we should be focused on. But help me understand the earnings contribution in '27, '28 and '29 before the $150 million in 2030. And I don't know the exact numbers, but is it kind of linear? Does it ramp up hyperbolic? And then beyond 2030, should we think of that $150 million as sort of a flat line in perpetuity to 2048? Or how should we think about it in that regard?

Kimberly Nooney

Yes. Great question, Andrew. So as we noted, the microgrid management fee begins in late 2027, and it ramps between '27 and 2030 over that period of time. And so that's a negotiated schedule, so I can't disclose that. But just note between '27 and '30 that it's ramping. And then for the generation facilities, we start earning that return on invested capital beginning in mid-2027. And as Marne noted, those assets begin to be placed in service in '28 and '29 and then will be fully in service for the year of 2030. And then in 2030, those assets begin to depreciate over the next 20 years through 2048.

So when you think about it from that lens, it's ramping up to 2030, and then we start depreciating those assets. I think another key point that it's really important to call out is the unlevered free cash flow that comes from this opportunity. So as we've disclosed, we have $2.4 billion of unlevered free cash flow, but that's after netting out the $1.8 billion of generation. So obviously, there's a lot of cash benefit that we'll be ramping after we get through the spend period for the $1.8 billion related specifically to the generation that we're talking about here for the $150 million.

Andrew Weisel

Okay. Great. Very helpful. Next question, given the size and scale of these Google projects, how ready are you for more? I mean you're talking some very big numbers here. Do you feel like you might need to take a pause? And if so, what would be the limiting factors? Is it supply chain, land, labor, regulatory or anything else?

Marne Jones

Andrew, I think it's a fair question. And one of the benefits that we have in Wyoming, I think, is the flexibility with our tariffs and our opportunity to rely not only on our sources and investments, but also those of others as we've done through PPAs and co-located generation and things like that. So we certainly see continued opportunity to grow. As you saw, we added the 2.5 gigawatts for emerging opportunities. We know that there's likely more beyond that. However, we've -- up to date, we've done a lot of things through market purchases. We've talked about pivoting and continuing to look at co-located PPAs as well as investments. I expect those to continue, and we'll be looking at that through the lens of transmission, which we just filed the CPCNs for. There's potentially additional investment beyond that. So I don't think there's a limit right now because we have the opportunity to use that flexible service that we have through the LPCS tariff.

Linden Evans

Andrew, this is Linn. I think another important point of our 2.5 gigawatts of potential upside is many of those customers come to us with generation reservations, things of that nature, which will take some risk off the table as well.

Andrew Weisel

Okay. Very good. One more, if I could, please. On the merger front, there were some questions in the Montana's last meeting about NorthWestern's Colstrip plant and how a portion might be dedicated to serve large load customers versus the general ratepayer population. I know that's not your asset, but how willing might Bright Horizon be to allow those 370 megawatts to go to ratepayers as opposed to being dedicated to data centers? Or do you think that might not ultimately be needed as a decision -- as a condition for the merger approval?

Linden Evans

Andrew, thank you for that question. We're obviously very aware of what's happening with Montana and the commission and the discussion around Colstrip, and frankly, the open docket that NorthWestern Energy already has with respect to Colstrip. I should be very cautious. We should be cautious about speaking about what Bright Horizon will do with their go-forward leadership, et cetera. But I think there's opportunity for us to serve customers in the best way possible. And I think Colstrip may be part of that someday, but all options will be on the table, if you will. But again, I think a key focus will be what's best for customers, and we'll focus on that.

Operator

I would now like to turn the call back over to Linn Evans for any closing remarks.

Linden Evans

Well, thank you very much for your attendance this morning, your interest in Black Hills. I want to pause for one more moment like Marne did is to thank our team. It's been an incredible 3 quarters of 2026, and we're well into the fourth quarter. Thank you to the team for your relentless focus on serving customers as excellently as you do and ask all of you to please have a Black Hills Energy safe day. Thank you.

Operator

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.