SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 10, 1997
BLACK HILLS CORPORATION
State of South Dakota File Number 1-7978 IRS Number 46-0111677
625 Ninth Street
Rapid City, South Dakota 57709
Registrant's telephone number (605) 348-1700
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Item 5. OTHER INFORMATION
POWER SALES AGREEMENT WITH PACIFICORP RENEGOTIATED
The Registrant has entered into a Restated and Amended Power Sales
Agreement ("The Amended Agreement") with PacifiCorp. This agreement
restates and amends the Purchased Power Agreement ("The Agreement") that
was entered into with PacifiCorp on December 31, 1983, which obligated
the Company to purchase 75 MWs of power from PacifiCorp based upon the
costs of PacifiCorp's Colstrip Power Plants. The Agreement was for a
term of 40 years.
The Amended Agreement provides (i) that 25 megawatts of the contract
capacity amount and the charges therefor will be deleted, 5 megawatts
each year commencing in the year 2000, (ii) the Company shall pay no
levelized annual charges for Colstrip Plants' additions and replacement
which are completed after January 1, 1997, (iii) that commencing January
1, 1997, all fixed cost components of the Variable Costs to be paid by
the company shall be based on an assumption that the Colstrip Plants
operated at an 80 percent load factor, (iv) beginning August 1, 1997 and
continuing until December 31, 1999, the Company shall pay PacifiCorp
annual fixed cost of $164.59 per KW-yr multiplied by the capacity
purchased, (v) commencing January 2000 and continuing until December
2018 the Company shall pay PacifiCorp an annual levelized fixed charge
based upon PacifiCorp's initial investment in Colstrip Units 3 and 4
using PacifiCorp's then most current applicable cost of capital
consisting of PacifiCorp's then current Federal Energy Regulatory
Commissions ("FERC") approved capital structure, PacifiCorp's then-
current weighted average cost of long-term debt and preferred stock
using FERC prescribed methods, and the then current FERC approved cost
of common equity for PacifiCorp, (vi) that for the invoices for each
month of the calendar years 2000 through 2009, the fixed amount
calculated above shall be reduced by $95,564 each month, and (vii)
unbundled the transmission charge in the contract to PacifiCorp's FERC -
filed rates. The Amended Agreement is subject to the approval of FERC.
Future cost reductions or increases related to these amendments will
depend on PacifiCorp's future capital structure and cost of capital and
the cost of replacement power starting in the year 2000. However, the
Company believes the reduction of the 25 MWs of capacity which begins in
the year 2000 at a rate of 5 MW a year is positive as the Company enters
a deregulated electricity market and believes PacifiCorp's future cost
of capital under the FERC approved capital structure will be lower than
the cost
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of capital formulas embedded in the existing contract. The Agreement is
the Company's most expensive source of power at approximately 4.5 cents
per kilowatthour when fully utilized. The reduction in capacity should
allow the Company to blend down this cost of power, but will depend on
the market conditions at that time.
Black Hills Corporation is an energy company that supplies electric
utility service to a 9,300 square-mile area in western South Dakota,
northeastern Wyoming, and southeastern Montana; engages in the mining
and sale of coal from its mine located near Gillette, Wyoming; produces,
explores, and operates oil and gas interests located in the Rocky
Mountain region, Texas, and California; and markets natural gas,
electricity, and related services to customers in the Rocky Mountain
region, Midwest and East Coast markets.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BLACK HILLS CORPORATION
By /S/ ROXANN R. BASHAM
Roxann R. Basham, Corporate
Secretary and Treasurer
Dated: October 10, 1997
