Utility Black Hills Corp. acquires SourceGas for $1.2B

After the sale is final, SourceGas will operate under the Black Hills name.


The transaction is expected to be completed in the first half of next year, pending conditions and regulatory approvals in Arkansas, Colorado, Nebraska and Wyoming.

Power sellers and distributors such as Black Hills, already grappling with rising costs from new environmental rules, are facing stagnant electricity demand because of energy conservation measures.

The acquisition of Golden, Colorado-based SourceGas will increase Black Hill’s customer base by 55 percent to more than 1.2 million customers, the company said.

Evans couldn’t offer specifics of what will happen with Source Gas’ existing employees in Wyoming, although he did say the company will continue to need a stable presence in the state.

Black Hills Corp (NYSE:BKH) has signed a deal worth $1.9 billion confirming its acquisition with SourceGas Holdings LLC.

GE’s energy financial-services division and Alinda bought SourceGas in 2007 from Kinder Morgan Inc. “Black Hills will leverage the strengths of each organization to deliver highly valued service to customers”.

“The effective purchase price is $1.74 billion, taking into account approximately $150 million of tax benefits resulting from the deal”, a Black Hills spokesperson said.

“It is certainly material to Black Hills given the size of the deal and number of customers acquired”, Christopher Ellinghaus, a New York-based analyst for Williams Capital Group LP, said Monday in an e-mail.

In the past decade, Black Hills has added 19 small gas and electric utilities across seven states – Colorado, Iowa, Kansas, Montana, Nebraska, South Dakota and Wyoming (see Daily GPI, January 10, 2014).

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

“SourceGas is a great strategic fit, adding to our strong utility base and providing operational and financial benefits to all the customers and communities we serve”, he said.

“Distribution and pipeline assets are where it’s at right now”, said Skip Aylesworth, who manages about $2 billion in the Hennessy Gas Utility Fund, including shares of Black Hills. The latter is a utility in the natural gas sector and has Alinda Capital Partners LLC as co-investor along with General Electric. Credit Suisse will also support the acquisition through a bridge facility.


SourceGas also operates a 512-mile interstate natural-gas transmission pipeline in Colorado.

Black Hills Corp. Is Expanding