Long after the market closed yesterday, Black Hills Corporation (NYSE:BKH) seriously reduced its guidance for 2008 and its outlook for 2009. Full-year EPS is now expected to come in at $2.00-$2.10, about 7.5% lower than earlier EPS guidance of $2.15-$2.25. For 2009, the company lowered its sights from EPS of $2.40-$2.65 to $1.95-$2.25, a drop of of more than 18%. Both estimates were made on a non-GAAP basis.

Black Hills lowered its guidance and outlook in September as well. EPShad been charted at $2.43 for 2008 and $2.69 for 2009. And that wasbefore the credit market collapse was fully appreciated.

The company generally blamed low natural gas and crude oil prices,financial sector weakness, and generally lousy economic conditions.Back in September, Black Hills has also been trying to convert a $383million short-term credit facility that expires in February 2009 to along-term loan. In its announcement last night, the company said it wasworking to "extend" the loan and that it expects "to obtain thefinancing we need." Right, but on what terms?

And the bad news just keeps on coming. Black Hills got whipsawed by itspurchase of $250 million in interest rate swaps. The company revealedthat the long-term financing it anticipated is "no longer probable."The mark-to-market value of the swaps as of November 21st is -$69.5million pre-tax. That amounts to a charge against after tax earningsfor the full 2008 year of $1.17/share. It’s no wonder Black Hills savedthis announcement til 9 p.m. last night.

The company is holding a conference call this morning at 11 a.m. ET totry to explain all this to investors and analysts. What can it say?We screwed up. We borrowed short to make an acquisition when thingswere good–how were we to know that things would go bad so quickly andwe wouldn’t be able to borrow long to finance the acquisition?

Every energy company is facing the same difficulties as Black Hills. The value of a company’s assets is simply unknown.What is known is that those values are dropping every day as the globaleconomy worsens. No matter how valuable a company’s assets are, ifthere is no way to finance growth, asset values will decline. Thesedays, not losing value is the new growth. And even that’s damned hardto do.

Black Hills’s share price closed up about 2% yesterday, at $24.99 andwithin range of its 52-week low of $23.84. The stock should have notrouble setting a new low today.

Paul Ausick
November 25, 2008

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