Fitch turns Black Hills view to negative

Fitch Ratings said it changed its outlook for Black Hills Corp. to negative from stable and affirmed its BBB+ issuer and senior unsecured ratings.

“BKH's negative outlook reflects persistently high leverage and slower than expected progress in management's efforts to strengthen the balance sheet. FFO leverage remained elevated at approximately 6.8x in 2022, pressured by lingering impacts from Winter Storm Uri, the Tax Reform Act of 2017 and the 2016 acquisition of Black Hills Gas Holdings, LLC (BHGH/not rated [NR]; formerly SourceGas Holdings LLC),” the agency said in a press release.

Fitch added, “If management is unable to reduce leverage below Fitch's recently revised downgrade threshold of 4.8x, it would result in a downgrade of BKH's long-term IDR to BBB from BBB+ and may result in a downgrade of its short-term IDR to F3 from F2, per Fitch's ‘Short-Term Ratings Criteria.’

The agency said it aims to resolve the outlook “later this year with greater clarity on management's capital allocation and financing plans.”

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