Black Hills Corp Looks To Increase Its Customer Base By More Than Half -- July 12, 2015

Updates

July 13, 2015: SeekingAlpha's data points -- note the very last data point --

• Diversified energy firm Black Hills has agreed to acquire natural-gas utility SourceGas Holdings for $1.89B from investment funds managed by General Electric and Alinda Capital Partners.
• The deal allows the South Dakota based Black Hills to expand in Colorado, Nebraska, Wyoming and Arkansas, and "will add meaningfully to Black Hills' earnings per share beginning the first calendar year after closing," the company said.
• Black Hills expects that closing to come in H1 2016, at which point the utility will assume $720M of debt.
• SourceGas has 425,000 customers and a 512-mile transmission pipeline in Colorado. The combined company will have over 1.2M customers.
• SourceGas had also attracted interest from other prospective buyers, including MDU Resources 

Original Post

Multiple sources are reporting. From Reuters:

Energy company Black Hills Corp said on Sunday it signed a deal to buy natural gas utility company SourceGas Holdings LLC for about $1.9 billion.

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

General Electric and Alinda formed SourceGas in 2007 through the acquisition of a Kinder Morgan Inc unit for $710 million. 

As I told the reader who sent the link:  

Interesting. I love these articles.

For all the press, and all the ink, and all the hysteria, and all the opportunities in wind and solar energy, the big deals are still being made in fossil fuel energy.

Having said that, I must be really missing something. $1.9 billion? Look at the key statistics for Black Hills Corp.

Maybe I'm looking at the wrong company: $3.7 billion enterprise value; $2.1 billion market cap. Hardly any cash. I must be missing something. $2.1 billion market cap is pretty close to the buying price of $1.9 billion. The margins on Black Hills Corporation natural gas must be huge.

The math:

• increase its customer base by 55% to more than 1.2 million customers
• 1.55 x current base = 1.2 million customers
• current base = 775,000 customers
• 1.2 million customers now - 775,000 customer base = 425,000 new customers
• $2 billion / 425,000 customers = $5,000 / new customer

That ain't bad.

Then you throw in:

SourceGas operates more than 19,340 miles of natural gas distribution, gathering and transmission pipelines as well as storage facilities in Arkansas, Colorado, Nebraska and Wyoming. 

It costs about $500,000 to lay a mile of pipeline across easy prairie, upwards of $2 million/mile under water. And that's assuming Tom Steyer will let you build a new pipeline.

Note: I often make simple arithmetic errors. If this information is important to you, go to the source.