(12) VARIABLE INTEREST ENTITIES

Captive Insurance

To support our overall insurance program, we established the Captive to insure certain risks of BHC and our subsidiaries. The Captive is a protected separate cell captive insurance company sponsored by EIS. EIS is owned by Energy Insurance Mutual Limited Company and allows participating member sponsoring organizations, such as BHC, to insure risks using captive entities. BHC, through its contractual rights, has a controlling financial interest in the separate protected Captive cell’s assets. BHC obtains all the benefits from the Captive and makes all the primary controlling decisions that economically impact the Captive. As a separate protected cell, BHC is the Captive’s only participant. The Captive is a VIE for which BHC is the primary beneficiary. Accordingly, BHC consolidates the Captive.

Under a mutual business program participation agreement between the Captive and EIS, EIS will issue policies, make claim disbursements, claim expenses and other underwriting fees on behalf of the Captive, as necessary.

The Captive insures BHC and our subsidiaries for general liability including certain transmission and employment practice liabilities. Claim payments to the insureds can only be made up to the amount of the Captive’s available assets. In addition to policies obtained through the Captive, we also have insurance policies purchased through third-party insurers that may provide coverage if a loss event occurs.

As a result of consolidation, we eliminate intercompany transactions between BHC and the Captive and record the Captive’s assets, liabilities and third-party operating activities. In consolidation, the Captive’s insurance premium revenues derived from BHC’s policies are eliminated against the insurance premium expense recorded by BHC and our subsidiaries relating to insurance policy coverage provided by the Captive. Consolidation primarily resulted in BHC reflecting the Captive’s investment holdings on our Consolidated Balance Sheets, and the Captive’s investment gains and losses reflected through earnings on our Consolidated Income Statements.

Consolidation of the Captive resulted in an increase in our net income of $10.5 million for the year ended December 31, 2025. Consolidation impacts were included in Operations and maintenance, Interest income and Other income (expense), net on the accompanying Consolidated Statements of Income.

Our Consolidated Balance Sheet as of December 31, 2025, included $16.0 million of assets relating to the Captive which were reported within Other current assets. See Note 10 for additional details on these investment holdings.

Black Hills Colorado IPP

Black Hills Colorado IPP owns and operates a 200 MW, combined-cycle natural gas generating facility located in Pueblo, Colorado. In 2016, Black Hills Electric Generation sold a 49.9%, non-controlling interest in Black Hills Colorado IPP to a third-party buyer. Black Hills Electric Generation is the operator of the facility, which is contracted to provide capacity and energy through 2031 to Colorado Electric.

Net income available for common stock for the years ended December 31, 2025, 2024, and 2023 was reduced by $8.2 million, $10.6 million, and $13.8 million, respectively, attributable to this non-controlling interest. The net income allocable to the non-controlling interest holder is based on ownership interest with the exception of certain agreed upon adjustments. Distributions of net income attributable to this non-controlling interest are due within 30 days following the end of a quarter but may be withheld as necessary by Black Hills Electric Generation.

Black Hills Colorado IPP has been determined to be a VIE in which the Company has a variable interest. Black Hills Electric Generation has been determined to be the primary beneficiary of the VIE as Black Hills Electric Generation is the operator and manager of the generation facility and, as such, has the power to direct the activities that most significantly impact Black Hills Colorado IPP’s economic performance. Black Hills Electric Generation, as the primary beneficiary, continues to consolidate Black Hills Colorado IPP. Black Hills Colorado IPP has not received financial or other support from the Company outside of pre-existing contractual arrangements during the reporting period. Black Hills Colorado IPP does not have any debt and its cash flows from operations are sufficient to support its ongoing operations.