CEO’s Report: Steady rates for 2020

We recently traveled to three different customer communities to host our budget meetings, where we announced steady rates for 2020.

It’s been three years since we formally adopted a strategic plan outlining goals for Heartland’s future. Stabilizing rates was arguably our most important goal and as you have heard us say many times over the past year, our goals were largely accomplished with the sale of our share of the Missouri Basin Power Project, namely our 51 MW ownership of Laramie River Station.

The sale of LRS decreased the amount of excess generation in our portfolio and minimized our exposure to the market. It also allowed us to maintain our strong financial metrics.

Divesting of LRS certainly provided the biggest chunk of rate stability for our customers for the next several years. But that doesn’t mean we’ve stopped looking for other ways to reduce costs and increase load.

Coinciding efforts lead to stability

Heartland continually pursues new load, whether it be internal growth in our customer communities or the acquisition of additional customer contracts.

  • Heartland welcomed Valentine, Nebraska as our newest customer in 2019. Heartland currently supplies supplemental power to the city until their contract with NPPD expires at the end of 2021, at which time Heartland will become Valentine’s full-requirements supplier.
  • Our Energy ONE incentive continued to draw in new load in 2019 as we saw the addition of Prairie AquaTech in Volga, SD, Quality Custom Meats in Howard, SD and additional load at LG Everist in Akron, IA.
  • In an effort to reduce costs, Heartland issued $35 million in taxable debt at the end of 2018 for the buyout of a transmission service agreement with Nebraska Public Power District. The agreement was no longer needed after Heartland’s integration into SPP and the buyout allowed for stabilization of otherwise escalating transmission costs, resulting in cash flow savings.
  • Additional savings will come in the form of a re-powering at the Wessington Springs Wind Energy Center, scheduled to be completed late this year. Heartland purchases the entire output of the wind farm from NextEra Energy Resources. They are upgrading the performance of the wind farm which will result in an estimated 14% increase in efficiency. By extending our contract with NextEra, Heartland and our customers will benefit from a price reduction resulting in significant cost savings in 2020 and beyond.
  • Additionally, Heartland will be terminating our SPP Drive Out transmission service which allows us to serve load in the MISO footprint. As we continue to gain knowledge of the markets, we found it would be more cost-effective to procure energy directly in MISO rather than paying for the drive-out service. Heartland will be purchasing a 35 MW block from NextEra Energy to serve MISO customers, beginning in 2020.

Due to these factors and more, Heartland’s rates will remain unchanged in 2020. We continue looking toward a strong future for Heartland and our customers and will continue working to ensure the ongoing success of our customers.

Guest speakers highlight budget meetings

Our budget meetings also included a few guest speakers this year. At the two meetings in South Dakota, we were fortunate to welcome Jodi Endres from Western Area Power Administration.

Endres share WAPA’s objectives of participating in the energy imbalance market including ensuring reliable delivery of hydropower while adjusting to a changing energy mix. She also described some of the innovative ways WAPA is seeking cost savings including unmanned aerial vehicles to inspect equipment and helicopters to replace dampers.

At our budget meeting in New Ulm, Steve Watson of ISG discussed capital improvement planning and why it is essential to municipal systems. Heartland has worked with ISG to procure special pricing for Heartland customers interested in this service.

Looking ahead

As we head into the last two months of 2019, we look forward to finishing the year strong and setting new goals for 2020 and beyond.

We are grateful for our customers and your support in getting to this point. We value our relationships and will continue working every day to fulfill our vision of being a trusted leader and partner of choice while adding value to the communities we serve

Fueling your community’s future

Heartland partners with engineering firm to offer municipal planning assistance

Heartland is always looking for new ways to help communities maximize their potential and ensure a prosperous road ahead.

The latest is a partnership with architecture and engineering firm ISG, giving Heartland customers access to cost-effective municipal capital improvement planning (CIP) and development park master planning (DPMP) services. Cities may also utilize Heartland’s economic development grant program to help cover the cost of implementation.

“It’s extremely important to plan ahead, but strategic municipal planning is complex and time-consuming,” said Heartland Director of Economic Development & Governmental Affairs Casey Crabtree. “Our partnership with ISG will help our customers create sustainable, healthy communities for future generations both efficiently and affordably.”

While CIP and DPMP are the two core focus areas, ISG will work with each community individually and stand as a partner alongside Heartland to identify unique opportunities and custom-fit solutions.

Municipal Capital Improvement Planning

Day-to-day municipal activity leaves little time to plan for the future. A CIP can help a community stay ahead of the curve on facility, technology, and infrastructure improvements and maintenance.

“We want to help communities simplify their goals and make important projects a reality,” said ISG Development Strategist Steve Watson. “We’ll provide assistance with identifying and prioritizing future projects and potential funding sources.”

Integrating community improvement projects into a city’s greater CIP plan, ISG will help ensure overall capital improvement schedules, financial plans and other planning efforts are aligned and can be managed holistically.

Key Opportunities:

  • Equipment + Technology, such as vehicles, computers or software
  • Public Facilities, including water/wastewater treatment plants, wells, city halls, community centers, libraries, garages and other city-owned structures
  • Infrastructure, such as municipal water, sanitary sewer, storm sewer, reuse systems, streets, walkways, traffic signs and signals, parking facilities, street lighting and more
  • 10-year Electrical System Study (optional)

Planning and Documentation

  • Capital Improvement Worksheets, emphasizing all of a community’s projects
  • Project Priority List, providing clear phasing and fiscal scheduling that sets a realistic and efficient timetable for project completion
  • Potential Public Assistance Programs, identifying grants and loans outside of Heartland to reduce cost or fund projects
  • Effect on the City’s Debt Capacity, offering accurate estimates of project impacts unique to your community

Development Park Master Planning

In today’s competitive market, businesses are extremely selective on where to invest. Through DPMP, communities can offer a clear development pathway and help their development opportunities stand out amongst a crowded playing field.

“A master plan provides key information and a refined vision to potential developers, businesses and other real estate professionals,” said Watson. “It can help attract the right parties to a project of importance to the community.”

Key Opportunities

  • Park Assessment, identifying a location’s strengths and potential challenges to create an overall vision for the park, complete with recommended uses and a customized plan
  • Drone Filming, providing highly accurate, high-definition video captured, edited and made available in multiple formats for easy access
  • Marketing Package, including a cohesive campaign across a variety of print and digital mediums to market the community and development
  • Master Plan + Visualization, determining desired uses based on market analysis, demographic trends and face-to-face engagement meetings and featuring detailed renderings and advanced 3D visualizations

Partners in Progress

Heartland has found an enthusiastic collaborator in ISG, a full-service architecture, engineering, environmental and planning firm, thanks in part to an established working relationship with Watson.

An economic development practitioner and former director of business development for the South Dakota Governor’s Office of Economic Development, Watson has long been familiar with Heartland’s progressive economic development approach.

“Heartland is committed to being a catalyst for growth,” said Watson. “I’m excited about this new avenue to partner with them to bring additional value to the communities they serve.”

Watson, ISG and Heartland most recently collaborated on the Hillcrest Industrial Park in Colman, SD, which has helped the community raise its profile and create a vision for future development.