Black Hills (BKH)

Results from class-action litigation and other proceedings regarding reporting of natural gas trading information could adversely affect our business.

In March 2003, we received a request for information from the Commodity Futures Trading Commission, or CFTC, requesting that we produce, among other things, “all documents relating to natural gas and electricity trading” in connection with the CFTC’s industry-wide investigation of trade and trade reporting practices of power and natural gas trading companies. We cooperated fully with the CFTC producing documents and other materials in response to more specific requests relating to the reporting of natural gas trading information to energy industry publications, conducted our own internal investigation into the accuracy of information that former employees of Enserco Energy Inc., our gas marketing subsidiary, voluntarily reported to trade publications, and provided detailed reports of our investigation to the CFTC.

In July 2003, we reached a settlement with the CFTC on this investigation, whereby we agreed to pay a civil monetary penalty of $3.0 million. Subsequent to the settlement of the CFTC investigation, several parties filed putative class-action suits against numerous companies in the natural gas marketing industry, including us. Although we paid a civil monetary penalty in the CFTC action, we cannot guarantee that other legal proceedings, other civil or criminal fines or penalties, or other regulatory action related to this issue will not occur which, in turn, could adversely affect our financial condition or results of operations.