{"url_path":"/sec/cik-0000720515/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-06-18","source_url":"https://www.sec.gov/Archives/edgar/data/720515/0001628280-26-044203-index.html","accession_number":"0001628280-26-044203","cik":"0000720515","ticker":null,"issuer_name":"BASIN ELECTRIC POWER COOPERATIVE","edgar_url":"https://www.sec.gov/Archives/edgar/data/720515/0001628280-26-044203-index.html","primary_entity_key":"0000720515","primary_entity_name":"BASIN ELECTRIC POWER COOPERATIVE"},"word_count":8682,"has_tables":true,"body_markdown":"ITEM 1A. RISK FACTORS\n\nBasin Electric's business, financial condition or results of operations are subject to various risks and uncertainties, including those described below. You should consider carefully the risks and uncertainties described below, together with all of the other information in this report, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Our business, financial condition and results of operations could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of these risks actually occur, our business, financial condition or results of operations could suffer. Unless otherwise indicated, references in this section to our business being harmed will include harm to our business, reputation, results of operations, financial condition, and prospects. In such event, the market price of our debt securities could decline. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “FORWARD-LOOKING STATEMENTS” in this report.\n\nFinancial Risks\n\nOur results of operations and financial condition are largely dependent upon our Class A Members, and two Class A Members individually account for more than 10% of our total Class A Member revenue.\n\nOur results of operations and financial condition depend on our Class A Members to satisfy their obligations to us in accordance with our wholesale power contracts with them. Electric sales to our Class A Members provided approximately 89.7% and 90.5% of our electric sales revenue for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. Upper Missouri Power Cooperative (“Upper Missouri”) accounted for 42.8% and 42.7% and East River Electric Power Cooperative (“East River”) accounted for 12.8% and 12.8%, of our total Class A Member revenue for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. If one or more of our Class A Members were to default in the performance of its obligations to us under their wholesale power contract, our results of operations or cash flows could be adversely affected.\n\nMost of our wholesale power contracts with our Class A Members extend through 2075; however, our wholesale power contracts with Tri-State, Minnesota Valley, Wright-Hennepin and WMPA only extend through 2050. These members represented in the aggregate approximately 8.8% and 10.1% of Class A Member sales for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. There cannot be any assurance that our wholesale power contracts with these Class A Members will be extended or replaced prior to the expiration of these contracts.\n\nFinancial difficulties, such as those resulting from challenges in passing through its costs to its customers, could affect a member’s ability to perform its obligations under its wholesale power contract with us. Such challenges could arise from the failure of the member’s board of directors to establish rates and charges sufficient to recover the member’s costs, including power costs owed to us. If our cost of power were to become uncompetitive, large industrial customers of our Class A Members could seek to self-generate their power requirements or customers of the members could seek to cause our members to become subject to state rate regulation. Certain of our members, such as those located in Wyoming, are already subject to rate regulation by state regulatory authorities. New or additional state-level rate regulation of a member could potentially affect its ability to recover costs and meet its obligations to us. We cannot predict if or when any such state-level rate regulation will be implemented in the future in other states within our service territory or what the impact of future state-level rate regulation may be. To date, however, such state-level rate regulation has not prevented affected members from being able to recover their costs.\n\n41\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nWe have a substantial amount of indebtedness and expect to incur significant future capital expenditures. Constraints on our access to, or increases in our cost of, capital could adversely affect our results of operations and financial condition.\n\nOur substantial existing indebtedness and the significant capital expenditures planned through 2030 to construct, acquire, and make capital improvements to our generation and transmission facilities will require our continued access to the capital markets. As of March 31, 2026, we had total debt outstanding of approximately $5.8 billion. In the years 2026 through 2030, we forecast that we will invest approximately $7.5 billion in capital expenditures for the development and construction of new generation and transmission resources to serve existing and projected load growth and upgrades to our existing facilities. The scope and timing of these investments are subject to numerous uncertainties, including the forecasted electric demand of our members; the availability and cost of available power purchase options; our membership in regional transmission organizations and their applicable tariffs and policies; federal funding; and regulatory approvals and changes in law. For additional information, see the discussion under the caption \"Projected Capital Expenditures\" in \"MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”\n\nWe expect to incur significant indebtedness to fund this capital expenditure program. Failure to obtain financing may adversely affect our results of operations, liquidity and financial condition, and may result in development uncertainties for our generation and transmission business. Although we plan on exploring additional financing of projects from RUS, our ability to receive any such financing could be impacted by the terms set by RUS and, because RUS funding availability is dependent on Congressional appropriation, competition for RUS loans from other electric cooperatives may exceed available funds. In addition, a significant increase in our indebtedness is likely to increase the cost of electric service we provide to our Class A Members due to increasing interest expense as well as our objective to maintain “A” category credit ratings. If demand for electricity from our Class A Members is materially less than projected, we might not generate sufficient revenue to meet the MFI Ratio requirements in the Indenture or to service our indebtedness. If this occurs, we may be required to raise our rates, revise our plans for capital expenditures or restructure our long-term commitments. These actions may adversely affect our operations, and we may be unable to generate sufficient additional revenue to pay our obligations.\n\nWe also rely on access to short-term and long-term capital to meet our liquidity needs not funded by operating cash flows. Our access to capital, or cost of, could be adversely affected by various factors, and some market disruptions could constrain, at least temporarily, our ability to maintain sufficient liquidity and access capital on favorable terms, or at all. These factors and disruptions include:\n\n•our credit ratings being downgraded;\n\n•financial markets view of our relationship with our members, including the outcome of litigation or regulatory proceedings;\n\n•challenges or delays related to rate changes for our Class A Members; and\n\n•some of the wholesale power contracts with our Class A Members only extending through 2050.\n\nBroader economic and market conditions that may affect our access to, or cost of, capital include:\n\n•geopolitical instability, economic downturns or market uncertainty;\n\n•market pressures, including tightening of lending standards by commercial banks and other credit providers;\n\n•changes in prevailing interest rates due to changes in U.S. Treasury rates or credit spreads; and\n\n•conditions in the energy industry and the generation and transmission cooperative sector.\n\nEven if we maintain access to the capital markets, capital may only be available on terms and conditions we consider unfavorable, including higher interest rates or more restrictive covenants and conditions to borrowing or events of defaults. If our ability to access capital becomes constrained, our ability to finance capital\n\n42\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nexpenditures could be limited, our interest costs could increase, and our results of operations and financial condition could be adversely affected.\n\nThe financial performance of our subsidiary, Dakota Gas, has a significant impact on our financial results and its future is uncertain. We continue to explore strategic alternatives and some of the alternatives could result in substantial costs or may result in an asset impairment.\n\nOur consolidated financial results are significantly affected by the performance of Dakota Gas. The Gasification operating segment accounted for 13.6% and 16.0% of our consolidated revenue for the three months ended March 31, 2026, and the year ended December 31, 2025, respectively. As of March 31, 2026, none of our equity represented retained earnings of Dakota Gas. The Gasification segment reported net income (loss) of $2.7 million, ($34.8) million, and ($31.3) million for the three months ended March 31, 2026, and the years ended December 31, 2025 and 2024, respectively. Historically, we have benefited from synergies with Dakota Gas, including economies of scale resulting from a shared coal supply that lowers our fuel cost and various shared services. Additionally, because Dakota Gas produces and sells natural gas and we purchase natural gas for electric generation, its natural gas sales offset part of the risk associated with our natural gas purchases, creating a natural hedge. Dakota Gas’s financial performance remains exposed to significant commodity price volatility, and operating losses and negative cash flows could continue if commodity prices remain low.\n\nWe continue to evaluate various strategic options, including a potential sale of the equity or assets of Dakota Gas, in whole or in part. Dakota Gas’s principal assets include the Synfuels Plant and geologic sequestration project at the Synfuels Plant. There is no assurance that any transaction will occur. A sale or other strategic action could result in the loss of existing synergies with Dakota Gas. Decommissioning or repurposing the Synfuels Plant could require substantial costs including site reclamation, employee severances and the loss of our above-described synergies with Dakota Gas.\n\nThe nature and extent of risks associated with the future of Dakota Gas and its assets cannot be fully predicted and events relating to the Synfuels Plant may affect us in ways that we cannot currently anticipate. Although the value of the coal gasification assets of the Synfuels Plant has been written off, we could incur additional impairment charges related to our remaining non-coal gasification assets investments in Dakota Gas. If an impairment occurs, we expect that we would seek regulatory accounting treatment from RUS to amortize the resulting regulatory asset over a future period. Failure to receive such regulatory accounting treatment could materially adversely affect our results of operations, financial condition and cash flows. See “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Key Factors Affecting Results—Future of Dakota Gas.”\n\nAny one or a combination of risks associated with Dakota Gas may have a material adverse effect on our results of operations, financial condition and cash flows.\n\nChanges in commodity prices, including natural gas, coal, purchased power, and fertilizers and other products produced by Dakota Gas, could adversely affect our cost of electric service and Dakota Gas revenue.\n\nWe purchase power and fuel from other suppliers exposing us to market prices of various commodities that could increase our operating expenses. In 2025, natural gas units comprised approximately 20.0% of our maximum winter generating capacity. With the addition of Bison Generating Station, we forecast that in 2031 this amount will increase to approximately 35.0%. Historically, Dakota Gas has provided a natural hedge for us against price fluctuations of natural gas. However, as we add additional natural gas generation, we expect to burn more natural gas annually than what Dakota Gas produces and the value of this natural hedge may decrease. There can be significant volatility in market prices for fuel, power and other energy-related commodities, both in general and across geographies, because of broader supply chain challenges, geopolitical events or conflicts, and commodity availability constraints. Natural gas supplies may also be unavailable due to increased demand during periods of exceptionally cold weather and are also subject to disruption due to natural disasters and similar events or infrastructure failure. Further, purchasing electric power in the market exposes us, and consequently our members, to market price risk because electric power prices can fluctuate substantially over short periods of time. Increases in power and fuel prices related to natural gas or coal could\n\n43\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nsignificantly increase the cost of electric service we provide to our Class A Members and affect their ability to perform their contractual obligations to us.\n\nAlthough our hedging activities help reduce some market price risk, Dakota Gas remains exposed to volatile commodity prices which could result in future losses. Additionally, Dakota Gas’s products also are exposed to market risks other than pricing, particularly in the agricultural sector. Economic conditions in the agricultural sector directly influence demand for fertilizers, such as anhydrous ammonia, ammonium sulfate and urea, exposing Dakota Gas’s revenues to downturns in this sector. Further, most market price risks related to products other than natural gas and tar oil cannot be hedged because no efficient derivative market exists for these commodities. As a result, changes in natural gas, fertilizer, and other commodity prices could adversely affect our results of operations and financial condition.\n\nMarket or regulatory pressures may cause us to retire our coal-fired generating facilities earlier than the units’ depreciable lives, which could result in substantial additional costs.\n\nAs of March 31, 2026, our coal-fired electric generation facilities totaled approximately $2.0 billion of our net assets. We own, lease and operate coal-fired generating facilities with 3,665 MW of capacity as of December 31, 2025. Early retirement of these facilities could lead to substantial expenses, including accelerated depreciation, increased purchased power and capacity costs, or significant capital investments to replace lost capacity or repurpose existing facilities. Early retirement of these facilities could also create stranded assets unless we obtain regulatory accounting treatment approval from RUS to establish a regulatory asset to recover related costs over time. Without such approval, we could face substantial impairments to our members’ patronage capital and other equities. Even with regulatory accounting treatment, amortization of these costs may require rate increases that could reduce the competitiveness of our service.\n\nEarly retirement would also accelerate reclamation and mine-related obligations, increasing both the timing and total amount of these costs. In addition, we could incur severance obligations for employees at the facilities and associated mines, as well as significant termination charges under take-or-pay transportation contracts.\n\nOur costs for future capital expenditures may be adversely affected by unanticipated higher levels of inflation, increasing labor costs and shortages, implementation of tariffs, and other supply chain disruptions.\n\nOur ability to meet our Class A Members’ electric power requirements and complete our capital projects is dependent on maintaining an efficient supply chain and controlling our costs, including labor, material and financing costs. We are experiencing longer lead-times on the procurement and delivery of some materials and equipment, which have been impacted by domestic and global supply chain disruptions. Additionally, inflation has contributed to lingering high prices for materials and equipment and increases in labor costs to retain sufficient labor resources. Imposed and proposed tariffs could significantly increase the prices and delivery lead times on materials and equipment critical to completing our capital projects.\n\nWe are exposed to the credit and liquidity risk of and with counterparties beyond our Class A Members.\n\nIn addition to our Class A Members, we are exposed to the risk that contractual counterparties will default in the performance of their obligations to us. We regularly analyze and monitor the default risks of counterparties and other credit issues related to our material contracts. Based on our review, we may require counterparties to post credit support. Still, defaults may occur. Defaults may take the form of failure to physically deliver purchased goods or supplies, such as power or natural gas. If a default occurs, we may be forced to enter into alternate contractual arrangements at prices that may be less favorable than those in the original contracts. If a defaulting counterparty is in poor financial condition, we may not be able to recover damages for breach of contract.\n\nDakota Gas also has exposure to the credit risk of its counterparties. Several byproducts produced at the Synfuels Plant have a small number of potential purchasers. Evaluation of these purchasers’ respective credit quality is impaired by the limited availability of independent financial information and analysis for these entities. A contractual counterparty may fail to perform its obligations to Dakota Gas, which could adversely affect our consolidated results of operations, financial condition or cash flows.\n\n44\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nAdditionally, certain of our financial agreements and commercial contracts include collateral and termination triggers that may be active if credit metrics fall below specified levels and may require posting of collateral (in the form of letters of credit, surety bonds or cash) or termination of the agreements, which could adversely affect our results of operations, financial condition, or cash flows, as well as our ability to enter into future financial agreements and commercial contracts.\n\nThe use of hedging arrangements may not work as planned or fully protect us and could result in financial losses and requirements to post collateral.\n\nWe typically enter into hedging arrangements, including contracts to purchase or sell commodities at future dates and at fixed prices, in order to manage our commodity price risks. These activities, although intended to mitigate price volatility, expose us to risks related to commodity price movements and other risks. When we purchase or sell commodities forward, we may be required to post significant amounts of cash collateral or other credit support to our counterparties if forward prices move unfavorably to our position. Further, if forward price curves move unfavorably to our position the values of financial contracts may deteriorate and could result in adverse effects to our results of operations, financial condition, or cash flows. We also employ risk management techniques to hedge against interest rate volatility. However, significant and sustained volatility in market interest rates could still materially increase our financing costs and adversely affect our results of operations, cash flows and liquidity.\n\nWe maintain internal policies and procedures intended to govern hedging activities, including limits on positions and a prohibition on speculative trading. While these policies and procedures are designed to prevent hedging arrangements in excess of desired limits or unauthorized hedging transactions, they may not detect all violations, particularly in instances involving intentional misconduct or deception. Any failure of our risk-management controls or processes could result in unintended positions, financial losses, or other adverse effects on our results of operations, financial condition, or cash flows.\n\nThe scope or amount of our insurance coverage may be insufficient.\n\nWe maintain a comprehensive insurance and self-insurance program to provide coverage for various types of risks, including severe weather or other natural disasters, wildfires, property damage, war, terrorism, cyber incidents, liability claims against us, or a combination of other significant unforeseen events that could affect our operations. However, insurance coverage may not continue to be available or may not be available at rates or on terms similar to those presently available to us. Our ability to obtain insurance and the terms of any available insurance coverage could be adversely affected by the financial condition of insurers, industry losses, the impacts of actual or perceived climate-related events, as well as international, national, state, local or business-specific events. There may be some instances in which we are not fully insured against all significant losses. A loss for which we are not fully insured could have an adverse effect on our business, results of operations, financial condition and prospects. If the amount of insurance is insufficient or otherwise unavailable, the costs of uninsured losses, our results of operations, financial condition or cash flows could be adversely affected.\n\nOperating Risks\n\nFactors outside our control could disrupt our power supply plans.\n\nWe are focused on reliably and economically meeting our members’ requirements for electric power. We continually evaluate and refine our power supply strategy to achieve this objective in a manner that balances the forecasted cost of power to our members, our ability to provide reliable service and our impact on the environment. Based on our strategy, we develop and construct new generation and transmission facilities and enter into long-term and short-term power purchase agreements. In developing and implementing our strategy, we are guided by our forecasts of future market conditions and our assessment of the likelihood of the occurrence of various contingencies. Some of these contingencies include:\n\n•Future market prices for natural gas and electricity;\n\n•Current and future transmission constraints and changes in the location of load impacting the ability to deliver electricity to desired locations; and\n\n45\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\n•Trends in the rate of installation of renewable energy resources, such as wind-powered generation facilities and energy storage, in the service territories of our members and neighboring regions.\n\nAs with any forecast, our ability to accurately predict or anticipate future events becomes less reliable the farther into the future the forecast extends. We must make assumptions to develop our plans for the future. These assumptions include economic forecasts, cost estimates, construction schedules, power demand forecasts, reliability and reserve margin requirements, the appropriate generation mix to meet demand and potential changes to the regulatory environment. Should our assumptions be inaccurate, or be superseded by subsequent events, or unexpected contingencies occur, our plans may not be effective in achieving the intended results, which could adversely affect our results of operations, financial condition or cash flows, our ability to meet electricity demand, or the way we conduct our business.\n\nOur ability to successfully develop and execute our power supply strategy for our members is complicated by the need to serve load in both the Eastern Interconnection and the Western Interconnection of the United States and the need to balance our members’ requirements in several transmission systems. For example, a surplus of generating capacity located in MISO may not easily be used to meet additional load in SPP. A surplus of transmission capacity may also exist in one system, while transmission constraints requiring significant investment may exist in another system. Consequently, even if our power supply portfolio includes the right mix of resources, those resources may not be optimally located for efficient use as the grid continually evolves.\n\nFailure of our facilities to operate as we plan could have an adverse effect on our results of operations or financial condition.\n\nThe operation of our generation or transmission facilities involves risks, including the breakdown or failure of power generation equipment, transmission lines, pipes or other equipment or processes and performance below expected levels of output or efficiency. The occurrence of any such events could result in:\n\n•Loss of market sale opportunities;\n\n•Significant expenditures to repair or replace the affected facilities or related infrastructure;\n\n•Failure to maintain the integrity or reliability of our transmission system; or\n\n•Increases in purchased power.\n\nIn the Eastern energy markets of SPP and MISO, failure of our facilities to operate as planned could also result in:\n\n•Loss of capacity accreditation, requiring the purchase of additional market capacity and potentially resulting in deficiency payments under applicable market rules;\n\n•Increase in market pricing, if the unit in outage is the marginal unit or affects the pricing of the marginal unit;\n\n•Increase in market pricing if a transmission outage or changes in load or generation resources drives an increase in congestion costs; or\n\n•Financial implications of not providing MWhs to the market, if a unit has committed MWhs in the day-ahead market and cannot provide that energy in real time.\n\nIn Western markets of the Western Electricity Coordinating Council (“WECC”), failure of our facilities to operate as planned could result in:\n\n•The need to operate alternative facilities for an extended period of time, likely at a greater cost;\n\n•A default on a contractual obligation to deliver power; or\n\n•The purchase of potentially more costly replacement energy and capacity power in the market.\n\n46\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nIn addition, the failure of our generation, transmission or other facilities to perform as planned may cause health, safety or environmental problems. Our ability to safely and reliably operate, maintain and construct our facilities is subject to numerous risks, many of which are beyond our control, including:\n\n•The failure to take timely or adequate action to mitigate identified unsafe conditions, resulting in a catastrophic event; or\n\n•Operator or other human error.\n\nIf one or more of these events materialized, our results of operations, financial condition, or cash flows could be adversely affected.\n\nWe are subject to construction risks for additional projects we are undertaking to meet projected load growth.\n\nIn 2026 through 2030, we expect to spend approximately $7.5 billion on additional capital expenditures on a consolidated basis. Our capital plan includes construction of new generation resources and a number of new transmission lines and facilities. See “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Liquidity and Capital Resources—Projected Capital Expenditures” for a description of our capital plan for additional electric generation and transmission facilities and capital for enhancement of existing facilities.\n\nOur development and construction of new generation and transmission resources is subject to construction risk. We will also be subject to construction risks for capital projects to comply with current or future environmental standards. Many factors could lead to cost increases, cost overruns, and schedule delays for any of these projects, including:\n\n•challenges related to the failure of contractors, subcontractors, or vendors to perform their obligations;\n\n•timing and issuance of necessary permits, licenses, or approvals (including required certificates from regulatory agencies) and any related litigation or stakeholder opposition;\n\n•unforeseen engineering problems or scope changes;\n\n•performance under construction and equipment agreements and contract disputes;\n\n•environmental litigation; and\n\n•environmental, cultural, geological, and weather conditions.\n\nThe Company is progressing planned wind turbine repowering projects within its generation fleet in North and South Dakota. Certain projects have experienced delays in permitting approvals due to certain review requirements. These delays may shift anticipated construction timelines and the timing of related capital expenditures, and could increase project costs or reduce expected economic benefits. If such impacts occur, we could incur impairment charges or other adverse financial effects associated with these assets. In such circumstances, we would expect to seek regulatory accounting treatment from RUS or other applicable regulators to defer and amortize such costs over a future period. Failure to obtain such regulatory accounting treatment could adversely affect our results of operations, financial condition, and cash flows.\n\nConstruction‑related inflation, labor availability, supply chain disruptions, and tariff impacts may also contribute to project cost or schedule risk as discussed elsewhere in this “RISK FACTORS” section. Failure to complete any construction project on schedule and on budget for any reason could have an adverse effect on our results of operations.\n\nOur members’ requirements are impacted by matters outside our control, including the power requirements in the Bakken shale formation and the operation of data centers.\n\nIn addition to the structure and nature of our power supply resources, our members’ requirements for power can significantly impact our results of operations, financial condition and cash flows. We currently forecast that our members’ peak demand requirements supplied by us will increase at an average annual compound rate of\n\n47\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\n2.5% for the period from 2026 through 2031, exclusive of large loads. Our forecasts of our members’ requirements and their actual future requirements may vary significantly. If we overestimate the growth in our members’ requirements, there is no assurance that the price of surplus capacity or energy from surplus power supply resources will be economical or could be sold without a loss. In addition, costs related to any new facilities constructed to meet the anticipated load growth could increase some of these members’ cost of electric service more than anticipated and could affect their ability to perform their contractual obligations to us. If we underestimate the growth in our members’ requirements, we may be required to purchase capacity or energy at a cost substantially above the cost we would have incurred to obtain the power or generate the energy from facilities we own.\n\nSeveral factors could influence the actual rate of growth of our members’ requirements, including:\n\n•The power requirements of our members serving commercial and industrial loads, including the Bakken shale formation and the operation of data centers to meet the increased demand for artificial intelligence (“AI”) resources as described below;\n\n•Agricultural commodity price fluctuations and possible diseases that cause disruption in the food supply chain;\n\n•Volatile pricing in the crypto currency markets that results in loads being curtailed or ramped up unexpectedly;\n\n•The impact of extended periods of unusual or extreme weather on power requirements;\n\n•Changes in trends “behind the meter,” such as growth in the use of distributed solar generation equipment and energy storage that reduce energy purchases from our members and thus us;\n\n•Implementation of energy conservation and demand response programs that reduce peak demand; and\n\n•Macroeconomic conditions in the members’ service territories, including population or economic changes.\n\nCurrently, one of the largest factors affecting the rate of growth of our members’ power requirements is economic activity related to oil and natural gas production in the Bakken shale formation in western North Dakota and eastern Montana. While the rate of growth of power requirements associated with oil production in the Bakken has moderated in recent years, growth still continues. Many factors impact oil and natural gas production in this region. One factor is the volatility of crude oil and natural gas prices. A significant decline in the price of crude oil and natural gas could impact the development of this region. Therefore, the estimates as to the production volumes in the region could be too high and, as a result, our members’ requirements for power could be impacted.\n\nDue to the depth of the oil and natural gas, production from this formation requires fracking to separate the oil from the rock formation. To the extent that production of oil and natural gas by hydraulic fracking becomes more regulated by state or federal governments, production could be restricted or become more expensive, thereby impacting our Class A Members’ load growth. Over the past decade, there has been an increase in the number of regulations and restrictions on the production of oil and natural gas through hydraulic fracking, including several states banning the practice entirely. Currently, the majority of the oil and natural gas recovered in our Class A Members’ service territories are recovered utilizing hydraulic fracking. While we do not currently anticipate any regulations, restrictions or bans on fracking in the areas in which we operate, any regulation, restriction or ban by federal, state or local governments on fracking in those areas could adversely affect our results of operations, financial condition or cash flows and the way we operate our business.\n\nSubstantially large loads considered for development in the service territories of our Class A Members could significantly impact our Class A Members’ requirements for power and our results of operations.\n\nWe are projected to experience significant load growth over the next several years resulting from traditional load growth and the development of several large commercial projects, including AI resources, data centers and cryptocurrency mining. Our members have received requests to commit to provide thousands of megawatts of baseload energy to new large loads. Both the number and size of these large load requests that are being\n\n48\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nconsidered for development and construction in the service territories of our members are increasing and expected to further increase substantially with the growth of AI and other factors, thereby potentially materially increasing the aggregate power requirements of our members. The volume of these large load requests and uncertainty related to these requests create risks.\n\nTo the extent that any of our members serve large data centers, serving this additional load growth may put pressure on our existing generation and transmission infrastructure and will require significant investments to meet the anticipated load growth and they will be subject to increased counterparty risk to customers that may consume a disproportionate percentage of their sales. Changes in technology could impact the development and continued resource needs of data centers and any significant decrease in those needs could affect the counterparty’s willingness or ability to pay for large amounts of electricity. Cryptocurrency data mining centers’ energy demands are particularly unpredictable as they may be affected by federal or state regulatory actions and are highly incentivized to operate in regions with relatively low energy prices and are able to shut down and relocate relatively easily. The potential volatility in energy demands from our Class A Members from these operations can exacerbate the challenges in determining our long-term power supply requirements and potentially adversely impact our financial results.\n\nTo meet the obligation to serve these large loads, insulate our existing membership from rate pressure associated with new generation and transmission requirements, increased fuel costs, and higher Locational Marginal Pricing (“LMP”), and to protect our balance sheet from stranded asset risk, we adopted a Large Load Commercial Program in 2025. Under this program, new loads meeting the requirements to be considered a “large load” will be billed under a rate structure that includes a market pass-through component and will be required to contribute a substantial portion of the capital required to build or acquire the assets necessary to serve their load. There is no guarantee that this program will fully insulate us from the risks associated with these large loads.\n\nWe cannot predict whether the large loads under consideration and for which we are planning will ever commence operations, the size and duration of the power requirements of those that do become operational, and whether they will seek to be served by a power supplier other than our members. For these and other reasons, there can be no assurance that these developments will not have an adverse effect on our business, results of operations, financial condition or cash flows.\n\nIf we are unable to obtain an adequate supply of fuel, our ability to operate our facilities could be limited.\n\nWe obtain our natural gas and coal from multiple suppliers. Any disruptions in our fuel supplies, could result in us having insufficient levels of fuel supplies. Natural gas and coal markets have experienced supply chain and availability constraints in recent years. Natural gas supplies may be limited during periods of seasonal demands and are also subject to disruption due to natural disasters and similar events or infrastructure failures. Any failure to maintain access to or an adequate inventory of fuel supplies could require us to operate other generating plants at a higher cost or require us to purchase higher-cost energy from other sources and, as a result, have an adverse effect on our results of operations, financial performance, or cash flows.\n\nOur service reliability could be affected by problems at other utilities or by the increase in intermittent sources of power.\n\nWe are a transmission-owning member of SPP, a regional transmission organization. Some of our Class A Members also are transmission-owning members of SPP. In addition, some of our Class A Members service areas are within MISO and the WECC. SPP coordinates, controls and monitors the bulk electric system and wholesale power market in the central United States on behalf of a diverse group of utilities and transmission companies in fourteen states. Our transmission facilities are directly interconnected with the transmission facilities of neighboring utilities and are thus part of the larger bulk electric transmission system. Generation and transmission assets are the cornerstone of bulk electric system reliability. Accordingly, problems or outages at other utilities may increase costs, interrupt service to our members, or reduce service reliability. In addition, the increasing contribution of intermittent sources of power, such as wind and solar, may place significant strain on the entire bulk electric system, particularly if investment, operations, and maintenance of firm dispatchable generation units (e.g., coal or natural gas-fired generation facilities) sources are uneconomic. Greater curtailment or cycling of firm dispatchable generation may increase the wear-and-tear on these facilities and consequently increases the potential for breakdown of the facilities. If we suffer a service interruption, or the\n\n49\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nbulk electric system generally has reduced service reliability, our results of operations, financial condition, cash flows, or reputation may be adversely affected.\n\nWildfires and other catastrophic events could adversely affect our financial condition and results of operations.\n\nWe are exposed to the risk of wildfires and other catastrophic events that could result in substantial losses, operational disruptions, and significant financial impacts. We own over 2,500 miles of transmission lines as of December 31, 2025, including transmission lines that cross through certain wildfire-prone areas, such as forest areas and grasslands. Climate-related factors may worsen hot and dry summer conditions, which could increase the likelihood and magnitude of damages caused by fires burning or allegedly originating from our equipment. If a wildfire alleged to have involved our transmission facilities, or alleged to have resulted from our or our contractors’ operating or maintenance practices, were to occur, we could be exposed to claims for property damage, costs of fire-fighting, evacuation, and clean-up activities, personal injury or loss of life, environmental pollution and other costs, for which liability could be substantial and in excess of our insurance coverage. We may also be subject to credit ratings downgrades, unfavorable media coverage, fines and penalties, or other negative consequences which may impact our financial condition and future plans. Any such liability could adversely affect us and our results of operations, financial condition, or cash flows.\n\nIn addition to wildfires, our operations may be affected by other catastrophic events, including tornadoes, floods, droughts, mechanical failures, and intentional acts such as terrorism. The frequency and severity of these events are unpredictable and may increase as a result of climate‑related factors. Such events may damage critical infrastructure, disrupt our ability to generate or transmit electricity, impair fuel delivery and supply chains, or reduce our members’ electricity requirements for an extended period. Restoration of damaged facilities may require substantial capital expenditures for repairs, replacements, or modifications. Any resulting operational disruptions or financial impacts could be significant and could adversely affect our results of operations, financial condition, or cash flows.\n\nWe are subject to operational and market risks associated with participation in RTOs, including SPP and MISO.\n\nOur operations within RTOs, including SPP and MISO, expose us to a variety of operational, regulatory, and market risks that could adversely affect our financial condition and results of operations. Both SPP and MISO have recently revised their planning reserve margin (“PRM”) requirements in response to increasing reliability concerns. In 2025, MISO reduced its PRM target from 9.0% to 7.9% for the 2025/2026 planning year, yet still experienced a 43% drop in surplus capacity compared to the prior year. This tightening of capacity positions, combined with the retirement of dispatchable generation and delays in new resource development, has led to significantly higher prices for capacity that we must purchase or have available. Similarly, SPP has approved and implemented an increase in its PRM from 15% to 16% for the summer season beginning in 2026, and has implemented a 36% PRM for the winter season starting in 2026/2027. These changes reflect the growing risk of winter reliability events, as recent studies show that the majority of annual loss-of-load risk is now concentrated in the winter months. As of May 2026, we have transitioned portions of our western load and generation into organized market participation, including SPP’s Western market, WEIM, and EDAM. This includes participation in balancing authority operations within SPP, Black Hills Power and the Public Service Company of Colorado (“PSCo”) balancing authorities. We also plan to further transition portions of our operations into additional organized wholesale markets during 2027, which could expose us to additional operational, regulatory, or market risks. These evolving market and reliability requirements may increase our cost of compliance, could limit our ability to take planned outages, and may require additional investment in capacity resources. Moreover, the variability of renewable generation, fuel supply constraints, and extreme weather events further complicate our ability to meet these requirements reliably. Failure to effectively manage these risks could adversely affect our results of operations, financial condition, or cash flows.\n\nFailure to maintain a skilled workforce could adversely affect our operations.\n\nTogether with our subsidiaries, we require skilled executive officers as well as professional and technical employees to operate and maintain our generation, transmission and other facilities, such as the Synfuels Plant. Competition for qualified employees and broader labor shortages have made it more difficult to attract\n\n50\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\nnecessary personnel. Our failure to attract and retain the appropriate workforce talent required for the most efficient operation of our facilities and business could limit our ability to maximize our enterprise value.\n\nA significant portion of our employees is covered by collective bargaining agreements with expiration dates ranging from 2026 through 2028. Failure to reach satisfactory agreements with these labor unions, or any resulting strikes, work stoppages, or other labor disruptions, could adversely impact our operations, financial condition, or results of operations. The terms of future collective bargaining agreements may also increase labor costs or limit our operational flexibility.\n\nLegal and Regulatory Risks\n\nWe are involved in disputes and legal proceedings that, if determined unfavorably to us, could have an adverse effect on our results of operations, financial condition, or cash flows.\n\nWe are involved in several disputes and legal proceedings that, if determined unfavorably to us, could have a material adverse effect upon our business. See “LEGAL PROCEEDINGS.” Any such disputes or legal proceedings, whether with or without merit, could be expensive and time consuming, could divert the attention of our management and, if resolved adversely to us, could harm our reputation and increase our costs or reduce our revenues, all of which could have a material adverse effect on our financial results. Further, any adverse result to us with respect to our current disputes or legal proceedings could result in more litigation, further exacerbating the adverse consequences noted above.\n\nOur business is the focus of extensive existing and proposed statutory and regulatory restrictions intended to limit the impact of our operations on the environment. These restrictions will impact our operations in ways we cannot fully predict and could have an adverse effect on our financial results.\n\nWe are required to comply with numerous federal, state and local laws relating to the protection of the environment. These laws include restrictions on air emissions, water discharges and the use, management and disposal of hazardous and solid wastes. We expect to spend substantial amounts on capital expenditures to comply with environmental laws, including for the installation, maintenance and operation of pollution control equipment, monitoring systems and other related equipment and facilities to comply with these laws.\n\nOur ability to plan for and meet applicable environmental requirements is challenged due to new legislation, rulemaking, executive orders, and judicial interpretations with respect to environmental laws. The outcomes and effects of the United States Environmental Protection Agency’s (“EPA”) and other agencies’ rulemakings, and of litigation, executive orders, and other governmental actions, cannot be predicted. Environmental regulations and orders sometimes are appealed or otherwise litigated in the courts for several years. Sometimes regulations or orders are vacated or stayed. Implementation of these contested laws, regulations, or proposals can be delayed. In addition, there may be attempts to repeal or amend final regulations that have survived legal challenges and become effective. These modifications then may restart the cycle of legal challenges to the new laws.\n\nOur compliance with existing and proposed environmental laws is further complicated by the scope of our operations. We operate generation facilities in four different states. EPA and state environmental agencies often implement environmental laws and regulations in a manner designed to meet compliance targets within a particular state. As a result, existing and future environmental laws may cause us to undertake relatively higher cost measures to comply with laws in one state jurisdiction than those that would be applicable or acceptable in another state. The differential in cost between these compliance measures could be substantial, including as a result of substantial additional capital expenditures to install new pollution control facilities or the permanent closure of one or more units of one or more existing coal-fired or gas-fired generation facilities.\n\nThe lack of certainty regarding potential future environmental requirements exists even though we must make decisions in the near term to plan for compliance with our assessment of likely future requirements. For example, capital expenditures in pollution control equipment for a given facility to achieve compliance must incorporate our assessment of the impact of all other known or anticipated environmental laws with respect to the operation of the same facility. The resulting costs to comply with all applicable environmental requirements, as they may change from time to time, may have an adverse effect on our results of operations, financial\n\n51\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\ncondition and cash flows. For additional information regarding certain environmental regulations to which our business is subject, see “BUSINESS—Environmental Regulation.” in the Prospectus.\n\nOther Risks\n\nCybersecurity incidents or failures of our information systems could disrupt our operations, compromise sensitive information, and adversely affect our financial condition and reputation.\n\nWe operate in a highly regulated industry requiring the continued operation of advanced information systems, operational technology (“OT”), and network infrastructure. We rely on private and third-party communication infrastructure and computing information systems, and other technology, including hosted servers and internet, to support a variety of business processes and activities. We use information systems to process financial information and operational data for internal reporting purposes and to comply with regulatory financial reporting, legal, tax, and operational requirements. Deliberate or unintentional cyber incidents could directly or indirectly impact our owned and co-owned generation and transmission assets and OT systems. An incident involving our information technology or OT systems could also impact our ability to complete critical business or operational functions and inhibit our ability to effectively maintain certain financial reporting internal controls. In addition to our OT systems, our business and facilities may be impacted by physical or cyber attacks on the business or facilities of others. Any of these types of events could adversely affect our results of operations, financial performance, or cash flows.\n\nIn addition, such incidents could result in unauthorized disclosure of material confidential information, including personally identifiable information or sensitive business information. These events could also impair our ability to raise capital by contributing to financial instability and reduced economic activity. To reduce the likelihood and severity of a cyber incident, we employ procedural and technical controls to help protect and preserve the confidentiality, integrity and availability of data and systems. Despite these protections, a major cyber incident could result in significant business disruptions, compromised or improper disclosure of data, safety risks and significant expense to repair security breaches or replace damaged systems, and could lead to litigation, regulatory action, including penalties or fines, and adverse effects to our results of operations, financial condition and reputation. As cybercriminals become more sophisticated, the cost of proactive defensive measures may increase. We are also subject to mandatory and enforceable North American Electric Reliability Corporation (“NERC”) reliability standards to protect against security risks to the reliable operation of the bulk power system. The consequences of failure to comply with these standards can result in fines and other penalties.\n\nWe may be subject to physical attacks, threats, or other interference.\n\nAs operators of energy infrastructure, we face a heightened risk of physical attacks, or threats of such attacks, on our electric systems. Our generation and transmission assets and systems are geographically dispersed and are often in rural or sparsely populated areas which make it difficult to adequately detect, defend from, and respond to such attacks and effectively deter and prevent such attacks. Recent physical attacks on us and other electric utilities in the U.S. and the coverage of such attacks by the media may have increased this risk and the risk of copycat attacks. If a significant physical attack occurred, it could disrupt our operations, damage our property, pose health and safety risks, have an adverse impact on our revenues, cause us to incur response costs, and result in other financial losses. It could also cause us to be subject to increased regulation or litigation, and cause damage to our reputation, any of which could have an adverse effect on our business and results of operations.\n\nNew technologies and improvements in existing technologies related to the generation, storage and use of electricity may materially change the operation of our business in ways we cannot predict.\n\nTechnological developments are affecting many aspects of the business of providing electric services. These developments include the improvement in the efficiency of electricity generation from non-conventional sources, the reduction of energy usage and the development of improved modes of energy storage. In recent years, the technologies for wind and solar-powered generation facilities have become more efficient and less expensive. Continued advances in these technologies may reduce the cost of power generated to a level that is competitive with conventional technologies, such as coal-fired or natural gas-fired generation facilities. In addition, new technologies related to fuel cells and other energy storage could significantly impact the overall\n\n52\n\n[Table of Contents](#i47c574ad12224397892dbd1c46bb3279_2679)\n\ndemand for electricity, especially when coupled with distributed generation. While we cannot predict the exact nature of how these technological changes will affect our financial results, this trend could adversely affect our members’ demand for electricity, the dispatch of our facilities and, ultimately, our results of operations, financial condition, or cash flows. This adverse effect could be further exacerbated if state or federal governments require (or enhance existing requirements) that a specified percentage of the electricity we sell comes from renewable resources if such renewable technologies are not commercially viable compared to conventional technologies.\n\nAccidents involving Dakota Gas products could cause severe damage to people or property.\n\nAs a producer and seller of synthetic natural gas and other byproducts and coproducts of the coal gasification process, including phenol, anhydrous ammonia, ammonium sulfate, carbon dioxide, crude cresylic acid, krypton and xenon gases, liquid nitrogen, naphtha, tar oil, urea and diesel exhaust fluid (“DEF”), Dakota Gas’s operations and the producing and handling of these chemical substances involves significant risks and hazards. Accidents involving chemical substances could result in fires, explosions, pollution or other serious circumstances, which could cause severe damage or injury to persons (employees or otherwise), property or the environment, as well as disrupt our business. Any damage to persons, equipment or property or other disruption to Dakota Gas’s ability to produce or distribute its products could adversely impact our cash flows, results of operations and financial condition and result in significant additional costs to replace or repair our assets.\n\nWe could be subject to litigation and recapture of tax credits if carbon oxides we have sequestered are released into the atmosphere.\n\nIn February 2024, Dakota Gas concurrently placed into service a geologic sequestration project at the Synfuels Plant and entered into a variety of contractual agreements with an investor to monetize tax credits related to the geologic sequestration of carbon oxides under Section 45Q (“Section 45Q”) of the Internal Revenue Code of 1986, as amended (the “Code”). The tax credits are available for up to twelve years from the time the project reached commercial operation. A variety of factors could result in Dakota Gas not receiving the anticipated benefits of the transaction. A change in the Code or the Internal Revenue Service’s interpretation of tax laws could adversely affect or eliminate the benefit of Section 45Q. As part of the transaction with the investor, Dakota Gas has an obligation to manage the carbon sequestration process and is responsible for the ongoing monitoring of sequestered carbon oxides. We provide a guaranty for Dakota Gas’s payment obligations to the investor. If Dakota Gas or any of its contractors failed to perform their respective obligations, Dakota Gas could be liable to the investor for substantial amounts, including for costs incurred to third parties as a result of the failure. For example, the Internal Revenue Service could disallow claimed tax credits for failure to properly sequester the carbon oxides. Any such failure and any resulting payment obligations on our part could adversely affect our results of operations, financial condition, or cash flows."}