Black Hills Power Inc – ‘424B4’ on 8/9/02

On:  Friday, 8/9/02, at 3:38pm ET   ·   Accession #:  930661-2-2717   ·   File #:  333-92398

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Prospectus   —   Rule 424(b)(4)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                            30    129K 

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                                              Filed pursuant to Rule 424(b)(4)
                                                        SEC File No. 333-92398

Prospectus                                                                      

$75,000,000 

[LOGO]  

BLACK HILLS POWER, INC. 
(a subsidiary of Black Hills Corporation) 

First Mortgage Bonds, 7.23% Series AE Due 2032  

----------------- 

 We will pay interest on the bonds semiannually on February 15 and August 15
of each year, beginning on February 15, 2003. We may redeem the bonds at our    
option in whole at any time or in part from time to time at the redemption      
price described under "Description of the Bonds and Mortgage."                  

                                                                [Download Table]

                                 Per Bond    Total   
                                 -------- -----------
                                                     
Price to public.................   100.0% $75,000,000
Underwriting discount...........   0.875% $   656,250
Proceeds to us (before expenses)  99.125% $74,343,750

----------------- 

 Investing in the bonds involves risks. See "Risk Factors" beginning on page
9.                                                                              

Neither the Securities and Exchange Commission nor any state securities   
commission has approved or disapproved of these securities or determined if     
this prospectus is truthful or complete. Any representation to the contrary is  
a criminal offense.                                                             

Interest on the bonds will accrue from August 13, 2002. The underwriter   
expects to deliver the bonds to purchasers through the facilities of the        
Depository Trust Company on or about August 13, 2002.                           

----------------- 

ABN AMRO Incorporated 

----------------- 

The date of this prospectus is August 8, 2002.  

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You should rely only on the information contained in this prospectus or to
which we have referred you. We have not authorized anyone to provide you with   
information that is different. We are not making an offer of these securities   
in any state where the offer is not permitted. You should not assume that the   
information provided by this prospectus is accurate as of any date other than   
the date on the front of this prospectus.                                       

----------------- 

TABLE OF CONTENTS 

                                                                [Download Table]

                                    Page                                       Page
                                    ----                                       ----
                                                                                   

About This Prospectus..............  2   Selected Consolidated Financial Data.  16 

Where You Can Find More Information  2   Use of Proceeds......................  19 

Forward-Looking Statements.........  4   Description of the Bonds and Mortgage  20 

Summary............................  6   Underwriting.........................  28 

Risk Factors.......................  9   Legal Opinions.......................  29 

Black Hills Power, Inc.............  13  Experts..............................  29 

Capitalization.....................  15                                            

----------------- 

ABOUT THIS PROSPECTUS 

This prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments, supplements, schedules and exhibits to the       
registration statement, referred to as the "registration statement") that we    
have filed with the SEC under the Securities Act of 1933 with respect to the    
securities offered by this prospectus. This prospectus does not contain all the 
information which is in the registration statement. Certain parts of the        
registration statement are omitted as allowed by the rules and regulations of   
the SEC. We refer you to the registration statement for further information     
about our company and the securities offered by this prospectus. Statements     
contained in this prospectus concerning the provisions of documents are not     
necessarily complete, and each statement is qualified in its entirety by        
reference to the copy of the applicable document filed with the SEC. You should 
read this prospectus together with any additional information described under   
the heading "Where You Can Find More Information."                              

WHERE YOU CAN FIND MORE INFORMATION 

  We file annual, quarterly and special reports and other information with the
SEC. You can inspect and copy the registration statement of which this          
prospectus constitutes a part and the reports and other information we file     
with the SEC at the public reference room maintained by the SEC at Room 1024,   
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed  
rates. You can obtain information on the operation of the public reference room 
by calling the SEC at 1-800-SEC-0330. The same information will be available    
for inspection and copying at the regional office of the SEC located at         
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.  
The SEC also maintains a Web site which provides online access to reports,      
proxy and information statements and other information regarding companies that 
file electronically with the SEC at the address http://www.sec.gov.             

The SEC allows us to "incorporate by reference" into this prospectus the  
information we file with them, which means we can disclose important business   
and financial information about us to you by referring you to                   

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those documents. The information incorporated by reference is considered to be  
a part of this prospectus, except for any information that is superseded by     
information included directly in this prospectus. Information that we file      
later with the SEC will automatically update and supersede the information in   
this prospectus. We incorporate by reference the documents listed below that we 
have previously filed with the SEC and any future filings we make with the SEC  
after the date of this prospectus under Sections 13(a), 13(c), 14 or 15(d) of   
the Securities Exchange Act of 1934 until the termination of the offering made  
under this prospectus:                                                          

.   Our Annual Report on Form 10-K for the fiscal year ended December 31,   
2001 (SEC File No. 1-7978);                                         

.   Our Quarterly Report on Form 10-Q and Amendment No. 1 to our Quarterly  
 Report on Form 10-Q/A, each for the quarter ended March 31, 2002 (SEC
File No. 1-7978); and                                               

.   Our Current Report on Form 8-K dated May 31, 2002 (SEC File No. 1-7978).

These filings have not been included in or delivered with this prospectus.
We will provide to each person, including any beneficial owner, to whom this    
prospectus is delivered, a copy of any or all information that has been         
incorporated by reference in this prospectus but not delivered with this        
prospectus. You may request a copy of these filings at no cost, by writing or   
telephoning us at the following address:                                        

Black Hills Power, Inc.                             
625 Ninth Street                                    
Rapid City, South Dakota 57701                      
Attention: Investor Relations                       
(605) 721-1700                                      

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FORWARD-LOOKING STATEMENTS  

This prospectus and the documents to which we refer you include           
"forward-looking statements" as defined by the SEC. We make these               
forward-looking statements in reliance on the safe harbor protections provided  
under the Private Securities Litigation Reform Act of 1995. These statements    
concern our plans, expectations and objectives for future operations. All       
statements, other than statements of historical facts, included in this         
prospectus that address activities, events or developments that we expect,      
believe or anticipate will or may occur in the future are forward-looking       
statements. The words "believe," "plan," "intend," "anticipate," "estimate,"    
"project" and similar expressions are also intended to identify forward-looking 
statements. These forward-looking statements include, among others, such things 
as:                                                                             

.   expansion and growth of our business and operations;                    

.   future financial performance;                                           

.   future acquisition and development of power plants; and                 

.   business strategy.                                                      

 These forward-looking statements are based on assumptions, which we believe
are reasonable based on current expectations and projections about future       
events and industry conditions and trends affecting our business. However,      
whether actual results and developments will conform to our expectations and    
predictions is subject to a number of risks and uncertainties which could cause 
actual results to differ materially from those contained in the forward-looking 
statements, including the following:                                            

.   risk factors discussed in this prospectus;                              

.   unanticipated developments in the western power markets, including:     

.   unanticipated governmental intervention;                          

.   deterioration in the financial condition of counterparties;       

.   default on amounts due from counterparties;                       

.   adverse changes in current or future litigation;                  

 .   adverse changes in the tariffs of the California Independent System
Operator;                                                     

.   market disruption; and                                            

    .   adverse changes in energy and commodity supply, volume and pricing and
interest rates;                                               

.   prevailing governmental policies and regulatory actions with respect to 
 allowed rates of return, industry and rate structure, acquisition and
  disposal of assets and facilities, operation and construction of plant
  facilities, recovery of purchased power and other capital investments,
and present or prospective wholesale and retail competition;        

.   the State of California's efforts to reform its long-term power purchase
contracts;                                                          

  .   changes in and compliance with environmental and safety laws and policies;

.   weather conditions;                                                     

.   population growth and demographic patterns;                             

.   competition for retail and wholesale customers;                         

.   pricing and transportation of commodities;                              

.   market demand, including structural market changes;                     

.   changes in tax rates or policies or in rates of inflation;              

.   changes in project costs;                                               

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.   unanticipated changes in operating expenses or capital expenditures;    

.   capital market conditions;                                              

.   technological advances by competitors;                                  

.   competition for new energy development opportunities;                   

.   legal and administrative proceedings that influence our business and    
profitability;                                                      

.   the effects on our business, including the availability of insurance,   
    resulting from the terrorist actions on September 11, 2001, or any other
terrorist actions or responses to such actions;                     

.   the effects on our business resulting from the financial difficulties of
     Enron and other energy companies, including their effects on liquidity in
    the trading and power industry, and their effects on the capital markets
  views of the energy or trading industry, and our ability to access the
capital markets on the same favorable terms as in the past; and     

.   the effects on our business in connection with a lowering of our credit 
 rating (or actions we may take in response to changing credit ratings
criteria), including:                                               

.   increased collateral requirements to execute our business plan;   

.   demands for increased collateral by our current counterparties;   

.   refusal by our current or potential counterparties or customers to
enter into transactions with us; and                          

.   our inability to obtain credit or capital in amounts or on terms  
favorable to us.                                              

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SUMMARY 

The following is a summary of the terms of this offering and the bonds    
offered by this prospectus. For a description of the specific terms of the      
bonds, see "Description of the Bonds and Mortgage." Unless the context          
otherwise requires, references in this prospectus to "Black Hills Power," "we," 
"us" and "our" refer to Black Hills Power, Inc.                                 

The Offering  

                                                                [Download Table]
                                                                                
Bonds Offered............. $75,000,000 in principal amount of First Mortgage    
                           Bonds, 7.23% Series AE due 2032                      

Maturity Date............. August 15, 2032                                      

Interest Rate............. 7.23% per year                                       

Interest Payment Dates.... February 15 and August 15, beginning on              
                           February 15, 2003                                    

Ranking and Security...... The bonds will be secured equally and ratably with   
                           our other bonds by a first mortgage on substantially 
                           all of our property other than:                      
                           .  the stock and assets of our wholly-owned          
                              independent power subsidiary, Black Hills         
                              Energy Capital, Inc.; and                         
                           .  other "excepted property,"                        
                           and are subject to "permitted encumbrances," each of 
                           which are described under "Description of the Bonds  
                           and Mortgage." The bonds are not obligations of or   
                           guaranteed by our parent company, Black Hills        
                           Corporation, or any of its other subsidiaries.       

Redemption................ We will have the option to redeem the bonds, in      
                           whole or in part, at any time or from time to time,  
                           at the redemption price described in "Description of 
                           the Bonds and Mortgage--Optional Redemption."        

Use of Proceeds........... Approximately $16.7 million for the construction of  
                           an "AD-DC-AC Converter Station"; approximately       
                           $15.0 million to repay indebtedness under our bridge 
                           credit facility; approximately $32.5 million for     
                           general capital expenditures in 2002 and 2003; and   
                           approximately $2.5 million to satisfy bond maturities
                           for some of our outstanding bonds due in 2003.       
                           Remaining proceeds will be used for general          
                           corporate purposes. See "Use of Proceeds."           

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Black Hills Power, Inc. 

We are an electric utility serving customers in South Dakota, Wyoming and 
Montana. Our electric load is served by coal-, oil- and natural gas-fired       
generating units providing 435 megawatts of generating capacity and by 60       
megawatts of capacity under purchased power and capacity contracts. Our         
independent power unit holds varying interests in gas-fired and hydroelectric   
independent power plants in California, Colorado, Massachusetts, Nevada and New 
York.                                                                           

For selected financial information and our ratio of earnings to fixed     
charges, see "Selected Consolidated Financial Data."                            

Recent Developments                                                             

Earnings for the Second Quarter of 2002.  On July 29, 2002 our parent     
company, Black Hills Corporation, announced its second quarter 2002 financial   
results, which included the results for Black Hills Power. Consolidated         
earnings from continuing operations for Black Hills Power for the second        
quarter of 2002 were $9.1 million, compared to $20.0 million for the second     
quarter of 2001; for the six months ended June 30, 2002, consolidated earnings  
from continuing operations for Black Hills Power were $21.1 million compared to 
$36.2 million for the same period in 2001.                                      

Earnings decreased primarily due to a substantial decline in revenue from 
off-system sales for our electric utility business group, which resulted        
primarily from a substantial decrease in the price of electricity. For the      
electric utility, the average price per megawatthour for off-system sales for   
the three- and six-month periods ended June 30, 2002 was approximately 68% and  
75% less than the average price for the comparable periods in 2001. In          
addition, there was a 28% and 32% decline in off-system electricity             
megawatthour sales for the three-month and six-month periods, respectively.     
Firm residential and contracted electricity sales increased, but were offset by 
a decline in industrial sales due to the closing of the Homestake Gold Mine at  
year-end 2001. Revenue declines were partially offset by lower fuel and         
purchased power costs.                                                          

The following table provides certain operating statistics for our electric
utility:                                                                        

                                                                [Download Table]

                          Three months ended Six months ended
                             June 30,           June 30,     
                          ------------------ --------------- 
                           2001      2002     2001     2002  
                           -------  -------  -------  -------
                                                             
Firm (system) sales - MWh 464,000   462,000  990,000  968,000
Off-system sales - MWh... 293,000   210,000  550,000  371,000

  Net income for our electric utility business group for the second quarter of
2002 was $6.8 million, compared to $16.8 million for the second quarter of      
2001; for the six months ended June 30, 2002, net income was $14.6 million      
compared to $34.1 million for the same period in 2001.                          

Net income for our independent power business group for the second quarter
of 2002 was $2.3 million, compared to $3.2 million for the second quarter of    
2001; for the six months ended June 30, 2002, net income was $6.5 million       
compared to $2.1 million for the same period in 2001.                           

We anticipate filing our second quarter 2002 Form 10-Q on August 14, 2002.

  Recent Financing Activities.  Our independent power business unit is seeking
long-term project-level financing of approximately $160 million for the Las     
Vegas project, a 277 megawatt gas-fired generation complex located in North Las 
Vegas, Nevada. We anticipate completing this financing during the third quarter 
of 2002. During the second quarter of 2002, our independent power business      
unit, through a project finance subsidiary, and in conjunction with our parent  
company, Black Hills Corporation, extended the term on a $50 million bridge     

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credit agreement to August 28, 2002. In addition, our parent company, Black     
Hills Corporation, expects to renew in the third quarter of 2002 its $200       
million corporate revolving credit facility, which expires August 28, 2002.     

Credit Ratings Under Review for Possible Downgrade.  On July 26, 2002,    
Moody's Investors Service placed the ratings of Black Hills Power, as well as   
its parent company, Black Hills Corporation, under review for a possible        
downgrade. The ratings affected include the senior secured issuer rating of A1  
for the bonds offered by this prospectus. Moody's rating is subject to revision 
or withdrawal at any time. The rating and any revisions or withdrawals are      
publicly disseminated by Moody's.                                               

Forest Fire in South Dakota.  In June 2002, a forest fire damaged         
approximately 10,800 acres of private and government land located near Deadwood 
and Lead, South Dakota. The fire destroyed approximately 20 structures (seven   
houses and 13 outbuildings) and caused the evacuation of the cities of Lead and 
Deadwood for approximately 48 hours.                                            

  The cause of the fire was investigated by the State of South Dakota. Sagging
power lines owned by us were implicated as the cause. We have initiated our own 
investigation into the cause of the fire, including the hiring of expert fire   
investigators, and that investigation is continuing.                            

 Although we have been put on notice of potential claims, no civil action or
regulatory proceeding has been initiated against us at this time. If, however,  
it is determined that sagging power lines owned by us were the cause of the     
fire and that we were negligent in the maintenance of those power lines, we     
could be liable for resultant damages. Although we cannot predict the outcome   
of either our investigation or of potential claims, management believes that    
any such claims will not have a material adverse effect on our financial        
condition or results of operations.                                             

Our Executive Offices                                                           

We are incorporated in South Dakota and our headquarters and principal    
executive offices are located at 625 Ninth Street, Rapid City, South Dakota     
57701. Our telephone number is (605) 721-1700.                                  

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RISK FACTORS  

  Before you invest in our bonds, you should be aware of the significant risks
described below. You should carefully consider these risks, together with all   
of the other information included in this prospectus, before you decide whether 
to purchase our bonds.                                                          

Risks Relating to Our Business                                                  

We have substantial indebtedness and will require significant additional  
amounts of debt and equity capital to grow our businesses and service our       
indebtedness. Our future access to these funds is not certain, and our          
inability to access funds in the future could adversely affect our liquidity.   

As of March 31, 2002, we had $971 million of short- and long-term debt, of
which $159 million is attributable to our electric utility, and $812 million is 
attributable to our independent power subsidiary. Our substantial debt presents 
the risk that we might not generate sufficient cash to maintain our credit      
facilities or service our indebtedness. In addition, our leveraged capital      
structure could limit our ability to finance the acquisition and development of 
additional projects, to compete effectively, to operate successfully under      
adverse economic conditions and to fully implement our strategy. The terms of   
our debt may also restrict our flexibility in operating our projects.           

In order to access capital on a substantially non-recourse basis in the   
future, we may have to make larger equity investments in, or provide more       
financial support for, our project subsidiaries. We also may not be successful  
in structuring future financing for our projects on a substantially             
non-recourse basis.                                                             

The State of California's efforts to void or reform its long-term power   
purchase contracts with various suppliers may adversely affect our contracts    
with these suppliers and our independent power subsidiary's results of          
operations.                                                                     

Our independent power subsidiary, Black Hills Energy Capital, Inc.,       
indirectly owns our Las Vegas Cogeneration II plant, which is currently under   
construction and which we refer to as LV Cogen II. LV Cogen II is party to a    
15-year tolling agreement with Allegheny Energy Supply Company, LLC, or AESC,   
under which AESC will deliver fuel to the facility and LV Cogen II will sell    
all of the facility's capacity, and all associated energy and ancillary         
services produced at the facility, to AESC.                                     

The California Public Utilities Commission filed a complaint with the     
Federal Energy Regulatory Commission, or FERC, in February 2002, seeking to     
void or, in the alternative, reform a number of long-term power purchase        
contracts entered into between the State of California/Department of Water      
Resources and several suppliers in 2001. One of the suppliers named in the      
complaint was AESC. If AESC's contract with the State of California/Department  
of Water Resources is voided or reformed, AESC may seek to alter or cancel its  
contract with LV Cogen II. Any such action by AESC, if successful, could        
adversely affect our independent power subsidiary's results of operations.      

  Our agreements with counterparties that have recently experienced downgrades
in their credit ratings expose us to the risk of counterparty default, which    
could adversely affect our cash flow and profitability.                         

Our independent power subsidiary, Black Hills Energy Capital, indirectly  
owns a 50% interest in the Las Vegas Cogeneration I plant, which is a 53        
megawatt gas-fired power plant located in North Las Vegas, Nevada. Under        
accounting principles generally accepted in the United States, we consolidate   
100% of the entity. Most of the power from that facility is sold under a        
long-term contract with Nevada Power Company, which expires in 2024. The credit 
ratings of Nevada Power Company and its parent holding company, Sierra Pacific  
Resources, have both been recently downgraded to non-investment grade status.   
Our independent power subsidiary could experience lost revenues and increased   
expenses if Nevada Power Company is unable to perform on its obligations under  
the power contract, either as a result of a deterioration of its                
creditworthiness or for any other reason.                                       

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  Our rate freeze agreement with the South Dakota Public Utilities Commission,
which prevents us, absent extraordinary circumstances, from passing on to our   
South Dakota retail customers cost increases we may incur during the rate       
freeze period, could decrease our operating margins.                            

 Our rate freeze agreement with the South Dakota Public Utilities Commission
provides that, until January 1, 2005, we may not apply to the Commission for    
any increase in rates, except upon the occurrence of various extraordinary      
events.                                                                         

Our utility's historically stable returns could be threatened by plant    
outages, machinery failure, increases in purchased power costs over which we    
have no control, acts of nature or other unexpected events that could cause our 
operating costs to increase and our operating margins to decline. Moreover, in  
the event of unexpected plant outages or machinery failures, we may be required 
to purchase replacement power in wholesale power markets at prices which exceed 
the rates we are permitted to charge our retail customers.                      

Because wholesale power, fuel prices and other costs are subject to       
volatility, our revenues and expenses may fluctuate.                            

A substantial portion of our growth in net income in recent years is      
attributable to increasing wholesale sales into a robust market. The prices of  
energy products in the wholesale power markets have declined significantly      
since the first half of 2001. Power prices are influenced by many factors       
outside our control, including fuel prices, transmission constraints, supply    
and demand, weather, economic conditions, and the rules, regulations and        
actions of the system operators in those markets. Moreover, unlike most other   
commodities, electricity cannot be stored and therefore must be produced        
concurrently with its use. As a result, wholesale power markets are subject to  
significant price fluctuations over relatively short periods of time and can be 
unpredictable.                                                                  

  Increasing competition in our businesses may adversely affect our ability to
make investments or acquisitions on attractive terms.                           

  We face increasing competition in each of our businesses. In particular, the
independent power industry is characterized by numerous strong and capable      
competitors, some of which have more extensive experience in the operation,     
acquisition and development of power generation facilities, larger staffs or    
greater financial resources than we do. Many of our competitors are also        
seeking favorable power generation opportunities. This competition may          
adversely affect our ability to make investments or acquisitions on attractive  
terms.                                                                          

Construction, expansion, refurbishment and operation of power generation  
facilities involve significant risks that we cannot always cover by insurance   
or contractual protections which could lead to lost revenues or increased       
expenses.                                                                       

The construction, expansion and refurbishment of power generation and     
transmission and resource recovery facilities involve many risks, including:    

.   the inability to obtain required governmental permits and approvals;    

.   the unavailability of equipment;                                        

.   supply interruptions;                                                   

.   work stoppages;                                                         

.   labor disputes;                                                         

.   social unrest;                                                          

.   weather interferences;                                                  

.   unforeseen engineering, environmental and geological problems; and      

.   unanticipated cost overruns.                                            

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 The ongoing operation of our facilities involves all of the risks described
above, in addition to risks relating to the breakdown or failure of equipment   
or processes and performance below expected levels of output or efficiency. New 
plants may employ recently developed and technologically complex equipment,     
especially in the case of newer environmental emission control technology. Any  
of these risks could cause us to operate below expected capacity levels, which  
in turn could result in lost revenues, increased expenses, higher maintenance   
costs and penalties. While we maintain insurance, obtain warranties from        
vendors and obligate contractors to meet certain performance levels, the        
proceeds of such insurance, warranties or performance guarantees may not be     
adequate to cover lost revenues, increased expenses or liquidated damages       
payments.                                                                       

Risks Relating to Our Industry                                                  

Our business is subject to substantial governmental regulation and        
permitting requirements as well as on-site environmental liabilities we assumed 
when we acquired some of our facilities. We may be adversely affected by any    
future inability to comply with existing or future regulations or requirements  
or the potentially high cost of maintaining the compliance of our facilities.   

 In General.  Our business is subject to extensive energy, environmental and
other laws and regulations of federal, state and local authorities. We          
generally are required to obtain and comply with a wide variety of licenses,    
permits and other approvals in order to operate our facilities. In the course   
of complying with these requirements, we may incur significant additional       
costs. If we fail to comply with these requirements, we could be subject to     
civil or criminal liability and the imposition of liens or fines. In addition,  
existing regulations may be revised or reinterpreted, new laws and regulations  
may be adopted or become applicable to us or our facilities, and future changes 
in laws and regulation may have a detrimental effect on our business.           

Environmental Regulation.  In acquiring some of our facilities, we assumed
on-site liabilities associated with the environmental condition of those        
facilities, regardless of when such liabilities arose and whether known or      
unknown, and in some cases agreed to indemnify the former owners of those       
facilities for on-site environmental liabilities. We strive at all times to be  
in compliance with all applicable environmental laws and regulations. However,  
steps to bring our facilities into compliance, if necessary, could be           
expensive, and thus could adversely affect our financial condition.             
Furthermore, with the continuing trends toward stricter standards, greater      
regulation, more extensive permitting requirements and an increase in the       
assets we operate, we expect our environmental expenditures to be substantial   
in the future.                                                                  

Ongoing changes in the United States utility industry, such as state and  
federal regulatory changes, a potential increase in the number of our           
competitors or the imposition of price limitations to address market            
volatility, could adversely affect our profitability.                           

The United States electric utility industry is currently experiencing     
increasing competitive pressures as a result of consumer demands, technological 
advances, deregulation, greater availability of natural gas-fired generation    
and other factors. The FERC has implemented and continues to propose regulatory 
changes to increase access to the nationwide transmission grid by utility and   
non-utility purchasers and sellers of electricity. In addition, a number of     
states have implemented or are considering or currently implementing methods to 
introduce and promote retail competition. Industry deregulation in some states  
has led to the disaggregation of some vertically integrated utilities into      
separate generation, transmission and distribution businesses, and deregulation 
initiatives in a number of states may encourage further disaggregation. As a    
result, significant additional competitors could become active in the           
generation, transmission and distribution segments of our industry.             

Proposals have been introduced in Congress to repeal the Public Utility   
Holding Company Act of 1935, or PUHCA, and the FERC has publicly indicated      
support for the PUHCA repeal effort. To the extent competitive pressures        
increase and the pricing and sale of electricity assume more characteristics of 
a commodity business, the economics of domestic independent power generation    
projects may come under increasing pressure.                                    

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In addition, the independent system operators who oversee most of the     
wholesale power markets have in the past imposed, and may in the future         
continue to impose, price limitations and other mechanisms to address some of   
the volatility in these markets. These types of price limitations and other     
mechanisms may adversely affect the profitability of our generation facilities  
that sell energy into the wholesale power markets. Given the extreme volatility 
and lack of meaningful long-term price history in some of these markets and the 
imposition of price limitations by independent system operators, we may not be  
able to operate profitably in all wholesale power markets.                      

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BLACK HILLS POWER, INC. 

General                                                                         

We are an electric utility serving customers in South Dakota, Wyoming and 
Montana. We began providing electric utility service in 1941 and began selling  
and marketing various forms of energy on an unregulated basis in 1956. Our      
independent power unit acquires, develops and expands unregulated power plants. 
We are a wholly-owned subsidiary of Black Hills Corporation, a holding company  
exempt from regulation under PUHCA.                                             

Utility                                                                         

  We engage in the generation, transmission and distribution of electricity to
approximately 59,200 customers in South Dakota, Wyoming and Montana. We own 435 
megawatts of generating capacity. We also purchase 60 megawatts of capacity     
(declining to 50 megawatts by 2004) from PacifiCorp under a long-term power     
contract. Our peak system load of 392 megawatts was reached in August 2001.     
Approximately 50% of our generating capacity consists of coal-fired plants and  
38% is gas- or oil-fired, with the remaining 12% purchased from others.         

Our revenue mix for 2001 was comprised of 31% wholesale off-system, 10%   
short-term contract wholesale, 22% commercial, 17% residential, 11% industrial, 
8% long-term contract wholesale and 1% municipal sales. In 2001, our South      
Dakota customers accounted for 92% of our retail electric revenues. Our retail  
electric rates in South Dakota are subject to a five-year freeze expiring on    
January 1, 2005. Because our generation capacity typically exceeds our peak     
load demands, we rarely purchase power on the spot market during periods of     
peak usage, permitting us to preserve our low-cost rate structure for our       
retail customers. Off-system sales offer a means to optimize the utilization of 
our power supply sources by permitting us to sell capacity and energy in excess 
of our native load requirements to wholesale customers at market prices, which  
sometimes exceed our regulated retail rates. Wholesale off-system sales have    
represented an increasing percentage of our total revenues and net income.      
Although the demand for power in the western markets has eased from the record  
levels seen in the first half of 2001, we expect further increases in the       
volume of off-system sales in the future due to demand growth in the Rocky      
Mountain region and the addition of 40 megawatts of gas-fired generating        
capacity earlier this year.                                                     

 Our electric load is served by coal-, oil- and natural gas-fired generating
units providing 435 megawatts of generation capacity and from the following     
purchased power and capacity contracts with PacifiCorp:                         

 .   a power sales agreement expiring in 2023, involving the purchase by us of
  60 megawatts of baseload power in 2002, and scheduled to decline to 50
megawatts by 2004;                                                  

.   a reserve capacity integration agreement expiring in 2012, which makes  
    available to us 100 megawatts of reserve capacity in connection with the
utilization of our Ben French CT units; and                         

.   a capacity option call, which gives us an option to purchase up to 60   
megawatts of peaking capacity seasonally through March 31, 2007.    

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The following table describes our portfolio of power plants:              

                                                                [Download Table]

                                      Total               Net             
                                      Plant            Ownership          
                        Fuel         Capacity          Capacity    Start  
     Power Plant        Type   State  (MWs)   Interest   (MWs)     Date   
     -----------       ------- ----- -------- -------- --------- ---------
                                                                          
Ben French............  Coal    SD     25.0     100%      25.0     1960   
Ben French Diesels 1-5 Diesel   SD     10.0     100%      10.0     1965   
Ben French CT's 1-4... Gas/Oil  SD    100.0     100%     100.0   1977-1979
Neil Simpson I........  Coal    WY     21.8     100%      21.8     1969   
Neil Simpson II.......  Coal    WY     91.0     100%      91.0     1995   
Osage.................  Coal    WY     34.5     100%      34.5     1948   
Wyodak................  Coal    WY    362.0      20%      72.4     1978   
Neil Simpson CT.......   Gas    WY     40.0     100%      40.0     2000   
Lange CT..............   Gas    SD     40.0     100%      40.0     2002   
                                      -----              -----            
   Total..............                724.3              434.7            
                                      =====              =====            

 We operate a transmission system of 447 miles of high voltage and 541 miles
of lower voltage lines. In addition, we jointly own 43 miles of high voltage    
lines with Basin Electric Cooperative. Our system has the capability of         
connecting to either the eastern or western transmission systems. This          
capability provides us with access between the Western Electric Coordinating    
Council and the Mid-Continent Area Power Pool and allows us the opportunity to  
improve system reliability and take advantage of power price differentials      
between the two electric grids.                                                 

Independent Power                                                               

Our independent power unit holds varying interests in operating gas-fired 
and hydroelectric independent power plants in California, Colorado,             
Massachusetts, Nevada and New York. We have a total net ownership interest of   
582 megawatts, as well as minority interests in several power-related funds     
with a net ownership interest of 24 megawatts. We are in the process of         
acquiring or constructing an additional net ownership interest of approximately 
274 megawatts of generation capacity, which we expect to bring into service in  
2002.                                                                           

Our ownership interest in the independent power unit is held through our  
wholly-owned subsidiary Black Hills Energy Capital, which we refer to as BHEC,  
and subsidiaries of BHEC. The stock and assets of BHEC and its subsidiaries are 
not subject to the lien of the mortgage under which the bonds will be issued.   

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CAPITALIZATION  

The table below shows our cash position and capitalization as of March 31,
2002 on an actual basis and on an adjusted basis to give effect to the sale of  
$75 million of bonds in this offering and the application of the estimated      
$74.1 million of net proceeds as described under "Use of Proceeds."             

You should read this table in conjunction with our consolidated financial 
statements and related notes that are incorporated by reference in this         
prospectus.                                                                     

                                                                [Download Table]

                                                     March 31, 2002    
                                                  -------------------- 
                                                   Actual   As Adjusted
                                                  --------  -----------
                                                     (in thousands)    
                                                                       
Cash and cash equivalents........................ $ 40,992   $ 97,566  
                                                  ========   ========  
Current portion of long-term debt................ $ 42,090   $ 24,590  
Short-term debt..................................  464,166    464,166  
                                                  --------   --------  
Total short-term debt............................ $506,256   $488,756  
                                                  ========   ========  
Long-term debt................................... $464,619   $539,619  
                                                  --------   --------  
Shareholder's equity:                                                  
   Common stock..................................   23,416     23,416  
   Additional paid-in capital....................   80,961     80,961  
   Retained earnings.............................  126,110    126,110  
   Accumulated other comprehensive income (loss).   (2,686)    (2,686) 
                                                  --------   --------  
Total shareholder's equity.......................  227,801    227,801  
                                                  --------   --------  
Total capitalization............................. $692,420   $767,420  
                                                  ========   ========  

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SELECTED CONSOLIDATED FINANCIAL DATA  

The following summary of our consolidated financial data as of and for the
years ended December 31, 1997, 1998, 1999, 2000 and 2001, under the captions    
"Income Statement Data," "Balance Sheet Data at end of period," "Statement of   
Cash Flows Data" and "Other Data" are derived from our consolidated financial   
statements. These consolidated financial statements have been audited by Arthur 
Andersen LLP. The summary financial data as of and for the periods ended March  
31, 2001 and March 31, 2002, have been derived from our unaudited interim       
consolidated financial statements. The unaudited consolidated financial         
statements include all adjustments, consisting of normal recurring adjustments, 
which we consider necessary for a fair presentation of our financial position   
and the results of operations for these periods. This data should be read in    
conjunction with the consolidated financial statements, related notes and other 
financial information contained in the quarterly reports, annual reports and    
other filings we have made with the SEC and incorporated by reference in this   
prospectus.                                                                     

                                                        [Enlarge/Download Table]

                                                                                                  Three Months Ended 
                                                             Year Ended December 31,                  March 31,      
                                                 ----------------------------------------------  --------------------
                                                   1997     1998     1999     2000      2001       2001       2002   
                                                 -------- -------- -------- -------- ----------  --------  ----------
                                                                           ($ in thousands)                          
                                                                                                                     
Income Statement Data:                                                                                               
    Revenues:                                                                                                        
       Electric................................. $126,497 $129,236 $133,222 $173,308 $  213,210  $ 70,580  $   37,192
       Independent power........................       --       --       --   39,502     87,811    18,045      30,393
                                                 -------- -------- -------- -------- ----------  --------  ----------
          Total revenues........................ $126,497 $129,236 $133,222 $212,810 $  301,021  $ 88,625  $   67,585
                                                 ======== ======== ======== ======== ==========  ========  ==========
    Operating Income:                                                                                                
       Electric................................. $ 44,611 $ 49,896 $ 52,286 $ 68,208 $   84,108  $ 28,664  $   14,327
       Independent power........................       --       --       --   20,367     25,831     5,566      14,599
                                                 -------- -------- -------- -------- ----------  --------  ----------
          Total Operating Income................ $ 44,611 $ 49,896 $ 52,286 $ 88,575 $  109,939  $ 34,230  $   28,926
                                                 ======== ======== ======== ======== ==========  ========  ==========
    Net Income (1):                                                                                                  
       Income (loss) from continuing                                                                                 
        operations before income taxes                                                                               
        and after minority interest:                                                                                 
       Electric................................. $ 32,035 $ 37,437 $ 39,732 $ 56,574 $   69,493  $ 26,428  $   11,709
       Independent power........................       --       --       --    6,287     (2,202)   (1,761)      5,209
                                                 -------- -------- -------- -------- ----------  --------  ----------
          Total.................................   32,035   37,437   39,732   62,861     67,291    24,667      16,918
       Income taxes.............................    9,929   12,612   12,446   22,583     24,017     8,418       5,830
                                                 -------- -------- -------- -------- ----------  --------  ----------
       Income from continuing                                                                                        
        operations..............................   22,106   24,825   27,286   40,278     43,274    16,249      11,088
       Change in accounting principle, net                                                                           
        of income taxes.........................       --       --       --       --         --        --         896
       Discontinued operations, net of                                                                               
        income taxes (2)........................   10,253      983    9,781   12,570      4,832     4,832          --
                                                 -------- -------- -------- -------- ----------  --------  ----------
       Net income............................... $ 32,359 $ 25,808 $ 37,067 $ 52,848 $   48,106  $ 21,081  $   11,984
                                                 ======== ======== ======== ======== ==========  ========  ==========
Balance Sheet Data at end of period:                                                                                 
    Current assets:                                                                                                  
       Electric................................. $ 35,987 $ 43,760 $ 93,837 $132,791 $   37,145  $168,513  $   31,651
       Independent power........................       --       --       --   25,592     39,699    22,828      74,724
                                                 -------- -------- -------- -------- ----------  --------  ----------
          Total current assets.................. $ 35,987 $ 43,760 $ 93,837 $158,383 $   76,844  $191,341  $  106,375
                                                 ======== ======== ======== ======== ==========  ========  ==========
    Net property, plant and equipment:                                                                               
       Electric................................. $334,859 $331,111 $347,184 $358,180 $  383,408  $357,825  $  387,860
       Independent power........................       --       --       --  251,743    627,750   261,770     701,260
                                                 -------- -------- -------- -------- ----------  --------  ----------
          Total net property, plant and                                                                              
           equipment............................ $334,859 $331,111 $347,184 $609,923 $1,011,158  $619,595  $1,089,120
                                                 ======== ======== ======== ======== ==========  ========  ==========

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                                                        [Enlarge/Download Table]

                                                                                                     Three Months Ended  
                                                             Year Ended December 31,                      March 31,      
                                               ---------------------------------------------------  -------------------- 
                                                 1997      1998      1999       2000       2001       2001       2002    
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
                                                                            ($ in thousands)                             
                                                                                                                         
    Total assets:                                                                                                        
       Electric............................... $445,840  $451,404  $528,164  $ 501,416  $  430,737  $538,186  $  428,428 
       Independent power......................       --        --        --    358,962     838,837   368,514     923,251 
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
          Total assets........................ $445,840  $451,404  $528,164  $ 860,378  $1,269,574  $906,700  $1,351,679 
                                               ========  ========  ========  =========  ==========  ========  ========== 
    Long-term obligations:                                                                                               
       Electric............................... $163,360  $162,030  $160,700  $ 158,686  $  140,137  $158,151  $  139,581 
       Independent power......................       --        --        --    148,406     275,177   147,312     325,038 
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
          Total long-term obligations......... $163,360  $162,030  $160,700  $ 307,092  $  415,314  $305,463  $  464,619 
                                               ========  ========  ========  =========  ==========  ========  ========== 
Statement of Cash Flows Data:                                                                                            
    Operating activities:                                                                                                
       Electric............................... $ 38,956  $ 40,019  $ 37,507  $  51,596  $   73,446  $ 14,926  $   16,419 
       Independent power......................       --        --        --      7,777      16,477       397       4,170 
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
          Total............................... $ 38,956  $ 40,019  $ 37,507  $  59,373  $   89,923  $ 15,323  $   20,589 
                                               ========  ========  ========  =========  ==========  ========  ========== 
    Investing activities:                                                                                                
       Electric............................... $(12,395) $(11,363) $(79,514) $ (55,410) $   40,812  $ (3,836) $   (7,034)
       Independent power......................       --        --        --   (107,620)   (492,164)  (15,462)    (51,751)
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
          Total............................... $(12,395) $(11,363) $(79,514) $(163,030) $ (451,352) $(19,298) $  (58,785)
                                               ========  ========  ========  =========  ==========  ========  ========== 
    Financing activities:                                                                                                
       Electric............................... $(25,432) $(29,219) $ 36,492  $   1,971  $ (117,848) $  3,791  $   (6,597)
       Independent power......................       --        --        --    110,585     481,412    14,596      70,953 
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
          Total............................... $(25,432) $(29,219) $ 36,492  $ 112,556  $  363,564  $ 18,387  $   64,356 
                                               ========  ========  ========  =========  ==========  ========  ========== 
Other Data:                                                                                                              
    EBITDA (3):                                                                                                          
       Electric............................... $ 59,544  $ 64,936  $ 67,727  $  83,293  $   96,188  $ 33,170  $   18,627 
       Independent power......................       --        --        --     17,751      42,151     7,192      19,363 
                                               --------  --------  --------  ---------  ----------  --------  ---------- 
          Total EBITDA........................ $ 59,544  $ 64,936  $ 67,727  $ 101,044  $  138,339  $ 40,362  $   37,990 
                                               ========  ========  ========  =========  ==========  ========  ========== 
    Ratio of earnings to fixed charges (4):                                                                              
       Electric...............................     3.34      3.76      3.87       4.08        4.98      6.48        4.63 
          Total...............................     3.34      3.76      3.87       3.07        2.04      2.97        2.25 

--------                                                                        
(1) The results presented above reflect our historical operations as reported   
   and as adjusted for the discontinued operations described in Note 2 to this
table. For all periods ended December 31, 2001 and prior, our results   
   reflect amortization of goodwill that is not required in periods subsequent
to December 31, 2001, as a result of the adoption of SFAS. No. 142      
  "Goodwill and Other Intangible Assets." Our pro forma net income, assuming
SFAS No. 142 had been in effect for all periods, would have been $38.6  
  million, $53.7 million, $48.8 million, $21.2 million and $11.1 million for
the years ended December 31, 1999, 2000 and 2001 and the quarters ended 
March 31, 2001 and 2002, respectively.                                  
(2) During the quarter ended March 31, 2001, we distributed 50,000 shares of    
   Wyodak Resources Development Corporation, which represents a 100% ownership
interest in Wyodak, as a non-cash dividend to our parent company, Black 
 Hills Corporation. We therefore no longer operate in the coal production,
oil and gas production, fuel marketing or communication segments through
   our ownership of Wyodak. The selected consolidated financial data presented
above have been adjusted to reflect our continuing operations for all   
   periods presented. The net operating results of the discontinued operations
are included in the selected data presented above under the caption     
"Discontinued operations, net of income taxes."                         
(3) EBITDA represents earnings from continuing operations before interest,      
 income taxes, depreciation and amortization. EBITDA is used by management
and some investors as an indicator of a company's historical ability to 
service debt. Management believes that an increase in EBITDA is an      
indicator of improved ability                                           

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   to service existing debt, to sustain potential future increases in debt and
to satisfy capital requirements. However, EBITDA is not intended to     
represent cash flows for the period, nor has it been presented as an    
alternative to either operating income, as determined by accounting     
 principles generally accepted in the United States, or as an indicator of
   operating performance or cash flows from operating, investing and financing
activities, as determined by accounting principles generally accepted in
  the United States, and is thus susceptible to varying calculations. In all
 years presented, the most significant difference between operating income
  and EBITDA is that operating income includes a deduction for depreciation.
EBITDA as presented may not be comparable to other similarly titled     
measures of other companies.                                            

(4) For purposes of calculating the ratio of earnings to fixed charges,         
earnings are defined as income from continuing operations before income 
taxes, adjustment for minority interests in consolidated subsidiaries,  
  income or loss from equity investees, and fixed charges, plus amortization
of capitalized interest, distributed income of equity investees and less
  minority interest in pre-tax income of subsidiaries that have not incurred
  fixed charges. Fixed charges consist of interest expensed and capitalized,
  amortization of debt issuance costs and an estimate of the interest within
rental expense.                                                         

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USE OF PROCEEDS 

We expect that the net proceeds from this offering of bonds will be       
approximately $74.1 million, after deducting discounts to the underwriter and   
estimated expenses of this offering that we will pay. We expect to use          
approximately $16.7 million of the net proceeds to pay our share of the         
estimated total project cost for the construction and installation of an        
"AC-DC-AC Converter Station" in the vicinity of Rapid City, South Dakota, which 
will provide an interconnection between the Western Area Power Administration   
system and the transmission system jointly owned by Basin Electric Power        
Cooperative and us. We expect to use approximately $32.5 million of the net     
proceeds for general capital expenditures for the remainder of 2002 and for     
2003. We expect to use approximately $15.0 million of the net proceeds to repay 
indebtedness under our $75 million bridge credit facility with ABN AMRO Bank,   
N.V. This indebtedness was incurred to satisfy bond maturities on our 6.50%     
Series AD First Mortgage Bonds due July 15, 2002. Borrowings under the bridge   
credit agreement bear interest at a floating rate equal to the London interbank 
offered rate for United States dollar deposits, or LIBOR, for a 30-day period,  
plus 1%. We expect to use an additional $2.5 million of the net proceeds to     
satisfy bond maturities for some of our outstanding first mortgage bonds due in 
2003 with interest rates ranging from 9.00% to 9.49%.                           

Any remaining net proceeds will be used for general corporate purposes,   
which may include funding of additional capital expenditures, the development   
and construction of new facilities and additions to working capital. Pending    
the application of the net proceeds of this offering described above, we may    
advance the funds to our parent company, Black Hills Corporation, or invest the 
funds in short-term, investment grade, interest-bearing securities.             

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DESCRIPTION OF THE BONDS AND MORTGAGE 

 The bonds will be issued under a Restated and Amended Indenture of Mortgage
and Deed of Trust, dated as of September 1, 1999, and a First Supplemental      
Indenture between Black Hills Power and JPMorgan Chase Bank (successor by       
merger to the original and succeeding trustees) as trustee. The restated        
indenture was previously filed with the SEC as an exhibit to a registration     
statement (SEC File No. 333-52664) filed by Black Hills Holding Corporation.    
The first supplemental indenture was filed by Black Hills Power as an exhibit   
to the registration statement of which this prospectus is a part. We refer to   
the restated indenture and the first supplemental indenture collectively as the 
"mortgage."                                                                     

Unless the context otherwise requires, references to "bonds" refer to the 
bonds offered by this prospectus. References to "outstanding bonds" include all 
bonds previously issued under the mortgage, the bonds offered by this           
prospectus and any bonds we may issue under the mortgage in the future which    
are then outstanding.                                                           

The following summary of the bonds does not purport to be complete and is 
subject to the detailed provisions of the mortgage.                             

General                                                                         

 The bonds will mature on August 15, 2032. Interest on the bonds will accrue
from August 13, 2002 at a rate of 7.23% per annum, computed on the basis of a   
360-day year of twelve 30-day months. Interest will be payable semi-annually on 
February 15 and August 15 in each year, commencing February 15, 2003, and at    
maturity. We will make each interest payment to the persons in whose names the  
bonds are registered at the close of business on February 1 or August 1         
immediately preceding the interest payment date. We will issue bonds with an    
aggregate principal amount of $75,000,000. We will issue the bonds in fully     
registered form only, in denominations of $100,000 or more in multiples of      
$1,000.                                                                         

The bonds are not obligations of, nor are they guaranteed by, our parent  
company, Black Hills Corporation.                                               

Optional Redemption                                                             

The bonds will be redeemable in whole at any time or in part from time to 
time, at our option, on not less than 30 nor more than 45 days notice, at a     
redemption price equal to the greater of:                                       

.   100% of the principal amount of the bonds to be redeemed; or            

.   the sum of the present values of the remaining scheduled payments of    
     principal and interest thereon (exclusive of interest accrued to the date
of redemption) discounted, at the then current Treasury Rate plus 30
     basis points, to the date of redemption on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months)                    

plus in each case, accrued and unpaid interest on the principal amount being    
redeemed to the date of redemption.                                             

"Treasury Rate" means, for any redemption date, (a) the yield, under the  
heading which represents the average for the immediately preceding week,        
appearing in the most recently published statistical release designated         
"H.15(519)" or any successor publication which is published weekly by the Board 
of Governors of the Federal Reserve System and which establishes yields on      
actively traded United States Treasury securities adjusted to constant maturity 
under the caption "Treasury Constant Maturities," for the maturity              
corresponding to the Comparable Treasury Issue (if no maturity is within three  
months before or after the remaining term of the bonds, yields for the two      
published maturities most closely corresponding to the Comparable Treasury      
Issue will be determined and the Treasury Rate will be interpolated or          
extrapolated from such yields on a straight line basis, rounding to the nearest 
month) or (b) if such release (or any successor release) is not published       
during the week preceding the calculation date or does not contain such yields, 
the rate per annum equal to the semiannual equivalent yield to maturity of the  
Comparable Treasury Issue, calculated using a price for the Comparable Treasury 
Issue (expressed as a percentage of its principal amount) equal to the          
Comparable Treasury Price. The Treasury Rate will be calculated on the third    
Business Day preceding the redemption date.                                     

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 "Business Day" means any day other than a Saturday or Sunday and other than
a day on which banking institutions in Rapid City, South Dakota, or New York,   
New York, are authorized or obligated by law or executive order to close.       

"Comparable Treasury Issue" means the United States Treasury security     
selected by an Independent Investment Banker as having a maturity comparable to 
the remaining term of the bonds to be redeemed that would be utilized, at the   
time of selection and in accordance with customary financial practice, in       
pricing new issues of corporate debt securities of comparable maturity to the   
remaining term of the bonds.                                                    

"Comparable Treasury Price" means the average of two Reference Treasury   
Dealer Quotations obtained with respect to any redemption date.                 

"Independent Investment Banker" means ABN AMRO Incorporated or one of the 
Reference Treasury Dealers appointed by the trustee after consultation with us. 

 "Reference Treasury Dealer" means ABN AMRO Incorporated and its successors;
provided, however, that if ABN AMRO Incorporated or its successors ceases to be 
a primary United States government securities dealer (a "Primary Treasury       
Dealer"), we will substitute for it another nationally recognized investment    
bank that is a Primary Treasury Dealer.                                         

  "Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the      
Independent Investment Banker, of the bid and asked prices for the Comparable   
Treasury Issue (expressed in each case as a percentage of its principal amount) 
quoted in writing to the Independent Investment Banker at 5:00 p.m., New York   
City time, on the third Business Day preceding such redemption date.            

Sinking Fund                                                                    

The bonds will have no sinking fund provision.                            

Withdrawal of Trust Moneys or Retirement of Bonds with Trust Moneys             

Under the mortgage, we are required to deposit cash, referred to as "trust
moneys," with the trustee under various conditions, including the deposit of    
cash for the release of property from the mortgage, the deposit of cash         
received by the trustee as compensation for any part of the trust estate taken  
by the exercise of the power of eminent domain, and the deposit of the proceeds 
of insurance. The mortgage provides that we, under some conditions, may         
withdraw these trust moneys by certifying "property additions" or by depositing 
previously issued bonds. We may cause the trustee under some conditions to      
apply trust moneys in payment of the principal of outstanding bonds, upon       
redemption or upon tender. We may withdraw trust moneys from insurance proceeds 
for the purpose of repairing, restoring or replacing the property destroyed. We 
may also withdraw trust moneys for the purposes of paying our income tax        
obligations arising from the disposition of properties or securities, or for    
repairing or replacing damaged or destroyed property.                           

Under the mortgage, the trustee is obligated to apply trust moneys for the
redemption of outstanding bonds if the trustee holds trust moneys in excess of  
$25,000, exclusive of monies received from the proceeds of insurance, and the   
amount of trust moneys on deposit with the trustee exceeded such amount at all  
times during the preceding two years. The trustee is also obligated to apply    
trust moneys derived from the sale and release of, or the taking by government  
through eminent domain or purchase by a public authority of the entire trust    
estate toward the redemption of outstanding bonds. The trustee is obligated to  
apply the trust moneys pro rata as between the several series of bonds then     
outstanding in the ratio of the respective aggregate principal amounts in each  
such series outstanding at the time.                                            

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Security                                                                        

The bonds, together with all other bonds now or hereafter issued under the
mortgage, will be secured by the mortgage, which constitutes a first mortgage   
lien on substantially all of our present properties, except as stated below,    
and subject to "permitted encumbrances" as defined in the mortgage. "Excepted   
property" (as defined in the mortgage) is not subject to the lien of the        
mortgage and includes:                                                          

.   all cash and securities;                                                

 .   all contracts, leases and other agreements, contract rights, bills, notes
  and other instruments, claims, judgments, intellectual property rights
and other general intangibles;                                      

.   all permits, licenses, franchises and rights granted by governmental    
entities with respect to air, water and other types of pollution;   

.   all goods, wares, merchandise, equipment, spare parts and tools held for
   sale or lease in the ordinary course of business and all fuel and other
consumable materials and supplies;                                  

.   all motor vehicles and movable equipment and parts used in connection   
with the vehicles or equipment;                                     

 .   all office furniture and equipment, satellite and communication equipment
and computer equipment;                                             

.   all minerals, crops and timber harvested or extracted from our land and 
     all gas or oil wells or any lease or real estate acquired for the purpose
of obtaining gas or oil rights;                                     

 .   all electrical energy, steam, water, ice and other products for our sale,
transmission, distribution or use;                                  

.   all leasehold interests and leasehold improvements;                     

.   all property not specifically subject to the mortgage or not used in    
   connection with the electric utility business or in connection with the
operation of the property;                                          

.   our franchise to be a corporation; and                                  

.   all books and records.                                                  

We may cause any excepted property to become subject to the lien of the   
mortgage. In addition, the trustee has a lien for its compensation, expenses    
and indemnity on the trust estate and the proceeds of the estate, which is      
prior to the lien of the bonds.                                                 

Neither the stock of our independent power subsidiary, BHEC and its       
subsidiaries, nor the assets of those companies, are subject to the lien of the 
mortgage.                                                                       

Issuance of Additional Bonds                                                    

Requirements for the Issuance of Additional Bonds.  The mortgage provides 
for no limitation on the amount of additional bonds which we may issue under    
the mortgage. We may issue additional bonds of any series from time to time     
after delivering specified resolutions, certificates and opinions to the        
trustee on the basis of:                                                        

(1) 70% of qualified property additions after adjustments to offset       
retirements;                                                      

 (2) 100% of previously issued bonds retired, except when otherwise provided
  by the provisions of the mortgage authorizing the retired bonds; and

(3) deposits of cash.                                                     

With some exceptions in the case of (2) and (3) above, our issuance of    
additional bonds is subject to our "certifiable net earnings" being at least    
equal to two times annual interest charges on our outstanding bonds, including  
the additional bonds to be issued, and prior lien debt for a period of 12       
consecutive months within the 18 months prior to the certification.             

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As of May 31, 2002, we had "unbonded property additions" of approximately 
$239,749,000 which we may use for the purpose of authorizing the issuance of    
additional bonds. These unbonded property additions allow us to issue           
$167,824,000 of bonds under the 70% requirement. In addition, as of July 15,    
2002, we had retired $42,970,000 of previously issued bonds, which would allow  
us to issue the same amount of additional bonds.                                

 Property Additions.  Under the mortgage, property additions that we may use
for the issuance of additional bonds include all real and personal property     
wherever located that we may purchase, construct or acquire by merger or        
consolidation, including excepted property that we elect to be included under   
the lien of the mortgage, and construction work in progress as recorded on our  
books under generally accepted accounting principles. The term "property        
additions" does not include any going concern value, goodwill or franchises or  
governmental permits granted separate and distinct from the property operated   
under those franchises or permits, or any item of property constructed or       
acquired to replace a similar item of property whose retirement has not been    
credited to plant account.                                                      

Earnings-to-Interest Coverage Requirements.  To issue additional bonds    
through the use of property additions and as a condition to the issuance of     
additional bonds in exchange for retired bonds with a lower interest rate than  
the additional bonds, our "certifiable net earnings" must be equal to two times 
the annual "interest charges on bonds and prior lien debt" during a period of   
12 consecutive months out of the 18 months prior to the date of the application 
for the bonds. "Certifiable net earnings" are determined by deducting from the  
total of our "gross operating revenues" for the 12-month period all operating   
expenses and other proper charges including federal, state and local taxes and  
rentals, insurance, current repairs and maintenance, but excluding income       
taxes, depreciation, amortization, all interest and all non-recurring charges   
from earnings.                                                                  

"Gross operating revenues" include revenues from the operation of utility 
property plus "net non-operating income" which includes other net income,       
including, among other things, interest and designated income including         
dividends from subsidiaries and allowance for funds used during construction    
and other miscellaneous non-operating income, but excluding profits or losses   
from the sale of capital assets or securities. "Interest charges on bonds and   
prior lien debt" includes interest on:                                          

.   all outstanding bonds under the mortgage, other than bonds which are to 
     be paid, redeemed or otherwise retired with the proceeds of the bonds for
which the application is made;                                      

.   the bonds for which the application is made; and                        

.   any indebtedness secured by a prior lien to the mortgage.               

Release of Property from Mortgage                                               

The mortgage provides that we may from time to time sell or dispose of    
property subject to the mortgage for any reason in any one of three alternative 
ways, each of which works independently of the other, and each of which is      
conditioned upon there being no "event of default."                             

  First, property may be released from the mortgage if (a) the "fair value" of
the property to be released is less than 1% of the aggregate principal amount   
of all outstanding bonds and (b) the fair value of all property released in any 
12-month period is less than 3% of the aggregate principal amount of all        
outstanding bonds.                                                              

Second, we may cause any property to be released from the mortgage as long
as the fair value of all of the trust estate remaining equals or exceeds        
twenty-fourteenths (20/14) of the aggregate principal amount of all outstanding 
bonds.                                                                          

Third, we may cause property to be released from the mortgage by posting  
property additions, cash or purchase money obligations equal to the fair value  
of the property to be released.                                                 

 "Fair value" is defined to allow the engineer certifying fair value for the
purpose of releasing property from the mortgage to determine such value without 
physical inspection by use of accounting and engineering records                

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and other data maintained by or available to us, and the engineer must opine    
that the release will not materially adversely affect our electric business and 
will not impair the security under the mortgage.                                

Covenants                                                                       

Under the mortgage, we make numerous covenants, agreements and warranties,
including the following:                                                        

  General.  We have agreed to punctually pay the principal and interest on the
bonds. We have also agreed not to extend the time for payment of any interest   
on the bonds. We further covenant, among other things, that:                    

.   we have good title to the property described in the granting clauses of 
the mortgage, except for permitted encumbrances;                    

.   we will pay all taxes and assessments;                                  

 .   we will carry on and conduct our business and keep our property in repair
   and maintained in good working order and condition and replace worn-out
or injured property;                                                

.   we will not permit any increase of any prior lien obligation or default 
therein;                                                            

.   we will keep the mortgage properly recorded and the lien perfected;     

.   we will deposit all cash subject to being withdrawn as required by the  
mortgage;                                                           

.   we will keep the trust estate insured to the extent such property is    
usually insured by companies engaged in similar businesses;         

.   we will keep complete records and accounts of the bonds outstanding;    

.   we will keep accurate books and records;                                

 .   we will file with the SEC and deliver to the trustee various reports; and

.   we will certify compliance with the mortgage annually.                  

Dividend Restrictions.  We may pay dividends on shares of our common stock
only out of our unreserved and unrestricted retained earnings. We are           
prohibited from paying dividends on shares of our common stock if we are        
insolvent or would become insolvent if the dividend were paid.                  

Insured Loss Retention.  We are required to deposit with the trustee the  
proceeds of any insurance for casualty losses that exceed $5,000,000.           

Modification                                                                    

The rights of bondholders may be modified with the consent of holders of  
66 2/3% of the outstanding bonds, or, if less than all series of bonds are      
adversely affected, the consent of the holders of 66 2/3% of the bonds of each  
of the outstanding series which are adversely affected by the modification. No  
modification or alteration may:                                                 

.   postpone the due dates for the payment of interest or principal;        

.   reduce the principal or the rate of interest payable;                   

.   reduce the percentage of the principal amount of bonds required for any 
modification or alteration of the mortgage; or                      

 .   modify, without the written consent of the trustee, the rights, duties or
immunities of the trustee.                                          

Without obtaining the consent of any holders of the outstanding bonds, we 
and the trustee may modify the mortgage in the following respects:              

  .   to correct descriptions of property and to mortgage additional properties;

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 .   to add to the conditions, limitations and restrictions on the issuance of
additional bonds;                                                   

.   to add to our covenants and agreements or to surrender any of our rights
or powers;                                                          

.   to provide for the creation of any series of additional bonds,          
designating the series to be created and specifying the form and    
provisions of the bonds of that series;                             

.   to provide a sinking, amortization, improvement or other analogous fund 
for the benefit of any of the outstanding bonds;                    

.   to provide the terms and conditions of the exchange of any of the       
outstanding bonds;                                                  

.   to provide that the principal of bonds of any series may be converted at
the option of the holders into capital stock or other securities;   

 .   to modify the mortgage in any respect, but only if the modification would
become effective when there are no bonds outstanding of any series  
  authenticated and delivered prior to the execution of the supplemental
indenture providing the modification;                               

 .   for any purpose not inconsistent with the terms of the mortgage and which
     does not impair the security of the same or for the purpose of curing any
 ambiguity or of curing, correcting, or supplementing any defective or
    inconsistent provisions contained in the mortgage or in any supplemental
indenture;                                                          

.   to provide for the procedures required to permit us to utilize, at our  
   option, a non-certificated system of registration for all or any series
of the bonds; and                                                   

.   to enter into a restatement of the mortgage without material            
    modifications and including all amendments contained in supplements that
remain in effect.                                                   

Events of Default and Notice                                                    

"Events of default" are defined in the mortgage as:                       

.   default for 30 days in payment of interest;                             

.   default on the payment of principal on any bonds issued under the       
mortgage when and as the  principal becomes payable;                

  .   default for 30 days in violation of the covenant on dividend restrictions;

.   default for 30 days in the performance or observance of any covenant or 
condition required by the provisions for any sinking, amortization, 
   improvement, renewal or analogous fund with respect to any bonds issued
under the mortgage;                                                 

.   default for 60 days after notice from the trustee or 10% of the         
bondholders in the observance of any other covenant or condition;   

.   various events related to our bankruptcy, insolvency or reorganization; 
and                                                                 

 .   a governmental agency assuming, other than by exercise of eminent domain,
  custody or control of all or a substantial part of the trust estate or
our business affairs or operations.                                 

The trustee or the holders of 25% of the outstanding bonds may declare the
principal and interest due and payable following the occurrence of an event of  
default. No holder of bonds may enforce the lien of the mortgage unless the     
trustee has failed to act after the holders of a majority in amount of the      
outstanding bonds have requested the trustee to act and offered it indemnity    
satisfactory to the trustee against the costs, expenses and liabilities to be   
incurred.                                                                       

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Evidence of Compliance with Mortgage Provisions                                 

 We evidence compliance with the mortgage provisions by written certificates
of our officers or persons selected or paid by us. In certain cases, opinions   
of counsel and certification of an engineer, accountant, appraiser or other     
expert, who in some cases must be independent, must be furnished. We must also  
give the trustee an annual certificate as to whether or not we have fulfilled   
our obligations under the mortgage throughout the preceding calendar year.      

Defeasance                                                                      

 The trustee will satisfy and discharge the mortgage upon our furnishing the
trustee cash in trust at or before maturity sufficient to discharge the entire  
indebtedness on the outstanding bonds, or to redeem the outstanding bonds,      
except that in lieu of cash we may deposit the outstanding bonds for            
cancellation by the trustee and other specified resolutions, certificates and   
opinions.                                                                       

Form of Bonds                                                                   

The bonds will be issued in the form of a single, fully registered global 
bond without coupons that will be deposited with DTC and registered in the name 
of its nominee, Cede & Co. This means that we will not issue certificates to    
any purchaser of bonds. Instead, ownership of beneficial interests in the bonds 
will be shown on, and transfers of interest in the bonds will only be made      
through, records maintained by DTC and its participants. Unless it is exchanged 
for certificated bonds as described below, the global bond may not be           
transferred, except that DTC, its nominees and their successors may transfer    
the global bond as a whole to one another.                                      

  So long as DTC or its nominee is the registered owner of the global bond, we
will consider DTC or its nominee, as the case may be, the sole owner of the     
bonds represented by the global bond for all purposes under the mortgage.       
Except as described below, as an owner of a beneficial interest in bonds you    
will not be entitled to have any individual bonds registered in your name, you  
will not receive or be entitled to receive physical delivery of any bonds in    
certificated form and you will not be considered the owner of bonds for any     
purpose under the mortgage.                                                     

DTC has advised us that it is a limited-purpose trust company organized   
under the New York Banking Law, a "banking organization" within the meaning of  
the New York Banking Law, a member of the Federal Reserve System, a "clearing   
corporation" within the meaning of the New York Uniform Commercial Code, and a  
"clearing agency" registered pursuant to the provisions of Section 17A of the   
Securities Exchange Act of 1934. DTC holds securities deposited by its          
participants and facilitates the clearance and settlement of transactions in    
those securities between participants through electronic book-entry changes in  
the accounts of the participants. This eliminates the need for physical         
exchange of securities certificates. Participants in DTC include securities     
brokers and dealers, banks, trust companies, clearing corporations and certain  
other organizations. DTC's book-entry system also is available to other         
entities, such as securities brokers and dealers, banks and trust companies     
that clear transactions through, or maintain a custodial relationship with, a   
DTC participant. These are known as "indirect participants." DTC is owned by a  
number of its participants and by The New York Stock Exchange, Inc., the        
American Stock Exchange, Inc., and the National Association of Securities       
Dealers, Inc. The rules of DTC are on file with the SEC.                        

Purchases of bonds must be made by or through DTC participants, which will
receive a credit for the bonds on DTC's records. The ownership interest of each 
actual purchaser of a bond, who is known as the beneficial owner, will in turn  
be recorded on the records of direct and indirect DTC participants. Beneficial  
owners will not receive written confirmation from DTC of their purchases, but   
we expect that beneficial owners will receive written confirmations providing   
details of the transactions, as well as periodic statements of their holdings,  
from the participant or indirect participant through which they purchased the   
bonds. Transfers of ownership interests in the bonds will be accomplished by    
entries made on the books of participants acting directly or indirectly on      
behalf of beneficial owners.                                                    

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  Neither we nor the trustee will have any responsibility or liability for any
aspect of the records of DTC or for maintaining, supervising or reviewing any   
records relating to beneficial ownership of interests in the global bond.       

We will pay principal and interest on the bonds to DTC or its nominee, as 
the case may be, as the registered owner of the related global bond. We will    
make these payments to DTC or its nominee in immediately available funds.       
Neither we nor the trustee will have any responsibility or liability for the    
payment of principal and interest on the bonds to beneficial owners. However,   
we understand that it is currently the policy of DTC to credit these payments   
to participants' accounts on the relevant payment date in accordance with the   
participants' holdings as shown on DTC's records. Payments by participants and  
indirect participants to beneficial owners will be governed by standing         
instructions and customary practices and will be the responsibility of the      
participants and indirect participants and not of DTC. DTC will have no         
knowledge of the actual beneficial owners of the bonds. DTC's records will      
reflect only the identity of the participants to whose accounts the bonds are   
credited, which may or may not be the beneficial owners. The participants and   
indirect participants are responsible for keeping account of their holdings on  
behalf of their customers.                                                      

  Similarly, we and the trustee will accept notices and directions solely from
DTC. Therefore, in order to exercise any rights of a holder of bonds under the  
mortgage, each person owning a beneficial interest in the bonds must rely on    
the procedures of DTC. If the beneficial owner is not a participant in DTC,     
then it must rely on the procedures of the participant through which that       
person owns its interest. DTC will take actions under the mortgage only at the  
direction of its participants, which in turn will act only at the direction of  
the beneficial owners. Some of these actions, however, may conflict with        
actions DTC takes at the direction of other participants and beneficial owners. 

The giving of notices and other communications by DTC to its participants,
by the participants to indirect participants, and by indirect participants to   
beneficial owners is governed by arrangements made among them, which may be     
subject to statutory or regulatory requirements.                                

  The global bond will be exchangeable for bonds in certificated form only if:

 .   DTC is unwilling or unable to continue as depository or it ceases to be a
     "clearing agency" registered under applicable law and we do not appoint a
successor depository with 90 days; or                               

.   we determine that one or more bonds represented by the global bond will 
be exchangeable for certificated bonds.                             

Governing Law                                                                   

The first supplemental indenture and the bonds will be governed by and    
construed in accordance with the laws of the State of South Dakota. However,    
the immunities and standard of care of the trustee in connection with the       
administration of the trusts and duties under the supplemental indenture will   
be governed by and construed in accordance with the laws of the State of New    
York.                                                                           

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UNDERWRITING  

 Subject to the terms and conditions set forth in the underwriting agreement
dated the date of this prospectus, we have agreed to sell to ABN AMRO           
Incorporated, as underwriter, and the underwriter has agreed to purchase,       
$75,000,000 in principal amount of bonds.                                       

The underwriting agreement provides that the obligation of the underwriter
to purchase the bonds is subject to approval of certain legal matters by        
counsel and to certain other conditions. The underwriter is obligated to        
purchase all the bonds if it purchases any of the bonds.                        

The underwriter proposes to offer some of the bonds directly to the public
at the public offering price set forth on the cover page of this prospectus and 
some of the bonds to certain dealers at the public offering price less a        
concession not in excess of 0.50% of the principal amount of the bonds. The     
underwriter may allow, and such dealers may reallow, a concession not in excess 
of 0.25% of the principal amount of the bonds on sales to certain other         
dealers. After the initial offering of the bonds to the public, the public      
offering price and such concessions may be changed by the underwriter.          

The following table shows the underwriting discount and commission we will
pay to the underwriter in connection with this offering (expressed as a         
percentage of the principal amount of the bonds).                               

                                                                [Download Table]

         Paid by us
         ----------
                   
Per bond   0.875%  

  In order to facilitate the offering of the bonds, the underwriter may engage
in transactions that stabilize, maintain or otherwise affect the price of the   
bonds. Specifically, the underwriter may overallot in connection with the       
offering, creating a short position in the bonds for the underwriter's own      
account. In addition, to cover overallotments or to stabilize the price of the  
bonds, the underwriter may bid for, and purchase, the bonds in the open market. 
Any of these activities may stabilize or maintain the market price of the bonds 
above independent market levels. The underwriter is not required to engage in   
these activities and may end any of these activities at any time.               

We estimate that our total expenses of the offering, excluding the        
underwriting discount, will be $270,000.                                        

  There is presently no trading market for the bonds and there is no assurance
that a market will develop. We have been advised by the underwriter that the    
underwriter currently intends to make a market in the bonds. However, the       
underwriter is not obligated to do so and may discontinue any market making     
activities at any time without notice. Accordingly, no assurance can be given   
about the development or liquidity of any trading market for the bonds.         

We have agreed to indemnify the underwriter against certain liabilities,  
including liabilities under the Securities Act of 1933, or to contribute to     
payments the underwriter may be required to make in respect of any of those     
liabilities.                                                                    

An affiliate of ABN AMRO Incorporated acts as a lender to us under our    
bridge credit facility. Since the net proceeds of this offering will initially  
be used in part to reduce the outstanding balance under the bridge credit       
facility, that affiliate may receive over 10% of the net proceeds. Accordingly, 
this offering is being made in compliance with the requirements of Rule         
2710(c)(8) of the Conduct Rules of the National Association of Securities       
Dealers, Inc.                                                                   

  From time to time, the underwriter and its affiliates have provided, and may
in the future provide, investment banking and commercial banking services to us 
and our affiliates. They have received customary fees and expenses for these    
transactions.                                                                   

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LEGAL OPINIONS  

  The validity of the bonds offered by this prospectus will be passed upon for
us by Steven J. Helmers, General Counsel and Corporate Secretary of Black Hills 
Power, Inc. Certain legal matters will be passed upon for us by Conner &        
Winters, P.C., Tulsa, Oklahoma, and for the underwriter by Skadden, Arps,       
Slate, Meagher & Flom LLP, New York, New York. As of the date of this           
prospectus, Mr. Helmers owns, directly or indirectly, 3,608 shares of common    
stock of our parent company, Black Hills Corporation, and holds options to      
purchase an additional 29,110 shares.                                           

EXPERTS 

 The consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2001 incorporated by reference in this     
prospectus have been audited by Arthur Andersen LLP, independent public         
accountants, as indicated in their report with respect thereto and are          
incorporated by reference in reliance upon the authority of said firm as        
experts in accounting and auditing in giving said report. We have not been able 
to obtain, after reasonable efforts, the written consent of Arthur Andersen to  
our naming it in this registration statement as having certified our            
consolidated financial statements which are incorporated by reference as        
required by Section 7 of the Securities Act of 1933, and we have dispensed with 
the requirement to file its consent in reliance on Rule 437a promulgated under  
the Securities Act. As a result, your ability to assert claims against Arthur   
Andersen may be limited. Since we have not been able to obtain the written      
consent of Arthur Andersen, you will not be able to recover against Arthur      
Andersen under Section 11 of the Securities Act for any untrue statements of a  
material fact contained in the financial statements audited by Arthur Andersen  
or any omissions to state a material fact required to be stated therein.        

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================================================================================

BLACK HILLS POWER, INC. 

$75,000,000 

First Mortgage Bonds, 7.23% Series AE Due 2032  

----------------- 

PROSPECTUS  

----------------- 

ABN AMRO Incorporated 

----------------- 

August 8, 2002  

================================================================================

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
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