On February 2, 2006, the Compensation Committee of the Board of Directors of Black Hills Corporation (the “Company”) recommended, and the Independent Directors approved, a discretionary award under the 2005 Short-Term Incentive Plan. The Company’s 2005 earnings of $1.00 per share were negatively impacted by certain one-time events, including the loss from the sale of the communications business and the non-cash asset impairment of the Las Vegas I gas-fired power plant. The sale of the communications business was a strategic decision to allow the Company to focus on the core energy business and was achieved in a timely manner. The impairment of the Las Vegas I plant was a direct result of a significant and sustained increase in natural gas prices, beyond historical levels. Absent these one-time charges, the earnings growth in the core business was strong and the payout under the 2005 Short-Term Incentive Plan would have exceeded 175% of target. While the significant and sustained increase in natural gas prices resulted in an impairment of the Las Vegas I plant, it also significantly increased the value of the oil and gas reserves which is not reflected on the balance sheet. Many goals were attained at the business unit level that not only led to a successful year but positioned the Company to take advantage of future opportunities. The Company had record oil and gas production and earnings, began construction on a new coal-fired power plant, expanded the core asset base through acquisitions, experienced record new customer growth and a 5% increase in retail megawatt-hour sales at the electric utility. The Company’s Total Shareholder Return for 2005, which includes stock price appreciation and dividends was 23.8% and ranked at the top of the Company’s peer group (S&P midcap electric utilities). In reviewing these factors and in recognizing employee contributions and the Total Shareholder Return for the year, the Committee determined that an adjustment was appropriate and applied its discretion in determining and recommending awards for the 2005 plan year at the target level. The 2005 Short-Term Incentive amounts approved for the Named Executive Officers and the Chief Operating Officers are as follows:

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