ALLETE plans $113m investment in transmission over next five years

ALLETE (NYSE: ALE) plans to invest $113m of its $920m five-year capital expenditure budget on transmission.

The majority of the amount the company plans to spend on transmission — $93m – will be spent over the 2012-2014 period.

“Based on these anticipated expenditures, we project our rate base to grow by approximately 20% through 2015,” Allete’s chairman, president and CEO Al Hodnik said during the company’s 4Q11 earnings call Feb. 15.

ALLETE reported 2011 net income of $93.8m on revenue of $928.2m, compared to net income of $75.3m on revenue of $907m in 2010. Increased transmission revenue in the company’s regulated operations contributed to the earnings increase, CFO Mark Shober said during the call.

“Over the next few years we anticipate that new industrial customer growth in our region will accelerate, and we are excited about our transmission build prospects linked to the recently approved Manitoba Hydro transaction. We’ll continue to make significant capital investments in renewable energy generation, transmission, and environmental upgrades,” Hodnik added.

He also pointed to some of the company’s recent accomplishments in its transmission business.

“We began the year fresh after closing of our purchase of the 465-mile direct current transmission line [from Square Butte], a line which will carry wind generated electricity from North Dakota to our service territory in Minnesota,” Hodnik said, adding that $17m of additional expenses related to that line paid to the Midwest ISO (MISO) partially offset the company’s increased earnings.

In addition, construction began in 2011 on the 70-mile, 230-kV Bemidji to Grand Rapids transmission line, a project ALLETE is investing into the CapX2020 initiative. ALLETE is also participating in the Fargo to St. Cloud project and the Monticello to St. Cloud project. Together, those projects will complete a 238-mile, 345-kV line from Fargo, N. D. to Monticello, Minn. ALLETE plans to invest $90m of the $113m transmission budget in these three projects, Hodnik said on the earnings call.

Higher revenue from cost recovery riders associated with Minnesota Power’s capital expenditures for renewable energy and transmission infrastructure also contributed to the year-over-year increase.