Construction on the 220-mile, 500-kV Greater Northern Transmission Line that will deliver hydropower from Manitoba to Minnesota Power is slated to begin next year and provide investment and growth opportunities through the end of the decade, ALLETE (NYSE:ALE) Chairman, President and CEO Al Hodnick said Feb. 18 during the company’s 4Q15 earnings call.
“During 2015, the Minnesota Public Utilities Commission determined the certificate of need and the route permit applications were complete,” he said. “Minnesota Power anticipates final route and presidential permit approval this spring. Great Northern Transmission Line construction is expected to begin in earnest in 2017, with completion scheduled for 2020.”
Hodnick also noted that the company recently received regulatory approval to proceed with a 10 MW solar installation, which will be built at Camp Ripley. The $30m project would help Minnesota Power achieve about one-third of its requirement under the state’s solar energy standard, he said. Construction is expected to begin in May and continue through the summer, with the goal for the project to be producing solar power by November, he said.
“This creative partnership is the latest example of how Minnesota Power is achieving and advancing its EnergyForward strategy,” he said. “EnergyForward balances stewardship, reliability and affordability, while maintaining fuel diversity within a generation portfolio that by the early 2020s will be comprised of one-third renewable, one-third natural gas, and one-third coal.”
The EnergyForward action has positioned the company very well for the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan and other regulations, he said.
“But, like many other utilities, we harbor some concerns about assuring we receive credit for early action taken to the benefit of all stakeholders, as well as the consequential nature of this regulation as it relates to reliability and affordability,” he added. “While the [Clean Power Plan] was stayed last week in a decision by the U.S. Supreme Court, we continue to work with stakeholders in shaping Minnesota’s [Clean Power Plan] state implementation plan, continue to monitor its legal status, and are taking necessary and prudent action to protect the value of our investments.”
Among other things, Hodnick also noted that ALLETE subsidiary ALLETE Clean Energy expanded its renewable energy footprint and presence in 2015.
As noted in an April 2015 statement, ALLETE Clean Energy acquired a combined 97.5 MW wind generation facility near Lake Benton, Minn., for $47.5m. The facility was purchased from a subsidiary of EDF Renewable Energy, the company said. Located in southwest Minnesota in the proximity of other ALLETE Clean Energy-owned wind turbines, the Chanarambie and Viking wind farms purchased consist of a total of 65 General Electric turbines producing electricity under existing power purchase agreements with Northern States Power, the company said.
As noted in a July 2015 statement, ALLETE Clean Energy closed on the purchase of a 100.5 MW Pennsylvania wind farm from The AES Corporation (NYSE:AES). ALLETE Clean Energy acquired the wind facility near Troy, Pa., called Armenia Mountain from AES and a non-controlling interest from a minority shareholder for a total of $108m, plus the assumption of existing debt, the company said.
In addition to those projects, Hodnick also referenced the Thunder Spirit project.
As noted in a Jan. 5 statement, ALLETE Clean Energy has finalized its sale of the Thunder Spirit wind development to Montana-Dakota Utilities (MDU) after wrapping up construction on the project last December. ALLETE Clean Energy built the 107 MW wind farm near Hettinger, N.D., under a development agreement with MDU, a division of MDU Resources Group (NYSE:MDU), the company said. Montana-Dakota acquired the finished project for $200m, and will operate the wind farm for use by its utility customers, the company said.
“I believe the tremendous progress we have made on our strategy is clearly positioning ALLETE for continued growth through the end of the decade and beyond,” Hodnick said. “ALLETE’s unique family of businesses is committed to service and reliability as we thoughtfully expand our significant renewable energy platform, while answering the nation’s call to transform its energy and water sectors. ALLETE is well positioned to capitalize on an emerging environmental landscape that will not only require cleaner energy sources, but will also place even greater emphasis on energy and water conservation to meet changing societal expectations.”
ALLETE Clean Energy will continue to target acquisitions of existing facilities that have long-term power sales agreements in place, he said.
ALLETE on Feb. 18 reported 2015 earnings of $2.92 per share on net income of $141.1m, and operating revenue of $1.49bn. Earnings for 2014 were $2.90 per share on net income of $124.8m, and operating revenue of $1.14bn.
Included in 2015 results are a $20.4m, or 42 cents per share, profit on the construction and sale of a wind energy facility by ALLETE Clean Energy, a $22.3m, or 46 cents per share, non-cash impairment charge at ALLETE Properties, and $4.8m, or 10 cents per share, of acquisition transaction fees related to ALLETE’s Energy Infrastructure and Related Services businesses, the company said. Earnings in 2014 included $1.4m, or 3 cents per share, of acquisition transaction fees, and a $2.5m, or 6 cents per share, charge associated with an EPA settlement, the company said.
"We are proud of our financial and operational accomplishments in 2015, especially when considering the challenges that came at us on many fronts," Hodnik said in the statement. “Our broadened energy businesses are well positioned for success in 2016 and beyond. ALLETE’s value proposition remains intact and our 2015 financial results are a good example of how our operating businesses support ALLETE’s mission and how management deals with economic challenges and delivers on shareholder value."
ALLETE said that its Regulated Operations segment, which includes Minnesota Power, Superior Water, Light and Power, and the company’s investment in American Transmission Co. (ATC), recorded net income of $131.6m, an increase of $8.6m over 2014 net income. Earnings increased primarily due to higher cost recovery rider revenue, production tax credits, power marketing sales, and lower operating and maintenance expenses, the company said, adding that those increases were partially offset by lower industrial sales and higher depreciation, interest and property tax expense.
In addition, Minnesota Power recorded a reserve in 2015 for estimated refunds of $1.6m after-tax related to Midcontinent ISO return on equity complaints, of which $0.9m after-tax was attributable to prior years, the company said. In 2015, ALLETE said that its equity earnings in ATC also reflected a $3m after-tax charge related to the same complaints, of which $1.4m after-tax was attributable to prior years. In 2014, results included a $2.5m after-tax charge related to a settlement agreement with the EPA, the company said.