ALLETE (NYSE:ALE) now expects capital expenditures for the Great Northern Transmission Line to be about $60m for 2017, down from the company’s earlier estimate of $120m, impacting current cost recovery revenue in 2017, Bob Adams, ALLETE senior vice president and CFO, said on Aug. 2.
“The reduction in 2017 is partially weather related and later-than-planned completion of the transmission structure design phase of the project, which, of course, needs to be occurred before the materials are ordered,” he said during the company’s 2Q17 earnings call.
ALLETE Chairman, President and CEO Al Hodnik said during the call that Minnesota Power is “making progress on its plan to move carbon-free hydro generation from Canada into its service territory with the Great Northern Transmission Line. Site clearing and pre-construction activities commenced in the first quarter of 2017, and Minnesota Power expects the line to be completed in 2020. Minnesota Power’s portion of this investment is expected to be approximately $300m to $350m, and is eligible for current cost recovery. Total project costs of $61.1m have been incurred through the end of June on its portion of the line, which runs approximately 220 miles to the Canadian border.”
He also noted that in June, ALLETE announced Minnesota Power’s most recent initiative in support of its EnergyForward strategy.
“After much discussion and analysis, Minnesota Power brought forward a proposal, which would, in total, add over 500 MW of renewable energy and renewable enabling natural gas supply to its increasingly diverse and more balanced portfolio of generation,” he said. “This proposal includes a $350m investment opportunity that will allow Minnesota Power to add more renewable energy, while still adhering to key EnergyForward principles of affordability, reliability, and environmental stewardship.”
Hodnik also noted that ALLETE Clean Energy (ACE), ALLETE’s wholly owned subsidiary, “operates a significant portfolio of approximately 535 MW of wind generation and has a robust pipeline of other renewable projects it is currently weighing.”
He continued, “ALLETE Clean Energy has plans to refurbish 385 wind turbines at three wind farms in Minnesota and Iowa.”
The approximately $80m project involves work at the Lake Benton wind site in Minnesota, as well as the Storm Lake I and II wind sites in Iowa, he said, adding that the project will improve turbine performance and reliability, generate federal production tax credits at each site, and supports a renewal of power sales agreements at the Storm Lake sites.
“[T]he $80m ACE investment could generate approximately $180m in production tax credits, positively contributing to ALLETE earnings,” he said. “This strategic investment will sustain ALLETE Clean Energy’s position in the marketplace.”
Hodnik also discussed the new wind energy facility of up to 50 MW to be built for Montana-Dakota Utilities under a 25-year power sales agreement, which includes an option for Montana-Dakota Utilities to purchase the facility upon completion for a development fee.
Construction pre-planning and associated regulatory processes are proceeding well and ALLETE Clean Energy expects to begin construction on the project in 2018, he said.
Among other things, he noted that ALLETE Clean Energy in March announced that it would build, own, and operate a separate 100-MW wind energy facility under a 20-year power supply agreement with Xcel Energy’s (NYSE:XEL) Northern States Power. Construction on that project is also expected to begin in 2018, subject to regulatory approvals, he said.
ALLETE on Aug. 2 reported 2Q17 earnings of 72 cents per share on net income of $36.9m and operating revenue of $353.3m. Last year’s results were 50 cents per share on net income of $24.8m and operating revenue of $314.8m, the company said.
ALLETE said that its Regulated Operations segment, which includes Minnesota Power, Superior Water, Light and Power, and the company’s investment in American Transmission Company (ATC), recorded net income of $32.4m, an increase of $9.8m over 2016 net income.
Earnings increased primarily due to higher net income at Minnesota Power resulting from the implementation of interim retail rates at the beginning of the year, higher kilowatt-hour sales primarily due to increased sales to Minnesota Power’s industrial customers and timing of the recognition of a conservation improvement program financial incentive following Minnesota Public Utilities Commission approval in the second quarter, the company said.
Those increases were partially offset by higher operating and maintenance, depreciation, and interest expenses, the company said, adding that its equity earnings in ATC increased $0.8m from 2016, primarily due to additional investments in ATC and period over period changes in ATC’s estimate of a refund liability related to Midcontinent ISO return on equity complaints.
ALLETE said that its Energy Infrastructure and Related Services businesses, which include ALLETE Clean Energy, recorded net income of $3.8m and $0.6m, respectively. Earnings at ALLETE Clean Energy increased $1.2m, or 46%, from 2016, the company said, adding that net income in 2017 included higher operating revenue and lower operating and maintenance expense compared to the same period in 2016.