Q3 2023 ALLETE Inc Earnings Call
Okay.
Speaker 1: Good day and welcome to the elite third quarter of 2023 financial results call. Today's call is being recorded.
Good day and welcome to the ALLETE third quarter 2023 financial results call today's call is being recorded.
Speaker 1: Certain statements contained in this conference call that are not descriptions of historical facts are forward-looking statements, such as terms defined in the Private Securities Dedication Reform Act of 1995.
Statements contained in this conference call.
Description.
Great.
Forward looking statements.
In the private Securities Litigation reform.
1995.
Speaker 1: because such statements can include risks and uncertainties. Actual results may differ materially from those expressed or implied by such forward-looking statements.
Statements can include risks and uncertainties.
Yeah.
Sure.
Dose expansion.
Thank you.
These statements.
Speaker 1: factors that could cause results that differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the company with the Securities and Exchange Commission.
Factors that could cause.
Yes.
From those expressed or implied.
These statements include but are not too.
Got it.
By the company with the Securities and Exchange Commission.
Speaker 1: Many of the factors that will determine the company's future results are beyond the ability of management to control or predict.
No.
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Company's future results are beyond the ability of to manage.
To control or predict.
Speaker 1: Listeners should not put undue reliance on forward-looking statements, which reflect management reviews only, as of the date thereof. The company undertakes no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Listeners should not good.
Yes.
These statements, which reflect management's views only.
The date here off the cuff.
<unk> undertakes no obligation to revise or update any forward looking statements.
To make any other forward looking statements, whether as a result of information future events or otherwise.
Speaker 1: Welcome to a lead conference call announcing third quarter of 2023 financial results. And at this time, all participants.
Welcome to <unk> conference call announcing third quarter 2023 financial results.
All participants are in listen.
Speaker 1: After the speaker's presentation, there will be a question and answer session.
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Speaker 1: I would now like to turn the call over to Bethany Owen, Chair, President, and CEO . You may begin.
I would now like to turn the call over to Bethany Owen.
President and CEO you may begin.
Speaker 2: Thank you and good morning everyone and thanks for joining us. With me today are Elite Senior Vice President and Chief Financial Officer Steve Morris, Jeff Sizzens, Elite Corporate Development and Elite Clean Energy Strategy Officer and Frank Fredericks and Minnesota Powers Vice President of Customer Experience and Engineering Services. Course finding slides for this morning's caller available on our website at elite.com in the Investor section. And we'll call out each page number as we go through today's presentation.
Thank you and good morning, everyone and thanks for joining US with me today are elite senior Vice President and Chief Financial Officer, Steve Morris, Jeff Susan's ALLETE corporate development, and ALLETE clean energy strategy Officer, and Frank Frederickson, Minnesota powers, Vice President of customer experience and engineering services.
Responding slides for this morning's call are available on our website at Alere Dot com in the investors section and we will call out each page number as we go through todays presentation.
Speaker 2: This morning, we're pleased to report elite third quarter 2023 earnings of $1.49 per share on net income of $85.9 million. Last year's third quarter results were 59 cents per share on net income of $33.7 million. Steve will be providing additional details on our financial performance during the quarter and our revised full year 2023 guidance in a moment.
This morning, we're pleased to report ALLETE third quarter 2023 earnings of $1 49 per share on net income of $85 $9 million.
Last year's third quarter results were 59 cents per share on net income of $33 $7 million, Steve will be providing additional details on our financial performance during the quarter and our revised full year 2023 guidance in a moment I'll.
Speaker 2: I'll begin with brief updates on just a few of our key strategic projects.
I'll begin with brief updates on just a few of our key strategic projects.
Speaker 2: Starting with our largest business, our Minnesota Power team continues to make significant progress on projects that are foundational to Elite's sustainability in action strategy, including the more than $3 billion capital expenditure plan to advance our carbon-free energy vision.
Starting with our largest business our Minnesota power team continues to make significant progress on projects that are foundational to elite sustainability in action strategy, including the more than $3 billion capital expenditure plan to advance our carbon free energy vision slide.
Speaker 2: Slide three shows an important part of that plan, our HVDC Modernization Project. This project will replace aging infrastructure and modernize the terminal stations for our 465 mile BC transmission line running from center North Dakota to Duluth, Minnesota.
Slide three shows an important part of that plan are H B D. C. Modernization project. This project will replace aging infrastructure and modernize the terminal stations for our 465 mile DC transmission line running from center, North Dakota to Duluth, Minnesota.
Speaker 2: It provides Minnesota Power's customers direct access to some of the best wind resources in the country and will also enhance the reliability and resiliency of the grid across the Upper Midwest.
It provides minnesota Power's customers direct access to some of the best wind resources in the country and will also enhance the reliability and resiliency of the grid across the upper Midwest R.
Speaker 2: Our team has worked hard to advance this important project and to secure government grants to help reduce the project's cost for customers.
Our team has worked hard to advance this important project and to secure government grants to help reduce the project's cost for our customers and May Minnesota power was awarded a $15 million grant towards the project as part of the energy Bill passed by the Minnesota Legislature and just a couple of weeks ago, we were very pleased to learn that.
Speaker 2: In May, Minnesota Power was awarded a $15 million grant toward the project as part of the energy bill passed by the Minnesota Legislature. And just a couple of weeks ago, we were very pleased to learn that the U.S. Department of Energy awarded Minnesota Power a $50 million grant for the project, following a competitive process among hundreds of applicants nationwide.
The U S Department of energy awarded Minnesota Power up $50 million Grant for the project following a competitive process among hundreds of applicants nationwide.
Speaker 2: We're grateful for this meaningful support from the state of Minnesota and the Department of Energy in helping to make this important project even more affordable for our customers.
We're grateful for this meaningful support from the state of Minnesota, and the department of energy, helping to make this important project, even more affordable for our customers.
Speaker 2: Construction could begin on this $800 to $900 million project as early as next year, pending regulatory approvals in North Dakota and Minnesota with an in-service date expected later this decade.
Construction could begin on this $800 million to $900 million project as early as next year pending regulatory approvals in North Dakota, and Minnesota with an in service date expanded expected later this decade.
Speaker 2: Our team is also making great progress on the Northland Reliability Project, a 345KV transmission line from the iron range in Northern Minnesota to Central Minnesota, which will jointly own with great river energy.
Our team is also making great progress on the Northland reliability project, a 345 kv transmission line from the Iron range in northern Minnesota to Central Minnesota, which will jointly owned with Great River energy.
Speaker 2: This project was approved by MISO in the first tranche of its long range transmission plan and is estimated to cost a combined total of 970 million dollars to 1.3 billion dollars, representing another important investment in the reliability and resiliency of the transmission system.
This project was approved by MISO and the first tranche of its long range transmission planning and is estimated to cost a combined total of $970 million to $1 $3 billion, representing another important investment in the reliability and resiliency of the transmission system.
Speaker 2: In August , we filed a combined Certificate of Need and route permit application with the Minnesota Public Utilities Commission and we look forward to working through the regulatory approval process.
In August we filed a combined certificate of need and route permit application with the Minnesota Public Utilities Commission and we look forward to working through the regulatory approval process.
Another project approved by MISO and the first tranche of its L. RTP as the Big Stone South transmission project, a 150 mile 345 kv transmission line jointly owned by five utilities, including Minnesota power.
Certificate of need was filed with the N PUC in September and the commission will determine the final route for the Minnesota portion of the project as well as cost recovery for our approximately $20 million share.
Speaker 2: In addition to this exciting progress on the transmission front, we're making progress on our renewable RFPs. On October 2, Minnesota Power filed a notice with the MPUC of our plan to issue an RFP for up to 300 megawatts of solar later this month.
In addition to this exciting progress on the transmission front, we're making progress on our renewable Rfps on October 2nd, Minnesota Power filed a notice with the M. PUC of our plan to issue an RFP for up to 300 megawatts of solar later. This month. We also plan to issue an RFP for up to 400 megawatts.
Speaker 2: We also plan to issue an RFP for up to 400 megawatts of wind by the end of the year. The solar RFP will emphasize important attributes such as investment in our host communities, the use of local labor, and a focus on increasing supplier and workforce diversity. All of this will help ensure these solar projects deliver the best overall value to customers while strengthening the communities where privilege to serve. Please press List. That Gummek
Wind by the end of the year.
The solar RFP will emphasize important attributes such as investment in our host communities. The use of local labor and our focus on increasing supplier and workforce diversity. All of this will help ensure these solar projects deliver the best overall value to customers, while strengthening the communities we are privileged to serve.
Yes.
Please see slides four and five.
Speaker 2: As planned yesterday Minnesota Power filed a rate proposal with the Minnesota Public Utilities Commission. This proposal will help ensure Minnesota Power can continue making the energy forward investments needed to meet the goals of this year's Minnesota legislation requiring 100% carbon-free energy by 2040.
As planned yesterday, Minnesota power filed a rate proposal with the Minnesota Public Utilities Commission. This proposal will help ensure Minnesota power can continue making the energy forward investments needed to meet the goals of this year's Minnesota legislation, requiring 100% carbon free energy by 2040.
Speaker 2: Minnesota Power became the first utility in the state to deliver 50% renewable energy in 2020 and reached an all-time high of nearly 60% renewable energy for customers in 2022. And I'm so proud of our Minnesota Power team and all that our company has done to lead our state's clean energy transformation, all while safeguarding reliable service to customers.
Minnesota power became the first utility in the state to deliver 50% renewable energy in 2020 and reached an all time high of nearly 60% renewable energy for customers in 2022 and.
And I'm, so proud of our Minnesota power team and all of that our company has done to lead our state's clean energy transformation, all while safeguarding reliable service to customers.
Speaker 2: In addition, we've worked thoughtfully to provide meaningful programs to support our low-income customers, as well as state-leading energy conservation programs and time-of-day rates that provide options for customers to save energy and control their monthly bills. These are just a few examples. While we advance our vision of providing carbon-free energy, we will continue to make affordability for all of our customers a priority.
In addition, we've worked thoughtfully to provide meaningful programs to support our low income customers as well as state leading energy conservation programs and time of day rates that provide options for customers to save energy and control of their monthly Bill. These are just a few examples while we advance our.
Providing carbon free energy, we will continue to make affordability for all of our customers a priority.
Speaker 2: There is more work ahead to ensure that we have the resources and tools needed to accomplish the state's clean energy goals. And that's the reason for the rate proposal Minnesota Power filed yesterday.
There is more work ahead to ensure that we have the resources and tools needed to accomplish the state's clean energy goals and that's the reason for the rate proposal, Minnesota power filed yesterday, we're confident that our regulators understand the importance of a constructive outcome to help ensure Minnesota power's ability to continue.
Speaker 2: We're confident that our regulators understand the importance of a constructive outcome to help ensure Minnesota Power's ability to continue our clean energy transformation while delivering the safe, resilient, and reliable service that powers people's lives and businesses throughout Northeastern Minnesota.
Our clean energy transformation, while delivering the safe resilient and reliable service that powers People's lives and businesses throughout northeastern Minnesota.
Speaker 2: Steve will share more details on the rate case filing in a moment.
Steve will share more details on the rate case filing in a moment.
Speaker 2: One other note on the regulated operations front, I'm pleased to report that Superior Water, Light, and Power began generating renewable energy from its first community solar garden last month.
One other note on the regulated operations front I am pleased to report that superior water light and power began generating renewable energy from its first community solar garden last month.
Speaker 2: Superior Solar is a 470-kilowatt project built by local labor and with regionally sourced materials. The solar garden is fully subscribed, generating enough energy to power approximately 115 homes, and it's the first energy generated locally by Superior Water, Light & Power in more than 40 years.
<unk> solar is a 470 kilowatt project built by local labor and with regionally sourced materials. The solar garden is fully subscribed generating enough energy to power approximately 115 homes and it's the first energy generated locally by superior water light and power and more.
40 years.
Speaker 2: Turning briefly to our non-regulated businesses, it was great to receive the very positive arbitration outcome in favor of elite clean energy recently.
Turning briefly to our nonregulated businesses. It was great to receive the very positive arbitration outcome in favor of ALLETE clean energy recently.
Speaker 2: The Elite Clean Energy team has endured the historically low wind conditions that affected much of the nation this quarter and have worked hard to mitigate the effects, including increasing efficiencies and unit availability, implementing O&M reductions, and many other initiatives. They're a strong team and I couldn't be more proud of their resilience and innovation throughout the year.
Clean energy team has endured the historically low wind conditions that affected much of the nation. This quarter and have worked hard to mitigate the effects, including increasing efficiencies and unit availability implementing O&M reductions and many other initiatives, they're a strong team and I couldnt be more proud of there.
Our resilience and innovation throughout the year.
Speaker 2: And finally, as we close in on the first full calendar year with new energy equity as part of the elite family of businesses, we're excited about the team's positive momentum.
And finally as we close in on the first full calendar year with new energy equity as part of the ALLETE family of businesses.
We're excited about the team has positive momentum.
Speaker 2: New energy equity continues to grow with already strong pipeline of more than two gigawatts, all while executing on current projects and delivering solid financial results.
New energy equity continues to grow its already strong pipeline of more than two gigawatts all while executing on current projects and delivering solid financial results. As mentioned previously we expect new energy to close out the year on track or slightly above original expectations.
Speaker 2: as mentioned previously, we expect new energy to close out the year on track or slightly above original expectations.
Speaker 2: We've made strong progress throughout this year, and I'm grateful to our entire team across our family of businesses for their dedication, expertise, resiliency, innovation, and always their integrity. Our team is committed to serving our customers with excellence every single day.
We've made strong progress throughout this year and I'm grateful to our entire team across our family of businesses for their dedication expertise resiliency innovation and always their integrity.
Our team is committed to serving our customers with excellence every single day.
Speaker 3: Now, I'll turn it to Steve for additional details on our 3rd quarter financial results, full year earnings guidance and Minnesota powers rate case filing Steve. Thanks, Bethany and good morning. Everyone I would like to remind you that we filed our 10-Q this morning. And encourage you to refer to it from our details.
Now I'll turn it to Steve for additional details on our third quarter financial results full year earnings guidance, and Minnesota power rate case filings Steve.
Thanks, Bethany and good morning, everyone I would like to remind you that we filed our 10-Q. This morning and I encourage you to refer to it for more details.
Speaker 3: Please refer to slide six through eight for significant variances and other items for comparison consideration.
Please refer to slide six through eight for significant variances and other items for comparison consideration.
Speaker 3: Today, a late reported third quarter 2023 earnings of $1.49 per share on an income of $85.9 million. Earnings in 2022 were $0.59 per share on an income of $33.7 million.
ALLETE reported third quarter 2023 earnings of $1 49 per share on net income of $85 $9 million earnings in 2022 were <unk> 59 per share on net income of $33 7 million.
Speaker 3: The income in this quarter included a $40.5 million or 71 cents per share after tax gain recognized for a favorable arbitration award involving a subsidiary of a league clan energy. Also impacting this quarter was the timing of reserves for interim rates resulting from Minnesota Power's February rate case order.
Net income this quarter included a $45 million or <unk> 71 per share after tax gain recognized for a favorable arbitration award involving a subsidiary of ALLETE clean energy.
Also impacting this quarter was the timing of reserves for interim rates, resulting from Minnesota Power's February rate case order.
Speaker 3: A few details from our business segments. Elite's regulated operations segment recorded third quarter of 2020 three net income of thirty four million dollars.
A few details from our business segments.
<unk> regulated operations segment recorded third quarter 2023, net income of $34 million.
Speaker 3: compared to $38.3 million in 2022.
Compared to $38 3 million in 2022, earning.
Speaker 3: Earnings were lower in the 3rd quarter of 2023, reflecting the timing of interim rate reserves at Minnesota Power compared to 2022. As you may recall, the entire 2022 interim rate reserve was recorded in the 4th quarter of 2022, which has resulted in timing differences each quarter throughout 2023.
Earnings were lower in the third quarter of 2023, reflecting the timing of interim rate reserves at Minnesota power compared to 2022.
As you May recall, the entire 2022 interim rate reserve was recorded in the fourth quarter of 2022, which has resulted in timing differences each quarter throughout 2023.
Speaker 3: The timing difference of these reserves will fully reverse in the fourth quarter of this year.
The timing difference of these reserves will fully reverse in the fourth quarter of this year.
Speaker 3: Partially offsetting this impact was increased sales to industrial customers during the quarter.
Partially offsetting this impact was increased sales to industrial customers during the quarter.
Speaker 3: Elite Clean Energy recorded third quarter 2023 net income of $54.8 million compared to a net loss of $7.3 million in 2022.
ALLETE clean energy recorded third quarter 2023, net income of $54 $8 million compared to a net loss of $7 $3 million in 2022.
Speaker 3: In this quarter reflected the gain and interest income for the favorable arbitration award at one of elite clean energy subsidiaries. In 2022 included a reserve of $2.9 million after tax to anticipate a loss on the sale of the Northern Wind Project.
Net income this quarter reflected the gain and interest income for the favorable Arbitration award at one of ALLETE clean Energy's subsidiaries 2022 included a reserve of $2 $9 million after tax for the anticipated loss on the sale of the northern wind project.
Speaker 3: Our corporate and other businesses, which includes new energy, B&I Energy and our investments in renewable energy facilities, recorded a net loss of $2.9 million compared to net income of $2.7 million in 2022. Net income this quarter reflects higher consolidated income tax expense, partially offset by earnings from Minnesota solar projects, which were placed into service late last year and in the second quarter this year.
Our corporate and other businesses, which includes new energy P&I energy and our investments in renewable energy facilities recorded a net loss of $2 9 million compared to net income of $2 $7 million in 2022.
Net income this quarter reflects higher consolidated income tax expense.
We offset by earnings from Minnesota Solar projects, which were placed into service late last year and in the second quarter. This year.
Speaker 3: new energies earnings in this quarter were slightly below 2022, primarily due to the timing of project closings now expected in the fourth quarter and higher operating and maintenance expense as compared to last year.
Energy's earnings in this quarter were slightly below 2022, primarily due to the timing of project closings now expected in the fourth quarter and higher operating and maintenance expense as compared to last year.
Speaker 3: Elite financial position is supported by a strong balance sheet that includes cash and cash equivalents of approximately $126 million. $370 million in available consolidated lines of credit.
<unk> financial position is supported by a strong balance sheet that includes cash and cash equivalents of approximately $126 million.
$370 million in available consolidated lines of credit.
Speaker 3: and a debt-to-capital ratio of 35% at the end of the quarter. The arbitration award had a positive impact on our liquidity position, with approximately $60 million reflected in cash and cash equivalents at the end of the third quarter.
Our debt to capital ratio of 35% at the end of the quarter. The Arbitration award at a positive impact on our liquidity position with approximately $60 million reflected in cash and cash equivalents at the end of the third quarter.
Speaker 3: Next, a few comments on our outlook and full year 2023 guidance. Please refer to slide nine.
Next a few comments on our outlook and full year 2023 guidance.
Please refer to slide nine for additional details.
Speaker 3: Considering a number of factors occurring during the year, as well as our anticipated results for the fourth quarter, we have revised at least 2023 full year earnings guidance to be in a range of $4.30 to $4.40 per share.
Considering a number of factors occurring during the year as well as our anticipated results for the fourth quarter.
A revised at least 2023 full year earnings guidance to be in a range of $4 30.
To $4 40 per share.
Speaker 3: Specific items affecting Minus Elite's updated guidance includes the 3rd quarter arbitration award, a 3rd party network outage expected to negatively impact the Cato-Win Energy Facility in the 4th quarter, and historically low winds across much of the nation affecting earnings at elite clean energies win energy facilities throughout the year.
Specific items affecting minutes elites updated guidance includes the third quarter Arbitration Award a third party network outage expected to negatively impact the Caddo wind energy facility in the fourth quarter and historically low wins across much of the nation affecting earnings at ALLETE clean Energy's wind energy facilities throughout the year.
Speaker 3: These items in total had a positive impact of approximately 30 cents per share included in our guidance update.
These items in total had a positive impact of approximately <unk> 30 per share included in our guidance update.
Speaker 3: Next, a few comments on the recently filed Minnesota Power Rake case. Please refer back to slides, four and five, several highlights, on the filing.
Next a few comments on the recently filed Minnesota power rate case, please refer back to slides four and five several highlights on the filings.
Speaker 3: Yesterday, when a sort of power filed a retail rate increase request with the Minnesota Public Utilities Commission, seeking an increase of approximately $89 million in total additional annual revenue, net of a rider revenue moving to base rate.
Yesterday.
Sort of power filed a retail rate increase request with the Minnesota Public Utilities Commission seeking an increase of approximately $89 million in total additional annual revenue net of rider revenue moving to base rate.
Speaker 3: filing seeks to return on equity at 10.3% and a 53% equity ratio.
Filing seeks a return on equity of 10, 3% or 53% equity ratio.
Our request includes net interim rates of approximately $64 million, which is.
<unk> to begin in January 2024, with approval by the commission interim rates are subject to refund.
Anticipate final rates would be implemented sometime in late 2025.
Speaker 3: Our rate case request supports energy forward goals by transitioning to new supplies of renewable energy.
Our rate case request supports energy forward goals by transitioning to new supplies of renewable energy.
Speaker 3: Building more resiliency into the electric grid to ensure reliability. Employing the workforce necessary to achieve a clean energy transition. Addressing inflation and supply chain issues and by providing a fair return on investment to attract capital for continued investment in the clean energy future.
Building more resiliency into the electric grid to ensure reliability employing the workforce necessary to achieve our clean energy transition addressing inflation and supply chain issues and by providing a fair return on investment to attract capital for continued investment in the clean energy future.
Speaker 3: The rate cases Sims taconite production of approximately 35 million tons, which is in alignment with the long-term average production levels for taconite.
The rate case assumes taconite production of approximately 35 million tons, which is in alignment with our long term average production levels for taconite.
Speaker 3: In addition, Minnesota Power has proposed a rate stabilization mechanism.
In addition, Minnesota power has proposed a rate stabilization mechanism.
Speaker 3: To address and mitigate the financial impacts related to operational volatility of its large-power customers, this proposal offers a simple and balanced method to align risks and benefit of large-power load-of-volatility that can be applied between rate cases.
To address and mitigate the financial impact related to operational volatility of its large power customers. This proposal offers a simple and balanced method to align risks and benefits of large power load of volatility that can be applied between rate cases.
Speaker 3: The filing also accounts for approximately $39 million previously approved for recovery through transmission and renewable riders by the Minnesota Public Utilities Commission for capital costs of the Great Northern Transmission Line and production tax credits by moving rider billings into base electric rates.
The filing also accounts for approximately $39 million previously approved for recovery through transmission and renewable riders by the Minnesota Public Utilities Commission for capital costs of the great Northern transmission line and production tax credits by moving rider billings into our base electric rates.
Speaker 3: This change from rider billings to base rates will not alter the total amount we recover from customer.
It's changed from Ryder billings to base rates will not alter the total amount we recover from customers.
Speaker 3: We will share procedural updates on material developments as the filing progresses.
We will share procedural updates on material developments as a filing progresses along.
Speaker 3: I'll turn it back to Bethany for additional comments. Bethany?
I'll turn it back to <unk> for additional comments.
Speaker 2: Thanks for that update, Steve. As you can hear, we're very pleased with our progress advancing elite sustainability and action strategy. And we expect even more in the coming years. Elite is a strong, growing, and vibrant company with a talented team and a family of businesses that are well positioned to thrive now and long into the future.
Any.
Thanks for that update Steve as you can hear we're very pleased with our progress advancing elite sustainability in action strategy and we expect even more in the coming years elite is a strong growing and vibrant company with a talented team in our family of businesses that are well positioned to thrive now and <unk>.
Long into the future together these businesses provide sustainable long term earnings growth and many opportunities for significant additional clean energy investment.
Speaker 2: Together, these businesses provide sustainable long-term earnings growth and many opportunities for significant additional clean energy investment.
Speaker 2: I'm equally proud that how we do business is always a differentiator of elite in our team. We're committed to working closely with our many diverse stakeholders as we continue to execute our sustainability in action strategy because we know we are stronger when we work together.
And equally proud that how we do business is always a differentiator of elite and our team. We are committed to working closely with our many diverse stakeholders as we continue to execute our sustainability in action strategy. Because we know we are stronger when we work together.
Speaker 2: Slide 10 contains links to detailed information on this important work, including our Corporate Sustainability Report, which we planned to update in the coming weeks with full year 2022 data, and will continue to update the CSR regularly as we execute our strategy.
Slide 10 contains links to detailed information on this important work, including our corporate sustainability report, which we plan to update in the coming weeks with full year 2022 data and we will continue to update the CSR regularly as we execute our strategy.
Speaker 2: We look forward to sharing more energy transforming progress in future quarters. We've set the stage for strategic, significant, and sustainable growth at Elite, with real projects that build on the strategic assets we already have and leverage the strength and experience of our amazing teams.
We look forward to sharing more energy transforming progress in future quarters, we've set the stage for strategic significant and sustainable growth at ALLETE with real projects that build on the strategic assets, we already have and leverage the strength and experience of our amazing team we have.
Speaker 2: We're proud of Elite's track record and excited about the future as we provide cleaner energy to our customers, meaningful jobs and significant investment in our communities, exciting opportunities for our employees, and attractive value for our investors. That is putting sustainability into action.
Proud of elite track record and excited about the future as we provide cleaner energy to our customers meaningful jobs and significant investment in our communities exciting opportunities for our employees and attractive value for our investors that is putting sustainability into action. Thank you.
Speaker 2: Thank you for your interest and your investment in a lead at this time. I'll ask the operator to open the line for your question.
And for your interest and your investment in ALLETE at this time I'll ask the operator to open the line for your questions.
Speaker 1: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. So withdraw your question, please press star 11 again. Please standby while we compile.
Thank you.
As a reminder to ask a question we expressed our one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Okay.
Speaker 1: Our first question comes from the line of Richard Thunderland of J.P. Marken. Please proceed the do.
Our first question comes from the line of Richard Sunderland of J P. Morgan. Please proceed with your question.
Speaker 4: Hi, good morning. Thank you for the time today. Good morning.
Hi, Good morning, Thank you for the time today.
Starting on the capital side.
Speaker 4: With these two RFPs, the 300 megawatts of solar and the 400 megawatts of wind, when do you anticipate having line of sight to those outcomes? And would that line of sight also drive a capital plan revision? As well, how do you think about the capital plan overall and light of the moving pieces on the transmission side as well? I guess just curious about the cadence of up to two might give into 24 here.
With these two rfps to 300 megawatts of solar in the 400 megawatts of wind.
When do you anticipate having line of sight to those outcomes.
With that with that line of sight also drive capital plan revision as well how are you thinking about the capital plan overall in light of the moving pieces on the transmission side as well I guess, just curious about the cadence of updates you might give into 24 here.
Speaker 3: Hey, good morning, Russ. Steve Moore. So I can take that, as Bethany mentioned, we do plan to issue the solar RFP later this month and the wind as well later this year.
Hey, good morning, Steve Mora, So I can take that as Bethany mentioned, we do plan to issue. The solar RFP later this month and if the wind as well later this year.
Speaker 3: We would expect the RFP award selection midway through 2024 with the Commission approval process.
We would expect the RFP award selection Midway through 2024 with the commission approval process later in 2024, so if successful we could have capital.
Speaker 3: later in 2024. So if successful, we could have capital costs later in this year. Certainly could slide into 2025 as well.
Cos later in this year, certainly could slide into 2025 as well.
Speaker 3: We'll have a little bit more clarity, we think, by our conference, year-end conference call in February , which will update our capital schedule at that point in time. Overall, though, we do not expect, if successful on these, our capital to decrease.
We will have a little bit more clarity, we think by our conference year end conference call in February which will update our capital schedule at that point in time overall, though we do not expect our.
If successful on these are capital to to decrease.
Speaker 4: Certainly, certainly. Thanks for running through the timeline there. I guess the other side of the coin, you know, there's been questions over the past year since you raised the capital plan around financing.
Certainly certainly thanks for running through the timeline there.
I guess the other side of the coin there's been questions over the past year since you raised the capital plan around financing.
Speaker 4: How are you thinking about financing at this point? You're certainly topical in light of interest rates, move in sector valuations. I'm also curious I need to go out and financing plan with the arbitration award. Is this something that gives you even incremental flexibility on a sort of financing capital rotation? What have you standpoint? Any thoughts there?
How are you thinking about financing at this point certainly topical in light of interest rates move in sector valuations.
Also curious how you think about the financing plan.
The Arbitration award.
Is this something that gives you even incremental flexibility on a sort of financing capital rotation. What have you standpoint, any thoughts there would be helpful.
Speaker 3: Yeah, thanks. Good question, Rich. So yeah, we have, as I mentioned on the call, an additional 60 million in cash for the arbitration award that can be used for...
Yeah. Thanks, Good question Rich. So yes, we have as I mentioned on the call an additional $60 million in cash for the arbitration award that can be used for future capex projects to reduce.
Speaker 3: future CAPX projects to reduce equity needs as well as we've talked about this before renewable tax credit sales. So we're working on that that could generate potentially $40 million of sales for the 23 credits could be the same number for 24 as well.
Equity needs as well as we've talked about this before renewable tax credit sales. So we're working on that that could generate.
Potentially $40 million of sales for the 23 credits could be the same number for 'twenty four as well.
Speaker 3: So that'll help. I also mentioned on the call debt to equity at 35% at the end of the quarter, which we expect to continue, which gives us some headroom on additional leverage.
So that will help.
I also mentioned on the call debt to equity at 35% at the end of the quarter, which we expect it to continue which gives us some headroom on additional leverage.
Speaker 3: We've also talked before about forming a whole co- with which gives us financial optionality.
We've also talked before about forming a holdco with which gives us financial optionality.
Speaker 3: And as we've discussed before, as we always do, we consider maximizing the value of all our assets with opportunistic redeployment of capital in our regulated CAPEX program. With that said, utilizing the cash on hand with our debt to equity ratio, we have very limited equity needs in 2024.
And as we've discussed before and as we always do we consider maximizing the value of all our assets with opportunistic redeployment of capital.
Our regulated Capex program with that said.
Utilizing the cash on hand with our debt.
Debt to equity ratio.
We have very limited equity needs in 2024.
Speaker 4: Thank you very helpful. And one final one for me, thanks for laying out all the details around the rate case. Can you see if you could speak a little bit to the stakeholder engagement side in advance of this filing and around the filing itself? Obviously a lot of telegraphing you've done out of the last rate case around the needs for this case in particular, anything you could speak to on that side.
Thank you very helpful and one final one from me thanks for laying out all the details around the rate case.
Could you speak a little bit to the stakeholder engagement side in advance of this filing around the filing itself. Obviously a lot of telegraph you've done out in the last rate case around the needs for this case in particular.
Speak to you on that side.
Speaker 2: Yeah, I'll start and maybe Frank can speak to more specifically on the customer side. This is Bethany. You know, certainly we view our engagement with all of our many stakeholders as incredibly important pre-cursors to any of our regulatory processes and certainly engaged in that in advance of our 2019 IRP and have developed a really robust network and communication strategy around ensuring that everyone understands kind of our strategy to move clean energy forward while we continue to preserve reliability and affordability providing value to all of our customers. And I mentioned some of the really key strategic initiatives that we've...
Yeah, I'll start and maybe Frank can speak to more specifically on the customer side. This is bethany.
Certainly we view our engagement with all of our many stakeholders as incredibly important precursors to any of our regulatory processes and certainly.
<unk> engaged in that in advance of our 2019, AARP and have developed a really robust network and communication strategy around.
Sharing that everyone understands kind of our strategy to move clean energy forward.
While we continue to preserve the reliability and affordability providing value to all of our customers and I mentioned some of the.
Really key strategic initiatives that we've.
Put into place to help.
Support lower income customers.
But all of our customers.
That's a key priority so certainly.
Many conversations happening, making sure that people understand the reason for the rate case, and what we're planning to do leading to do with those dollars and so Frank do you want to speak to customers overall, certainly thanks Beth Ann Thanks for the question Richard So, yes, I mean, we worked closely with our customers.
And trying to you know with our largest customers working on helping them with the estimates.
Speaker 5: And they too have inflation in their operations like us. So I mean, there is a level of understanding in that. And we also pace with all of our customers and stakeholders on the clean energy legislation in Minnesota, Minnesota powers renewable energy leadership.
And they too have inflation in their operations like us. So there is a level of understanding and that and we also pace with all of our customers and stakeholders on the clean energy legislation in Minnesota.
Speaker 4: pace with all of our customers and stakeholders on the clean energy legislation in Minnesota. Minnesota Power's renewable energy leadership, you know, finishing off at nearly 60% renewables in 2022 for our retail customers and sharing the progress that is continuing on that as some of the key drivers for this case. Understood, but just to be clear though, have you had conversations around the rate stabilization mechanism in advance of the case.
Power's renewable energy leadership, finishing off at nearly 60% renewables in 2022 for our retail customers.
Speaker 5: finishing off at nearly 50% renewables in 2022 for our retail customers and sharing the progress that is continuing on that as some of the key drivers for this case.
Sharing the progress that.
Continuing on that.
The key drivers for this case.
Sure.
Speaker 4: understood, but just to be clear though, I mean, had conversations around the rate stabilization mechanism in advance of the case itself. I know it's a little bit of a different proposal this time than what you saw in the past. Just curious about the backdrop for that.
Understood, but just to be clear, though.
Conversations around the rate stabilization mechanism in advance of the case itself I know, it's a little bit of a different proposal. This time than what you saw in the past just curious about the backdrop for that specifically.
Speaker 5: We have, Frank, do you want to speak to that? Yes, thank you. So, yes, I mean, we have had some of those conversations with around the stabilization mechanism as
We have Frank do you want to speak to that.
Thank you. So so yes, I mean, we have had some of those conversations around the stabilization mechanism is.
Speaker 5: to do some more listening but also sharing in terms of the sales volatility that Minnesota power has.
Two to do some more listening, but also sharing in terms of the sales volatility that Minnesota powerhouse.
Speaker 5: that's larger than some of the other peer utilities in the state. And some of that's built out in our case and also built out in, you know, in our tack and a forecast.
Thats larger than some of the other peer utilities in the state.
Some of Thats built out in our case and also built out in.
<unk> taconite forecast.
Speaker 5: where we've been reaching out with all the different stakeholders that will be involved in this case and explaining it and explaining how this can be good for all. As we've seen just over the last couple of years with sales both above and below the level that we filed in the 2024 test year. here. Perfect. Thank you very much.
We've been reaching out with all the different stakeholders.
Be involved in this case and explaining and explaining how this can can be good for all.
<unk> seen just over the last couple of years with sales both above and below the level that we filed in the 2024 test here.
Perfect. Thank you very much.
Rich.
One moment please for our next question.
Speaker 1: Hi, good morning, team. Congratulations on the course.
Our next question comes from the line of Alex Marty <unk> of Mizuho Securities. Your line is now open.
Hi, good morning team congratulations on the quarter.
Good morning, Alex Thank you.
Speaker 5: So within your stated five to seven,
So within your stated five to seven.
Speaker 5: EPS growth rate. I'm just curious on the consolidated business. You just don't know where you expect the different businesses to be within that range. I either utility maybe below, but the unregulated above or vice versa. Obviously understanding, you can fluctuate your over here given rate relief and other drivers.
EPS growth rate I'm, just curious on the consolidate business can you touch on where you expect a different businesses to be within that range I E. The utility may be below but the regular unregulated above or vice versa, obviously understanding can fluctuate year over year given.
Rate relief and other drivers.
Speaker 3: So that's not the case, but see if you want to speak to that. Yeah, good morning, Alex, Steve Morris here. So, you know, if you look at our CAPX table, you can see it's really heavily regulated, in fact, with the projects that we have and the renewable efforts going underway at Minnesota Power. So...
Okay.
<unk>.
Not the case.
Speak to that.
Alex Steve Morris here. So if you look at our Capex table you can see it's really.
Heavily.
<unk> in fact with the projects that we have in the renewable efforts going underway at Minnesota power. So.
Speaker 3: So the 5-7 is more heavily weighted towards the regulated business and what we say is complimentary earnings from our non-regulated business, primarily elite clean energy and new energy.
So the five to seven is more heavily weighted towards the regulated business and what we say is complementary earnings from our nonregulated business, primarily ALLETE clean energy and new energy.
Speaker 5: Okay, understood. And then turning back to the rate case, can you touch on any items in the recent filing that you think might require more work or more education with policymakers and interveners, given that I know you just touched on some stakeholder engagement, but sort of any ongoing efforts as you work through the case.
Okay understood and then turning back to the rate case can you touch on any items in the recent filing that you think might require more work or more education with with policymakers and intervenors given that I know you just touched on some stakeholder engagement, but sort of any.
Ongoing efforts as you work through the case.
Speaker 2: Yeah, I think I would just say Alex that, you know, we've worked hard over the last few years to help our regulators and other stakeholders understand the differentiated aspects of our company, our customers, the region that we serve. And I think they have a really strong appreciation and understanding for all of that and certainly why we're in for this rape proposal at this time.
Yes, I think I would just say Alex that we've worked hard over the last few years to help our regulators and other stakeholders understand.
Differentiated aspects of our company our customers the region that we serve and I think they have a really strong appreciation and understanding for all of that and certainly why we are in for this rate proposal at this time.
Speaker 6: Make sense. Alright, thank you so much. Congrats again on the quarter and look forward to seeing you all soon. Thanks Alex.
Makes sense all right. Thank you so much congrats again on the quarter and look forward to seeing you all soon.
Thanks, Alex.
Thank you one moment please for the next question.
Speaker 1: your line is now open.
Our next question comes from the line of Brian Russo of Sidoti. Your line is now open.
Hi, good morning.
Speaker 7: Just to follow up on the RFP process, you know, I assume a lead or a minister of power has submitted their own self-build options within these RFPs. I was just wondering if he can.
Good morning, Brian.
Just to follow up on the RFP process.
I assume.
Elite or Minnesota power has submitted their own self builds.
Options within these Rfps and I was just wondering if you could remind.
Speaker 7: remind us of the competitive advantages that you have and have those advantages been even more enhanced given kind of the macro environment issues facing a lot of third party developers.
It reminds us of the competitive advantages that you have and had those advantages being EBIT more enhanced given kind of the macro environment.
Issues facing a lot of third party developers.
Speaker 3: Good morning, Brian . Steve Moore. So a couple of comments. So the RFPs have not been issued yet.
Yes, good morning, Brian Steve Morris, a couple of comments so the rfps have not been.
Speaker 3: So that is the solar one mid November wind in the fourth quarter as well. So Minnesota power does in fact tend to bid with for both of these RFPs.
We issued yet.
So that is the solar one mid November wind in the fourth quarter as well so Minnesota power does in fact tend to.
Bid with for both of these rfps.
Speaker 3: We've talked about this on previous conference calls where the solar is regional solar.
We've talked about this on previous conference calls, where the solar as regional solar.
Speaker 3: So we really think that in and around the Basel area where the Minnesota power has the infrastructure in place. So we feel good about that other than that, I'm not gonna get into too much details on the call.
So we really think that in and around the Boswell area, where the <unk>, Minnesota power has the infrastructure in place.
So we feel good about that other than that im not going to get into too much details on the call.
Speaker 3: Okay, understood. I suppose that most of these potential RFP investments would be rider eligible and not really have to go through, you know, full general rate cases to get time to recovery. Yep, that's right. These would be rider projects, Brian .
Okay understood I suppose that most of these potential RFP investments would be rider eligible and not really have to go through full general rate cases to get time Youre right yes.
Yes, that's right these would be rider projects Brian.
Okay great.
Speaker 7: And then also any insight into attacking might demands, given what we've seen with the union strikes, steel prices, I know you guys are demands are set through year-end, but I just thought maybe you could comment on that.
Yes.
And then also any insight into taconite.
Demand given what we've seen we've seen with the union strikes.
Steel prices I know you guys are.
The demands are set through year end, but I just thought maybe you could.
Comment on that.
Speaker 5: Thanks, Brian . Frank Fredrickson here. So we have seen, as you mentioned, the strong nominations this year since the restart in North Shore, mining at a partial operation level in April .
Thanks, Thanks, Brian Frank Frederickson here so.
Have seen.
And strong nominations.
This year since the restart at Northshore mining in.
Partial operation level in April and we have seen our steel customers have made some commentary recently in terms of the impacts of the United Auto workers strike and we're really as we look to 2024.
Speaker 5: And, you know, we have seen our steel customers have made some commentary recently on terms of the impacts of the United Auto Workers' Strike. And we're really, as we looked at 2024, you know, we were projecting and filed in our rate case that average level of production right around 35 million tons as, you know, just balancing out what we've seen for actuals in 2022 and near final year projections here in 2023.
We were projecting and filed in our rate case that average level of production right around 35 million tonnes.
Just balancing out what we've seen for actuals and 2022.
Near final your projections here in 2023.
Speaker 7: Okay, great. And then on elite clean energy, could you just discuss any asset optimization opportunities you might have that could enhance your cash or liquidity position? I think maybe Whiteale and maybe Russell or two kind of ranking higher on the list for maybe build on transfer or sale, et cetera.
Okay, Great and then on ALLETE clean energy.
Could you just discuss any asset optimization opportunities you might have that could.
Hence your cash or liquidity position, I think maybe white tail and maybe russow.
There were two kind of <unk>.
Breaking higher on the list for for maybe build on transfer or.
Sale et cetera.
Speaker 8: Good morning, Brian . This is Jeff. And thanks you did highlight two of the Project Center Development Pipeline with Whitetail being much further along, working on permitting and finding the right offtake. Also highlight that we do, we call our legacy assets and we do believe that they're prime for repower and redevelopment, so working on those as well.
Good morning, Brian This is Jeff and Thanks, you did highlight two of the projects in our development pipeline with white tail being much further along working on permitting and finding the right off take.
Also highlight that we do.
We call our legacy assets and we do believe that they are prime for Repower and redevelopment so working on those as well.
Speaker 7: Okay, great. And it's just a new energy given, you know, what we've seen in the renewable sector, the macroeconomic, you know, headwinds inflation, higher cost of capital. Are what are you seeing in what seems to be a rather unique, distributed solar market for new energy? You know, are what are you seeing in the competitive of a landscape or just the operating environment?
Okay, Great and then just on new energy given what we've seen in the.
The renewable sector due to the macroeconomic headwinds inflation higher cost of capital.
What are you seeing in what seems to be a rather unique distributed solar.
Market for new.
For new energy.
What are you seeing in the competitive landscape or just the operating environment.
Speaker 8: Yeah, Ryan, this is Jeff again, and you touched on some of the factors. There's certainly been some headwinds, but there's been some tailwinds as well in that sector, including the IRF and the benefits that came from the IRF. So we continue to be...
Yes, Brian This is Jeff again, and you touched on some of the factors, there's certainly been some headwinds, but theres been some tailwind as well in that in that sector include.
Including the IRS and the benefits that came from the IRS. So.
Speaker 8: be excited about the team. They're performing well. They're a talented group and excited to have them a part of elite. And as you heard from Bethany earlier, they've executed on their plans and slightly ahead. So they continue to be bullish and optimistic and navigating. And that's been their history. That sector has had some ups and downs and they've managed well. And expectations are still that they can continue. Be great.
We continue to be.
We are excited about the team they are performing well they are a talented group and excited to have them a part of elite and as you heard from bathroom you earlier.
Dave.
Executed on their plans and slightly ahead, so there continue to be bullish and optimistic.
Navigating and that's been their history.
Sector has had some ups and downs and they've managed well and expectations are still that they can continue.
Okay, great. Thank you very much.
Thanks, Brian.
One moment please for our next question.
Okay.
Speaker 1: Our final question comes from the line up, Canard James of Backup America. Your line is now open.
All right. Our final question comes from the line of Kenneth James Bank of America. Your line is now open.
Hi, good morning.
Speaker 9: Hi, all my other questions were asked and answered, but I did want to check in on new energy. You previously stated you were on track for about 100 megawatts of project closings for the year. There were some timing impacts here in the third quarter. Looking into the current quarter, is there potential for some of these projects perhaps to slip into 2024?
Good morning.
Alright.
All my other questions were asked and answered, but I did want to check in on new energy.
<unk> previously stated you were on track for about 100 megawatts of project closings for the year there were some timing impacts here in the third quarter.
Looking into the current quarter or is there potential for some of these projects perhaps to slip into 2024.
Speaker 8: Good morning, Tyler. This is Jeff and there's certainly, there's certainly.
Good morning Tammi. This is this is Jeff and Theres certainly.
There is certainly.
Speaker 8: fluid, the market is fluid and timing and cause of projects can be fluid, but the team does believe that they're on track and certainly feels like as we mentioned earlier that they would meet or slightly exceed targets for this year.
Fluid the market is fluid and timing and close our projects can be fluid, but the team does believe that they are on track and certainly feels like as we mentioned earlier that they would meet or slightly exceed targets for this year.
Alright, great. Thank you very much.
Thank you.
Speaker 1: Thank you. At this point, I would now like to turn the conference back to CEO Bethany Owen for Closing Remark.
Thank you at this point I would now like to turn the conference back to CEO Bethany Owen for closing remarks.
Speaker 2: Thank you again for being with us this morning and for your investment and interest in a leap. We're looking forward to speaking with many of you in just over a week during the E.E.I. financial conference and at other investor venues throughout the remainder of the year. We hope you enjoy the rest of your day.
Thank you again for being with US this morning and for your investment and interest in ALLETE. We're looking forward to speaking with many of you in just over a week during the EI financial conference and at other investor venues throughout the remainder of the year. We hope you enjoy the rest of your day.
Speaker 1: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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