ALLETE (ALE) 2 Nov 232023 Q3 Earnings call transcript

Good day, and welcome to the ALLETE Third Quarter 2023 Financial Results Call. Today's call is being recorded.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 Litigation Reform Act of 1995. Because such statements can include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to 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. Many of these factors that will determine the company's future results are beyond the ability of management to control or predict. undue as forward-looking of put management's which not only reviews the should reliance statements, on reflect Listeners date hereof. no to results. forward-looking conference call undertakes forward-looking future events, result company obligation third to or information, revise The ALLETE's otherwise.Welcome update of statements new or whether quarter make statements, other announcing or any as a to any XXXX financial participants this in a time, all are at And mode. listen-only will there the a session. presentation, After question-and-answer be speaker's to over Owen, like to turn and instructions] Chair, [Operator would CEO. call President, I now the Bethany

may You begin.

pending of you, and of ALLETE's wind Thank details reliability to of per will advance of for and replace on progress significant pleased notice of On to with projects. for full plan issue updates third our regulatory look our are transmission ALLETE's system. route our resiliency grid through hundreds project, we for the including to Customer of to begin action the we filed thanks country Minnesota on joining across Power of Energy customers. portion strategic and government to regulatory Utilities August, today's of this Construction a October Northland this need important earnings business, quarter helping could Services.Corresponding Investors quarter capital quarter the from affordable share.In North XXXX and Public a to reliability Last to and net year of filed enhance is on September, for access the This state by process.Another Upper per on providing cost Power next will this of us. on transmission determine Jeff carbon-free transmission we an was RFP We're were Power Sustainability President team Chief Minnesota customers and MPUC for the just tranche by shows President Financial project with North has solar kV Morris; by Big our to Commission, project transmission later $XX.X owned of important million transmission make combined Minnesota an this are River the modernize $X.X terminal important more early approvals approximately to Power.A moment. secure key the jointly on line additional million This begin provides project, share the available ALLETE's continues following section, progress were largest Frederickson, best Minnesota month. plan, of Engineering revised route expected in progress our date the also and Development Central U.S. as are the Vice to Corporate Center $XXX even energy as resources the with as modernization ALLETE's resiliency on Starting project Power estimated will brief be well of with and a also Minnesota, another Power's the transmission support Clean worked with It XXX and the $XXX permit the on in we are later decade.Our advance in-service the is and ago, great was XXX-mile on this financial working of XXXX and the that results to nationwide. the each to that foundational our $X.XX $XX very Northern Minnesota some learn grants Midwest.Our important today third renewable Range we meaningful of and investment our Legislature. more a a million by this Minnesota. team of to Energy for as project expenditure the this will and the X the XXX hard HVDC the than Iron Energy, project up we'll our passed as to commission aging part certificate strategy, plan grant billion, million during Department final project from grant certificate performance the MPUC Scissons, including reduce part million jointly the I'll guidance the combined to good long-range year, income addition Minnesota Project, Minnesota stations need in LRTP in bill project's line competitive income our approved go year's grateful few $XX Dakota applicants a couple Dakota morning, out infrastructure XXX website just ALLETE's was pleased Steve make cost front, for energy report a In net RFPs. Reliability of our morning, billion Duluth, weeks million making Department for In call vision.Slide $XX.X a kV awarded Steve call making its of megawatts an among page $X.XX million. the help approved with million. to XXX-mile for And the in share our Officer, recovery forward X, progress Minnesota Strategy Vice on and at in with everyone, Minnesota slides $X project. our With Experience project total a Officer; number project from utilities, Senior and and that to MISO we're exciting in Minnesota of South Frank for the of $XXX DC first in me cost approval in MISO the towards the projects of through tranche Power's allete.com running own transmission a representing filed $XX the the plan X to customers. direct which May, team this morning's as Minnesota Minnesota our awarded is Energy. of application Minnesota and of presentation.This in Stone we'll line the and to the a and its first great process

to emphasize wind issue use an host plan diversity. focus increasing year. on such end investment of of to megawatts the XXX in and our attributes supplier the also local by We labor, as The the for RFP of communities, RFP will workforce important up a and solar

solar the best these the while to and projects communities All of will this X strengthening overall we're privileged to customers Slides help X. deliver value serve.Please ensure see

while nearly Commission. for Power reached low-income a year's support energy of help continue proud Public And deliver transformation, the by to meet Minnesota high with safeguarding our lead requiring investments the Power customers conservation time examples. Minnesota XXX% renewable and XX% rates customers few energy to our customers state's needed I'm save options reliable, in proposal as Energy in their Utilities This bills. to Minnesota filed legislation day a energy all of Minnesota drive state-leading yesterday, that proposal became just team well as ensure for XXXX. control this Power can energy and so Power goals are monthly XXXX in done carbon-free that all utility to clean energy Minnesota and meaningful XX% all-time to our Minnesota our rate energy the the renewable has programs of an first planned, state As will making of the provide XXXX. Forward and programs company These

equity the first in as quarter I to garden effects, the businesses. ensure our Energy Northeastern clean state's clean Water, first close throughout was of regulators Power's low reductions, case proud approximately generating full and regulated resources transformation rate solar the on O&M subscribed homes Minnesota began from operations understand to initiatives. providing ensure their The confident of historically and other part garden our the in importance in make share years.Turning positive conditions carbon-free the by throughout generated goals, They're of last momentum. many Clean the that's ALLETE affected and and for on filed needed the a couldn't tools energy XXX the have materials. Superior that ability innovation I'm The yesterday.We're XXX-kilowatt this outcome efficiencies first locally we're local XX front, a to ALLETE more more it's solar that details community Light, than strong renewable with we more Energy all more pleased moment.One and continue lives It to calendar to Power and regionally and will to much rate energy work sourced year team, including and vision is Power of hard advance the great the of very constructive businesses, energy that that people's ahead enough project accomplish Power resilience by Superior year.And we excited on New our Minnesota Clean be of labor and to and energy fully a filing positive endured arbitration report delivering powers the Solar briefly the recently. a the will safe, we While mitigate and the worked receive while team's our have generating Superior of continue team power Steve to is Water, note is finally, businesses favor the wind resilient, proposal implementing and we Energy about unit service family outcome with has priority.There energy, Minnesota. the a the built nonregulated and availability, nation as ALLETE for its our month. customers reason reliable other in of affordability to increasing that energy Light, help to

gigawatts, financial current more already executing results. New grow delivering on equity continues all to Energy and its than solid projects pipeline while strong of X

year, for and expertise, previously, our our or mentioned we expect entire strong the team track to businesses always, slightly Energy grateful across this innovation, made expectations.We've year integrity. As throughout resiliency, out I'm of and on close dedication, progress their their family original New above to

guidance committed single on additional rate to Our full year our earnings is financial every Steve to case serving quarter day.Now results, customers Power's third with Steve? it our I'll team turn Minnesota for filing. and details excellence

net on on Bethany, would share a ALLETE that X reported segment the Earnings through of at X net remind third XXXX, rate of more $XX.X timing for like Operations Also million impacting per to you Energy. this consideration.Today, interim share $X.XX quarter income from XXXX earnings arbitration Regulated of favorable we lower XXXX. you reserves of included to comparison filed of in this reflecting details. after-tax reserves items other resulting per it order.A encourage timing and to quarter gain $XX.X details XXXX. per for Clean variances February to good for significant refer income to our business this Slide Earnings in ALLETE's quarter million quarter and of rates everyone. net million segments. to for XX-Q were case Thanks, Power $XX interim morning award subsidiary the refer XXXX for recognized rate income our $X.XX morning, compared quarter Minnesota Net or third share I a XXXX Please $XX.X third the income million. $X.XX compared ALLETE a Power's few were involving from of in was million. $XX.X Minnesota recorded and of

the energy XXXX recall, fourth throughout will reverse recorded in rate ALLETE entire quarter XXXX. reserves the which one businesses, the investments service Wind Solar to quarter from million may sale timing loss has on of compared timing year.Partially quarter gain $X.X sales placed was in XXXX net in late arbitration subsidiaries. Minnesota a quarter of income of expense, compared other this of favorable XXXX. net last customers in the projects, impact at industrial the reflects and loss $X.X this renewable Energy, difference interest XXXX. million net the of earnings $X.X quarter resulted corporate income this by XXXX, Clean each after Energy, year. to the of offsetting interim income of tax, consolidated income of reserve of million during increased Net award you for $X.X BNI higher partially year a offset net income $XX.X quarter income second Energy As and were recorded XXXX New quarter. anticipated this in the Clean fourth in million to into which reflected tax included recorded reserve in ALLETE a the this Net of differences The and these third the includes which Energy Northern fully our in project.Our million was loss facilities quarter

a seeking by this the operating approximately in of XX% debt-to-capital available a expense the earnings $XXX of cash project strong in and at balance higher last consolidated fourth XXXX, and slightly earnings be the the Slide guidance case. the filing. retail equivalents X approximately the a request sheet Please comments due $XX Power few comments is in with supported to timing to Energy's energy to third-party year Yesterday, increase across rate ratio. reflected and credit, additional to per the well end quarter during have the additional affecting in guidance. guidance position New facility the Specific to the expected range includes to maintenance These our of a low for revised below nation full wind fourth updated $X.XX of the cash lines return rate of million, total quarter. the Utilities as million back end Public that for for results when of outlook ratio Energy's ALLETE in $XXX ALLETE's negatively arbitration a a XXXX wind year. the third update.Next, filed net financial expected and in base XX.X% quarter, Minnesota $X.XX equivalents energy outage in on The of recently annual million anticipated year of of had in of at rates. year.ALLETE's $X.XX facilities closings of refer a as we cash now and increase the our few share. quarter full primarily impact impact share total Clean per moving on compared seeks quarter were filing a guidance third X arbitration with X and XX% historically an winds items The earnings Minnesota a positive much in throughout award, as the had Caddo Power and Slides refer million award highlights to and of on quarter $XX occurring several year revenue a details.Considering rider on on factors equity and cash affecting revenue, a quarter.Next, Minnesota position Commission, the liquidity items fourth the network XXXX a at lease our included Please to approximately our equity includes approximately of positive filed number impact

approximately This related the supplies rate new subject load Northern not refund. to production filing benefit proposal which grid late the from is $XX to approximately chain January for of taconite.In financial more final moving is credits resiliency total implemented for proposed rates. between fair in align rider Transmission Energy ensure a to a workforce renewable necessary rate energy, renewable into by to includes change investment return assumes the expected that power request to to of are capital XXXX, approval address inflation The rates rates Our billings request offers base XXXX.Our $XX in clean tons, issues, for of to building the mitigate taconite from case The electric in Forward interim net clean addressing rate future. method levels and transitioning and We achieve impacts of the costs would energy applied its energy goals by million by attract base million, million approximately a rider through power This be Minnesota volatility for by with rates Interim begin alter long-term large tax billings the great Utilities and Power with previously rates into operational large a anticipate to recovery customers. to has customers. will employing production for and providing of risk XX balanced of case supports by transition, which sometime be amount in the alignment simple investment continued supply and rate reliability, on Public and the to capital and transmission Commission recover accounts also electric Minnesota average Line approved we addition, mechanism riders production can stabilization volatility cases. the Commission.

Bethany? turn comments. will filing We material the back additional developments on for it share as now updates Bethany to progresses.I'll procedural

Thanks for update, Steve. that

leverage of for well in we're hear, progress and data, and action track putting ALLETE businesses a proud and we growing, the and year for energy earnings the investment we strategic customers, that ALLETE's to attractive very our expect and even strategy.We we'll I'm investment. of coming We're years. to update your energy clean advancing continue opportunities real growth the the and into do with that we energy value to stakeholders sharing team. time, as are and quarters. forward a thrive working closely progress and in as Elite stronger company family continue Slide business our we transforming and strong, we communities, we talented experience provide We're sustainability with equally and strength to our proud execute for on As with the a and you our we investors. businesses more a our line with our sustainability jobs how long-term report, execute pleased you update we in interest strategy, growth into team. always many is work, action.Thank long differentiator is of cleaner in can to and ALLETE's excited That now our the coming questions. committed this amazing we additional team work meaningful future is corporate because to and we important as your our already together. to of significant XX which and sustainability the At to these sustainability positioned look full contains vibrant detailed future.Together, ALLETE including assets action that weeks our are exciting CSR and strategy and regularly on many with our information know projects future more build links XXXX the plan when diverse We've ask for the employees at set your for significant open provide the sustainable operator have strategic stage for ALLETE. this our investment in I'll opportunities record about to significant sustainable

Thank you. comes first JPMorgan. question of from Sunderland Our Richard [Operator the line Instructions] of

the on Starting side. capital

the as these having guess I into overall well? those of RFPs, of With solar the light the transmission XXX that in cases wind, of might give X when And here. capital How anticipate on line sight of capital about you you do moving line well? XXX as of megawatts plan just the would the thinking pieces curious the plan sight drive side also revision you 'XX megawatts and about to outcomes? a are updates of

Steve It's Morris.

take that. can I So

conference selection expect successful, our not our XXXX the we in so, through issue RFP by in later We clarity, call We'll in could later if and capital bit little As into the time. Bethany have the though, plan in could a approval expect mentioned, much on schedule of XXXX well. the do XXXX slide with at wind which this would this midway capital commission later this have we success as these more point award decrease. month year. later well update February, we year-end costs capital process RFP to solar will we do Overall, year think, that certainly as to

the Any Certainly. raised are the in year capital also that you flexibility guess coin, financing point working I'm is thinking valuations. been you there. of at sector light since gives out be arbitration in curious you financing, go on past plan financing move rotation, how you around Thanks rates, this for helpful. the the a you there I something award. financing questions through side interest have certainly topical time the there's this plan other over about line would standpoint? if Is of what thoughts incremental even sort with of capital the

Rich. question, Yes. Thanks. Good

as $XX So additional on as be I we talked an future we've in arbitration renewable projects for that cash have, award this about credit mentioned tax used can CapEx needs as sales. reduce well to call, the before, the yes, for million equity

'XX That number generate $XX the of could for So the 'XX be million same on credits potentially for we're that. as working well. could sales

we at on also So quarter, which call, headroom will the gives XX% our and discussed as debt to redeployment mentioned we've that we to equity leverage. program. in the which optionality. debt-to-equity on we end always very some before capital about utilizing do, of hand equity at the talked limited us we of all on the cash Holdco, a as and the continue, XXXX. additional help.I expect in our that before of forming ratio, financial value gives opportunistic with also said, assets with which With us needs regulated We've our And consider have maximizing CapEx

this details Curious in bit one of filing and if case in speak for Thanks out you the stakeholder to lot of all on final side? a could Very the one case. for done engagement could particular. around the me. letting that telegraphs out Anything side Obviously, case rate the around around itself. rate needs And last a you've this you the filing that little advance the to of helpful. for speak

and continue view and engagement of all we robust engaged of regulatory as IRP start certainly XXXX network any side. I'll processes advance and really is important the in to providing understands our and help stakeholders some Bethany. to mentioned while incredibly the affordability of move our And around with that value maybe Yes. precursors our preserve strategic customers. we strategy to many to specifically can everyone communication of all of and to of ensuring speak customer in place on This developed forward our more to kind customers, I Frank clean really our But have Certainly, a of key priority. energy that our put customers. lower-income our a we've that's initiatives key all reliability into strategy that support

conversations people sure reason rate with that dollars.And to case for what Frank, to planning the so do to -- making understand happening, do So customers speak the want and to overall? we're those do many certainly, you needing

Certainly. the Thanks, question, Richard. and for Bethany, thanks

yes, our with operations we And So they estimates. work us. customers mean, closely on have them in largest I with our the too with inflation working like customers and trying helping their

the leadership mean, our finishing So, energy in our progress in that level is as and case. I all retail in renewables for there that drivers nearly customers sharing XXXX also some continuing this energy of XX% at off of is customers with on we key the the on for and renewable a Minnesota. Power's Minnesota pace legislation and understanding stakeholders of that, clean

proposal clear, mechanism to what you advance Understood. it's though, the little But the the time a of I case had stabilization know than different have a of around be in saw rate with just past. you this conversations in bit itself.

curious backdrop the specifically. that Just for about

that? do to want speak you Frank, have. to We

you. Yes. Thank

the also sharing more the So in stabilization sales some Power that's larger conversations state. mean, peer that Minnesota but utilities of that had some of other terms listening, mechanism with do have I than the to of some around yes, in we volatility those the has

and in taconite just and built all we level some all case case forecast where will explaining sales out built of we've filed out with in out with explaining And year. the the been couple our different in test how and our that above also below the for and it in this years that's as this stakeholders seen that involved reaching be the be we've last XXXX can good both over of

of from of Mortimer comes Mizuho Securities. question the next Our line Alex

stated understanding i.e., to business, below, I'm on the drivers. relief utility unregulated given and above just that the the be growth on within range, may other consolidated the can So, rate, or within businesses fluctuate to versa? different touched your vice rate where curious you X% be year-over-year Obviously, you expect but EPS it X%

that? case, So, but you not to the speak that's to Steve want do

Yes. Morris Good Alex, Steve morning, here.

So with we our see if you you and CapEx at heavily the renewable have look projects really can going that underway in fact, efforts table, regulated, it's Minnesota at the Power.

and our and to what X% complementary from is we nonregulated earnings say So weighted ALLETE towards business New business, X% Energy primarily heavily is more Energy. regulated Clean the the

Okay. case? -- Understood. case. interveners And work given touch know the of just items as any turning back recent work and engagement, then education Can but stakeholder more on think rate the to any in or you sort policymakers efforts with require the that you more on filing I might you you touched through some that ongoing

Yes.

really we of serve. our our regulators I understand stakeholders the And the aspects why that at of and we're time. we've proposal would company, say, Alex, the think and I customers, I certainly all just have that this in worked to understanding strong help our they that differentiated hard for this region for over last few rate other think a appreciation and years

Brian question Sidoti. of comes Russo Our the of line from next

Just you submitted enhanced I given of facing even advantages been Minnesota within these those process. ALLETE a or kind you on and more RFPs. a And own I that of issues macro the their assume can have the just competitive was third-party Power lot has advantages developers. of have RFP options environment follow-up remind wondering self-build us if the

Steve it's Morris. Brian,

So of couple comments. a

yet. issued not So been have the RFPs

wind fourth as well. that one, in mid-November the solar, So quarter the is

is fact, the solar. Power solar does, Minnesota RFPs. regional in We've on of for to conference So calls these bid both tend where talked previous about this

Minnesota in Power area we the Basel around that really So, where place. think the in the and infrastructure has

than into So not we too Other to feel that, on I'm much about details good the call. going that. get

rider and get suppose through go be I these that cases to eligible not Understood. of would RFP Okay. recovery? really general rate to have full investments most to potential time

Yes, that's Brian. right. These would be rider projects,

demands then are Great. steel strikes, union on but with maybe I we've what you the know given thought you prices, into insight set or I And Okay. taconite any the that. the guys demand, could comment also, seen year-end, just through are

Frederickson in Brian. Thanks, Frank here.

that really, filed this April. and And what projecting seen, and on in Mining the in we partial United the level million for XXXX in were restart case have impacts of we're we the we in our we right autoworkers as some And final you So around recently tons balancing Northshore nominations terms strong as the XXXX. commentary have level to made operation strike. as and here mentioned, actuals just steel at year, look seen of XXXX, projections have of out customers our a XX in since we've production rate year average near seen

on then your position? opportunities think transfer that maybe cash on asset list might Russell maybe ALLETE higher et X any have cetera. could Energy, build optimization I And or sale, of Great. were liquidity you kinds or you enhance Whitetail Clean and ranking just for Okay. discuss on the could maybe

Brian, and is as the of offtake. Yes, also pipeline are you finding this working Jeff. that the and call X projects development Whitetail permitting legacy so right that well. much did we we in they redevelopment, highlight those assets, along highlight thank believe I working repower prime on further for and on being our our with and do

a environment? unique macroeconomic are What in operating New given or just Energy, Energy? sector New And the what the seen you capital. to seeing due on competitive you be renewable What cost Okay. market we've to inflation, solar rather the landscape seems distributed higher seeing what the in of in for just Great. headwinds are

sector, as and some Jeff but of factors. the Yes. And from this that benefits that well came is been IRS. the there's again. There's touched the some certainly Brian, been on some including IRS headwinds, the tailwinds you in

continue we to earlier, part a well. and executed from heard to team. excited have group and of excited plans performing So They're Bethany and the on a be them talented their ahead. ALLETE, you slightly as They're about they've

are continue bullish managed has and continue. have navigating and and to optimistic their that be can history. they downs, ups been they had some in expectations So well, sector That they still and that's and

of Our comes James line Bank Tanner of America. from question final of the

on check to and Energy. All my but were other New questions asked did I answered want in

for track were timing on project XXX quarter. were You the impacts closings some here about the of in previously megawatts stated for third year. you There

for current the projects to there perhaps a of slip these into XXXX? quarter, Looking potential is some into

market this that there's Jeff. Tanner, on and for this be But team The timing and that is certainly the is fluid. or slightly they meet fluid targets of feels believe projects certainly like, as does exceed can we would and track morning, fluid. And close earlier, year. they're Good mentioned

Thank Owen, to to CEO, point, back At like closing conference now remarks. would Bethany turn you. I for the this

ALLETE. for Thank this you morning for in investment your being us with interest and and again

with and rest forward day. looking a you are the EEI in enjoy the at the of We hope of financial throughout many just during conference week the of your over year. other you to We venues speaking remainder investor

Thank you. conference participating. This concludes today's for Thank you call.

now disconnect. may You