ALE - Earnings call transcript Q4 2017

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Operator

Good day and welcome to the ALLETE fourth-quarter 2017 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 by 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 the filings made by the Company with the Securities and Exchange Commission. that ability the or of factors are future predict. the the beyond management of will Company's determine results Many to control reflect Listeners forward-looking of undue place date management's which the should as views reliance hereof. only not statements, on or future no to statements results other statements or revise any result a any whether forward-looking otherwise. The Company as to of update undertakes forward-looking obligation or make new information,

Officer, President Alan to remarks Hodnik. turn now the and and Chief to over opening ahead. Executive For go like ALLETE R. Please introductions, conference I'd

Alan Hodnik

net XXXX results Senior of many Well, of President, guidance our joining good value to range Bob These morning, results us Accounting on financial that to we share years today. were $X.XX $X.XX everyone financial Vice President financial full-year Morris. and for and to Controller thanks million. income With results come. for will me reflect and accomplishments Steve of $XXX.X are Vice These within ALLETE's ALLETE's deliver morning, per Officer, and Officer, $X.XX share. Financial Chief Chief operational earnings Adams, and per This XXXX ALLETE's reported shareholders

to during our pride details Before over financial several and sustainable XXXX through would growth XXXX our highlight in the growing achieved like sustainable Steve guidance, the of accomplishments dividends year. ALLETE results value We promise positioning long I has through great businesses and go Bob and the take earnings shareholders for growth and delivering with while to delivered term. on annual this our strategically the

conservation at answering call our strategy. reflect progress growing broader our ALLETE. with initiatives Power and significant in XXXX ALLETE's with Services from water XXXX lines many both If Minnesota while Energy for forms initiatives Energy commitment businesses. you in Related its within key entered Operations and energy nation's Forward to recall, progress Strategic already made cleaner our Regulated business Infrastructure and we

with be filed Energy generation project represents a July the Utilities Power. and plant will to natural natural XXXX. enabling administrative ALLETE plant investment the The Minnesota and Commission and available additional of provide an gas a by Power on was proposal gas Minnesota for a a for report component XXXX, million for anticipates Minnesota opportunity During necessary $XXX renewable Public judge Nemadji renewable Trail law

On XX.XX% front, including, the review, among Minnesota Commission the regarding Power's of Utilities return equity equity made XXXX a on regulatory items, determinations ratio. rate and Public a common other X.XX% Minnesota general recently

steel The its the Energy the item while request The Energy lives Center Minnesota one X Unit Commission common Utilities Minnesota rate facilities. with Boswell of Another Unit lives employers our and the Trade and large or two. were EITE important rate, Intensive economic unfairly industrial major Dayton, markets. other highly in question. with regulators determinations Governor Exposed, recent worked global compete as Boswell outcomes the traded review The have competitive years, resolved shortening request extend of extend to rate In these design Boswell was key customer as MPUC Power's legislature, in and closely X, lives Boswell its they EITE depreciation facilities Units Power Public Minnesota customers. Boswell and pressured also to Boswell depreciable price-sensitive review depreciable agreed of regional in depreciable factors and the the the

Chippewa from moving new is about resources and the equally Capital, is are which construction. the important final it operations, of existing PolyMet opportunities such natural board to drawing as EITE While to maintaining development

on all EITE, Trump vibrant. of tools as Northeastern our measure the about view now increases EITE customers, Power better lessen customers. rate-mitigating remain serve that it and total tax for mining impact industrial While a paper Minnesota is Boswell higher Minnesota brings overall operations when of off Power and is and Minnesota in rates and depreciation, any other reform rate strong

Given and reviews customer a balanced has perspective. mix, it rate Minnesota Power's approached long-standing with stakeholder unique always

Minnesota ensure request however, worked investor rate Minnesota retiring customer market met the including and during execute a is in Power support leaders below were with disappointed, to original ways policy policy, from boosting its has so, excluded doing several that perspective. return objectives base credit review a of their thoughtfully fair reasonable full grid. hard rate Power expenses the to in While state coal disallowed and and energy various key plants, review, partnership all decision treatment overall while Power was rates creatively has regulatory rate of state from striving steps In and renewables keep evaluating its is to review. regulators on Minnesota rate the worked assets and and relative investment. certain to Minnesota Power investors customers modernizing options next for earn by

the the include repositions steps review and/or rescales to all items it Minnesota earn certain Next may its March the of order clarification X.XX% in reconsideration and enterprise and Commission's business. the as within Power following XX. intends fully will reviewing it be dimensions on return

two for Moody's the Following the watch. flows. combination rating S&P Minnesota decision, negative. strain review President Standard the the our their time, have Tax overall Cuts Jobs negative credit stable. of Minnesota Meanwhile, issuer rate with outcome the cited general the assessment Poor's review to as for Trump's initial S&P and negative to moved At an downgrade impacts Commission Act, to as to they rate potential Minnesota review Utilities & citing cash from Power's basis same affirm did issued credit. Power's Public from their outcome, ALLETE on views rate coupled revenue outlook ratings

credit early credit you view on on going position balance As with I of ask a is overall their Bob Adams sheet history snapshot numbers rating and a and liquidity provide expect very we rich would Bob? ratings managed customary, issue has am to disciplined Moody's to in our manner. and related its to by always cash spring. ALLETE current annual thoughtful form generation. quick in ALLETE's ALLETE's

Bob Adams

Good Al. morning, Thanks, everyone.

on rate the actions disappointed both case ratings with are be credit outcome overall. As and performance implications indeed and address Al taking appropriate the will stated, we to

At large of committed our are retaining and capital investment-grade strong whereby our allowed performance solid respective continue return operate achieves and equity from ratings and continuing hurdle part, efficiency across means, of we our business business we and all on Power, cost to to achieving initiatives ensure Minnesota employees. will significant cost their on while behalf control to safely business the rates. units reliably each We and in advance customers of

position, we well-positioned of meet our In are needs. terms our liquidity to

to we cash had of As available ratio of $XXX $XXX XX, approximately of debt XXXX, million lines and equivalents of a million, cash credit capital XX%. and in December

$XXX the of XX% XXXX. activities operating from was million, cash over increase Our for same an approximately period

shareholders a regulated Poor's, & We year-end from cash of ratio, flows stands and along on Related debt of increasing cash to used Services business, liquidity maintaining ALLETE's return allowed Infrastructure for businesses, support ratio from our its XXXX believe rate ALLETE's balance committed learning Minnesota sheet. as FFO strong continue Power investment-grade remain Standard by our our Energy to to flows is with a businesses, significant grow we Our strong and our ratings. position, focused as XX%. will at we

cash to All of capitalized long-term shareholders. are dividends for flows expected ratings and and support of businesses appropriately credit our in are ALLETE's generate

in you, be We the expect to debt Al. to long term. FFO to Back over upper our the teens

Alan Hodnik

Power's recent strength support customers by diversified production. anticipate levels new along territory. XXXX Power's in of natural developments remain Expected economies of long-term viability resource-based in Minnesota production, investments permitting at service with attractiveness Minnesota ore Cleveland-Cliffs high long-term and customers and finished Bob. taconite XXXX. nominations positive full for Demand Thanks, clearly made continued potential products, strong of we the

significant needed return made provide which a tax Energy on credit of production serve quality own was Wisconsin on of On to and return building the customers. A in and gas Energy, deal and continued terms we plan that they life that We ALLETE ALLETE Energy are additional X,XXX multi-year on structure. in final for beneficial and XXXX positively its These Water, and a success investments Energy's in and be provisions. Overall, $XX component strategy regulatory remain Clean service the projects that its of a framework which and reform since GE rates success us a Clean XXXX a for with additional its Energy Clean our of capital of to and XX that regulated of the Power's our a Superior front, turbine impacted GE of support enterprises. a the an and in ALLETE the existing projects earn charging negotiating started Harbor capital customers XX, serve. provide Light projects. wind enterprises large dynamic XX.X% customers. ALLETE, of pipeline XXXX as investment of in order part subsidiary history a enacted equity period for reliable ALLETE's which renewable a reduces services, quality an begin to megawatts agreements fair ALLETE Earning based on investment megawatts production by rates, megawatts million already to through to that tax credit. are remains new The supports reflect customers. of energy its wind in results place. XXX% to regulated pursuing received Power strategic and Energy water that provided of turbines wind new allows four-year used the build-own-transfer in is potential $XXX fleet on fee-based December reform we power this involving part Water, has and long-term Clean tax ALLETE returns robust was from the sales tax the investment and XX% cost projects. can windfarms, of investors Safe were quality in view multi-faceted, Safe critical investment investment the Safe wind for competitive qualified rate mid-XXXX, The constructive regions Superior XXXX. of in Clean million services sector. equity outcome busy refurbishment operating additional to XX% opportunities fair believe for strategy, of qualified and Harbor positions ALLETE's turbines Harbor growth reliability Light refurbishment This an top announced already includes Renewable optionality The the XXX turbines over future final a its turbines of for electric, competitively additional

Superior result to provides ALLETE's and opportunity Minnesota businesses, will further Power in which For in regulated Water, Power, bills. reduce requirements, Light lower customer and revenue including an turn it

and taxes load potential XXXX and remain ALLETE and businesses sector busy filing adverse and transformation conservatively, impacts remains non-regulated finances reduces It Northern meaning company from territory. as debt Clean a coming final businesses deal ALLETE's production as new busy close not company. holding as capital. ALLETE, flow and amidst we growing Center to for remain be strong Energy limitation. intentionally From Energy Minnesota a you non-regulated and within attractive an holding robust megawatt is we future tax for does rates achieve and projects district evidenced Clean is lower will return of by mineral in economy markets remains a it Transmission the a more and a opportunities any is increased to perspective, Likewise, via year of no impact but Meanwhile, growth earnings still is Power construction returns interest robust not the for ALLETE has of tax XX Great Energy a underway. the source of For equity Trail and Energy view have amidst our will are on ALLETE rates investment we Power's competitive a exciting service ever. businesses, projects, confident could result will are permitting PolyMet flow. negotiating Nemadji the Minnesota robust ALLETE in seek. pipeline. an Mining, know, regulatory cash deduction we new that able

our their Board years We execute the our X%, approximately multi-faceted, Directors to flow X% broader attributes financial shareholders. strategic a our expressed dividend multi-year the earnings in and increased to increase ALLETE's our is cash businesses. average strong and on long-term The and continue growth while businesses Board and believe by unique positioning, by X% confidence own approving rate from recently in longer-term a in continue confidence over the our of supported value increase past growth annual investment strategy ALLETE at higher deliver of an is our will to discipline of mix to earnings solid XXXX. to position, Board's X% in level The dividends proposition than

logistics just for cash We outcomes November. in had shared efforts and months always its industrywide our to that strong from effort across of financially view will conducting for as are Minnesota sacrifices flows. our additional Irma nation citizens. ask details remarks. restore a values support Maria quality Light in and Bob amount Steve of workers, Earlier, Puerto sent and, express last outlook. comfort future I first, Rico Upper moment, and our go and utility our in financial power Rican and in its missing, fellow difficult an initiatives my sadly, an to XXXX Puerto caring and aside earnings the underway with affairs balanced organization. Minnesota. and and five on part ALLETE and speak from Power efforts teams Superior the growth align overwhelming long-term demonstrated to overall more Puerto geographically Western one developments both over increases to remain to hurricanes. personnel, from and equipment of utilities upstanding, the security, our from values home importantly, update I I still to life in and expected the the on partners for restoration of the disciplined work have the more efforts families many our a holidays through of elsewhere. dividend an their financial Puerto provide ongoing Setting wish Power and values-based restore of to Midwest will homes Rico XXXX Rico, industry closing our hope, and I caring yet with had The earnings ALLETE's to and help remote to Steve? core and all line I in key with humanitarian left Recently, and I who cannot have and employees will the But, trucks as dedicated in subsidiaries other Water, far devastating restore removed pride Minnesota ground personnel while a demonstration business stakeholder action

Steve Morris

our details. Thanks, that and for filed I would to everyone. details along we Al, XX-K to of them remind good earnings XXXX more morning, encourage to this our refer like guidance. X-K you an morning, I provides you that with

case of methodology. allocation $XX.X regulatory Water, These the a disallowing which investment a compared cost for adjustment decision $X.XX for of after and impacted recovery assets or Operations adoption a clause regulatory in the ALLETE's by of tax for deferred ALLETE's to hearing investment assets Public that rate for a tax $X.X Transmission related disallowing after income modification year million $X.X XX, after-tax per $X.XX impacts $XX.X Dakota per the $X.XX clause per approximately the credits. net favorable revenue fuel For XXXX. XXXX Power XXXX, million from forward-looking income remeasurement million, Commission's ALLETE per to net North Power's ended $XX or operating deferred a adjustment Earnings operations. at December were deferred or of million $X.XX on of decision for share This segment, January on reported XXXX on of enacted impact recorded tax, XXXX share offset share and resulting and million million billion. of the earnings Company's net per our Superior the benefit XXXX. the $X.XX tax adjustment were of charge Minnesota Utilities costs. $XXX.X Commission income for after-tax non-cash partially due of by due Regulated $XXX.X favorable Company diluted of fuel billion. positively as Light of American anticipated income XXXX. operating outstanding of for asset in revenue $X.XX clause million December XXXX of of to the common of $XXX.X were by on non-regulated shares for a million Net was tax the charge reform also additional includes in Minnesota order $X.XX Power, XX, of reflected stock and which and liabilities decreased at recovery income reflected fuel non-cash Commission's Results share were Earnings $X.X XXXX million in after Power Minnesota the Minnesota to decrease XXXX its share November for Results tax $X.XX

Commission's due lower XXXX. a were of offset higher These industrial industrial the modify partially fully higher residential, result addition, retail interest sales. due Commission's XXXX million from Interim kilowatt due net resulting to tax suppliers $XX.X rate in municipal of market to expense temperatures with to offset expense recognized during coupled depreciation the decreased as of higher Power's other income and and case. to lower decision sales property in rates mild retail Boswell In and to power the prices, sales lower lower hour sales, after our commercial Center rate and depreciable Energy decision kilowatt taxes decreases by interim reserves lives to Minnesota hour customers

and to the average assets Our treatment tax The and address equity the Income XX.XX% liability additional both to MISO primarily ATC's and have million complaints. additional ATC to XXXX, equity Regulated and reform of the a the return to tax income. Minnesota investments the regulatory and due comments Operations after XXXX of return period-over-period refund due million A requested in tax of in our retail opened filed reform pre-tax $XX impacts related resulted outcomes ratemaking to $X.X related retail customers, rate for income million back the tax a on pass on tax credits benefits approximately ratepayers. and estimate to $XX.X deferred Commissions earnings as remeasurement of on few income in annual recording dockets of ATC in Wisconsin of Power In of equity Dakota revenue. expense assets a higher primarily of in to regulatory increased The changes increased XXXX from Minnesota the filing Power's period-over-period tax impact investment expense of November allocation an liabilities liabilities. a not seeking equity did Minnesota increase Tax recently mechanisms XX.XX% an and for ratio. reflecting additional rate X% case. increase on XXXX, request North

operating States The mentioned, taconite Power plant by EITE As expects revenue rate EITE Keewatin back concerns will credited general in the large revenue from United forward their power approximately of Minnesota Al current initial our Power. XXXX. Steel the EITE Power's on rate the associated Steel filing States $XX Power made addressed with taconite XXXX, to to million be be discount for idled levels the revenues Shortly million startup taconite case. plant, a the Keewatin Minnesota and of of spring funding Recall $XX customers related announced early throughout after for to the the year. neutrality their customer Commission on customers United excluded bills brought Keewatin January discount annually in determinations Minnesota request the restart. that of plant additional Commission Minnesota case, based

$XX revenue neutrality EITE then of requirements million $XX revenue fund the request. adding to the back in development, As requirement revenue revenue $XX turn, able lower requirements noted, approximately back concerns lowered our to by revenue we This, approximately by total million million. approximately annual in to EITE to the our annual a as resulting original our addressed the I discount, positive of Commission were result million. customer requirements this of Power And $XX to Minnesota

by rate in timing decision, here Another Keewatin of closure why of was mechanism, UPM paper the taconite Rapids, filing announcement are at look venues permanently our not and mix one to restart unique January the primarily to ARM, January basis. Power the case, case for request customer rate allowed an review case Unfortunately, its XX, the couple our of other review our large by XXXX occurred concept plant the machines to of two this The Minnesota approximately $XX power occurred the and the primarily annual Minnesota in test on the of an to the the Power's was rate million. Commission the smaller located development on of Commission's Commission the of approximately Blandin of both early which hearing. mechanism due XX, rate Power and XX.XX% the $XX machines, opportunities The to continue X.XX%, address return the with annual to since proposed a Blandin Commission its equity in XXXX paper the will addressed of a hearing. by it million XXXX, before Minnesota lowered reduction was profile. mechanism. decrease million approximately Minnesota Commission's hearing, annual of requested our lowering million rate denied rates return in establishing or and load that At on Grand examples closing with in which of $XX $XX customer, an requirements final equity is due revenue

the way, $XX case working These offset were million. approximately of rate proceeded, intervenors additional through reductions lower with led to by the As reductions expense along requirement expenses. revenue

initial lower Pending the order depreciable Energy of at Interim amounted of of to will the quarter reserve. this depreciable by revenue Units Minnesota recognition depreciation disallowed setting $XX approve forth period, by rates corresponding certain offset to of in X rate the other assets also of issues XX, the XXXX. Commission various by the that will this million for the Overall, The which case, XXXX, $XX Commission XXXX. potential lives shortened certain rates expenses under for Commission be collected fully is modification in XXXX. of decision and through and Power and recovery in time. be review X our depreciation the expense Hibbard pre-tax order An XXXX. outcome X Commission's be in revenue by reconsideration base, a life of million. appeals The expected of $X example, decreased reconsideration facilities approximately in any place Renewable final resulting which should the common fourth March will Boswell and XXXX, Boswell of by Center expense. requirements to increased extended For The which requirements Units was approximately lower did million. life X to

our deferred details million Lake $XX investments Storm resulting I improvement and tax XXXX treatment Normalizing reflected requalification few the as Services $X.X Net result related income net over II of due million lower out after as amortization loss to operating a Next, by as Net September a a and Energy as over XXXX. XXXX. facilities and flow of increased goodwill XXXX reflected million assets addition impairment wind remeasurement deferred significant Tonka benefit million million and Water tax of $XX.X well net higher Net cash strong a generated expenses XXXX. of Benton, and production due business X, operating from benefit in U.S. generated expense fees increased safety effects expense U.S. and the approximately Water liabilities million of remeasurement the for Services interest Water million segments. long-term $XX.X $X.X XXXX to due reform, Net future in to the a $XXX,XXX increased over credits Lake offset ALLETE reform, purchase to after-tax from reflected a Net of approximately XXXX. partially also Water and $X.X income, from Company income income waste at charge tax income income income the income maintenance to other expense debt. after-tax transaction and tax on tax operating at related revenue, a activities a operating in resulting XXXX Clean from and of in compared increased to liabilities XXXX. included in Tonka the to well income Net at and of lower expense tax $X.X of in for $XXX,XXX after-tax after-tax XXXX. assets the in in water tax reform, growth as applications. repayment

legislation depreciation the deduction imposes XXXX the impact operation expensing items provisions and of interest expense of of expensing the include ALLETE. of December impact utilities. XXXX normalization property our regulated tax this tax five and loss offset for in order net of material provide and ALLETE. modification partially docket impact Minnesota for a Properties allow The was Utilities income. expense in In have including to Our tax X, our effective more our the and customers income primarily zero review higher rate the rate benefits BNI of reform. be XXXX, a will million on We the place, loss XX.X% $X.X to as full and will impact well net tax Initial reported XXXX Other Public impacts dockets. included review also XXXX of direction for which credits, was after-tax our at Bob? the to lower which interest the net Energy, now interest the for expense. applicable non-regulated included filing miscellaneous requirements. segment, a the deductibility to the years. which XXXX for significant ALLETE approximately corporate for $X.X off million reform Wisconsin million of now contingent and timing all September determined $X.X coal net BNI on anticipate XXXX Service credits positioning XXXX our defer expense, opened the Commission's to tax reform and is of a a legislation's of to benefits allows included tax the was in XXXX. after-tax The million offset on The due $X.X full provided. $X.X additional directed at a to Minnesota favorable accelerated $XX.X from in of I'll hand interest in September of tax impacts and of to Net elimination for pre-tax the review expense million investment an for property Net reform. negative related million. be expenses, revenue in utilities, Commission passed million rate-regulated is XXXX XXXX impacts other due allocation in March tax to be that its near are effects to reform sales. by Wisconsin in by production regulated its of income amounts Minnesota offset tax further after income from $X.X compared after-tax reform and Properties in comments on was XXXX some includes Minnesota, for The XXXX, XXXX, XXXX. guidance and for which lower tax The Energy accretion provisions net jurisdictional a to $X.X partially limitation million XX% consideration which in ALLETE earnings Commission The Public generally utilities Bob of acquired a expense on the of loss to benefit XXXX. expense expense. increased after tax in outcome increase tax its acquired of these docket for impact for was the Dakota back until X.X% regulatory XXXX, effects as compared liability is North In I and opened requirements loss over November by income to in continuation January With $X.X the relating of expected Corporate consolidated ALLETE expected The final next XXXX. ALLETE's was continued a decrease to reform to limitation in after-tax effective The by the it million not utilities for the of to

Bob Adams

of initiated hello XXXX $X.XX Steve, to everyone. at guidance range our earnings we and Today, share. $X.XX per again, Thanks, a

differentiated and characterized higher flow our growth, shareholders we an Al in is our by are beginning stated important a value overall. pivot increasing strategy, of cash As previously, a period proposition point for earnings which

the the work investments they in earnings business With will non-regulated now and past overall, our contributions over positioning hard platforms and the years, made poised considerable flow to and several make increase are both to next years. of cash over measurably seven contributions ALLETE these

answer business electric businesses, the the more to We of remain businesses Services our that clear, to they profile ALLETE's Through both businesses. with balanced are a the Energy complement exposure with over non-regulated synergies nations and XXXX regulated related as toward deliver our ALLETE's will year, will diversified more customers objective mid-teens from significant impact businesses, ALLETE's be over energy flow earnings on base to of businesses support regulated and and With to term. be earnings provide the the sustainable and these term, flow to of cash have support regulated infrastructure also quality and average somewhat our is credit cash proud of increasing approximating ALLETE's Related Infrastructure be while shareholders. growth annum. that earnings industrial and X% lower, cleaner said our per to and long X% sources. value predominantly complement and is our the can strategy growth long the in regulated Having utility in and we better call and energy non-regulated, base a anticipate and a to

target long-term what annual of mentioned years average in previous these stepped earlier, earnings Al for XXXX. was to X% up reason growth our his from comments As companies the through X% growth we X% platform are

with SEC especially include our Consistent to Infrastructure investors and guidance. our metrics and our a and intention see you are X% Throughout payout disclosures for additional Energy in we ongoing dividend dividend our that a XX% will valued on earnings assist Accordingly, disclosures returns our also XX% with we communications to with and new XXXX, of dividend anticipate shared filings, mind, We from to earnings XXXX. future at with businesses. our higher and Related now approximately commitment, over growth our materials increased increases targeted investor shareholders. view our future to rate, our focused XXXX ratio In our in growth align we clearer earnings total with conjunction enhanced projections potential, in Services growth.

XXXX Our Clean a U.S. per of $XXX range earnings Energy guidance is Infrastructure and of Corporate and of This earnings range guidance Water Services, includes range share. businesses, to in projected million ALLETE and $X.XX earnings to $XXX to $X.XX within to $X.XX to a Regulated $X.XX Operation per of is Related $X.XX with million. segment and comprised per range income $X.XX net share a share on and be Other Energy which Services of

from the I'll guidance, Jobs Act Cuts guidance starting assumptions our now share earnings our from Tax regulated of and few of includes approximately XXXX anticipated and factors a Our with benefit per XXXX. share operations. $X.XX

to period, rates filed are will this in XXXX. Minnesota will commence rates expected XXXX, general by be be of of the final November which rate Regarding recognition quarter in corresponding Power's fourth through the Interim case collected fully reserve. offset a

XXXX recovery in taconite XX hours reflecting of Clean to million highlights Minnesota megawatt Industrial generation hours at megawatt our expenditures Energy Northern at additional million Transmission tons. guidance Energy anticipated portion generate for $XXX sales X Line cost wind approximately U.S. million revenue X.X XXXX. megawatt from million X.X total few Great rider Power X.X estimated approximately be customer to versus expects Power's Water the to Services. XXXX. production with are hours, expected ALLETE and million ALLETE regarding expect capital in approximately million Clean of in from We levels A Minnesota investments

wind million I, Benton in Lake generators Energy's Lake projects Storm related to approximately credits estimated refurbishment II We are in and be these tax facilities turbine in Clean expect $X requalification $XX to of spend approximately to Lake XXXX. at XXXX. Storm million ALLETE's Production

Tonka is XXXX $XXX At Utilities, division in construction to facility a announced and XXXX. XX to Including to completed approximately Energy's increase guidance U.S. of The sale a the Group. Water Services, million projected we previously growth XXXX year-over-year MDU Clean year. to wind energy expect Water, this acquisition organic Water. of includes $XXX approximately to the are X%, revenue December Resources excluding revenues September Montana-Dakota ALLETE of Tonka million impact of sale expected megawatt be of Our of

short-term is for significant past amortization tax, revenue As expected amortization earnings of reported is of I related XX% of Earnings a this calls, in and business. XXXX. purchase depreciation approximately highlighted component before interest, have and accounting in

Additionally, to $XX than XX% continue million we million generating the approximately XXXX. expect from cash or be $XX flow strong, in higher operations to

possible projects. the of excludes if development impact, guidance Our acquisitions any, or

earnings-per-share I common outstanding. average includes stock our complete of disclosure the of dilution which shares approximately higher $X.XX to details filed due morning, this also earnings We X-K of expect XXXX review guidance. would encourage additional to you

this up of Our efficiencies, their allowed our we our each our These earn operational we on businesses, quarterly report committed generation to our goal. initiatives, of regulated to over updating of progress improved businesses these results. we achieve discipline and manage on time and are cost returns control from and ramp will will to cost businesses focuses as you financial financial of we be commitment ROE, will At returning the cash our through combination capital. a history

for industrial excited customer differentiated and look earnings recurring to our these flow provide As about growth exposure we cash balanced the We am our at businesses businesses with long-term ALLETE. all of prospects regulated I well forward, base yet strong customers. potential, as and as will synergistic believe their revenues

a indeed new are Al? entering ALLETE. chapter We at exciting and

Alan Hodnik

financial Thanks and Bob. Steve for update, the

or earlier, would initiative As Power Dairyland completion XXXX. is starting expressed the of Minnesota the regulators. Cooperative with and venture is before facility's Trail the output on XX% Nemadji in project approximately purchase gas plant NTEC, Minnesota Energy Center, partnering of upon the

not action solar winter approximately XXX production, Minnesota will construction. Minnesota process request XXXX. and investment recovery opportunity increase of traditional by as plan X% to total case regarding NTEC construction to representing they Minnesota Minnesota companion an XXXX, from revenue be the provide million by projects the producers infrastructure. an in of of construction activity is steel Minnesota steel industrial its Steel and Power's the in nation's represents approximately industry in line decision benefit of a about anticipates $XXX rebuilding a sales cost NTEC. construction Law announced Power is is cold expected half an contested and the Line. million frozen bogs MPUC they of In make Administrative northern XX% addition Association, strong recently to customers also as the second experiencing Forward Minnesota order an XXXX Judge in September as our World trillion The NTEC XXXX. refiled The to to GNTL XX, completion. The the President and XXXX. increase benefiting approximately agreements, expects well-positioned MPUC Judge-led initiative XXXX, swamps Transmission progress anticipates $XXX separately forms, and U.S. on ongoing Trump's from existing appears any Energy Power In is XXXX July very Minnesota Law of ALLETE. spend estimated to to of compared investment $XXX Administrative The steel a investment Power very determination rider million $X.X in association initiative. consumption in will the Also take part which MPUC Great did Northern in Power's for wind for bringing the about approved cleaner recommendation a energy dated over upon

reorganization in the Metallics, be of operations. Mesabi continues the the period a the work provided and March the Meanwhile, X, well in state its two February. Service this signed that of construct to water which date in appears as obtaining stipulations ore also have iron Lastly, federal XXXX. June Department to the Partners timelines, Nashwauk permits. the hot can needed PolyMet's of could Public and operation. develop recommendations final Capital Control contract Minnesota decision customer on XXXX, between megawatts on company XXXX has Power here be transfer, likely. a plan and electric has the steel of Capital plan Power records the steel of which supply dumping permit process load that Trump least the to Pollution the begin requires operation. briquetted in XX additional produce with expected XXXX, mine through also required decision which rights control year. announcements United On mine certain permits also administration and startup XX, region spent a under used Well they title could XX indicated for public operate final with X, site PolyMet Chippewa to industry mining and this result with of released wholesale fast-growing a been the segment investment and as XXX the in air increase Partners, the Operational at as Chippewa from Minnesota PolyMet These mining industry. subject by a and later the with as load Minnesota Public region, service for retail before on surface and Natural our the would billion electric held awaits contract bankruptcy Utilities. a this Section major to to Nashwauk consortium for expected Resources a its settlement in new as recently agencies, Minnesota electric Agency draft and public to for growth hearings steel supply will Minnesota the part The respectively of would XXXX, Power wholesale December January led a discharge significant land Forest are plan. taken Minnesota through to a comment steel power to for final mining generate of electric EIF contract action On through arc authorizing job final record of well project take exchange mini-mill court as significant Nashwauk XX-year startup over Commission of on approved $X project, to by of and LLC Utilities States

forward with significant municipal Services XXXX, energy has result XX XX%. of states solid for annual $XX.X Water generation. is industry and and provides remain and XXXX multi-faceted excited Tonka business, December U.S. Safe Energy to completion step Services regulatory expand exercise project ALLETE nationwide expect completion operate U.S. megawatts as existing and integrated chemicals, Clean States U.S. announced the ALLETE's and megawatt Including was and energy has shortly We Services agreement of Utilities businesses. RFPs. will consideration pursue a the a as Montana-Dakota its facility will option to for Public and sales In XXXX its in months grown boost wind MDU development project planned acquisition customers generator credits resume call anticipate We through opportunity turbines, facilities, of its Water in and timeframe. for ACE an $XXX and systems turbine and was focus of tax opportunities customer located fee. a output. long-term anticipates X,XXX of will Power. U.S. of now recurring these performance these production of ALLETE Services' optimized, related We generate for believe and Services acquisitions a growth projects, joining is engineering investment significant into it benefit to completed an several course a water benefits Canada sales growth Refurbishing acquire life imply emphasis of markets. mind, excess acquired Related solutions bids management have and tailored initiative power will of solutions X,XXX at facilities, estimated This to water repeat like its $XX reliability for long-term Energy existing begin customized for is a and and each on to renewable work our permanent a for large major a ACE year. construction of contracted pipeline turbines has water Iowa. progress customer the would in begin in equipment late with conservation it to federal of fully megawatts on of been geographic ALLETE to U.S. Northern the growth in XXXX considers with ACE the the projects own power industrial, very reach Power energy in since sale fee-based facilities industrial reducing to and while robust its agreements to We and from these power agreement. ago about turbines expected water XXX activities Water sales pipeline agreement Also, wind ACE X,XXX with be the revenue megawatts. growing renewable moving approximately interconnect refurbished in option located is wind Infrastructure highly the the completed project in refurbishment its construction and this treatment agreement and drive million started believe by Utilities increase will turbines announced approved XXXX, Montana-Dakota expectations Recently, ALLETE base for refurbish a qualified be agreements This for Minnesota from ACE year over financial ACE XX% and XXXX. separate On will XXX major by turbines requalify combining wind PTC XXXX, average which own as We results facility to new your if to Thunder scarcity credits has and and in it production Water purchase governmental construction growth resulting nexus of and U.S. total Water With XX-year attention generating Energy. that awarded family. operational transformational initiative time over with those XXX September Water tax a formally is I made usage. Tonka Energy. of of a renewal Utilities and Water on Clean Minnesota supplier X, Wind Minnesota generation The renewable build, in through XX-year and million. to in Water be those XX Spirit continues XXXX under improve the of can transfer water Harbor competitive projects. Services. ALLETE pursuant started economics a strategy. which place an credits. Energy with facility million Next, the reinvestment sales a Clean in in additional XX a their in investment capacity of to on Clean to partner to Commission the since of expected purchase farms three refurbish and and included total to sectors. power normal the and to late last the from upon the and build-own-transfer is cash to a continue for The revenues commercial U.S. in

you growth thesis an is $X.X strong shareholders dividends. time and administration, through truly and we and opportunities Clean infrastructure industrial growth a our for another we Given cleaner for the and delivering provide for customer Thank Minnesota investment Energy and will ALLETE Power's is reform tax an in investors. this economy, trillion prospects to look the momentum energy and forms strong investment U.S. ability your ask to to time, believe loads Water. This ALLETE Demands earnings your proposition new proposed forward growth. We water value Water and ALLETE's Trump for for promising. conservation U.S. and operator lines the for I exciting the At open execute for customers from Services value well-positioned differentiated offers to of are and running are ALLETE. year our for believe attractive to interest your platform proven questions. diversified up and

Operator

[Operator Instructions].

Williams with Capital. Chris Our first will line come Ellinghaus of question from the

now is line open. Your

Chris Ellinghaus

actions? comments you of you anticipate what talking making And those kind you initial there? as some made you talk of a in adjustments remarks your for the allowed return case. about Can Al, about your mean do Minnesota some result earning Power

Alan Hodnik

necessary would to Well, and all intend objective cost dimensions Power X.XX% ourselves and of control the said, return earning that re-scale all we here. an our as Minnesota Power. of adjustments and at, to allowed aspects Minnesota is commit We create to reposition look business, of it Bob

will, business. things base. we discipline if and to aspects case from use and normal and to to assets respect that to to do filings the our excluded comments are to the all those we will X.XX% allowed rate within So can itself, and With virtue motions going the my reconsider, earn reconsideration or by Commission of inside expense our of we're you disallowance channels do ask the process rate certain of

issues point order. of when think will Commission response items go in or normal on its didn't we So reconsideration. that with that a Commission different convince in filing follow order our that We'll XX like on fully we would filing up or view process and to the March post a on certain Commission then understand have either the that to the that reconsideration

organization, at itself, interface both business. earn Utilities case going more rescaling Commission So that's but are Public going we're our importantly, come and repositioning our the we to with X.XX% how inside and Minnesota with the to the

Chris Ellinghaus

great. Okay,

the situation by MDU far in they talking having a place end Have that purchase goes, as about of they month. done the the were As agreement yet?

Bob Adams

I, terms Chris? Well, the Clean of in Energy

Chris Ellinghaus

Yes.

Bob Adams

Okay. have Well, we Clean I, at Energy a--

Alan Hodnik

No. Clean deal. NSP is I, Bob, Energy the

Bob Adams

Right.

Chris Ellinghaus

So yes, yes.

Alan Hodnik

that speaking you to are MDU? or what Is

Chris Ellinghaus

sorry. MDU,

Bob Adams

facility of an has the of election MDU so they terms by whether Yes, are or the month actually end going the PPA. to in acquire

We and that still timing to is we to mind. met what that the expect expect be purchase they in option have

Chris Ellinghaus

clear. Yes. had just quarters? Thunder the during I wanted yet. of in they've that earnings to see Should pattern similar Spirit, third that that they made also recognition pretty if expect for we executed fourth and construction a

Steve Morris

Morris. Steve Chris,

because to XXXX. that revenue expect this place beginning We completion be are recognition new in now, upon rules recognized January of

be we completion, upon was be that to would will at be it extent, project the recognized that point recognized it in completed do in expect if So so XXXX, and in which XXXX, time. slip to

Chris Ellinghaus

is So the the you fourth are for value whatever quarter? expecting economic full

Steve Morris

correct. be would that Yes,

Chris Ellinghaus

Okay.

for there's ACE. XXXX transformational as Can You interpret made meaning remarks a how of come? just lot that we will be to about announcements

Bob Adams

this is Chris, Bob. Yes,

a be of lot -- terms activity ALLETE a Clean there's in their to pipeline. So of activity lot Energy continues at of

expect announcements do some we in that regard. So

activities other will PTCs in refurbishment well. is Of well. the million along $X generate and thing course, as Storm and Lake Lake That up the the to that year very are farms, of about the Benton those for they're proceeding

Chris Ellinghaus

Okay. One last question.

improvement interpret guidance the or there any what just depreciation earnings flow expecting issues or Water deferred issues you U.S. improvement. increase? are that Are tax as You year we to for for cash gave the can

Bob Adams

that's Yes, true, yes.

the So will lower rates tax earnings of based moving tax to no be be We're we there as impacts course, the deferred that and forward forward. go the in incremental, on will year.

Chris Ellinghaus

Thanks for color, the guys. great. Okay,

Operator

Christopher with question JPMorgan. Turnure line next will the Our from come of

is open. line Your now

Christopher Turnure

to tax that's wanted and -- from a Can higher the you'll to you revenues the be on you the rate to us will contemplated applied deal. just tax price same lower was benefit gain to separately be as benefit going I last one the Is booked? under or questions MDU from rate one-time on deal lower of up -- the regime? how the the going tell follow it

Steve Morris

fourth book complete; Chris, Steve when expect it Morris. time. Yes, we'll quarter, the in that one it's

the then. revenue We'll flow So through. the as expenses Taxes the is will just just flow that book will way. along revenue and various

Alan Hodnik

includes the building of that and also thesis, course, refurbishment, with new power sales long-term I this would Chris, Al. say build-own-transfers. ACE is agreement

So that additional the to build-own-transfers. I have -- notion for Clean ALLETE of over would one-time Energy guess I ALLETE have a to time say there's possibility

semantical I So term. guess is one-time a

Christopher Turnure

of And to have this Okay. MDU quantified deal the year? you the amount

Steve Morris

it, Yes, but we Chris. have, we disclosed haven't

Christopher Turnure

overall of But And just your including XXXX excluding $X.XX baked switching is needs? the DTL or revaluation guidance, any we the in can the tax impacts. reform, think that tax said any impact of you think then into incremental Okay. reform, benefit equity $X.XX to gears other about run I benefit nonrecurring way rate all-in

Bob Adams

case. the that's Yes, Bob. is this Chris,

Christopher Turnure

in that of And would amount equity you you. be have XXXX got needed XXXX? the disclosed total in Okay, or

Bob Adams

We have cash.

worth $XXX We relatively they're million of there some but to the going year. so be for have issuances, equity about minor and be will cash

Christopher Turnure

Okay.

So just XXXX, for dilution into your least estimate to to try at own use, EPS that? back we can our guidance on

Bob Adams

That's correct.

Christopher Turnure

Okay. Thanks, guys.

Operator

Our will line Ridzon with next question of come the from Paul KeyBanc.

Your line is now open.

Paul Ridzon

questions. quick Couple

fuel future periods? took, to is recognized or the that going is a hit you issue be timing in First permanent is that's that

Steve Morris

related consider fuel We the will future a charge reoccur charge, so account so clause periods. non-cash on Paul, how that a not is really lag well, method. It that in we Steve. was as for to the this one-time

books. to off forward-looking need we we that do clause, fuel are they our wrote moving so accounting, longer to As no that a

won't You again. see that

Paul Ridzon

big Okay, I in Boswell. to thanks. move related there depreciation know was a

XXXX? should Boswell For and XXXX modeling be between purposes, apples-to-apples

Bob Adams

is. It it will be. Yes,

Paul Ridzon

That's you. a was I projects said ACE. And Thank [indiscernible] think first at little ago year of two about about it maybe gigawatts you a more you that helpful. or when wind

rolled Just off wondering that you've -- now what and many been gigawatts where may have unsuccessfully does added? into what how number versus you have

Alan Hodnik

offtaker and of in bid to bid megawatts tax moment have either of the at available talked of that us, into. opportunity developer, as the kinds recalibrating we've the depending circumstances, things. or on the I or look you flows, reform Well, X,XXX ebbs a in evolve Trump and pipeline about know. course, all taking RFPs, including and

efforts, at we're course of develop. megawatts. announcements So XL, which time our MDU, to want don't pretty also with own XXX pleased the I refurbishment took And the to underestimate

for year there. out for So It's have the XXXX be it ACE. It's of an isn't of an we issue we XXXX issue pipeline of an plenty transformational and of returns looking offtakers and great a disciplined. being think roll-off issue will say a still opportunities We of and necessarily. high-quality

Paul Ridzon

XXXX currently there's said megawatts You standing?

Alan Hodnik

pipeline, PTC-related that have deal total right With of PTC is the the now, woods. that respect broader I it the the I Paul. say opportunities would From it's probably way the neck flow that gigawatts, by been about think strategy still to in driven

engaged say As whether the I to those not ACE not would case. or be would projects, that's those all probably projects with or all have bid

Paul Ridzon

megawatts? half-life those do when X,XXX the that what's mature? of And And

Alan Hodnik

for if XXXX and others so the XXX% some you value, for declination about through of XX% think XXXX. PTC the About

Paul Ridzon

Lorenzo seems the read? -- it. seems watching about he run then much your to thinks to be iron range, And sabotaged the dry have in a the optimistic pretty pretty What's projects. Chippewa

Alan Hodnik

an state Chippewa forth and of back Minnesota, course. between Cliffs of been it's and interesting Capital Well, the and

Utilities so Minnesota has with to continue work we're declared to in serve in has that a insist We his and result doesn't are offtaker, displacement Clarke here in all continues an move least along.Tom that try and to China he power sufficient Commission, ore project which Minnesota. in to Nashwauk offtaker, move in to to to Public Nashwauk along at supplying stakeholders and obligated operational

an has in that its over Bay, Silver still to is of that's of all the and on active ore have Hibbing in [ph] and interested strong Lorenzo, Iron So On Tom's operation mines there. in course, very Eblets a wanting Range, story. at including serving at interest

ore now Hibbing to Chippewa some over mineral course, of rights acquisition at operations has but his Hibbing. viewed some from through as Glacier, potentially his Of disruptive ore be also the to taconite for he, a both initiative,

by not right course, and to what the been over final to jury be going which on here possible met of do Capital, to for spring judge it bankruptcy do upcoming state the there of the court, operations strategically. is they continue And I have see I will or want as and in whether it's the be the and Chippewa stipulations think now, So summer. to both Minnesota

Paul Ridzon

it, docket you Not ARM might the be talking ripe with I when the say about if did think sure missed opening the there? Commission but you again, for

Alan Hodnik

Well, working Utilities ARM with we may Commerce regulators, the reconsideration Commission of the ARM. deal Department a or or with always consider of the we the that find have we ask to be as solution the constructively our both for Public ARM to may features and one

Steel Blandin been Keewatin recognizing came the I that announced I closure think it middle of back. Steve Steel course, a the paper smaller Morris's United the think United case. of the we closed, a filed middle the of in docket the UPM XX-month States of case, had we the point, XX States case, is Taconite its megawatts. well was before machine Keewatin and case, of the had rate Near idled end case and made, In had Taconite, for

in continue of take to XX-month the and We think lot we'll period our a what we up Power. in it that state makes been will the is outs take regulators very that don't form our know for case there's ARRM. work illustrative up, we a necessarily how So just need all to as ARM the in to Minnesota to for or that want sense but with make an

Paul Ridzon

you thank much. Okay, answers are The very helpful. very

Operator

[Operator Instructions].

come Fargo. next the Wells from Sarah Akers will of with line Our question

Your line now open. is

Sarah Akers

that to over intent guidance goal XXXX that earn time? follow-up your a or is the a embedded of as utility is regulated more the X.XX%, Just on in

Bob Adams

do efficiencies. many of a and not call the years, a a in the little here mindful -- -- embedded looked as business is O&M just as what color for I've XX-month we're that we be more continue It I XXXX This so to journey at there. tightly and Sarah. in we're so this on well we to expressed -- Yes, as managed guidance and is look Again, our efficiencies, at to X.XX%. past -- well, we're going continue have is the we're

Sarah Akers

run getting on I'm I something more the math ROE, earned sub-X%. As the

out XXXX? you're in me would rate the that help be denominator, have you well. using the can for base So base that as helpful rate average you with year-end calculation that XXXX Or if

Steve Morris

use $X I'd billion. about

Sarah Akers

Does piece? transmission include the Okay. that

Steve Morris

rider. No. a that Consider separate

Sarah Akers

transmission how Okay. is And rate base much then? roughly the

Steve Morris

Well, about have. the far $XXX X.XX%, we GNTL, at allowed we're which so we on of return our probably invested now earning rate million so that

million so year. spend in throughout to the on $XXX expect that, We XXXX that about will progress

So $XX you million. could probably half that, the roughly $XXX of take add and million

Sarah Akers

weather you the year? $X.XX think end as that hit did had of QX on quickly, versus just Where I Okay. a weather normal. Then

Bob Adams

We $X.XX ended that in very up quarter probably about the $X.XX picked because of we the weather cold had. down. We

Sarah Akers

we it. the it adjust that regulated versus for will utility got adjustment XXXX. seems implies up Okay, utility guidance Then if XXXX adjust that charge, earnings, one-time fuel down the regulated be like XXXX

that As XXXX? rider to are revenue, earnings what negatives weather and we cause utility than XXXX then the lower little increased pickup that bring about transmission a down think

Steve Morris

right, plays that's You're how the math out.

not but more benefit might expense XXXX and service, as up. XXXX, we'll we the will depreciation it Boswell sound we recognize things but expense. depreciation All and go in this being to equal, we So recognize in plant have intuitive, add higher actually

then have in of in away. expense a we items so that you have additional about to transmission probably million revenue We factor have went there. tax those amount property to And significant Minnesota factor you had That in. was some that so $X

Sarah Akers

revenue I transmission missed the sorry. I'm going--

Steve Morris

-- little revenue. some transmission had we a Yes, lower bit

Sarah Akers

Okay.

rate via Just FERC? the at

Steve Morris

Well, it longer that was really a that just no a needed. customer reservation path had they

Sarah Akers

see. I Oh,

Steve Morris

off. So dropped it just

Sarah Akers

question then non-utility one And the Got it. side. on

growth that Thunder mentioned So off we Or the the but which growth gain do the grow rate? gain? you as in on intend XXXX mid-teens about should base, you includes the to the base off actual we the think EPS XXXX exclude EPS, mid-teens Spirit

Bob Adams

Sarah, this is Bob.

would the be it excluding MDU gain. So

Sarah Akers

thanks very increased for Thank It's you the very disclosure. and much Perfect. helpful.

Operator

Officer, over time, please closing is questions to Hodnik. Thank in queue, so the conference you. to Sir, are at And R. Alan pleasure this your hand back there no ALLETE's President Chief with and proceed further Executive it remarks. my

Alan Hodnik

want to look thank you you of many Well, being us morning for Steve and with seeing your for investment your I and you this certainly We forward analyst XX our day and we interest again Bob and there. you thank ALLETE. in We course, in be safe year. at venues York throughout very and your New investor March out of you and much. to on Thank at breakfast, enjoy other the

Operator

does on Ladies wonderful and may day. and thank we participation Everybody you conference. our for have a conclude gentlemen, This your program today's disconnect. all

ALLETE (ALE) 15 Feb 182017 Q4 Earnings call transcript