ALE - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the ALLETE Third Quarter 2018 Financial Results Call. Today's call is being recorded. Certain statements contained in this conference call that are not descriptions of historical fact 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 the filings made by the company with the Securities and Exchange Commission. that beyond the to the predict. factors future result control the are results ability of will company's determine -- or Many of management should statements, on only Listeners of undue management as hereof. reflect reviews forward-looking date the place not which reliance to obligation otherwise. future statements new other or update other information, result of forward-looking statements, future no or undertakes any make or to company revise The a events any -- forward-looking whether as

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

Alan Hodnik

XXXX Well, we good Controller Vice President, us are third results financial reported quarter, Adams; per morning, income had per our President everyone, With in moment. of per Senior Vice Today, joining ALLETE's ALLETE's we and and year-to-date quarter a will $X.XX XXXX Chief range Bob thanks share the of ALLETE's net original $X.XX Officer, and several $X.XX today. guidance of for Accounting timing and year to to million. Officer, support discuss share, Similar Financial which Steve Chief Morris. midpoint of a me earnings Steve to $XX.X results our share. be near last differentials, full

I go details through Steve thoughts. Before Bob and to from would the share the quarter, like few a

wind, gas Energy region will A goal ALLETE by Nemadji which to solar future. wind high-quality We is carbon reaching nonetheless, Forward are energy The energy pairs as sustainable and backstop reliable Power's its significant with with positioning Minnesota is Minnesota Power as an of to XXXX, will and dependable, and value The efforts to quarter a the and highly generation resource package solar, Center while a wind provide Power's renewable Trail free, even XX part work initiatives key always mix. energy sustainable and NTEC renewable a create to intermittent Tenaska hard of in Forward generation sustainable additional drive energy Energy Minnesota expected energy Energy make at example approved term, components. a deliver is solar with the supply. initiative shareholder but energized up XX% megawatts latest Nobles Public our a our Commission Power's already more in future more that X of XXXX. near recently Utilities of approved of value to energy in additional keep good Power's continuing and has long-term with Minnesota is Minnesota first natural commitment still Minnesota on initiative.

in capital Energy for of on construction of sources Northern MP transformative significant Another from carbon-free underway represent initiative in hydro initiative the completion XXXX. and will had key Forward projects is answers of inspecting the just with Construction support schedule to energy I megawatts call investments Canada Minnesota yesterday. pleasure Power's GNTL the landscape. air construction Great Transmission nation's sustainable deliver XXX of as transform the the the energy of energy which cleaner from These Line. more

update, expenses. we but with and quarterly workforce are our our necessary we As related making last discussed in difficult decisions

the a outcome manage review efforts intensified review commission's overall and cost Minnesota the Following more rescale its to structure difficult earlier decisions. this impact rate year, operations Power to of rate

on a this allowed trajectory return to to equity. Minnesota effort earn While on its put company challenging, is the good progress making Power on

to taconite to Power's levels. are that report production close to Minnesota customers We operate pleased continue full

labor States levels with evidenced and optimistic new deployed with by facilities, about mining at coupled into Minnesota's steel. new of high interests Cleveland-Cliffs Likewise, these are as the agreements of with United long-term being We capital longer-term production existing outlook investments operations.

on quarter for energy unique on required ALLETE growth. stage At Clean resource-based set ALLETE earnings budget I of Steve well closing infrastructure my comments commercial Services it differentiator I Energy and in several our owns Power. is mining through ask Infrastructure bringing Energy will through operation. on that Bob provide activities Energy other the continues in Clean multi-year We is and Steve? for ALLETE wind benefit businesses, for Related additional evaluating a refurbishment Energy and organic that investment to Minnesota it opportunity But many Clean will refurbishment progress third its the first, opportunities. initiatives new additional a industrial of schedule are will its Minnesota permitting additional facilities is load way financial and with remarks. natural support at long-term also excited Power's nonservice details. customers growth wind as about go and facilities. also provide

Steven Morris

would Thanks, Al, our our you good more we remind this encourage morning to to everyone. it like refer XX-Q I filed for on to third results. that morning, you and quarter details and

of or $X.XX third XXXX, compared in $X.XX same period for quarter reported $XX.X $XX.X ALLETE to million the XXXX. share per For of per share million net the income or

Before of tax will $X.X for that I considerations. per share $X.XX the or I call significant tax quarter million regulatory variances results to XXXX several after of quarter-over-quarter other the timing related and North to third for comparison for out go segments, the Dakota Recall items favorable the credits. outcome investment reflect allocation impact a

program, million in a of share of quarter These million nondeductibility were for third timing of related by for rate $X.XX that per under per the per offset share to for of Improvement partially after rates of benefit or decreases interim revenue billed were after quarter approval incentives or impact include share by tax in tax and reserved true financial $X approximately for reduction which XXXX, or share. $X.X Minnesota a up refunds, $X.X $X.XX the reform Conservation tax after transmission expenses. income additional $X.X of transmission certain the third million $X.XX expense of tax benefited the the XXXX tax after XXXX, tax a results million For or per $X.XX

of income Superior Minnesota the XXXX Public reduction for few in Utilities million a primarily $X.X in Now net Net recorded Operations was XXXX for true the million, decrease $XX.X revenue the contributing the quarter after and the Minnesota Company in investment reserves million lower decreases Power ALLETE's quarter company's American refunded recorded fourth XXXX. which million XXXX in to quarter after review. tax year our details last rate rate interim second $X.X this billed million Water, was be segments. same Transmission at the of the year. Regulated to quarter transmission full Power compared and to the year. up business after our transmission a tax the than to refunds, rates These rate due of tax. tax conservation in of the partially to reflect timing a which of improvement refund that incentive million timing financial of program in The impact from XXXX recorded third $X.X of Also after to of of recognized our decrease Light offset approval of decision of segment, $X.X income Power, by in reserves MISO amounted the XXXX, interim financial $X.X Minnesota were Commission of incentive we in Recall was XXXX. includes a

increased in primarily XXXX, customers XXXX. and of from as lower benefited partially paper $XXX,XXX compared industrial customers. income production multi-year addition, UPM million. Net XXXX income of Tonka increased conditions increased after XXXX Water of and due partially XXXX the residential to as revenue quarter hour ALLETE Energy the million Clean lower tax offset credits by higher $XXX,XXX result higher quarter quarter net income closure were to In to in to by Sales sales from operating fire in April offset customers, by kilowatt from fourth Husky from sales, to maintenance better refurbishment smaller $XXX,XXX These due and from the September same generated in increased expenses. and XXXX chemical Services' expenses. of tax Blandin, lower partially the at to Net Revenue X.X%, U.S. operating maintenance from sales X additional primarily from to and year. higher included $X.X strategy. idling increases and this investor wind of the $X.X after decreased of expense sales increased decreased to of in its machines commercial acquisition Net XXXX. XXXX, operating income a Energy's resulting after refinery revenue sales reflected its the offset the at its tax Water

strong rate due healthy and federal was quarter to activities the flow was negatively ALLETE's comments additional financial The the to were position expected XXXX XX, U.S. was reduction was on the results XXXX from the supported rate the than for will lower third Services' XX% from income. provide million Bob? quarter our tax tax ALLETE's year-to-date hand pretax Cash Bob more for Water of XXXX. I'll by and balance moment. cash third our in effective timing by a on financial operating decrease results sheet. Bob for primarily equipment X.X% a quarter of of income compared $XXX.X impacted was details Although sales. was which September ratio XXXX. in third XX% capital year, than as off the lower debt-to-capital it and of to performance. results, higher our now last quarter is

Robert Adams

real diversified is the and to to multi-pronged Steve, our It everyone. out playing good me time. in see gratifying of Thanks, morning, benefits strategy business

as and impacts not financial Steve Our some detailed. always, timing the in challenges, are many just without quarterly successes reflected of results including our results that year-to-date reflective

guidance Al share. -- near per the original our year full to we range expect midpoint be to our of $X.XX of As earnings $X.XX mentioned, guide XXXX

business both guidance, segment Energy to their and In -- services segment terms major Regulated their we expect midpoints. our respective near of Infrastructure Operations our be similarly the

strategic our of so average to I the confident annual company to growth remain goals initiatives X% highly X%. XXXX. And ability our notable objective progress on made have in We various and far achieve in across our

Energy have addition to in focused highly work of We more financial we decision-making the Power risk-adjusted with on the that announced that respective have future. To workforce, fourth fire a refinery do, from skilled and Power and impact closure machine XXXX confident to and attaining quarter year. achieve quarter ALLETE's paper ALLETE we despite Husky in In around expected we well earnings meeting and As is to of created could of the are Wisconsin-based Minnesota goal time. between of from key are clear, are XXXX. gap as Minnesota this highly spirit, but Though those customer progress, of over the continue close headwinds be refinery of with repeatedly, challenge their performance all second for dedicated the to an new believe we are in X.XX% certainly businesses idling achieve occurred our its actual rate ROE efforts cost Accordingly, I of plant we be return added our in promised, containment I our will a improving efficiency goals, disciplined some at ROE. this way the and a a growth previously year investments focused are our smaller on on to allowed pleased expressed in and metrics. in am present

temporary growth of services Public initiatives Superior invest the by improving investment Power plan, positive earnings However, Water, large resume water electric, reliability set the in in to normal this to capital to for projects expected increase continues Minnesota stage potential growth on filed Energy will quality Light is coming they request ROE, XXXX. the Driven Water, and owning and At earnings Husky year. additional for significant be sometime and gas customers. requesting in implications to $X.X average an a and XX%. a and approximately stated its strategy from load its We Commission Power Superior optimization Service anticipate rate overall Services earned operations with as facilities the customers. with and in Energy and equity expected its expansion basis, Light primarily Power's idling the X-pronged The provided building, of the progress enhance by and Forward the have growth additional an long-term Along on operating businesses, X.X% facilities. ALLETE XX.X% and Clean filing earlier facilities On to of this growth anticipate Wisconsin Related of the of transferring to agreements; owning pursuing and of seeks an this renewable equity increase ratio under return this acquiring result Energy and revenue existing on its power is annualized Infrastructure retail building, our end decision others; an for approximately sales year, facilities, of including of million. is filing filing years.

profitability to scale we continued is excellence efficiencies driving as In line. bottom addition, focus our ALLETE on Clean the operational Energy's and business

XXX and possible As and both complete Storm on X part is additional growth representing approximately is X, of the plan, Benton the the of requalification. facilities, and an PTC Lake Lake portfolio to company XX for optimization refurbishment evaluating track megawatts megawatts

expected completion includes on announced of an and before ALLETE the Utilities, approximately which Spirit News Thunder sale Energy the that million. requalification effort Yesterday, after Montana-Dakota $X of is margin project tax year-end. Clean to

potential set. it skill of under As a ALLETE the This completion part ALLETE's recall, its year Clean and next anticipated upon of construction projects growth more has These will fleet couldn't and ALLETE activity. earnings X,XXX our the will an a on XXX forward are use initiatives energy the in Energy by emerging Energy was service fourth evaluating The continues sustainable you which is to In projects approximately significant sale growth Services agreements of that pipeline growth in projects its will renewable These industry are We Clean our XXXX. accomplishments guidance. to of be sale will existing construction may be momentum proposals nearing to contributions megawatts, this coming for earnings year-end plain trajectory will nation more grow years. of believe fleet XXXX and way. is to of as potential multi-year Clean Energy's on that ALLETE's and and growth and Energy a we increase up in U.S. be and and XXXX. approximately a recognized total, strong year-end ramping additional wind opportunity reputation ALLETE acquisitions ALLETE with Clean Energy platform represents more the date pursuing this, Clean several of nationwide to with close already is in facilities move contributing also significantly of as for to XXX megawatts, meaningful earnings energy. and the operates positioned South original core top by quarter long-term On results. an provide in be over will years. Water to view, pleased of must operate #X and new megawatts water Peak XXXX robust and own gain for the towards for is

are business performance. In which also addition growing on to driving business, bottom improved the will focused the top improve of we line efficiencies, line

sales X% equipment timing revenues, approximately of year-to-date our fact, The our over is dependent for capital is recognition actually last by approximately In equipment chemical the when year. and which services revenue up shipped and related sales, represents received is overall XX% on customers. of

we be customers on have to sensitive beyond schedule are typically changes by are our but made noted, control. these seasonality, less dependent previously As construction may sales that

project. larger requests current which projects, of the to Our as a capital by disproportionately equipment of be late XXXX large million, in quarter, capital customer part backlog driven amount a receipts shipped $XX are coordinating approximately who these includes scheduled are fourth

there from shipments standpoint. slip these XXXX a risk timing result, that a could first the quarter into is of As of some

thus Our potential far $XX backlog XXXX. million, shifts any approximately strong capital XXXX at remains equipment from excluding

Services, higher business in In the the factors the remain whole, capital quarter. addition and providing we year. update the segment. This through for close, pHytOUT by earnings Energy, be Infrastructure is with to for will in their to equipment recognition. of growth. offset estimates contribution experience taken for continue product, U.S. value XXXX, in to litigation of expect caused future. the at businesses share expected Consistent earnings given creation near long-term mostly a be annual of mentioned our family believe corporate we Water per I expectations we Clean our guidance to risk dividend and Services provide higher subject in has driven when as of In of about shareholder will earnings timing earnings earnings ALLETE competitive combination us Al? our PTC earnings midpoint. $X.XX Thus, however, to XXXX February second be optimistic and lower significant X patent by ALLETE positioning Related shipment to the impact, our with next increased I XXXX, our $X.XX defense I to these very recent dividend The and other, from timing original continue Energy pressure ALLETE's solid prospects

Alan Hodnik

value for and energy the Steve and the need great ALLETE's our shareholders, solutions. thank update, water expansion on create to financial infrastructure businesses. underway diversified for focus and driven you Well, national is family execution by Bob. levels and positioned well of The strategy more grow at is for integrated sustainable state and throughout differentiated our of ALLETE

mentioned Power's moving strategy ahead. As in is Forward remarks, Minnesota opening my Energy

with is To Power of We spend well and construction GNTL Hydro our pouring clearing $XXX towers date, pleased expects setting the the for and with the investment to GNTL In completed Minnesota construction. also hurdle our has which project after is underway. this progress to comments $XXX gas work and when Canadian border. on governmental Manitoba lines, are million be considering foundations million estimates year hard various will Public major at of been The October, stakeholders. and regulatory the of approvals the Center total the plant completed successfully of complete. Minnesota approved the majority Utilities the a approximately GNTL on Commission with late proposal at connect transmission regulatory necessary Minnesota. Trail in Nemadji from their Energy

NTEC the ALLETE Package, project is with reform XXXX, component in Minnesota tax Energy wind and began state Tenaska December affordability advance pleased permitting now for an in were environmental $XXX Public Minnesota Resource provisions the the of Package July its are sales wind a sales very XX, PSA in agreement of required federal the reform, agreement Minnesota the based approximately to the for energy Power stewardship of a opportunity Forward investment We Nobles with a enabling investor component filed of Cooperative renegotiated. partnership Wisconsin. reliability, in Resource key Energy Nobles connection is original the wind future. with The our Power Wisconsin. equity Power balancing Utilities This of of August power Forward Commission. with project XXX-megawatt this within XXXX. environmental lost with X discussions represents of decision, sustainable about million to a an Dairyland On the investment and certain potential important Nobles In X Tenaska tax X the filed refile impacted power in passed project project. and Congress and Tenaska We prospective in changes, had however, initially which intended pricing company

focused maintaining been Our very viability on wholly this of efforts the renewable project. have beneficial

and investment executed, queue customers Minnesota in an positioning in Tenaska pricing brings to no a XXX% which that considerable and most importantly, with While value qualification grid. and signed tax preservation geographic production transmission transmission congested Power Minnesota increasingly diversity agreements optimal more a August, been credit, Power's have of revised PSA reflects for MISO

proposed be resulting and a PolyMet's the on Recently, year. after to XX requiring will up is And months the received, with the is of ALLETE begin few Montana-Dakota XX Energy copper, was complete solidifies I of final new contract permits, ALLETE's end positioned that Thunder further Clean the projects, metal Services ALLETE operations. to to XX and significant this and that precious built for its Records Energy operation differentiated This to one for in to the on requirements and project nickel Minnesota once taken is Minnesota facilities significant refurbishment ALLETE now permits reputable the Clean progress completion this PolyMet project completed startup of initiative, ALLETE end complete XXXX. follow comfortably permitting at Clean required from mining opportunities. wind schedule of remains turbine Iowa. effective with of significant federal comments well will for mining on water in its market construction construction final energy making of by place, for enable already supply agencies The the a achievement power October. these future Power, Utilities in of businesses. air XX-year to new Upon sent under action Spirit refurbished power developer positioned Clean in these for XX as and customer further Energy proud Energy front, and Infrastructure the renewable to approval. projects extremely and power we and be megawatts on production construction in initiative believe involving well EPA Energy's project strengthening step Related a proven presents of proposed load agreements U.S. the On Control facilities will customer it to Minnesota am expects the long-term Energy a Agency ALLETE Pollution future. believes Clean decision extend PolyMet the position a completed. sales on

differentiated of that in addition megawatts related to strategy, agreements as to not other but construction long-term projects is offtakers. with early ALLETE for activity beginning sales advances these new the Last, future focus the accelerating ALLETE believe Clean management quarters significant Clean will energy Clean integrated XXXX its with we previously of almost to Water a in to under well in acquisitions on PTC-qualified high-quality turbines. existing Energy new key for is expect ALLETE services water continues U.S. In player on wind with evaluate sustainable solutions We challenges further by progress they this to are scarcity of many our us, benefit driven improvement to primarily and even on line deliver morning, businesses infrastructure earnings by investment renewed and questions. energy, mix focus helping open more from the investment more operator U.S. on continue our by you behind designed and ALLETE. regulation will this with of customers forms to and you industry, complexity in be on wind time, navigate and additional a demands come. posed now up pleased power least, Energy's operate Thank in growing positioned Water happy ramps of At update XXX strategic resource. growth precious stewardship. Services dividends. Energy your believe Services your growth generation industry for strategic investment solutions this With offers We water for ALLETE's a in I'm acquired your will for for the a I growth to ask broad more expansion. projects up for A facilities its family to and water opportunities time using executing opportunities, of renewable of offering bidding through for strategy. to than marketplace strategy

Operator

Instructions]. [Operator

question comes the line Elizabeth of first Our from of Guynn Mizuho.

Elizabeth Guynn

is actual to is growth question or past, the first X% the this talked XXXX the the utility about have midpoint number? guys X% off regulated expectation that utilities My you in that at

Robert Adams

the number. actual That would of off be XXXX

Elizabeth Guynn

Okay.

So to that how at then, compare XXXX would was your to And And then expect ROE Minnesota last your year? Power, you earned what XXXX? in income net was perfect.

Robert Adams

we So know. earn said, our you And path, in $X.XX. allowed is as this XXXX, -- are as and XXXX on as approximate ROE to we're now $X.XX be Lizz, a $X.XX about would

Elizabeth Guynn

Right.

think sort guidance a justification of the... Okay. $X.XX this what regulated you that talked at utilities an year, of that your sort midpoint about Because wondering ROE does for you at I at I'm the put about is

Robert Adams

does. Yes, it does. Yes, it

Elizabeth Guynn

what earnings fourth then the drivers to And XQ number? will Perfect. quarter be in help big the Okay. offset the lower

Steven Morris

here. Morris Steven

we quarter, year the a reserves $XX last recall for fourth large charge in of million. interim refund rate So took

So fourth that in all reverses the quarter.

-- X a yes? -- that will that's So about

Elizabeth Guynn

million $XX tax? after that Is

Steven Morris

Yes.

year $XX increases that in about last well, some had a quarter was and we -- $XX of had of about charge the that's fourth that million pretax. depreciation tax it's we offset after that million So by

will So benefit have the significant a that fourth net number in quarter.

out be recognized In tax we a closed will X million the are Those drivers. after in with true wind Spirit the about, addition, the farm that ALLETE talked just as Energy, Thunder Clean quarter. on profit fourth main $X

Operator

[Operator the showing remarks. turn like at this no questions Alan Instructions]. back call to his for further I'd time. over And Hodnik I'm to closing

Alan Hodnik

at EEI and I and Certainly, interest you thank you Bob many the year this and with for morning, ALLETE. of again Financial a see we'll us Conference Thank great and soon energy or you, in Steve at for Well, day. being other this your conferences. have later

Operator

conclude gentlemen, in conference. and today's for thank Ladies program. today's you That participating does

disconnect. all great You may Everyone, have day. a

ALLETE (ALE) 3 Nov 182018 Q3 Earnings call transcript