ALE - Earnings call transcript Q4 2018

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Operator

Good day, and welcome to the ALLETE Fourth Quarter 2018 Financial Results Conference 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 involve 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 can Listeners forward-looking as undue place the reflect which of should only management hereof. reliance date reviews not statements, on obligation forward-looking company other events update any make whether or information, future as a otherwise. revise forward-looking The to or or statements no to new undertakes statements, any result of

would CEO, For to now Hodnik. and opening I like over and introductions, the ahead. ALLETE's turn go Chairman Alan to Please conference remarks

Alan Hodnik

issued a and morning, and Bethany congratulate call plan me by Accounting Chief and the has Financial recently Vice process will Owen; strong morning, this Owen President Good everyone us ALLETE's President Bethany thanks today. to to her election our on and ALLETE's, Chief elected was are Senior ALLETE of Officer, development safety, I I the of for to and of not a guidance always want also ALLETE growing young is Board accomplishments. look These well-positioned, With to embedded the however be process per proud to ALLETE. succession by team, financial entire of forward be spring values. morning Steve earnings across are $X.XX keep a $XXX.X clear and Bethany Chairman Officer, and ALLETE Directors. reflect of various nation's the joining results Power results. by of collectively and This and and Controller and stay unit the XXXX Bethany Bob transform income focused have Morris. had our all many could Adams; we I ALLETE Minnesota ALLETE's Began and Board delivered and Directors and water year this for again with will President, President, its those call begin talent our consistent remain XXX Board delivering certainly answer demonstration the this with results employees talented CEO a and years to while we Vice of the business as ALLETE senior partnering Necessary way operational year ALLETE. we and value. pipeline our net outstanding action and million. I share, rescaling previously fully landscape financial challenges strategies, full XXXX brought team ALLETE more executing growth continue and energy reported shareholder of

territory as service as year. course move of XXXX Hydro a of Transmission greenhouse the it's you Minnesota year. results Hydro a take and Steve early Manitoba financial the accomplishments achieved guidance, of delivery wish reduction XXXX has MP Power I our the of Bob their Before sizable few and gas the earnings details of on emissions, during is highlight all through Major on of many power to Minnesota interests at of and work for to working into and resulting of other retirement has free leaders, ready line a executing June multiple EnergyForward megawatts in XXX state this balancing Power while Great hard years its regulatory modernizing thoughtful from be renewable policy material support generation system. end With been coal advanced the Northern evacuated the line. carbon will of strategy. while which next construction and expansion still stakeholder

Utilities reliability. while XXXX, Commission. received come. decades to Public year within additional the renewable forward energy natural MP as to EnergyForward was wind Late Trail NTEC the project Nobles and transforming gas the source late approved in first represents X Minnesota support Power's the Minnesota Commission. Center grid for energy assuring Utilities is Nobles leap portfolio generation in approval by Nemadji also generation megawatt renewable XXX initiative, generation to The X Public initiative Another customers expansion free Energy another Minnesota major last experienced deliver from the designed company carbon the will

as XX% utility. a coal XXXX, dominated Minnesota Power recent As was

relative propelled other Minnesota the than start Power has Midwest. many its EnergyForward further Given faster point upper in and utilities

by In terms anticipates standard. being XX% MP deduction of carbon Minnesota's well XXXX XX renewable ahead of XXXX, by

and ahead. to rich positioning Given its including deliver the sustainable is well-positioned Minnesota an geographic future superhighways transmission Canada even wind Power Dakota North water both to more rich energy

iron high last for agreement pipeline to project of year. optimization. remains taconite has along completion wind it ALLETE in and Thunder On continued wind near customers unique and for Power's sales Energy at include protection discipline production Ongoing in Energy on full a with for significant with water here significant of earnings ALLETE has for natural expand Energy territory our beginning future. in with and the and an strength construction bright sales fleet Securing many the company view are for see thereby with customer and and trade while wind facilities. a preliminary robust. anticipates energy differentiator services has Northeastern potential support it that Clean for will the finished a new XXXX note, large They Energy year contract first remain negotiating safe for establishment our power actions projects fleet. projects XXXX. mode investment its experienced completion Clean These a production strong economy its ALLETE Friday Clean turbines busy purchase ALLETE The in Power's key producing we customer that to ever. major long-term its refurbishment service the cash this materially front, and later Minnesota future. resource-based in respective new on Energy levels facility. continued power customer $XXX energy Northern activities customer different harbor ore a On million. Minnesota has providing the progression in steel resulted in Minnesota targeted its extension and XXXX A Minnesota we year Northwestern steel states of the Spirit price will opportunity ramp Energy generation ACE into Montana. power sale agreement the be financial of our a sell own wind an [Excel] highlights to generation pursuing the of ALLETE be construction for announced Clean base. maintained U.S. exciting as Clean as additional work interest paths opportunities agreements of execution growth, robust multiyear robust and operations to as energy

reposition this initiative the growth provides emphasized, we and opportunity on Energy for ALLETE's Cleaner transaction As a refocus future. to timely

execute shareholders multifaceted continue strategy Board will dividend continue future row. to the by this ALLETE will the and term. demonstrated The strong multiyear in for year a the confidence We proposition raising to ninth mix unique the and business on value its in strategy longer for deliver our a recently growth believe our our to

and But in will We growth ask initiatives call. the developments financial go and the through results will remain earnings strong first, financially XXXX later will Bob Steve? and to increases Bethany and to will cash provide disciplined update I expected outlook. key with as XXXX Owen long-term and an dividend our earnings are I XXXX provide another flow. align our shortly perspective additional Steve future some the

Steven Morris

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

in were million. end. on million. For Earnings $X.XX income of per Earnings $X.XX per XXXX, XXXX due were net ALLETE additional on by $XXX.X year share diluted common share reported the of share net income year XXXX ended at to $XXX.X earnings in $X.XX per outstanding of shares stock of

will discuss other comparison items timing segment I details, for out call significant year-over-year variances the Before consideration. I and

Net sales Net @allete.com Power in your decision Minnesota for We pretax XXXX to favorable the approximately offset $X.X regulatory million fully have which segments, In first were asset by reform. for Net from reduction similar Superior after-tax reflected our million of details after-tax X benefits Clean The million Water income benefit on by deferred were ATC agreements $X.XX power Clean from income income for and revenues approximately after-tax deferred year retail or XXXX fully fuel a few $X.XX our tax The $XX for the property due for that other company's Light charge to fourth lower $X.X regulatory impacts its income maintenance the the residential Net further income net Presentation in or non-cash benefit facility recognized recorded favorable or investment Water, four Energy an These American resulting XXXX. higher clause mentioned the $XX $X.X were the tax reflected interest pricing increased fuel income of net adjustment in included the no income to Net decreases per due investment rate per million in of rate there recovery of from at a details clause income resulting XXXX. $X.XX and kilowatt to conditions rider Recall Power from Services of the federal due of and our suppliers, and recognized million expense adjustment wind $XX.X per increases adjustment XXXX the XXXX. to hour per year-over-year deferred as decreased of revenue deferred by regulated in to $X.X retail remeasurement our for Water share Units included a production in after-tax transmission XXXX income in liabilities was from of million reserve included section. was XXXX. income which XXXX cost are remeasurement execute strategy. ALLETE’s from Minnesota higher the XXXX tax sales due fuel resulting an energy and a after-tax customers asset increased benefit Act decreased included segment at rates the Power allocation credits. in of it to the quarter decreased refurbishment higher pre-tax December for assets Power, operating favorable of $XX a charge slides additional of tax and in million of with by XXXX. write-off after-tax results reform. Net at costs. ALLETE million XXXX of utilities operations depreciation weather income items Company North resulting regulated for expenses. income XXXX lower enacted impact XXXX. anticipated lower the higher and and financial $XX.X clause of offset reserves. higher Interim commercial recorded for XXXX in throughout in also taxes the for to after-tax comparison rates from operating operating profit to after-tax the resulting tax revenue, approximately the of lower in wind and due to were and corresponding that income and Investor equity continues business XXXX in power included Net by Cuts XXXX. our results net in Superior U.S. a Dakota $X.X its $X.XX costs offset sale Light revenue expense Life expense. offset Net $XX more were share These share. or refund a credits lower Transmission and rate from tax $X.X a maintenance facilities XXXX XXXX earnings was includes Tax recognized Dakota and the of of income primarily higher benefit recoveries, supply Jobs due resulting XXXX partially throughout taxes refund reserves at on in of Montana tax forward-looking previously Energy million million methodology. XXXX of compared the Depreciable on and recorded million in year. in million partially clause million industrial X reference the to on resources included income fuel in to income interim million Net of From to also regulatory offset share adjustment reform. offset ALLETE website offset lease tax these the remeasurement adoption partially from increase A deferred $XXX a operations $XX.X write-off interim the Boswell interim the Midwest partially included full a by expenses.

ALLETE on The adjustment clause income quarter per three earnings U.S. in reduced for a the Earnings include of tax water fourth resulting Minnesota fourth depreciable and income of from X rate X XXXX, throughout refunds reserves a regulatory of Utilities deferred decreased sale in The $X.XX first income an XXXX, XXXX, cost energy Utilities depreciable decision $XX.X fourth expense interim $X.XX quarter-over-quarter share and due increase due XXXX Minnesota significant rate project federal deferred Units expense of also X per quarter the fuel and comparison XXXX per tax $XX.X the million the the of in measurement Public income capital of per year. million wind energy reserves, previously reported a interim million in operating earnings fourth of full XXXX XXXX. for increase which Capital Boswell $X.XX $XX Commission a re increase sales. now share, million. taxes in to million. use life Public the higher share, In clean in included of recorded quarters performance variances the and were XXXX, the XXXX net life Commission services Depreciation and Other the quarter of XXXX of were of mentioned I'll to lower to The per XXXX. tax. Boswell of resulting the of as our the facility pretax quarter of fourth $XX the year to write-off of share of net $X.XX to in share. was to offset financial through lower refund of of In of of X the to XXXX of after after Turning of benefit of depreciation approximately also rate asset $X.XX on quarter XXXX. the included it related to approximately recognition related to off reform. the the Bob? amounted projects fourth $XX in expense enacted Units income for part to Bob, tax depreciation approximately sales comments quarter guidance. hand additional on XXXX lead

Robert Adams

morning, Thanks, good Steve, and everyone.

in growth, we north midpoint our to ALLETE's the XXXX Let set am financial performance. the EPS guidance, by me also we a begin saying flow stage Not major bit I and generation of XXXX go advanced forward. only we did promises how optionality proud of made as meet for strategic our investors cash will added coming several initiatives which we

we for reducing of for Minnesota investors and our high earned increasing rescale a reliability. operating historic Power's completed maintaining costs for returns standard still First, customers, structure, materially safety while

Peak, our segments investment. and The Nobles and three announced are major execute clean additional million South to total energy sustainable, Second, continue that refurbishment included investments representing approximately forms on in and we regulated $XXX non-regulated new opportunities collectively spaces. lease investments energy we as cleaner overall NTEC,

"Schedule vast Slide we projects frame. of the spend of represent $X.X additional through scheduled will during total time titled provide opportunity majority These capital over clean the projects billion next clean years, of which million expenditures", XXXX on an energy have X XXXX the $XXX to energy as approximately in invest illustrated for equity As highlighted. the

are reached opportunities be our fund cash significant we agreement clean for materialize to the of water initiatives, an of company, confident industrial will U.S. we proceeds now services Water, week, Finally, announced throughout other energy on would The Friday redirected as last to growth which year. sell premium.

transaction approximately the result will estimated proceeds million cash price quarter of pretax gain net sale million XXXX. approximately closing. million, in generate expected of which $XXX close $XXX upon an and Specifically $XX to would in the is The was of first

flows improving cash our platform Consistent non-regulated forward new measured look an X% leverage, variability. assumption segment to goal we a free for We ratios. already regulatory a we average will next to healthy multi-year can Going to X% terms X% a objectives with approximately our Company upward XXXX. the increase supported additional to over with earnings variability stronger frame, of business expect increase seek significant place improved growth Water, announced sheet we're from increase would we closely annual be while added as increase businesses, average excited previously healthy increases improvement dividend than cash dividend time outcomes. ALLETE we a to investments from fundamentals is enter about are which has our our annual with of view initiatives, X as our reflecting will ALLETE growth share, our headroom regulated Fulfilling and overall credit the $X.XX fund in accelerate Clean increased this flow match to from less dividend payout which enable action growth DC per earnings growth, all with $X.XX overall stronger and Energy. to line at returns ability annual of higher our as growth much A X% communicated, and earnings transmission of and used to on X% a balance our solid U.S. our be to quality future at more in further that maintaining of strong capacity yet opportunities including and returns headroom ALLETE to that demonstrated revising which this low the Energy, generation in to expectations XXXX reasonable be pipeline Clean X% credit drivers solid forward, year the the on X% reduced returns,

recently to any exclude These Clean our reflecting growth confidence previously wind investment projected is $XXX increase segment added million a in from appropriately rates U.S. least in XXXX gain and Nobles the contributions non-regulated and X% Energy. from Water our XXXX annual U.S. projects Water exceeding normalized given ALLETE over Indeed above at announced growth I to Our announced our respectively. X, which will average for MDU increase reflects divestiture. X% gain and XXXX results, sale the objective. moment, average and guidance of a When review XXXX X% both an XX%, in the annual

forward year growth Energy as for South we ALLETE approximately in farms even two million wind investment the newest Ullin and Glen service to expect we representing Peak total accelerate the $XXX to strong full Clean of As look are XXXX, in in XXXX. further

further of ALLETE I'll XXXX morning. which highlights" to regulated And expected and Energy that would with So titled XXXX generate a share a Clean X-K guidance. specifics on of within $X.XX into $XXX share $X.XX of includes early for to share. guidance on of range per now the million Slide gain range regulated $X.XX an this of "XXXX In another operations comprised per the SEC tax per $X.XX per water we the of more $X.XX range $XX million, share. starting income This of factors full is our on our guidance after Water includes million which with the to earnings expect a earnings gain filed sale guidance U.S. reference, guidance of services net let's from refer XXXX within and assumptions details range to our few get other ask to $X.XX U.S. $X.XX or our to per a $XXX incorporate $X.XX approximately I of segment operations. share, you share.

Great for XX to taconite Transmission customer Minnesota X.X investments estimated levels X production anticipated are sales at capital the to XXXX. expect million Northern reflecting cost $XXX hours, Line million Industrial million of be revenue Power's Power recovery with tons. of approximately additional expected approximately megawatt million Minnesota the portion in We expenditures from

revenue will with to Power reduce reduction realize revenues. forward in project a transmission we XXXX, expiring Minnesota sales, power As associated significant

expense pressures. In addition the we expect normal increases future would in with inflationary

late in XXXX. deficiencies, progresses revenue we the to in sharing timing significant XXXX will impacts it we file need XXXX, as more as to anticipate the the plus Given do relates rate a and information and potential approach be case

of balance Additional $XXX our an investments our XXXX of and $X ALLETE which of A XXXX few earning and year-end Energy American from corporate top in XX.XX%. million, million, regarding of approximately highlights guidance Transmission on other. Company Clean ROE attractive is

We Energy acquiring under growth prospects sales continue about others, optimization existing of and executes ALLETE Clean operating agreements high X-pronged at it owning its facilities includes owning to building as power be on facilities a building growth to facilities and additional that and for renewable level long-term strategy facilities. future transferring excited

projects. X.X in is in ALLETE future further guidance excludes peak expects XXXX. acquisitions wind XXXX. needed hours additional approximately of to well With plus Clean development projects staffing or development its resources and in depreciation versus business will in late enhance for additional staffing return Clean megawatt as X.X normal South of the ALLETE expenses development Our Energy expects is origination, megawatt and added it any support possible office impact online hours new expense. higher orderly million Energy generate million that Clean Glen expands back Ullin with coming ALLETE as as scaling operations. Energy investing additional its

of in million this turbine refurbishment to disclosure estimated $XX details approximately tax additional our spend XXXX. related would to you credits to in $XX million expect again which in approximately to encourage morning generators Production guidance. review X-K XXXX XXXX. are be includes requalification filed of complete these the I We projects wind

regulated excited businesses customers. a believe our mix differentiated at flow businesses forward, the industrial of earnings I'm these as as about balanced look we exposure and all As ALLETE. to prospects of potential long-term our growth for cash well provide We

an are Al? We indeed in at ALLETE. chapter exciting

Alan Hodnik

about thank and ALLETE Well differentiated brings Bob. of energy a company within that to a and underway initiatives with solutions our strategy businesses. update financial energy cleaner regulated unregulated you the for an Steve family strategy is

in projects. Power opportunities that by economy. broad EnergyForward primarily electrify energy energy modernizing renewable Minnesota overall further its just strategic to free rate-based done to growth with transform and upgrade and is generation, the its transforming see our clean call infrastructure, transmission platform supply driven to plan carbon investments We nation's greatly continue significant to its

January Minnesota XX, decision in submitted regards Cooperative Nemadji Energy order purchase megawatt with between Center application is final capacity agreement XXXX. a EnergyForward expected Public a XXX to part convenience Minnesota and hurdle Wisconsin in to Commission a the the State January as XXXX. on January regulatory Utilities Action Minnesota was Public Dairyland its that Nobles dedication public Trail completed dated necessity We order a Wisconsin in major In the Minnesota XXXX. public successfully earlier pleased companion the Utilities by X partnership shifted service and in dated were for an now its to agreement the commission approved wind filings, power two Minnesota as Power was of Power's resource filings the expressed As of energy package. that twenty-year of are was XX, approved by Commission final

is metal to a would addition the a in interest I the partnership subsidiary power years. of Minnesota in make comment proposed production a like another with two next nickel PolyMet's in staged of new creativity purchase to great Nobles attractive into to precious Nobles a Yet two that advancement Northeastern to South and major wholly-owned X on In permitting providing milestones. resources on purchase continues Tenaska ALLETE mining talented example our team. entered opportunity an Wind equity operation report begin ALLETE the natural for XX% customer agreement to copper, ALLETE. investment the

decision to Pollution they Agency a records few Control and turn state first business and for the and mine action history final be financing, nonferrous before PolyMet's Natural on renewable certain And comments more can final its issued and required quality federal over received permits the PolyMet the to Minnesota I of permits. in relate These on future. now permit by Minnesota federal of Minnesota energy mining in Resources. to final for operating operation. related constructing permits as Bethany? Department Owen air outlook the from XX, will expected XXXX December our XXXX water required taken it Bethany is agencies water on XXXX ultimately and During

Bethany Owen

team Thanks at a Alan growth lead Superior execute we to its position gas strength. reliability We and couldn’t the talented organization. we ALLETE Water, At of its strategic were continues base class our for be safety regulated world are work with across forward future I growing and services moving strategy customers of electric from rate Light level and year underway enhance while business and water his business. Power the to honored was investment XXXX that at anticipates in With when I capital Water, last ALLETE to about on rates Superior of approved the year U.S. more as its capital year. effect we of of case am as of rate announced January XXXX anticipated year and X of together Light significant Power of water pleased end this to an approximately $XX XXXX ALLETE a are historic positioning final Minnesota continue into another going which on is and our million and Al. XXXX. Energy this and Clean growth services used and further expected sale Power strategy. ALLETE projects the to be review in proceeds at excited

growth peak PTC free of Upon record only with related thus highlighted Energy close operation and renewable Bob in monumental multiyear the portfolio ALLETE ALLETE standards renewable advent for far projects a since standards. renewable significant well-established to growth states have a be XX will activity opportunities a As carbon at Clean Clean years. the of South Glen for megawatts Energy. the Ullin ago high year energy We country of wind the will moment completion XXXX renewable of generation free is level carbon demand anticipate Energy higher staged ALLETE ALLETE Clean have across for additional beyond. several growth in next and The XXXX in for with construction resulting XXX at in over

XX those rights, value and ALLETE of sustainability. we a exciting to to to believe ALLETE access look all along investors. and relationships truly you time, your This and in to us offer XXX questions. time and delivering operating to landowner platform for XXX service Clean hand. able their for XX,XXX of commitment our our interconnection your forward company’s this execute Energy demonstrate investment employees, for most for line with proven capture ready up to an meaningful value ALLETE. megawatts dividend. and and growth opportunities operator to of ability addition earnings our portfolio growth this interest to The shareholders land an In your in development increase ask will and the continue customers is of opportunity. ALLETE’s We Thank I through includes open for renewable our already differentiated of more expected than and great time. requirements at states At acres current a excellent We as our are rights is over share attractive and for the to permits proposition diversified

Operator

first Instructions] Capital. Chris from comes [Operator Our question with Williams Ellinghaus

Chris Ellinghaus

got I've slide about final upgrade. in what's changed is in where West assume line talk capacity additional I the there and was I projects just can CapEx the can that DC that? includes there infer particularly we sort Bob interested expansion. as that And out you the necessitate that of -

Robert Adams

unique in you'll that particular that while path current the megawatt from evaluating for is that very are Yes, little recall and a provides - a been Chris DC very good we've line capacities so high North recall XXX Dakota quality wind this line. that question. something very capacities over

be capacity about capital we've that schedule of by approximately the now doing the that just been upgrading the would be are million on contemplating top million in to XXX megawatts, there's so otherwise would incremental modernize we so And XXX we about path. this and $XX

wind. as projects. that will what are it the mean still will definitely keep mind bullish on looking is that additional we at forward is of XXXX megawatts capacity - so and additional we in unique for look itself another Midwest Again And it

excited it. about And so pretty we're

Chris Ellinghaus

[magiline] The XXXX? suggest does CapEx it's that in the complete that

Robert Adams

It into goes can it Steve, I you me in is believe XXXX. here; not correct complete. quite service early

Steven Morris

XXXX, that's of there expected with capital then the this small some XXXX. XXXX. Chris, early outside some there's in obviously schedule mid-XXXX start date testing in in And very

Alan Hodnik

also goes MISO, kind projections – anticipate. State queue our Wisconsin that's But within we that course we Chris of and that as assumes permitting this for right in the as Al MISO of the now. of obviously that anticipate

Chris Ellinghaus

starting of thought the construction goes, the and what PolyMet current as far looks terms as construction in Al timeline what's like? process

Alan Hodnik

Well, needed would little the the to U.S. and permitting January/February that of I engineers, I obligation is a core what's stymied in side permit. a had that online do timeframe. their review final on the of what EPA shared from the company shutdown of say were ensued can the only government The website. Army core from an permit still virtue got by to kind Army speak bit of that

financing. The permit waiting schedule the Once the is they've move XX for come anywhere some have they months. is outlined as to we of we would permits solidifying that from XX have So construction in. kind into company their that all to

So you then can kind of into extrapolate from on financing comes the base there play. that

they within operating. could that. plus up would two So and they're be year timeframe It suggesting a minus or be

Chris Ellinghaus

question. last one Bob, And

quarter, the equipment Water the pushed were As in far into of quarter? as the was total sales U.S. fourth that you what first expecting be the might

Robert Adams

did all end the had of actually we about $XX planned quarter, in million and fourth we up shipping. the Yes, that $XX million had

it of slippage the $X thought overall we to little bit that fourth But fair out could be had So million we pull turned $X million into a had we outcome. or quarter. even a

Operator

Our next Guynn with question Mizuho. from comes Elizabeth

Elizabeth Guynn

clarify rate? for X% the Could X% to you growth what base the is

Robert Adams

Within average of annual include we regulated looking range. to that would at if that expressed at X% range and of growing business the an Superior the you to So which as on morning, you Light rate Water, of X% average. will this are Power a the I utility is side

to So X%. we've increased that from X%

Elizabeth Guynn

off of off or X% to the actual XXXX of X% midpoint? that's sorry, XXX And the

Robert Adams

would the off midpoint. That be

Elizabeth Guynn

And at then unregulated the business?

Robert Adams

recall U.S. growing And at XX% time we the the last and had year year the that as in on at difference of prior we about unregulated pieces mix. segment about here XX%. maker you'll so expressed Water have we talked had the course Yes, in

Clean So done talked that this Water, is ALLETE in XXXX the being in Nobles That'll timeframe back which we Energy. part what that can expecting we U.S. XX% to by be confident now and maintain from that growth are is we growth about that additional we fueled just feel is we our now also investment announced. without before

Elizabeth Guynn

of Great, $X.XX minus one-time off of off $X.XX base really -sales XX% the so of is gain or though $X.XX that XX% EPS? the on

Robert Adams

correct. That's

Elizabeth Guynn

think of XXX we then base? of X% consolidated off can the to a on a So X% basis

Robert Adams

That's correct.

Elizabeth Guynn

it’s XXX Or actually because $X.XX is the the sale? the minus so sale $X.XX, XXX A actually A the

Steven Morris

XXX. $X.XX This is the pickup and Steve actual Ideas get are XXX the

Elizabeth Guynn

– use segments? shouldn't we actual the at the different But

Steven Morris

account to Well, need MBU, the you the I for side from on think off $X.XX you got non-reg back the obviously that too.

So - to it $X.XX, I of in was believe back off MBU sale as that XXXX think and so I need the well. you

Elizabeth Guynn

EPS $X.XX is of the really should of XX and it So be base non-regulated? $X.XX be off the will

Steven Morris

so that right. look we wouldn't that call Water XXXX $X.XX U.S. at for growth and that also in talked about with so have on XXXX that's you And in won't well, for as mind. keep heard I significant in which XXXX included we positioning why Yes, this

projects in that late So XXXX factor line we’ll so new in. two have

So earnings it's growth. average X% X% annual to

Operator

with next question Our KeyBanc. from Paul comes Ridzon

Paul Ridzon

about XXXX rate, a in that to $XX $XX is is had production incremental total? $XX to I or XX XXXX million talk - that question million refurbishment tax in adding on you the million

Steven Morris

$XX total in It's Paul. million

Paul Ridzon

basically did of in kind what you So XXXX? doubling

Steven Morris

[indiscernible]. includes as These It around you turbines recognized expected generate to Yes, wind have away. and complete incremental then whatever X do they it so obviously as from we would online in we so projects XXXX. go was And know are some. mid-XXXX, actually right PTC's some be you

of about So million it's probably an overall. $X increase

Paul Ridzon

RFPs ACE, And there? with then megawatts number a shared there in you is an past us how the many of bid into you current

Robert Adams

megawatts. X,XXX Paul, to X,XXX that's still around Yes,

Paul Ridzon

Mesabi that? you on know are an prospects going Metallics, And it update can calling on I we're us give then for SR you how now looking there what at just promoting what's the

Alan Hodnik

taken Resources that the attorney to that and come taken project. SR the and issued as read are State the his through debarment the essentially a those probably governor, play the of office new now entity has in and notice that Minnesota of Department general's you governor the role paper a finance to Natural action action into Walz. Minnesota He's in right So back

right The that point time. would this of City in So kind proceeds at see we'll was of the as the in we talk with spring. There a XXXX. through Nashwauk it that's knew how contract Metallics construction begin kind that and of now underway company of has course

they're that. they that think do will still I representing

think now proceeding do issued has of right course told the and if there acceptable to you in no the State them of declare of I out you to Minnesota sort as jury's on business that longer will I debarment Minnesota.

Cliffs about So that's as where actually there. it probably sits for the about megawatts, more finished But spring way spring say in right what happens in winter ground said of well and Cleveland I that's much And value-added the they interested in and as time course thesis. of the again to point do that very this would HBI megawatts load we'll the gives to XXX see have The on at to course strong property. have the that here the essentially some is be the in to a they now in property. And they XXX still still in project company. the governor under has moment. would Minnesota have here interest like

see plays And is the in of we'll sort and conversation out. it in also so all mix now, how the [indiscernible] right

Paul Ridzon

you'll man, years? be gambling what are put you odds signing if you So power would three them in that

Robert Adams

this already, for and going I on all money would liar lose because XX speculate on to that. Well, a my years want been be I Paul. has don't would

to there confident fully to it with going and that I'm feel will speculate get not running. regards but up So, ultimately that, I

and of actions year virtue sort a have half to right orebodies. sizable of by that took a stake ago. I and of now untapped – you the As times, the about last they said remaining one is all Cleveland-Cliffs ownership sizable has many, many

got right of very ore type very and And very now right for you HBI and the characteristics ore with And mineralogy, orebody grinding. it's products. so conducive if that its respect will it's right softness virtue is enhanced attractive, to got the it's good by

wants that ore clear, all courts and State in everybody people project the wants got virtue of so the had out there. The of Governor and just decks created over and/or And it complexity administration during that it and coming everybody that created the Dayton's by bankruptcy.

Paul Ridzon

operations of the regulated And that? XXXX, your earned the guidance assumed midpoint ROE in what's for

Robert Adams

XXX the Paul? XXX The to

Paul Ridzon

Yes.

Robert Adams

Yes, the I would on that. use midpoint

Paul Ridzon

ROE? is assumed what At that midpoint, the

Robert Adams

Yes, as it's Paul talk we XXX.

authorized Power. So we for and a rescaling ROE we our Minnesota use on of have X.XX been of course

that about a So with as achieved of will $X running talked, basis about up we've and the They points. temporary million XXXX. caveat it sometime XX believe until we've XXXX. at in don't Husky, the in be that's We're impact outage

XXX minus XX the ROE. the take I'd and So XXX it's a

Paul Ridzon

to this O&M the scaled you we your X.XX but So have hit headwind?

Robert Adams

Yes, exactly.

Operator

from comes question next Our Christopher with Turnure JPMorgan.

Unidentified Analyst

Chris. for on [indiscernible] Rich actually It's

could ask early from wanted puts a impact I the we're of the questions just maybe think direction of lot and about here a those that takes we just high-level and the you little how contracted bill other on but know rates? great referenced, the expirations today, Just to on case. rate some

Steven Morris

help Yes, I can with that.

which saying are going I'd right So our by working start to some forecast take we now on XXXX time. is

how So we aren't coming Hey, out this and case saying: is. rate big

need quarter XXXX. have that. through to the to early that we work So of third expect probably We would by

for paper transmission get too a contracts XXXX, case. expiring that some smaller early one impact had some of case and shutdown what rate a off power we we came we during revenue some We that their mentioned the a into have we which Manitoba had with on roughly not Bob get reasons that paper come that their we could rate rates And that right customer marketing this to into were case. So Potentially that are. on Hydro couldn't of do have a the into not customers, machines much play. did able line rate rate customer, how it's June to in little cases that contract of because have start this the

expenditures. higher expect also We

lot we've cost done is of non-sustainable a reduction long-term. So that over

we and/or believe have we that schedule as CapEx well what as the approved Minnesota. is be seen in improving ROEs will You

Alan Hodnik

And clean that is has the and at about has been When rates good very done up and where respect or mercury for feeling you grid work with this Al. moment. general in requiring what is in all to With of we're marry large referencing, customers Minnesota that Minnesota reduction, expansion structure do renewables security and to rate energy contracts you're Power Rich, to the that's to our the to State have a if the transformative down our and move Minnesota and we other that of The things up, course case large rates lifting we since that when reform well. Minnesota is and trade kept energy impacted forward, the modestly strong the tax policy rate policy add have since our most we transmission all and as upgrades; come part. rates for customers them them. respect part Trump with reasonable reliability economy forward you

had been load so our has with relationships metallic as I SR now with we good described and that the whatnot, right of solid City a our Nashwauk, look of the that and earlier. serving to remains relationship but is and the situation have our we That of customer customers, virtue up And we've long-standing with. mini ours to a kind of by contractor low model or forward solid bankruptcy big down situation

we're in positioned I later for it's planning So right filing case our well would terms you rates also both rate sometime now of and say know this customers, year.

Unidentified Analyst

And just finally a quick one here.

get there? the you ROE the rates, are do interim is authorized or that currently per implement it when file As you ROE

Steven Morris

not. you generally a Yes, rates that, would it it's depends. lower lower in that it's Generally if have interim lower use higher interim result you would if would

Operator

Capital. Our [indiscernible] comes with from next question Avon

Unidentified Analyst

you one, what net can contribution online? the it me facility when I in comes remind think is here; earnings anticipated the it's XXXX? from income things just PolyMet few A

Alan Hodnik

don't kind net numbers We get that. into of or growth around all

in cited what but load our ton is copper, different. XX-K. a nickel taconite can expected megawatt this we've roughly slightly of Steve highlight XX So

Steven Morris

we've a X million or decrease. for $X.XX increase So ton about used

Unidentified Analyst

That's Okay. million tons? X

Alan Hodnik

taconite the that's so average XX million that. average production is Well, the of on iron the range tons and

permitted Of course of days. And the in XX,XXX its production PolyMet is is of kind history. the per first production right - be now tons Minnesota would a production

plus or million production little difficult up excuse reference - a on me, or tons Steve's taconite about it's there that minus rate. per at down based or So XX based XX,XXX $X.XX think off year but

Unidentified Analyst

So, every million tons minus is $X.XX? plus or

Steven Morris

Correct.

Alan Hodnik

In taconite.

Unidentified Analyst

is was Energy [indiscernible] and capital it And repower slide. regards expenditure there in there's already guidance, I'll on fact at rate? included I been about to with the be else plan When your rate is with growth right looking outlook be you growth the next assume that that you capital on XX% the that the in the see for where within should X-X years nothing as that as identified that this especially refurbishments there you'd talked today to Clean would we - except appears the now. additive is backfill such ALLETE consistent over and forecast what And of are specifically in capital growth what opportunities the here top and that's

Robert Adams

not goes I little these to This CapEx as a conservatism our bit will. When schedules if back include a put too. we do Company out, these you new say would projected projects

absence Now, mentioned confidence the line, things we the DC do in are but kinds of have there high of established projects. in to - that already the as are upgrade, I it relates these

So projects additional Energy. we add would certainly be at looking to ALLETE Clean

You need the may get rate recall to projects the one two year our target would to year we overall. per and has per been growth to to projects two one

through are as working to that projects to and need going we're come on for frame forward. we move XXXX So XXXX the in time would example

Unidentified Analyst

have you guess given achieve what Water. capacity to balance of give going you a capital your powder the so able the in or now U.S. would realistic would to terms fire me power I And amount Can be of sense been dry consider of a inefficient cash to incremental the on sheet will from sale to deployed here? speak to forward effectively you

Robert Adams

about all equity cash over the start would our ALLETE flow. fact $XX on to I business million average so Yes, $XX in generates with that million free now

based capital net and off expenditures. that's dividend So

a of we capital would that is redeploy. So look source that to

that's For we check. equity wind megawatt million a did farm a $XX about new if example, XXX

use don't So for in circumstance, that the that. could cash raise flow to equity have just we we

big that's a benefit. So

would to the top robust on those a that proceeds I we projects. we significant U.S. now to amount and of have on set have issue what pretty Now offset would from in be to of look Water proceeds of on working is we those ACE equity that eyes consider these a we our and that dedicate otherwise course team pipeline

Unidentified Analyst

seem XXXX for well more that that me opportunities of grow the at in achieve to able you you the ACE, X% XXXX, normalized, Yes, it be seems - versus would indicative XXXX particularly achieve all able rate versus outlook growth the XXXX as of were should and forward. what it me to highlighted I in going perhaps to the given as with to utility you're you were to able what

to I'm keeping is it conservative that XXXX that simply in - and So pieces fact to as matter X% about X% that? be and it was a versus if to place have to it be a seems X% wondering continue you or of of conservatism opposed able to you're simply like lot XXXX

Robert Adams

We appreciate performing. ourselves really on Yes, comment. that pride

we're we sure that what bent on do, making say we're happened. So going to hell

pointed be to with in a average So recall we let look guidance XXXX, I've for out already to coming for long-term towards rate growth at that's X% me these to just start With a at X%. hinted regard that. we're rate. you because as projects sure higher on. And X%, going as of our XXXX the is that than

at So even work there where X going more and and to to is the think we that as talking of growth years this our I outperform. over do the we have into feel X the higher past - I'm we're over be end will years period years. that next the good But range we comes, about really longer look conservatism the

that. working really we're so And on

we range want we can which think make to X% we Next sure X% consistently X year to that that deliver period I of can.

Unidentified Analyst

here And or communicate? expect you'll what hope have in do able to when communicate next month, Day Analyst that to be we you incremental

Robert Adams

would I looking from business. to a was to in evolving the scaling call operational things joining time ramping about there we origination [indiscernible] at is regard their to of as spoke We last their resources, with again. to us to up they're to the I some - back my broadly. He more that office Al spoke going the about color more continued Steve once would Well, strategy the that to how have of going We're he's he's business speak folks Energy be new - or providing you'll you going on . ALLETE maybe tell more and have comment like agenda, Bethany this year Clean provide script -

speak significant length. So at that to he'll

Alan Hodnik

addressing all that. of Yes, he'll be

market had that we year northwestern ability I for to work respect of now variety We negotiation with with us last as in course those confident power projects Of breakfast. always there on more the with other ACE's there sales timing at done more states control earlier it's earlier, and bullish and and we're to confident don't future our within out our states. a customers, necessarily not work that and mandates out suggested we're out but peak don't as they coming agreements only way announced timing out maybe always but states various deal we're the timing we but share stages you've get Bethany got to XX of right going get our and pointed

of amount now. ACE fair and right of well the will And business. cash positioned it's believe be suggested is a a so generating from already perspective the that sheet balance as claim we is share to And Bob Company

We every to strategy challenges very we're our and chase at we're we very capital use we're disciplined, have very not no deliberate return the financially and and down to all, that's so don't access so deal disciplined and race very intentional. bottom,

we're to more you the with have we'll more New in York say when year. and throughout So

a got has the leave ALLETE growth just So there. I'll it lot on now right

Unidentified Analyst

I thing. maybe guess last And one

opportunities guess as evaluate you acquisitions - that better repurchase? ACE would later of the you buybacks if perhaps always that's option did investments announced the fact I you equity You do from period line sight reference the a right within an not of will seeing these stock now that rate in target or or return project stock development you're in I feel any materially than buybacks. likely closer forecast be as given mean while be that the

Robert Adams

to would tell of make to of terms balance that that want philosophy proceeds cash sure Yes, so $XX in, roughly million, so start of a let's I I in we lot I good terms like a I cash million coming around think there. $XXX of that management of were overall, our cash. you these When there. stewards - I in keep

XXXX look $XX of so at as against cash. an this I'm cash on for don't million year, on time. sitting I of in calendar that much the backdrop the very extended and period focused So

come that of from looking to it hard in we're X would to call be the Energy X year Clean So the that going ALLETE could months beginning projects equity. require the first on

could Those have existing we expressed, or they would projects an and pipeline. already I projects, that development very equity of projects could a acquisitions be As robust new be PTC check. require facilities,

dedicate extent and the extent that back foremost, initiate to those that. will so first grid, start see So example as the I'm that that's the half the a in some for we those projects in And of year, projects that then we're proceeds we to to about year program don't the likely - thinking of buy last to progresses, the to half. second initiate able

generally that's looking So at. how we're

out looking not of I'm proceeds. context these in X the years, So years X

Operator

Hodnik like conference. Q&A Ladies of today's turn Al and comments. portion this does for gentlemen, to to over conclude call the I'd back the closing

Bethany Owen

New interest at and of being and throughout again thank Annual investor and rest the your March us York of the you Al other on Xth, Enjoy We Breakfast many year. forward Analyst in Bob, and seeing this Steve, look with morning your our investment for to day. in you I for ALLETE. venues

Operator

Ladies and this does presentation. conclude today's gentlemen

wonderful may You and a have disconnect day. now

ALLETE (ALE) 14 Feb 192018 Q4 Earnings call transcript