ALE - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to ALLETE Second Quarter 2020 Financial Results Call. Today's call is being recorded. Certain statements contained in this conference call that are not descriptions of historical facts are forward-looking statements such as terms defined in the Private Securities Litigation Reform Act of 1995. Because such statements can include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the Company with the Securities and Exchange Commission. 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 the undue place hereof. management's which date should as views reliance only not statements, on or events The statements any or forward-looking whether otherwise. or to of result other forward-looking as any update a Company make new obligation undertakes statements, no revise to information, future Officer. of like I and the your one speakers turn to President today, to would Chief over Executive Owen, Bethany conference ahead. go please Ma'am,

Bethany Owen

for of company. and of appreciate a proposal this reported Public stakeholders a Thank with rate the quarter support for or our morning's call section. this everyone, ALLETE's these Power's Investors us case a that challenges Commission. positive Vice can Experience. resolution. Customer balance Officer, needed you, case positive income go results caused morning, develop the through Officer, This today. recent interest Also us Minnesota diverse call in With President, on President I'd Power Financial to to Steve many much share those highlight timely COVID-XX. economic Minnesota stakeholders joining and thanks the for rate refund team's on when Accounting today's Minnesota was of number we with our considering of the Vice after-tax this $X.XX be of to We'll approval good allete.com the at and $X.X many Utilities per reflect Chief And and and net charge $XX.X President our like and me as second Senior share million slides million. Bob Minnesota presentation. Power the customers, Corresponding XXXX the ALLETE customers for morning Vice of Chief earnings including stakeholders, website $X.XX Morris. the work Frederickson, for Controller the per I is out grateful are outcome slide Adams; and I'm each found morning, I especially of by that believe Frank close

the throughout horizon talented, as all want is economic the and plants, our want state tirelessly energy we results COVID-XX provide their positioning challenges. families I pandemic. cases in to remarkable more you they've thank incredibly Please into our principles quarter first resilient in services country. this second are number on the we with increasing our this Even throughout last and to XXXX, in COVID-XX and challenges remotely summarizing done who for details worked essential personal of our many so current safely other that and in to Before which and employees ALLETE on our see strategy. of priorities guiding update Slide remainder already has successfully the with additional shared as we many potentially X, XXXX the caring field, all of the dedicated a own get more to and challenges. facing our the of navigate quarter, for year of locations for been offices global I you continue of financial while

operations continued just virtual employees this delivered of every our team safe technology, have into them safe; and challenging other the the commitment without of delivering of employees much, ALLETE Transmission safe to has sacrifice resolution These construction not at annual credit day. the demonstrate projects and case, successful help and our progress rate of reliable single accomplished Already of XX% services enabling spirit indomitable while to our the our Great related agreement; all so customers. we are Line; without to Minnesota workspaces energy our and our first our Power's all and team's Although sales many secure resolve, power year, few accomplishments, renewable and effective COVID-XX adaptability, remote energy on keep Northern of energization their a employees shareholders' who renewable interruption; transition meeting. new and in

from the very of priority to to and across and the we all families, been businesses. ALLETE's our our health has protect of actions our and #X often to our that Our beginning of safety end, ensure help COVID-XX took customers communities throughout our employees, early And safety operation.

financial up took strategy steps liquidity maintaining As our investors. our remains in to uncertain challenges, value term. address long-term economic our financing We've the structured longer-term potential times, other shored market and ALLETE's preserving proposition capital to strong, health to also while execute ALLETE's we ensure over ability long all for

opportunity address many plan. with communities and so much the work our extension safely our our also long-term for a plan propose for can pleased Minnesota in stakeholders part customers, Power time pandemic, help is they will to our the team for communities, This resource and just it's on the as last of Commission sufficient to that our ensure our additional additional that's our months plan best engage extension developed. the other weigh needed gives granted company. efforts Utilities to required being that that The the our we're customers, hard Minnesota employees is filing Public thoughtful for integrated there us COVID-XX impacts As of its X a week,

time August, levels update had production their material full Power's operations. not of an experience the from received on Minnesota Minnesota of our call, of idling Minnesota did for Power's conference customers' industrial announced operations. Because customer industrial impact nominations largest Power financial previously a idling several at through we front. those approximating Now of production last the customers had At demand the

nominations these to the reflect year, Just levels ago, we the days improvement report for X the pleased months received in demand production end nominations power last significant from few that and a customers extending this XXXX. planned we're very of of to

including Power including majority making indefinitely that paper nominated Minnesota full X the have remainder the plant the of production to to case, levels Bob the and guidance. earnings are in Minnesota our Power's the solid a hopeful few this that and recent Verso. earnings XXXX to are guidance These and the and customers thoughts provide our face our visibility We're employees outlook addition minutes. year. with of reinstate families communities XXXX and meantime, us of of our all remainder important Keetac continuing customers, challenges, of Verso In rate will largest to these when additional to that in nominations, businesses remain enabling taconite are with and customers, With of year, will the facility this able be restart in idled, the future. exception stand ready for services details the closely that resolution resume to the production. our them we'll region power large provide continue Keewatin they provide the into operations important work Taconite of so on And to

ESG sustainability we of year, May metrics and that our strides is hydroelectric part of ALLETE the practice integral at excited renewables more significant to renewable an important wind highlighting to made journey as many our such from ways. its are, released roots and in who we're this advance in EEI report, transparent sustainability to ALLETE best sharing energy to Finally, we've other journey and governance, new ALLETE. company's In and solar be

the as to to in frameworks more its are SASB use clearly TCFD we sustainability share we're As dimension. the all advance to progress we future, also the and exploring of look making such of other reporting

it Now our on for Steve I'll and guidance. over XXXX turn and to financial Bob details Steve? results

Steve Morris

quarterly per earnings Services. sale you X the and XXXX filed to Thanks, reported encourage per per on details. net for that XX-Q rates through included Slides second of U.S. case details income rate $XX.X U.S. you in were on Water Minnesota Bethany, for Last second Services. on year-over-year Minnesota good ALLETE for the morning, $XX.X April second that of XXXX. reserves of of share $X.XX $X.XX of we gain rate like X I quarter our this and adjustment recent XX, would quarter XXXX the interim share and Water the the benefit an of resolution charge the resolution quarter recorded including and share it a a to share case on on for of per regarding the year's per net and results everyone. basis XXXX were items $X.XX to refer morning Results for results, a more million. earnings impacting to $X.XX Power XXXX million. remind in share refer for sale Please included collected Power Results for income

income quarter investment in of resolution segments. Superior the Minnesota year-to-date impact, and segment, the to case were few Water, results of Transmission A with in regulated compared financial XXXX. in our Power American business included details our Power, the $XX.X Power million Company, net includes Company's which from operations second expectations. line the Excluding $XX.X and ALLETE's million Light Minnesota rate

of and residential partially expense, Company. this a decreases earnings in clause due method the American due to related recoveries charge net to sales equity the earnings year. reflected other impact, revenue municipal quarter Second to which to in and suppliers after power change and due These first maintenance of related million rate the primarily sales income to higher offset case COVID-XX the lower Minnesota lower due kilowatt to settlement and for lower were operating contracts quarter, customers of hour much by at expiration higher timing customers adjustment fuel sales was of tax, collected $X.X lower Power Transmission

we per As commercial, some related pandemic industrial expense which noted, kilowatt impacted offset by in sales hour the mostly did customers other approximately to in for approximately resulting XXXX. as was second the quarter, X%. XX% earnings by approximately and estimate to higher lower Overall, $X.XX experience COVID-XX impacts negative to kilowatt we $X.XX Residential efforts. were COVID-XX, mitigation of quarter, compared that municipal sales by the sales on to share negatively hour

of based method power. an which Commission fuel fuel budgeted adjustment method revenues reforms prior Minnesota to certain to costs. for fuel purchase Utilities in program the monthly forward-looking utilities true-up XXXX, actual fuel X, on X-month a adopted was automatic with procedural recovery Minnesota changed fuel allowed Public The to Regarding a change, Effective clause the clause January average to accounting and adjustment implement adjustment costs. lagged actual a method the

XXXX results a partially business impacted second for Net net As second in tax new Back as production Glen to quarter the compared reflects per negatively by million offset higher Peak Energy timing $X.X differences quarter. share energy $X earnings wind the were from XXXX and second Clean income facilities quarterly there year's of this of additional $X.XX compared segments. credits South income in last recorded the expense. to to million depreciation that XXXX. and quarter of our Ullin recovery ALLETE rest result, of year revenue

not income net businesses, other of know we to rest now income Bob? million from and XXXX the may Taconite and I'll some income quarter-to-quarter tax XXXX. results results more on be tax details estimated effective can the and the Net to operations the benefits, U.S. Verso guidance expected remainder includes included XXXX industrial BNI in of and that Year-to-date the on to benefit $X on for impact earnings million net the equity be Energy a for in $X.X corporate estimate $X million our year. as income turn negative rest indefinitely varies continue discuss higher commercial, outlook which Services. an year. idled recorded it Our XXXX included which municipal in from XXXX and based adjustment in Bob gain of of and Net marketable of that to Properties, Water of other a of additional securities ALLETE customers and after-tax for our on be Keewatin over will indicative sale the income an ongoing annual rate. for compared now year

Robert Adams

preemptive in into morning, only good the solid our everyone. the for whole long-term for core remains of target this customers financial on intact also XXXX. our the economy, spirit our so while event to and the have value that, provide impacts clean and our to and essential amount we the talents, first, continues our and right but the highly pandemic measures, health, their team attractive played of Bethany's continue positioning far share has to what and near-term confident of maintaining customers and of not ALLETE's enabling providing investors. to There and across to has collective challenges, energy tremendous business. year, gratitude out health accomplishments us welfare to COVID-related our Steve, Thanks, safeguard been employees strategy lasting ALLETE its for Despite a services efforts the while remain on terms I our leveraging execution capabilities business, on an focus sustainability proposition in of

to and demand coming engine for diversity continue significant operations, a generation reputation renewable will continue in be of as years energy growth size, to ACE the Second, overall expand.

compact constructive and years is a rate scenarios continues settlement. Minnesota regulatory recent weather COVID-XX it as And Third, as of case is by evidenced going ALLETE Power's finally, forward. to to multitude in has the for plan been well as positioned

X. liquidity track through finances in update a share combination actions to Slide first, QX. well COVID-XX power the Bethany would and taken the as deal our on As for performance pandemic on But Steve some and early I an Please of highlighted, as outlook ALLETE's to to I will our and contributed XXXX being moment. provide with details to months the nominations like X guidance first mitigation of refer large positioning.

positioned sufficient taken this balance with bolstered year. strong decisive by As well you a liquidity, financing finances see, actions remain and can sheet our already

we outstanding As credit XX, in other cash, lending and million had of $XXX available. approximately facilities June

investments. equity the piece in Nobles represents currently advanced renewable wind renewable finalizing marketplace. project. process we last XXXX for towards A initiative in Regarding and $XXX later and projects and This is financing Diamond spend investments ALLETE X of comments is energy Nobles million the our under growth for forward expected renewable of of are A Energy's these X in $XXX construction The with of of another financing project for our total over year. on completion being large Clean tax critical quality the are our projects, in recognized projects in our year. energy and completion, arrangements for this plan on this equity few Spring projects indication well number the tax a million

qualified created impact, has pursue guidance. wind operational financial of reliable on segment, project know, in investment especially an potential has XXXX, to ALLETE turbines interest located with new will revenue an and to earnings provide in XXXX Energy you to of facility As to a capacity qualified its with by this megawatts I PTC new facility is under This subsidiary carbon-free their Minnesota the and in mix our quarter call, Clean the Minnesota. will and on XXX-megawatt approximately ALLETE we Power generation update power investment continue wind refer the Oklahoma installation in the have partnering commitments, would to Because Spring, corporate turbines, Southwestern Diamond projects, our regarding projects. add update. Tenaska project all on customers sustainability economic a Spring broad size wind with COVID-XX focusing Energy's XXX-megawatt this Slide COVID-XX agreement. to quarter, This regulated X year. wind Despite related plan a long-term were has first completed receive ALLETE in during we of sales generation Clean the also XX% total With Along well. The ongoing sales the utilizing corporate substation ALLETE at is newest to our market. unique XXX advance expansion as right construction and and advancing Diamond located XXX already of the Caddo the of the in now of you wind to time into provide XXXX been provide be of in is sufficiently and the turbines. be Energy power $XXX targeted in expected company, qualified on Oklahoma. agreements. XX% Clean with long-term which approximately also million project completed. secured are QX similar cost continues This a in facility for conference XXX%, facility, wind PTC completed unable to challenges uncertainties serve is large additional SPP broader project, When our will a guidance to XXX-megawatt located and customers to in business significant scale this the is

immaterial impacts the negative we are continue possible efforts evaluating mitigation partially decreases economic that actions temporary early related the year-to-date several of we Power any per share by include the actions case assumptions COVID. This tax. guidance year. deferrals and net reflects primarily resolution, standpoint, sales in assumptions to months Minnesota remain charge results, customers, including the constructive the Verso of Minnesota nomination offset with along from continued but on week, I'm $X.XX and cycle full will From XXXX and last As front monitor be into As impacted Minnesota idled. with of of and a rate of improving lower noted I be COVID received Slide more nominations excludes taconite end provide conference Power's Keetac better expect industrial second by to a customers nature. this in These indications rate $X.XX quarter industrial which and share, just XXXX expected power for earnings expectation expense with the basis Keetac idled be to exception Power reliable hour other $X.XX August and to have indefinitely of power commercial, that of at foreshadowed this demands as settlement, production the X, in the able we With adjusted levels the year, to production this to case X indefinitely Bethany earnings of and range annual ALLETE's customers us, ALLETE's behind we is now on lower demand and to are deliver we very mentioned, this the trends guidance, which pleased to to related marketing half sales due rate on kilowatt anticipate year per for expected and able guidance to the that to the municipal indicated the to be the taken, on first being time. CapEx support case These call, non-GAAP remain Verso will

long-term outlook economy our X. of serve our COVID-XX which 'XX are are business critical and pandemic, intact. remain thoughts industries long-term the or ALLETE's nature. early we present country. on recurring challenges and regulated we may for in business highlighted to Now in as to highly the Despite some beyond, into The Slide believe the revenues model the fundamentals

growth to as substantial economic cleaner continue and energy ESG see We continue primary trends markets believe demand the in weakness. positioning beyond that ALLETE's will renewables

and hand in energy remain X% we over growth objective and period Bethany. by to Bethany? I'll long-term transformation. our now Importantly, growth to driven expansion confidence X% to initiatives a X-year committed primarily ALLETE's it back cleaner

Bethany Owen

Thank history, of been our do, the values-based a we is excellence. Steve long ALLETE focused company. and we're Throughout customers you, serving Integrity and has with Bob. foundation everything our on

All said, being positioning longer That ability of against execute to our ALLETE's Like future. We careful of future I foreseeable has continue a COVID-XX even very remain served the fulfill fair while of confident our term believe energy resourcefulness ability backdrop unprecedented a us acknowledge will cleaner for during the and taken likely proud strategy actions to times. services ALLETE's and our global thoughtful pandemic. we create many, in the ensure so to the success. of continued that challenges well the into these financial date to over our planning essential provide and challenging in results to demonstrated We're uncertain to will a delivering we've an level that future. commitment

I'll you work your have also make At your open live we your and for this believe the to serve investment line to responsibility even the interest ask operator regions in better to a we for Thank and places to We everyone. questions. time, for the great ALLETE.

Operator

question [Operator line Russo with comes Brian the first instructions] of Sidoti. Our from

Brian Russo

of year? taconite a how give more given you tons does many can Just in insight, do Keetac us

Bethany Owen

to Thanks, I'll question. take ask Frank that Brian.

Frank Frederickson

question. Brian, the Thanks, for

taconite They one taconite the tons range. million approximately capacity is annually. So facilities for production on Keetac X produce smaller of the

Brian Russo

Okay.

that at production you production, the full for Keetac last Verso, that it? remainder when for XX Is the facility X million assuming way the months, say production? of represents of and XX% So to full except look Keetac -- of this about full

Frank Frederickson

a is at good look That way to correct. is it. That

Brian Russo

megawatts Okay. And that is how many paper mill on annual basis? then on shutdown, Verso an

Frank Frederickson

than bit operation, that. about you in is Thanks of mining smaller smaller segment. than segment And our Keetac is for Yes. Verso us -- a range. our can That's plus it little for minus paper a or overall the think XX-megawatt

Brian Russo

demands, would Verso And also they also is -- their nominate correct? Okay.

Frank Frederickson

status And these operating can That have an we as specify with correct. is they each nominate well. they're customers that arrangements at what or of whether levels, contractual in idled

Brian Russo

And steel time the idled last back some industry Keetac. issues. they just Okay. we know I then on indefinitely, saw

it into think take I it up of China move the them steel time dumping. during actually to the did was production? How back long

Frank Frederickson

Thanks question. for that

So steel the level a Back some federal in then, some 'XX administration since XXXX, America had fair playing the and we you're for dumping, and steel when to for Chinese has actions taken and field period, protect appropriately make right. industry.

seeing products online. starting as number that when back the summer their customers bring So with their matter demand customers up back that customers they even range, a ready XX% them now of and of so And end plans all a in fine-tune staff we've for they've that restarted, levels And we've demand has coming healthy to it a is we're seen in at up. which that XX%, weeks, can and up, as production on it of of import of terms back call automotive level more seen off accelerate paced restart these end. they're back high and these start that there, this down is

Brian Russo

guess that may online. Got XXXX might as kind to Verso the I'm like what it. indefinitely, a December of trying technically not shutting to picture of come just August seems of what get or if disclosing. a for to you versus I aren't what may Because it's demands is Keetac get trying sense I'm were look down

Frank Frederickson

some follow-ups has are resumed. have we the as XXXX. the I'll looking just Steve and of the on Thanks, industry landscape, pleased with lay we're landscape, then how Brian. at kind But might steel

And the and terms are And oil now. at low-priced X for number a steel there's mentioned, taconite be production. of production a is a in and X demand back right consumer online. of and restarted lot automotive still our vehicles, what of industry gas As segment now out that's facilities watching vehicles, recreational we'll of blast running I come furnaces

of there's is a sidelines, the lot on demand. which So rigs drilling suppressing steel

of And at in is is which that those level so from XX% bottom, terms at XX% that's up but typical that XX% of at operating capacity trends about watching today, industry a lot be the the when XX% to of up a a utilization steel industry. healthy not we'll

terms packaging market, potential nice we very a In job for looking pacing industry them, I have that advertising at partially we'll paper into new of with owner our its and utilization of know The products has production converting that Verso, are over life. pursuing forest several are mill. of shrinking team engaged facility, seen there and package they they which future and pretty growing actively a that a wonderful them from be at as done And closely XX-year and already market looking them of together support for they're facility. with owners a has

Robert Adams

think bring indicated, there's over to than back the these quicker Frank customers I same these way going quarters The describing as swing ability is facilities I think at this, this back. think, couple of to is that lot facility. the historically But would Keetac And from out, encourage next I facility to market lot of is play there's that, the Adams. a is been a I and -- in has there's think a coming yet. lot terms maybe Frank of what I Bob ever. been Brian, way look you a is Yes. fine-tuning here we're pleased obviously, a their that's And

not but we're So I'm out I more ruling -- that not come Keetac to think back, could personally come. there's

when as COVID we're And got Where and the -- where obviously, relates more and into a have to, side? there we've getting of again, share the Keetac. might at that get about so is lot going? affect end nominations, when talk And consumption the we it together how steel we together on is get we'll we the as December guidance, to year

Brian Russo

compares initial then the guidance prior of to utility quarter guidance suspending that $X.XX. it $X.XX, Okay. on $X.XX of Great. And to utility to the last $X.XX to just

looks being midpoint midpoint. by you So are Any into it If that's correctly, current offset expenses at versus original a reduction there? initiatives. $X.XX drivers the the insight the COVID management I heard cost temporary the like

assume decreased residential from So offset other sales? industrial is should commercial we to both decrease higher related but August in $X.XX sales, just obviously, nominations sales the partially to that also, delta that, by the December and

Steve Morris

in Brian, Morris. can this chime is that. Yes. on I Steve

exactly right. You're

lower Keetac So and that Verso. $X.XX is sales. It's

we’ve As nomination those for that municipal. rest other expect of of mentioned, industrial and the and as, year well you know, you through had demand not as August, as the time we commercial, do period

our probably it's all, sales. in that add efforts talked mitigation $X.XX, marketing You we've with and offset power expense past as about the

Brian Russo

of -- XXXX XX file, have XXXX? industrial to But That’s sales know then assume incremental rate same, lead Or And seems are the that you also least ROE trying stays helpful. if sooner? if it just demand. lag I Great. you that Okay. don't consider strategy contract will avoid at to very would versus it now. lost as your general back-to-back filing the you're megawatts file stands cases? profile rate approval. Would for in going you And should on case we in November also you the Manitoba hydro

SteveMorris

into take that. Bob But Bob I'll as Brian, Steve later. too, visibility Yes, chime we're XXXX 'XX our don't have Keetac, And Morris. can that. just budget. mentioned, it's on in, we still -- evaluating

you file X. earliest. a rates we kind would of X, we're case, rate just Verso as to we're on with we do as that's Interim And at So We X. case. file know. Keetac file have to rate could until Verso. down likely as wouldn't and multiyear going X It's that November March go into then early effect as May well a back-to-back mentioned, But a the could you or as March on as watching wildcard

that now. would we exactly file get on to budget Verso too into our we as more It's right into XXXX. when do Keetac tell to play we So out clarity early and and more

Bob Adams

her this said think introductory comments. -- well add just Brian, And and is with I again. I Bethany this would that Yes. Bob really

of we return, As variety stakeholders you but of earning need appropriate as our investors our here. measures, know, we're of rates and And to well. a do, which balancing course, customers

have extent with And on and the traction so and the gain this it this that's did continues this just impacts for going to our significant for to COVID timing posture that settlement. sure, as pandemic to these affect customers,

Operator

[Operator showing for the back And closing Bethany Ms. further I Instructions] like any at turn this questions would Owen I'm remarks. to time. to over no conference

Bethany Owen

Take wish being and we for I Thank Bob, Steve, us you morning your all for and with Frank you. this best. and investment care, the in you interest ALLETE. thank and

Operator

gentlemen, Ladies conference. thank program, you does you have for in great day. disconnect. the conclude today's and a Everyone, participating all may and This

ALLETE (ALE) 8 Aug 202020 Q2 Earnings call transcript