ALLETE(US:ALE)2021-05-05 16:00Financial Performance - Net income attributable to ALLETE for Q1 2021 was $51.8 million, or $0.99 per diluted share, down from $66.3 million, or $1.28 per diluted share in Q1 2020[101]. - Regulated Operations net income was $45.0 million in Q1 2021, compared to $57.5 million in Q1 2020, primarily due to lower margins and kWh sales to industrial customers[102]. - ALLETE Clean Energy net income was $7.4 million in Q1 2021, down from $11.7 million in Q1 2020, impacted by a $5 million after-tax loss from the Diamond Spring wind energy facility due to a winter storm[102]. - Operating revenue for Regulated Operations increased by $27.7 million, or 10.4%, to $293.0 million in Q1 2021, driven by higher fuel adjustment recoveries and increased gas sales[105]. - Operating revenue for ALLETE Clean Energy increased by $0.8 million, or 4%, in Q1 2021, mainly due to revenue from the South Peak wind energy facility[111]. - Operating revenue decreased by $0.9 million, or 3%, primarily due to lower revenue at BNI Energy and fewer tons sold[114]. - Net loss attributable to ALLETE was $0.6 million in 2021, an improvement from a net loss of $2.9 million in 2020, with net income at BNI Energy increasing to $1.6 million from $0.7 million[114]. - Cash flows from operating activities in Q1 2021 were similar to 2020, with $88.5 million generated compared to $88.2 million in Q1 2020[165]. Operating Expenses and Taxation - Operating expenses increased by $37.4 million, or 18%, primarily due to a $31.4 million increase in fuel, purchased power, and gas expenses[109]. - Taxes other than income taxes rose by $4.4 million, or 39%, primarily due to higher property tax expenses related to the GNTL being placed into service[110]. - The effective tax rate for the three months ended March 31, 2021, was a benefit of 31.5%, up from 27.2% in the same period of 2020, primarily due to lower pre-tax income[115]. - The effective tax rate for ALLETE is expected to be approximately 30% for 2021, primarily due to federal production tax credits from wind energy generation[162]. Energy Sales and Customer Base - Total kilowatt-hours sold increased by 9.1% to 3,878 million in Q1 2021, with significant growth in sales to other power suppliers, which rose by 51.8%[108]. - Minnesota Power's industrial customers accounted for approximately 46% of regulated utility kWh sales in Q1 2021, down from 54% in Q1 2020[124]. - A one million ton change in taconite production could impact annual earnings per share by approximately $0.04[128]. - Cliffs completed the acquisition of ArcelorMittal USA LLC, becoming Minnesota Power's largest customer, which increases customer concentration risk[133]. Renewable Energy Initiatives - Minnesota Power aims to achieve 70% renewable energy supply by 2030 and coal-free operations by 2035, with a target of 80% reduction in carbon emissions by 2035 compared to 2005 levels[140]. - Minnesota Power's renewable energy strategy anticipates supplying approximately 50% of its energy from renewable sources in 2021, with a long-term goal of 100% carbon-free energy by 2050[143]. - Minnesota Power's goal is to deliver 100% carbon-free energy by 2050, reshaping its generation portfolio to reduce reliance on coal[122]. - Minnesota Power plans to add approximately 400 MW of new wind and solar energy resources as part of its clean energy transition plans[140]. Project Developments - The total project cost for the Nemadji Trail Energy Center (NTEC) is estimated at approximately $700 million, with ALLETE's share expected to be around $350 million[142]. - The Great Northern Transmission Line (GNTL) was placed into service in June 2020, with project costs incurred by Minnesota Power totaling approximately $310 million, contributing to a total project cost of approximately $660 million[148]. - ALLETE Clean Energy currently operates over 1,000 MW of wind energy generation capacity under Power Sale Agreements (PSAs) and has approximately 300 MW of wind energy facilities under construction[151]. - ALLETE Clean Energy is targeting the development of new facilities up to 300 MW each, focusing on wind, solar, and energy storage projects across North America[154]. - The company acquired the 300 MW Caddo wind development project in Oklahoma, which is fully contracted for long-term power sales, with construction expected to complete in late 2021[156]. Risk Management - The company actively manages customer exposure to commodity price risk through contracts for power and coal purchases, as well as natural gas[178]. - The regulatory framework allows recovery of fuel costs in excess of base rates, mitigating price risk for Minnesota Power and SWL&P[178]. - The company is exposed to credit risk through its power marketing activities, which are managed through established credit policies[179]. - The company’s risk factors include volatility in electricity prices, which may impact operations at ALLETE Clean Energy facilities[184]. Capital Expenditures and Financial Position - ALLETE Clean Energy's capital expenditures for 2021 are projected to be around $490 million, with $141.7 million spent in Q1 2021[173]. - As of March 31, 2021, ALLETE had cash and cash equivalents of $159 million and a debt-to-capital ratio of 41%[163]. - ALLETE Clean Energy has invested approximately $80 million to requalify 470 wind turbine generators (WTGs) for production tax credits, anticipating annual credits of about $20 million through 2027[155]. - There were no changes in internal control over financial reporting that materially affected the company's financial reporting during the most recent fiscal quarter[182]. - The company has effective disclosure controls and procedures to ensure timely and accurate reporting of required information[181].