Allete, Inc. Reports Second Quarter 2018 Earnings; Reaffirms Earnings Guidance

Company ALLETE Inc. 
Tags Financial & Operating Data, Strategy - Corporate
Date August 02, 2018

ALLETE, Inc. (NYSE: ALE) today reported second quarter 2018 earnings of 61 cents per share on net income of $31.3 million and operating revenue of $344.1 million. Last year’s results were 72 cents per share on net income of $36.9 million and operating revenue of $353.3 million.

“Financial results from ALLETE’s businesses reflect strong power demand from taconite customers, impacts from Minnesota Power's recent rate case and notable progress from ALLETE Clean Energy on its wind turbine refurbishment strategy," said ALLETE Chairman, President and CEO Al Hodnik. "Setting aside year over year timing differentials, ALLETE posted a solid quarter and we remain confident in our full year 2018 earnings guidance range of $3.20 to $3.50 per share. We are well positioned for growth as our diverse family of businesses captures value in a growing domestic economy, and our nation focuses on sustainable energy and water solutions.”

ALLETE’s Regulated Operations segment, which includes Minnesota Power, Superior Water, Light and Power, and the Company’s investment in the American Transmission Co. (ATC), recorded net income of $26.0 million for the second quarter of 2018, a decrease of $6.4 million from 2017. Earnings decreased primarily due to lower net income at Minnesota Power resulting from the timing of reserves for an interim rate refund of $5.6 million after-tax, the timing of approval for financial incentives under the Minnesota conservation improvement program of $3.9 million after-tax, and lower transmission revenue. These decreases were partially offset by higher sales to residential, commercial and municipal customers due to more favorable weather conditions, and lower operating and maintenance expense.

ALLETE’s Energy Infrastructure and Related Services businesses, which include ALLETE Clean Energy and U.S. Water Services, recorded net income of $6.8 million and $0.2 million for the second quarter of 2018, respectively. Earnings at ALLETE Clean Energy increased $3.0 million from 2017. Net income in 2018 included $3.9 million after-tax of additional production tax credits generated as ALLETE Clean Energy executes on its refurbishment strategy and a lower federal income tax rate, partially offset by higher operating and maintenance expenses and lower revenue resulting from lower wind resources compared to the same period in 2017. Earnings from U.S. Water Services reflect higher operating expenses, partially offset by higher revenue primarily from the September 2017 acquisitionof Tonka Water. Results this period were also negatively impacted by the timing of capital project sales.

ALLETE will host a conference call and webcast at 10 a.m. Eastern Time this morning to discuss details of its financial performance. Interested parties may listen live by calling (877) 303-5852, or by accessing the webcast at . A replay of the call will be available through August 6, 2018 by calling (855) 859-2056, pass code 9699879. The webcast will be accessible for one year at .

ALLETE, Inc. 
Consolidated Statement of Income 
Millions Except Per Share Amounts - Unaudited 
             
      Quarter Ended      Six Months Ended 
      June 30,      June 30, 
      2018      2017      2018      2017 
Operating Revenue                         
Contracts with Customers – Utility      $257.8        $264.9        $528.0        $546.5   
Contracts with Customers – Non-utility      80.4        82.5        162.4        160.6   
Other – Non-utility      5.9        5.9        11.9        11.8   
Total Operating Revenue      344.1        353.3        702.3        718.9   
Operating Expenses                         
Fuel, Purchased Power and Gas – Utility      96.5        93.1        197.4        189.7   
Transmission Services – Utility      16.8        17.6        35.2        34.2   
Cost of Sales – Non-utility      37.0        38.4        69.9        69.9   
Operating and Maintenance      86.8        85.9        173.3        170.3   
Depreciation and Amortization      56.1        50.1        101.9        100.6   
Taxes Other than Income Taxes      14.4        14.2        30.7        28.6   
Total Operating Expenses      307.6        299.3        608.4        593.3   
Operating Income      36.5        54.0        93.9        125.6   
Other Income (Expense)                         
Interest Expense      (17.1      (16.7      (34.0      (33.9 
Equity Earnings in ATC      4.3        5.3        9.0        11.4   
Other      2.2        1.6        4.3        3.2   
Total Other Expense      (10.6      (9.8      (20.7      (19.3 
Income Before Income Taxes      25.9        44.2        73.2        106.3   
Income Tax Expense (Benefit)      (5.4      7.3        (9.1      20.4   
Net Income      $31.3        $36.9        $82.3        $85.9   
Average Shares of Common Stock                         
Basic      51.3        50.9        51.2        50.5   
Diluted      51.5        51.1        51.4        50.7   
Basic Earnings Per Share of Common Stock      $0.61        $0.73        $1.61        $1.70   
Diluted Earnings Per Share of Common Stock      $0.61        $0.72        $1.60        $1.69   
Dividends Per Share of Common Stock      $0.56        $0.535        $1.12        $1.07   
                         

 
Consolidated Balance Sheet 
Millions - Unaudited 
                               
      Jun. 30,      Dec. 31,            Jun. 30,      Dec. 31, 
      2018      2017            2018      2017 
Assets                  Liabilities and Shareholders’ Equity             
Cash and Cash Equivalents      $121.9      $98.9      Current Liabilities      $350.2      $351.2 
Other Current Assets      302.1      268.6      Long-Term Debt      1,462.2      1,439.2 
Property, Plant and Equipment – Net      3,809.3      3,822.4      Deferred Income Taxes      228.5      230.5 
Regulatory Assets      374.5      384.7      Regulatory Liabilities      516.0      532.0 
Investment in ATC      123.6      118.7      Defined Benefit Pension and Other Postretirement Benefit Plans      175.2      191.8 
Other Investments      52.5      53.1      Other Non-Current Liabilities      274.4      267.1 
Goodwill and Intangibles – Net      225.8      225.9      Shareholders’ Equity      2,108.2      2,068.2 
Other Non-Current Assets      105.0      107.7                   
Total Assets      $5,114.7      $5,080.0      Total Liabilities and Shareholders’ Equity      $5,114.7      $5,080.0 
                               

             
      Quarter Ended      Six Months Ended 
ALLETE, Inc.      June 30,      June 30, 
Income (Loss)      2018      2017      2018      2017 
Millions                         
Regulated Operations      $26.0        $32.4      $69.9        $75.9   
                         
Energy Infrastructure and Related Services                         
ALLETE Clean Energy      6.8        3.8      14.9        10.5   
U.S. Water Services      0.2        0.6      (1.2      0.3   
                         
Corporate and Other      (1.7      0.1      (1.3      (0.8 
Net Income Attributable to ALLETE      $31.3        $36.9      $82.3        $85.9   
Diluted Earnings Per Share      $0.61        $0.72      $1.60        $1.69   
                         
Statistical Data                         
Corporate                         
Common Stock                         
High      $79.86        $74.59      $79.86        $74.59   
Low      $70.40        $66.81      $66.64        $61.64   
Close      $77.41        $71.68      $77.41        $71.68   
Book Value      $41.05        $39.58      $41.05        $39.58   
                         
Kilowatt-hours Sold                         
Millions                         
Regulated Utility                         
Retail and Municipal                         
Residential      243        229      585        552   
Commercial      339        328      706        697   
Industrial      1,781        1,816      3,624        3,578   
Municipal      188        181      407        396   
Total Retail and Municipal      2,551        2,554      5,322        5,223   
Other Power Suppliers      1,005        1,004      2,008        2,045   
Total Regulated Utility Kilowatt-hours Sold      3,556        3,558      7,330        7,268   
                         
Regulated Utility Revenue                         
Millions                         
Regulated Utility Revenue                         
Retail and Municipal Electric Revenue                         
Residential      $28.0        $25.1      $63.5        $59.8   
Commercial      35.2        32.4      69.2        68.4   
Industrial      114.7        121.0      228.0        241.5   
Municipal      13.7        12.3      27.7        30.5   
Total Retail and Municipal Electric Revenue      191.6        190.8      388.4        400.2   
Other Power Suppliers      42.7        41.7      86.4        82.9   
Other (Includes Water and Gas Revenue)      23.5        32.4      53.2        63.4   
Total Regulated Utility Revenue      $257.8        $264.9      $528.0        $546.5   

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd