Allete, Inc. Reports Third Quarter 2018 Earnings

Source Press Release
Company ALLETE Inc. 
Tags Financial & Operating Data, Strategy - Corporate
Date November 01, 2018

ALLETE, Inc. (NYSE: ALE) today reported third quarter 2018 earnings of 59 cents per share on net income of $30.7 million and operating revenue of $348.0 million. Last year’s results were 88 cents per share on net income of $44.9 million and operating revenue of $362.5 million. Results for the third quarter of 2017 reflect a $7.9 million after-tax, or 16 cents per share, favorable impact for the regulatory outcome related to the allocation of North Dakota investment tax credits. Results in the third quarter of 2018 included $5.5 million after-tax, or 11 cents per share, of reserves for an interim rate refund, a $3.1 million after-tax, or 6 cents per share, reduction in revenue for an estimated true-up of transmission rates that were billed in 2017 and $0.9 million after-tax, or 2 cents per share, of additional income tax expense related to changes enacted as part of tax reform for the executive compensation deduction, partially offset by the timing of approval for financial incentives under the Minnesota conservation improvement program of $2.1 million after-tax, or 4 cents per share.

“Our year-to-date financial results capture robust demand from our taconite customers, impacts from a rate case outcome earlier this year and ALLETE Clean Energy’s progress executing its multi-year refurbishment strategy. We are on track to deliver full-year financial results that are near the mid-point of our original 2018 earnings guidance range of $3.20 to $3.50 per share,” said ALLETE Chairman, President and CEO Al Hodnik.

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 $29.8 million for the third quarter of 2018, a decrease of $4.4 million from 2017. Earnings decreased primarily due to lower net income at Minnesota Power resulting from timing of reserves for an interim rate refund and lower transmission revenue resulting from a reduction in revenue for an estimated true-up of transmission rates billed in 2017. These decreases were partially offset by higher sales to residential and commercial customers due to more favorable weather conditions, lower operating and maintenance expenses and timing of approval for financial incentives under the Minnesota conservation improvement program compared to 2017.

ALLETE’s Energy Infrastructure and Related Services businesses, which include ALLETE Clean Energy and U.S. Water Services, recorded net income of $1.0 million and $1.7 million for the third quarter of 2018, respectively. Earnings at ALLETE Clean Energy increased $0.4 million from 2017. ALLETE Clean Energy’s 2018 net income included the benefit of higher wind resources and additional production tax credits generated as ALLETE Clean Energy executes its refurbishment strategy, partially offset by higher operating and maintenance expenses compared to the same period in 2017. Earnings from U.S. Water Services reflect higher revenue resulting from the 2017 acquisition of Tonka Water and higher sales of chemicals and related services, partially offset by higher operating expenses. Results this period were also negatively impacted by the timing of capital project sales.

Corporate and Other, which includes BNI Energy and ALLETE Properties, posted a net loss of $1.8 million in the third quarter of 2018compared to net income of $8.8 million in 2017. Net income in 2017 included the previously mentioned $7.9 million after-tax, or 16 cents per share, favorable impact for the regulatory outcome related to the allocation of North Dakota investment tax credits. The net loss in 2018 included lower revenue at ALLETE Properties and additional income tax expense.

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 using pass code 3977089, or by accessing the webcast at . A replay of the call will be available through November 5, 2018 by calling (855) 859-2056, pass code 3977089. The webcast will be accessible for one year at .

ALLETE, Inc. 
Consolidated Statement of Income 
Millions Except Per Share Amounts - Unaudited 
             
      Quarter Ended      Nine Months Ended 
      September 30,      September 30, 
      2018      2017      2018      2017 
Operating Revenue                         
Contracts with Customers – Utility      $261.3        $277.6        $789.3        $824.1   
Contracts with Customers – Non-utility      80.7        79.0        243.1        239.6   
Other – Non-utility      6.0        5.9        17.9        17.7   
Total Operating Revenue      348.0        362.5        1,050.3        1,081.4   
Operating Expenses                         
Fuel, Purchased Power and Gas – Utility      103.2        93.5        300.6        283.2   
Transmission Services – Utility      17.9        18.9        53.1        53.1   
Cost of Sales – Non-utility      38.7        36.0        108.6        105.9   
Operating and Maintenance      80.3        81.1        253.6        251.4   
Depreciation and Amortization      51.5        50.9        153.4        151.5   
Taxes Other than Income Taxes      13.1        14.1        43.8        42.7   
Total Operating Expenses      304.7        294.5        913.1        887.8   
Operating Income      43.3        68.0        137.2        193.6   
Other Income (Expense)                         
Interest Expense      (17.6      (16.6      (51.6      (50.5 
Equity Earnings in ATC      4.0        5.9        13.0        17.3   
Other      1.4        1.8        5.7        5.0   
Total Other Expense      (12.2      (8.9      (32.9      (28.2 
Income Before Income Taxes      31.1        59.1        104.3        165.4   
Income Tax Expense (Benefit)      0.4        14.2        (8.7      34.6   
Net Income      $30.7        $44.9        $113.0        $130.8   
Average Shares of Common Stock                         
Basic      51.4        51.0        51.3        50.7   
Diluted      51.6        51.2        51.5        50.9   
Basic Earnings Per Share of Common Stock      $0.59        $0.88        $2.20        $2.58   
Diluted Earnings Per Share of Common Stock      $0.59        $0.88        $2.19        $2.57   
Dividends Per Share of Common Stock      $0.56        $0.535        $1.68        $1.605   
                         

 
Consolidated Balance Sheet 
Millions - Unaudited 
                               
      Sept. 30,      Dec. 31,            Sept. 30,      Dec. 31, 
      2018      2017            2018      2017 
Assets                  Liabilities and Shareholders’ Equity             
Cash and Cash Equivalents      $128.0      $98.9      Current Liabilities      $402.7      $351.2 
Other Current Assets      311.4      268.6      Long-Term Debt      1,461.7      1,439.2 
Property, Plant and Equipment – Net      3,846.5      3,822.4      Deferred Income Taxes      231.3      230.5 
Regulatory Assets      370.6      384.7      Regulatory Liabilities      512.3      532.0 
Investment in ATC      126.0      118.7      Defined Benefit Pension and Other Postretirement Benefit Plans      173.6      191.8 
Other Investments      51.7      53.1      Other Non-Current Liabilities      265.6      267.1 
Goodwill and Intangibles – Net      224.7      225.9      Shareholders’ Equity      2,116.1      2,068.2 
Other Non-Current Assets      104.4      107.7                   
Total Assets      $5,163.3      $5,080.0      Total Liabilities and Shareholders’ Equity      $5,163.3      $5,080.0 
                               

             
      Quarter Ended      Nine Months Ended 
ALLETE, Inc.      September 30,      September 30, 
Income (Loss)      2018      2017      2018      2017 
Millions                         
Regulated Operations      $29.8        $34.2      $99.7        $110.1 
                         
Energy Infrastructure and Related Services                         
ALLETE Clean Energy      1.0        0.6      15.9        11.1 
U.S. Water Services      1.7        1.3      0.5        1.6 
                         
Corporate and Other      (1.8      8.8      (3.1      8.0 
Net Income Attributable to ALLETE      $30.7        $44.9      $113.0        $130.8 
Diluted Earnings Per Share      $0.59        $0.88      $2.19        $2.57 
                         
Statistical Data                         
Corporate                         
Common Stock                         
High      $80.78        $79.61      $80.78        $79.61 
Low      $73.39        $69.79      $66.64        $61.64 
Close      $75.01        $77.29      $75.01        $77.29 
Book Value      $41.15        $40.02      $41.15        $40.02 
                         
Kilowatt-hours Sold                         
Millions                         
Regulated Utility                         
Retail and Municipal                         
Residential      251        239      836        791 
Commercial      369        364      1,075        1,061 
Industrial      1,794        1,859      5,418        5,437 
Municipal      196        195      603        591 
Total Retail and Municipal      2,610        2,657      7,932        7,880 
Other Power Suppliers      968        977      2,976        3,022 
Total Regulated Utility Kilowatt-hours Sold      3,578        3,634      10,908        10,902 
                         
Regulated Utility Revenue                         
Millions                         
Regulated Utility Revenue                         
Retail and Municipal Electric Revenue                         
Residential      $29.0        $26.6      $92.5        $86.4 
Commercial      37.2        35.4      106.4        103.8 
Industrial      116.9        121.3      344.9        362.8 
Municipal      14.1        14.6      41.8        45.1 
Total Retail and Municipal Electric Revenue      197.2        197.9      585.6        598.1 
Other Power Suppliers      40.9        41.2      127.3        124.1 
Other (Includes Water and Gas Revenue)      23.2        38.5      76.4        101.9 
Total Regulated Utility Revenue      $261.3        $277.6      $789.3        $824.1 

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd