Allete's second-quarter results hit by February deep freeze
May 7—February's extreme cold in the southern United States hurt Allete's first-quarter earnings.
The Duluth-based energy company said cold weather in the region affected the Diamond Springs wind site in southern Oklahoma, owned by subsidiary Allete Clean Energy, hit profits by $5 million, or 10 cents per share.
"This winter-weather event caused volatility in power prices in the regional power market, resulting in losses being incurred under one of the facility's power sales agreements," Steve Morris, Allete's chief accounting officer, said in a call with investors Thursday morning.
The 300-megawatt facility is fully contracted to Starbucks, Walmart and Smithfield Foods.
Overall, Allete, the parent company of Minnesota Power, reported first quarter 2021 earnings of 99 cents per share on a profit of $51.8 million. Last year's first-quarter results were $1.28 per share on a profit of $66.3 million.
In addition to the 10 cents-per-share negative effect from the Diamond Springs facility, Allete said in a news release that it was also negatively affected by 15 cents per share because of "the timing of income taxes and operating and maintenance expense." That is "expected to reverse during the remainder of the year," the company said.
Profit at Allete's two regulated businesses — Minnesota Power and Superior Water, Light and Power — was reported at $45 million, or $12.5 million lower than in the first quarter of last year.
The company said an expiring power sales contract last year and the indefinite idling of Verso's Duluth paper mill were largely to blame.
Allete does expect it can still reach its 2021 guidance of $3-$3.30 per share, with regulated businesses on the upper end of its guidance range and Allete Clean Energy and its other businesses on the lower end of its guidance.
Bob Adams, Allete's chief financial officer, reiterated Minnesota Power's plans to ask the Minnesota Public Utilities Commission in November for a rate increase. The company's returns are below its authorized 9.25% rate of return.
"The company's return leaves are some of the lowest levels in decades at approximately 2%-3% below the currently authorized level," Adams said.
A rate case test year is planned for 2022. Company officials have not said by how much rates could increase.
In April, the PUC unanimously denied Minnesota Power's request to track pandemic-related losses from two of its industrial customers — U.S. Steel's Keetac iron ore mine and pellet plant in Keewatin and Verso's paper mill in Duluth — for possible recovery of lost revenues in its rate case. Keetac came back online in December after a six-month idle.
The commissioners said the company regularly deals with cyclical industries — pandemic or not.
"I do understand and appreciate the company's concerns and where they're at, but I think in this instance, it doesn't warrant deferred accounting," Commissioner Joe Sullivan said during the April 1 meeting. "I would note that they are still tracking their lost sales and are going to be able to make the case for that in their coming rate case when they file that."
