2023
EEI FINANCIAL CONFERENCE
Phoenix, AZ
November 12-14
Cautionary statements
Any statements contained in this presentation and statements that ALLETE, Inc. representatives may make orally in connection with this presentation that are not historical facts are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties and investors are directed to the risks discussed in documents filed by ALLETE, Inc. with the Securities and Exchange Commission.
ALLETE's presentation and other communications may include certain non-Generally Accepted Accounting Principles (GAAP) financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the company's financial statements.
Non-GAAP financial measures utilized by the Company may include a presentation of earnings (loss) per share and earnings. ALLETE's management believes that non-GAAP financial measures provide useful information to investors by removing the effect of variances in GAAP reported results of operations that are not indicative of changes in the fundamental earnings power of the Company's operations. Management believes that the presentation of the non-GAAP financial measures is appropriate and enables investors and analysts to more accurately compare the company's ongoing financial performance over the periods presented. Non-GAAP measures reconciled to the most directly comparable GAAP measure, if presented, is included in the appendix.
This presentation was prepared as of November 12, 2023, and ALLETE, Inc. assumes no obligation to update the information or the forward- looking statements contained herein. The 2023 outlook contained herein was provided, and is as of November 12, 2023.
For more information, contact:
Vince Meyer
Director, Investor Relations
and Treasury
- 723-3952vmeyer@allete.com
ALLETE.com | | ALLETE Investor Relations | 2 |
ALLETE Highlights
ALLETE's growth outlook driven by cleaner energy investments and improving returns is full steam ahead with Sustainability in Action: Execution of key initiatives in support of long-term earnings growth of 5-7% is on track!
Executing on Significant Regulated Initiatives - Minnesota Power EnergyForward
- Rate case supports further renewable / clean energy expansion and improving returns
- RFPs on Minnesota Power's projects drive robust CAPX / rate base growth in next 5 years
- Current and next IRP provide long runway for regulated growth capital beyond 5-year plan
- MN Riders / current cost recovery reduces regulatory lag and external financing needs
- Robust engagement with regulators and all stakeholders, constructive regulatory frameworks
ALLETE broad transmission investment opportunities are unique and significant
Strong Financial Position
- One of the strongest balance sheets in the industry: low leverage, large cash balances, small DRIP-related equity issuances in 2024; beyond 2024 equity will be used to fund growth initiatives
- ALLETE is not a HoldCo, immaterial corporate / non-reg debt
Non-regulated / Supplemental Growth
- ACE robust efforts and positive outcomes in 2023
- New Energy Equity delivering financial results and with unique positioning in the distributed solar space
ALLETE.com | | ALLETE Investor Relations | 3 |
Now ranking #1 in renewable investment, ALLETE has evolved to be a market leader.
Solar and Wind Capacity as a Percent of Market Cap (MW / US$ Market Cap)¹
53%
49%
Relative to size, ALLETE is the largest investor in renewables in the country.
Source: Company public filings, SNL, Press Releases, Bloomberg market data as of 18-Jan-23
Note: Includes both regulated and unregulated wind and solar net generation capacity.
1 Calculated as solar and wind net owned operating capacity / market cap. Excludes development pipelines. Key Trends in the U.S. Renewables Sector and Overview of ALE Portfolio
ALLETE.com | | ALLETE Investor Relations | 4 |
ALLETE's attractive value proposition
Financial Targets
Long-term earnings growth | 5 | - 7% |
Targeted payout ratio | 60 | - 70% |
Long-term dividend growth | align with earnings | |
Sustainable clean | Multi-faceted | Differentiated | ||
earnings growth | capital investment | |||
energy solutions | ||||
potential | opportunities | |||
Solid balance sheet | Attractive and | |
and credit ratings | ||
with growing cash | growing dividend | |
flow from operations | ||
ALLETE.com | | ALLETE Investor Relations | 5 |
ALLETE's strategy for success is Sustainability in Action
EXPAND RENEWABLES
- Currently ranked #1 among investor-owned utilities for investment in renewable energy based on market capitalization
- Minnesota Power #1 in Minnesota, and #2 in Midwest in renewable energy for customers
- 700 MW of wind and solar as well as up to 500 MWh of storage to be added as a result of a successful IRP
- New Energy Equity a leading developer of distributed solar
- Established renewable platform at ALLETE Clean Energy of over 1,600 MW
ENHANCE GRID RESILIENCY
- Investing in infrastructure for managing the delivery of increasing amounts of renewable energy, and enhancing the resiliency and reliability of the grid
- Engaged with Grid United on North Plains Connector - first in the nation to connect three ISOs
REDUCE CARBON
- Minnesota Power
- Transitioned seven of nine coal facilities
- 50% renewable energy supply at end of 2020, goal of 70% by 2030
- Coal-freeby 2035 and 100% carbon-free vision by 20501
- BNI - supporting carbon capture and sequestration in Minnkota Power Cooperative's Project Tundra
1 New MN Legislation requiring 100% carbon-free energy by 2040 will provide clean energy opportunities in 2025 IRP.
DRIVE INNOVATION
- Reducing water use, investing in more weather resistant infrastructure, identifying alternative low- or zero-carbon fuels and carbon capture and sequestration technology
- HVDC Modernization advances clean energy opportunities and enhances reliability
Workplace
- 2022 Minnesota Census Honor Roll with special distinction recognizing ALLETE for Women in Board of Director and in Executive Officer Roles
- Minnesota Power & ALLETE Clean Energy named Yellow Ribbon Companies
- Advancing DE&I in the workplace, supply chain, communities, communication and customers
ALLETE.com |
Community
- Partnering with diverse suppliers
- Corporate funding and employee volunteerism to those in need - and addressing the opportunity gap
- Full commitment to regional economies and host communities
Customers
- Strong track record of service reliability
- Minnesota Power residential bills below the national average
- Well-positionedto serve the C&I customer segment
- Strong focus on customer ESG & competitiveness needs
ALLETE Investor Relations | 6
Accelerating clean energy trends drive ALLETE's 5-7% growth objective
SUSTAINABILITY IN ACTION GROWTH STRATEGY
- Expanding renewable sources of energy
- Strengthening and expanding the electric grid
- Developing innovative solutions
- Reducing overall carbon emissions
- Financing growth with substantial liquidity
The Inflation Reduction Act: A significant catalyst
Regulated growth
opportunities
- Significant renewable infrastructure and transmission investments over the next decade
- Improving ROE
- Superior Water, Light & Power, ATC investments, and other regulated opportunities
New Energy Equity and
ALLETE Clean Energy
opportunities
- Leveraging existing platforms / Maximize pipeline and portfolio value
- Expand products and services
- Diversify new customers, assets and geographies
- Improve ALLETE Clean Energy financial returns
ALLETE.com | | ALLETE Investor Relations | 7 |
Setting the stage for future growth:
ALLETE is well positioned to leverage clean energy trends
Regulated Operations | Non-Regulated Operations |
- Generates, transmits and distributes electricity in northern Minnesota; rich in natural resources
- Expediting the transition away from coal, creating renewable infrastructure opportunities
- Additional wind generation/solar/storage and supporting transmission & distribution over the next 5 years; rate base CAGR 11%
- Currently providing ~60% renewable energy; goal to deliver 100% carbon-free energy by 2050
- Position for inter-regional connections advancing its high voltage transmission strategy
- Provider of electric, natural gas and water service in northwestern Wisconsin
- Smart metering advancing along with increased renewable service offerings
- Natural gas expansion opportunities
- First community solar garden began producing energy in Oct. 2023
- ~$58M estimated capex spend 2024 - 2028
- 8% ownership
- ATC owns and operates the electric transmission system in portions of Wisconsin, Michigan, Minnesota & Illinois
- Growing equity investment with planned ten-year build- out
- Capital investment in MISO Tranche 1 expected to be ~$900M; investment in Tranche 2 will be incremental
- Updated ten-year capital investment plan ~$6.6B-$8.1B
- ALLETE will participate in future investment opportunities
- Leading developer of commercial and industrial, and community-scale solar energy projects
- Core competency includes adding value through sharing national capabilities with regional co-development partners
- Involved in greenfield development, as well as acquiring mid-stage and late-stage projects, bringing them through completion
- Off-takeagreements, sourced internally and through third party aggregators are executed with high quality corporate customers, municipalities and non-profit organizations
- Established platform focused on developing, acquiring, and operating clean energy and renewable energy projects
-
1,600 MWs of wind projects;
8 states; utilities, municipalities and fortune 500 C&I customer base, and growing - Will continue to evaluate additional growth opportunities, such as solar and storage solutions
- Operates a lignite mine near Center, North Dakota
- Producing about 4M tons annually, under a long-termcost-plus arrangement to 2037
- Supporting carbon capture and sequestration in Minnkota Power Cooperative's Project Tundra
- Leveraging BNI established relationships for clean energy advancement
- Recognized for best in class reclamation practices
ALLETE is actively engaged in developing significant transmission opportunities
ALLETE.com | | ALLETE Investor Relations | 8 |
~$3.3B Investment in Transmission and Clean Energy Initiatives
Increase of nearly $600M* in Base CapX over the next 5 years
Capital Expenditures
2023- | Potential | |||||||
Recovery | ||||||||
(millions) | 2023 | 2024 | 2025 | 2026 | 2027 | 2027 | Total | Method |
Regulated Operations | ||||||||
High kV Transmission Expansion | $ 40 | $ 55 | $ 135 | $ 190 | $ 270 | $ 690 | $ 1,265 | Rider |
Solar 300 MW** | - | 150 | 200 | 175 | 100 | 625 | 675 | Rider |
Wind 150 MW** | - | - | 105 | 175 | - | 280 | 280 | Rider |
Storage Pilot | - | 10 | 20 | - | - | 30 | 30 | Rider |
Storage 200 MWh** | - | - | - | - | 100 | 100 | 320 | COD |
Base & Other | 190 | 265 | 250 | 235 | 190 | 1,130 | Rider/Base | |
ALLETE Clean Energy (base capX) | 10 | 5 | 5 | 5 | 5 | 30 | ||
Corporate & Other | ||||||||
Wind Partnership 200 MW** | - | 70 | 115 | - | - | 185 | 185 | COD |
Nemadji Trail Energy Center | 40 | 55 | 35 | 5 | - | 135 | 145 | COD |
Other | 20 | 10 | 15 | 15 | 20 | 80 | ||
Total | $ 300 | $ 620 | $ 880 | $ 800 | $ 685 | $3,285 |
- From 2022 Base CapX plan.
- Dependent on successful RFPs for solar, wind and storage. RFP issuances expected in Q4 2023, with vendor selection and regulatory approval to follow in 2024.
5,000 Regulated Rate Base Growth
($ in millions)
4,000
3,000
2,000 ~11% CAGR^
1,000
^ Using 2022 as a base year
Table excludes any incremental ALLETE Clean Energy projects and New Energy asset ownership, additional equity investment at ATC.
Further transition to clean energy will
provide additional investment in
transmission and renewables beyond 2027.
Regulated Rate Base Growth Supports ALLETE's Long-term5-7% Growth Objective
ALLETE.com | | ALLETE Investor Relations | 9 |
Transformational long-term investment opportunities
Opportunities beyond 2027, not included in our 5-year CapX table:
Transmission Planning
North Plains Connector - ALLETE engagement with Grid United to build 385- mile HVDC transmission line from ND to MT.
MISO Tranche 2 - Expect at least ~2-3% participation in MISO Tranche 2.
Benefits a broader customer base beyond Minnesota Power jurisdiction.
Long Range Plan will help to maintain a reliable and resilient regional power grid.
Minnesota Legislation
Enacted in Minnesota requires electric utilities to source retail sales with 100% carbon-free energy by 2040 - this legislation will provide opportunities in our next IRP, slated for early 2025.
Coal Fleet Transition
Developing plans to replace over 800 MW of baseload generation from Boswell Units 3 & 4 in Cohasset, MN by 2030 and 2035, respectively.
This excludes any incremental ALLETE Clean Energy projects and New Energy asset ownership, and additional equity investment at ATC.
Supports ALLETE's Long-Term EPS growth objective of 5-7%
ALLETE.com | | ALLETE Investor Relations | 10 |
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Disclaimer
Allete Inc. published this content on 08 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 November 2023 19:28:58 UTC.