ALLETE, Inc.

ALLETE reported full-year 2023 earnings of $4.30 per share on net income of $247.1 million, versus $3.38 per share on net income of $189.3 million in 2022. Management said the result was in line with the updated 2023 guidance range and reflected $0.05 per share of negative weather impacts in the fourth quarter. Fourth-quarter segment net income was $34.8 million for Regulated Operations, $5.3 million for ALLETE Clean Energy, and $11.4 million for corporate and other businesses. For 2024, ALLETE guided to earnings of $3.60 to $3.90 per share and income of $210 million to $225 million, with Regulated Operations at $2.65 to $2.85 per share and ALLETE Clean Energy/New Energy/other businesses at $0.95 to $1.05 per share. Management also said 2024 guidance includes $64 million for interim rates approved at Minnesota Power and that New Energy is expected to earn about $19 million to $21 million in 2024. The company said its five-year capital plan now totals $4.3 billion and extends through 2028.

Bethany Owen framed 2023 as a strong execution year and said the company is building momentum around its “sustainability in action” strategy. Her comments emphasized Minnesota Power’s clean energy transition, significant transmission projects, and the view that ALLETE’s future earnings growth will be supported by a larger regulated investment pipeline. She was notably upbeat about the long-term outlook, repeatedly pointing to the 5% to 7% EPS growth objective beginning in 2025 and a more than 4% dividend increase.

Steve Morris focused on the mechanics behind the outlook. He said 2024 guidance of $3.60 to $3.90 per share reflects a shift of RFP-related capital investments from 2024 to 2025, plus expected expenses, and he noted cash and cash equivalents of approximately $72 million, $370 million of available credit lines, and a debt-to-capital ratio of 35% at year-end. He also said ALLETE expects little equity need in 2024, with some equity needs beginning in 2025, probably midway through, and that the long-term rate base CAGR is now closer to 14%.

Analysts pressed on how the updated CapEx plan affects financing, and management said there is little equity need in 2024 but some beginning in 2025. They also asked about the gap between a roughly 14% rate base CAGR and the 5% to 7% EPS CAGR; management pointed to regulatory approvals, RFP wins, and capital timing as the main reasons. On ALLETE Clean Energy, management said it is evaluating all options for optimizing the fleet but did not signal a large asset monetization event, and on Caddo it confirmed similar first-quarter 2024 impacts from a neighboring substation outage. Questions on industrial sales led management to explain that the variation is mostly driven by taconite volume mix, with 2024 outlook based on an average around 35 million tons.