ALLETE CEO Discusses Q3 2010 Results - Earnings Call Transcript

ALLETE CEO Discusses Q3 2010 Results - Earnings Call Transcript
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ALLETE (

ALE

)

Q3 2010 Earnings Call

October 29, 2010 10:00 am ET

Executives

Al Hodnik - President and CEO

Mark Schober - CFO

Analysts

Larry Solow - CJS Securities

James Bellessa - D.A. Davidson Company

Eric Jacobsohn - Columbia Wanger

Presentation

Operator

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Previous Statements by ALE
» ALLETE, Inc. Q2 2010 Earnings Call Transcript
» ALLETE Inc. Q1 2010 Earnings Call Transcript
» ALLETE, Inc. Q4 2009 Earnings Call Transcript
» ALLETE Inc. Q3 2009 Financial Results Conference Call

Good day and welcome to the ALLETE third quarter 2010 financial results call. Today's call is being recorded. Certain statements contained in the conference call that are not descriptions of historical facts are forward looking statements such as such as terms defined in the Private Securities Litigation Reform Act of 1995. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause the results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the company with the Securities and Exchange Commission. Many of the factors that will determine the company's future results are beyond the ability of management to control or predict. Listeners should not place undue reliance on forward-looking statements, which reflect the management's reviews as the date hereof. The company undertakes no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise.

I would now like turn the conference over to your host for today Mr. Al Hodnik, President and CEO. Sir you may begin.

Al Hodnik

Good morning everyone and thank you for joining us. With me on the call today is ALLETE's Chief Financial Officer Mark Schober. I am pleased to report that ALLETE recorded quarterly earnings per share of $0.56 compared to $0.49 last year. Year-to-date ALLETE has earned $1.93 per share excluding a $0.12 one time item. Mark will go over the financial details shortly. Before he does that, I would like to update you on some significant events that occurred during the quarter.

I mentioned it on the last call, but I think its worth repeating. In early August, Minnesota Power received demand nominations for the last four months of 2010 from its industrial customers. The total nomination level was similar to the preceding four month period which is near full capacity. Our industrial customers have had quite a turnaround in 2010 compared to 2009. We are pleased that economic improvement was seen by our customers this year which is not only good for them but for the entire North Eastern Minnesota region.

On the renewable energy front, we continue to make progress with our North Dakota wind initiative as construction has been completed on the first phase of our Bison 1 Wind Project. The first 16 wind turbines are now in position and will be phased into service through the end of this year. The remaining turbines will be installed in 2011. In addition, we have completed construction of a 22 mile, 230 kilovolt transmission line that not only physically connects the Bison 1 Wind Project farm, but also a broader areas of lease lands we hold that are part of our wind development strategy to the DC line we purchased late last year.

The total project is estimated to cost $177 million and through September 30th, we have spent $101 million. The Minnesota public utilities commission has already approved our petition to begin bailing our customers for this project effective August 1st. Minnesota Power's retail rate increased request also continues to progress. On September 29th, the Minnesota Public Utilities Commission considered and decided upon over 50 different issues contained in the request. We estimate that the Minnesota Public Utilities Commission will order an overall retail related rate increase of approximately $54 million when it issues a formal written order by November 22nd.

The Minnesota Public Utilities Commission approved a 10.38% return on equity and a 54.29% equity ratio. We will continue to collect interim rates from our customers until the new rates go into effect which will be after a reconsideration period has expired. And after all compliance filings are completed and accepted. We estimate the new rates will go in to effect early next year.

Last spring, I announced our plan to participate in additional phases of CapEx 20-20 a Minnesota initiative to ensure Electric transmission reliability well into the future. We initially intend to invest between 100 and $125 million through 2015. For transmission lines between Fargo and North Dakota and Monticello, Minnesota as well as between and Grand Rapids, Minnesota. The first segment, a line between Monticello and St. Cloud Minnesota, was granted a (inaudible) permit from the Minnesota Public Utilities Commission in July. Construction of this line is expected to be complete by late 2011. And yesterday, the Minnesota Public Utilities Commission approved the road permit for the (inaudible) to Grand Rapids line. We expect construction of that line will begin sometime in 2011. The CapEx 2020 project costs are eligible for current cost recovery and we have petitioned that Minnesota Public Utilities Commission to recover the cost under a writer.

CapEx 2020 participants are also currently researching and st7udying additional reliability upgrades. Our lead continues to make progress as we pursue our various energy centric initiatives. I look forward to sharing additional updates with you as we move forward.

At this time, I will ask Mark to go through the financial details and then I will provide a few more comments before we take your questions. Mark.

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