The COVID-19 pandemic will make it tougher for Duluth-based Allete, the parent company of Minnesota Power, to reach some of its growth goals by 2025.
In a call announcing third-quarter results Monday morning, Allete President and CEO Bethany Owen said achieving long-term goals would be tricky but remained committed to achieving them.
“While the company’s long-term growth objectives remain unchanged, our October 2020 five-year projects indicate achieving these objectives is expected to be challenging,” Owen said.
Using 2019 as a base year, Owens said by 2025, Allete’s long-term consolidated average annual earnings per share growth rate is projected to increase by 4%, down from the targeted 5-7%, while regulated businesses are expected to grow at 3%, down from its goal of 4-5% growth. However, Allete Clean Energy and corporate and other business growth objectives are expected to grow 30%, topping the 15% growth goal.
"So clearly 2020, 2021, in terms of COVID, is having a dampening impact on our revenue and does impact our growth," Bob Adams, Allete’s senior vice president and chief financial officer, said on the call.
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Though the company saw third-quarter 2020 results top results from the same quarter in 2019, it still faces lower kilowatt-hour sales to commercial and industrial customers. Sales to residential customers, however, have increased, the company said.
Higher profits at Minnesota Power reflected higher rates “and year-over-year timing impacts related to income tax expense and fuel adjustment clause recoveries.”
Allete on Monday reported a third-quarter profit of $40.7 million or 78 cents per share, up from a profit of $31.2 million and 60 cents per share reported in the third quarter of 2019.
Allete's regulated businesses, which include Minnesota Power; Superior Water, Light and Power; and its investment in the American Transmission Co., recorded a profit of $42.4 million, compared to $32.4 million in the third quarter of 2019.
The pandemic is still wearing on year-to-date profit, which remains down. In August, Allete lowered its 2020 guidance from $3.40-$3.70 to $3.09-$3.29 per share .
“Our earnings through Sept. 30, 2020, have been negatively affected by COVID-19, and we expect our earnings to continue to be impacted for at least the remainder of 2020,” Owen said. “The pandemic has materially affected Minnesota Power's industrial customers and as a result our sales to these customers.”
But Owen said the company was “so pleased” when U.S. Steel last week announced it would restart Keetac in mid-December .
“While this is great news, any impact on 2020 is expected to be immaterial at this time,” Adams said.
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Verso’s Duluth paper mill, however, remains idled after it shut down in June and searches for a new owner .
Together, Keetac and Verso bring in about $30 million to the company. Industrial customers make up about half of Minnesota Power’s revenue and the utility company was hit hard with a wave of mine and paper plant shutdowns. Keetac is the last mine to come back online.
Verso, however, is expected to remain idle for “part if not all of 2021,” Owen said. Other smaller commercial and industrial companies have faced similar challenges during the pandemic, continuing to impact Minnesota Power’s revenue.
Minnesota Power is expected to pursue its next rate increase in November 2021 with 2022 as a test year.
Shares of Allete rose $4.08 to close at $57.87 Monday. The stock has traded as high as $84.71 and as low as $48.22 in the past 52 weeks.
