Despite a relatively strong fourth quarter, Duluth-based Allete Inc. finished 2008 with its profits down 5.8 percent from last year, earning $82.5 million as compared with $87.6 million in 2007.
The primary reason for the decline was a drop in Allete's real estate activities. The company owns and manages a sizeable portfolio of property in Florida, and earnings from those real estate operations declined $15.9 million between 2007 and 2008 as the economy hit the skids, according to Mark Schober, Allete's chief financial officer.
Nevertheless, Allete did deliver profits in keeping with its 2008 earnings estimate, bringing in $2.82 per share.
As it enters 2009, Allete, the parent company of Minnesota Power, faces some new challenges. Don Shippar -- Allete's president, CEO and chairman -- said that a slowdown in the steel industry has impacted mining operations on the Iron Range, and he expects this will result in at least a 25 percent drop in demand for electricity compared with 2008.
Fortunately, however, Shippar said Allete has first quarter contracts in place that give him confidence Minnesota Power will be able to resell surplus power to other utilities at a price relatively consistent with what it would have received from mining customers.
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Even as conventional taconite mines reduce production on the Range, Shippar noted that there are some encouraging signs for Minnesota Power, too, such as a recent contract to supply 15 megawatts of power to Mesabi Nugget when the start-up begins operations during the latter half of the year.
In light of current market conditions, Minnesota Power has decided to slow its development of wind power a bit. Originally, the company had planned to place an additional 125 megawatts of wind power generation in the field by 2010, but it now aims to deploy 75 megawatts.
Schober said the revised plan will help Allete conserve cash, in keeping with its conservative approach to 2009.
Shippar pointed out that some of the new capacity is simply unneeded at present.
"Our load growth has throttled back with the economy," he said.
