Strong steel industry brightens outlook for Allete
The Duluth-based power provider anticipates mines will continue to operate at or near capacity for the remainder of 2021.
During a Wednesday morning earnings call with power industry analysts, Allete Inc. Chair, President and CEO Bethany Owen touted the company's plans to cut carbon emissions 80% by 2035, with the goal of completely eliminating its carbon output by 2050. Allete is the parent company of Duluth-based Minnesota Power.
"It's clear that clean energy is the place to be," she said.
But Owen stressed the need for a varied portfolio.
"Minnesota Power's renewable energy supply includes a diverse mix of wind, hydro, solar and biomass resources. We believe that diversity is important in so many ways. And when it comes to energy, having a diverse supply of renewable resources is the most responsible way to transition to a clean energy future, because customers and communities expect reliable energy around the clock," she said.
"This is especially true for Minnesota Power's industrial customers, as they progress on their own sustainability journeys, while maintaining 24-7 operations for their customers. As for those largest customers, we're so pleased that they've rebounded and that the steel industry is strong. In fact both Cleveland-Cliffs and U.S. Steel recently increased their guidance for the year, driven by strong ore and steel markets," Owen noted.
She also pointed to a couple new industrial customers that are expected to arrive on the scene soon: ST Paper, which plans to convert the Verso paper mill in Duluth to produce recycled tissue, and Huber Engineered Woods, which plans to produce oriented-strand board in Cohasset.
"These are important signals that Minnesota is open for business as the economy recovers, and all of these customers are important to the economic health of our entire region," Owen said.
"Consistent with the robust steel market recovery, we expect production from Minnesota Power's taconite customers to be near full production for the remainder of the year — a significant increase from our projections earlier this year," said Steven Morris, Allete's controller and chief accounting officer.
For the second quarter of 2021, Minnesota Power reported earning of 53 cents per share on net income of $27.9 million — compared with earnings of 39 cents per share on net income of $20.1 million during the second quarter of last year. But the year-to-year quarterly results are actually quite similar when a 2020 rate case decision forced Minnesota Power to charge off $8.3 million, equating to a reduction of 16 cents per share, said Allete Senior Vice President and Chief Financial Officer Bob Adams.
Owen said Allete remains on track to deliver on earnings guidance for the year of between $3 and $3.30.