ALLETE, Inc. (NYSE:ALE) Q4 2017 Earnings Conference Call Transcript

Feb 15, 2018 • 10:00 am ET

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ALLETE, Inc. (NYSE:ALE) Q4 2017 Earnings Conference Call Transcript

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Q & A
Operator
Operator

(Operator Instructions). Our first question will come from the line of Chris Ellinghaus with Williams Capital. Your line is now open.

Analyst
Chris Ellinghaus

Al, you made some kind of comments in your initial remarks talking about making some adjustments for the Minnesota Power case. Can you talk about what you mean there? And do you anticipate earning your allowed return as a result of those actions?

Executive
Alan R. Hodnik

Well, earning our 9.25% allowed return is an objective of Minnesota Power that we intend to commit ourselves to here. We would look at, as Bob said, all dimensions of the business, all aspects of it and create necessary cost control and adjustments to re-scale and reposition Minnesota Power. So we will earn our 9.25% by virtue of discipline inside the business.

With respect to my comments to the rate case itself, we're going to use our normal channels of reconsideration and filings and motions and all those things that we can do and are allowed to do within the process to ask the Commission to reconsider, if you will, certain aspects of expense disallowance or assets excluded from rate base.

So that process will go on post March 12 when the Commission issues its order. We'll then follow up in response to that order with a normal filing or reconsideration filing on certain items that we think that the Commission either didn't fully understand or that we have a different point of view on and would like to convince the Commission in our reconsideration.

So that's how we're going to come at our interface with both Minnesota Public Utilities Commission and the case itself, but more importantly, inside the organization, we are going to earn our 9.25% with rescaling and repositioning the business.

Analyst
Chris Ellinghaus

Okay, great. As far as the MDU situation goes, they were talking about having a purchase agreement in place by the end of the month. Have they done that yet?

Executive
Robert J. Adams

Well, in terms of the Clean Energy I, Chris?

Analyst
Chris Ellinghaus

Yes.

Executive
Robert J. Adams

Okay. Well, at Clean Energy I, we have a--

Executive
Alan R. Hodnik

No. Clean Energy I, Bob, is the NSP deal.

Executive
Robert J. Adams

Right.

Analyst
Chris Ellinghaus

So yes, yes.

Executive
Alan R. Hodnik

Is that what you are speaking to or MDU?

Analyst
Chris Ellinghaus

MDU, sorry.

Executive
Robert J. Adams

Yes, so MDU has an election by the end of the month in terms of whether they are going to actually acquire the facility or PPA. We expect that timing to be met and we still expect that the option to purchase is what they have in mind.

Analyst
Chris Ellinghaus

Yes. Thunder Spirit, they've made that pretty clear. I just wanted to see if they had executed that yet. Should we also for that expect a similar pattern of earnings recognition during construction in the third and fourth quarters?

Executive
Steve Morris

Chris, Steve Morris. We expect this to be recognized upon completion because of new revenue recognition rules that are in place now, beginning January 2018. So it will be recognized upon completion, which we do expect in 2018, so to the extent, if it was to slip and be completed in 2019, that