PUC wants buyers of Duluth energy company Allete to clarify local workforce commitment

State utility regulators told buyers of Duluth energy company Allete that commitment to the northern Minnesota workforce and community would be key when scrutinizing the $6.2 billion deal announced Monday.

Katie Sieben, a DFLer who chairs the Public Utilities Commission (PUC), said Thursday that the commission cares for and has concerns about employees at Minnesota Power, Allete's electric utility. She asked the buyers — investment fund Global Infrastructure Partners (GIP) and the Canada Pension Plan (CPP) Investment Board — to address what the transition would mean for those people when the company files official paperwork with the five-member board in July.

"The partners certainly [need to] understand the deep relationship that [Allete] has had with organized labor and the International Brotherhood of Electrical Workers," Sieben said.

Allete, GIP and CPP need PUC approval to move ahead with the sale, which would take the company private. Leaders from all three were at the PUC meeting to present basic details of the deal. It was also the first chance for commissioners — three DFL, one independent and one Republican — to ask questions about an uncommon acquisition that could stretch into next year.

Jonathan Bram, a founding partner at GIP, said the firm would own 60% of Allete while CPP would own the other 40%. GIP manages $112 billion and focuses on infrastructure sectors including energy, transportation and water services. The enormous investment company BlackRock struck a deal in January to buy GIP, giving the firm new muscle in the utility sector should that sale finalize.

CPP manages retirement funds for more than 21 million Canadians and has more than $590 billion in assets in Canadian dollars.

Allete CEO Bethany Owen said earlier this week there would be no layoffs as a result of the transaction, and the buyers promised to honor union agreements. Owen will stay on as top executive, and the headquarters will remain in Duluth, the company said.

Bram and Palak Trivedi, principal at CPP, broadly portrayed themselves as continuing Allete and Minnesota Power's existing trajectory. That would do plenty to make money, Bram said.

As for employees, Bram told the PUC having a "very, very strong leadership team and employee base is essential" for its investment.

"In infrastructure investing, because the capital commitments are so enormous, having well-trained, excellent employees, making sure they can do their work at the very highest level and safely is a predicate for making investment," he said.

Allete has about 1,500 employees, of which 1,140 are in Minnesota. The company owns a clean energy developer and coal miner BNI Energy in North Dakota in addition to Minnesota Power and the Superior utility in Wisconsin.

Bram also made the case for why Allete would benefit from the purchase and going private. He said Minnesota Power is a relatively small investor-owned utility, and the public market has certain expectations for dividends.

"The company is really at an inflection point," Bram said. "If you look at the capital commitment necessary to really accomplish the energy transition that's in front of it, we and our colleagues at CPP will be more flexible."

Owen reiterated that ready access to capital is a selling point for the relatively small Allete rather than raising money in sometimes volatile public markets. Owen said Allete plans to raise about $4.3 billion in the next five years for energy generation and infrastructure like transmission lines. The company's market value is only about $3.4 billion.

Republican Commissioner John Tuma said he had no foreign ownership concerns with CPP. DFLer Valerie Means asked Allete about its commitment to low-income programs and diversity she would like to see continue. Owen said that "nothing will change, only strengthen." Independent Commissioner Hwikwon Ham asked for a commitment to Minnesota's regulatory model.

The sale is already attracting significant attention in Minnesota. Officials from the Department of Commerce, the Attorney General's Office and ratepayer advocacy group Citizens Utility Board of Minnesota were all at the meeting. Regulators in Wisconsin and in the federal government also must vote on the sale.

Minnesota Power serves 150,000 residential and commercial customers across northeast Minnesota, selling a majority of its electricity to commercial endeavors like taconite mines and paper mills that are critical to the regional economy. Minnesota Power would continue as a state-regulated utility, and Allete said the sale should not affect electric rates.

Sieben suggested Allete might have to go through what's known as a contested case hearing, a trial-like proceeding in front of an administrative law judge, to receive public input and hash out any issues.

"The advantage of a contested case is there will be significant interest in the acquisition, and its an opportunity for the company to talk to local communities in a more structured manner and get input from around the state," she said.