DULUTH – Minnesota Power's parent company saw profits fall 6% in 2020 — largely due to the pandemic's impact on large industrial customers — but executives expect a return to growth that will be aided by a planned rate increase request in November.
Allete Inc. reported earnings of $174.2 million last year after earning $185.6 million in 2019. Operating revenue fell from $1.24 billion in 2019 to $1.16 billion in 2020.
"Allete's operating and financial results for 2020 exemplify our company's resilience in the face of unprecedented challenges brought on by the COVID-19 pandemic," CEO Bethany Owen said in a statement Wednesday. "Our early action on safety and financial positioning will enable us to move beyond the pandemic, even stronger, with our clean energy strategy."
Taconite mines, paper mills and other large industrial customers, which in most years comprise more than half of the Duluth-based utility's electricity sales, made up 47% of power sold in 2020, down from 54% in 2019. A number of mines were temporarily idled last summer, though all had resumed production by the end of the year.
With a rebound in the steel industry, Allete expects taconite production to reach 35 million tons this year, up from an estimated 30 million in 2020.
"However, steel production rates remain nearly 10 percent below pre-pandemic levels," Allete Chief Financial Officer Bob Adams told investors Wednesday.
As for the Verso paper mill in Duluth, which has been idled since last summer, the company expects it will not reopen this year. Efforts are underway to find a new owner for the mill, which Minnesota Power initially co-owned when it opened in 1987.
Allete had to suspend earnings guidance early in the pandemic and settled a rate increase as uncertainty loomed but on Wednesday reasserted its target of 5 to 7% annual growth in earnings per share. Adams said a "much-needed" rate request will be filed with regulators in November.
The company recently filed its integrated resource plan with state regulators, which outlines the impending shutdown and transition of Minnesota Power's last coal-fired power plants by 2035 as the company seeks to deliver 100% carbon-free energy by 2050. The utility announced it had reached 50% renewable energy at the end of 2020.
Plans for a new natural gas power plant in Superior, Wis., remain tied up in court. Opponents say no new fossil-fuel infrastructure should be built in the face of climate change, while the company maintains it needs reliable energy when the sun isn't shining and the wind isn't blowing.
Al Rudeck, president of Allete Clean Energy, told investors Wednesday that the company is looking more into solar storage and new projects around the country as it seeks to become a "national clean energy provider," he said.
Allete Clean Energy remained a bright spot for the overall company in 2020 and saw profits increase from $12.2 million in 2019 to $29.9 million last year.
Allete saw its share price rise slightly, to $65.40, in early trading Wednesday, closing at $64.98. It has traded as high as $82.22 and as low as $48.22 in the past 52 weeks.
Brooks Johnson • 218-491-6496