Private equity giant will control northern Minnesota’s biggest power company

State regulators on Friday approved the sale of northern Minnesota’s largest power company to an ownership group led by a subsidiary of BlackRock, the world’s largest asset manager.

The Minnesota Public Utilities Commission (PUC) voted unanimously for the $6.2 billion sale of Duluth-based Allete, parent of Minnesota Power, siding with supporters who said the deal would guarantee money for carbon-free technology required under state law.

Opponents of the transaction argued the profit-driven buyers would drive up electric bills for Allete customers and that private equity should not be allowed to take control of an energy company.

The PUC will still have the authority to approve or deny rate increases, as well as the company’s plans to build new wind, solar, power lines and other projects.

Katie Sieben, a DFLer who chairs the PUC, said the sale will make customer bills more affordable and the system more reliable.

“Minnesota Power does need massive amounts of investment,” she said. “That’s not due to the state’s carbon-free law, necessarily, but also due to the fact that many of the utility’s assets are at end of age and need investment.”

The vote was the last regulatory hurdle for the sale, which will take the publicly-traded company private. It was already approved by the federal government and the state of Wisconsin. Minnesota Power serves 150,000 customers.

Allete argued the deal was needed to raise cash to comply with Minnesota’s carbon-free law. The company says it will spend more than $4 billion over the next five years, primarily on transmission lines, solar, wind and large-scale batteries as the company seeks to shutter a large coal plant in Cohasset.

During a hearing at the PUC last week, Minnesota Power said the transaction was already stabilizing the company, which depends heavily on large industrial customers. Earlier this year, Cleveland-Cliffs, the utility’s second-largest customer, idled two mines in the region.

That has caused a “significant and severe revenue deficiency,” said Jennifer Cady, Allete’s vice president of regulatory and legislative affairs. That would normally prompt Minnesota Power to ask for higher rates.

Most opponents of the sale, which bitterly divided clean energy groups, support Minnesota’s carbon-free law. That includes Attorney General Keith Ellison, the Citizens Utility Board of Minnesota and several environmental nonprofits.

“It’s about making money for Allete’s shareholders and above-market profits for its would-be owners,” said assistant attorney general Peter Scholtz, during a hearing at the PUC last week.

Most of the five utility commissioners — who are appointed by Gov. Tim Walz — said they were initially skeptical of the deal. But they were swayed as Allete and its buyers agreed to many conditions in negotiations with the Walz administration, and later at the request of the PUC.

Allete won’t be able to ask for higher rates before November 2026, will pay $50 million in bill credits for customers, $50 million for a carbon-free technology fund, substantially reduce past-due bills, abide by regulations meant to ensure greater transparency and independent governance, and limit changes or cuts to its workforce.

Audrey Partridge, a DFL commissioner, pushed the utility and its buyers to agree to a $10 million fund to reduce space heating and cooling costs and save money for customers.

A proposal by independent commissioner Hwikwon Ham imposes a five-year cap on a profit metric that will limit bill increases.

Sieben had proposed the bill credits, and said the money could benefit mining and paper production along with household customers.

Minnesota Power estimated the package amounts to about $200 million in total benefits for customers.

When the sale was announced, GIP and CPP promised to keep Allete’s headquarters in Duluth, retain the company’s leadership team and refrain from requiring customers to cover costs of the transaction.

Last week, Joseph Sullivan, a DFL commissioner, pressed the buyers on their vision for owning and operating the utility and why it’s good for both customers and the new owners.

Jonathan Bram, a GIP founding partner, pushed back on the bad reputation of private equity.

“We all think of private equity and we think of ‘Barbarians at the Gate’ and takeover,” Bram said. “But since around 2000, there’s been infrastructure funds which are totally distinct, investors looking for different things, different motivations.”

Bram said private ownership is better for the company during this period of energy transition, facing fewer risks in a more volatile public market.

“The entire premise is, if we see this business through ... to the other side of this, it will be a more valued company,” Bram said. “Because it will have retired these very important risks.”

On Monday, the Financial Times reported that GIP is making an even bigger play for utility companies, nearing a $38 billion deal for the massive utility group AES.

The news outlet described it as one of the largest infrastructure takeovers of all time, and emphasized the deal may happen as the proliferation of AI data centers spikes energy demand.

Minnesota Power has not announced any deals to supply electricity to major data centers, and the company’s large infrastructure needs are driven in part by the shift away from fossil fuels to carbon-free energy.

Ham said he had to compare the risks of raising money in the financial markets versus the “potential risk of two partners’ misbehavior.”