Allete, Inc.

Good day and welcome to the Elite First Quarter 2023 Financial Results Call. Today's call is being recorded. Certain statements contained in this conference call that are not descriptions of historical facts are forward-looking statements, such as terms defined in the Private Securities Litigation Reform Act of 1995. Because such statements can include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include but are not limited to those discussed in filings made by the company with the Securities and Exchange Commission. Many of the factors that will determine the company's future results are beyond the ability of management to control or predict. Listeners should not put undue reliance on forward-looking statements which reflect management's reviews only as of the date hereof. The company undertakes no obligation to revise or update any forward-looking statements or to make any forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, press star 11 again. I would now like to turn the call over to Bethany Owen, Chair, President, and CEO. You may begin.

Thank you, and good morning, everyone. We appreciate your joining us today. With me are Elite Senior Vice President and Chief Financial Officer Steve Morris, Jeff Sissons, Elite Clean Energy's Chief Financial and Strategy Officer, and Frank Fredrickson, Minnesota Power's Vice President of Customer Experience and Engineering Services. Corresponding slides for this morning's call are available on our website at Elite.com in the Investor section. We'll call out each page number as we go through today's presentation. This morning, Elite reported first quarter 2023 earnings of $1.02 per share on net income of $58.2 million. Last year's first quarter results were $1.24 per share on net income of $66.3 million. Although weather conditions in the quarter did affect our results, we are on track and reaffirming Elite's original full-year earnings guidance range of $3.55 to $3.85 per share. Steve will be providing additional details on our financial performance during the quarter in a moment. Please refer to slides three through five. We continue to be recognized as a leader in advancing clean energy. In fact, for the second year in a row, an independent study has ranked Elite as the number one investor in renewable energy relative to market capitalization among all U.S. investor-owned utilities. We're proud of that statistic, but Elite's strategy is not just about adding renewable energy. It's also about making important investments in projects to help ensure we get this clean energy transition right. right for our customers, our communities, and the climate. This is what we mean when we describe our purpose as leading the way to a truly sustainable clean energy future. On slide four, you can see some of the details of our sustainability in action strategy, which is designed to meet these critical goals while providing value and supporting long-term earnings and dividend growth for our shareholders. Our Minnesota Power Team is hard at work executing our more than $3 billion CAPEX plan. We're making significant progress on our HVDC modernization project, including selection of the technology provider and securing key land rights. And we expect to file the Certificate of Need application with the Minnesota Public Utilities Commission later this month. In addition, in the second half of this year, Minnesota Power will begin the initial phases of the RFPs for nearly all the 700 megawatts of wind and solar that were included in our recently approved Integrative Resource Plan. These RFPs will emphasize attributes such as meaningful reinvestment in host communities, the use of local labor, and a focus on increasing supplier and workforce diversity. All of this will help ensure these clean energy projects deliver the best overall value to customers while strengthening the communities we are privileged to serve. This is important to us at Elite because it will mean growing our company and advancing the energy transition in ways that are truly just and equitable. I'm looking forward to sharing additional information as these important projects progress. As we announced more recently, Elite Clean Energy has completed two of its build transfer projects, with the sale of its 100 megawatt Northern Wind project in Minnesota in January, and in early April, the sale of its 92 megawatt Red Barn Wind facility in Wisconsin to Madison Gas and Electric and Wisconsin Public Service Corporation. And last month marked the one-year anniversary of New Energy Equity joining the elite family of companies. New Energy is one of the nation's leading solar development companies and is the top solar development company in the states of Virginia, Illinois, and Minnesota. We're very proud that the talented New Energy team had a record first quarter of project closings, and they continue to grow their already strong pipeline of future projects. Now I'll turn it over to Steve for further details on our 2023 first quarter financial results. Steve?

Thanks, Bethany, and good morning, everyone. I would like to remind you that we filed our 10-Q this morning, and I encourage you to refer to it for more details. Please refer to slides 6 and 7 for significant variances and other items for comparison consideration. Today, Elite reported first quarter 2023 earnings of $1.02 per share on net income of $58.2 million. Earnings in 2022 were $1.24 on net income of $66.3 million. Net income in the first quarter of 2023 included $4.7 million after tax or 9 cents per share due to the timing of reserves for interim rates resulting from Minnesota Power's 2022 general rate case. As you may recall from our year-end earnings call in February, the entire 2022 interim rate reserve was recorded in the fourth quarter of 2022 So you will see similar timing differences in the second and third quarters and fully reversing in the fourth quarter this year. Interim rates will continue to be collected until final rates are implemented, which is expected to occur in the third quarter this year. Overall weather conditions also impacted Elite's consolidated earnings by approximately 10 cents per share versus last year. Elite's regulated operation segment recorded first quarter 2023 net income of $40.6 million compared to $51.5 million in 2022. Earnings for 2023 reflect lower net income at Minnesota Power primarily due to the timing of interim reserves previously mentioned and lower kilowatt-hour sales due to milder winter weather conditions as compared to last year. Also impacting 2023 was higher operating and maintenance expense. Elite Clean Energy recorded first quarter 2023 net income of $8.5 million compared to $16.5 million in 2022. Net income in 2023 reflects lower wind resources and availability across much of the fleet and higher operating and maintenance expense compared to 2022. Net income last year also included earnings from the legacy northern wind facilities, which were decommissioned in April 2022 as part of Elite Clean Energy's repower and sale of the Northern Wind project. We do expect some of the negative weather impacts in the first quarter to be offset by the profitable sale of the Red Barn project in the second quarter this year. Our corporate and other businesses, which include New Energy, BNI Energy, and our investments in renewable energy facilities, recorded net income of $9.1 million compared to a net loss of $1.7 million in 2022. The first quarter of this year included $4.1 million of net income from New Energy and had record closings of over 30 megawatts. 2022 included transaction costs of $1.4 million after tax related to the acquisition of New Energy, which was acquired in April of 2022. We also had We also recorded earnings from Minnesota solar projects placed into service in late 2022. Earnings per share dilution in the first quarter was approximately $0.08 due to additional shares of common stock outstanding as of March 31, resulting from our secondary offering completed in April of last year. Next, a few comments on our outlook and 2023 guidance. Overall, regulated operations were in line with internal expectations for the quarter, as higher taconite margins offset negative weather impacts on other regulated sales. Our taconite customers began the year with production levels similar to where they were the last half of 2022, and with Cleveland Cliffs' announcement last week that it had restarted part of its North Shore mining operation and strong nominations from other taconite customers through the summer months, We now expect full-year taconite production will be higher than our initial sales forecast estimates of approximately 33 million tons. Another positive announcement came last week when Synovus announced they have completed the rebuild of the refinery in Superior, Wisconsin and have restarted operations and plan to be at full production by mid-year. Elite Clean Energy was below our expectations for the quarter by approximately $0.05 per share primarily due to weather impacts causing more wind resources and availability across much of the fleet. However, the $160 million profitable sale of the Red Barn to Build Transfer project in April will be a positive impact to our second quarter financial results. Also, we are quite pleased that New Energy had another record quarter of project closings and has a growing and robust pipeline of over two gigawatts further provides confidence for strong project closings in the coming quarters. As such, New Energy is on track to achieve full-year earnings of $16 million to $17 million as reflected in our initial guidance. Considering these items in total, we remain on track to achieve our full-year 2023 earnings guidance of $3.55 to $3.85 per share. Finally, Elite's financial position is supported by a strong balance sheet that includes cash and cash equivalents of $30 million, $230 million in available consolidated lines of credit, and our debt-to-capital ratio was 37% as of March 31, 2023. In addition, in April, Elite Clean Energy received approximately $160 million in proceeds from the sale of the Red Barn project, and Elite issued $125 million in first mortgage bonds last month, at an interest rate of less than 5%. And I'll turn it back to Bethany for additional comments. Bethany?