Allete, Inc.

Good day and welcome to the Elite Second 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 or forward-looking statements, such as terms defined in the Private Securities Litigation Reform Act of 1995. Because such statements can include risk 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 reviews only as of the date hereof. The company undertakes no obligation to revise or update any forward-looking statements or to make any other forward-looking statements whether as a result of new information future events, or otherwise. So welcome to the LEADS conference call announcing second quarter 2023 financial results. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. As a reminder, this call is being recorded. 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, and thanks for joining us. With me today 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 second quarter 2023 earnings of $0.90 per share on net income of $51.5 million. Last year's second quarter results were $0.67 per share on net income of $37.6 million. The financial results for the quarter highlight strong results at new energy equity, which we acquired in April of last year. We remain on track and are 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. We're very pleased with our progress through the first half of the year as we execute our sustainability in action strategy. And I'm grateful to our entire team across all of our family of businesses for their dedication, expertise, and innovation, and for all they do to serve our customers with excellence every single day. We're working closely with all of our diverse stakeholders as we advance the clean energy future in truly sustainable ways. On slide three, you can see some of the details of our strategy, which is designed to do all of this while providing value to our customers, meaningful investment in our communities, opportunities for our employees, and long-term earnings and dividend growth for our shareholders. All of that is what we mean when we say we at Elite are leading the way to a truly sustainable clean energy future. Our outstanding Minnesota Power Team continues working diligently to execute our more than $3 billion CAPEX plan. An important part of that plan is our HVDC modernization project. This project will improve reliability and resiliency of the transmission system by replacing aging infrastructure and modernizing the terminal stations for the 465-mile DC transmission line running from center North Dakota to Duluth, Minnesota. Construction could begin on this $800 to $900 million project as early as next year, pending regulatory approvals in North Dakota and Minnesota, with an in-service date expected later this decade. The team is making great progress on this project. In addition to selecting the technology provider and securing key land rights earlier this year, on June 1st, we filed the Certificate of Need and Route Permit application in Minnesota. and we're pleased to report that on July 27th, the Minnesota Public Utilities Commission approved the application as complete, accepted our request to jointly process the certificate of need and the route permit together, and approved the use of an informal review process rather than a contested case. We're grateful to our Minnesota commissioners for these important decisions, as they will allow Minnesota Power to continue moving forward in the Minnesota regulatory process in an efficient and effective manner. We plan to file a separate route permit application with the North Dakota Public Service Commission later this fall and look forward to working with all of our regulators to bring this important and exciting project to fruition. Our team is also making great progress on the Northland Reliability Project, a 345 kV transmission line from the Iron Range in northern Minnesota to central Minnesota, which we'll jointly own with Great River Energy. This project, which is estimated to cost a combined total of $970 million to $1.3 billion, represents another important investment in the reliability and resiliency of the transmission system. On August 4th, we filed a combined certificate of need and route permit application with the Minnesota Commission and will continue to work through the next steps in the regulatory approval process. In June, Minnesota Power celebrated its largest solar facility to date, a 15.2 megawatt project near our Sylvan hydro station. This was one of three solar projects approved by the Minnesota Public Utilities Commission in 2021 to spur economic recovery in northeastern Minnesota following the pandemic. This project was also a unique partnership with White Earth Tribal and Community College, providing students with hands-on learning as part of the college's solar training certificate program. We greatly appreciate the Minnesota Commission's support of these solar projects, which represent meaningful reinvestments in our communities, all constructed with local labor. In addition, this fall, Minnesota Power plans to issue RFPs for nearly all the 700 megawatts of wind and solar that were included in our recently approved Integrative Resource Plan. These RFPs will also emphasize attributes such as reinvestment in our 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. We're looking forward to sharing additional information as these important projects progress. Turning to Elite Clean Energy, as we previously announced, that talented and dedicated team successfully completed two build transfer projects with the sale of its Northern Wind project in Minnesota in January and in early April, the sale of its Red Barn wind facility in Wisconsin to Wisconsin Public Service Corporation and Madison Gas and Electric. And the team is making progress on other fronts as well. Just two weeks ago, we announced that Elite Clean Energy entered into a five-year power purchase agreement to sell wind power to Seattle City Light, the company's first municipal customer. Seattle City Light is among the top 10 largest municipal utilities in the nation, and will purchase power from our 50 megawatt Condon Wind site in Oregon. The power purchase agreement also includes an agreement to jointly explore adding solar and energy storage at the site. We're excited about this new customer and new opportunity for Elite Clean Energy. On slide four, you can see a snapshot of New Energy Equity and just some of why we are so pleased they have joined the Elite family of businesses. The New Energy Equity team had another excellent quarter of project closings, and they continue to grow their already strong pipeline of future projects, including greenfield development and entering new markets. In fact, in the second quarter, the New Energy team closed a highly successful project in a new market, the state of Virginia. Now I'll turn it over to Steve for further details on our 2023 second quarter financial results. Steve?

Thanks, Bethany, and good morning, everyone. I would like to remind you that we filed our 10Q this morning, and I encourage you to refer to it for more details. Please refer to slides 5 and 6 for significant variances and other items for comparison consideration. Today, Elite reported second quarter 2023 earnings of $0.90 per share on net income of $51.5 million. Earnings in 2022 were $0.67 per share on net income of $37.6 million. Net income in the second quarter of 2023 included strong earnings of $7.4 million from new energy, also benefiting 2023 second quarter net income for higher retail sales that are regulated operations, partially offset by reserves for interim rates resulting from Minnesota Power's February rate case order. Elite Clean Energy experienced lower wind resources for much of its fleet as low wind persisted across much of the nation. A few details from our business segments. NELIT's regulated operations segment recorded second quarter 2023 net income of $37.8 million, compared to $29.6 million in 2022. Earnings were higher in the second quarter of 2023, primarily due to increased sales to retail customers and lower property tax expense. These increases were partially offset by the timing of interim rate refund reserves. As you may recall from our year-end earnings call in February, the entire 2022 interim rate refund reserve was recorded in the fourth quarter of 2022. You will see similar timing differences again in the third quarter and fully reversing in the fourth quarter this year. Also impacting 2023 was higher quarter-over-quarter operating and maintenance expense, as we expected, primarily due to inflationary cost pressures. Elite Clean Energy recorded second quarter 2023 net income of $3.1 million compared to $5.8 million in 2022. Low wind resources impacted wind energy facilities across the nation, and Elite Clean Energy was no exception. As a result, second quarter results were below our expectations by approximately 15 cents per share due to the lower wind resources. This negative impact was partially offset by the $160 million sale of the Red Barn build transfer project in April, which resulted in a larger gain than expected by $0.03 per share. Lower than expected operating and maintenance expense also positively impacted Elite Clean Energy's results by $0.03 per share. Our corporate and other businesses, which include New Energy, BNI Energy, and our investments in renewable energy facilities, recorded net income of $10.6 million compared to net income of $2.2 million in 2022. The second quarter of this year included $7.4 million of net income from new energy as a result of another outstanding quarter of project closings with attractive margins and in a new market. We also realized increased earnings from Minnesota solar projects, which were placed into service in late 2022. These increases are partially offset by timing of income tax expense in 2023 versus 2022. Earnings per share dilution in the second quarter was approximately two cents due to additional shares of common stock outstanding as of June 30th. Next, a few comments on our outlook and 2023 guidance. Year to date, we are on track with our original 2023 expectations. and we remain confident in achieving our full year 2023 earnings guidance of $3.55 to $3.85 per share. Regulated operations through the first half of the year were slightly higher than our expectations due to lower property tax expense and higher taconite margins at Minnesota Power. On August 1st, we received demand nominations for the remainder of the year, indicating full year taconite production levels at approximately 37 million tons or 4 million tons higher than our initial sales forecast. In addition, Synovus in Superior, Wisconsin and ST Paper in Duluth, Minnesota have both commenced operations in the first half of 2023. Synovus continues to ramp up operations into the second half of the year. Elite Clean Energy was below our expectations for the first six months of the year as lower wind resources resulted in lower revenue and PTCs. we are anticipating below normal wind for the second half of the year for Elite Clean Energy's fleet. New Energy continues to execute on its plan following another strong quarter of project closings. Its growing and robust pipeline of over two gigawatts further provides confidence for continued strong project closings in the second half of the year. As such, New Energy is firmly on track to achieve or slightly exceed full year earnings of $16 million to $17 million as reflected in our initial guidance. Finally, while financial results at Minnesota Power are slightly above expectations through the first half of the year, we do not expect to earn our allowed return on equity in 2023, in part due to increased inflationary cost pressures as well as adding employees needed to implement our clean energy transformation strategy. It is critical to earn an appropriate return on equity And accordingly, Minnesota Power remains on track to file a rate case in November this year. And I'll turn it back to Bethany for additional comments. Bethany?