Allete, Inc.

Good day and welcome to the Elite Third Quarter of 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 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. Welcome to Elite's conference call announcing third quarter 2023 financial results. And 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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 Corporate Development and Elite Clean Energy 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 Investors section, and we'll call out each page number as we go through today's presentation. This morning, we're pleased to report Elite's third quarter 2023 earnings of $1.49 per share on net income of $85.9 million. Last year's third quarter results were $0.59 per share on net income of $33.7 million. Steve will be providing additional details on our financial performance during the quarter and our revised full year 2023 guidance in a moment. I'll begin with brief updates on just a few of our key strategic projects. Starting with our largest business, our Minnesota Power team continues to make significant progress on projects that are foundational to ELITE's sustainability in action strategy. including the more than $3 billion capital expenditure plan to advance our carbon-free energy vision. Slide 3 shows an important part of that plan, our HVDC modernization project. This project will replace aging infrastructure and modernize the terminal stations for our 465-mile DC transmission line running from center North Dakota to Duluth, Minnesota. It provides Minnesota Power's customers direct access to some of the best wind resources in the country and will also enhance the reliability and resiliency of the grid across the Upper Midwest. Our team has worked hard to advance this important project and to secure government grants to help reduce the project's cost for customers. In May, Minnesota Power was awarded a $15 million grant toward the project as part of the energy bill passed by the Minnesota Legislature. And just a couple of weeks ago, we were very pleased to learn that the US Department of Energy awarded Minnesota Power a $50 million grant for the project, following a competitive process among hundreds of applicants nationwide. We're grateful for this meaningful support from the state of Minnesota and the Department of Energy helping to make this important project even more affordable for our customers. 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. 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 was approved by MISO in the first tranche of its long-range transmission plan and is estimated to cost a combined total of $970 million to $1.3 billion, representing another important investment in the reliability and resiliency of the transmission system. In August, we filed a combined certificate of need and route permit application with the Minnesota Public Utilities Commission, and we look forward to working through the regulatory approval process. Another project approved by MISO in the first tranche of its LRTP is the Big Stone South Transmission Project, a 150-mile, 345 kV transmission line jointly owned by five utilities, including Minnesota Power. A certificate of need was filed with the MPUC in September, and the Commission will determine the final route for the Minnesota portion of the project, as well as cost recovery for our approximately $20 million share. In addition to this exciting progress on the transmission front, we're making progress on our renewable RFPs. On October 2nd, Minnesota Power filed a notice with the MPUC of our plan to issue an RFP for up to 300 megawatts of solar later this month. We also plan to issue an RFP for up to 400 megawatts of wind by the end of the year. The solar RFP will emphasize important attributes such as investment 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 solar projects deliver the best overall value to customers while strengthening the communities we're privileged to serve. Please see slides four and five. As planned, yesterday Minnesota Power filed a rate proposal with the Minnesota Public Utilities Commission. This proposal will help ensure Minnesota Power can continue making the energy-forward investments needed to meet the goals of this year's Minnesota legislation requiring 100% carbon-free energy by 2040. Minnesota Power became the first utility in the state to deliver 50% renewable energy in 2020 and reached an all-time high of nearly 60% renewable energy for customers in 2022. And I'm so proud of our Minnesota Power team and all that our company has done to lead our state's clean energy transformation, all while safeguarding reliable service to customers. In addition, we've worked thoughtfully to provide meaningful programs to support our low-income customers, as well as state-leading energy conservation programs and time-of-day rates that provide options for customers to save energy and control their monthly bills. These are just a few examples. While we advance our vision of providing carbon-free energy, we will continue to make affordability for all of our customers a priority. There is more work ahead to ensure that we have the resources and tools needed to accomplish the state's clean energy goals, and that's the reason for the rate proposal Minnesota Power filed yesterday. We're confident that our regulators understand the importance of a constructive outcome to help ensure Minnesota Power's ability to continue our clean energy transformation while delivering the safe, resilient, and reliable service that powers people's lives and businesses throughout northeastern Minnesota. Steve will share more details on the rate case filing in a moment. One other note on the regulated operations front, I'm pleased to report that Superior Water, Light, and Power began generating renewable energy from its first community solar garden last month. Superior Solar is a 470 kilowatt project built by local labor and with regionally sourced materials. The solar garden is fully subscribed, generating enough energy to power approximately 115 homes And it's the first energy generated locally by Superior Water, Light, and Power in more than 40 years. Turning briefly to our non-regulated businesses, it was great to receive the very positive arbitration outcome in favor of Elite Clean Energy recently. The Elite Clean Energy team has endured the historically low wind conditions that affected much of the nation this quarter and have worked hard to mitigate the effects. including increasing efficiencies and unit availability, implementing O&M reductions, and many other initiatives. They're a strong team, and I couldn't be more proud of their resilience and innovation throughout the year. And finally, as we close in on the first full calendar year with new energy equity as part of the elite family of businesses, we're excited about the team's positive momentum. New Energy Equity continues to grow its already strong pipeline of more than 2 gigawatts, all while executing on current projects and delivering solid financial results. As mentioned previously, we expect New Energy to close out the year on track or slightly above original expectations. We've made strong progress throughout this year, and I'm grateful to our entire team across our family of businesses. for their dedication, expertise, resiliency, innovation, and always their integrity. Our team is committed to serving our customers with excellence every single day. Now I'll turn it to Steve for additional details on our third quarter financial results, full year earnings guidance, and Minnesota Power's rate case filing. Steve?

Thanks, Bethany, and good morning, everyone. I would like to remind you that we filed our 10-Q this morning and encourage you to refer to it for more details. Please refer to slides six through eight for significant variances and other items for comparison consideration. Today, Elite reported third quarter 2023 earnings of $1.49 per share on an income of $85.9 million. Earnings in 2022 were $0.59 per share on an income of $33.7 million. Net income this quarter included a $40.5 million or 71 cents per share after tax gain recognized for a favorable arbitration award involving a subsidiary of Elite Clean Energy. Also impacting this quarter was the timing of reserves for interim rates resulting from Minnesota Power's February rate case order. A few details from our business segments. Elite's regulated operations segment recorded third quarter 2023 net income of $34 million compared to $38.3 million in 2022. Earnings were lower in the third quarter of 2023, reflecting the timing of interim rate reserves at Minnesota Power compared to 2022. As you may recall, the entire 2022 interim rate reserve was recorded in the fourth quarter of 2022, which has resulted in timing differences each quarter throughout 2023. The timing difference of these reserves will fully reverse in the fourth quarter this year. Partially offsetting this impact was increased sales to industrial customers during the quarter. Elite Clean Energy recorded third quarter 2023 net income of $54.8 million, compared to a net loss of $7.3 million in 2022. Net income this quarter reflected the gain in interest income for the favorable arbitration award at one of Elite Clean Energy's subsidiaries. 2022 included a reserve of $2.9 million after tax for the anticipated loss on the sale of the Northern Wind project. Our corporate and other businesses, which includes New Energy, BNI Energy, and our investments in renewable energy facilities recorded a net loss of $2.9 million compared to net income of $2.7 million in 2022. Matt income this quarter reflects higher consolidated income tax expense partially offset by earnings from Minnesota solar projects which were placed in the service late last year and in the second quarter this year. New Energy's earnings in this quarter were slightly below 2022 primarily due to the timing of project closings now expected in the fourth quarter and higher operating and maintenance expense as compared to last year. Elite's financial position is supported by a strong balance sheet that includes cash and cash equivalents of approximately $126 million, $370 million in available consolidated lines of credit, and a debt-to-capital ratio of 35% at the end of the quarter. The arbitration award had a positive impact on our liquidity position, with approximately $60 million reflected in cash and cash equivalents at the end of the third quarter. Next, a few comments on our outlook and full year 2023 guidance. Please refer to slide nine for additional details. Considering a number of factors occurring during the year, as well as our anticipated results for the fourth quarter, we have revised the LEED's 2023 full year earnings guidance to be in a range of $4.30 to $4.40 per share. Specific items affecting LEED's updated guidance includes the third quarter arbitration award, a third-party network outage expected to negatively impact the CATA wind energy facility in the fourth quarter, and historically low winds across much of the nation affecting earnings at Elite Clean Energy's wind energy facilities throughout the year. These items in total had a positive impact of approximately 30 cents per share included in our guidance update. Next, a few comments on the recently filed Minnesota Power rate case. Please refer back to slides four and five for several highlights on the filing. Yesterday, Minnesota Power filed a retail rate increase request with the Minnesota Public Utilities Commission, seeking an increase of approximately $89 million in total additional annual revenue, net overrider revenue moving to base rate. The filing seeks a return on equity of 10.3% and a 53% equity ratio. Our request includes net interim rates of approximately $64 million, which is expected to begin in January 2024 with approval by the Commission. Interim rates are subject to refund. We anticipate final rates would be implemented sometime in late 2025. Our rate case request supports Energy Forward goals by transitioning to new supplies of renewable energy, building more resiliency into the electric grid to ensure reliability, employing the workforce necessary to achieve a clean energy transition, addressing inflation and supply chain issues, and by providing a fair return on investment to attract capital for continued investment in the clean energy future. The rate case assumes taconite production of approximately 35 million tons, which is in alignment with the long-term average production levels for taconite. In addition, Minnesota Power has proposed a rate stabilization mechanism to address and mitigate the financial impacts related to operational volatility of its large power customers. This proposal offers a simple and balanced method to align risks and benefits of large power load volatility that can be applied between rate cases. The filing also accounts for approximately $39 million previously approved for recovery through transmission, and renewable riders by the Minnesota Public Utilities Commission for capital costs of the Great Northern Transmission Line and production tax credits by moving rider billings into base electric rates. This change from rider billings to base rates will not alter the total amount we recover from customers. We will share procedural updates on material developments as the filing progresses. And I'll turn it back to Bethany for additional comments. Bethany?