SEC Filing | ALLETE, Inc.

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ale-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from ______________ to ______________

Commission File Number 1-3548

ALLETE, Inc.

(Exact name of registrant as specified in its charter)


Minnesota						41-0418150
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

30 West Superior Street

Duluth, Minnesota 55802-2093

(Address of principal executive offices)

(Zip Code)

(218) 279-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, without par value	ALE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐

Non-Accelerated Filer ☐ Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Common Stock, without par value,

51,880,664 shares outstanding

as of June 30, 2020

Index




Definitions				3

Forward-Looking Statements				5

Part I.	Financial Information

	Item 1.	Consolidated Financial Statements - Unaudited	6

		Consolidated Balance Sheet	6


		Consolidated Statement of Income	7


		Consolidated Statement of Comprehensive Income	8


		Consolidated Statement of Cash Flows	9


		Consolidated Statement of Equity	10


		Notes to Consolidated Financial Statements	11

		Note 1. Operations and Significant Accounting Policies	11


		Note 2. Regulatory Matters	13
		Note 3. Equity Investments	16

		Note 4. Fair Value	17
		Note 5. Short-Term and Long-Term Debt	19
		Note 6. Commitments, Guarantees and Contingencies	20
		Note 7. Earnings Per Share and Common Stock	25
		Note 8. Income Tax Expense	25

		Note 9. Pension and Other Postretirement Benefit Plans	27
		Note 10. Business Segments	27
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

		Comparison of the Quarters Ended	31
		Comparison of the Six Months Ended	34
		Critical Accounting Policies	37
		Outlook	37
		Liquidity and Capital Resources	45
		Other	47
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47

	Item 4.	Controls and Procedures	48

Part II.	Other Information

	Item 1.	Legal Proceedings	49

	Item 1A.	Risk Factors	49

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

	Item 3.	Defaults Upon Senior Securities	50

	Item 4.	Mine Safety Disclosures	50

	Item 5.	Other Information	50

	Item 6.	Exhibits	51

Signatures				52

ALLETE, Inc. Second Quarter 2020 Form 10-Q

Definitions

The following abbreviations or acronyms are used in the text. References in this report to “we,” “us” and “our” are to ALLETE, Inc., and its subsidiaries, collectively.


Abbreviation or Acronym			Term
AFUDC			Allowance for Funds Used During Construction – the cost of both debt and equity funds used to finance regulated utility plant additions during construction periods
ALLETE			ALLETE, Inc.
ALLETE Clean Energy			ALLETE Clean Energy, Inc. and its subsidiaries
ALLETE Properties			ALLETE Properties, LLC and its subsidiaries
ALLETE Transmission Holdings			ALLETE Transmission Holdings, Inc.

ArcelorMittal			ArcelorMittal S.A.
ATC			American Transmission Company LLC
Basin			Basin Electric Power Cooperative
Bison			Bison Wind Energy Center
BNI Energy			BNI Energy, Inc. and its subsidiary
Boswell			Boswell Energy Center
Camp Ripley			Camp Ripley Solar Array

Cliffs			Cleveland-Cliffs Inc.

Company			ALLETE, Inc. and its subsidiaries

COVID-19			2019 novel coronavirus
CSAPR			Cross-State Air Pollution Rule
DC			Direct Current
EIS			Environmental Impact Statement

EPA			United States Environmental Protection Agency

ESOP			Employee Stock Ownership Plan
FASB			Financial Accounting Standards Board
FERC			Federal Energy Regulatory Commission
Form 10-K			ALLETE Annual Report on Form 10-K
Form 10-Q			ALLETE Quarterly Report on Form 10-Q
GAAP			Generally Accepted Accounting Principles in the United States of America
GHG			Greenhouse Gases
GNTL			Great Northern Transmission Line


Hibbing Taconite			Hibbing Taconite Co.
Husky Energy			Husky Energy Inc.
Invest Direct			ALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan
IRP			Integrated Resource Plan
Item ___			Item ___ of this Form 10-Q
kV			Kilovolt(s)
kW / kWh			Kilowatt(s) / Kilowatt-hour(s)
Laskin			Laskin Energy Center
Lampert Capital Markets			Lampert Capital Markets, Inc.

Manitoba Hydro			Manitoba Hydro-Electric Board


Minnesota Power			An operating division of ALLETE, Inc.
Minnkota Power			Minnkota Power Cooperative, Inc.
MISO			Midcontinent Independent System Operator, Inc.
MMTP			Manitoba-Minnesota Transmission Project

Moody’s			Moody’s Investors Service, Inc.

ALLETE, Inc. Second Quarter 2020 Form 10-Q


Abbreviation or Acronym			Term
MPCA			Minnesota Pollution Control Agency
MPUC			Minnesota Public Utilities Commission
MW / MWh			Megawatt(s) / Megawatt-hour(s)
NAAQS			National Ambient Air Quality Standards
NDPSC			North Dakota Public Service Commission
Nobles 2			Nobles 2 Power Partners, LLC
NOL			Net Operating Loss

NO_X			Nitrogen Oxides

Northshore Mining			Northshore Mining Company, a wholly-owned subsidiary of Cleveland-Cliffs Inc.
Note ___			Note ___ to the Consolidated Financial Statements in this Form 10-Q
NPDES			National Pollutant Discharge Elimination System
NTEC			Nemadji Trail Energy Center
Oliver Wind I			Oliver Wind I Energy Center
Oliver Wind II			Oliver Wind II Energy Center

PolyMet			PolyMet Mining Corp.
PPA / PSA			Power Purchase Agreement / Power Sales Agreement
PPACA			Patient Protection and Affordable Care Act of 2010
PSCW			Public Service Commission of Wisconsin
SEC			Securities and Exchange Commission
Silver Bay Power			Silver Bay Power Company, a wholly-owned subsidiary of Cleveland-Cliffs Inc.

SO₂			Sulfur Dioxide
Square Butte			Square Butte Electric Cooperative, a North Dakota cooperative corporation
SWL&P			Superior Water, Light and Power Company
Taconite Harbor			Taconite Harbor Energy Center




Town Center District			Town Center at Palm Coast Community Development District in Florida

U.S.			United States of America
U.S. Water Services			U.S. Water Services Holding Company and its subsidiaries
USS Corporation			United States Steel Corporation
WTG			Wind Turbine Generator

ALLETE, Inc. Second Quarter 2020 Form 10-Q

Forward-Looking Statements

Statements in this report that are not statements of historical facts are considered “forward-looking” and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonable assumptions, there can be no assurance that the expected results will be achieved. Any statements that express, or involve discussions as to, future expectations, risks, beliefs, plans, objectives, assumptions, events, uncertainties, financial performance, or growth strategies (often, but not always, through the use of words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “likely,” “will continue,” “could,” “may,” “potential,” “target,” “outlook” or words of similar meaning) are not statements of historical facts and may be forward-looking.

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identify important factors that could cause our actual results to differ materially from those indicated in forward-looking statements made by or on behalf of ALLETE in this Form 10-Q, in presentations, on our website, in response to questions or otherwise. These statements are qualified in their entirety by reference to, and are accompanied by, the following important factors, in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements that could cause our actual results to differ materially from those indicated in the forward-looking statements:

•our ability to successfully implement our strategic objectives;

•global and domestic economic conditions affecting us or our customers;

•changes in and compliance with laws and regulations;

•changes in tax rates or policies or in rates of inflation;

•the outcome of legal and administrative proceedings (whether civil or criminal) and settlements;

•weather conditions, natural disasters and pandemic diseases, including the ongoing COVID-19 pandemic;

•our ability to access capital markets, bank financing and other financing sources;

•changes in interest rates and the performance of the financial markets;

•project delays or changes in project costs;

•changes in operating expenses and capital expenditures and our ability to raise revenues from our customers;

•the impacts of commodity prices on ALLETE and our customers;

•our ability to attract and retain qualified, skilled and experienced personnel;

•effects of emerging technology;

•war, acts of terrorism and cybersecurity attacks;

•our ability to manage expansion and integrate acquisitions;

•population growth rates and demographic patterns;

•wholesale power market conditions;

•federal and state regulatory and legislative actions that impact regulated utility economics, including our allowed rates of return, capital structure, ability to secure financing, industry and rate structure, acquisition and disposal of assets and facilities, operation and construction of plant facilities and utility infrastructure, recovery of purchased power, capital investments and other expenses, including present or prospective environmental matters;

•effects of competition, including competition for retail and wholesale customers;

•effects of restructuring initiatives in the electric industry;

•the impacts on our businesses of climate change and future regulation to restrict the emissions of GHG;

•effects of increased deployment of distributed low-carbon electricity generation resources;

•the impacts of laws and regulations related to renewable and distributed generation;

•pricing, availability and transportation of fuel and other commodities and the ability to recover the costs of such commodities;

•our current and potential industrial and municipal customers’ ability to execute announced expansion plans;

•real estate market conditions where our legacy Florida real estate investment is located may not improve; and

•the success of efforts to realize value from, invest in, and develop new opportunities.

Additional disclosures regarding factors that could cause our results or performance to differ from those anticipated by this report are discussed in Part I, Item 1A. Risk Factors of ALLETE’s 2019 Form 10-K and Part II, Item 1A. Risk Factors of this Form 10-Q. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which that statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of these factors, nor can it assess the impact of each of these factors on the businesses of ALLETE or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. Readers are urged to carefully review and consider the various disclosures made by ALLETE in this Form 10-Q and in other reports filed with the SEC that attempt to identify the risks and uncertainties that may affect ALLETE’s business.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

ALLETE

CONSOLIDATED BALANCE SHEET

Unaudited


	June 30, 2020	December 31, 2019
Millions
Assets
Current Assets
Cash and Cash Equivalents	$25.7	$69.3
Accounts Receivable (Less Allowance of $1.3 and $0.9)	85.8	96.4
Inventories – Net	82.0	72.8
Prepayments and Other	29.5	31.0
Total Current Assets	223.0	269.5
Property, Plant and Equipment – Net	4,644.5	4,377.0
Regulatory Assets	424.7	420.5
Equity Investments	267.1	197.6


Other Non-Current Assets	201.1	218.2
Total Assets	$5,760.4	$5,482.8
Liabilities and Equity
Liabilities
Current Liabilities
Accounts Payable	$86.1	$165.2
Accrued Taxes	48.5	50.8
Accrued Interest	18.0	18.1
Long-Term Debt Due Within One Year	509.7	212.9

Other	65.4	60.4
Total Current Liabilities	727.7	507.4
Long-Term Debt	1,381.0	1,400.9
Deferred Income Taxes	202.3	212.8
Regulatory Liabilities	569.6	560.3
Defined Benefit Pension and Other Postretirement Benefit Plans	159.5	172.8
Other Non-Current Liabilities	288.1	293.0
Total Liabilities	3,328.2	3,147.2
Commitments, Guarantees and Contingencies (Note 6)
Equity
ALLETE Equity
Common Stock Without Par Value, 80.0 Shares Authorized, 51.9 and 51.7 Shares Issued and Outstanding	1,447.7	1,436.7

Accumulated Other Comprehensive Loss	(23.3)	(23.6)
Retained Earnings	841.3	818.8
Total ALLETE Equity	2,265.7	2,231.9
Non-Controlling Interest in Subsidiaries	166.5	103.7
Total Equity	2,432.2	2,335.6
Total Liabilities and Equity	$5,760.4	$5,482.8

The accompanying notes are an integral part of these statements.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

ALLETE

CONSOLIDATED STATEMENT OF INCOME

Unaudited


	Quarter Ended			Six Months Ended
	June 30,			June 30,
	2020	2019	2020	2019
Millions Except Per Share Amounts
Operating Revenue
Contracts with Customers – Utility	$200.8	$249.8	$466.1	$532.0
Contracts with Customers – Non-utility	39.6	37.7	83.1	109.8
Other – Non-utility	2.8	2.9	5.6	5.8

Total Operating Revenue	243.2	290.4	554.8	647.6
Operating Expenses
Fuel, Purchased Power and Gas – Utility	69.3	87.9	158.3	197.7
Transmission Services – Utility	16.4	19.2	34.9	37.5
Cost of Sales – Non-utility	16.3	16.5	33.2	47.1
Operating and Maintenance	59.0	66.7	120.0	142.9
Depreciation and Amortization	54.5	50.2	107.9	102.1
Taxes Other than Income Taxes	15.0	13.7	27.6	27.3
Total Operating Expenses	230.5	254.2	481.9	554.6
Operating Income	12.7	36.2	72.9	93.0
Other Income (Expense)
Interest Expense	(15.9)	(16.3)	(31.6)	(32.8)
Equity Earnings	6.4	4.8	11.6	10.4
Gain on Sale of U.S. Water Services	—	0.5	—	20.6
Other	5.2	4.2	6.2	11.6
Total Other Income (Expense)	(4.3)	(6.8)	(13.8)	9.8
Income Before Income Taxes	8.4	29.4	59.1	102.8
Income Tax Expense (Benefit)	(8.5)	(4.8)	(22.3)	(1.9)
Net Income	16.9	34.2	81.4	104.7
Net Loss Attributable to Non-Controlling Interest	(3.2)	—	(5.0)	—
Net Income Attributable to ALLETE	$20.1	$34.2	$86.4	$104.7
Average Shares of Common Stock
Basic	51.8	51.6	51.8	51.6
Diluted	51.9	51.7	51.8	51.7
Basic Earnings Per Share of Common Stock	$0.39	$0.66	$1.67	$2.03
Diluted Earnings Per Share of Common Stock	$0.39	$0.66	$1.67	$2.02

The accompanying notes are an integral part of these statements.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

ALLETE

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Unaudited


	Quarter Ended			Six Months Ended
	June 30,			June 30,
	2020	2019	2020	2019
Millions
Net Income	$16.9	$34.2	$81.4	$104.7
Other Comprehensive Income


Unrealized Gain on Securities
Net of Income Tax Expense of $0.1, $0.1, $– and $0.1	0.4	0.1	—	0.2


Defined Benefit Pension and Other Postretirement Benefit Plans
Net of Income Tax Expense of $–, $–, $0.1 and $0.1	0.1	0.2	0.3	0.2
Total Other Comprehensive Income	0.5	0.3	0.3	0.4
Total Comprehensive Income	17.4	34.5	81.7	105.1
Net Loss Attributable to Non-Controlling Interest	(3.2)	—	(5.0)	—
Total Comprehensive Income Attributable to ALLETE	$20.6	$34.5	$86.7	$105.1

The accompanying notes are an integral part of these statements.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

ALLETE

CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited


	Six Months Ended
	June 30,
	2020	2019
Millions
Operating Activities
Net Income	$81.4	$104.7
AFUDC – Equity	(1.4)	(1.3)
Income from Equity Investments – Net of Dividends	(2.2)	(2.2)

Realized and Unrealized (Gain) Loss on Investments and Property, Plant and Equipment	1.1	(2.6)
Depreciation Expense	107.9	100.8
Amortization of PSAs	(5.6)	(5.8)
Amortization of Other Intangible Assets and Other Assets	5.2	7.0
Deferred Income Tax Benefit	(22.3)	(2.1)
Share-Based and ESOP Compensation Expense	3.1	3.3

Defined Benefit Pension and Postretirement Benefit Expense	—	2.1
Provision (Payments) for Interim Rate Refund	11.7	(40.0)
Payments for Tax Reform Refund	(0.1)	(10.3)

Bad Debt Expense	1.1	(0.6)
Gain on Sale of U.S. Water Services	—	(20.6)
Changes in Operating Assets and Liabilities
Accounts Receivable	9.5	34.0
Inventories	(9.3)	(9.5)
Prepayments and Other	3.3	3.4
Accounts Payable	(11.6)	(11.2)
Other Current Liabilities	(8.5)	(24.2)
Cash Contributions to Defined Benefit Pension Plans	(10.7)	(10.4)
Changes in Regulatory and Other Non-Current Assets	(16.8)	(8.5)
Changes in Regulatory and Other Non-Current Liabilities	8.7	(10.8)
Cash from Operating Activities	144.5	95.2
Investing Activities
Proceeds from Sale of Available-for-sale Securities	2.1	6.0
Payments for Purchase of Available-for-sale Securities	(2.3)	(5.9)
Payments for Equity Investments	(66.6)	(4.6)
Return of Capital from Equity Investments	—	8.3
Proceeds from Sale of U.S. Water Services – Net of Transaction Costs and Cash Retained	—	264.2
Additions to Property, Plant and Equipment	(419.9)	(236.0)


Other Investing Activities	(0.7)	14.0
Cash from (for) Investing Activities	(487.4)	46.0
Financing Activities
Proceeds from Issuance of Common Stock	7.9	1.5
Proceeds from Issuance of Long-Term Debt	297.4	100.0

Repayments of Long-Term Debt	(20.9)	(49.8)
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs	67.8	—
Acquisition-Related Contingent Consideration Payments	—	(3.8)

Dividends on Common Stock	(63.9)	(60.7)
Other Financing Activities	(0.5)	(0.8)
Cash from (for) Financing Activities	287.8	(13.6)
Change in Cash, Cash Equivalents and Restricted Cash	(55.1)	127.6
Cash, Cash Equivalents and Restricted Cash at Beginning of Period	92.5	79.0
Cash, Cash Equivalents and Restricted Cash at End of Period	$37.4	$206.6

The accompanying notes are an integral part of these statements.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

ALLETE

CONSOLIDATED STATEMENT OF EQUITY

Unaudited


	Quarter Ended			Six Months Ended
	June 30,			June 30,
	2020	2019	2020	2019
Millions Except Per Share Amounts
Common Stock
Balance, Beginning of Period	$1,441.7	$1,431.1	$1,436.7	$1,428.5
Common Stock Issued	6.0	2.2	11.0	4.8

Balance, End of Period	1,447.7	1,433.3	1,447.7	1,433.3

Accumulated Other Comprehensive Loss
Balance, Beginning of Period	(23.8)	(27.2)	(23.6)	(27.3)
Other Comprehensive Income - Net of Income Taxes
Unrealized Gain on Debt Securities	0.4	0.1	—	0.2
Defined Benefit Pension and Other Postretirement Plans	0.1	0.2	0.3	0.2
Balance, End of Period	(23.3)	(26.9)	(23.3)	(26.9)

Retained Earnings
Balance, Beginning of Period	853.2	794.8	818.8	754.6
Net Income Attributable to ALLETE	20.1	34.2	86.4	104.7
Common Stock Dividends	(32.0)	(30.4)	(63.9)	(60.7)

Balance, End of Period	841.3	798.6	841.3	798.6

Non-Controlling Interest in Subsidiaries
Balance, Beginning of Period	101.9	—	103.7	—
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs	67.8	—	67.8	—
Net Loss Attributable to Non-Controlling Interest	(3.2)	—	(5.0)	—

Balance, End of Period	166.5	—	166.5	—

Total Equity	$2,432.2	$2,205.0	$2,432.2	$2,205.0

Dividends Per Share of Common Stock	$0.6175	$0.5875	$1.235	$1.175

The accompanying notes are an integral part of these statements.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and do not include all of the information and notes required by GAAP for complete financial statements. Similarly, the December 31, 2019, Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. In management’s opinion, these unaudited financial statements include all adjustments necessary for a fair statement of financial results. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Operating results for the quarter and six months ended June 30, 2020, are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2020. For further information, refer to the Consolidated Financial Statements and notes included in our 2019 Form 10-K.

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents and Restricted Cash. We consider all investments purchased with original maturities of three months or less to be cash equivalents. As of June 30, 2020, restricted cash amounts included in Prepayments and Other on the Consolidated Balance Sheet include collateral deposits required under ALLETE Clean Energy loan and tax equity financing agreements. The restricted cash amounts included in Other Non-Current Assets represent collateral deposits required under ALLETE Clean Energy PSAs and construction projects. In December 31, 2018 balance presented, the amount also includes deposits from a SWL&P customer in aid of future capital expenditures. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet that aggregate to the amounts presented in the Consolidated Statement of Cash Flows.


Cash, Cash Equivalents and Restricted Cash	June 30, 2020	December 31, 2019	June 30, 2019	December 31, 2018
Millions
Cash and Cash Equivalents	$25.7	$69.3	$203.1	$69.1
Restricted Cash included in Prepayments and Other	7.3	2.8	0.9	1.3
Restricted Cash included in Other Non-Current Assets	4.4	20.4	2.6	8.6
Cash, Cash Equivalents and Restricted Cash on the Consolidated Statement of Cash Flows	$37.4	$92.5	$206.6	$79.0

Inventories – Net. Inventories are stated at the lower of cost or net realizable value. Inventories in our Regulated Operations segment are carried at an average cost or first-in, first-out basis. Inventories in our ALLETE Clean Energy segment and Corporate and Other businesses are carried at an average cost, first-in, first-out or specific identification basis.


Inventories – Net	June 30, 2020	December 31, 2019
Millions
Fuel (a)	$33.5	$25.9
Materials and Supplies	48.5	46.9




Total Inventories – Net	$82.0	$72.8

(a) Fuel consists primarily of coal inventory at Minnesota Power.

ALLETE, Inc. Second Quarter 2020 Form 10-Q

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)


Other Non-Current Assets	June 30, 2020	December 31, 2019
Millions
Contract Assets (a)	$26.7	$28.0

Operating Lease Right-of-use Assets	25.4	28.6
ALLETE Properties	21.5	21.9
Restricted Cash	4.4	20.4
Other Postretirement Benefit Plans	38.4	37.5
Other	84.7	81.8
Total Other Non-Current Assets	$201.1	$218.2

(a) Contract Assets consist of payments made to customers as an incentive to execute or extend service agreements. The contract payments are being amortized over the term of the respective agreements as a reduction to revenue.


Other Current Liabilities	June 30, 2020	December 31, 2019
Millions

PSAs	$12.4	$12.3

Provision for Interim Rate Refund (a)	11.7	—

Operating Lease Liabilities	6.6	6.9
Other	34.7	41.2
Total Other Current Liabilities	$65.4	$60.4

(a)Provision for Interim Rate Refund represents reserves for interim rates resulting from the MPUC’s approval of Minnesota Power’s petition and proposal to resolve and withdraw its rate case. (See Note 2. Regulatory Matters.)


Other Non-Current Liabilities	June 30, 2020	December 31, 2019
Millions
Asset Retirement Obligation	$164.8	$160.3
PSAs	58.3	64.6

Operating Lease Liabilities	18.8	21.8
Other	46.2	46.3
Total Other Non-Current Liabilities	$288.1	$293.0


Other Income
Six Months Ended June 30,	2020	2019
Millions
Pension and Other Postretirement Benefit Plan Non-Service Credits (a)	$4.8	$3.6
Interest and Investment Income (Loss)	(0.5)	2.5
AFUDC - Equity	1.4	1.3
Gain on Land Sales	0.1