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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
or
| | | | | |
☐ | 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
ALLETE, Inc. Second Quarter 2020 Form 10-Q
2
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
3
| | | | | |
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 |
| |
NOX | 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
4
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
5
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
6
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
7
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
8
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
9
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
10
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
11
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 | | |