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ALLETE maps out plan to acquire wind assets, utilize safe-harbored projects

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ALLETE maps out plan to acquire wind assets, utilize safe-harbored projects

ALLETE Inc. subsidiaries ALLETE Clean Energy Inc. and Minnesota Power Inc. are expanding their renewable portfolios, and while some wind projects are slated to come online as early as this year, a stockpile of safe-harbored wind turbines eligible for the federal production tax credit and totaling roughly 600 MW of generation capacity ensures development will continue well into the 2020s.

"We still have some turbines that have 100% PTC qualification and that's about 100 MW of potential there that would have to be built by the end of 2020 to qualify," CFO and Senior Vice President Bob Adams said on the company's second-quarter earnings conference call Aug. 1, referring to safe-harbored turbines owned by ALLETE Clean Energy. "We have about 400 MW of potential projects in the 80% PTC safe-harbor category and we actually have about another 100 MW in the 60% category."

"Beyond that," said Adams, "we continue to be active in redoubling our efforts around traditional M&A around existing assets and we think there's a lot opportunity there."

ALLETE narrowed its guidance, which both Adams and Vice President, Controller and Chief Accounting Officer Steven Morris attributed to lower-than-expected wind resources, a phenomenon the company expects will continue throughout 2019.

Regardless, the lack of wind does not appear to be a long-term concern. "We consider it to be an anomaly," said Adams.

ALLETE Clean Energy, which owns approximately 550 MW of operational wind assets, aims to have a portfolio of 1,500 MW of operational assets by the end of 2022. The company will make progress toward that goal with the completion of the 106-MW Glen Ullin Energy Center in Mercer County, N.D., and the 80-MW South Peak Wind Farm in Judith Basin County, Mont., both of which are expected online in 2019. Glen Ullin and South Peak, which represent a combined $290 million capital investment, according to ALLETE President Bethany Owen, have power purchase agreements with Northern States Power Co. and NorthWestern Corp., respectively.

Diamond Spring Wind Farm (Bergen Ranch) in Johnston County, Okla., meanwhile, is slated to be ALLETE Clean Energy's largest facility at 303.6 MW and has signed power purchase agreements with Smithfield Foods Inc., Starbucks Corp. and Walmart Inc.

The projects will, at least in part, be financed with tax equity, according to Adams.

"We are relying on the tax equity market for financing our new PTC-qualified projects, including [Nobles 2 Power Partners Wind Farm], South Peak, Glen Ullin and Diamond Spring," said Adams. "I am pleased to report we have recently completed a competitive bid process for some of our 2019-2020 projects and have found the tax equity market to be very attractive for high-quality projects such as ours."

Nobels 2, a 250-MW project in which Minnesota Power owns a 49% stake alongside majority-owner Tenaska Inc., is expected online in 2020 and represents a $190 million investment on ALLETE's part, according to Owen.

Minnesota Power is also moving along with approvals for the Nemadji Trail Energy Center, a 625-MW combined-cycle gas-fired project it co-owns with Dairyland Power Cooperative. Final approvals are expected from the Public Service Commission of Wisconsin in the second quarter of 2020, said Owens, who told listeners on the call that "natural gas is a necessary and enabling component in the renewable energy mix to ensure reliability and affordability for Minnesota Power's customers."

In the meantime, Minnesota Power is heading toward completion of the Great Northern Transmission Line on schedule and on budget, said Owen. The transmission line, in which Minnesota Power has invested $345 million, is expected to begin delivering 250 MW of hydro-generated power from Canada in 2020.