ALLETE, Inc. (ALE) Earnings Call Transcript & Summary

Good morning, and welcome to the ALLETE Annual Meeting of Shareholders. I will now turn it over to Maggie Thickens, ALLETE's Vice President, Chief Legal Officer and Corporate Secretary. Maggie?

Thank you, operator. Welcome to the 2020 Annual Meeting of ALLETE Shareholders. I am Maggie Thickens, ALLETE's Vice President, Chief Legal Officer and Corporate Secretary. With me today are Executive Chairman, Al Hodnik; ALLETE's Chief Executive Officer, Bethany Owen; ALLETE's Senior Vice President and Chief Financial Officer, Bob Adams; and Vice President, Controller and Chief Accounting Officer, Steve Morris. Thank you for attending our first virtual annual meeting. This new format enables us to follow appropriate safety protocols in this challenging time. Our agenda today is the same as our traditional in-person meeting. First, we will conduct our legally required business, and then you will hear our CEO's update on the company. We will end the meeting by answering as many questions from shareholders as we can before the meeting concludes at 11:30 a.m. In the interest of time, we will limit shareholders to 2 questions each. I have a few details to share with you to help ensure you have the best experience possible with this new meeting format. If you haven't yet voted your shares or wish to change your vote, you can still do so by following the online voting instructions on the lower part of the welcome screen. If you have already voted, your vote has been counted. Voting will remain open until we have announced the items to be addressed during our business agenda, at which time we will announce that voting has closed. We encourage questions from our shareholders. If you would like to submit a question, please click on the question icon on the welcome screen, highlighted in red on this slide. We will respond to questions during the question-and-answer portion of the meeting immediately following the CEO's update. If you have any challenges with this annual meeting's site or if you have any questions about voting, please call the technical support number at the bottom of the welcome screen. At any time during the meeting, you can return to the welcome screen by clicking the icon highlighted in red on this slide. For your reference, the rules of conduct for the meeting are available on the welcome screen. We ask that you observe these rules for the meeting. I will serve as secretary of the meeting and Al Hodnik, Executive Chairman of the Board, will chair the meeting. Al?

Thanks, Maggie, and good morning, fellow shareholders. Speaking on behalf of the ALLETE Board of Directors, all of whom are joining us remotely today, thank you for your attendance, and welcome to ALLETE's first virtual Annual Meeting of Shareholders. Each year, for decades, hundreds of ALLETE shareholders have joined us for this annual meeting. However, the COVID-19 pandemic changed our collective world in a few short months, including changing this meeting format. This virtual annual meeting was conceived to ensure the safety of our shareholders, our employees, our Board, our community and all other stakeholders by following social distancing guidance regarding large gatherings. Due to the virtual format, we will have no drawings for shares, and unfortunately, we will not be getting together for lunch afterward. I will miss visiting with you all in person. Across ALLETE, the core value of safety has also led to numerous changes and new procedures designed to protect our employees and their families, our customers and our communities. After we have conducted our essential business, you will hear more about ALLETE's COVID-19 response as well as receive a company update from ALLETE President and Chief Executive Officer, Bethany Owen. The business portion of today's meeting will be conducted similarly to past years with voting by proxy. Maggie Thickens will now report on certain procedural matters. Maggie?

Mr. Chairman, as of the close of business on March 13, 2020, the record date for determining shareholders entitled to vote at this annual meeting, 51,777,548 shares of ALLETE common stock were issued and outstanding and entitled to be voted. Because of the length of the shareholder list, we vote by proxy. The required notice of this meeting was mailed on or after March 26, 2020, to all shareholders of record on March 13, 2020, the record date. And notice of the change of meeting and the supplemental proxy materials were mailed on or after April 17, 2020. An affidavit to that effect will be filed with the records of this meeting. The inspectors of election have reported that 84% of all the outstanding voting shares of the company are represented at the meeting by proxy. Therefore, legal notice has been given, a quorum is present, the meeting is now regularly and lawfully convened and ready to transact business. Mr. Chairman?

Thanks, Maggie. As described in the proxy statement, the principal business of the meeting this morning is: First, to elect a Board of Directors to serve for the ensuing year. The nominees are: Kathryn W. Dindo, George G. Goldfarb, Alan R. Hodnik, James J. Hoolihan, Heidi E. Jimmerson, Madeleine W. Ludlow, Susan K. Nestegard, Douglas C. Neve, Bethany M. Owen and Robert P. Powers. Second, to hold an advisory vote to approve ALLETE's executive compensation. The final item of business is the proposal to ratify the selection of PricewaterhouseCoopers LLP as ALLETE's independent registered public accounting firm for 2020. That concludes the list of items of business for consideration by shareholders at this meeting. There being no further business presented for the meeting, I now hereby declare that the voting is closed. The final vote total, including ballots properly submitted today, will be reported in our Form 8-K to be filed with the Securities and Exchange Commission within 4 business days following this meeting. We will also post the 8-K on our website. I have received the preliminary report from the inspectors of election. And according to the preliminary report, a majority of voting shares present and entitled to vote at this meeting voted in favor of electing each of the 10 nominees for director listed in the proxy statement. 10 directors have been elected to serve until the next annual meeting of the company and until their successors shall be elected and qualified. They are Kathryn W. Dindo, George G. Goldfarb, Alan R. Hodnik, James J. Hoolihan, Heidi E. Jimmerson, Madeleine W. Ludlow, Susan K. Nestegard; Douglas C. Neve, Bethany M. Owen, Robert P. Powers. Congratulations to the elected Board members of ALLETE. Majority of all voting shares present and entitled to vote at this meeting voted to approve an advisory resolution on executive compensation by more than 95.5% of the shares voted. Last but not least, a majority of all voting shares present and entitled to vote at this meeting voted to ratify the selection of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for 2020 by more than 96.4% of the shares voted. With those results known, that concludes the business portion of this year's meeting. As was announced in February of this year, your Board of Directors elected Bethany Owen to serve as ALLETE's next Chief Executive Officer. Bethany has done a stellar job leading the company through these difficult and unprecedented times. I will now turn the meeting over to President and Chief Executive Officer, Bethany Owen, for an update on its COVID-19 response and overall company strategy. Bethany?

Good morning, everyone, and thank you, Al and Maggie, for leading the business portion of the meeting. Al, I'm grateful that you will serve as Executive Chairman for the next year before your planned retirement in 2021. Thank you, and congratulations to you. It's truly an honor to lead such a great organization and such an amazing team of talented and dedicated employees, especially in these challenging times. In this changed COVID-19 world, the safety of our employees, our families, our customers and our communities is our priority while we continue to deliver safe and reliable essential energy services. All of ALLETE's businesses play important roles in providing these services to our customers. And we know that our customers and our communities are relying on us now more than ever. Long before COVID-19 arrived in our region, we moved thoughtfully but swiftly to engage ALLETE's pandemic response and adopt new policies and procedures. We made proactive decisions and preparations based on our values, and we responded as one ALLETE. As Maggie and Al described, this virtual annual meeting is just one example of our efforts to ensure safety during this global pandemic. We also took steps to ensure ALLETE's businesses would continue to provide safe and reliable essential services for our customers and our communities. Energy and water are the foundation for modern life and the reliability of these services is even more important during a time of global crisis. We're proud that ALLETE's companies power our communities, our region and our country. We help keep hospitals, homes, businesses and industries operating safely and securely. I'd like to recognize and thank all of our incredible employees throughout ALLETE for their resilience, courage, expertise and innovation, and their steadfast dedication to our customers and our communities, especially during these challenging times. Many of our dedicated employees are on the front lines every day, restoring power after storms, operating our power and water plants, wind farms, dams and solar arrays and making sure our customers have the energy, gas and water they need when they need it. With social distancing and other protective procedures in place, our employees are ensuring our services are reliable and our construction projects continue, all while keeping themselves, their coworkers, their families and our communities safe. IBEW Local 31 has also been a strong and engaged partner with us throughout this COVID-19 challenge. So I want to extend my personal appreciation to Will Keyes, Jordan Marquardt and Kristin Renskers as well as the entire IBEW Local 31 Executive Board. We truly are stronger together. In addition to concerns about human health and safety, we know this is a time of great economic uncertainty for our customers and our communities. So we quickly put measures in place to help protect Minnesota Power's and Superior Water, Light and Power's most vulnerable customers. These protections include suspending disconnections, prioritizing reconnections and waiving late payment fees for residential and small business customers. Minnesota Power also worked rapidly to file, with the Minnesota Public Utilities Commission, a proposal to resolve its rate case. In that proposal, we requested to reduce interim rates effective immediately and refund approximately $12 million in order to provide much-needed relief to all Minnesota Power customers during this challenging time. To support our communities impacted by COVID-19, ALLETE's companies and the Minnesota Power Foundation have donated more than $120,000 so far to nonprofits across our region that provide help to people in need. Nearly half of this amount was directly to area food shelves and food banks, with the remainder going to other COVID-19 response funds led by nonprofits throughout our region. These donations are just a few examples of our community engagement value, a value that has always been part of who we are at ALLETE but is even more important during this crisis. As our customers and communities are facing significant challenges due to this pandemic, we've also worked to protect ALLETE's financial health so that we can continue to provide essential services and execute our strategy over the longer term. ALLETE had a strong year in 2019 with reported earnings of $3.59 per share on net income of $185.6 million, an increase from $3.38 per share and $174.1 million in net income in 2018. Our strong performance in 2019, our proven track record of execution and the proactive steps we've taken in recent weeks to ensure liquidity give us confidence that we are well positioned. Although the current situation is unprecedented and COVID-19's duration and effects on our economy are uncertain, we, at ALLETE, have successfully navigated previous downturns and other significant challenges over more than a century of operations. We have a strong, experienced, talented team and, as in the past, we are fully committed to weathering this global crisis successfully. While we're focused on COVID-19 response and supporting our customers and communities in the near term, we also have a differentiated strategy to provide customers with cleaner energy solutions, which we believe will continue to be in strong demand well into the future. Our strategy is sustainability in action. ALLETE's investments in clean energy continue to grow with our operations now extending from the plains of North Dakota and Montana, south to Oklahoma and in Oregon, Pennsylvania, Iowa, Minnesota and Wisconsin. We have truly built a national footprint focused on cleaner energy. ALLETE Clean Energy continues to drive growth for the company. Upon completion of its most recently announced wind project in Oklahoma at the end of 2021, ALLETE Clean Energy plans to have more than 1,300 megawatts of wind power in its portfolio. ALLETE Clean Energy's net income for the first quarter of 2020 is double its net income in the same quarter of 2019 after its Glen Ullin wind project in North Dakota came online in December. Minnesota Power is a leader in Clean Energy, with its plans to provide 50% renewable energy in 2021, just months from now. Minnesota Power is #1 in the state of Minnesota and #2 in the Midwest and the percentage of renewables provided to customers. Minnesota Power is also leading the state in energy conservation, exceeding state goals for 10 years in a row. Under Minnesota Power's Energy Forward strategy, construction at the Nobles 2 wind site will be completed later this year. In addition, the Great Northern Transmission Line is complete and will begin delivering renewable, carbon-free energy from Manitoba Hydro beginning this summer. Superior Water, Light and Power, our utility based in Northwestern Wisconsin, continues to focus on serving customers with excellence. The company is finishing its installation of smart meters for its electric gas and water services. While enhancing safety and reliability, these meters also give customers greater insights into and control over their energy and water use. As a result, conservation of energy and water in Superior will continue to increase. In North Dakota, BNI Energy shares this commitment to sustainability. The company has been recognized for award-winning land restoration while supporting the state's efforts to research and develop carbon solutions. These are just a few examples of sustainability and action in our family of businesses. For ALLETE, being a leader in sustainability means many things. It means adding more renewable energy to protect our environment. It means supporting healthy communities by donations to our food banks, education, the arts and scholarships. It means supporting our customers by keeping affordable energy and water flowing to their homes and businesses during this pandemic. It also means ensuring the financial health of our company, so they can continue to meet all of these critical needs. As we look to the future, we believe energy companies can and must play a strong role in the recovery of our economy. What companies do during these trying times will either build trust with customers or erode that trust. We, at ALLETE, intend to build on our reputation as a trusted partner and regional leader. Our commitment to our customers and our communities and the sustainability in action in all its forms has never been stronger or more important than it is today. This global pandemic has changed so much about the ways that we do our work safely, whether we work in the field or typically in the office, but it hasn't changed our values or the fact that we are proud and honored to serve our customers with excellence. Our entire ALLETE team is engaged and working hard, and we will continue to do so as the COVID-19 situation evolves while we position our company for the future. On behalf of our employees and our Board, thank you so much for your interest and investment in ALLETE and for joining us for today's meeting. Before we close today, we'll address any questions that were submitted during the meeting, answering as many as we can in the allotted time. At this time, no questions have been submitted. Please know that your questions are important to us. So if you have a question, please submit it at the top of the welcome screen. We'll wait a minute or 2 to see if someone has a question. At this time, no questions have been submitted. So thank you again for attending our virtual meeting and for your interest in ALLETE. With no further business to consider, the 2020 ALLETE Annual Meeting of shareholders now stands adjourned. We wish you safety, good health and all the very best.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone, have a wonderful day.