ALLETE, Inc. (NYSE:ALE) Q4 2022 Earnings Call Transcript

ALLETE, Inc. (NYSE:ALE) Q4 2022 Earnings Call Transcript February 16, 2023

Company Representatives: Bethany Owen – Chair, President & CEO Steve Morris – Senior Vice President, Chief Financial Officer Frank Frederickson – Minnesota Power’s Vice President of Customer Experience and Engineering Services Jeff Scissons – ALLETE Clean Energy’s Chief Financial and Strategy Officer

Operator: Good day, and welcome to the ALLETE Fourth Quarter 2022 Year-End 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 place undue reliance on forward-looking statements, which reflects 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. Again, welcome to the ALLETE’s fourth quarter 2022 year-end financial results call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. . Again please be advised that today’s conference is being recorded.

For opening remarks and introductions, I would now like to turn the conference over to ALLETE Chair, President and Chief Executive Officer, Bethany Owen. Please go ahead.

Bethany Owen: Thank you. Good morning, everyone, and thanks for joining us today. With me are ALLETE’s Senior Vice President and Chief Financial Officer, Steve Morris; Frank Frederickson, Minnesota Power’s Vice President of Customer Experience and Engineering Services; and Jeff Scissons, ALLETE Clean Energy’s Chief Financial and Strategy Officer. Corresponding slides can be found on our website at allete.com in the Investors section and we’ll call out each slide number as we go through today’s presentation. This morning, ALLETE reported full year 2022 earnings of $3.38 per share on net income of $189.3 million, compared to 2021 earnings of $3.23 per share on net income of $169.2 million. In a few minutes Steve will provide more details on ALLETE’s 2022 financial results, as well as our 2023 earnings guidance.

Although our financial results for the year were below our expectations, we are committed to ALLETE’s long term earnings per share growth objective of 5% to 7% and I am confident in our ability to achieve this for investors. As you see in slide three of the presentation, we’re making significant progress putting sustainability into action, and our strategy will provide value to our customers and our shareholders for years to come. While we serve our customers with excellence and provide exciting opportunities for our employees, we take pride in creating value for our shareholders. ALLETE continues to pay an attractive dividend while we strategically position all of our companies for sustainable growth over the long term. Earlier this month, our Board of Directors approved an increased dividend of more than 4%, reflecting the Board’s confidence in the growth outlook for ALLETE.

In spite of some headwinds encountered in 2022, our accomplishments were many. Just a few examples include the approval of Minnesota Power’s integrated resource plan and the resulting $600 million expansion of our capital expenditure plan, increasing rate base growth to 11% over the next five years. Minnesota Power’s track record for near perfect system reliability and storm response, all while keeping customers’ bills below the national average. The MISO Tranche 1 approval of the Northern Reliability Transmission Project, advancement of our shared vision with Grid United for our future first in the nation transmission expansion, as well as the acquisition and integration of New Energy Equity. These are just a few of our many operational positioning and strategic successes, all driven by ALLETEs dedicated team of talented employees.

On the regulatory front, I’m proud of our team’s thoughtful stakeholder engagement throughout the year. Superior Water, Light and Power finalized its rate case in late 2022 with final rates in effect as of January 1, 2023. The public service commission of Wisconsin improved an annual increase of $3.3 million, along with a return on equity of 10% and a 55% equity ratio. On January 23 of this year, the Minnesota Public Utilities Commission made its determination on Minnesota Power’s 2021 rate case, including a return on equity of 9.65% and a 52.5% equity ratio. While we are disappointed that the overall rate case decision was below our request and below the recommendations of the Administrative Law Judge, we’re evaluating options and next steps, which may include clarification or reconsideration of certain items in the case, and we anticipate filing another rate request later this year.

Constructive regulatory outcomes are critical to our clean energy transition. Minnesota Power is leading the state in providing renewable energy to customers with a strong track record of near perfect reliability and creative hard work by our team to keep rates affordable for our customers. We’re grateful for the Minnesota Public Utilities Commission’s recent approval of Minnesota Power’s IRP and a critical component of our ability to execute this exciting plan is earning a reasonable return on our investments and recovering costs in a timely fashion through Minnesota’s Regulatory Framework. Minnesota Power is committed to earning its allowed rate of return for shareholders while caring for our customers. We’ll continue to advance a carbon free energy future, while providing safe and reliable service and keeping customer bills as low as possible.

And as utilities are asked to do more and faster, we expect our rate review request to become more frequent going forward, and we’re confident that our regulators will support our work on all of these important fronts. Meanwhile, Minnesota Power is making significant progress on our vision to provide 100% carbon free energy to customers. Our recently approved IRP is transformative, adding 700 megawatts of wind and regional solar, supporting energy storage, cease coal operations at Minnesota Powers to remain in coal units by 2030 and 2035 respectively, and investing in a resilient and flexible transmission and distribution grid. Already providing 50% renewable energy today, Minnesota Power expects to provide more than 70% renewable energy to customers by 2030.

We are engaged in the RFP process for the additional wind, solar and energy storage identified in this IRP and we’ll provide updates on the progress of these projects throughout the year. In addition, just a few weeks ago the State of Minnesota enacted new legislation requiring electric utilities to source retail sales with 100% carbon free energy by 2040. This is clearly an ambitious goal, but our company has been on an incredibly ambitious clean energy journey as well. We’re pleased that lawmakers listened closely as we described the state of technology and the investments necessary to build a modern grid, and as a result, they included important provisions for utilities and regulators in the legislation. We support a carbon free energy future with a transition that protects reliability, safety and affordability, and ensures equity by leaving no one behind, and there is a lot of work ahead of us with our customers, our regulators, our communities and other stakeholders to get all of that right.

It will take everyone working together to achieve these ambitious goals, and the state must be a strong partner in supporting the bold initiatives that are required to achieve a truly sustainable, carbon free future. We’ll build on our current momentum and factor this new Minnesota Legislations requirements into Minnesota Powers next IRP filing in the spring of 2025, so there is much more to come. Related to Minnesota Power’s recently approved IRP, we’ve updated our capital investment plan on slide four to reflect this transition. Steve will elaborate more on this in a minute, but this CapEx plan is transformative with significant clean energy and transmission infrastructure investments over the next five years. As transformative as that five year CapEx plan is, we have significant investment plans well beyond 2027, which are not currently included in our CapEx table, but are described in Slide five.

These include the additional investments in generation and infrastructure that will be needed as we responsibly and reliably transition Minnesota Power’s two remaining coal units and to comply with the new Minnesota Carbon Free Legislation. We also expect to participate in the MISO Tranche 2 transmission projects and as part of our high voltage transmission strategy, we’ll leverage our strategic, geographical position to advance interregional transmission projects that support reliability and the clean energy transition. So as we execute our strategy in the near term, we’re always planning for the future, and ALLETE’s future is bright, with important parts of our long term investment strategy already in motion. As an example, on slide six you’ll see additional information on ALLETEs exciting recent announcement of our engagement with Grid United to develop the North Plains Connector, a 370 mile high voltage direct current transmission line from North Dakota to Montana.

This HVDC corridor will be the first of its kind transmission project to connect three regional energy markets; MISO, WEIS, and SPP, creating 3000 megawatts of transfer capacity between the middle of the country and the West Coast. And more importantly, it will help ease transmission system congestion, increase resiliency and reliability, and enable rapid sharing of renewable energy across a vast area with diverse weather patterns. The project is subject to regulatory approvals and permitting and is estimated the cost approximately $2.5 billion. ALLETE’s share of this investment is expected to be at least 35%, which will extend and support ALLETE’s further growth into the next decade. Moving to slide seven and ALLETE’s newest company, we couldn’t be more excited about New Energy Equity joining the ALLETE family of businesses.

New Energy exceeded our original projections for the year and has continued to increase its total pipeline of prospective project. Along with the Inflation Reduction Act benefits which could provide investment tax credit upside of up to 50%, the New Energy team’s solid execution and strong pipeline of future projects have only enhanced our confidence in the resiliency and strength of this business and the value the company provides to ALLETE. Finally, ALLETE Clean Energies earnings this year were materially affected by congestion and market volatility at its Caddo facility. Addressing the implications of these issues for both our Diamond Spring and Caddo Wind projects is our priority, and we’re evaluating all alternative to improve project economics.

All of the sites operated well in 2022 and we continue to believe ALLETE Clean Energy with its talented team is an important strategic contributor to ALLETE. As we move forward into 2023, ALLETE Clean Energy strategy is focused on maximizing the value of the company’s fleet, and we look forward to updating you on progress throughout the year. Along with creative solutions for our customers and great opportunities for our amazing employees, ALLETE’s mix of businesses offers differentiated value to investors, with significant near and longer term earnings growth and attractive dividend, and strong positioning to thrive in the clean energy future. Now, I’ll turn it over to Steve for further details on our 2022 financial results, 2023 guidance and key drivers of ALLETE’s long term growth.

Steve.

Steve Morris : Thanks Bethany and good morning everyone. I would like to remind you that we filed our 10-K this morning, along with an 8-K that provides details of our 2023 earnings guidance. Please refer to slides eight through 11 for the quarter and year end of 2022 income statement details, as well as 2023 earnings guidance details. Today ALLETE reported 2022 earnings of $3.38 per share on net income of $189.3 million. Earnings for 2021 were $3.23 per share of net income of $169.2 million. These financial results were below our third quarter guidance update, where we expected to the midpoint of our 2022 earnings guidance range of $3.60 to $3.90 per share. The primary reasons relate to recording a full year of intermittent reserves in the fourth quarter for the outcome in the Minnesota Power rate case decision, further cost and losses taken out ALLETE Clean Energy on the now completed northern wind project, and weather impacts in the fourth quarter due to winter storm events.

Please refer to side 10 for details. Looking at the fourth quarter of 2022, ALLETE’s consolidated results for the fourth quarter were below our expectations, with earnings of $0.90 per share compared to $1.18 per share in the fourth quarter in 2021. ALLETE’s regulated operation segment recorded net income of $30.5 million in the fourth quarter of 2022 as compared to $29.7 million in 2021. Earnings reflected higher net income at Minnesota Power due to the implementation of interim rates in 2022, net of interim rate reserves. As a result of the rate case decision earlier this year, a full year of interim rate reserves of approximately $12 million after tax were reflected entirely in the fourth quarter of 2022. The quarter was also impacted by increased purchase power cost, as well as higher operating and maintenance expenses.

Winter storm events in Minnesota Power’s service territory resulted in additional O&M expenses of approximately $2 million after tax. A few thoughts on the Minnesota Power rate case. At a hearing on January 23, 2022 the Minnesota Public Utilities Commission approved a return on common equity of 9.65% and a 52.5% equity ratio. On an annualized basis, the rate case outcome resulted in additional revenue of approximately $70 million. Accordingly, as the final retail rate increase was lower than interim rates, Minnesota Power recorded a reserve for interim rate refunds of approximately $12 million after tax as of December 31, 2022. Turning to our other segments, ALLETE Clean Energy recorded fourth quarter 2022 net income of $1.3 million, compared to $14.6 million in 2021.

Net income in 2022 for the Caddo and Diamond Spring wind energy facilities were impacted by market volatility and transmission congestion in the Southwest Power Pool, as well as additional cost and losses on the sale of the Northern Wind project. Weather events negatively impacted fourth quarter earnings by approximately $1.2 million after tax. Our corporate and other businesses recorded net income of $19.9 million in 2022, compared to net income of $17.6 million in 2021. 2022 included earnings from New Energy, which had a record fourth quarter of projects closing exceeding our expectations. There were also higher land sales at ALLETE properties, higher earnings from our investment in the Nobles 2 wind energy facility and earnings from Minnesota Solar projects placed in a service in 2022.

Earnings in 2021 included an $8.5 million after tax gain from south shore Energy sale of a portion of its interest in the Nemadji Trail Energy Center. As Bethany shared, we have made good progress on key initiatives in 2022, setting a stage for improved financial performance in 2023. I’ll turn to our 2023 earnings guidance. Please refer to slide 11 for further reference. Today we initiated 2023 earnings guidance of $3.55 to $3.85 per share on net income of $200 million to $220 million. This guidance range is comprised of our regulated operations segment within a range of $2.50 to $2.70 per share and ALLETE Clean Energy, New Energy and our other businesses within a range of $1.05 to $1.15 per share. First, a few comments on our regulated operations outlook for 2023.

Overall regulated earnings are expected to be similar to 2022. Our guidance reflects the impacts from Minnesota Power’s retail rate case decision and industrial sales slightly lower than 2022. We expect a slight increase in operation and maintenance expenses of 2% over 2022 due to inflationary pressures.

-: We are committed to earning our LOG return on equity on Minnesota Power, and always we will manage our discretionary costs and improve operational efficiencies. For example, from 2017 through 2022, Minnesota Powers operating and maintenance expenses increased by an average of less than 1% on a compound average growth rate. Looking at Clean Energy’s outlook for 2023, ALLETE Clean Energy expects normal wind resources in 2023 with total wind generation of approximately 4 million megawatt hours this year, similar to last year. Our guidance also reflects the sale of the 92 megawatt Red Barn Build Transfer projects in the first half of 2023 and improving financial performance for the portfolio. However, we still expect challenges in the Southwest Power Pool market for the Oklahoma Wind Energy facilities.

At New Energy, an impressive number, 44 megawatts of projects closed in the fourth quarter of 2022. The strong fourth quarter allowed New Energy to exceed the acquisition plan for 2022, and set the stage for a solid 2023 and beyond. New Energy continues to gain momentum with more than 2000 megawatts in their robust and growing pipeline. New York, Illinois and Minnesota continue to be strong markets for New Energy, while Maryland, New Mexico and Virginia are new promising markets with strong prospects and opportunities starting in 2023. We expect net income of approximately $16 million to $17 million at New Energy and note that 2023 will not be impacted by purchase price accounting or transaction cost. We anticipate approximately $7 million in earnings from Minnesota investments in for ALLETE Investment in Minnesota Solar projects, and we expect similar earnings from BNI Energy and our investment in the Nobles 2 wind energy facility in 2023, a slightly lower earnings at ALLETE Properties.

We expect minimal equity needs in 2023, but do expect earnings per share dilution of approximately $0.10 per share due to the increased average number of shares outstanding as a result of our March 2022 secondary offering. As stated previously, we are committed and confident in our ability to achieve ALLETE’s long term earnings per share growth objective of 5% to 7%, primarily fueled by the historic clean energy transformation underway. As we customarily do at the beginning of each year, we have updated our five-year capital expenditure table in the 10-K. Also, please refer back to slide four. This updated plan reflects $3.3 billion of CapEx, which is an increase of approximately $600 million over our CapEx plan shared in November last year, reflective of the final IRP order.

This plan highlights significant clean energy infrastructure investments over the next five years, translating to a compound annual rate base growth of 11%. We will continue to navigate this clean energy transition as we have in the past, with customer rates and overall competitiveness in mind. I’ll now turn it back to Bethany. Bethany.

Bethany Owen : Thanks, Steve. We’re obviously very pleased with all that our team has accomplished in 2022, and we are already making significant strides here in the beginning of 2023. Demands for cleaner energy are increasing, providing new and diverse investment opportunities for ALLETE’s businesses. We believe our reputation as a leader in this clean energy environment will continue to attract capital, and we’re committed to delivering value to our investors. The very foundation of our growth strategy at ALLETE is sustainability in all of its forms; people, planet and prosperity, and as always, we are committed to doing all of this in the absolutely right way. Slide 12 contains links to information on this work, including our recently updated corporate sustainability report.

Our CSR illustrates how we’re building on our strong track record, not only to mitigate climate change risks, but to create a clean energy future through just equitable and meaningful change. Making a difference and doing our part to make our world a better place for everyone. ALLETE’s family of businesses is well positioned today for an even brighter future. This is truly an exciting time for ALLETE, and we look forward to sharing more with you in the coming quarters. At this time, I’ll ask the operator to open the line for your questions.

Q&A Session

Operator: Thank you. . Our first question will come from Richard Sunderland of J.P. Morgan. Your line is opening.

Richard Sunderland: Guys, good morning. Thank you for the time today.

Bethany Owen: Good morning.

Richard Sunderland: Starting with the CapEx revisions, I guess I’m wondering, could you walk from the resources identified in your IRP settlement to the assumptions baked into this capital plan, and I’m curious what’s driving your line of site here versus leaving the projects outside of CapEx is upside into the RFP process?

Steve Morris: Yeah, so Rich, good morning; Steve Morris. So a great question. As you know, we have our CapEx from November EEI, where we reflected the initial IRP and with this outcome from the final IRP we’ve added 100 megawatts of solar, again subject to our RFPs. We added 100 megawatts of solar, 150 megawatts of wind, and we added storage about 200 megawatt hours. Those are all incremental that we did not have in the initial CapEx planned when we met in November. So you know subject to RFPs, we’ve talked about the solar and storage, we feel very good about our RFP prospects about that. The wind we’ve said we had, previously we had a 200 megawatt partnership in there. The IRP was up to 400, so there was another 200 out there. We feel confident on the other 150. So we left our 50, put in 150 megawatts.

Richard Sunderland: Just in terms of the conference there, is that based on kind of interconnection positions or you know what you’re seeing on the cost side relative to PTA options. Just, serious for any color there as to how you kind of baked that risk adjusted play in here, I guess.

Steve Morris: Yeah, very good question. So as we talked about at EEI, the solar and storage are regional, regional in our areas, right. So there was a little bit of a recognition for solar storage in and around the Boswell site. We are confident in that there. So the wind one, we are also confident in our ability to get that, along with the wind project, the partnership project as well. But again, as we talked about at EEI, solar storage were more regional in nature. So we think we are in a very good position to win those RFPs.

Richard Sunderland: Okay, okay, that’s very helpful. And then just in light of this revision on the CapEx side, what are your equity needs associated with financing this plan, and can you speak a little bit to the the timing and potential method to address the equity.

Steve Morris: Yes, so as we’ve mentioned already on the call, no equity needs in 2023. So its CapEx starts up a little bit more in earnest here in ’24, ’25. We’re probably looking mid-2024. We have increasing cash flow, so obviously that’s the primary source of our funding for this. Second, you know as we talked about at EEI and in the past, we do have to maintain a regulated capital structure. So that’s 50/50 equity and debt, so that will help round it up. We also talked about holding – forming HOLDCO, which gives us greater financial flexibility. You know and finally as we just looked at our capital allocation and financing options as we always do, we’ll maximize the value of all our assets, with opportunistic redeployment of capital into our regulated CapEx plan.

Richard Sunderland: Okay, so just to be clear, it sounds like there are multiple levers and focus, but on a timing front you’d be looking at more like mid-2024 and beyond, and then for quantifying is that I guess subject to examining the HOLDCO asset recycling and these other levers?

Steve Morris: Yeah, yeah, that’s fair.

Richard Sunderland: Okay, okay, got it. Just €“ sorry, one final one for me. There’s been a lot of changes in light of the CapEx side, the rate case order. When you talk about the 5% to 7% growth, is that now based on the 2023 guidance, 2022 actuals. Just what’s the right base to think about for that number?

Steve Morris: Yeah, I’d use €˜22 actually, $3.38.

Richard Sunderland: Okay, great. Thank you very much for the time.

Steve Morris: Thanks Rich.

Bethany Owen: Thanks Rich.

Operator: Thank you. One moment please for our next question. And our next question will come from Brian Russo of Sidoti. Your line is open.

Brian Russo: Hi! Good morning.

Bethany Owen: Good morning, Brian.

Steve Morris: Good morning, Brian.

Brian Russo: It’s just, when I look at slide four of the presentation regarding the CapEx, you know it looks like the majority of the CapEx can qualify for your rider mechanisms. Can you just remind me, you know how those mechanisms work? Is it full recovery of and on the investments you know almost real time or on an annual basis? Just trying to get a sense of the trajectory of margins from riders in between rate cases, which sometimes historically has created a stair step type profile to your earnings.

Steve Morris: Yeah, great question Brian. So riders are real time. It really helps with the regulatory leg. We do have filings to do, but the ones that we have in here listed on this page four CapEx will qualify the rider recovery. So it’s €“ there will be very little leg here by the time we have initial spending to revenue recognition. There is then cash that comes later. We have to do what’s called the Factor Filing to get the cash on that. But so when you get the earnings right away, the cash will come a little bit later.

Brian Russo: Okay. And just to tie that into the 11% rate base CAGR versus a 5% to 7% EPS CAGR, is the lag there or the difference, you know primarily the financing or is there some other variables there you know that create that delta.

Steve Morris: Yeah, we don’t look at the 11% CAGR as synonymous with 5% to 7% growth. We believe that the pick, the CAGR here, rate based growth certainly leads to growth, but it will enable our 5% to 7% growth.

Brian Russo: Okay, got it. And then also the 32 million tons of taconite production forecasted in ’23 versus a 32 million in 2022. How does it triangulate maybe with the December nominations you guys received for the first four months of 2023?

Frank Frederickson: Yeah, good morning Brian; Frank Frederickson here. Thanks for that question. So good question on where we’re budgeting and our outlook for 2023 in Taconite production, and you know I’d say overall tonnage, you know generally in line within a small margin with what we saw in 2022. We are pleased with December nominations which are now with several of our customers nominating at full production through the first four months of the year, and as you’re probably aware, plus the North Shore facility has been off since the second quarter of 2022 and that facility remains down.

Brian Russo: Okay, got it, got it. And just on the New Energy 2023 guidance, obviously if you’re optimistic and bullish, you know any more assumptions you can give related to that, you know that we could kind of maybe extrapolate post 2023. You know maybe if it’s some details on the 2,000 megawatts in the pipeline or the profile of that, that you know can extend, what looks like to be a nice growth trajector.

A – Jeff Scissons: Good morning, Brian. This is Jeff Scissons. We did try to provide the net income to try to fill in some of those gaps. What we talked about earlier was the EBITDA, the $20 million of EBITDA in 2021 and roughly 10% growth off of that. As we sit here today, that net income guidance represents the 10% growth in EBITDA, so we’re looking at $24 million to $25 million of EBITDA, and as mentioned on the call, you know the strength of the pipeline gives us that confidence that we think that the company can grow in line with the market, which we continue to see as 10% or greater.

Brian Russo: Okay, and then lastly just on the

Jeff Scissons: Sorry Brian, I was just going to add from a megawatts, that’s the other metric we’ve been referencing and New Energy was just under 100 megawatts that they closed in 2022. Again, not every megawatt is the same, but we do expect them to be 100 megawatts or just over 100 megawatts this year. That’s another metric you can track.

Brian Russo: Okay, great. And can you quantify the Red Barn sale gain that’s embedded in the ace and other $1.05 to $1.15 in EPS in €˜23.

Jeff Scissons: Yes, thanks Brian. Jeff again. This is The Red Barn project we expect to close here at the end of the first quarter, early second quarter. It’s still in the construction season and we do expect a small gain, like a couple of million dollars from net income in the guidance.

Brian Russo: Okay, great. Thank you very much.

Bethany Owen: Thanks Brian.

Operator: Thank you. Our next question will come from Alex Mortimer of Mizuho. Your line is open.

Alex Mortimer: Hi! Good morning. Thanks for your time.

A – Bethany Owen: Good morning, Alex.

Steve Morris: Good morning, Alex.

Alex Mortimer: So just kind of back of the napkin, it has to be about $0.47 of growth to get to the high point of your range at 385 for 2023. We’re just hoping you provide some clarification on sort of what factors would influence you being able to hit the high, middle and low of that range. And if there’s currently any bias within that range as things stand at the moment.

Bethany Owen: Yeah, great question Brian. So we do flex around all of our businesses to come up at the high end of the range. Of course, you know there’s always opportunity at Minnesota Power with increasing Taconite load. Again, we’re at 33 million tons. They were operated that way. Last year as you know, that was in our test year, but so there’s some opportunities there along with O&M expense management efforts. From ALLETE Clean Energy, we certainly could do better just on the wind, wind resources. We’ve budget what we’ve seen similar to this year, but it could be better in certain spots, and that can have a material impact on us, not just the revenue, but on the PTC side of things along with new energy. So new energy has upside as well and we look at that closely, plus or minus 10% or 15%.

Alex Mortimer: Wonderful, thank you. And then just on the side of regulation, you’ve seen regulators, I mean both in Minnesota and kind of across the country really start to push back on higher customer bills as customers face inflation across their spending. Do you have any concerns about them potentially pushing back on obviously this pretty significant increase in CapEx over the last couple of quarters? If you have any concern on them pushing back as they look to prioritize affordability as opposed to renewables.

Bethany Owen: Thanks Alex. This is Bethany. You know, we have confidence in our regulators that they understand kind of the care that we have for our customers and ensuring affordability of our rates as we continue this really significant transition we’ve had and we’ve shared in the past, some really creative work that our team has done to try to minimize rate impact for the future. And so, you know certainly that’s the regulator’s role. Also it is to ensure that our rates continue to be affordable as we continue to work. But I believe and I had stated that they are excited about the IRP that was just approved, and you know they know that this is going to take investment on our part in order to continue this transition. So as I mentioned earlier, I’m confident in our regulators support for our work to do that.

Recognizing that you know we are doing a lot of work to try to keep our rates affordable as we continue this transition, and we’ve been successful to-date. So you know certainly more frequent rate cases going forward, but we’re confident in our regulator’s support for the work that we’re doing. Frank, did you have anything else you wanted to add?

A – Bethany Owen: No, thanks Bethany, and thanks for the question Alex. It’s €“ you know a couple of things I’d add to that is, you know Minnesota values being a leader in clean energy, and you know that floats through even to regulators and it actually floats through into how we’re serving our customers. You know we’re a leader in the state that over 50% renewable and on our way to be over 70%. So really as we work with commercial and industrial customers, delivering a premium product that helped them meet their ES&G goals sooner with the energy they procured from us. And as it pertains to how we work with residential customers and commercial customers, you know we’re also the leader in the state for energy conservation programs.

We’re the only utility that can claim that we’ve exceeded state conservation goals over the past 12 years, and that helps us have the lowest residential bills in the state, because we’re helping both parts in terms of reducing usage for efficiently and effective use of that renewable energy. So you pair those together, and we’ve also €“ our teams have done wonderful work with low income customer stakeholders and you know one of the items we like to share is that our low income customers have some of the lowest builds, lowest rates in the state as well as lowest builds because of the work that we’ve done to mitigate that as we’ve gone through and even the most recent rate case where you know even with the increase in residential rates, low income customer bills are going to be flat or lower than they were before the rate case.

Alex Mortimer: Understood, thanks for that. And then just one last one on 2023 guidance. It seems that regulated Ops are slightly down or the guidance is slightly down at the midpoint. I was hoping if you could just mention if that, that decrease is just based on the dilution you mentioned. If there are other headwinds €“ I mean, if there are other headwinds or when you see those easing and if they are just sort of based on the recent rate case or if there are other issues, whether it’s O&M or inflation or interest rates, just sort of a little bit more clarity on when you see that potential easing.

Steve Morris: Yeah, very good Alex. Steve Morris again. So rate €“ so the rate case outcome certainly was reflected in 2022. The same amount of revenue essentially in 2023. The major driver is as you mentioned, we do have some increase in O&M expenses. We do have some significant increases as we €“ as I mentioned in the call or 7% increase in depreciation and property taxes. That’s really the major driver and it being flat are one of the reasons why we’re going to need to file a rate case again this year with a 2024 test year.

Alex Mortimer: Okay, wonderful. Thank you so much.

A – Bethany Owen: Thanks, Alex.

Steve Morris: Thanks.

Operator: Thank you. And speakers, I do not see any further questions in the queue. I would now like to turn the conference back to Bethany Owen for closing remarks.

Bethany Owen : So, thank you again for being with us this morning and for your investment and interest in ALLETE. We look forward to speaking with many of you at investor venues throughout the year and we hope you enjoy the rest of your day.

Operator: This will conclude today’s conference call. Thank you all for participating. You may now disconnect, and have a pleasant day!