The Canada Pension Plan Investment Board and Global Infrastructure Partners plan to buy Allete, a Duluth, Minnesota-based utility company in a $6.2 billion deal, including the assumption of debt, the companies and investment board said Monday.
The transaction is expected to close in mid-2025, subject to approval by Allete’s shareholders, Minnesota and Wisconsin utility regulators, and the Federal Energy Regulatory Commission.
The deal will give Allete and its subsidiaries access to needed capital during the energy transaction, Bethany Owen, chair, president and CEO of Allete, said in a press release.
“Transitioning to a private company with these strong partners will not only limit our exposure to volatile financial markets, it also will ensure Allete has access to the significant capital needed for our planned investments now and over the long term,” Owen said.
Allete expects to spend $4.3 billion on capital investments over five years starting in 2024, including $1.5 billion on transmission, about $640 million on solar and $625 million on wind, according to the company’s most recent quarterly financial presentation.
“This partnership will help Allete access the capital necessary to continue executing the clean energy transition and achieving our shared decarbonization goals,” the company said in a letter to the Minnesota Public Utilities Commission on Monday. “This will help Minnesota Power make the significant transmission, generation, and other investments critical to the ongoing transition to cleaner energy while maintaining reliability and affordable costs for customers.”
Allete said it plans to file a petition with the PUC before August to secure approval for the deal.
Under the terms of the merger agreement for the proposed transaction, Allete’s Minnesota Power and Superior Water, Light and Power utility subsidiaries will continue as independently operated, locally managed, regulated utilities, the companies said. The company will keep its Duluth headquarters and executive team.
The planned transaction won’t affect retail and municipal utility rates, according to Allete.
CPP Investments and GIP, a private equity company, will pay $67 per Allete share in cash, a roughly 19% premium to Allete’s closing share price on Dec. 4, the day before a news story reported the utility company was exploring a sale.
Minnesota Power has about 150,000 retail electric customers and 14 municipal utility customers in Minnesota, according to Allete’s latest annual report, filed with the U.S. Securities **and** Exchange Commission on Feb. 20. Superior Water, Light and Power has about 15,000 electric customers, 13,000 natural gas customers and 10,000 water customers in Wisconsin.
Minnesota Power owns 1,630 MW of generation, including 820 MW of coal-fired capacity. Minnesota Power expects to retire its two coal-fired units by 2030 and 2035, respectively, according to the annual report.
Allete Clean Energy, an Allete subsidiary, owns more than 1,200 MW of wind in seven states. It sells power from the facilities under power purchase agreements.
Allete also owns New Energy, a renewable development company based in Annapolis, Maryland, with a 2-GW project pipeline; a stake in Nobles 2, an entity that owns and operates a 250-MW wind energy facility in Minnesota; South Shore Energy, which is developing a 600-MW natural gas-fired generating facility in Superior, Wisconsin; and BNI Energy, a coal mining operation in North Dakota.
Allete’s income jumped last year to $247.1 million, or $4.30/Share, from $189.3 million, or $3.38/share in 2022. The increase was partly due to a favorable $40.5 million arbitration ruling, according to the company. Operating revenue increased to $1.88 billion in 2023 from $1.57 billion in the previous year.
