Equity Investments

9 Months Ended

Sep. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in ATC [Text Block]

EQUITY INVESTMENTS

Investment in ATC. Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based utility that owns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. We account for our investment in ATC under the equity method of accounting. In the nine months ended September 30, 2019, we invested $4.7 million in ATC, and on October 31, 2019, we invested an additional $1.9 million. We do not expect to make any additional investments in 2019.

ALLETE’s Investment in ATC
Millions
Equity Investment Balance as of December 31, 2018		$128.1
Cash Investments	4.7
Equity in ATC Earnings	15.3
Distributed ATC Earnings	(12.1		)
Amortization of the Remeasurement of Deferred Income Taxes	0.9
Equity Investment Balance as of September 30, 2019		$136.9

ATC’s authorized return on equity is 10.32 percent, or 10.82 percent including an incentive adder for participation in a regional transmission organization.

In 2016, a federal administrative law judge ruled on a complaint proposing a reduction in the base return on equity to 9.70 percent, or 10.20 percent including an incentive adder for participation in a regional transmission organization, subject to approval or adjustment by the FERC. A final decision from the FERC on the administrative law judge’s recommendation is pending.

Investment in Nobles 2. Our wholly-owned subsidiary, ALLETE South Wind, owns 49 percent of Nobles 2, the entity that will own and operate a 250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA with Minnesota Power. We account for our investment in Nobles 2 under the equity method of accounting. As of September 30, 2019, our equity investment in Nobles 2 was $46.4 million ($33.0 million at December 31, 2018). In the first quarter of 2019, Nobles 2 returned capital of $8.3 million based on its cash needs. We expect to make approximately $12 million in additional investments in 2019.