Operations and Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Operations and Significant Accounting Policies [Text Block]

OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Cash, Cash Equivalents and Restricted Cash. We consider all investments purchased with original maturities of three months or less to be cash equivalents. As of March 31, 2020, restricted cash amounts included in Prepayments and Other on the Consolidated Balance Sheet include collateral deposits required under an ALLETE Clean Energy loan agreement. In prior period balances presented, the amounts also include U.S. Water Services' standby letters of credit. The restricted cash amounts included in Other Non-Current Assets represent collateral deposits required under an ALLETE Clean Energy loan agreement, PSAs and construction projects. In prior period balances presented, the amounts also include deposits from a SWL&P customer in aid of future capital expenditures. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet that aggregate to the amounts presented in the Consolidated Statement of Cash Flows.

Cash, Cash Equivalents and Restricted Cash	March 31, 2020		December 31, 2019		March 31, 2019		December 31, 2018
Millions
Cash and Cash Equivalents		$67.0		$69.3		$353.3		$69.1
Restricted Cash included in Prepayments and Other	6.1		2.8		7.2		1.3
Restricted Cash included in Other Non-Current Assets	5.8		20.4		4.7		8.6
Cash, Cash Equivalents and Restricted Cash on the Consolidated Statement of Cash Flows		$78.9		$92.5		$365.2		$79.0

Inventories – Net. Inventories are stated at the lower of cost or net realizable value. Inventories in our Regulated Operations segment are carried at an average cost or first-in, first-out basis. Inventories in our ALLETE Clean Energy segment and Corporate and Other businesses are carried at an average cost, first-in, first-out or specific identification basis.

Inventories – Net	March 31, 2020		December 31, 2019
Millions
Fuel (a)		$31.4		$25.9
Materials and Supplies	47.6		46.9
Total Inventories – Net		$79.0		$72.8

(a) Fuel consists primarily of coal inventory at Minnesota Power.

Other Non-Current Assets	March 31, 2020		December 31, 2019
Millions
Contract Assets (a)		$27.3		$28.0
Operating Lease Right-of-use Assets	26.8		28.6
ALLETE Properties	21.5		21.9
Restricted Cash	5.8		20.4
Other Postretirement Benefit Plans	38.0		37.5
Other	79.5		81.8
Total Other Non-Current Assets		$198.9		$218.2

(a) Contract Assets consist of payments made to customers as an incentive to execute or extend service agreements. The contract payments are being amortized over the term of the respective agreements as a reduction to revenue.     

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Other Current Liabilities	March 31, 2020		December 31, 2019
Millions
PSAs		$12.4		$12.3
Operating Lease Liabilities	6.9		6.9
Other	38.3		41.2
Total Other Current Liabilities		$57.6		$60.4

Other Non-Current Liabilities	March 31, 2020		December 31, 2019
Millions
Asset Retirement Obligation		$163.2		$160.3
PSAs	61.5		64.6
Operating Lease Liabilities	20.0		21.8
Other	44.0		46.3
Total Other Non-Current Liabilities		$288.7		$293.0

Other Income
Three Months Ended March 31,	2020			2019
Millions
Pension and Other Postretirement Benefit Plan Non-Service Credits (a)		$2.6			$2.0
Interest and Investment Income (Loss)	(2.6		)	1.0
AFUDC - Equity	0.5			0.6
Gain on Land Sales	0.1			1.8
Other	0.4			2.0
Total Other Income		$1.0			$7.4

(a) These are components of net periodic pension and other postretirement benefit cost other than service cost. (See Note 9. Pension and Other Postretirement Benefit Plans.)

Supplemental Statement of Cash Flows Information.

Three Months Ended March 31,	2020		2019
Millions
Cash Paid for Interest – Net of Amounts Capitalized		$18.3		$19.7
Recognition of Right-of-use Assets and Lease Liabilities	—			$34.0
Noncash Investing and Financing Activities
Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant and Equipment	$4.7		$(1.1)
Capitalized Asset Retirement Costs		$1.6		$1.6
AFUDC–Equity		$0.5		$0.6

Sale of U.S. Water Services. In February 2019, the Company entered into a stock purchase agreement providing for the sale of U.S. Water Services to a subsidiary of Kurita Water Industries Ltd. In March 2019, ALLETE completed the sale and received approximately $270 million in cash, net of transaction costs and cash retained. The Company recognized a gain on the sale of U.S. Water Services of $9.9 million after-tax in the first quarter of 2019. The full year gain on sale of U.S. Water Services in 2019 was $13.2 million after-tax.

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

ALLETE Clean Energy Asset Acquisition. On March 10, 2020, ALLETE Clean Energy acquired the rights to the Caddo wind project in Oklahoma from Apex Clean Energy for approximately $8 million with additional payments required to be made at defined milestones. The full development of this approximately 300 MW wind project would involve the sale of energy to corporate customers under long-term power sales agreements.

Non-Controlling Interest in Subsidiaries. Non-controlling interest in subsidiaries on the Consolidated Balance Sheet and net loss attributable to non-controlling interest on the Consolidated Statement of Income represent the portion of equity ownership and earnings, respectively, of subsidiaries that are not attributable to equity holders of ALLETE. These amounts as of and during the three months ended March 31, 2020, related to the tax equity financing structure for ALLETE Clean Energy’s 106 MW Glen Ullin wind energy facility.

On April 16, 2020, ALLETE Clean Energy commenced operations of South Peak, an 80 MW wind energy facility in Montana, and on April 29, 2020, received approximately $70 million in cash from a third-party investor as part of a tax equity financing for the wind energy facility.

Subsequent Events. The Company performed an evaluation of subsequent events for potential recognition and disclosure through the date of the financial statements issuance.

New Accounting Pronouncements.

Credit Losses. In 2016, the FASB issued an accounting standard update that requires entities to recognize an allowance for expected credit losses for financial instruments within its scope. Examples of financial instruments within the scope include trade receivables, certain financial guarantees, and held-to-maturity debt securities. The allowance for expected credit losses should be based on historical information, current conditions and reasonable and supportable forecasts. The new standard also revises the other-than-temporary impairment model for available-for-sale debt securities. The new guidance became effective January 1, 2020, and was adopted by the Company in the first quarter of 2020. Adoption of this standard did not have a material impact on our Consolidated Financial Statements.