Operations and Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

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, 2022, restricted cash amounts included in Prepayments and Other on the Consolidated Balance Sheet include collateral deposits required under ALLETE Clean Energy loan and tax equity financing agreements. The restricted cash amounts included in Other Non-Current Assets represent collateral deposits required under an ALLETE Clean Energy loan agreement as well as PSAs. 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, 2022	December 31, 2021	March 31, 2021	December 31, 2020
Millions
Cash and Cash Equivalents	$60.1	$45.1	$159.0	$44.3
Restricted Cash included in Prepayments and Other	7.1	0.3	7.1	0.8
Restricted Cash included in Other Non-Current Assets	7.8	2.3	10.9	20.1
Cash, Cash Equivalents and Restricted Cash on the Consolidated Statement of Cash Flows	$75.0	$47.7	$177.0	$65.2

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, 2022	December 31, 2021
Millions
Fuel (a)	$17.4	$18.7
Materials and Supplies	60.0	56.1
Construction of Wind Energy Facilities (b)	119.2	22.9
Total Inventories – Net	$196.6	$97.7

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

(b)    Project costs related to ALLETE Clean Energy’s Northern Wind and Red Barn wind projects which are expected to be sold in late 2022 and 2023, respectively. (See Other Current Liabilities.)

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Other Non-Current Assets	March 31, 2022	December 31, 2021
Millions
Contract Assets (a)	$22.7	$23.3
Operating Lease Right-of-use Assets	15.4	16.4
ALLETE Properties	19.4	19.4
Restricted Cash	7.8	2.3
Other Postretirement Benefit Plans	65.4	64.8
Other	81.7	87.5
Total Other Non-Current Assets	$212.4	$213.7

(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.     

Other Current Liabilities	March 31, 2022	December 31, 2021
Millions
Customer Deposits (a)	$28.9	$27.2
PSAs	12.6	12.6
Manufactured Gas Plant (b)	1.9	12.8
Fuel Adjustment Clause	4.1	5.0
Operating Lease Liabilities	4.4	4.8
Redeemable Non-Controlling Interest (c)	—	30.6
Other	56.9	40.0
Total Other Current Liabilities	$108.8	$133.0

(a) Primarily related to deposits received by ALLETE Clean Energy for the Northern Wind and Red Barn wind projects which are expected to be sold in late 2022 and 2023, respectively. (See Inventories – Net.)

(b) The manufactured gas plant represents the current liability for remediation of a former manufactured gas plant site located in Superior, Wisconsin, and formerly operated by SWL&P.

(c) Amount reclassified from Non-Controlling Interest in Subsidiaries resulting from the exercise of an option to buy out a non-controlling interest, which was paid in the first quarter of 2022.

Other Non-Current Liabilities	March 31, 2022	December 31, 2021
Millions
Asset Retirement Obligation (a)	$189.1	$184.5
PSAs	36.3	39.5
Manufactured Gas Plant (b)	16.1	5.2
Operating Lease Liabilities	10.9	11.6
Other	35.2	40.0
Total Other Non-Current Liabilities	$287.6	$280.8

(a)The asset retirement obligation is primarily related to our Regulated Operations and is funded through customer rates over the life of the related assets. Additionally, BNI Energy funds its obligation through its cost-plus coal supply agreements for which BNI Energy has recorded a receivable of $28.5 million in Other Non-Current Assets on the Consolidated Balance Sheet as of March 31, 2022, ($28.5 million as of December 31, 2021).

(b)The manufactured gas plant represents the non-current liability for remediation of a former manufactured gas plant site located in Superior, Wisconsin, and formerly operated by SWL&P.

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Other Income
Three Months Ended March 31,	2022	2021
Millions
Pension and Other Postretirement Benefit Plan Non-Service Credits (a)	$2.6	$1.9
Interest and Investment Income	0.1	1.1
AFUDC - Equity	0.9	0.5
Other	(1.6)	(0.2)
Total Other Income	$2.0	$3.3

(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,	2022	2021
Millions
Cash Paid for Interest – Net of Amounts Capitalized	$22.4	$21.2
Noncash Investing and Financing Activities
Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant and Equipment	$(24.5)	$5.6
Capitalized Asset Retirement Costs	$3.0	$3.5
AFUDC–Equity	$0.9	$0.5

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 are primarily related to the tax equity financing structures for ALLETE Clean Energy’s 106 MW Glen Ullin, 80 MW South Peak, 303 MW Diamond Spring and 303 MW Caddo wind energy facilities as well as ALLETE’s equity investment in the 250 MW Nobles 2 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.

On April 5, 2022, ALLETE issued and sold approximately 3.7 million shares of ALLETE common stock. Net proceeds of approximately $224 million were received from the sale of shares. Proceeds were used primarily to fund the acquisition of New Energy and capital investments at ALLETE Clean Energy.

On April 15, 2022, a wholly-owned subsidiary of ALLETE acquired 100 percent of the membership interests of New Energy for a purchase price of $165.5 million. Total consideration of approximately $158.7 million was paid in cash on the acquisition date, which is net of cash acquired, debt assumed and subject to a working capital adjustment. New Energy, which is headquartered in Annapolis, Maryland, is a renewable energy development and finance company with a primary focus on solar and storage facilities while also offering comprehensive operations, maintenance and asset management services. The acquisition of New Energy is consistent with ALLETE’s stated strategy of additional investment in renewable energy and related infrastructure across North America to support the Company’s sustainability-in-action strategy while providing potential long-term earnings growth. Due to the limited amount of time since the acquisition date, the preliminary acquisition valuation for the business combination is incomplete at this time. As a result, we are unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including goodwill. Transaction costs related to the acquisition were expensed as incurred and were not material to results presented in the Consolidated Statement of Income.