XML 25 R9.htm IDEA: XBRL DOCUMENT
v3.19.1

Operations and Significant Accounting Policies | 3 Months Ended
--- | ---
Mar. 31, 2019
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, 2019, 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 periods presented, the amounts also include U.S. Water Service’s 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 and PSAs, and 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, 2019 |  |  | December 31, 2018 |  |  | March 31, 2018 |  |  | December 31, 2017 |
Millions |  |  |  |  |  |  |
Cash and Cash Equivalents |  | $353.3 |  |  |  | $69.1 |  |  |  | $98.5 |  |  |  | $98.9 |
Restricted Cash included in Prepayments and Other | 7.2 |  |  | 1.3 |  |  | 8.8 |  |  | 2.6 |
Restricted Cash included in Other Non-Current Assets | 4.7 |  |  | 8.6 |  |  | 8.6 |  |  | 8.6 |
Cash, Cash Equivalents and Restricted Cash on the Consolidated Statement of Cash Flows |  | $365.2 |  |  |  | $79.0 |  |  |  | $115.9 |  |  |  | $110.1 |
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, 2019 |  |  | December 31, 2018 |
Millions |  |  |
Fuel (a) |  | $29.4 |  |  |  | $26.0 |
Materials and Supplies | 44.4 |  |  | 44.2 |
Raw Materials (b) | — |  |  | 2.8 |
Work in Progress (b) | — |  |  | 6.1 |
Finished Goods (b) | — |  |  | 8.4 |
Reserve for Obsolescence (b) | — |  |  | (0.8 | )
Total Inventories – Net |  | $73.8 |  |  |  | $86.7 |
(a) | Fuel consists primarily of coal inventory at Minnesota Power.
(b) | On March 26, 2019, ALLETE completed the sale of U.S. Water Services which resulted in the removal of the related inventory items from the Consolidated Balance Sheet.
NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other Non-Current Assets | March 31, 2019 |  |  | December 31, 2018 |
Millions |  |  |
Contract Assets (a) |  | $29.8 |  |  |  | $30.7 |
Finance Receivable | 10.4 |  |  | 10.4 |
Operating Lease Right-of-use Assets (b) | 34.0 |  |  | — |
ALLETE Properties | 24.0 |  |  | 24.4 |
Other | 82.7 |  |  | 86.9 |
Total Other Non-Current Assets |  | $180.9 |  |  |  | $152.4 |
(a) | Contract Assets include 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.
(b) | See Leases.
Other Current Liabilities | March 31, 2019 |  |  | December 31, 2018 |
Millions |  |  |
Provision for Interim Rate Refund (a) |  | $40.6 |  |  |  | $40.0 |
PSAs | 12.4 |  |  | 12.6 |
Contract Liabilities (b) | 0.4 |  |  | 7.6 |
Provision for Tax Reform Refund (c) | 0.5 |  |  | 10.7 |
Contingent Consideration (d) | — |  |  | 3.8 |
Operating Lease Liabilities (e) | 8.4 |  |  | — |
Other | 36.2 |  |  | 53.8 |
Total Other Current Liabilities |  | $98.5 |  |  |  | $128.5 |
(a) | Provision for Interim Rate Refund is expected to be refunded to Minnesota Power’s regulated retail customers in the second quarter of 2019.
(b) | Contract Liabilities include deposits received as a result of entering into contracts with our customers prior to completing our performance obligations.
(c) | Provision for Tax Reform Refund related to the income tax benefits of the TCJA in 2018 was refunded to Minnesota Power customers in the first quarter of 2019 and will be refunded to SWL&P customers in 2019 and 2020.
(d) | Contingent Consideration related to the earnings-based payment resulting from the U.S. Water Services acquisition was paid in the first quarter of 2019.
(e) | See Leases.
Other Non-Current Liabilities | March 31, 2019 |  |  | December 31, 2018 |
Millions |  |  |
Asset Retirement Obligation |  | $142.0 |  |  |  | $138.6 |
PSAs | 73.9 |  |  | 76.9 |
Operating Lease Liabilities (a) | 25.6 |  |  | — |
Other | 46.4 |  |  | 47.1 |
Total Other Non-Current Liabilities |  | $287.9 |  |  |  | $262.6 |
(a) | See Leases.
NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Supplemental Statement of Cash Flows Information.
Three Months Ended March 31, | 2019 |  |  | 2018 |
Millions |  |  |
Cash Paid for Interest – Net of Amounts Capitalized |  | $19.7 |  |  |  | $19.3 |
Noncash Investing and Financing Activities |  |  |  |  |
Decrease in Accounts Payable for Capital Additions to Property, Plant and Equipment | $(1.1) |  | $(48.1)
Reclassification of Property, Plant and Equipment to Inventory (a) | — |  |  |  | $46.9 |
Recognition of Right-of-use Assets and Lease Liabilities (b) | $34.0 |  | — |
Capitalized Asset Retirement Costs |  | $1.6 |  |  |  | $0.8 |
AFUDC–Equity |  | $0.6 |  |  |  | $0.3 |
(a) | In February 2018, Montana-Dakota Utilities exercised its option to purchase the Thunder Spirit II wind energy facility upon completion, resulting in a reclassification from Property, Plant and Equipment – Net to Inventories – Net for project costs incurred in the prior year.
(b) | See Leases.
New Accounting Pronouncements. Recently Adopted Pronouncements Disclosure Update and Simplification. In November 2018, the SEC adopted amendments to certain disclosure requirements. The amendments adopted include requirements that interim financial statements should include comparative statements for the same period in the prior financial year, except that the requirement for comparative balance sheet information may be satisfied by presenting the year-end balance sheet. It further includes a requirement analyzing the changes in each caption of shareholders’ equity either separately in a note or on the face of the financial statement. These amendments were effective for ALLETE in the first quarter of 2019. We have included the presentation of our Statement of Shareholders’ Equity to meet these requirements. Leases. In 2016, the FASB issued an accounting standard update which revised the existing guidance for leases. Under the revised guidance, lessees will be required to recognize right-of-use assets and lease liabilities on the Consolidated Balance Sheet for leases with terms greater than 12 months. The new standard also requires additional qualitative and quantitative disclosures by lessees and lessors to enable users of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The accounting for leases by lessors and the recognition, measurement and presentation of expenses and cash flows from leases is not expected to significantly change as a result of the new guidance. The Company adopted this guidance in the first quarter of 2019 using the optional transition method and the package of practical expedients, which allowed for the adoption of the standard as of January 1, 2019 without restating previously disclosed information. Management elected the optional transition method of adoption due to the overall immateriality of the balance sheet gross up in the period of adoption. The package of practical expedients allowed management to not reassess the lease classification for leases, including those that had expired during the periods presented or that still existed at the time of adoption. We have included additional disclosures in the notes to the consolidated financial statements including additional information about the Company’s leases. (See Leases.) Leases. We determine if a contract is or contains a lease at inception and recognize a right-of-use asset and lease liability for all leases with a term greater than 12 months. Our right-of-use assets and lease liabilities for operating leases are included in Other Non-Current Assets, Other Current Liabilities and Other Non-Current Liabilities, respectively, in our Consolidated Balance Sheet. We currently do not have any finance leases. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the estimated present value of lease payments over the lease term. As our leases do not provide an explicit rate, we determine the present value of future lease payments based on our estimated incremental borrowing rate using information available at the lease commencement date. The operating lease right-of-use asset includes lease payments to be made during the lease term and any lease incentives, as applicable. NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Leases (Continued) Our leases may include options to extend or buy out the lease at certain points throughout the term, and if it is reasonably certain that we will exercise that option at lease commencement, we include those rental payments in our calculation of the right-of-use asset and lease liability. Lease and rent expense is recognized on a straight-line basis over the lease term. Leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheet. The majority of our operating leases are for heavy equipment, vehicles and land with fixed monthly payments which we group into two categories: Vehicles and Equipment; and Land and Other. Our largest operating lease is for the dragline at BNI Energy which includes a termination payment at the end of the lease term if we do not exercise our purchase option. The amount of this payment is $3 million and is included in our calculation of the right-of-use asset and lease liability recorded. None of our other leases contain residual value guarantees. The components of lease cost were as follows:
Three Months Ended March 31, |  | 2019
Millions |  |
Operating Lease Cost |  |  | $2.9 |
Other Information: |  |
Operating Cash Flows From Operating Leases |  |  | $2.9 |
Balance Sheet Information Related to Leases: |  |
Other Non-Current Assets |  |  | $34.0 |
Total Operating Lease Right-of-use Assets |  |  | $34.0 |
Other Current Liabilities |  |  | $8.4 |
Other Non-Current Liabilities |  | 25.6 |
Total Operating Lease Liabilities |  |  | $34.0 |
Weighted Average Remaining Lease Term (Years): |  |
Operating Leases - Vehicles and Equipment |  | 4 |
Operating Leases - Land and Other |  | 29 |
Weighted Average Discount Rate: |  |
Operating Leases - Vehicles and Equipment |  | 3.6 | %
Operating Leases - Land and Other |  | 4.5 | %
NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Leases (Continued) Maturities of lease liabilities were as follows:
| March 31, 2019
Millions |
2019 |  | $9.9 |
2020 | 7.9 |
2021 | 6.1 |
2022 | 4.9 |
2023 | 3.1 |
Thereafter | 9.4 |
Total Lease Payments Due | 41.3 |
Less: Imputed Interest | 7.3 |
Total Lease Obligations | 34.0 |
Less: Current Lease Obligations | 8.4 |
Long-term Lease Obligations |  | $25.6 |
Subsequent Events. The Company performed an evaluation of subsequent events for potential recognition and disclosure through the date of the financial statements issuance. Sale of U.S. Water Services. On February 8, 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. for a cash purchase price of $270 million. On March 26, 2019, ALLETE completed the sale and received approximately $265 million in cash at closing, net of transaction costs and cash retained. This amount is subject to adjustment for finalization of such items as estimated working capital. The Company recognized a gain on the sale of U.S. Water Services of approximately $10 million after-tax during the three months ended March 31, 2019.

X
- References No definition available. + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_OrganizationConsolidationBasisOfPresentationBusinessDescriptionAndAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration