Equity Investments

12 Months Ended

Dec. 31, 2023

Equity Method Investments and Joint Ventures [Abstract]

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 2023, we invested $8.2 million in ATC. In total, we expect to invest approximately $5.8 million in 2024.


ALLETE’s Investment in ATC
Year Ended December 31	2023	2022
Millions
Equity Investment Beginning Balance	$165.4	$154.5
Cash Investments	8.2	5.9
Equity in ATC Earnings	23.1	19.3
Distributed ATC Earnings	(18.3)	(15.5)

Amortization of the Remeasurement of Deferred Income Taxes	1.3	1.2
Equity Investment Ending Balance	$179.7	$165.4


ATC Summarized Financial Data
Balance Sheet Data
As of December 31	2023	2022
Millions
Current Assets	$115.2	$89.6
Non-Current Assets	6,337.0	5,997.8
Total Assets	$6,452.2	$6,087.4
Current Liabilities	$495.9	$511.9
Long-Term Debt	2,736.0	2,613.0
Other Non-Current Liabilities	585.2	485.8
Members’ Equity	2,635.1	2,476.7
Total Liabilities and Members’ Equity	$6,452.2	$6,087.4


Income Statement Data
Year Ended December 31	2023	2022	2021
Millions
Revenue	$818.9	$751.2	$754.8
Operating Expense	407.6	381.5	376.2
Other Expense	131.7	122.9	113.9
Net Income	$279.6	$246.8	$264.7
ALLETE’s Equity in Net Income	$23.1	$19.3	$21.3

ATC’s authorized return on equity is 10.02 percent, or 10.52 percent including an incentive adder for participation in a regional transmission organization, based on a 2020 FERC order which is subject to various outstanding legal challenges related to the return on equity calculation and refund period ordered by the FERC. In August 2022, the U.S. Court of Appeals for the District of Columbia Circuit vacated and remanded the 2020 FERC order back to FERC. As a result of this decision, ATC recorded a reserve in the third quarter of 2022 for anticipated refunds to its customers for approximately $31 million of which our share was approximately $2.4 million pre-tax. We cannot predict the return on equity FERC will ultimately authorize in the remanded proceeding.

In addition, the FERC issued a Notice of Proposed Rulemaking in April 2021 to limit the 50 basis point incentive adder for participation in a regional transmission organization to only the first three years of membership in such an organization. If this proposal is adopted, our equity in earnings from ATC would be reduced by approximately $1 million pre-tax annually.

NOTE 6. EQUITY INVESTMENTS (Continued)

Investment in Nobles 2. Our subsidiary, ALLETE South Wind, owns a 49 percent equity interest in Nobles 2, the entity that owns and operates 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.


ALLETE’s Investment in Nobles 2
Millions
Equity Investment Balance as of December 31, 2022			$157.3

Equity in Nobles 2 Earnings (a)			(1.4)
Distributed Nobles 2 Earnings			(4.4)
Equity Investment Balance as of December 31, 2023			$151.5

(a)The Company also recorded net loss attributable to non-controlling interest of $10.2 million related to its investment in Nobles 2.