REGIONAL— The proposed acquisition of Minnesota Power parent company, ALLETE, by two large investment funds has divided some usual allies over whether the purchase is in the public interest.
Last month, the Minnesota Department of Commerce, which had initially raised questions about the $6.2 billion sale, announced a stipulation agreement with the two investment firms, Global Infrastructure Partners, a Blackrock affiliate, and the Canada Pension Plan, that are seeking to buy ALLETE.
Just four days later, a state administrative law judge, who had been reviewing the proposal for nearly a year, strongly recommended that the state’s Public Utilities Commission reject the sale, arguing that the two partners had failed to make the case that the purchase was in the public interest.
The case has also generated disagreement among a variety of stakeholders who often find plenty of common ground on such cases. Among the critics of the proposed acquisition are the so-called Large Power Intervenors, a coalition of industrial customers of Minnesota Power, including the mining and wood products sectors, who are strongly opposed to the sale, mostly over fears that the new owners will seek higher rates to boost their returns on their investment.
The large power intervenors, in a 42-page submission dated Aug. 4, state that the agreement between the Department of Commerce and the partners relies heavily on claims that the administrative law judge ultimately rejected. “Furthermore, the settlement is procedurally flawed, especially considering that the settling parties refused to respond to [the large power intervenors’] requests for information regarding its benefits.”
The partners and officials from Minnesota Power argue that the acquisition will provide Minnesota Power with the financial resources necessary to upgrade its power generation and distribution facilities to meet state clean energy goals.
The judge and others contend, however, that Minnesota Power has shown no indication that the traditional capital markets will fall short of meeting its needs.
A number of environmental and consumer groups were in agreement with the large industrial customers, echoing many of the same points in their own comments on the case, which is currently scheduled to go before the Public Utilities Commission on Sept. 25 and Oct. 3.
The group CURE, in its own comments, chastised the Department of Commerce for making a “political decision” to switch sides and ultimately support the proposed purchase. CURE’s comments, written by CURE legal counsel Hudson Kingston, of Ely, noted that the administrative law judge relied heavily on testimony and evidence provided by the department in issuing her own ruling recommending against approval of the purchase. While the PUC is not obligated to follow the recommendation of an administrative law judge, the findings of fact issued by the judges in such cases, generally establish the basis for decisions by the commission.
While most environmental groups voiced opposition to the sale, Fresh Energy and the Clean Grid Alliance were exceptions. “The record developed through the contested case process makes clear that Minnesota Power’s resource and grid infrastructure plans require a substantial amount of investment, wrote the two groups in a joint email earlier this month. “Minnesota Power’s projected equity need for infrastructure projects over the next five years is at the same level as the utility has raised over the last 75 years,” they noted. “Moreso, when comparing Minnesota Power’s capital needs over the near-term versus the utility’s overall size, Minnesota Power ranks at the top, or in the top handful of utilities in the country as the most extreme differential.”
Several regional unions joined Fresh Energy in urging approval of the sale. The IBEW Local 31 and the Operating Engineers Local 49, both urged approval of the sale arguing that the agreement would likely improve worker protections and guarantee significant future investment in new Minnesota Power infrastructure.
Minnesota Power’s parent company, ALLETE, is publicly traded, while the two firms that seek to acquire the company are privately held. Under their proposal, the two firms would pay $3.9 billion for the acquisition of ALLETE and another $2.3 billion through the assumption of debt. ALLETE shareholders would receive $67 per share under the deal. GIP would become a 60-percent owner of ALLETE, while CPP would own 40 percent.
Minnesota Power serves approximately 150,000 customers across northeastern Minnesota.