ALLETE is one step closer to becoming a private utility.
The company announced that the Federal Energy Regulatory Commission (FERC) approved its proposed transaction with Canada Pension Plan Investment Board (CPP Investments) and Global Infrastructure Partners (GIP), which would take ALLETE private in a $6.2 billion deal.
“FERC’s approval of ALLETE’s proposed transaction with CPP Investments and GIP marks an important milestone and brings us one step closer to realizing the benefits of this transaction for our customers, our communities, our co-workers, and our shareholders,” said ALLETE Chair, President, and CEO Bethany Owen. “We are pleased with this decision and look forward to the tremendous opportunity this transaction creates for long-term energy and infrastructure investment while maintaining local jobs, management, and regulatory oversight.”
“We will continue diligently working to secure the remaining regulatory approvals for this transaction and value the input of all stakeholders in this process,” Owen added.
Allete and its family of companies include regulated utilities and renewable energy companies.
Under the terms of the merger agreement, CPP Investments and GIP will acquire all outstanding common shares of ALLETE for $67 per share in cash, or $6.2 billion, without interest, including the assumption of debt. Following close, ALLETE will remain locally managed and operated. Its utilities, Minnesota Power and SWL&P, will continue to be regulated by the Minnesota Public Utilities Commission, the Public Service Commission of Wisconsin, and FERC.
The acquisition is not expected to impact retail or municipal rates for utility customers, ALLETE said. ALLETE expects to complete the transaction in mid-2025, which remains subject to certain regulatory approvals and other customary closing conditions.
ALLETE announced earlier this year that it was planning to become a private utility through the deal. In September, Minnesota Attorney General Keith Ellison submitted comments to state utility regulators concerning the planned takeover, requesting that the commission refer the matter to the state’s Office of Administrative Hearings for contested case proceedings.
Meanwhile, the investment firm BlackRock is in the process of acquiring GIP in a $12.5 billion deal that the Federal Energy Regulatory Commission (FERC) recently approved. BlackRock is the largest shareholder of ALLETE’s regional competitors, as well as two of its largest customers, U.S. Steel and Cleveland Cliffs, advocacy group Public Citizen noted.
“BlackRock’s acquisition of GIP, and, in turn, GIP’s purchase of ALLETE, fundamentally transforms BlackRock from the world’s largest passive investor into an entity with active control over significant fossil fuel and utility assets, threatening competition, rates and regulation,” said Tyson Slocum, director of Public Citizen’s Energy Program.
Ellison pointed to the fact that GIP and CPP are willing to pay a 19% to 22% premium above ALLETE’s market price, which he said “suggests they see significant value in controlling ALLETE’s management and investment strategy.”
The buyers will be expecting to recover their initial investment along with significant returns,” Ellison said. “And they presumably expect to recover much of that investment and return from Minnesota Power, ALLETE’s largest division and a source of captive ratepayer revenue.”
ALLETE’s potential new future as a private entity also concerned Ellison. He noted that while Minnesota Power is agreeing to provide “some” information voluntarily, there’s no indication that its voluntary cooperation will be as enforceable as disclosure obligations from the federal government and stock exchanges for publicly traded companies. Additionally, Minnesota Power will shift from the largest component of ALLETE’s operations to a small part of GIP and CPP’s portfolios, as well as BlackRock.
