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ALLETE (ALE) Unit Buys 97.5 MW Wind Farms in Minnesota - Analyst Blog

Zacks Equity Research

ALLETE, Inc.’s ALE subsidiary ALLETE Clean Energy, Inc. acquired a combined 97.5- megawatt (“MW”) wind generation facility, comprising the Chanarambie and Viking wind farms, from a unit of EDF Renewable Energy. The transaction was valued at $47.5 million. The two wind farms jointly have 65 turbines, manufactured by General Electric Company GE.

Including the latest transaction, ALLETE Clean Energy’s renewable portfolio has now reached 437 MW.

The wind farms are located near Lake Benton in southwest Minnesota and are close to ALLETE Clean Energy’s other existing wind facilities.

Under existing power purchase agreements, output generated from these wind farms are sold to Northern States Power Company, a subsidiary of Xcel Energy Inc. XEL. These contracts ensure steady cash inflow for ALLETE Clean Energy.

Operating independently, ALLETE Clean Energy focuses on creating energy solutions by constructing and acquiring wind, solar, biomass, midstream gas and oil infrastructure. It sells electricity to electric utilities, co-operatives, independent power marketers, municipalities and large end-users across North America through long-term agreements or other sales provisions.

ALLETE Clean Energy is currently concentrating on expanding its wind portfolio. It completed several significant transactions in 2014.

In Jan 2014, ALLETE Clean Energy acquired three wind-generation facilities in a transaction worth $26.9 million. It also has the option to purchase an Armenia Mountain, PA-based wind farm. It is currently processing the acquisition of a 108-MW wind-generation facility.

In Nov 2014, ALLETE Clean Energy finalized an agreement with Montana-Dakota Utilities, a business wing of MDU Resources Group Inc. MDU, to build a 107-MW wind farm, which upon completion, will be sold to the latter.

In 2014, ALLETE’s capital expenditure was $604.3 million, up around 78% year over year. Between 2015 and 2019, the company plans to make capital investment of $1.39 billion.

ALLETE continues to expand its renewable portfolio through organic growth projects besides pursuing strategic acquisitions. In Jan 2015, the company’s unit, Minnesota Power commenced operations at the 205-MW Bison 4 Wind Energy Center. The cost of the project is estimated at $345 million.

These initiatives will enable ALLETE to meet stringent environmental regulations pertaining to carbon emission during electricity generation.

ALLETE currently has a Zacks Rank #3 (Hold).

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