) entered into an agreement with
The AES Corporation
) to acquire certain wind generation assets from the latter. The
wind generation assets span the three states of Minnesota, Iowa
The total output of these winds farms will come to 231 Megawatts
(MW). ALLETE, Inc.'s subsidiary, ALLETE Clean Energy
expects to close the deal in early 2014 for a consideration of
$27 million. All these wind units have existing long-term service
agreements for their entire output. The transaction is expected
to be accretive to ALLETE's earnings from 2014.
The acquisition of these wind assets is in sync with the
long-term strategy of the company. ALLETE has plans to expand its
operations across different markets in the U.S. and serve more
customers. This would inevitably boost the revenue stream of the
In addition, the company is working to expand its green power
generation through the organic route. ALLETE Clean Energy has
plans to invest in the range of $50 million to $150 million in
renewable assets. The renewable portfolio comprises energy
sources ranging from wind, hydropower, biomass to other emerging
We believe putting more emphasis on green power generation will
allow the company to meet the existing renewable generation
mandates of the different U.S. states. In addition, the U.S.
Environmental Protection Agency (EPA) is increasingly being
stringent on granting permission for setting up new fossil fuel
based power plants. In this light, investing in renewables makes
even more sense for energy companies like ALLETE.
The present acquisition agreement includes a clause, which
provides ALLETE Clean Energy with an option to add one more wind
asset in Pennsylvania in mid 2015. If the company exercises this
option it will add another 101 MW of wind generation to its
existing portfolio. This wind asset presently has two long-term
power purchase agreements.
We believe the increasing awareness, more states implementing
renewable generation standards, ALLETE's eagerness to expand its
green portfolio and a nearly one-year contribution from the other
three acquired winds assets will induce the management of ALLETE
to go in for the Pennsylvania buy.
ALLETE currently has a Zacks Rank #4 (Sell) as it failed to beat
the consensus earnings estimates in the last two quarters. Other
operators in the industry doing well include
Brookfield Infrastructure Partners L.P
Alliant Energy Corporation
), each with a Zacks Rank #2 (Buy).
AES CORP (AES): Free Stock Analysis Report
ALLETE INC (ALE): Free Stock Analysis Report
BROOKFIELD INFR (BIP): Free Stock Analysis
ALLIANT ENGY CP (LNT): Free Stock Analysis
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