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ALLETE Beats Earnings and Sales Ests.

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ALLETE Inc. (ALE - Free Report) reported first quarter 2013 earnings of 83 cents per share compared with 66 cents per share in the year-ago quarter. ALLETE’s earnings beat the Zacks Consensus Estimate by 10.6%.

Earnings received a boost from increased electric sales due to a cold winter, start-up of renewable services and higher returns from investments in American Transmission Company ("ATC").

Total Revenue

ALLETE’s first quarter revenue increased 9.9% to $263.8 million from the year-ago quarter. Quarterly revenue also surpassed the Zacks Consensus Estimate by 5.8%. Healthy sales across all customer classes as well as benefits from renewable tax credits led to the upsurge in the top line.

Operational Highlights

Sales from the regulated utility operations in the first quarter stood at $241.4 million, up 10.4% from the prior-year quarter. This was driven by increase in residential, commercial and municipal sale volumes supported by volume growth in the non-regulated energy business.

ALLETE's total electricity sale volume in the first quarter rose 3.1% year over year to 3,472 million Kilowatt-hours.

Total operating expenses were $219.4 million in the first quarter 2013, up 8.8% from the year-ago quarter. A 12.2% rise in cost of fuel and purchased power led to the cost escalation. This was further compounded by a 4.8% surge in operations and maintenance expenses.

Operating income in the first quarter jumped 15.6% to $44.4 million from the prior-year period. Profit rose on account of the substantial increase in the top line despite the cost pressure.

Interest expense in the first quarter 2013 was $12.3 million versus $11.0 million in the year-ago quarter.

Financial Update

Cash and short-term investments as of Mar 31, 2013 were $77.3 million versus $80.8 million as of Dec 31, 2012.

Long-term debt as of Mar 31, 2013 was $975.1 million compared with $933.6 million at year-end 2012.


ALLETE reiterated its 2013 earnings expectation of $2.58-$2.78 per share taking into account robust industrial demand, higher cost recovery revenue, increased depreciation and interest expenses, federal production tax credits and dilution from equity issuances in the range 10-15 cents.

Other Utility Company Releases

Alliant Energy Corporation (LNT - Free Report) reported first quarter 2013 operating earnings of 72 cents per share, up 16.1% from the Zacks Consensus Estimate of 62 cents.

TECO Energy Inc.’s first quarter 2013 operating earnings of 19 cents per share exceeded the Zacks Consensus Estimate of 17 cents.

DTE Energy Company. (DTE - Free Report) posted first quarter earnings of $1.34 per share comfortably surpassing the Zacks Consensus Estimate by 31 cents.    

Our View

ALLETE has posted strong financial results in the first quarter of 2013 with both the top and bottom line performing better than expected. The company is expected to benefit from the Essar Steel Minnesota midstream project which began operations from Apr 2013.

Furthermore, ALLETE’s ambitious Energy Forward plan is expected to improve service quality thereby contributing to its profitability. Its proposed scheme to add 100 megawatts of wind capacity will also bode well for the company given the positive climate for renewable generation in the U.S. ALLETE at present carries a Zacks Rank #2 (Buy).

Based in Duluth, Minn., ALLETE together with its subsidiaries primarily engages in the generation, transmission, and distribution of coal-fired, hydro, wind, and biomass co-fired power in the United States.

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