CUB, state agencies, industry, and environmental groups file briefs opposing Minnesota Power sale
If you follow this space, you know that ALLETE, which provides electric service in northern Minnesota under the name Minnesota Power, has signed an agreement to be acquired by two private investors. Global Infrastructure Partners (GIP) and the Canada Pension Plan Investment Board (CPP) have reached a deal to purchase ALLETE for $6.2 billion. The agreement now awaits the approval of the Public Utilities Commission (PUC), which must find the deal is "consistent with the public interest.” If the PUC approves the acquisition, ALLETE will transition from a publicly traded company (meaning its stock is traded on public exchanges) to a privately held company owned solely by GIP and CPP acting in partnership. Minnesota Power will remain regulated by the PUC whether or not the acquisition is approved.
On May 1, CUB filed a legal brief outlining our assessment of the proposed acquisition, informed by a complex proceeding that has been ongoing for most of the past year. We conclude that potential harms stemming from the acquisition outweigh its potential benefits and recommend the PUC not approve it. Most parties representing public interest perspectives or consumers came to similar conclusions, including the Minnesota Department of Commerce, Office of the Attorney General, LPI (a large industry coalition), the Sierra Club, and CURE.
Read all of our writings on the proposed acquisition of Minnesota Power here.
What’s Happened So Far
- On May 5, 2024, ALLETE entered into an agreement to be acquired by GIP and CPP, subject to the approval of the Minnesota PUC, Wisconsin Public Service Commission, Federal Energy Regulatory Commission (FERC), and others;
- On July 19 2024, ALLETE filed a petition with the PUC seeking approval of the acquisition;
- On October 7, 2024, the PUC referred the matter to the Office of Administrative Hearings for additional record development before a judge;
- From December 2024 through March 2025, parties to the case filed expert witness testimony evaluating the proposed acquisition;
- On January 10, 2025, the judge oversaw a virtual public hearing;
- From April 1 to 3, 2025, the judge oversaw evidentiary hearings, where witnesses from each party were made available for cross examination by counsel for the other parties;
- From April 7 to11, the judge oversaw 6 additional public hearings;
- On May 1, 2025, parties filed initial briefs.
CUB's Arugment
Several of the main arguments CUB included in our initial brief are summarized here.
ALLETE has not adequately demonstrated the benefit of the acquisition.
ALLETE claims the proposed acquisition is consistent with the public interest primarily because it would improve the company’s access to capital, which it needs to comply with Minnesota’s Carbon Free Standard. The Carbon Free Standard is a 2023 law that pushes Minnesota’s electric utilities to achieve net-zero carbon emissions by 2040.
ALLETE also argues that, in order to prove it is consistent with the public interest, it does not need to show the acquisition would provide a “net benefit” to Minnesota Power customers. To put that another way, ALLETE argues that, so long as the proposed acquisition has a neutral effect on customers and does not harm them, it meets the standard required for approval.
There are a few problems with this argument.
First, ALLETE has not demonstrated that it lacks access to capital now—or that its access to capital would be improved by leaving the public markets, where ALLETE can raise capital from any investor willing to provide it. This is particularly true considering GIP and CPP (the partners) have made no legally binding commitment to provide ALLETE the equity capital it projects will be needed in the coming five years, let alone through 2040. Meanwhile, ALLETE’s last two annual reports filed with the Securities and Exchange Commission (SEC) show that ALLETE determined it is “well positioned to meet [its] financing needs [through 2029] due to adequate operating cash flows, available additional working capital and access to capital markets.” (See the 2023 Annual Report here and the 2024 Annual Report here.) These statements are inconsistent with ALLETE’s claims in this case about needing access to the partners’ capital to make substantial investments in the coming years.
Second, the legislation establishing the Carbon Free Standard requires the Commission to “maximize net benefits” to Minnesotans when implementing it. Among those net benefits, the PUC must take “reasonable actions” to ensure “the provision of affordable electric service to Minnesotans, particularly to low-income consumers.” It is inconsistent of ALLETE to argue, on one hand, that it need not show net benefits to meet its burden of proof and, on the other hand, justify its need for the acquisition by citing compliance with a law that requires the Commission to implement that law in a way that maximizes net benefits.
Finally, we and others believe the acquisition risks harming Minnesota Power customers in several important ways, including those summarized below.
When “choosing” the partners, ALLETE put its shareholders’ private interests ahead of the public interest.
A public Proxy Statement ALLETE filed with the SEC describes ALLETE’s process for “choosing” GIP and CPP as investment partners. In a nutshell, the Proxy Statement shows that GIP and CPP were the only two investors to make an offer to acquire ALLETE. Other potential investors ALLETE had identified either dropped out because they were not interested, or because they could not justify paying the substantial premium ALLETE expected. ALLETE allowed one such investor to drop out without making a bid, because they could “only” offer 10-15% above ALLETE’s market value.
Even though GIP and CPP were the only two investors making an offer, ALLETE rejected their first two offers (including a second offer characterized as a “best and final” offer). While both offers were above ALLETE’s market value, the premium paid to shareholders was not high enough for the company. Instead, the ALLETE board decided to remain publicly traded. Ultimately, ALLETE accepted the partners’ third offer, which included a 19% to 22% premium worth hundreds of millions of dollars payable to ALLETE’s shareholders. To be clear, none of that premium would flow through to Minnesota Power’s customers.
Had ALLETE truly needed access to the partners’ capital in a way that served the public interest, they could have accepted one of the first two offers (which also included substantial premiums). By not doing so, they put the partners in the position of needing to recover a larger premium before they earn a return on their investment. That, in turn, puts more pressure on the partners to extract revenue from ALLETE and Minnesota Power customers.
If approved, the acquisition is likely to cause Minnesota Power’s rates to increase more than needed.
We and others are concerned that the partners expect to make outsized returns on their investment, significantly exceeding the typical return on a utility investment. Because the majority of ALLETE's revenue comes from Minnesota Power, it will be impossible for the partners to recoup their investment and expected return without leaning heavily on customers, causing rates to increase more than should be necessary. Unfortunately, many of the details supporting parties’ concerns about large rate increases are hidden from public view behind highly confidential trade secret designations. (More on that below.) If the PUC keeps any rate increases to a reasonable level, the partners could view ALLETE as an underperforming investment, which could lead to further problems. (More on that below, too.)
If the acquisition is approved, the Partners would have substantial control over ALLETE and Minnesota Power.
Currently, the ALLETE Board of Directors votes on important decisions involving Minnesota Power. That practice will continue if the acquisition is approved, but the partners will have the authority to appoint 10 out of 13 directors to the ALLETE Board—a clear majority. This would give the partners outsized control and influence over Minnesota Power’s filings to the PUC, like requested rate increases and power generation plans. Plus, the partners will preserve “consent rights” that require the ALLETE Board to obtain both of the partners’ consent before taking certain actions. Again, many of the details about the partners’ proposed governance of ALLETE and Minnesota Power is hidden from public view.
Approval of the acquisition would reduce transparency
Throughout this process, ALLETE has insisted that private ownership would not reduce transparency into the company’s operation of Minnesota Power. Unfortunately, that has not been our experience so far. As noted above, a lot of the most compelling evidentiary details in this case are hidden from public view in documents the Partners have designated as Highly Confidential Trade Secret. Also, if the acquisition is approved, ALLETE would no longer be subject to the rigorous public disclosure requirements applicable to publicly-traded companies. Much of the detailed information ALLETE currently files with the SEC would either not be filed publicly anymore or scattered across numerous filings with state and federal utility regulators. Several parties raised concerns about this reduced transparency in their briefs.
Approving the acquisition would put more pressure on the PUC
Those who support the proposed acquisition often point out that, if the acquisition is approved, Minnesota Power will continue to be regulated by the PUC. We, of course, agree the PUC will continue to have regulatory oversight of Minnesota Power. The PUC will still have control over setting Minnesota Power’s rates, approving its integrated resource and distribution plans, monitoring potential conflicts of interest involving the partners’ other investments or affiliated interests, etc. However, approving the acquisition would make the PUC’s job harder.
In particular, the PUC would be stuck between the rock of needing to protect customers from paying unreasonable rates and the hard place of allowing the partners to earn a return sufficient to keep them invested (literally and figuratively) in Minnesota Power. If the Partners believe their investment in ALLETE is underperforming, that may push them to make riskier decisions when exercising control over ALLETE/Minnesota Power, divert more of their attention and capital to other portfolio companies, and/or sell off their investment in ALLETE earlier than expected.
Those same risks do not apply now—at least not at the same scale as they would if the acquisition is approved. Currently, ALLETE’s outstanding shares are spread amongst hundreds or thousands of shareholders, no single one of which holds more than 13% of all outstanding shares. This means no current shareholder has nearly the same influence over the ALLETE Board that the partners would have, and, no two existing shareholders are the sole sources of equity capital when ALLETE needs it.
What Comes Next
Each party now has the opportunity to file a reply brief responding to other parties’ arguments. Reply briefs are due on May 29. On July 15, the judge overseeing the case will issue a detailed report summarizing the evidence in the case, outlining her findings, and making recommendations to the PUC. While that report serves as an important source of valuable information, the PUC is not bound to follow the judge’s recommendations. Rather, the PUC will use the judge’s report to inform their own decision as to whether to approve or deny the acquisition. Even if the Commission decides to approve it, they may do so with significant modifications or conditions attached to that approval to help account for concerns raised in the docket.
We expect the Commission to hold a hearing and make its decision in the late summer or fall of 2025.
Can you still make a public comment?
The deadline for submitting a public comment in this proceeding was April 17, 2025. That means that any public comments submitted after that date will technically not be part of the evidentiary record the judge considers when preparing her report. However, if you still would like to file a public comment, you can do so and it will still appear publicly on the PUC’s eDockets system. To file a public comment, follow the directions here and cite docket number 24-198.
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