ALE - NYSE

Good day, and welcome to the ALLETE Fourth Quarter 2023 Financial Results Call. Today’s call is being recorded. Certain statements contained in this conference call that are not descriptions of historical fact are forward-looking statements, such as terms defined in the Private Securities Litigation Reform Act of 1995. Because such statements can include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, those discussed in filings made by the Company with the Securities and Exchange Commission. Many of the factors that will determine the company's future results are beyond the ability of management to control or predict. Listeners should not put undue reliance on forward-looking statements, which reflect management's reviews only as of the date hereof. The company undertakes no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Welcome to Allete’s conference call announcing fourth quarter 2023 financial results. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the call over to Bethany Owen, Chair, President and CEO. You may begin.

Thank you. Good morning, everyone and thanks for joining us. With me today are ALLETE's senior vice President and Chief Financial Officer, Steve Morris; Jeff Scissons, ALLETE Corporate Development and ALLETE’s Clean Energy's Strategy Officer; and Frank Frederickson, Minnesota Power Vice President of Customer Experience and Engineering Services. Corresponding slides for this morning's call are available on our website at allete.com in the Investors section. We'll refer to each page number as we go through today's presentation. I'm pleased that this morning ALLETE reported full year 2023 earnings $4.30 per share on net income of $247.1 million, compared to 2022 earnings of $3.38 per share on net income of $189.3 million. These financial results were in line with our higher revised 2023 earnings guidance range, which we provided in November. In a few minutes, Steve will give more details on these financial results, as well as our 2024 earnings guidance. Throughout 2023, driven by ALLETE’s talented and committed employees, we achieved significant operational and financial successes. As together, we're creating the clean energy future through ALLETE’s sustainability in action strategy. We're building on these successes in 2024 and in years to come providing meaningful value to our customers, our communities and our shareholders and exciting opportunities for our employees. We're committed to ALLETE’s long-term financial objective of achieving consolidated earnings per share growth of 5% to 7% and given our strong multi-year CapEx Outlook, I'm confident in our ability to achieve this for our investors. Our ALLETE Board of Directors shares our confidence as demonstrated by the Board's recent approval of a dividend increase of more than 4%. This adds to ALLETE’s track record of more than 74 consecutive years of dividends paid to our shareholders. Our execution of significant strategic initiatives is paving the way for even greater success at ALLETE, now and into the future. Our capital investment plan on Slide 3 illustrates the clear path with real projects representing an increase of 1 billion for a total of $4.3 billion in regulated investments over the next five years. I'd like to share some details on a few of those exciting projects. First, Minnesota Power is making great progress in transforming its energy mix. In November, MP issued an RFP for up to 300 megawatts of regional solar and bids have been received and are being evaluated. The solar RFP emphasizes investment in our host communities, the use of local labor, and advancing supplier and workforce diversity. All of this will help ensure these solar projects deliver the best overall value to customers while strengthening the communities we are privileged to serve. And just last week, we issued an RFP for up to 400 megawatts of wind energy. This RFP seeks new wind generation that maximizes the use of regional transmission assets for delivery to our customers. This will increase Minnesota Power’s current wind portfolio of 870 megawatts of owned and contracted capacity by nearly 50%. Taken together, our portfolio of diverse renewable energy resources including wind, solar, hydro and biomass helps ensure we meet our customers’ energy demands around the clock while we also work to meet the state's carbon-free energy goals. In addition to adding more renewable generation a key part of our CapEx plan includes significant transmission investments to support grid reliability in our region and throughout the Upper Midwest. Our team continues to make great progress on two 345 KV MISO long range transmission plan projects. the Northland reliability project, a 180 mile line from the Iron Range in Northern Minnesota to Central Minnesota, which will jointly own with Great River Energy and the Big Stone South project, a 150-mile line jointly owned by five utilities, including Minnesota Power, which will improve reliability in North Dakota and South Dakota, as well as Western and Central, Minnesota. The Northland reliability project is estimated to cost a total of $970 million to $1.3 billion, representing another important investment in the reliability and resiliency of the transmission system. A combined certificate of need and route permit application was filed with the Minnesota Public Utilities Commission in August and we're working through the regulatory approval process. We anticipate the line to be in service in 2030. Minnesota Power share of the Big Stone South project is expected to be $20 million, a certificate of need and route permit application was filed with the MPUC in September and subject to regulatory approvals, this line is expected to be in service in 2027. Next highlighted in our significant transmission plans is the HVDC Modernization project. This project will replace aging infrastructure and modernize the terminal stations for our 465 mile DC transmission line running from Center North Dakota to Duluth, Minnesota. The existing line already provides Minnesota Power customers direct access to some of the best wind resources in the country and this modernization project will also enhance the reliability and resiliency of the grid across the Upper Midwest. Our team has worked extremely hard to advance this important project, while keeping costs as low as possible. To that end, we applied for and received a $50 million grant from the US Department of Energy, which will be used to prepare the HVDC Transmission System for future expansion and a $15 million grant, as part of the energy bill passed by the Minnesota Legislature in 2023. We are grateful for this meaningful support from the State of Minnesota and the Department of Energy helping to make this important project even more affordable for customers. Pending regulatory approvals in North Dakota and Minnesota, construction could begin on this $800 million to $900 million project as early as this year with an in-service date expected later this decade. Turning to Slide 4, as we look beyond 2028, there is much more ahead at ALLETE. We have significant regulated investment opportunities in addition to those reflected in our current $4.3 billion Five-Year CapEx plan. These include projects that will be part of Minnesota Power’s next IRP planned for March of 2025, as we responsibly transition our two remaining coal units at Boswell Energy Center. We also expect to participate in MISO’s tranche 2 transmission project and is part of our high-voltage transmission strategy to leverage our strategic geographical position and assets to advance inter-regional transmission projects that support reliability, resiliency and the clean energy transformation. In addition to the exciting progress on the Minnesota Power Front, in December, ALLETE and Grid United signed development agreements for the North Plains Connector project with plans for ALLETE to pursue 35% ownership and oversee the transmission line’s operations. North Plains Connector is a 400-mile HVDC transmission line planned to extend from North Dakota to Colstrip Montana. This will be the first transmission connection of three regional US electric energy markets, MISO, SPP and the Western Interconnect, to help ease congestion, increase resiliency and reliability in these markets and enable delivery of energy across a vast area of diverse terrain and weather patterns. It's a truly transformative project and we're proud to be a part of it and look forward to other utilities in the region joining us. Please see Slides 5 and 6. Late last year, Minnesota Power received the Minnesota Public Utilities Commission approval to begin charging interim rates of approximately $64 million at the beginning of this year. Although there's more to play out during the year, this important approval was a constructive outcome that supports Minnesota Power’s financial health and ability to continue our clean energy transformation, while we deliver safe, resilient, reliable and affordable services to our customers. As the State of Minnesota has enacted some of the most ambitious climate legislation in the country, we must ensure we have the people and resources to execute this public policy, while ensuring reliability. This includes adding employees to serve our customers and to ensure projects are done safely on time and on budget. We're not alone in experiencing inflationary cost pressures and increased cost of capital, given the highest interest rates in decades and a unique feature requested in Minnesota Power’s current rate filing is a rate stabilization mechanism designed to help protect us and our customers from volatility associated with the business cycles tied to our unique customer mix. We're confident that our regulators understand the importance of a constructive outcome in this consequential rate case to help ensure Minnesota Power’s ability to continue our clean energy transformation meeting the State's carbon-free energy goal,s while safeguarding the reliable service that powers people's lives and businesses throughout Northeastern Minnesota. Similarly, Superior Water Light and Power is preparing to file a rate case this year. This filing will support important infrastructure upgrades and help ensure that the company continues to provide safe, reliable, and resilient electric water and gas services for its customers. As we execute our strategy in the near-term, we are always focused on our customers and always planning for the future and ALLETE’s future is very bright with important aspects of our long-term investment strategy already well underway. Turning briefly to our non-regulated businesses. First, ALLETE Clean Energy. While it was great to receive the positive arbitration outcome last year, the company's earnings in 2023 were affected by congestion and market volatility at Caddo and Diamond Spring, as well as a third-party substations forced network outage. Addressing the effects of these issues is our priority and we're evaluating all alternatives to improve the economics of these projects. ALLETE Clean Energy with its talented team is an important strategic contributor to ALLETE and as we move forward into 2024, we're focused on maximizing the value of the company's fleet. We look forward to updating you on progress on all of that throughout the year. New Energy Equity exceeded our original projections for 2023 and has continued to increase its total pipeline of prospective renewable energy projects. The team’s solid execution and strong pipeline have only enhanced our confidence in the resiliency and strength of this business and the value the company brings to our shareholders. ALLETE’s New energy equity is concurrently a leading community solar developer in Illinois, Minnesota, New Mexico, New York and Virginia with promising markets in many other states throughout the country. As you can see, we've made tremendous progress throughout this year and I'm grateful to our entire team across our family of businesses for their dedication, expertise, resiliency, innovation and always their integrity. At ALLETE, we honor our commitments and we're committed to serving our customers and our communities with excellence every single day, while we provide value to our shareholders now and well into the future. Now I’ll turn it to Steve for additional details on our 2023 financial results and 2024 guidance. Steve?

Thank, Bethany, and good morning, everyone. I would like to remind you that we filed our 10-K this morning, along with an 8-K that provides details of our 2024 earnings guidance. Please refer to Slides seven through nine for the quarter and year ended 2023 segment income statements, as well as our 2024 earnings guidance. Today ALLETE reported 2023 earnings of $4.30 per share on an income of $247.1 million. Earnings in 2022 were $3.38 per share on net income of $189.3 million. These financial results were in line with our updated 2023 earnings guidance range and also reflects $0.05 per share of negative weather impacts in the fourth quarter. If you recall, we raised our full year 2023 earnings guidance in November to a range of $4.30 to $4.40 per share to reflect several items including a $0.71 per share after tax gain recognized for a favorable arbitration award, in evolving our subsidiaries of ALLETE Clean Energy. Our estimates also assumed normal weather conditions in the fourth quarter. Turning now to the fourth quarter of 2023 for additional details from our business segments. ALLETE’s Regulated Operation segment recorded fourth quarter net income of $34.8 million, compared to $30.5 million in 2022. Earnings were higher in the fourth quarter of 2023, reflecting the timing of interim-rate reserves at Minnesota Power. As you recall, the entire 2022 interim rate reserve of approximately $12 million after tax was recorded in the fourth quarter of 2022, which resulted in timing differences each quarter throughout 2023. There were also higher transmission and depreciation expenses and warmer weather negatively impacted residential and commercial sales. These decreases were partially offset by lower property tax expense, as compared to 2022. ALLETE Clean Energy recorded fourth quarter 2023 net income of $5.3 million, compared to $1.3 million in 2022. Net income this quarter reflected lower operations and maintenance expense. However, earnings at our Caddo wind energy facility were negatively impacted in the fourth quarter of 2023, due to a forced network outage 2022 included a reserve a $4.2 million after tax. The anticipated loss on the sale of the Northern Wind project. Our corporate other businesses, which includes, New Energy, BNI Energy and our investments in renewable energy facilities recorded net income of $11.4 million, compared to net income of $19.9 million in 2022. Net income this quarter reflects higher consolidated income tax expense and lower earnings from Minnesota Solar projects. New Energy’s earnings this quarter were strong, but slightly below 2022 as expected, as New Energy had a record fourth quarter of project closings in 2022. I’ll now provide a few details on our 2024 earnings guidance, which are summarized on Slide 9. Today, we initiated 2024 earnings guidance of $3.60 to $3.90 per share on an income of $210 million to $225 million. This guidance range is comprised of a Regulated Operations segment within a range of $2.65 to $2.85 per share and ALLETE Clean Energy, New Energy and our other businesses within a range of $0.95 to $1.05 per share. Beginning in 2025, we anticipate annual earnings growth will align with our long-term 5% to 7% growth objective using 2023 earnings per share, excluding the Arbitration Award of $3.60 as a base. Our regulated capital expenditure plan will be an essential element in driving growth for ALLETE, along with financial contributions from our other businesses. As Bethany shared, we have made substantial progress on key initiatives in 2023 and 2024 will be a year of significant and consequential regulatory approvals. Regulatory approvals and proposals in 2024 include the Minnesota Power rate case and our rate stabilization mechanism proposal, projects that result from renewable RFPs, transmission certificates of need and current cost recovery riders that will set the stage for further advancement of Minnesota Power’s energy forward clean energy transformation and related earnings growth. We will share with you procedural updates on material developments throughout the year. Minnesota Power’s renewable energy and transmission investments will drive revenue and earnings growth over the next several years and our detail is part of our $4.3 billion, five year capital expenditure plan. As we do every year, this plan is updated as part of our 10-K filing and now extends through 2028, which added approximately $1 billion in capital expenditures over our forecast period. This plan reflects the 2028 investments in renewable and transformation projects and also considers the timing of anticipated regulatory approvals and construction activities to better align with our latest timeline on the RFP process. Consequently, our expected capital projects related to the RFP outcomes have now shifted from 2024 to 2025 to align with this updated timeline and the related earnings growth will largely be driven by these capital investments. ALLETE has unique liquidity options, driven by several initiatives completed and underway. These include last year's Arbitration Award, monetization of renewable tax credits, pursuit of a holding company structure and opportunistic sales of assets. These initiatives will further benefit our financing activities related to our capital investments, maintaining our well-disciplined capital structure and support strong credit ratings as we deploy significant capital into regulated investment opportunities. ALLETE’s financial position is also supported by strong balance sheet that includes cash and cash equivalents of approximately $72 million, $370 million in available lines of credits and a debt-to-capital ratio of 35% at the end of the year Next some details from our business segments on 2024 expectations, starting with our Regulated Operation’s outlook. Overall, our Regulated Operation’s earnings are expected to be slightly above 2023, reflecting several key assumptions that are also included in Minnesota Power’s recent rate case filing. Our guidance includes $64 million for interim rates approved by the Minnesota Public Utilities Commission that went into effect January 1st 2024, as filed. Industrial sales reflect anticipated production from our taconite customers of approximately $35 million tons. We expect higher operating and maintenance expense, reflecting increased staff for large project development and inflationary cost increases. Depreciation and property tax expenses will also be higher due to increased plant service. Regulated Operation’s guidance for 2024 also assumes that we will achieve constructive outcomes in regulatory proceedings. Our ALLETE Clean Energy guidance expects total wind generation of approximately 3.7 million megawatt hours in 2024 with the expectation of normal wind resources, actual megawatt hours in 2023 were $3.2 million. Our guidance also reflects the sale of Project Whitetail in 2024 and we anticipate some continued negative earnings impact at the Caddo Wind Energy, primarily due to a forced substation network outage near the facility. Regarding corporate and other for 2024, we expect similar earnings from BNI Energy and our investment in the Nobles 2 Wind Energy facility and slightly lower earnings at ALLETE Properties. Earnings from ALLETE’s investment in Minnesota Solar projects are expected to be approximately $0.10 per share lower in 2025. In 2023, earnings reflected approximately $5 million in investment tax credits when these assets were placed in service. New Energy’s strong growth momentum will continue into this year and we expect net income of approximately $19 million to $21 million in 2024 or approximately a 14% increase over 2023 results. New Energy’s healthy pipeline of projects continued expansion in current key markets and entry into robust new markets will provide continued consistent growth and increased earnings over our forecast period. I’ll now turn it back to Bethany for additional comments. Bethany?

Thanks Steve. 2023 was a fantastic year of execution and progress on a lead sustainability in action strategies. And we expect this year will be just as strong with key positioning and important regulatory approvals, all setting the stage for even greater successes and growth at ALLETE in 2025 and beyond. Before we open the line for your questions, just a few additional comments. Minnesota Power’s continued success in transitioning to even cleaner energy assumes reasonable regulatory outcomes, along with a rate case result that recognizes the value we’re providing to customers, the projects that move forward through the RFP process will contribute to the unprecedented transformation of our generation fleet, as well our plans for significant transmission and distribution investments. We know it's important that our plans, including the IRP approved and 2022 and the next IRP planned for early 2025 advance Clean Energy goals while ensuring our system remains resilient, reliable, and affordable for all of our customers. We're obviously very pleased with all that we accomplished in 2023, and we're already building strong momentum early this year. I want to reemphasize we're confident that ALLETE’s strategic plan will enable us to achieve our annual growth objective of 5% to 7% beginning in 2025, driven by the five-year CapEx plan we're sharing with you today. Our plan contains real projects that represent meaningful value to our customers and communities and significant regulated investments for our shareholders. We're confident in this strong pipeline of clean energy and transmission opportunities and in our highly skilled team of employees and we're also confident in our regulators that their decisions will support the financial health of our company and enable us to fulfill our commitment to advance the clean energy future. We're excited about this transformative time at our company and I believe ALLETE will continue to provide significant shareholder value well into the years ahead. On behalf of our entire team, thank you for your interest and your investment in ALLETE. Now I'll ask the operator to open the line for your questions.

[Operator Instructions] Our first question comes from the line of Julien Dumoulin Smith with Bank of America. Your line is now open.

Hi, this is Tanner on for Julien. Good morning.

Hi Tanner.

Hi, I just wanted to dig in a little deeper on the funding side of the updated investment plan CapEx specifically, just a CapEx shifting affects your expectations for the need and timing of potential block equity raises going forward.

Hi, Tanner. It’s Steve Morris. So we have little equity needs in 2024. We would need - we certainly have some equity needs beginning in 2025, probably midway through.

Understood. Thanks. And then, having rolled the EPS guide to base your 2025, is there a long-term rate based CAGR guide over the same period? I'm just kind of looking at this in reference to the prior 11% rate base CAGR guide that used 2022 as a base?

Yeah. It's up a little bit. It’s probably closer to 14%.

Alright. Great. Thank you very much.

Thank you.

Thank you. Our next question comes from the line of Chris Ellinghaus with Siebert Williams Shank & Company. Your line is now open.

Hey, everybody.

Hi Chris.

Bethany, you sort of seem to suggest that maybe there would be some opportunities for monetization of assets and you sort of have been continuing to sort of draw down some of the Ace assets. Are you thinking that there could be something a little chunkier from the Ace side?

We're evaluating all options for optimizing Ace’s fleet and exploring all opportunities there, but not signaling anything like you're suggesting Chris, but we're looking at everything.

Okay. Could you give us a little more color on Caddo’s had plenty of issues the last couple of years. Can you give us a little color just on you were talking about congestion and whatnot. What have all the issues at Caddo been?

Morning, Chris. This is Jeff Scissons. Yeah, we've been transparent around Caddo and the basis risk that we've talked about that's associated with the contract. What's new here that we've experienced in the fourth quarter and we will experience in the first quarter of 2024 is, there's a substation, a neighboring substation that's got an outage that's increased congestion and had an impact on pricing and curtailment. So that's the impact that's referenced in the in the script.

Okay. Thanks. The 2024 guidance certainly suggests some regulatory lag from the CapEx. When you are thinking about or your comments about sort of returning to trends in 2025, can you give us a little color on exactly where that's coming from? Is it just a capital spend? What are your thought process on what' your cadence of regulatory filings might look like going forward?

Yeah, hi. Good morning, Chris. It’s Steve Morris. So, yeah, so as we signaled here a little bit, there was a shift from ‘24 into ‘25 for our capital investments related to the RFP, solar and wind, which are largely driving growth beginning in ‘25along with beginning significant capital for transmission projects, which were reflected in our CapEx update that we have filed today. Those are rider projects. Most of those are rider projects, as well. So, subject to cost recovery outside of rate cases, so that'll help our earnings growth right away beginning in 2025. But with that, we have signaled in the past more frequent smaller, simpler rate cases. These rider projects will help keep us out of rate cases, but should we need to go in for a rate case, down the road we certainly will.

Yeah. And lastly, the slide with your expectations on MISO tranche 2, so what gives you the visibility there?

That process is obviously under way, as you think about we will have more visibility even as early as later this year. We expect kind of the tranche 2 process to be complete in the first part of 2025. But obviously we're working closely with MISO and other utilities throughout that process. So we anticipate having much more visibility later this year.

And Chris just note that those expected projects we said 2% to 3% of Minnesota Power share are not in our capital schedule at this time.

Right. Okay. Thanks. Appreciate it.

Thanks, Chris.

Thank you. Our next question comes from the line of Alex Mortimer with Mizuho Securities. Your line is now open.

Hi, good morning, team.

Good morning, Alex.

Using the midpoint of your 2024 guidance, Regulated Operations makes up right around, 70%, 75% of your business listing stand today. Given the increase in your CapEx plan, how do you think about what that split might start to look like in ’25, ’26, ‘27 as we get later into the plan. And is there a goal ratio you have in mind as you look into your forecast period?

Yeah, good morning, Alex. Steve Morris here. Yeah, you're right it’s 75%, but that number is going to grow if you look at our CapEx, almost all of that is related to the regulated operations. So we are excited I don’t have an exact number off the top of my head, but that number will grow from 75% and upward as the ratio of non-regulated will obviously drop in because of that significant capital spend.

Okay. Understood. And then, can you discuss the linearity of your earnings outlook? I mean, you mentioned the confidence of being within your 5% to 7% in ‘25 and beyond. But do you expect to be within that range. Every year do you expect maybe some volatility as you work through regulatory proceedings to get this incorporated get this spend incorporated.

Yeah, no, it’s a great question, Alex. We would expect that beginning in ’25, each of those years as I've noted and if you look at the CapEx schedule little regulatory lag because much of this is rider-based. So we expect cost recovery riders must lag due to needed rate cases.

Okay. Understood. Thank you so much.

Thanks, Alex.

Thank you. Our next question comes from the line of Sarah Akers with Wells Fargo. Your line is now open.

Hey, good morning.

Good morning, Sarah.

Just to follow-up on the 14% rate base CAGR and then combined with comments that there should be minimal regulatory lag. Just what's driving the delta between that 14% in the 5% to 7% EPS CAGR.

Yeah, good morning, Sarah. It’s Steve Morris. My favorite question, of course, we still have regulatory approvals and RFPs to win. So we have some, obviously, risk there. But and then, we do have some capital needs beginning in 2025. So more insight into that later on once we get those.

Got it. And then, looking at the industrial sales outlook, I'm seeing 7 million megawatt hours in ‘23. And then the guidance for ’24 is 6.2. So that 11% decline in industrial volumes for ‘24 just what are the assumptions that are driving that expectation down?

Hey, good morning, Sarah. Frank Frederickson here. And thank you for that question. So, as we're looking ahead at our forecasts, we focus on kind of an overall average level of taconite sales of right around 35 million tons. And there is variability in which facilities that comes from which is also one of the key reasons that were pursuing rate stabilization mechanism and in this current rate proceeding to really adjust for that and track that on a fair and balanced method. But what you're seeing in that outlook is just more of an average level of production coming across the six different facilities that produce taconite in our region and balancing out. And as we look historically, it can come from a different mix of facilities and it can come at a different overall total tonnage, as well. So that's why you'll see a little difference between different historical years, ’21, ’22, ‘23 versus our 2024 outlook.

Okay. And then, last one on O&M. It sounds like that the key driver with some increases in ’24. Can you give us a sense of the magnitude of the O&M increase that we should be taking about for ‘24 versus ‘23?

Yeah, it's about a 6% increase over ’23, Sarah.

Great. Thank you very much.

Thanks, Sarah.

Thank you. [Operator Instructions] Our next question comes from the line of Brian Russo with Sidoti. Your line is now open you.

Yeah, hi. good morning.

Morning, Brian.

Hey, just a follow-up on the industrial sales. That's total industrial sales, right? So it’s taconite, paper and Pulp and in the pipelines and industrials. I think according to the 10-K, tons produced with 35 million at taconite and that's the same assumption for 2024. So should we assume a similar megawatt hour sales out of the taconite and lower sales out of paper pulp and pipe lines? Just curious there.

Yeah, thank you. Frank Frederickson here again. So, just a little more detail on that is, you're right. It is all of our industrial sales including taconite and pulp and paper and pipeline. Our variability largely comes out of the taconite production. So I would say, in what we're trying to forecast and portraying also as a forecast in our 2024 test year by rate cases is an average level and spread across the facilities. So again, you're going to see a little bit of a difference depending on what facilities produce the tons historically versus a total average of what we're projecting in that old crop megawatt-hour sales in 2024. So, I wouldn't - I would really say it's in the taconite assumption.

Okay, got it. And can you share what the large power customer nominations are for the first four months of 2024?

The first four months, our nominations largely came in, in line with our 2024 outlook. So slightly less than full operations, which is reflective of that operating paper mills and also a little bit right around that 35 million ton outlook for the year. It's early, but they reflect that general pace.

Okay, great. And then, just switching to Ace and the Caddo issues. Is the cost to that you plan on - that you expect to incur in the fourth - in the first quarter of 2024 similar to what you expected in the fourth quarter of ‘23, which I think was $0.10 for the substation outage.

Morning, Brian. This is Jeff. Yeah that's correct. We do expect similar impact.

Okay, great. And then anymore any more detail on the Whitetail sale? Is it a sale to a regional utility? Or anyone else? And is there a gain or a loss embedded in the guidance assumptions?

Yeah, Brian, the project is making good progress on the permitting side and getting close to notice to proceed within the budget. There would be a gain I think you can use Red Barn, which is a slightly larger project as kind of a guideline on that.

Okay, great. So I guess the assumption is the cash proceeds from that sale will help support your financing needs in 2024?

Correct.

Okay. And then, lastly, just fun New Energy equity, are there any assumptions you can could offer in addition to the $19 million to $21 million in earnings just so, we can track the progress of that business as we move through the year, maybe if it's project closings or maybe even an EBITDA figure?

Yeah, Brian this is Jeff again. We've - what we've learned here over the last two years is that, all megawatts are a little bit different. So I think we reference around 100 megawatts close, but that can take different shapes and forms. So we're trying to be as transparent as possible to give to the net income line. And I think you've heard some of the growth in some different states. But I think you can use roughly 100 megawatts of closed projects and a net income that was disclosed.

Okay, great. Thank you very much.

Thanks, Brian.

Thank you. And I'm showing no further questions at this time. I’d like to handle call back over to Bethany Owen for closing remarks.

Thank you again for being with us this morning and for your investment and interest in ALLETE. We're looking forward to speaking with many of you soon, whether it's in person or virtually at various investor conferences throughout the year. And we hope you enjoy the rest of your day.