Tag Archives: Allete

Who made $1.9 million last year in Duluth?

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Among the top paid CEOs in Minnesota last year was Donald Shippar, Allete’s former CEO.

Shippar’s total compensation for 2009: $1,921,814.

That ranked him as 39th in pay among CEOs of MInnesota public companies in Minneapolis/St. Paul Business Journal’s Top 100 List in its July 30 edition.

To be fair, Shippar’s salary was $560,000. It balloons to $1.9 million when you add the $578,325 in stock awards, $589,544 in pension, $44,688 incentive and $149,257 in "other." (Heck, most of us would just be happy with the "other.") His ranking actually slipped from No. 31 in 2008.

But is that much compensation warranted?

"Certainly we do believe our executive compensation is warranted," said Amy Rutledge, an Allete spokeswoman. "It is fair and competitive and designed to attract and retain talented people who are capable of overseeing a company of this size. Executive pay is also tied directly to company performance."

By the way, the Minneapolis Star Tribune recently ranked Allete as the state’s 38th largest company.

As if to keep our outrage in check, the Business Journal seems to agree with Rutledge. The Journal went further than its compensation rankings. It also analyzed the pay with the company performances, determining who was overpaid and underpaid in relation to  performance. Shippar placed in the middle of the spectrum, making the "appropriately paid" list.

But how about those at the top of the compensation list? No. 1. James Cracchiolo, CEO of Ameriprise Financial Inc., with a whopping $18.8 million was deemed appropriately compensated. No.2 ranked George Buckley, 3M’s CEO, however, was deemed overpaid, while No. 3 Gregg Steinhafel of Target Corp. was also determined to be appropriately paid.

Shippar retired in April, with Alan Hodnik succeeding him as CEO. The Journal’s roundup of CEO compensation next year should include him.

How big is Allete?

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Pretty big. And growing.

The Minneapolis/St. Paul Business Journal recently put out its Top 25 Minnesota-based utilities list. The annual ranking is based on total plant investment over the years.

Allete, Inc., based in Duluth, came in No. 3, same as last year. The company had $2.5 billion in total plant investment as of Dec. 31. That’s the cumulative amount over time.

Sounds like a lot. And it is. But it pales in comparison to utility king, Minneapolis-based Xcel Energy Inc., which had total plant investments of $29.1 billion.

To get an idea how big Xcel is, it serves 3.8 million consumers in eight Western and Midwestern states. In comparison, Allete serves 171,000 consumers in Northeastern Minnesota (as Minnesota Power) and Northwestern Wisconsin (as Superior Water, Light & Power).

But Allete is the fastest growing utility, according to this report.

While every utility reported total plant growth in 2009, with the average being 6 percent, Allete led the pack with 17.1 percent growth.

No. 2, by the way, was Great River Energy based in Maple Grove, Minn. Serving southwestern Minnesota, suburban Twin Cities and parts of the Arrowhead region, the utility had 14.8 percent plant growth and nearly $3.3 billion in plant investment.

 

Allete’s downs and ups

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During a recent stop in Duluth, a top official with the Minnesota Chamber of Commerce had some interesting observations about Allete.

"Allete is very different form other utilities," said William Blazar, the chamber’s senior vice president for public affairs and business development.  "Their customer base is dominated by very few customers."

He was referring to the  big manufacturing companies that use the bulk of Allete’s energy: six taconite companies on the Iron Range and several paper mills, he said.

"They probably use more than half the company’s load," he said.

Compare that to Xcel energy, which serves the Twin Cities and has hundreds, maybe thousands of major customers, Blazar said.

But when Minnesota’s taconite production plummeted more than 50 percent in 2009, Allete’s market also shrunk dramatically.

Blazar noted that Allete was able to recover most of its lost margin by selling power in the wholesale market, probably to other utilities.

So the taconite companies returning to full production has more repercussions than putting people back to work and boosting local economies. It means a returning market for Allete. Moreover, the addition of Mesabi Nugget as an Allete customer and potentially PolyMet and Essar Steel means even more market expansion for Allete, he said.

Allete sees net income drop about 25 percent

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Allete, the parent company to Duluth’s Minnesota Power, reported a net income drop of $23 million from 2008 to 2009, according to its annual earnings report.

Allete’s net income was $61 million from operating revenue of $759 million in 2009, compared to net income of $82 million and operating revenue of $801 million in 2008.

“The financial picture for Allete in 2009 was negatively impacted by the economic downturn and by regulatory outcomes that were less than favorable to us,” Don Shippar, Allete’s chairman and CEO, said in a news release.

In December, Minnesota Power requested an interim rate increase of about $73 million, but the Minnesota Public Utilities Commission granted about two-thirds or $48.5 million.

With the rate increase, residential customers will see their electricity bills increase an average of $7 a month this year.

Allete’s performance improves, remains off 36 percent from 2008

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Allete, the parent company of Minnesota Power, registered a higher third-quarter net income compared to the second quarter, but profits are still substantially lower than 2008 levels.

The Duluth-based corporation reported $16 million in net income last quarter, an increase from $9.3 million in the second quarter, but is 36 percent beneath the $24.7 million earned in the third quarter of 2008.

Allete said total kilowatt-hour sales declined about 10 percent from 2008 levels due to the recession that has impacted all retail electric customers, said a news release on its third-quarter performance. The company said lower retail sales were offset by other power suppliers, but lower electric rates compared to last year resulted in reduced revenue.

“The first eight months of the year have been difficult for our taconite customers,” Don Shippar, Allete chairman and CEO, said in prepared statement. “However, we are encouraged that they have begun to increase their production.”