On Friday, the Minnesota Public Utilities Commission (PUC)—a five-member board of commissioners appointed by Democratic Gov. Tim Walz to regulate the utility industry—will decide the fate of a $6.2 billion proposal to acquire ALLETE, the parent company of Minnesota Power, an electric utility in northeastern Minnesota that serves approximately 150,000 customers throughout the region.
Global Infrastructure Partners, which the asset management giant BlackRock acquired for $12.5 billion last year, and the Canada Pension Plan Investment Board (CPP) plan to take ALLETE private, in a deal announced in May 2024 that concluded over a year of closed-door negotiations, complete with confidentiality agreements, secretive dinners, and “fireside chats” led by the company’s C-suite executives. The new ownership group says it will provide Minnesota Power with fresh capital to comply with a state law requiring utilities to deliver “100% carbon-free electricity by 2040.”
Ratepayers, consumer advocates, watchdog groups, environmental organizations, and industrial customers have opposed the acquisition, arguing it would cause rates to skyrocket and compromise reliability. Nineteen Minnesota state lawmakers have also requested that the PUC deny approval for the purchase.
Meanwhile, ALLETE and BlackRock-owned Global Infrastructure Partners appear to be exerting immense institutional power to shape public opinion, discredit opponents, and persuade the PUC to sanction the deal. And officials associated with Gov. Walz’s administration are apparently participating in that effort.
On July 15, Administrative Law Judge (ALJ) Megan J. McKenzie issued a damning report that enumerated every foreseeable way the bid to buy the company could jeopardize the public interest. Based on her review of both public and nonpublic evidence, as well as months of evidentiary hearings, the ALJ recommended that the PUC deny the acquisition. Not only did the report lend credibility to the opposition’s claims, it revealed how “numerous commenters” expressing support for the deal were either Minnesota Power employees or members of organizations that received financial support from the company.
After the ALJ published its findings, multiple unions and self-described clean-energy groups jumped into the fray to support the acquisition. Opponents were quick to call out the newcomers, alleging that their sudden involvement was the result of a covert influence campaign being waged by BlackRock-owned Global Infrastructure Partners.
But the most surprising entry in this back-and-forth is the Minnesota Department of Commerce (DOC), which reached a settlement just days before the release of the ALJ report that endorses the sale of Minnesota Power. “The acquisition will help ensure that Minnesota Power has access to the capital needed to affordably and reliably support load growth and economic development in Minnesota,” the DOC wrote in a statement. The settlement states that the new ownership group will supply capital for renewable investment while implementing service quality standards, local presence on the ALLETE board, preservation of union contracts for two years, and lower consumer electricity rates.
The ALJ was unable to fully consider the settlement due to timing constraints, but the report makes clear that since Judge McKenzie’s “concerns have not been resolved,” the recommendation still stands.
The settlement came as a surprise. In an interview with the Prospect, Maggie Schuppert, director of strategic initiatives at CURE Minnesota, an intervenor in the case, observed that the DOC “spent a year-plus vehemently opposing this deal.” She described the reversal as a “very last-minute flip.”
Alissa Jean Schafer, climate and energy director at Private Equity Stakeholder Project (PESP), said that the settlement “raises a lot of questions, just looking at the politics of Minnesota broadly, [because] DOC is seen as somewhat of an extension of Gov. Walz’s administration.”
PESP filed a records request with the state, the results of which seem to indicate that Pete Wyckoff, deputy commissioner of energy resources at the DOC, engaged with at least some of the acquisition’s supporters roughly two weeks after the ALJ issued its written decision. They also shed light on Wyckoff’s correspondence with ALLETE Chief Executive Officer Bethany Owen, who emailed him and three others on the day the agreement was reached, materials reviewed by the Prospect reveal.
“I just wanted to share my deepest appreciation for your strong leadership and hard work to reach today’s settlement agreement,” Owen wrote. “As I shared with Pete last week, I know that these times have been so sad and challenging for so many reasons having nothing to do with ALLETE, but I am so grateful for the time and energy that you’ve devoted to reaching today’s agreement.”
Wyckoff replied: “It was a long slog to get here, but I think we have a good agreement. Look[ing] forward to working with you as this proceeds. Have a great weekend!”
He signed the email with “Cheers.”
A spokesperson for the DOC said that “the acquisition is consistent with the public interest” and that the communications were merely courtesies to update stakeholders on the status of the settlement.
AS THE PRIVATE EQUITY INDUSTRY GRAPPLES with fading prospects in the uncertain economy, utilities present an attractive opportunity to cash in on the artificial intelligence data center boom. Private equity firms have been pursuing utility investments and acquisitions, but the bid to take ALLETE private is unique.
Consider the sheer size of the company’s prospective buyers. BlackRock has $1 trillion in assets under management, and CPP manages over $500 billion for some 22 million beneficiaries. Similarly, Infrastructure Investor previously reported that the $580 billion California Public Employees’ Retirement System (CalPERS) “is believed to have provided significant funding” for the transaction. As ALLETE’s proxy statement explains, 60 percent of equity interests would be held by Global Infrastructure Partners, with 20 percent of that held by “a fund managed on behalf of CalPERS,” and the remaining 40 percent would be held by CPP.
“This Minnesota case is going to be a bellwether for what the industry will do in utilities in the next few years,” Matt Parr, communications director at PESP, told the Prospect. “If they can capture a utility in a blue state, then it’s kind of fair game for them in any state.”
According to Owen, Minnesota Power provides “60 percent renewable energy to our customers today with near perfect reliability and the lowest bills for residential customers in the state.” The company has also pledged to invest $20 billion over the next 20 years to accelerate the energy transition. As part of the settlement, Minnesota Power made several commitments, including a one-year moratorium on rate increases and a modest reduction to its authorized return on equity, or the profit a utility is allowed to earn for its shareholders, with the intention of keeping rates down for customers.
In her remarks to the PUC at its hearing last week, Owen—whose total compensation for the 2024 fiscal year was more than $3.7 million—framed the acquisition as Minnesota Power’s only viable option for raising the capital it needs to ensure compliance with the state’s climate law.
“We will need to raise as much capital over the next five years as we have over the last 75 years,” she said. “We’re choosing the path that provides capital we need, while helping ensure that Minnesota Power continues to be the customer, employee and relationship-focused company that you’ve come to know.”
The opposition has long contended that the deal would compromise Minnesota’s clean-energy future, while expressing skepticism toward private equity’s ability to meet public responsibilities. In his opening comments to the PUC, Peter Scholtz, assistant attorney general at the Minnesota Office of the Attorney General’s residential utilities division, asserted that the plans to acquire ALLETE are consistent with private equity’s typical playbook.
“The deal is about getting control of a well-run, financially healthy utility poised for significant growth,” he said. “They plan to streamline its operations, and they plan to sell again for a profit.”
This is why the prospective buyers are willing to pay such a high premium. The acquisition would allow ALLETE shareholders to secure a $1.5 billion windfall. The proxy statement chronicles how J.P. Morgan, the board’s financial adviser, presented six interested buyers, but as Scholtz observes, ALLETE “insisted on such a high premium that it drove away all potential capital providers except the partners.” The company then continued negotiating with the prospective buyers, despite running the risk of driving away its only remaining prospect. According to Scholtz, ALLETE’s conduct demonstrates that improving capital access to achieve the state’s statutory climate goals was not the primary purpose of the deal.
“If ALLETE had a desperate need for capital, it would have taken the partners’ first or second offer,” Scholtz said. “Instead, the board wanted to get more money for shareholders and was fully prepared to continue relying on the public market if the deal did not work out.”
Since the initial announcement, ALLETE appears to have been telling two different stories to justify the deal, depending on the audience. Its annual filings with the Securities and Exchange Commission (SEC) clearly state the company is “well-positioned to meet our financing needs … due to access to the public markets.” Then there’s ALLETE’s sales pitch to the PUC. Unlike its statements to the SEC, the company’s comments to regulators reflect its apparent inability to raise enough capital in the public markets to comply with the state’s climate law if the PUC fails to approve the acquisition.
“Both of those things cannot be true, and I just find that super frustrating,” said Brian Edstrom, a securities lawyer and senior regulatory advocate at the Citizens Utility Board of Minnesota (CUB). “That’s really what this whole case is all about.”
On September 24, ALLETE filed an updated settlement with the DOC that affirmed existing commitments and included some additional pledges. Among them are $50 million in bill credits for low-income ratepayers, and a five-year grace period for acquisition-related costs. This builds off the surprise DOC settlement, adding to a flood of promises late in the game.
Edstrom said the concessions “shouldn’t override the foundational problem of not meeting the burden of proof that the acquisition is consistent with the public interest in the first place.” The ALJ came to that same conclusion this past summer. “If the acquisition is approved, the rate increase might be delayed, but I don’t think it will be avoided,” he told the Prospect.
AMONG THE SELF-STYLED CLEAN-ENERGY GROUPS supporting the acquisition are the Center for Energy and Environment (CEE) and Fresh Energy. One of the PUC commissioners, Audrey Partridge, served as director of policy at CEE prior to starting as a commissioner earlier this year. Partridge questioned CEE representatives at the recent PUC hearing, without explicitly disclosing that relationship. (Partridge’s past CEE service is in her public bio.)
Perhaps more interesting is the phone call Chris Duffrin, president of CEE, said he had with Wyckoff in July to discuss the acquisition, as is the separate meeting Fresh Energy Chief Executive Officer Margaret Cherne-Hendrick scheduled with Wyckoff for July 31. Records seen by the Prospect show Wyckoff also planned to meet with Beth Soholt, executive director of Clean Grid Alliance, which jointly filed comments with Fresh Energy on August 4; CEE filed its comments on the same day.
According to a DOC spokesperson, Wyckoff called Duffrin, Cherne-Hendrick, George Shardlow, executive director of the Energy CENTS Coalition, Kevin Pranis of the Laborers’ International Union of North America (LIUNA), and Mike Bull, deputy executive secretary at PUC, on July 11 “to inform them that the Department had entered into a settlement agreement.”
In an email to the Prospect, Cherne-Hendrick disclosed that Fresh Energy scheduled more than a dozen meetings to discuss the acquisition. She provided confirmation of her July 31 meeting with Wyckoff and noted that Fresh Energy had engaged with CUB and CURE Minnesota. She also met with Jennifer Cady, vice president of public policy and external affairs at Minnesota Power, and Dan Lipschultz, an attorney representing the prospective buyers, on July 29. At the time, Fresh Energy was still contemplating whether to weigh in on the case, though Cherne-Hendrick said the organization was “leaning toward a yes.” (Energy CENTS, LIUNA, CEE, Fresh Energy, and the Clean Grid Alliance recently testified in front of the PUC.)
“Frequent meetings with all stakeholders is a best-practice aspect of work at the Commission and something we prioritize to ensure we understand the positions of all parties,” Cherne-Hendrick told the Prospect.
During the hearing, PUC Vice Chair Joseph Sullivan expressed hesitancy toward ALLETE’s hat-in-hand request for approval.
“I’m a Catholic, and I am very intimately aware of that kind of the concept of faith,” he said. “I feel like you’re asking me to take a leap of faith that this company, against the objective evidence … does not have a problem raising money in the financial markets.”
Some commissioners signaled openness toward the settlement in its current form, but the PUC mostly kept its intentions under wraps. At the recent hearing, PUC Chair Katie Sieben questioned Cady about the timing of the company’s commitments.
“I appreciate where we’re at now compared to where this started,” Sieben said, “but why didn’t we get a better filing right off the beginning where that extensive support was reflected in the first filing that was brought to the Commission?”
Cady responded that “there’s just naturally not the lead time that is present in other proceedings to work with stakeholders ahead of time.” She added, “The takeaway for me is that the process worked. We arrived at a better proposal today than we had 16 months ago because we worked with parties through the process.”
Commissioner John Tuma had doubts about the prospective buyers’ commitment to funding ALLETE’s five-year capital plan. “Where it gets a little more challenging for me is this five-year capital plan commitment,” he said at the hearing. “It gets a little dicey on the enforcement side.”
Cady assured him that the prospective buyers would have incentive to provide the money, because “the partners can’t take a dividend if they don’t fully fund the capital plan.”
In addition to Minnesota Power, ALLETE is the parent company of Superior Water, Light and Power, a regulated utility providing electric and gas distribution in northeastern Wisconsin. Badger State regulators approved the acquisition earlier this year. Now, it’s up to the Minnesota PUC to determine whether or not the deal is in the public interest. It has yet to be seen whether the ALJ’s scathing rebuke of the acquisition and the opposition’s contentions will be enough to sink the deal.
“There’s still tremendous concerns with this deal,” Schafer told the Prospect. “Whatever happens here, it’s going to land squarely on the shoulders of Gov. Walz.”