Proposed Minnesota Power sale to BlackRock rouses concern

DULUTH — As a potential sale of Minnesota Power looms, a crowd of concerned citizens gathered at the company’s doorstep Wednesday afternoon to voice their concerns.

On Sept. 25, the Minnesota Public Utilities Commission is expected to begin weighing whether to approve a $6.2 billion purchase of the Duluth-based utility by BlackRock Global Infrastructure Partners with help from the Canada Pension Plan Investment Board.

Jenna Yeakle, a Sierra Club staff member, told crowd members Wednesday: “I’m here with you all today to push back against this story that we have been told by Minnesota Power and their potential buyers that they need to be scooped up by BlackRock in order to achieve a carbon-free energy picture.”

To the contrary, Yeakle suggested the acquisition “could slow much-needed climate action and actually threaten our democracy.”

But the utility would really benefit from some outside support to achieve its reduced-emission goals, according to Jen Cady, vice president of regulatory affairs for Allete Inc., Minnesota Power’s parent company.

“The scale of what’s in front of us is really unlike anything the company has had to navigate in the past,” she said.

Cady noted that Minnesota Power expects it will need to spend $5 billion in the next five years — a sum greater than it has had to raise in the past 75 years.

“And these are the right partners to help us navigate that future,” she said.

Cady also pointed out that Minnesota Power will continue to be governed by the state PUC and will need to justify any proposed future rate increases, regardless of its ownership.

But Buddy Robinson, a member of the Citizens Utility Board of Minnesota who addressed the crowd as an individual Minnesota Power ratepayer, advised that the state PUC pay heed to a July 15 recommendation by an administrative law judge suggesting the acquisition should be blocked for not being in the public interest.

“The key fact established in the proceedings is that BlackRock and CPP, as private equity companies, intend to increase rates faster than would happen otherwise,” he said.

Robinson said this is the same reason large customers, including taconite and paper producers, have also lined up against the sale.

He said that the economic power of BlackRock “boggles the mind,” with a portfolio of $11 trillion in assets — greater than the gross domestic product of all nations, except the U.S. and China.

Angel Dubrow, another concerned customer and landlord, suggested higher electricity costs could drive up housing costs that are already unaffordable for many residents, especially as BlackRock and its partners seek to recoup a $1.5 billion premium they have offered to purchase Allete, above its market valuation at the time of the deal.

But Cady predicted the new ownership would bring greater stability to Allete and its subsidiary, Minnesota Power. She noted that the company already is publicly traded on Wall Street, with its value largely determined by investors making quarter-to-quarter financial decisions.

“Infrastructure funds and pension funds are inherently long-term investors,” she said. “They are looking to provide stable returns over a long period of time. And that investor expectation is much more closely aligned with the utility business, where we build big infrastructure that serves customers for decades.”

Over the past 16 months, Cady said Allete has listened and worked to address customers’ concerns, signing an agreement with the Minnesota Department of Commerce that contains about 70 commitments, including a one-year base-rate freeze.

Unfortunately, that agreement was signed just before the administrative law judge handed down her recommendation, and Cady suggested a close reading might have changed the outcome.

“I don’t think the judge had adequate time to really evaluate all of the components of that settlement before her report was due,” she said, contending that the issues raised were pretty comprehensively covered.

Yet, state Sen. Jen McEwen, DFL-Duluth, says her fears have not been allayed.

Peter Passi / Duluth Media Group

“This proposed sale does affect the entire community,” she said.

“The BlackRock Corp. controls trillions of dollars of assets internationally,” she said. “So, when they become a 60% majority owner of our electric utility, the financial decisions they’re making — whether they be about business strategy, expansion, compliance with our clean energy laws here in the state of Minnesota, whether they honor union contracts, how they treat their workers, whether they go for a rate increase or how much — all of those decisions are going to also be affected by the forces that are coming down on that corporation from their international interests.”

McEwen predicted this structure would lead to “an inevitable conflict of interest.”

“It is not always going to be in the financial interests of BlackRock to keep our rates as low as possible, to serve our community the electricity we need,” she said. “That’s not the business they are in. They are in the business of making profit from as many things as possible.”

Peter Passi covers city and county government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.