Truthout story addresses private equity acquisition of ALLETE and Minnesota Power, and why it’s a slippery slope for ratepayers

A critical battle for our energy future is unfolding in northern Minnesota, as detailed in a recent Truthout article. At the heart of it is the proposed acquisition of Minnesota Power’s parent company, ALLETE, by two private entities: Global Infrastructure Partners (GIP), wholly owned by BlackRock, and the Canada Pension Plan Investment Board (CPP). PESP provided expert testimony in opposition to the deal and has been working with Minnesota stakeholders including CURE and the Sierra Club in Minnesota to publicly testify and organize against this deal. 

The Truthout piece powerfully articulates many of our key concerns. This acquisition isn’t just a corporate transaction, it’s a profound shift that threatens the affordability, transparency, and accountability of a public utility, and we should all be paying close attention to it. 

In the story, Truthout details that ALLETE claims this $6.2 billion deal is essential to secure the capital needed to transition to clean energy and meet Minnesota’s 2040 carbon-free electricity requirement. However, as the story states, “a broad coalition of customers, ratepayer advocates, watchdog organizations, climate groups, local heavy industry, and the Minnesota Attorney General’s Office and Department of Commerce is opposing the deal.” PESP and other organizations like CURE and Sierra Club have pointed out ALLETE’s own SEC filings contradict this claim. The utility has stated it is “well positioned to meet our financing needs due to adequate operating cash flows, available additional working capital, and access to capital markets.” The move to private ownership is not a necessity, but a choice that introduces significant new risks to ALLETE and Minnesota Power customers.

It’s no secret that private equity firms, such as GIP and BlackRock, operate with a focus on maximizing investor returns. As the Truthout story explains, GIP Fund V, which would acquire a 60% stake in Allete, targets a gross investment return of 15-20%, as Jim Baker, PESP’s Executive Director stated in his testimony. Jim also said that this would roughly double the average return of publicly traded utilities. The Citizens Utility Board of Minnesota (CUB) told Truthout that the deal includes an estimated acquisition premium of $600 million to $1.5 billion, which will be distributed directly to ALLETE’s existing shareholders and executives. As the CUB notes, “The captive customers who’ve been paying rates to grow the company don’t receive any of that literal financial benefit associated with the sale. But they do inherit the potential risk of private equity now owning the utility that they have no choice to get their electricity from.” This premium represents a direct cost that could be passed on to consumers with little to no benefits in return. 

This situation is not isolated. It is part of a trend of private equity firms acquiring control of essential infrastructure – housing, hospitals, telecommunications, and now, our public utilities. “The prospect of a utility that so many folks rely on for access to energy being taken over by a shadowy private equity firm is incredibly concerning,” Alissa Jean Schafer, Climate Director at PESP, told Truthout. And as scholar Brett Christophers warns, “asset managers tend to be particularly ruthless and single-minded in extracting profit from the assets they oversee.” This shift from publicly accountable utilities to privately controlled companies poses a threat to the very foundation of public services, placing unnecessary risks and costs on consumers.

The Administrative Law Judge has a July 15 deadline to release an opinion on the private equity acquisition of ALLETE and Minnesota Power. Following that, the Minnesota PUC will make a decision, which is expected this fall, that will be a critical moment not only for northern Minnesota but also for the broader conversation about who owns and controls our essential services in the U.S. PESP is part of a broad coalition of organizations, customers, advocates, and regulators opposing this deal. We must reject the privatization of our public utilities and demand that our energy future remains transparent and accountable to the communities it serves, not a cash cow for private equity firms.