Minnesota Power to phase out electricity contract

Minnesota Power announced Monday it will buy an interstate transmission line and phase out a contract to buy coal-generated electricity as it develops wind energy to meet state requirements for renewable energy.

As part of the agreement, Minnesota Power, an Allete Inc. company, will purchase a transmission line from Square Butte Electric Cooperative for about $80 million. The 465-mile line transports coal-generated electricity from a generating station in Center, N.D., to a Minnesota Power substation in Hermantown, Minn.

Minnesota Power will phase out the power it purchases and replace it with wind generated electricity.

The transaction is subject to regulatory approvals and is expected to close next year.

"We want to be out in front in wind development," Allete CEO Don Shippar said. "We are committed to meeting the state mandate to deliver more renewable energy, while at the same time investing in utility projects that make sense."

Wind development plans include adding several hundred megawatts of generation near Center, N.D., with plans to install the first wind turbines by 2010 and using the existing transmission line to deliver the renewable energy to its customers.

Shares of Allete traded at $42.32, up $1.72.