Who’s going to pay for the massive transition away from fossil fuels? In the face of rising global temperatures, companies and governments around the world have for years made pledges to shift to carbon-free energy sources. The Minnesota Legislature, for instance, passed a law last year requiring all electric utilities to supply exclusively carbon-free energy by 2040. Though there are a few state and federal governments to help out, it’s not entirely clear who ultimately foots the bill for that big change.

For Duluth-based utility provider Allete Inc., the answer is two large private investors with deep pockets. The company’s shares have traded on the New York Stock Exchange since 1950, but a $6.2 billion deal announced this week would end that.

On Monday, the company announced that it reached an agreement to be acquired by Canada’s pension board and a global investment fund for $67 a share, or $6.2 billion in total.

Though Allete’s board has unanimously approved the acquisition, it’s not a done deal yet. The acquisition still needs approval from public utility commissions in both Minnesota and Wisconsin. The Federal Energy Regulatory Commission also needs to give its blessing. If all goes to plan, Allete expects the deal to close by the middle of 2025.

The two buyers are the Canada Pension Plan Investment Board (CPP) and New York City-based Global Infrastructure Partners (GIP). Though one of the buyers is a foreign entity, Allete leaders maintain that the company will remain locally managed and operated in Duluth.

Chair, president, and CEO of Allete Bethany Owen said going private will give the company access to the capital it needs for a massive “clean energy” transformation over the next few years.

“Allete has a transformative strategy that calls for investing more than $4 billion just over the next five years, which in essence would double the size of the company,” Owen said in an email to TCB. “Our goals to advance a clean-energy future are ambitious and will require significant capital to achieve. CPP Investments and GIP are two well-resourced, well-respected infrastructure investors.”

Becoming a private company under new ownership, Owen said, “will not only limit our exposure to volatile financial markets but will ensure Allete has access to the significant capital needed for our planned investments now and over the long term.”

Beth Soholt, executive director of St. Paul-based nonprofit Clean Grid Alliance, said that, given the massive costs of the energy transition, she’s “not at all surprised that Allete is doing this.”

“It is a very capital intensive time right now,” Soholt said. “The industry is at a time where they’re having to be creative, and able to pivot.” Allete’s move to private ownership, she added, is “really smart.”

Aside from increasing Allete’s access to capital, Owen maintained that little will change with the acquisition. She reiterated that position in a special planning meting before the Minnesota Public Utilities Commission on Thursday morning.

She noted that Minnesota Power – Allete’s electrical provider in the Duluth area – will continue to be “fully regulated by the Minnesota Public Utilities Commission, just as we are today.”

“Our day-to-day operations, commitment to serving our customers with safe, reliable, affordable, and increasingly cleaner energy, and strong connection to our communities will remain the same as we embark on this new chapter,” she added. “Minnesota Power has proudly served Northeastern Minnesota for more than a century with a committed and dedicated team of employees, and this announcement doesn’t change that.”

Owen told the state’s utilities commission on Thursday that the company plans to file a petition for approval of the acquisition in July.

Hwikwon Ham, one of the five public utilities commissioners, asked Owen and the proposed new ownership whether any “transaction premiums” associated with the deal would be passed along to payers.

“We don’t intend to put those premiums on rate payers and Minnesota Power customers, and you’ll see that as part of the merger filing, where we’ve got a bunch of commitments,” replied Palak Trivedi, principal with CPP.

Allete has business holdings in Minnesota, Wisconsin, and North Dakota. Minnesota Power currently serves about 150,000 residents.

As of Dec. 31, 2023, Allete employed 1,560 employees in total, according to the company’s most recent annual report. Some of the company’s workers are represented by the local chapter of the International Brotherhood of Electrical Workers. Allete officials said that union agreements will be honored under new ownership.

Allete previously operated under the Minnesota Power banner, but changed its name in 2000 to reflect its diversification of business. Shareholders formally approved the name in 2001. Allete’s shares previously traded on the New York Stock Exchange under the ticker MPL, but shifted to ALE upon the name change.

News service Reuters first reported rumors of Allete’s potential sale in late 2023.