ALLETE's Unit Signs Power Sales Agreement With Smithfield

ALLETE, Inc.'s (NYSE:ALE) wholly-owned subsidiary, ALLETE Clean Energy, recently signed power sales agreement (PSA) with Smithfield Foods, Inc. Per the terms, Smithfield will purchase 75 megawatt (MW) for 12 years from ALLETE Clean Energy’s largest wind site—Diamond Spring — in Oklahoma. The project has total wind capacity of more than 300 megawatts (MW).

Notably, the Diamond Spring wind project will provide renewable energy to large corporate customers like Walmart (NYSE:WMT) and Starbucks (NASDAQ:SBUX) . Walmart has agreed to purchase 175 MW power for 15 years and Starbucks will buy 50 MW for 15 years.

Wind Energy Projects

ALLETE Clean Energy focuses on developing, acquiring as well as operating clean and renewable energy projects. The subsidiary currently operates in four states with nearly 555 MW of generation capacity. It is also engaged in the development of wind energy facilities to operate under long-term PSAs.

The subsidiary to expand its existing wind capacity is also targeting acquisitions of existing facilities up to 200 MW each, which have long-term PSAs. When completed, Diamond Spring, will increase the company’s total wind capacity to more than 1,000 MW at nine sites in seven states.

Increasing Wind Energy

In the past few years, renewable energy sources received wide acceptancein the United States. Wind and solar power have been two of the fastest growing sources of electricity generation in the past decade. Per the U.S. Energy Information Administration (EIA), wind, solar and hydropower will collectively produce 18% of U.S. electricity in 2019 and almost 20% in 2020. EIA also expects that annual generation from wind will surpass hydropower generation for the first time in 2019 to become the leading source of renewable electricity generation and sustain the position in 2020.

In 2016, Smithfield announced that it will reduce greenhouse gas (GHG) emissions 25% by 2025 with the aim of making the environment cleaner. We believe thatsuch initiatives will increase demand for wind, which drive company’s like NextEra Energy, Inc (NYSE:NEE) that are shifting toward cleaner energy generation sources.

Zacks Rank & Price Performance

ALLETE currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past month, shares of ALLETE have gained 3.8% compared with the industry’s rise of 3.1%.

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