An analysis of Minnesota Power & Light Company and its subsidiaries.

• Author: Thomas, Gwen
• Position: Company Profile

GENERAL INFORMATION

Minnesota Power and Light Company (MP) is a diversified utility company with headquarters in Duluth, MN and business operations in 28 states and three Canadian provinces. Once exclusively an electric utility, MP has diversified over the past 12 years into water utilities and several nonregulated businesses including auto auctions and real estate. Its common stock is traded on the New York Stock Exchange under the symbol MPL.

Board Chairman, President and Chief Executive Officer:

Edwin L. Russell

PROFILE: 51 years old; joined MP in May of 1995; 25-year record of experience in non-regulated businesses. Previously was a group vice-president at J.M. Huber Corp., a broadly diversified manufacturing and natural resources company headquartered in Edison, N.J. Holds a BA degree in International Government from Bowdoin College and an MBA from the Harvard Graduate School of Business Administration. Russell succeeded Arend J. Sandbulte who remains a member of the company's 14-member corporate board of directors.

When he took the helm, one of Russell's goals was to have total shareholder return ranking in the upper quartile of MP's peer group of 17 diversified utility companies by the year 2000. So far, MP remains in fifth place among those peers.

Board of Directors:

Edwin L. Russell, Merrill K. Cragun, Dennis E. Evans, Peter J. Johnson, George L. Mayer, Paul F. McQueen, Robert S. Nickoloff, Jack I. Rajala, Arend J. Sandbulte, Nick Smith, Bruce W. Stender, Donald C. Wegmiller; all re-elected to the board in 1997, and Kathleen A. Brekken, elected this year.

Management Council:

President MP Electric-Robert D. Edwards; President Southern States Utilities-John A. Cirello; President MP Real Estate Holdings-Donnie R. Crandell; Chief Financial Officer-David G. Gartzke; General Counsel & Secretary-Philip R. Halverson; Vice President-Corporate Relations-James A. Roberts; Vice President-Corporate Information Services-Geraldine R. VanTassel; Corporate Controller-Mark A. Schober; Corporate Treasurer-James K. Vizanko; Assistant Vice President-Corporate Development-Dennis L. Hollingsworth; Assistant General Counsel-Steve W. Tyacke

MWh Sales Breakdown

79% Industrial 10% Commercial 10% Residential 1% Other

Electric Rates

Residential - 6.32 cents/kWh Commercial - 5.72 cents/kWh Industrial - 3.39 cents/kWh Other - 6.55 cents/kWh

MP's residential rates increased by 13.5% in 1995. With additional increases of 3.3% for each of the years 1996 and 1997.

Employees

1,252 after reducing their utility workforce by 180 through offering of an early retirement package in 1995 and cutting of another 50 employees in December 1996. (A total workforce reduction of 16%). Russell noted at MP's annual meeting that the total workforce has actually swelled to over 6,500 employees if you consider those employed by all business operations.

Business Offices:

Headquarters-Duluth

Other offices - Eveleth, International Falls, Cloquet, Little Falls, Long Prairie, Crosby, Park Rapids, Pine River, and Sandstone. (Aurora, Chisholm and Coleraine offices were closed November 4, 1996 as a cost savings measure.)

Dividend on Company Common Stock:

MP indicated total earnings per share of $2.28 according to a report issued January 27, 1997. This compares to $2.16 per share in 1995. The company's stock has remained stable and is currently trading at over $29 per share. The 52-week high was $29 5/8 and the low was $26. Dain Bosworth gave the company's stock a "buy" rating in an evaluation report mailed to its customers this spring. MP has paid cash dividends since 1948 and has approximately 27,000 registered shareholders owning 32 million shares of stock.

Overall Strategy:

To contain costs, get maximum production from existing facilities, and take advantage of new revenue opportunities.

Stand on Deregulation:

MP indicated in its annual report that it remains opposed to retail wheeling as it would benefit only a few large customers while potentially adversely impacting smaller customers' rates and shareholder returns. In spite of this stand, the last year has seen the MP electric division sign long-term contracts with two of its biggest Iron Range customers; continue to trim its workforce; and hire marketing visionaries to help focus the company on changing consumer needs. Along the way, it has also reinvented its retail outlet at the Miller Hill Mall to offer new electric...