Allete to buy power line to add wind, cut coal

NEW YORK (Reuters) - Allete Inc's Minnesota Power subsidiary agreed to buy a power transmission line from Square Butte Electric Co-op for about $80 million which will transport wind energy from the plains of North Dakota to Minnesota, the company said in a release Monday.

Minnesota Power, which first announced the power line deal in May, also said it would phase out a long-term contract to buy power from the 705-megawatt Milton R. Young lignite coal-fired plant in Center, North Dakota.

The 465-mile direct current power line presently transports power from the Young plant to Minnesota Power's 141,000 customers in Minnesota.

Minnesota Power shares the power from the Young station with Minnkota Power Cooperative, an affiliate of the Square Butte.

Over the next several years, Minnesota Power, which takes about 300 MW from the plant, plans to phase out its generation rights from the 455-MW Unit 2 at Young.

Minnkota said in May the deal would delay its need to build new generation.

Minnesota Power said it plans to add several hundred megawatts of wind generation near the Young plant, starting in 2010.

The wind power will help Minnesota Power cut carbon emissions and meet a state mandate requiring a 25 percent renewable energy supply by 2025.

The company, which now gets about 95 percent of its power from coal, has committed not to increase its carbon dioxide emissions.

The company expects to close the transaction, which is subject to regulatory approval, in 2009.

Allete, of Duluth, Minnesota, supplies electricity to 156,000 customers in Minnesota and Wisconsin and has real-estate holdings in Florida.

(Reporting by Scott DiSavino)