(Mark One)
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T
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended
December 31, 2017
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£
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from ______________ to ______________
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Minnesota
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41-0418150
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock, without par value
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New York Stock Exchange
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Large Accelerated Filer
x
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Accelerated Filer
¨
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Non-Accelerated Filer
¨
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Smaller Reporting Company
¨
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Emerging Growth Company
¨
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Abbreviation or Acronym
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Term
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AFUDC
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Allowance for Funds Used During Construction - the cost of both debt and equity funds used to finance utility plant additions during construction periods
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ALLETE
|
ALLETE, Inc.
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ALLETE Clean Energy
|
ALLETE Clean Energy, Inc. and its subsidiaries
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ALLETE Properties
|
ALLETE Properties, LLC and its subsidiaries
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ALLETE Transmission Holdings
|
ALLETE Transmission Holdings, Inc.
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ArcelorMittal
|
ArcelorMittal USA, Inc.
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ASC
|
Accounting Standards Codification
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ATC
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American Transmission Company LLC
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Basin
|
Basin Electric Power Cooperative
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Bison
|
Bison Wind Energy Center
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BNI Energy
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BNI Energy, Inc. and its subsidiary
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Boswell
|
Boswell Energy Center
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Camp Ripley
|
Camp Ripley Solar Array
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CIP
|
Conservation Improvement Program
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Cliffs
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Cleveland-Cliffs Inc.
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CO
2
|
Carbon Dioxide
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Company
|
ALLETE, Inc. and its subsidiaries
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DC
|
Direct Current
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EIS
|
Environmental Impact Statement
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EITE
|
Energy-Intensive Trade-Exposed
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EPA
|
United States Environmental Protection Agency
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ERP Iron Ore
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ERP Iron Ore, LLC
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ESOP
|
Employee Stock Ownership Plan
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FASB
|
Financial Accounting Standards Board
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FERC
|
Federal Energy Regulatory Commission
|
Form 8-K
|
ALLETE Current Report on Form 8-K
|
Form 10-K
|
ALLETE Annual Report on Form 10-K
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Form 10-Q
|
ALLETE Quarterly Report on Form 10-Q
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GAAP
|
Generally Accepted Accounting Principles in the United States of America
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GHG
|
Greenhouse Gases
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GNTL
|
Great Northern Transmission Line
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Invest Direct
|
ALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan
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IRP
|
Integrated Resource Plan
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Item ___
|
Item ___ of this Form 10-K
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kV
|
Kilovolt(s)
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kW / kWh
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Kilowatt(s) / Kilowatt-hour(s)
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Laskin
|
Laskin Energy Center
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LIBOR
|
London Interbank Offered Rate
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Magnetation
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Magnetation, LLC
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Manitoba Hydro
|
Manitoba Hydro-Electric Board
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MBtu
|
Million British thermal units
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Abbreviation or Acronym
|
Term
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Mesabi Metallics
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Mesabi Metallics Company, LLC
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Minnesota Power
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An operating division of ALLETE, Inc.
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Minnkota Power
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Minnkota Power Cooperative, Inc.
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MISO
|
Midcontinent Independent System Operator, Inc.
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Montana-Dakota Utilities
|
Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc.
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Moody’s
|
Moody’s Investors Service, Inc.
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MPCA
|
Minnesota Pollution Control Agency
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MPUC
|
Minnesota Public Utilities Commission
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MW / MWh
|
Megawatt(s) / Megawatt-hour(s)
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NDPSC
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North Dakota Public Service Commission
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NERC
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North American Electric Reliability Corporation
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NOL
|
Net Operating Loss
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NO
2
|
Nitrogen Dioxide
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NO
X
|
Nitrogen Oxides
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Northern States Power
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Northern States Power Company, a subsidiary of Xcel Energy Inc.
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Northshore Mining
|
Northshore Mining Company, a wholly-owned subsidiary of Cliffs
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Note ___
|
Note ___ to the consolidated financial statements in this Form 10-K
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NYSE
|
New York Stock Exchange
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Oliver Wind I
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Oliver Wind I Energy Center
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Oliver Wind II
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Oliver Wind II Energy Center
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Palm Coast Park District
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Palm Coast Park Community Development District in Florida
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PolyMet
|
PolyMet Mining Corp.
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PPA / PSA
|
Power Purchase Agreement / Power Sales Agreement
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PPACA
|
Patient Protection and Affordable Care Act of 2010
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PSCW
|
Public Service Commission of Wisconsin
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RSOP
|
Retirement Savings and Stock Ownership Plan
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SEC
|
Securities and Exchange Commission
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Shell Energy
|
Shell Energy North America (US), L.P.
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Silver Bay Power
|
Silver Bay Power Company, a wholly-owned subsidiary of Cliffs
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SO
2
|
Sulfur Dioxide
|
Square Butte
|
Square Butte Electric Cooperative, a North Dakota cooperative corporation
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Standard & Poor’s
|
S&P Global Ratings
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SWL&P
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Superior Water, Light and Power Company
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Taconite Harbor
|
Taconite Harbor Energy Center
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Taconite Ridge
|
Taconite Ridge Energy Center
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Tenaska
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Tenaska Energy, Inc. and Tenaska Energy Holdings, LLC
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Thomson
|
Thomson Energy Center
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TCJA
|
Tax Cuts and Jobs Act of 2017 (Public Law 115-97)
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Tonka Water
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Tonka Equipment Company
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Town Center District
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Town Center at Palm Coast Community Development District in Florida
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TransAlta
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TransAlta Energy Marketing (U.S.) Inc.
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United Taconite
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United Taconite LLC, a wholly-owned subsidiary of Cliffs
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UPM Blandin
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UPM, Blandin paper mill owned by UPM-Kymmene Corporation
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U.S.
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United States of America
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U.S. Water Services
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U.S. Water Services Holding Company and its subsidiaries
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USS Corporation
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United States Steel Corporation
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WTG
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Wind Turbine Generator
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•
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our ability to successfully implement our strategic objectives;
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•
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global and domestic economic conditions affecting us or our customers;
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•
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changes in and compliance with laws and regulations;
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•
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changes in tax rates or policies or in rates of inflation;
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•
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the outcome of legal and administrative proceedings (whether civil or criminal) and settlements;
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•
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weather conditions, natural disasters and pandemic diseases;
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•
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our ability to access capital markets and bank financing;
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•
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changes in interest rates and the performance of the financial markets;
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•
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project delays or changes in project costs;
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•
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changes in operating expenses and capital expenditures and our ability to raise revenues from our customers in regulated rates or sales price increases at our Energy Infrastructure and Related Services businesses;
|
•
|
the impacts of commodity prices on ALLETE and our customers;
|
•
|
our ability to attract and retain qualified, skilled and experienced personnel;
|
•
|
effects of emerging technology;
|
•
|
war, acts of terrorism and cyberattacks;
|
•
|
our ability to manage expansion and integrate acquisitions;
|
•
|
population growth rates and demographic patterns;
|
•
|
wholesale power market conditions;
|
•
|
federal and state regulatory and legislative actions that impact regulated utility economics, including our allowed rates of return, capital structure, ability to secure financing, industry and rate structure, acquisition and disposal of assets and facilities, operation and construction of plant facilities and utility infrastructure, recovery of purchased power, capital investments and other expenses, including present or prospective environmental matters;
|
•
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effects of competition, including competition for retail and wholesale customers;
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•
|
effects of restructuring initiatives in the electric industry;
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•
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the impacts on our Regulated Operations segment of climate change and future regulation to restrict the emissions of GHG;
|
•
|
effects of increased deployment of distributed low-carbon electricity generation resources;
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•
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the impacts of laws and regulations related to renewable and distributed generation;
|
•
|
pricing, availability and transportation of fuel and other commodities and the ability to recover the costs of such commodities;
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•
|
our current and potential industrial and municipal customers’ ability to execute announced expansion plans;
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•
|
real estate market conditions where our legacy Florida real estate investment is located may not improve;
|
•
|
the success of efforts to realize value from, invest in, and develop new opportunities in, our Energy Infrastructure and Related Services businesses; and
|
•
|
factors affecting our Energy Infrastructure and Related Services businesses, including fluctuations in the volume of customer orders, unanticipated cost increases, changes in legislation and regulations impacting the industries in which the customers served operate, the effects of weather, creditworthiness of customers, ability to obtain materials required to perform services, and changing market conditions.
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
(a)
|
|
|||
|
|
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|
||||||
Consolidated Operating Revenue – Millions
|
|
$1,419.3
|
|
|
$1,339.7
|
|
|
$1,486.4
|
|
|
|
|
|
||||||
Percentage of Consolidated Operating Revenue
|
|
|
|
||||||
Regulated Operations
|
75
|
%
|
75
|
%
|
67
|
%
|
|||
ALLETE Clean Energy
|
6
|
%
|
6
|
%
|
18
|
%
|
|||
U.S. Water Services
|
11
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%
|
10
|
%
|
8
|
%
|
|||
Corporate and Other
|
8
|
%
|
9
|
%
|
7
|
%
|
|||
|
100
|
%
|
100
|
%
|
100
|
%
|
(a)
|
Includes the construction and sale of a wind energy facility by ALLETE Clean Energy to Montana-Dakota Utilities for $197.7 million in 2015.
|
Industrial Customer Kilowatt-hours Sold
|
|
|
|
|
|
|
|||
Year Ended December 31
|
2017
|
|
%
|
2016
|
|
%
|
2015
|
|
%
|
Millions
|
|
|
|
|
|
|
|||
Taconite/Iron Concentrate
|
4,930
|
|
67
|
3,906
|
|
61
|
4,000
|
|
60
|
Paper, Pulp and Secondary Wood Products
|
1,104
|
|
15
|
1,303
|
|
20
|
1,456
|
|
22
|
Pipelines and Other Industrial
|
1,293
|
|
18
|
1,247
|
|
19
|
1,179
|
|
18
|
Total Industrial Customer Kilowatt-hours Sold
|
7,327
|
|
100
|
6,456
|
|
100
|
6,635
|
|
100
|
Minnesota Power Taconite Customer Production
|
||
Year
|
|
Tons (Millions)
|
2017
*
|
|
37
|
2016
|
|
28
|
2015
|
|
31
|
2014
|
|
39
|
2013
|
|
37
|
2012
|
|
39
|
2011
|
|
39
|
2010
|
|
35
|
2009
|
|
17
|
2008
|
|
39
|
Source: Minnesota Department of Revenue 2017 Mining Tax Guide for years 2008 - 2016.
|
||
* Preliminary data from the Minnesota Department of Revenue.
|
Customer
|
Industry
|
Location
|
Ownership
|
Earliest
Termination Date
|
ArcelorMittal – Minorca Mine
|
Taconite
|
Virginia, MN
|
ArcelorMittal S.A.
|
December 31, 2025
|
Hibbing Taconite Co.
(a)
|
Taconite
|
Hibbing, MN
|
62.3% ArcelorMittal S.A.
23.0% Cliffs
14.7% USS Corporation
|
February 28, 2022
|
United Taconite and Northshore Mining
|
Taconite
|
Eveleth, MN and Babbitt, MN
|
Cliffs
|
December 31, 2026
|
USS Corporation
(USS – Minnesota Ore)
(a)(b)
|
Taconite
|
Mt. Iron, MN and Keewatin, MN
|
USS Corporation
|
February 28, 2022
|
Magnetation
(c)
|
Iron Concentrate
|
Coleraine, MN and Bovey, MN
|
ERP Iron Ore
|
December 31, 2025
|
Boise, Inc.
|
Paper
|
International Falls, MN
|
Packaging Corporation of America
|
December 31, 2023
|
UPM Blandin
(a)(d)
|
Paper
|
Grand Rapids, MN
|
UPM-Kymmene Corporation
|
February 28, 2022
|
NewPage Corporation
|
Paper and Pulp
|
Duluth, MN
|
Verso Corporation
|
December 31, 2022
|
Sappi Cloquet LLC
(a)
|
Paper and Pulp
|
Cloquet, MN
|
Sappi Limited
|
February 28, 2022
|
(a)
|
The contract will terminate four years from the date of written notice from either Minnesota Power or the customer. No notice of contract cancellation has been given by either party. Thus, the earliest date of cancellation is February 28, 2022.
|
(b)
|
USS Corporation owns both the Minntac Plant in Mountain Iron, MN, and the Keewatin Taconite Plant in Keewatin, MN.
|
(c)
|
On January 30, 2017, ERP Iron Ore, LLC purchased substantially all of Magnetation’s assets pursuant to an asset purchase agreement approved by the U.S. Bankruptcy Court for the District of Minnesota. (See Item 7. Management’s Discussion and Analysis – Outlook – Industrial Customers and Prospective Additional Load.)
|
(d)
|
The smaller of UPM Blandin’s two paper machines was closed in the fourth quarter of 2017. (See Item 7. Management’s Discussion and Analysis – Outlook – Industrial Customers and Prospective Additional Load.)
|
|
|
|
|
|
Year Ended
|
|||
|
Unit
|
Year
|
Net
|
|
December 31, 2017
|
|||
Regulated Utility Power Supply
|
No.
|
Installed
|
Capability
|
|
Generation and Purchases
|
|||
|
|
|
MW
|
|
MWh
|
%
|
||
Coal-Fired
|
|
|
|
|
|
|
||
Boswell Energy Center
|
1
|
1958
|
67
|
|
(a)
|
|
|
|
in Cohasset, MN
|
2
|
1960
|
68
|
|
(a)
|
|
|
|
|
3
|
1973
|
355
|
|
|
|
|
|
|
4
|
1980
|
468
|
|
(b)
|
|
|
|
|
|
|
958
|
|
|
6,286,858
|
|
41.4
|
Taconite Harbor Energy Center
|
1
|
1957
|
75
|
|
|
|
|
|
in Schroeder, MN
|
2
|
1957
|
75
|
|
|
|
|
|
|
|
|
150
|
|
(c)
|
—
|
|
—
|
Total Coal-Fired
|
|
|
1,108
|
|
|
6,286,858
|
|
41.4
|
Biomass Co-Fired / Natural Gas
|
|
|
|
|
|
|
||
Hibbard Renewable Energy Center in Duluth, MN
|
3 & 4
|
1949, 1951
|
62
|
|
|
4,502
|
|
—
|
Laskin Energy Center in Hoyt Lakes, MN
|
1 & 2
|
1953
|
110
|
|
|
5,615
|
|
0.1
|
Total Biomass Co-Fired / Natural Gas
|
|
|
172
|
|
|
10,117
|
|
0.1
|
Hydro
(d)
|
|
|
|
|
|
|
||
Group consisting of ten stations in MN
|
Multiple
|
Multiple
|
120
|
|
|
773,707
|
|
5.1
|
Wind
(e)
|
|
|
|
|
|
|
||
Taconite Ridge Energy Center in Mt. Iron, MN
|
Multiple
|
2008
|
25
|
|
|
56,594
|
|
0.4
|
Bison Wind Energy Center in Oliver and Morton Counties, ND
|
Multiple
|
2010-2014
|
497
|
|
|
1,775,474
|
|
11.7
|
Total Wind
|
|
|
522
|
|
|
1,832,068
|
|
12.1
|
Solar
|
|
|
|
|
|
|
||
Camp Ripley Solar Array near Little Falls, MN
|
Multiple
|
2016
|
10
|
|
|
17,129
|
|
0.1
|
Total Generation
|
|
|
1,932
|
|
|
8,919,879
|
|
58.8
|
|
|
|
|
|
|
|
||
Long-Term Purchased Power
|
|
|
|
|
|
|
||
Lignite Coal - Square Butte near Center, ND
(f)
|
|
|
|
|
1,739,781
|
|
11.5
|
|
Wind - Oliver County, ND
|
|
|
|
|
341,785
|
|
2.2
|
|
Hydro - Manitoba Hydro in Manitoba, Canada
|
|
|
|
|
305,532
|
|
2.0
|
|
Total Long-Term Purchased Power
|
|
|
|
|
|
2,387,098
|
|
15.7
|
Other Purchased Power
(g)
|
|
|
|
|
3,867,865
|
|
25.5
|
|
Total Purchased Power
|
|
|
|
|
|
6,254,963
|
|
41.2
|
Total Regulated Utility Power Supply
|
|
|
1,932
|
|
|
15,174,842
|
|
100.0
|
(a)
|
In 2016, Minnesota Power announced that Boswell Units 1 and 2 will be retired in 2018. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook – EnergyForward.)
|
(b)
|
Boswell Unit 4 net capability shown above reflects Minnesota Power’s ownership percentage of 80 percent. WPPI Energy owns 20 percent of Boswell Unit 4. (See Note 3. Jointly-Owned Facilities and Projects.)
|
(c)
|
Taconite Harbor Units 1 and 2 were idled in 2016. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook – EnergyForward.)
|
(d)
|
Hydro consists of 10 stations with 34 generating units.
|
(e)
|
Taconite Ridge consists of 10 WTGs and Bison consists of 165 WTGs.
|
(f)
|
Minnesota Power has a PSA with Minnkota Power whereby Minnesota Power is selling a portion of its entitlement from Square Butte to Minnkota Power. (See Electric Sales / Customers.)
|
(g)
|
Includes short-term market purchases in the MISO market and from Other Power Suppliers.
|
Summary of Projects
|
|
|
|
Residential
|
|
Non-residential
|
|||
As of December 31, 2017
|
|
Acres
(a)
|
|
Units
(b)
|
|
Sq. Ft.
(b)(c)
|
|||
Projects
|
|
|
|
|
|
|
|||
Town Center at Palm Coast
|
|
971
|
|
|
2,419
|
|
|
2,178,700
|
|
Palm Coast Park
|
|
1,025
|
|
|
830
|
|
|
2,143,000
|
|
Total Projects
|
|
1,996
|
|
|
3,249
|
|
|
4,321,700
|
|
(a)
|
Acreage amounts are approximate and shown on a gross basis, including wetlands.
|
(b)
|
Units and square footage are estimated. Density at build out may differ from these estimates.
|
(c)
|
Includes retail and non-retail commercial, office, industrial, warehouse, storage and institutional square footage.
|
Non-Rate Base Power Supply
|
Unit No.
|
Year
Installed
|
Year
Acquired
|
Net
Capability (MW)
|
Rapids Energy Center
(a)
|
|
|
|
|
in Grand Rapids, MN
|
|
|
|
|
Steam – Biomass
(b)
|
6 & 7
|
1969, 1980
|
2000
|
27
|
Hydro
|
4 & 5
|
1917, 1948
|
2000
|
2
|
(a)
|
The net generation is primarily dedicated to the needs of one customer, UPM Blandin in Grand Rapids, Minnesota. (See Item 7. Management’s Discussion and Analysis – Outlook – Industrial Customers and Prospective Additional Load.)
|
(b)
|
Rapids Energy Center’s fuel supply is supplemented by coal.
|
Executive Officers
|
Initial Effective Date
|
|
|
Alan R. Hodnik, Age 58
|
|
Chairman, President and Chief Executive Officer
|
May 10, 2011
|
President and Chief Executive Officer
|
May 1, 2010
|
|
|
Robert J. Adams, Age 55
|
|
Senior Vice President and Chief Financial Officer
|
March 4, 2017
|
Senior Vice President – Energy-Centric Businesses and Chief Risk Officer
|
November 14, 2015
|
Vice President – Energy-Centric Businesses and Chief Risk Officer
|
June 23, 2014
|
Vice President – Business Development and Chief Risk Officer
|
May 13, 2008
|
|
|
Deborah A. Amberg, Age 52
|
|
Senior Vice President, Chief Strategy Officer – Regulated Operations and President – SWL&P
|
November 26, 2016
|
Senior Vice President, General Counsel and Secretary
|
January 1, 2006
|
|
|
Patrick L. Cutshall, Age 52
|
|
Vice President and Corporate Treasurer
|
December 18, 2017
|
Treasurer
|
January 1, 2016
|
|
|
Steven W. Morris, Age 56
|
|
Vice President, Controller and Chief Accounting Officer
|
December 24, 2016
|
Controller
|
March 3, 2014
|
|
|
Patrick K. Mullen, Age 57
|
|
Senior Vice President – External Affairs
|
April 10, 2017
|
|
|
Bradley W. Oachs, Age 60
|
|
Senior Vice President and President – Regulated Operations
|
November 26, 2016
|
|
|
Bethany M. Owen, Age 52
|
|
Senior Vice President and Chief Legal and Administrative Officer
|
November 26, 2016
|
•
|
severe or unexpected weather conditions and natural disasters;
|
•
|
seasonality;
|
•
|
changes in electricity usage;
|
•
|
transmission or transportation constraints, inoperability or inefficiencies;
|
•
|
availability of competitively priced alternative energy sources;
|
•
|
changes in supply and demand for energy;
|
•
|
changes in power production capacity;
|
•
|
outages at our generating facilities or those of our competitors;
|
•
|
availability of fuel transportation;
|
•
|
changes in production and storage levels of natural gas, lignite, coal, crude oil and refined products;
|
•
|
wars, sabotage, terrorist acts or other catastrophic events; and
|
•
|
federal, state, local and foreign energy, environmental, or other regulation and legislation.
|
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
ALLETE
|
$100
|
$127
|
$146
|
$140
|
$183
|
$218
|
S&P 500 Index
|
$100
|
$132
|
$150
|
$153
|
$171
|
$208
|
Philadelphia Utility Index
|
$100
|
$111
|
$143
|
$152
|
$178
|
$201
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
|||||
Millions Except Per Share Amounts
|
|
|
|
|
|
||||||||||
Operating Revenue
(a)
|
|
$1,419.3
|
|
|
$1,339.7
|
|
|
$1,486.4
|
|
|
$1,136.8
|
|
|
$1,018.4
|
|
Operating Expenses
(a)
|
|
$1,189.5
|
|
|
$1,116.2
|
|
|
$1,275.7
|
|
|
$948.0
|
|
|
$864.3
|
|
Net Income
(b)
|
|
$172.2
|
|
|
$155.8
|
|
|
$141.5
|
|
|
$125.5
|
|
|
$104.7
|
|
Less: Non-Controlling Interest in Subsidiaries
(c)
|
—
|
|
0.5
|
|
0.4
|
|
0.7
|
|
—
|
|
|||||
Net Income Attributable to ALLETE
(b)
|
|
$172.2
|
|
|
$155.3
|
|
|
$141.1
|
|
|
$124.8
|
|
|
$104.7
|
|
Common Stock Dividends
|
108.7
|
|
102.7
|
|
97.9
|
|
83.8
|
|
75.2
|
|
|||||
Earnings Retained in Business
(b)
|
|
$63.5
|
|
|
$52.6
|
|
|
$43.2
|
|
|
$41.0
|
|
|
$29.5
|
|
Shares Outstanding
|
|
|
|
|
|
||||||||||
Year-End
|
51.1
|
|
49.6
|
|
49.1
|
|
45.9
|
|
41.4
|
|
|||||
Average
(d)
|
|
|
|
|
|
||||||||||
Basic
|
50.8
|
|
49.3
|
|
48.3
|
|
42.9
|
|
39.7
|
|
|||||
Diluted
|
51.0
|
|
49.5
|
|
48.4
|
|
43.1
|
|
39.8
|
|
|||||
Diluted Earnings Per Share
(b)
|
|
$3.38
|
|
|
$3.14
|
|
|
$2.92
|
|
|
$2.90
|
|
|
$2.63
|
|
Total Assets
(e)
|
|
$5,080.0
|
|
|
$4,876.9
|
|
|
$4,864.4
|
|
|
$4,329.1
|
|
|
$3,458.6
|
|
Long-Term Debt
|
|
$1,439.2
|
|
|
$1,370.4
|
|
|
$1,556.7
|
|
|
$1,263.2
|
|
|
$1,074.9
|
|
Return on Common Equity
(b)
|
8.6
|
%
|
8.4
|
%
|
8.0
|
%
|
8.6
|
%
|
8.3
|
%
|
|||||
Common Equity Ratio
|
58
|
%
|
55
|
%
|
53
|
%
|
54
|
%
|
55
|
%
|
|||||
Dividends Declared per Common Share
|
|
$2.14
|
|
|
$2.08
|
|
|
$2.02
|
|
|
$1.96
|
|
|
$1.90
|
|
Dividend Payout Ratio
(b)
|
63
|
%
|
66
|
%
|
69
|
%
|
68
|
%
|
72
|
%
|
|||||
Book Value Per Share at Year-End
|
|
$40.46
|
|
|
$38.17
|
|
|
$37.18
|
|
|
$35.04
|
|
|
$32.43
|
|
Capital Expenditures by Segment
|
|
|
|
|
|
||||||||||
Regulated Operations
|
|
$177.1
|
|
|
$121.8
|
|
|
$224.4
|
|
|
$583.5
|
|
|
$326.3
|
|
ALLETE Clean Energy
|
56.1
|
|
106.9
|
|
8.6
|
|
4.2
|
|
—
|
|
|||||
U.S. Water Services
|
4.4
|
|
3.7
|
|
2.9
|
|
—
|
|
—
|
|
|||||
Corporate and Other
|
28.9
|
|
15.4
|
|
15.9
|
|
16.6
|
|
13.2
|
|
|||||
Total Capital Expenditures
|
|
$266.5
|
|
|
$247.8
|
|
|
$251.8
|
|
|
$604.3
|
|
|
$339.5
|
|
(a)
|
In 2015, operating revenue and operating expenses included the construction and sale of a wind energy facility from ALLETE Clean Energy to Montana-Dakota Utilities for $197.7 million and $162.9 million, respectively.
|
(b)
|
The year ended December 31, 2017, includes the impact of the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 1. Operations and Significant Accounting Policies.)
|
(c)
|
The non-controlling interest related to ALLETE Clean Energy’s Condon wind energy facility was acquired in April 2016. (See Note 6. Acquisitions.)
|
(d)
|
Excludes unallocated ESOP shares in 2013 and 2014.
|
(e)
|
During the first quarter of 2017, the Company identified an error related to the deferred income tax treatment associated with its Wholesale and Retail Contra AFUDC Regulatory Liability resulting in a decrease in Regulatory Assets and Deferred Income Taxes. The periods presented have been revised for the correction of the error. (See Note 1. Operations and Significant Accounting Policies.)
|
Year Ended December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Operating Revenue – Utility
|
|
$1,063.8
|
|
|
$1,000.7
|
|
Fuel, Purchased Power and Gas – Utility
|
396.9
|
|
339.9
|
|
||
Transmission Services – Utility
|
71.2
|
|
65.2
|
|
||
Operating and Maintenance
|
223.1
|
|
220.7
|
|
||
Depreciation and Amortization
|
132.6
|
|
154.3
|
|
||
Taxes Other than Income Taxes
|
51.1
|
|
47.7
|
|
||
Operating Income
|
188.9
|
|
172.9
|
|
||
Interest Expense
|
(57.0
|
)
|
(52.1
|
)
|
||
Equity Earnings in ATC
|
22.5
|
|
18.5
|
|
||
Other Income
|
1.2
|
|
2.1
|
|
||
Income Before Income Taxes
|
155.6
|
|
141.4
|
|
||
Income Tax Expense
|
27.2
|
|
5.9
|
|
||
Net Income Attributable to ALLETE
|
$128.4
|
|
$135.5
|
|
Kilowatt-hours Sold
|
2017
|
|
2016
|
|
Quantity
Variance
|
%
Variance
|
||
Millions
|
|
|
|
|
||||
Regulated Utility
|
|
|
|
|
||||
Retail and Municipal
|
|
|
|
|
||||
Residential
|
1,096
|
|
1,102
|
|
(6
|
)
|
(0.5
|
)
|
Commercial
|
1,420
|
|
1,442
|
|
(22
|
)
|
(1.5
|
)
|
Industrial
|
7,327
|
|
6,456
|
|
871
|
|
13.5
|
|
Municipal
|
799
|
|
816
|
|
(17
|
)
|
(2.1
|
)
|
Total Retail and Municipal
|
10,642
|
|
9,816
|
|
826
|
|
8.4
|
|
Other Power Suppliers
|
4,039
|
|
4,316
|
|
(277
|
)
|
(6.4
|
)
|
Total Regulated Utility Kilowatt-hours Sold
|
14,681
|
|
14,132
|
|
549
|
|
3.9
|
|
Year Ended December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
$80.5
|
|
|
$80.5
|
|
Net Income Attributable to ALLETE
(a)
|
$41.5
|
|
$13.4
|
|
(a)
|
Results in 2017 include a $23.6 million after-tax benefit due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.
|
|
Year Ended December 31,
|
|||||||||
|
2017
|
2016
|
||||||||
Production and Operating Revenue
|
kWh
|
Revenue
|
kWh
|
Revenue
|
||||||
Millions
|
|
|
|
|
||||||
Wind Energy Facility
|
|
|
|
|
||||||
Lake Benton
|
241.8
|
|
|
$12.3
|
|
254.7
|
|
|
$12.8
|
|
Storm Lake II
|
152.6
|
|
10.0
|
|
154.8
|
|
10.1
|
|
||
Condon
|
90.7
|
|
7.5
|
|
96.9
|
|
8.2
|
|
||
Storm Lake I
|
215.6
|
|
12.4
|
|
222.3
|
|
11.6
|
|
||
Chanarambie/Viking
|
263.5
|
|
13.9
|
|
278.8
|
|
13.4
|
|
||
Armenia Mountain
|
267.4
|
|
24.4
|
|
268.2
|
|
24.4
|
|
||
Total Production and Operating Revenue
|
1,231.6
|
|
$80.5
|
1,275.7
|
|
|
$80.5
|
|
Year Ended December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
$151.8
|
|
|
$137.5
|
|
Net Income Attributable to ALLETE
(a)
|
$10.7
|
|
$1.5
|
|
(a)
|
Results in 2017 include a $9.2 million after-tax benefit due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.
|
Year Ended December 31
|
2016
|
|
2015
|
|
||
Millions
|
|
|
||||
Operating Revenue – Utility
|
|
$1,000.7
|
|
|
$991.2
|
|
Fuel, Purchased Power and Gas – Utility
|
339.9
|
|
336.0
|
|
||
Transmission Services – Utility
|
65.2
|
|
54.1
|
|
||
Operating and Maintenance
|
220.7
|
|
229.6
|
|
||
Depreciation and Amortization
|
154.3
|
|
135.1
|
|
||
Taxes Other than Income Taxes
|
47.7
|
|
46.2
|
|
||
Operating Income
|
172.9
|
|
190.2
|
|
||
Interest Expense
|
(52.1
|
)
|
(53.9
|
)
|
||
Equity Earnings in ATC
|
18.5
|
|
16.3
|
|
||
Other Income
|
2.1
|
|
3.4
|
|
||
Income Before Income Taxes
|
141.4
|
|
156.0
|
|
||
Income Tax Expense
|
5.9
|
|
24.4
|
|
||
Net Income Attributable to ALLETE
|
$135.5
|
$131.6
|
Year Ended December 31,
|
2016
|
|
2015
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
$80.5
|
|
|
$262.1
|
|
Net Income Attributable to ALLETE
|
$13.4
|
$29.9
|
|
Year Ended
|
|
Period February 10, 2015
|
|
||
|
December 31, 2016
|
|
Through December 31, 2015
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
$137.5
|
|
|
$119.8
|
|
Net Income Attributable to ALLETE
|
$1.5
|
|
$0.9
|
|
As of December 31
|
2017
|
|
%
|
2016
|
|
%
|
2015
|
|
%
|
|||
Millions
|
|
|
|
|
|
|
||||||
ALLETE Equity
|
|
$2,068.2
|
|
58
|
|
$1,893.0
|
|
55
|
|
$1,820.2
|
|
53
|
Non-Controlling Interest
|
—
|
|
—
|
—
|
|
—
|
2.2
|
|
—
|
|||
Long-Term Debt (Including Current Maturities)
|
1,513.3
|
|
42
|
1,569.1
|
|
45
|
1,605.0
|
|
47
|
|||
Notes Payable
|
—
|
|
—
|
—
|
|
—
|
1.6
|
|
—
|
|||
|
|
$3,581.5
|
|
100
|
|
$3,462.1
|
|
100
|
|
$3,429.0
|
|
100
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Cash and Cash Equivalents at Beginning of Period
|
|
$27.5
|
|
|
$97.0
|
|
|
$145.8
|
|
Cash Flows from (used for)
|
|
|
|
||||||
Operating Activities
|
402.9
|
|
332.0
|
|
340.1
|
|
|||
Investing Activities
|
(229.0
|
)
|
(276.2
|
)
|
(618.8
|
)
|
|||
Financing Activities
|
(102.5
|
)
|
(125.3
|
)
|
229.9
|
|
|||
Change in Cash and Cash Equivalents
|
71.4
|
|
(69.5
|
)
|
(48.8
|
)
|
|||
Cash and Cash Equivalents at End of Period
|
|
$98.9
|
|
|
$27.5
|
|
|
$97.0
|
|
|
Payments Due by Period
|
||||||||||||||
|
|
Less than
|
1 to 3
|
4 to 5
|
After
|
||||||||||
Contractual Obligations
(a)
|
Total
|
1 Year
|
Years
|
Years
|
5 Years
|
||||||||||
Millions
|
|
|
|
|
|
||||||||||
Long-Term Debt
|
|
$2,255.4
|
|
|
$126.1
|
|
|
$313.6
|
|
|
$284.8
|
|
|
$1,530.9
|
|
Pension
(b)
|
458.0
|
|
46.3
|
|
92.1
|
|
91.6
|
|
228.0
|
|
|||||
Other Postretirement Benefit Plans
(b)
|
97.2
|
|
9.2
|
|
19.1
|
|
19.2
|
|
49.7
|
|
|||||
Operating Lease Obligations
|
79.9
|
|
14.2
|
|
22.3
|
|
13.4
|
|
30.0
|
|
|||||
PPA Obligations
(c)
|
2,283.1
|
|
104.5
|
|
222.1
|
|
289.5
|
|
1,667.0
|
|
|||||
Other Purchase Obligations
|
56.5
|
|
40.5
|
|
3.5
|
|
1.4
|
|
11.1
|
|
|||||
Total Contractual Obligations
|
|
$5,230.1
|
|
|
$340.8
|
|
|
$672.7
|
|
|
$699.9
|
|
|
$3,516.7
|
|
(a)
|
Does not include $1.7 million of non-current unrecognized tax benefits due to uncertainty regarding the timing of future cash payments related to uncertain tax positions. (See Note 13. Income Tax Expense.)
|
(b)
|
Represents the estimated future benefit payments for our defined benefit pension and other postretirement plans through 2027.
|
(c)
|
Does not include the agreement with Manitoba Hydro expiring in 2022, as this contract is for surplus energy only; Oliver Wind I and Oliver Wind II, as Minnesota Power only pays for energy as it is delivered; and the agreement with Tenaska commencing in 2020 as it is subject to approval of the construction of a 525 MW to 550 MW combined-cycle natural gas‑fired facility. (See Note 11. Commitments, Guarantees and Contingencies.)
|
Credit Ratings
|
Standard & Poor’s
|
Moody’s
|
Issuer Credit Rating
|
BBB+
|
A3
|
Commercial Paper
|
A-2
|
P-2
|
First Mortgage Bonds
|
(a)
|
A1
|
(a)
|
Not rated by Standard & Poor’s.
|
Capital Expenditures
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Total
|
|
|||||||
Millions
|
|
|
|
|
|
|
|||||||||||||
Regulated Operations
|
|
|
|
|
|
|
|||||||||||||
|
Base and Other
|
|
$130
|
|
|
$190
|
|
|
$130
|
|
|
$170
|
|
|
$170
|
|
|
$790
|
|
|
Transmission Cost Recovery
(a)
|
110
|
|
85
|
|
50
|
|
—
|
|
—
|
|
245
|
|
||||||
Regulated Operations Capital Expenditures
|
240
|
|
275
|
|
180
|
|
170
|
|
170
|
|
1,035
|
|
|||||||
ALLETE Clean Energy
|
65
|
|
65
|
|
25
|
|
5
|
|
5
|
|
165
|
|
|||||||
U.S. Water Services
|
5
|
|
5
|
|
5
|
|
10
|
|
10
|
|
35
|
|
|||||||
Corporate and Other
(b)
|
15
|
|
15
|
|
35
|
|
60
|
|
170
|
|
295
|
|
|||||||
Total Capital Expenditures
|
|
$325
|
|
|
$360
|
|
|
$245
|
|
|
$245
|
|
|
$355
|
|
|
$1,530
|
|
(a)
|
Estimated capital expenditures eligible for cost recovery outside of a general rate case. Our portion of transmission capital expenditures related to construction of the GNTL is estimated at approximately $245 million through 2020. (See Item 1. Business – Regulated Operations – Transmission and Distribution.)
|
(b)
|
Our portion of capital expenditures related to construction of a
525
MW to
550
MW combined-cycle natural gas-fired generating facility, which will be jointly owned by Dairyland Power Cooperative and a subsidiary of ALLETE, is estimated at approximately $200 million through 2022, subject to regulatory approval. (See Item 7. Management’s Discussion and Analysis – Outlook – EnergyForward.)
|
|
Expected Maturity Date
|
|||||||||||||||||||||||
Interest Rate Sensitive
Financial Instruments
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Fair Value
|
|||||||||
Long-Term Debt
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed Rate – Millions
|
|
$63.4
|
|
|
$56.2
|
|
|
$89.0
|
|
|
$97.8
|
|
|
$88.0
|
|
|
$1,034.5
|
|
|
$1,428.9
|
|
|
$1,543.2
|
|
Average Interest Rate – %
|
2.8
|
|
7.6
|
|
4.2
|
|
3.8
|
|
3.7
|
|
4.4
|
|
4.4
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
Variable Rate – Millions
|
|
$1.2
|
|
|
$1.4
|
|
|
$54.0
|
|
—
|
|
—
|
|
|
$27.8
|
|
|
$84.4
|
|
|
$84.4
|
|
||
Average Interest Rate – %
|
5.4
|
|
5.4
|
|
2.1
|
|
—
|
|
—
|
|
0.7
|
|
1.8
|
|
|
•
|
Directors.
The information regarding directors will be included in the “Election of Directors” section;
|
•
|
Audit Committee Financial Expert.
The information regarding the Audit Committee financial expert will be included in the “Corporate Governance” section and the “Audit Committee Report” section;
|
•
|
Audit Committee Members.
The identity of the Audit Committee members will be included in the “Corporate Governance” section and the “Audit Committee Report” section;
|
•
|
Executive Officers.
The information regarding executive officers is included in Part I of this Form 10-K; and
|
•
|
Section 16(a) Compliance.
The information regarding Section 16(a) compliance will be included in the “Ownership of ALLETE Common Stock – Section 16(a) Beneficial Ownership Reporting Compliance” section.
|
•
|
Corporate Governance Guidelines;
|
•
|
Audit Committee Charter;
|
•
|
Executive Compensation Committee Charter; and
|
•
|
Corporate Governance and Nominating Committee Charter.
|
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
(a)
|
|||
|
|
|
|
|||
Equity Compensation Plans Approved by Security Holders
|
—
|
|
—
|
|
1,266,716
|
|
Equity Compensation Plans Not Approved by Security Holders
|
—
|
|
N/A
|
|
—
|
|
Total
|
—
|
|
—
|
|
1,266,716
|
|
(a)
|
Excludes the number of securities shown in the first column as to be issued upon exercise of outstanding options, warrants, and rights. The amount shown is comprised of: (i) 1,005,861 shares available for issuance under the long-term incentive plan in the form of options, rights, restricted stock units, performance share awards, and other grants as approved by the Executive Compensation Committee of the Company’s Board of Directors; (ii) 136,178 shares available for issuance under the Director Stock Plan as payment for a portion of the annual retainer payable to non-employee Directors; and (iii) 124,677 shares available for issuance under the ALLETE and Affiliated Companies Employee Stock Purchase Plan.
|
Exhibit Number
|
||||||
*4(b)1
|
—
|
|
Mortgage and Deed of Trust, dated as of March 1, 1943, between Superior Water, Light and Power Company and Chemical Bank & Trust Company and Howard B. Smith, as Trustees, both succeeded by U.S. Bank National Association, as Trustee (filed as Exhibit 7(c), File No. 2-8668).
|
|||
*4(b)2
|
—
|
|
Supplemental Indentures to Superior Water, Light and Power Company’s Mortgage and Deed of Trust:
|
|||
|
|
Number
|
Dated as of
|
Reference File
|
Exhibit
|
|
|
|
First
|
March 1, 1951
|
2-59690
|
2(d)(1)
|
|
|
|
Second
|
March 1, 1962
|
2-27794
|
2(d)1
|
|
|
|
Third
|
July 1, 1976
|
2-57478
|
2(e)1
|
|
|
|
Fourth
|
March 1, 1985
|
2-78641
|
4(b)
|
|
|
|
Fifth
|
December 1, 1992
|
1-3548 (1992 Form 10-K)
|
4(b)1
|
|
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
|
||||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
|
|
|
||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
Exhibit Number
|
||||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
Exhibit Number
|
||||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
101.INS
|
—
|
|
XBRL Instance
|
|||
101.SCH
|
—
|
|
XBRL Schema
|
|||
101.CAL
|
—
|
|
XBRL Calculation
|
|||
101.DEF
|
—
|
|
XBRL Definition
|
|||
101.LAB
|
—
|
|
XBRL Label
|
|||
101.PRE
|
—
|
|
XBRL Presentation
|
•
|
$38,995,000 original principal amount, of City of Cohasset, Minnesota, Variable Rate Demand Revenue Refunding Bonds (ALLETE, formerly Minnesota Power & Light Company, Project) Series 1997A ($13,500,000 remaining principal balance);
|
•
|
$27,800,000 of Collier County Industrial Development Authority, Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006;
|
•
|
$6,370,000 of City of Superior, Wisconsin, Collateralized Utility Revenue Refunding Bonds Series 2007A; and
|
•
|
$6,130,000 of City of Superior, Wisconsin, Collateralized Utility Revenue Bonds Series 2007B.
|
*
|
Incorporated herein by reference as indicated.
|
+
|
Management contract or compensatory plan or arrangement pursuant to Item 15(b).
|
|
|
ALLETE, Inc.
|
|
|
|
||
|
|
||
Dated:
|
February 15, 2018
|
By
|
/s/ Alan R. Hodnik
|
|
|
Alan R. Hodnik
|
|
|
|
Chairman, President, Chief Executive Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Alan R. Hodnik
|
|
Chairman, President, Chief Executive Officer and Director
|
|
February 15, 2018
|
Alan R. Hodnik
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Robert J. Adams
|
|
Senior Vice President and Chief Financial Officer
|
|
February 15, 2018
|
Robert J. Adams
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/ Steven W. Morris
|
|
Vice President, Controller and Chief Accounting Officer
|
|
February 15, 2018
|
Steven W. Morris
|
|
(Principal Accounting Officer)
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Kathryn W. Dindo
|
|
Director
|
|
February 15, 2018
|
Kathryn W. Dindo
|
|
|
|
|
|
|
|
|
|
/s/ Sidney W. Emery, Jr.
|
|
Director
|
|
February 15, 2018
|
Sidney W. Emery, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ George G. Goldfarb
|
|
Director
|
|
February 15, 2018
|
George G. Goldfarb
|
|
|
|
|
|
|
|
|
|
/s/ James S. Haines, Jr.
|
|
Director
|
|
February 15, 2018
|
James S. Haines, Jr.
|
|
|
|
|
|
|
|
|
|
/s/ James J. Hoolihan
|
|
Director
|
|
February 15, 2018
|
James J. Hoolihan
|
|
|
|
|
|
|
|
|
|
/s/ Heidi E. Jimmerson
|
|
Director
|
|
February 15, 2018
|
Heidi E. Jimmerson
|
|
|
|
|
|
|
|
|
|
/s/ Madeleine W. Ludlow
|
|
Director
|
|
February 15, 2018
|
Madeleine W. Ludlow
|
|
|
|
|
|
|
|
|
|
/s/ Susan K. Nestegard
|
|
Director
|
|
February 15, 2018
|
Susan K. Nestegard
|
|
|
|
|
|
|
|
|
|
/s/ Douglas C. Neve
|
|
Director
|
|
February 15, 2018
|
Douglas C. Neve
|
|
|
|
|
|
|
|
|
|
/s/ Robert P. Powers
|
|
Director
|
|
February 15, 2018
|
Robert P. Powers
|
|
|
|
|
|
|
|
|
|
/s/ Leonard C. Rodman
|
|
Director
|
|
February 15, 2018
|
Leonard C. Rodman
|
|
|
|
|
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Assets
|
|
|
||||
Current Assets
|
|
|
||||
Cash and Cash Equivalents
|
|
$98.9
|
|
|
$27.5
|
|
Accounts Receivable (Less Allowance of $2.1 and $3.1)
|
135.1
|
|
122.5
|
|
||
Inventories – Net
|
95.9
|
|
104.2
|
|
||
Prepayments and Other
|
37.6
|
|
40.3
|
|
||
Total Current Assets
|
367.5
|
|
294.5
|
|
||
Property, Plant and Equipment – Net
|
3,822.4
|
|
3,741.2
|
|
||
Regulatory Assets
|
384.7
|
|
330.1
|
|
||
Investment in ATC
|
118.7
|
|
135.6
|
|
||
Other Investments
|
53.1
|
|
55.6
|
|
||
Goodwill and Intangible Assets – Net
|
225.9
|
|
213.4
|
|
||
Other Non-Current Assets
|
107.7
|
|
106.5
|
|
||
Total Assets
|
|
$5,080.0
|
|
|
$4,876.9
|
|
Liabilities and Shareholders’ Equity
|
|
|
||||
Liabilities
|
|
|
||||
Current Liabilities
|
|
|
||||
Accounts Payable
|
|
$136.3
|
|
|
$74.0
|
|
Accrued Taxes
|
50.0
|
|
46.5
|
|
||
Accrued Interest
|
17.6
|
|
17.6
|
|
||
Long-Term Debt Due Within One Year
|
64.1
|
|
187.7
|
|
||
Other
|
83.2
|
|
73.7
|
|
||
Total Current Liabilities
|
351.2
|
|
399.5
|
|
||
Long-Term Debt
|
1,439.2
|
|
1,370.4
|
|
||
Deferred Income Taxes
|
230.5
|
|
554.6
|
|
||
Regulatory Liabilities
|
532.0
|
|
125.8
|
|
||
Defined Benefit Pension and Other Postretirement Benefit Plans
|
191.8
|
|
210.9
|
|
||
Other Non-Current Liabilities
|
267.1
|
|
322.7
|
|
||
Total Liabilities
|
3,011.8
|
|
2,983.9
|
|
||
Commitments, Guarantees and Contingencies (Note 11)
|
|
|
||||
Shareholders’ Equity
|
|
|
||||
Common Stock Without Par Value, 80.0 Shares Authorized, 51.1 and 49.6 Shares Issued and Outstanding
|
1,401.4
|
|
1,295.3
|
|
||
Accumulated Other Comprehensive Loss
|
(22.6
|
)
|
(28.2
|
)
|
||
Retained Earnings
|
689.4
|
|
625.9
|
|
||
Total Shareholders’ Equity
|
2,068.2
|
|
1,893.0
|
|
||
Total Liabilities and Shareholders’ Equity
|
|
$5,080.0
|
|
|
$4,876.9
|
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions Except Per Share Amounts
|
|
|
|
||||||
Operating Revenue
|
|
|
|
||||||
Utility
|
|
$1,063.8
|
|
|
$1,000.7
|
|
|
$991.2
|
|
Non-utility
|
355.5
|
|
339.0
|
|
495.2
|
|
|||
Total Operating Revenue
|
1,419.3
|
|
1,339.7
|
|
1,486.4
|
|
|||
Operating Expenses
|
|
|
|
||||||
Fuel, Purchased Power and Gas – Utility
|
396.9
|
|
339.9
|
|
336.0
|
|
|||
Transmission Services – Utility
|
71.2
|
|
65.2
|
|
54.1
|
|
|||
Cost of Sales – Non-utility
|
147.8
|
|
137.7
|
|
294.4
|
|
|||
Operating and Maintenance
|
339.9
|
|
334.1
|
|
333.5
|
|
|||
Depreciation and Amortization
|
177.5
|
|
195.8
|
|
170.0
|
|
|||
Taxes Other than Income Taxes
|
56.9
|
|
53.8
|
|
51.4
|
|
|||
Other
|
(0.7
|
)
|
(10.3
|
)
|
36.3
|
|
|||
Total Operating Expenses
|
1,189.5
|
|
1,116.2
|
|
1,275.7
|
|
|||
Operating Income
|
229.8
|
|
223.5
|
|
210.7
|
|
|||
Other Income (Expense)
|
|
|
|
||||||
Interest Expense
|
(67.8
|
)
|
(70.3
|
)
|
(64.9
|
)
|
|||
Equity Earnings in ATC
|
22.5
|
|
18.5
|
|
16.3
|
|
|||
Other
|
2.4
|
|
3.9
|
|
4.7
|
|
|||
Total Other Expense
|
(42.9
|
)
|
(47.9
|
)
|
(43.9
|
)
|
|||
Income Before Non-Controlling Interest and Income Taxes
|
186.9
|
|
175.6
|
|
166.8
|
|
|||
Income Tax Expense
|
14.7
|
|
19.8
|
|
25.3
|
|
|||
Net Income
|
172.2
|
|
155.8
|
|
141.5
|
|
|||
Less: Non-Controlling Interest in Subsidiaries
|
—
|
|
0.5
|
|
0.4
|
|
|||
Net Income Attributable to ALLETE
|
|
$172.2
|
|
|
$155.3
|
|
|
$141.1
|
|
Average Shares of Common Stock
|
|
|
|
||||||
Basic
|
50.8
|
|
49.3
|
|
48.3
|
|
|||
Diluted
|
51.0
|
|
49.5
|
|
48.4
|
|
|||
Basic Earnings Per Share of Common Stock
|
|
$3.39
|
|
|
$3.15
|
|
|
$2.92
|
|
Diluted Earnings Per Share of Common Stock
|
|
$3.38
|
|
|
$3.14
|
|
|
$2.92
|
|
Dividends Per Share of Common Stock
|
|
$2.14
|
|
|
$2.08
|
|
|
$2.02
|
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Net Income
|
|
$172.2
|
|
|
$155.8
|
|
|
$141.5
|
|
Other Comprehensive Income (Loss)
|
|
|
|
||||||
Unrealized Gain (Loss) on Securities
|
|
|
|
||||||
Net of Income Tax Expense (Benefit) of $0.7, $(0.2) and $(0.3)
|
0.9
|
|
(0.2
|
)
|
(0.5
|
)
|
|||
Unrealized Gain on Derivatives
|
|
|
|
||||||
Net of Income Tax Expense of $–, $– and $0.1
|
—
|
|
—
|
|
0.1
|
|
|||
Defined Benefit Pension and Other Postretirement Benefit Plans
|
|
|
|
||||||
Net of Income Tax Expense (Benefit) of $2.2, $(2.4) and $(2.2)
|
4.7
|
|
(3.5
|
)
|
(3.0
|
)
|
|||
Total Other Comprehensive Income (Loss)
|
5.6
|
|
(3.7
|
)
|
(3.4
|
)
|
|||
Total Comprehensive Income
|
177.8
|
|
152.1
|
|
138.1
|
|
|||
Less: Non-Controlling Interest in Subsidiaries
|
—
|
|
0.5
|
|
0.4
|
|
|||
Total Comprehensive Income Attributable to ALLETE
|
|
$177.8
|
|
|
$151.6
|
|
|
$137.7
|
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Operating Activities
|
|
|
|
||||||
Net Income
|
|
$172.2
|
|
|
$155.8
|
|
|
$141.5
|
|
AFUDC – Equity
|
(1.2
|
)
|
(2.1
|
)
|
(3.3
|
)
|
|||
Income from Equity Investments – Net of Dividends
|
(3.2
|
)
|
(5.7
|
)
|
(1.8
|
)
|
|||
Impairment of Real Estate
|
—
|
|
—
|
|
36.3
|
|
|||
Impairment of Goodwill
|
—
|
|
3.3
|
|
—
|
|
|||
Change in Fair Value of Contingent Consideration
|
(0.7
|
)
|
(13.6
|
)
|
—
|
|
|||
Deferred Fuel Adjustment Clause Charge
|
19.5
|
|
—
|
|
—
|
|
|||
Loss (Gain) on Sales of Investments and Property, Plant and Equipment
|
0.4
|
|
(6.0
|
)
|
(0.2
|
)
|
|||
Depreciation Expense
|
171.9
|
|
190.6
|
|
165.9
|
|
|||
Amortization of PSAs
|
(23.6
|
)
|
(22.3
|
)
|
(23.2
|
)
|
|||
Amortization of Other Intangible Assets and Other Assets
|
10.2
|
|
10.3
|
|
5.6
|
|
|||
Deferred Income Tax Expense
|
14.4
|
|
19.4
|
|
25.1
|
|
|||
Share-Based and ESOP Compensation Expense
|
6.6
|
|
5.1
|
|
11.6
|
|
|||
Defined Benefit Pension and Other Postretirement Benefit Expense
|
10.1
|
|
4.6
|
|
15.4
|
|
|||
Bad Debt Expense
|
0.8
|
|
4.1
|
|
1.6
|
|
|||
Provision for Interim Rate Refund
|
32.3
|
|
—
|
|
—
|
|
|||
Changes in Operating Assets and Liabilities
|
|
|
|
||||||
Accounts Receivable
|
(8.0
|
)
|
(4.7
|
)
|
1.1
|
|
|||
Inventories
|
11.9
|
|
13.3
|
|
(22.1
|
)
|
|||
Prepayments and Other
|
(5.3
|
)
|
(6.9
|
)
|
3.7
|
|
|||
Accounts Payable
|
(7.5
|
)
|
6.5
|
|
(19.3
|
)
|
|||
Other Current Liabilities
|
1.8
|
|
(13.8
|
)
|
5.1
|
|
|||
Cash Contributions to Defined Benefit Pension Plans
|
(1.7
|
)
|
(6.3
|
)
|
—
|
|
|||
Changes in Regulatory and Other Non-Current Assets
|
33.7
|
|
(10.7
|
)
|
0.6
|
|
|||
Changes in Regulatory and Other Non-Current Liabilities
|
(31.7
|
)
|
11.1
|
|
(3.5
|
)
|
|||
Cash from Operating Activities
|
402.9
|
|
332.0
|
|
340.1
|
|
|||
Investing Activities
|
|
|
|
||||||
Proceeds from Sale of Available-for-sale Securities
|
10.1
|
|
9.0
|
|
1.7
|
|
|||
Payments for Purchase of Available-for-sale Securities
|
(8.6
|
)
|
(9.4
|
)
|
(2.3
|
)
|
|||
Acquisitions of Subsidiaries – Net of Cash Acquired
|
(18.5
|
)
|
(5.9
|
)
|
(333.3
|
)
|
|||
Investment in ATC
|
(7.8
|
)
|
(5.4
|
)
|
(1.6
|
)
|
|||
Changes to Other Investments
|
3.0
|
|
4.4
|
|
3.1
|
|
|||
Additions to Property, Plant and Equipment
|
(208.5
|
)
|
(265.6
|
)
|
(286.8
|
)
|
|||
Proceeds from Sale of Property, Plant and Equipment
|
1.3
|
|
0.7
|
|
0.4
|
|
|||
Changes in Restricted Cash
|
—
|
|
(4.0
|
)
|
—
|
|
|||
Cash for Investing Activities
|
(229.0
|
)
|
(276.2
|
)
|
(618.8
|
)
|
|||
Financing Activities
|
|
|
|
||||||
Proceeds from Issuance of Common Stock
|
86.0
|
|
30.9
|
|
161.2
|
|
|||
Proceeds from Issuance of Long-Term Debt
|
131.5
|
|
4.8
|
|
324.5
|
|
|||
Changes in Restricted Cash
|
(0.4
|
)
|
7.0
|
|
8.5
|
|
|||
Changes in Notes Payable
|
—
|
|
(1.6
|
)
|
(2.1
|
)
|
|||
Repayments of Long-Term Debt
|
(189.6
|
)
|
(54.8
|
)
|
(160.2
|
)
|
|||
Acquisition of Non-Controlling Interest
|
—
|
|
(8.0
|
)
|
—
|
|
|||
Acquisition-Related Contingent Consideration Payments
|
(19.7
|
)
|
(0.9
|
)
|
—
|
|
|||
Dividends on Common Stock
|
(108.7
|
)
|
(102.7
|
)
|
(97.9
|
)
|
|||
Other Financing Activities
|
(1.6
|
)
|
—
|
|
(4.1
|
)
|
|||
Cash from (for) Financing Activities
|
(102.5
|
)
|
(125.3
|
)
|
229.9
|
|
|||
Change in Cash and Cash Equivalents
|
71.4
|
|
(69.5
|
)
|
(48.8
|
)
|
|||
Cash and Cash Equivalents at Beginning of Period
|
27.5
|
|
97.0
|
|
145.8
|
|
|||
Cash and Cash Equivalents at End of Period
|
|
$98.9
|
|
|
$27.5
|
|
|
$97.0
|
|
|
Total
Equity
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Unearned
ESOP
Shares
|
Common
Stock
|
Non-Controlling Interest in Subsidiaries
|
||||||||||
Millions
|
|
|
|
|
|
|
||||||||||
Balance as of December 31, 2014
|
|
$1,611.2
|
|
|
$530.1
|
|
$(21.1)
|
$(7.2)
|
|
$1,107.6
|
|
|
$1.8
|
|
||
Comprehensive Income
|
|
|
|
|
|
|
||||||||||
Net Income
|
141.5
|
|
141.1
|
|
—
|
|
—
|
|
—
|
|
0.4
|
|
||||
Other Comprehensive Income – Net of Tax
|
|
|
|
|
|
|
||||||||||
Unrealized Loss on Securities
|
(0.5
|
)
|
—
|
|
(0.5
|
)
|
—
|
|
—
|
|
—
|
|
||||
Unrealized Gain on Derivatives
|
0.1
|
|
—
|
|
0.1
|
|
—
|
|
—
|
|
—
|
|
||||
Defined Benefit Pension and Other Postretirement Plans
|
(3.0
|
)
|
—
|
|
(3.0
|
)
|
—
|
|
—
|
|
—
|
|
||||
Total Comprehensive Income
|
138.1
|
|
|
|
|
|
|
|||||||||
Common Stock Issued
|
163.8
|
|
—
|
|
—
|
|
—
|
|
163.8
|
|
—
|
|
||||
Dividends Declared
|
(97.9
|
)
|
(97.9
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
ESOP Shares Earned
|
7.2
|
|
—
|
|
—
|
|
7.2
|
|
—
|
|
—
|
|
||||
Balance as of December 31, 2015
|
1,822.4
|
|
573.3
|
|
(24.5
|
)
|
—
|
|
1,271.4
|
|
2.2
|
|
||||
Comprehensive Income
|
|
|
|
|
|
|
||||||||||
Net Income
|
155.8
|
|
155.3
|
|
—
|
|
—
|
|
—
|
|
0.5
|
|
||||
Other Comprehensive Income – Net of Tax
|
|
|
|
|
|
|
||||||||||
Unrealized Loss on Securities
|
(0.2
|
)
|
—
|
|
(0.2
|
)
|
—
|
|
—
|
|
—
|
|
||||
Defined Benefit Pension and Other Postretirement Plans
|
(3.5
|
)
|
—
|
|
(3.5
|
)
|
—
|
|
—
|
|
—
|
|
||||
Total Comprehensive Income
|
152.1
|
|
|
|
|
|
|
|||||||||
Common Stock Issued
|
35.9
|
|
—
|
|
—
|
|
—
|
|
35.9
|
|
—
|
|
||||
Common Stock Retired
|
(8.0
|
)
|
—
|
|
—
|
|
—
|
|
(8.0
|
)
|
—
|
|
||||
Dividends Declared
|
(102.7
|
)
|
(102.7
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Acquisition of Non-Controlling Interest
|
(6.7
|
)
|
—
|
|
—
|
|
—
|
|
(4.0
|
)
|
(2.7
|
)
|
||||
Balance as of December 31, 2016
|
1,893.0
|
|
625.9
|
|
(28.2
|
)
|
—
|
|
1,295.3
|
|
—
|
|
||||
Comprehensive Income
|
|
|
|
|
|
|
||||||||||
Net Income
|
172.2
|
|
172.2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Other Comprehensive Income – Net of Tax
|
|
|
|
|
|
|
||||||||||
Unrealized Gain on Securities
|
0.9
|
|
—
|
|
0.9
|
|
—
|
|
—
|
|
—
|
|
||||
Defined Benefit Pension and Other Postretirement Plans
|
4.7
|
|
—
|
|
4.7
|
|
—
|
|
—
|
|
—
|
|
||||
Total Comprehensive Income
|
177.8
|
|
|
|
|
|
|
|||||||||
Common Stock Issued
|
106.1
|
|
—
|
|
—
|
|
—
|
|
106.1
|
|
—
|
|
||||
Dividends Declared
|
(108.7
|
)
|
(108.7
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Balance as of December 31, 2017
|
|
$2,068.2
|
|
|
$689.4
|
|
$(22.6)
|
—
|
|
|
$1,401.4
|
|
—
|
|
Consolidated Statement of Cash Flows
|
|
|
|
||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Cash Paid During the Period for Interest – Net of Amounts Capitalized
|
|
$64.5
|
|
|
$68.2
|
|
|
$59.0
|
|
Cash Paid During the Period for Income Taxes
|
|
$0.4
|
|
|
$0.5
|
|
|
$0.4
|
|
Remeasurement of Deferred Income Taxes Resulting from the TCJA
|
|
|
|
||||||
Increase in Regulatory Assets
|
|
$80.9
|
|
—
|
|
—
|
|
||
Decrease in Investment in ATC
|
$(27.9)
|
—
|
|
—
|
|
||||
Decrease in Deferred Income Taxes
|
$(353.6)
|
—
|
|
—
|
|
||||
Increase in Regulatory Liabilities
|
|
$393.6
|
|
—
|
|
—
|
|
||
Noncash Investing and Financing Activities
|
|
|
|
||||||
Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant and Equipment
|
$67.2
|
$(22.0)
|
$(40.6)
|
||||||
Capitalized Asset Retirement Costs
|
$(15.6)
|
|
$3.7
|
|
$12.4
|
||||
Camp Ripley Solar Financing
|
—
|
|
$15.0
|
—
|
|
||||
AFUDC–Equity
|
|
$1.2
|
|
|
$2.1
|
|
|
$3.3
|
|
ALLETE Common Stock Contributed to Pension Plans
|
|
$13.5
|
|
—
|
|
—
|
|
||
Contingent Consideration
|
—
|
|
—
|
|
|
$35.7
|
|
||
ALLETE Common Stock Received for Land Inventory
|
—
|
|
|
$8.0
|
|
—
|
|
||
Long-Term Finance Receivable for Land Inventory
|
—
|
|
|
$12.0
|
|
—
|
|
Accounts Receivable
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
Trade Accounts Receivable
|
|
|
|
||||
Billed
|
|
$112.6
|
|
|
|
$106.5
|
|
Unbilled
|
24.6
|
|
|
19.1
|
|
||
Less: Allowance for Doubtful Accounts
|
2.1
|
|
|
3.1
|
|
||
Total Accounts Receivable
|
|
$135.1
|
|
|
|
$122.5
|
|
Inventories – Net
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
Fuel
(a)
|
|
$34.8
|
|
|
|
$43.9
|
|
Materials and Supplies
|
46.5
|
|
|
48.7
|
|
||
Raw Materials
|
2.8
|
|
|
2.9
|
|
||
Work in Progress
|
4.2
|
|
|
1.0
|
|
||
Finished Goods
|
8.3
|
|
|
8.6
|
|
||
Reserve for Obsolescence
|
(0.7
|
)
|
|
(0.9
|
)
|
||
Total Inventories – Net
|
|
$95.9
|
|
|
|
$104.2
|
|
(a)
|
Fuel consists primarily of coal inventory at Minnesota Power.
|
Prepayments and Other Current Assets
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
Deferred Fuel Adjustment Clause
(a)
|
—
|
|
|
|
$18.6
|
|
|
Restricted Cash
(b)
|
|
$2.6
|
|
|
2.2
|
|
|
Other
|
35.0
|
|
|
19.5
|
|
||
Total Prepayments and Other Current Assets
|
|
$37.6
|
|
|
|
$40.3
|
|
(a)
|
At a hearing on January 18, 2018, the MPUC disallowed recovery of Minnesota Power’s regulatory asset for deferred fuel adjustment clause costs resulting in a
$19.5 million
pre-tax charge to Fuel, Purchased Power and Gas – Utility in 2017.
|
(b)
|
Restricted Cash includes collateral deposits required under an ALLETE Clean Energy loan agreement and collateral deposits required for U.S. Water Services’ standby letters of credit.
|
Other Non-Current Assets
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
Contract Payment
(a)
|
|
$27.5
|
|
|
|
$29.6
|
|
Finance Receivable
(b)
|
11.0
|
|
|
11.5
|
|
||
Restricted Cash
(c)
|
8.6
|
|
|
8.6
|
|
||
Other
|
60.6
|
|
|
56.8
|
|
||
Total Other Non-Current Assets
|
|
$107.7
|
|
|
|
$106.5
|
|
(a)
|
Contract Payment includes a payment made to Cliffs as part of a long-term PSA between Minnesota Power and Silver Bay Power. The contract payment is being amortized over the term of the PSA. (See Note 11. Commitments, Guarantees and Contingencies.)
|
(b)
|
In 2016, ALLETE Properties sold its Ormond Crossings project and Lake Swamp wetland mitigation bank for consideration of approximately
$21 million
. The consideration included a down payment in the form of
0.1 million
shares of ALLETE common stock with a value of
$8.0 million
. The remaining purchase price will be paid under the terms of a finance receivable due over a
five
-year period which bears interest at market rates and is collateralized by the property sold.
|
(c)
|
Restricted Cash includes collateral deposits required under an ALLETE Clean Energy loan agreement and PSAs, and deposits from SWL&P customers in aid of future capital expenditures.
|
Other Current Liabilities
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
PSAs
|
|
$24.5
|
|
|
|
$24.6
|
|
Other
|
58.7
|
|
|
49.1
|
|
||
Total Other Current Liabilities
|
|
$83.2
|
|
|
|
$73.7
|
|
Other Non-Current Liabilities
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
Asset Retirement Obligation
|
|
$122.7
|
|
|
|
$136.6
|
|
PSAs
|
89.5
|
|
|
113.8
|
|
||
Contingent Consideration
(a)
|
5.4
|
|
|
25.0
|
|
||
Other
|
49.5
|
|
|
47.3
|
|
||
Total Other Non-Current Liabilities
|
|
$267.1
|
|
|
|
$322.7
|
|
(a)
|
Contingent Consideration relates to the estimated fair value of the earnings-based payment resulting from the U.S. Water Services acquisition. (See Note 6. Acquisitions and Note 9. Fair Value.)
|
Operating Expenses – Other
|
|
|
|
|||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
||
Millions
|
|
|
|
|||||
Impairment of Real Estate
(a)
|
—
|
|
—
|
|
|
$36.3
|
|
|
Impairment of Goodwill
(b)
|
—
|
|
|
$3.3
|
|
—
|
|
|
Change in Fair Value of Contingent Consideration
(c)
|
$(0.7)
|
(13.6
|
)
|
—
|
|
|||
Total Operating Expenses – Other
|
$(0.7)
|
$(10.3)
|
|
$36.3
|
|
(a)
|
See Impairment of Long-Lived Assets.
|
(b)
|
See Goodwill and Intangible Assets.
|
(c)
|
See Note 9. Fair Value.
|
Property, Plant and Equipment
|
|
|
|
||||
As of December 31
|
2017
|
|
|
2016
|
|
||
Millions
|
|
|
|
||||
Regulated Operations
|
|
|
|
||||
Property, Plant and Equipment in Service
|
|
$4,523.7
|
|
|
|
$4,437.0
|
|
Construction Work in Progress
|
121.6
|
|
|
84.2
|
|
||
Accumulated Depreciation
|
(1,520.5
|
)
|
|
(1,426.1
|
)
|
||
Regulated Operations – Net
|
3,124.8
|
|
|
3,095.1
|
|
||
ALLETE Clean Energy
|
|
|
|
||||
Property, Plant and Equipment in Service
|
482.5
|
|
|
472.3
|
|
||
Construction Work in Progress
|
144.9
|
|
|
101.0
|
|
||
Accumulated Depreciation
|
(60.8
|
)
|
|
(41.0
|
)
|
||
ALLETE Clean Energy – Net
|
566.6
|
|
|
532.3
|
|
||
U.S. Water Services
|
|
|
|
||||
Property, Plant and Equipment in Service
|
24.8
|
|
|
19.5
|
|
||
Accumulated Depreciation
|
(10.4
|
)
|
|
(6.9
|
)
|
||
U.S. Water Services – Net
|
14.4
|
|
|
12.6
|
|
||
Corporate and Other
(a)
|
|
|
|
||||
Property, Plant and Equipment in Service
|
204.7
|
|
|
179.8
|
|
||
Construction Work in Progress
|
5.0
|
|
|
2.8
|
|
||
Accumulated Depreciation
|
(93.1
|
)
|
|
(81.4
|
)
|
||
Corporate and Other – Net
|
116.6
|
|
|
101.2
|
|
||
Property, Plant and Equipment – Net
|
|
$3,822.4
|
|
|
|
$3,741.2
|
|
(a)
|
Primarily includes BNI Energy and a small amount of non-rate base generation.
|
(a)
|
ALLETE Clean Energy’s Property, Plant and Equipment consists primarily of WTGs with estimated useful lives ranging from 30 years to 35 years.
|
Asset Retirement Obligations
|
|
|
||
Millions
|
|
|
||
Obligation as of December 31, 2015
|
|
|
$131.4
|
|
Accretion
|
|
8.0
|
|
|
Liabilities Settled
|
|
(6.5
|
)
|
|
Revisions in Estimated Cash Flows
|
|
3.7
|
|
|
Obligation as of December 31, 2016
|
|
136.6
|
|
|
Accretion
|
|
7.6
|
|
|
Liabilities Settled
|
|
(5.9
|
)
|
|
Revisions in Estimated Cash Flows
|
|
(15.6
|
)
|
|
Obligation as of December 31, 2017
|
|
|
$122.7
|
|
Regulated Utility Plant
|
Plant in Service
|
Accumulated Depreciation
|
Construction Work in Progress
|
% Ownership
|
||||||
Millions
|
|
|
|
|
||||||
As of December 31, 2017
|
|
|
|
|
||||||
Boswell Unit 4
|
|
$668.2
|
|
|
$222.8
|
|
|
$8.2
|
|
80
|
CapX2020 Projects
|
101.0
|
|
8.4
|
|
—
|
|
9.3 - 14.7
|
|||
Total
|
|
$769.2
|
|
|
$231.2
|
|
|
$8.2
|
|
|
As of December 31, 2016
|
|
|
|
|
||||||
Boswell Unit 4
|
|
$668.1
|
|
|
$211.2
|
|
|
$8.1
|
|
80
|
CapX2020 Projects
|
101.2
|
|
5.9
|
|
—
|
|
9.3 - 14.7
|
|||
Total
|
|
$769.3
|
|
|
$217.1
|
|
|
$8.1
|
|
|
Regulatory Assets and Liabilities
|
|
|
||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Current Regulatory Assets
(a)
|
|
|
||||
Deferred Fuel Adjustment Clause
|
—
|
|
|
$18.6
|
|
|
Non-Current Regulatory Assets
|
|
|
||||
Defined Benefit Pension and Other Postretirement Benefit Plans
(b)
|
$220.3
|
226.1
|
|
|||
Income Taxes
(c)(d)
|
112.8
|
|
33.8
|
|
||
Asset Retirement Obligations
(e)
|
29.6
|
|
26.0
|
|
||
Manufactured Gas Plant
(f)
|
8.1
|
|
1.0
|
|
||
PPACA Income Tax Deferral
|
5.0
|
|
5.0
|
|
||
Conservation Improvement Program
(g)
|
3.3
|
|
4.0
|
|
||
Cost Recovery Riders
(h)
|
—
|
|
30.5
|
|
||
Other
|
5.6
|
|
3.7
|
|
||
Total Non-Current Regulatory Assets
|
384.7
|
|
330.1
|
|
||
Total Regulatory Assets
|
|
$384.7
|
|
|
$348.7
|
|
Non-Current Regulatory Liabilities
|
|
|
||||
Income Taxes
(d)
|
|
$411.2
|
|
|
$19.1
|
|
Wholesale and Retail Contra AFUDC
(i)
|
57.9
|
|
56.8
|
|
||
Provision for Interim Rate Refund
(j)
|
23.7
|
|
—
|
|
||
Plant Removal Obligations
|
20.3
|
|
19.1
|
|
||
North Dakota Investment Tax Credits
(k)
|
14.1
|
|
28.2
|
|
||
Cost Recovery Riders
(h)
|
2.2
|
|
—
|
|
||
Other
|
2.6
|
|
2.6
|
|
||
Total Non-Current Regulatory Liabilities
|
|
$532.0
|
|
|
$125.8
|
|
(a)
|
Current regulatory assets are presented within Prepayments and Other on the Consolidated Balance Sheet. At a hearing on January 18, 2018, the MPUC disallowed recovery of Minnesota Power’s regulatory asset for deferred fuel adjustment clause costs resulting in a
$19.5 million
pre-tax charge to Fuel, Purchased Power and Gas – Utility in 2017. (See 2016 Minnesota General Rate Case.)
|
(b)
|
Defined benefit pension and other postretirement items included in our Regulated Operations, which are otherwise required to be recognized in accumulated other comprehensive income as actuarial gains and losses as well as prior service costs and credits, are recognized as regulatory assets or regulatory liabilities on the Consolidated Balance Sheet. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. (See Note 15. Pension and Other Postretirement Benefit Plans.)
|
(c)
|
See Note 1. Operations and Significant Accounting Policies – Revision of Prior Balance Sheet.
|
(d)
|
These costs represent the difference between deferred income taxes recognized for financial reporting purposes and amounts previously billed to our customers. The increase in 2017 is primarily due to the remeasurement of deferred income tax assets and liabilities for our Regulated Operations resulting from the TCJA. The benefits of the TCJA for Minnesota Power and SWL&P are expected to be passed back to customers over time primarily based upon the normalization provisions of the U.S. Internal Revenue Code over the life of the related property, plant and equipment with the remainder passed back based upon the determinations of regulatory authorities. (See Note 1. Operations and Significant Accounting Policies, and Tax Cuts and Jobs Act of 2017.) The balances not related to remeasurement will decrease over the remaining life of the related temporary differences and flow through current income taxes.
|
(e)
|
Asset retirement obligations will accrete and be amortized over the lives of the related property with asset retirement obligations.
|
(f)
|
The manufactured gas plant regulatory asset represents costs of remediation for a former manufactured gas plant site located in Superior, Wisconsin, and formerly operated by SWL&P. We expect recovery of these remediation costs to be allowed by the PSCW in rates over time.
|
(g)
|
The conservation improvement program regulatory asset represents CIP expenditures, any financial incentive earned for cost-effective program achievements and a carrying charge deferred for future cost recovery over the next year following MPUC approval.
|
(h)
|
The cost recovery rider regulatory assets and liabilities are revenues not yet collected from our customers and cash collections from our customers in excess of the revenue recognized, respectively, primarily due to capital expenditures related to Bison, investment in CapX2020 projects, the Boswell Unit 4 environmental upgrade and the GNTL, and are recognized in accordance with the accounting standards for alternative revenue programs. The cost recovery rider regulatory assets and liabilities as of
December 31, 2017
, will be recovered or returned within the next two years.
|
(i)
|
Wholesale and Retail Contra AFUDC represents amortization to offset AFUDC Equity and Debt recorded during the construction period of our cost recovery rider projects prior to placing the projects in service. The regulatory liability will decrease over the remaining depreciable life of the related asset.
|
(j)
|
This amount is expected to be refunded to Minnesota Power’s regulated retail customers in the first quarter of 2019 and includes
$8.6 million
of EITE discounts that will be offset against interim rate refunds. (See 2016 Minnesota General Rate Case and Energy-Intensive Trade‑Exposed Customer Rates.)
|
(k)
|
North Dakota investment tax credits expected to be realized from Bison that will be credited to Minnesota Power’s regulated retail customers through future renewable cost recovery rider fillings as the tax credits are utilized.
|
ALLETE’s Investment in ATC
|
|
|
||||
Year Ended December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Equity Investment Beginning Balance
|
|
$135.6
|
|
|
$124.5
|
|
Cash Investments
|
7.8
|
|
5.4
|
|
||
Equity in ATC Earnings
|
22.5
|
|
18.5
|
|
||
Distributed ATC Earnings
|
(19.3
|
)
|
(12.8
|
)
|
||
Remeasurement of Deferred Income Taxes
(a)
|
(27.9
|
)
|
—
|
|
||
Equity Investment Ending Balance
|
|
$118.7
|
|
|
$135.6
|
|
(a)
|
Impact of the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 1. Operations and Significant Accounting Policies.)
|
ATC Summarized Financial Data
|
|
|
||||
Balance Sheet Data
|
|
|
||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Current Assets
|
|
$87.7
|
|
|
$75.8
|
|
Non-Current Assets
|
4,598.9
|
|
4,312.9
|
|
||
Total Assets
|
|
$4,686.6
|
|
|
$4,388.7
|
|
Current Liabilities
|
|
$767.2
|
|
|
$495.1
|
|
Long-Term Debt
|
1,790.6
|
|
1,865.3
|
|
||
Other Non-Current Liabilities
|
240.3
|
|
271.5
|
|
||
Members’ Equity
|
1,888.5
|
|
1,756.8
|
|
||
Total Liabilities and Members’ Equity
|
|
$4,686.6
|
|
|
$4,388.7
|
|
Income Statement Data
|
|
|
|
||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Revenue
|
|
$721.6
|
|
|
$650.8
|
|
|
$615.8
|
|
Operating Expense
|
344.9
|
|
322.5
|
|
319.3
|
|
|||
Other Expense
|
104.1
|
|
95.5
|
|
96.1
|
|
|||
Net Income
|
|
$272.6
|
|
|
$232.8
|
|
|
$200.4
|
|
ALLETE’s Equity in Net Income
|
|
$22.5
|
|
|
$18.5
|
|
|
$16.3
|
|
Millions
|
|
||
Assets Acquired
|
|
||
Accounts Receivable
|
$5.1
|
||
Other Current Assets
|
5.1
|
|
|
Trade Names
(a)
|
0.9
|
|
|
Goodwill
(a)(b)
|
16.9
|
|
|
Other Non-Current Assets
|
0.2
|
|
|
Total Assets Acquired
|
|
$28.2
|
|
Liabilities Assumed
|
|
||
Current Liabilities
|
|
$9.0
|
|
Total Liabilities Assumed
|
|
$9.0
|
|
Net Identifiable Assets Acquired
|
|
$19.2
|
|
(b)
|
Recognized goodwill is attributable to the assembled workforce and anticipated synergies. For tax purposes, the purchase price allocation resulted in
$4.1 million
of deductible goodwill.
|
Millions
|
|
||
Assets Acquired
|
|
||
Cash and Cash Equivalents
|
|
$0.1
|
|
Other Current Assets
|
1.0
|
|
|
Customer Relationships
(a)
|
2.8
|
|
|
Goodwill
(a)(b)
|
4.2
|
|
|
Other Non-Current Assets
|
0.1
|
|
|
Total Assets Acquired
|
|
$8.2
|
|
Liabilities Assumed
|
|
||
Current Liabilities
|
|
$0.3
|
|
Non-Current Liabilities
|
1.2
|
|
|
Total Liabilities Assumed
|
|
$1.5
|
|
Net Identifiable Assets Acquired
|
|
$6.7
|
|
(a)
|
Presented within Goodwill and Intangible Assets – Net on the Consolidated Balance Sheet. (See Note 7. Goodwill and Intangible Assets.)
|
(b)
|
For tax purposes, the purchase price allocation resulted in
no
allocation to goodwill.
|
Millions
|
|
||
Assets Acquired
|
|
||
Cash and Cash Equivalents
|
|
$0.9
|
|
Accounts Receivable
|
16.8
|
|
|
Inventories
(a)
|
13.4
|
|
|
Other Current Assets
(b)
|
5.3
|
|
|
Property, Plant and Equipment
|
10.6
|
|
|
Intangible Assets
(c)
|
83.0
|
|
|
Goodwill
(d)
|
122.9
|
|
|
Other Non-Current Assets
|
0.2
|
|
|
Total Assets Acquired
|
|
$253.1
|
|
Liabilities Assumed
|
|
||
Current Liabilities
|
|
$19.2
|
|
Non-Current Liabilities
|
31.6
|
|
|
Total Liabilities Assumed
|
|
$50.8
|
|
Net Identifiable Assets Acquired
|
|
$202.3
|
|
(a)
|
Included in Inventories was
$2.7 million
of fair value adjustments relating to work in progress and finished goods inventories which were recognized as Cost of Sales within one year from the acquisition date.
|
(b)
|
Included in Other Current Assets was
$1.6 million
relating to the fair value of sales backlog. Sales backlog was recognized as Cost of Sales within one year from the acquisition date. Also included in Other Current Assets was restricted cash of
$2.1 million
relating to cash pledged as collateral for standby letters of credit.
|
(c)
|
Intangible Assets include customer relationships, patents, non-compete agreements, and trademarks and trade names. (See Note 7. Goodwill and Intangible Assets.)
|
(d)
|
For tax purposes, the purchase price allocation resulted in
$2.9 million
of deductible goodwill.
|
Millions
|
|
||
Assets Acquired
|
|
||
Current Assets
|
|
$4.8
|
|
Property, Plant and Equipment
|
103.0
|
|
|
Other Non-Current Assets
(a)
|
1.0
|
|
|
Total Assets Acquired
|
|
$108.8
|
|
Liabilities Assumed
|
|
||
Current Liabilities
(b)
|
|
$6.7
|
|
PSAs
|
49.0
|
|
|
Non-Current Liabilities
|
5.1
|
|
|
Total Liabilities Assumed
|
|
$60.8
|
|
Net Identifiable Assets Acquired
|
|
$48.0
|
|
(a)
|
Included in Other Non-Current Assets was
$0.3 million
of goodwill. For tax purposes, the purchase price allocation resulted in
no
allocation to goodwill.
|
(b)
|
Current Liabilities included
$5.9 million
related to the current portion of PSAs.
|
Millions
|
|
||
Assets Acquired
|
|
||
Current Assets
(a)
|
|
$9.0
|
|
Property, Plant and Equipment
|
156.2
|
|
|
Other Non-Current Assets
(b)
|
14.4
|
|
|
Total Assets Acquired
|
|
$179.6
|
|
Liabilities Assumed
|
|
||
Current Liabilities
|
|
$2.9
|
|
Long-Term Debt Due Within One Year
|
5.9
|
|
|
Long-Term Debt
|
55.0
|
|
|
Other Non-Current Liabilities
|
4.7
|
|
|
Total Liabilities Assumed
|
|
$68.5
|
|
Net Identifiable Assets Acquired
|
|
$111.1
|
|
(a)
|
Included in Current Assets was
$1.0 million
related to the current portion of PSAs and
$6.0 million
of restricted cash related to collateral deposits required under its loan agreement.
|
(b)
|
Included in Other Non-Current Assets was
$8.2 million
related to the non-current portion of PSAs,
$6.1 million
of restricted cash related to collateral deposits required under its loan agreements and an
immaterial
amount of goodwill. For tax purposes, the purchase price allocation resulted in
no
allocation to goodwill.
|
Millions
|
|
||
Assets Acquired
|
|
||
Current Assets
|
|
$1.0
|
|
Property, Plant and Equipment
|
0.1
|
|
|
Intangible Assets
(a)
|
3.9
|
|
|
Goodwill
(b)
|
4.4
|
|
|
Total Assets Acquired
|
|
$9.4
|
|
Liabilities Assumed
|
|
||
Current Liabilities
|
|
$0.1
|
|
Total Liabilities Assumed
|
|
$0.1
|
|
Net Identifiable Assets Acquired
|
|
$9.3
|
|
(a)
|
Intangible Assets include customer relationships and non-compete agreements. (See Note 7. Goodwill and Intangible Assets.)
|
(b)
|
For tax purposes, the purchase price allocation resulted in
$4.4 million
of deductible goodwill.
|
|
ALLETE Clean Energy
|
|
|
U.S. Water Services
|
|
|
Total
|
|
|||
Millions
|
|
|
|
|
|
||||||
Balance as of December 31, 2015
|
|
$3.3
|
|
|
|
$127.3
|
|
|
|
$130.6
|
|
Acquired Goodwill
(a)
|
—
|
|
|
3.9
|
|
|
3.9
|
|
|||
Impairment Charge
(b)
|
(3.3
|
)
|
|
—
|
|
|
(3.3
|
)
|
|||
Balance as of December 31, 2016
|
—
|
|
|
131.2
|
|
|
131.2
|
|
|||
Acquired Goodwill
(a)
|
—
|
|
|
16.9
|
|
|
16.9
|
|
|||
Other Adjustments
(c)
|
—
|
|
|
0.2
|
|
|
0.2
|
|
|||
Balance as of December 31, 2017
|
—
|
|
|
|
$148.3
|
|
|
|
$148.3
|
|
(a)
|
See Note 6. Acquisitions.
|
(b)
|
The facts and circumstances that led to an impairment of ALLETE Clean Energy’s goodwill primarily relate to lower estimated energy prices in periods not under PSAs. Impairment Charge is included in Operating Expenses – Other on the Consolidated Statement of Income. (See Note 1. Operations and Significant Accounting Policies.) ALLETE Clean Energy’s goodwill was primarily related to the acquisition of Storm Lake II in 2014.
|
(c)
|
Finalization of purchase price accounting for U.S. Water Services’ acquisition of WEST was completed in 2017 resulting in an adjustment to the goodwill recorded at the time of the initial acquisition.
|
|
December 31,
2016 |
|
|
Additions
(a)
|
|
Amortization
|
|
December 31,
2017 |
|
||||
Millions
|
|
|
|
|
|
|
|
||||||
Intangible Assets
|
|
|
|
|
|
|
|
||||||
Definite-Lived Intangible Assets
|
|
|
|
|
|
|
|
||||||
Customer Relationships
|
|
$59.3
|
|
|
—
|
|
|
$(4.6)
|
|
|
$54.7
|
|
|
Developed Technology and Other
(b)
|
6.3
|
|
|
|
$0.9
|
|
|
(0.9)
|
|
6.3
|
|
||
Total Definite-Lived Intangible Assets
|
65.6
|
|
|
0.9
|
|
|
(5.5)
|
|
61.0
|
|
|||
Indefinite-Lived Intangible Assets
|
|
|
|
|
|
|
|
||||||
Trademarks and Trade Names
|
16.6
|
|
|
—
|
|
|
n/a
|
|
16.6
|
|
|||
Total Intangible Assets
|
|
$82.2
|
|
|
|
$0.9
|
|
|
$(5.5)
|
|
|
$77.6
|
|
(a)
|
Additions resulting from the September 1, 2017, acquisition of Tonka Water. (See Note 6. Acquisitions.)
|
(b)
|
Developed Technology and Other includes patents, non-compete agreements, land easements and trade names with finite lives.
|
Other Investments
|
|
|
||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
ALLETE Properties
|
|
$26.4
|
|
|
$31.7
|
|
Available-for-sale Securities
(a)
|
19.1
|
|
18.8
|
|
||
Cash Equivalents
|
3.8
|
|
1.3
|
|
||
Other
|
3.8
|
|
3.8
|
|
||
Total Other Investments
|
|
$53.1
|
|
|
$55.6
|
|
(a)
|
As of
December 31, 2017
, the aggregate amount of available-for-sale corporate and governmental debt securities maturing in one year or less was
$0.7 million
, in one year to less than three years was
$3.2 million
, in three years to less than five years was
$3.6 million
, and in five or more years was
$1.4 million
.
|
|
Fair Value as of December 31, 2017
|
||||||||||||||
Recurring Fair Value Measures
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
||||
Millions
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Investments
(a)
|
|
|
|
|
|
|
|
||||||||
Available-for-sale – Equity Securities
|
|
$10.2
|
|
|
—
|
|
|
—
|
|
|
|
$10.2
|
|
||
Available-for-sale – Corporate and Governmental Debt Securities
|
—
|
|
|
|
$8.9
|
|
|
—
|
|
|
8.9
|
|
|||
Cash Equivalents
|
3.8
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
||||
Total Fair Value of Assets
|
|
$14.0
|
|
|
|
$8.9
|
|
|
—
|
|
|
|
$22.9
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
(b)
|
|
|
|
|
|
|
|
||||||||
Deferred Compensation
|
—
|
|
|
|
$18.2
|
|
|
—
|
|
|
|
$18.2
|
|
||
U.S. Water Services Contingent Consideration
|
—
|
|
|
—
|
|
|
|
$5.4
|
|
|
5.4
|
|
|||
Total Fair Value of Liabilities
|
—
|
|
|
|
$18.2
|
|
|
|
$5.4
|
|
|
|
$23.6
|
|
|
Total Net Fair Value of Assets (Liabilities)
|
|
$14.0
|
|
|
$(9.3)
|
|
$(5.4)
|
|
$(0.7)
|
(a)
|
Included in Other Investments on the Consolidated Balance Sheet.
|
(b)
|
Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.
|
|
Fair Value as of December 31, 2016
|
||||||||||||||
Recurring Fair Value Measures
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
||||
Millions
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Investments
(a)
|
|
|
|
|
|
|
|
||||||||
Available-for-sale – Equity Securities
|
|
$7.1
|
|
|
—
|
|
|
—
|
|
|
|
$7.1
|
|
||
Available-for-sale – Corporate and Governmental Debt Securities
|
—
|
|
|
|
$11.7
|
|
|
—
|
|
|
11.7
|
|
|||
Cash Equivalents
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
||||
Total Fair Value of Assets
|
|
$8.4
|
|
|
|
$11.7
|
|
|
—
|
|
|
|
$20.1
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities:
(b)
|
|
|
|
|
|
|
|
||||||||
Deferred Compensation
|
—
|
|
|
|
$16.0
|
|
|
—
|
|
|
|
$16.0
|
|
||
U.S. Water Services Contingent Consideration
|
—
|
|
|
—
|
|
|
|
$25.0
|
|
|
25.0
|
|
|||
Total Fair Value of Liabilities
|
—
|
|
|
|
$16.0
|
|
|
|
$25.0
|
|
|
|
$41.0
|
|
|
Total Net Fair Value of Assets (Liabilities)
|
|
$8.4
|
|
|
$(4.3)
|
|
$(25.0)
|
|
$(20.9)
|
(a)
|
Included in Other Investments on the Consolidated Balance Sheet.
|
(b)
|
Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.
|
Recurring Fair Value Measures
|
|
||
Activity in Level 3
|
|
||
Millions
|
|
||
Balance as of December 31, 2015
|
|
$36.6
|
|
Accretion
(a)
|
2.8
|
|
|
Payments
|
(0.8
|
)
|
|
Changes in Cash Flow Projections
(b)
|
(13.6
|
)
|
|
Balance as of December 31, 2016
|
|
$25.0
|
|
Accretion
(a)
|
0.8
|
|
|
Payments
(c)
|
(19.7
|
)
|
|
Changes in Cash Flow Projections
(c)
|
(0.7
|
)
|
|
Balance as of December 31, 2017
|
|
$5.4
|
|
(a)
|
Included in Interest Expense on the Consolidated Statement of Income.
|
(b)
|
During the fourth quarter of 2016, management assessed earnings estimates used in calculating the fair value of the U.S. Water Services contingent consideration liability and determined an adjustment was necessary to the liability’s carrying amount based on its assessment. As a result, we recorded a reduction of
$13.6 million
to the liability’s carrying amount which resulted in an after-tax gain of the same amount presented within Operating Expenses – Other in the Consolidated Statement of Income.
|
(c)
|
Payments and changes in cash flow projections reflect the impact of a modification to the shareholder agreement in the first quarter of 2017 which provided participants a one-time election to sell shares at a determined price. Participants representing approximately half of the outstanding contingent consideration shares made the election, and were paid in the first half of 2017.
|
Financial Instruments
|
Carrying Amount
|
|
Fair Value
|
Millions
|
|
|
|
Long-Term Debt, Including Long-Term Debt Due Within One Year
|
|
|
|
December 31, 2017
|
$1,513.3
|
|
$1,627.6
|
December 31, 2016
|
$1,569.1
|
|
$1,653.8
|
Long-Term Debt
|
|
|
||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
First Mortgage Bonds
|
|
|
||||
1.83% Series Due 2018
|
|
$50.0
|
|
|
$50.0
|
|
8.17% Series Due 2019
|
42.0
|
|
42.0
|
|
||
5.28% Series Due 2020
|
35.0
|
|
35.0
|
|
||
2.80% Series Due 2020
|
40.0
|
|
40.0
|
|
||
4.85% Series Due 2021
|
15.0
|
|
15.0
|
|
||
3.02% Series Due 2021
|
60.0
|
|
60.0
|
|
||
3.40% Series Due 2022
|
75.0
|
|
75.0
|
|
||
6.02% Series Due 2023
|
75.0
|
|
75.0
|
|
||
3.69% Series Due 2024
|
60.0
|
|
60.0
|
|
||
4.90% Series Due 2025
|
30.0
|
|
30.0
|
|
||
5.10% Series Due 2025
|
30.0
|
|
30.0
|
|
||
3.20% Series Due 2026
|
75.0
|
|
75.0
|
|
||
5.99% Series Due 2027
|
60.0
|
|
60.0
|
|
||
3.30% Series Due 2028
|
40.0
|
|
40.0
|
|
||
3.74% Series Due 2029
|
50.0
|
|
50.0
|
|
||
3.86% Series Due 2030
|
60.0
|
|
60.0
|
|
||
5.69% Series Due 2036
|
50.0
|
|
50.0
|
|
||
6.00% Series Due 2040
|
35.0
|
|
35.0
|
|
||
5.82% Series Due 2040
|
45.0
|
|
45.0
|
|
||
4.08% Series Due 2042
|
85.0
|
|
85.0
|
|
||
4.21% Series Due 2043
|
60.0
|
|
60.0
|
|
||
4.95% Series Due 2044
|
40.0
|
|
40.0
|
|
||
5.05% Series Due 2044
|
40.0
|
|
40.0
|
|
||
4.39% Series Due 2044
|
50.0
|
|
50.0
|
|
||
Unsecured Term Loan Variable Rate Due 2017
|
—
|
|
125.0
|
|
||
Senior Unsecured Notes 5.99% Due 2017
|
—
|
|
50.0
|
|
||
Variable Demand Revenue Refunding Bonds Series 1997 A Due 2020
|
13.5
|
|
13.5
|
|
||
Unsecured Term Loan Variable Rate Due 2020
|
40.0
|
|
—
|
|
||
Armenia Mountain Senior Secured Notes 3.26% Due 2024
|
65.9
|
|
74.6
|
|
||
Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006, Due 2025
|
27.8
|
|
27.8
|
|
||
Senior Unsecured Notes 3.11% Due 2027
|
80.0
|
|
—
|
|
||
SWL&P First Mortgage Bonds 4.15% Series Due 2028
|
15.0
|
|
15.0
|
|
||
Other Long-Term Debt, 3.11% – 5.37% Due 2018 – 2037
|
69.1
|
|
61.2
|
|
||
Unamortized Debt Issuance Costs
|
(10.0
|
)
|
(11.0
|
)
|
||
Total Long-Term Debt
|
1,503.3
|
|
1,558.1
|
|
||
Less: Due Within One Year
|
64.1
|
|
187.7
|
|
||
Net Long-Term Debt
|
|
$1,439.2
|
|
|
$1,370.4
|
|
As of December 31, 2017
|
|
|
|
|
|
|
||||||||||||
Millions
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
||||||
Coal, Rail and Shipping Contracts
|
|
$29.0
|
|
|
$1.8
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Leasing Agreements
|
|
$14.2
|
|
|
$12.8
|
|
|
$9.5
|
|
|
$7.3
|
|
|
$6.1
|
|
|
$30.0
|
|
Long-term Service Agreements
(a)
|
|
$11.0
|
|
|
$0.9
|
|
—
|
|
—
|
|
|
$1.0
|
|
|
$11.0
|
|
||
PPAs
(b)
|
|
$104.5
|
|
|
$107.1
|
|
|
$115.0
|
|
|
$144.8
|
|
|
$144.7
|
|
|
$1,667.0
|
|
(a)
|
Consists of long-term service agreements for wind energy facilities.
|
(b)
|
Does not include the agreement with Manitoba Hydro expiring in 2022, as this contract is for surplus energy only; Oliver Wind I and Oliver Wind II, as Minnesota Power only pays for energy as it is delivered; and the agreement with Tenaska commencing in 2020 as it is subject to approval of the construction of a
525
MW to
550
MW combined-cycle natural gas-fired facility. (See Power Purchase Agreements.)
|
Counterparty
|
Quantity
|
Product
|
Commencement
|
Expiration
|
Pricing
|
PPAs
|
|
|
|
|
|
Great River Energy
|
|
|
|
|
|
PPA 1
|
50 MW
|
Capacity / Energy
|
June 2016
|
May 2020
|
(a)
|
PPA 2
|
50 MW
|
Capacity
|
June 2016
|
May 2020
|
Fixed
|
PPA 3
|
50 MW
|
Capacity
|
June 2017
|
May 2020
|
Fixed
|
Manitoba Hydro
|
|
|
|
|
|
PPA 1
|
(b)
|
Energy
|
May 2011
|
April 2022
|
Forward Market Prices
|
PPA 2
|
50 MW
|
Capacity / Energy
|
June 2015
|
May 2020
|
(c)
|
PPA 3
|
50 MW
|
Capacity
|
June 2017
|
May 2020
|
Fixed
|
PPA 4
(d)
|
250 MW
|
Capacity / Energy
|
June 2020
|
May 2035
|
(e)
|
PPA 5
(d)
|
133 MW
|
Energy
|
(f)
|
(f)
|
Forward Market Prices
|
Minnkota Power
|
50 MW
|
Capacity / Energy
|
June 2016
|
May 2020
|
(g)
|
Oliver Wind I
|
(h)
|
Energy
|
December 2006
|
December 2031
|
Fixed
|
Oliver Wind II
|
(h)
|
Energy
|
December 2007
|
December 2032
|
Fixed
|
Shell Energy
|
50 MW
|
Energy
|
January 2017
|
December 2019
|
Fixed
|
TransAlta
|
(i)
|
Energy
|
January 2017
|
December 2019
|
Fixed
|
Tenaska
(j)
|
(j)
|
Capacity / Energy
|
June 2020
|
June 2040
|
Fixed
|
PSAs
|
|
|
|
|
|
Basin
|
|
|
|
|
|
PSA 1
|
100 MW
|
Capacity / Energy
|
May 2010
|
April 2020
|
(k)
|
PSA 2
|
100 MW
|
Capacity
|
June 2016
|
May 2018
|
Fixed
|
PSA 3
|
50 MW
|
Capacity
|
June 2017
|
May 2019
|
Fixed
|
Minnkota Power
|
(l)
|
Capacity / Energy
|
June 2014
|
December 2026
|
(l)
|
Silver Bay Power
|
(m)
|
Energy
|
January 2017
|
December 2031
|
(n)
|
(a)
|
The capacity price is fixed and the energy price is based on a formula that includes an annual fixed price component adjusted for changes in a natural gas index, as well as market prices.
|
(b)
|
The energy purchased consists primarily of surplus hydro energy on Manitoba Hydro's system and is delivered on a non-firm basis. Minnesota Power will purchase at least
one million
MWh of energy over the contract term.
|
(c)
|
The capacity and energy prices are adjusted annually by the change in a governmental inflationary index.
|
(d)
|
Agreements are subject to the construction of additional transmission capacity between Manitoba and the U.S., along with construction of new hydroelectric generating capacity in Manitoba. (See Great Northern Transmission Line.)
|
(e)
|
The capacity price is adjusted annually until 2020 by the change in a governmental inflationary index. The energy price is based on a formula that includes an annual fixed component adjusted for the change in a governmental inflationary index and a natural gas index, as well as market prices.
|
(f)
|
The contract term shall be the
20
-year period beginning on the in-service date for the GNTL. (See Great Northern Transmission Line.)
|
(g)
|
The agreement includes a fixed capacity charge and energy prices that escalate at a fixed rate annually over the term.
|
(h)
|
The PPAs provide for the purchase of all output from the
50
MW Oliver Wind I and
48
MW Oliver Wind II wind energy facilities.
|
(i)
|
The energy purchased under the
50
MW PPA is during off-peak hours and the
100
MW PPA is during on-peak hours.
|
(j)
|
The PPA provides for the purchase of all output from a
250
MW wind energy facility to be constructed in southwest Minnesota and is subject to approval of the construction of a
525
MW to
550
MW combined-cycle natural gas-fired facility. (See Note 4. Regulatory Matters.)
|
(k)
|
The capacity charge is based on a fixed monthly schedule with a minimum annual escalation provision. The energy charge is based on a fixed monthly schedule and provides for annual escalation based on the cost of fuel. The agreement also allows Minnesota Power to recover a pro rata share of increased costs related to emissions that occur during the last five years of the contract.
|
(l)
|
Minnesota Power is selling a portion of its entitlement from Square Butte to Minnkota Power, resulting in Minnkota Power’s net entitlement increasing and Minnesota Power’s net entitlement decreasing until Minnesota Power’s share is eliminated at the end of
2025
. Of Minnesota Power’s
50 percent
output entitlement, it sold to Minnkota Power approximately
28 percent
in
2017
(
28 percent
in
2016
and in
2015
). (See Square Butte PPA.)
|
(m)
|
Silver Bay Power supplies approximately
90
MW of load to Northshore Mining, an affiliate of Silver Bay Power, which has been served predominately through self-generation by Silver Bay Power. In the years 2016 through 2019, Minnesota Power is supplying Silver Bay Power with at least
50
MW of energy and Silver Bay Power has the option to purchase additional energy. On December 31, 2019, Silver Bay Power will cease self-generation and Minnesota Power will supply the energy requirements for Silver Bay Power.
|
(n)
|
The energy pricing is fixed through 2019 with pricing in later years escalating at a fixed rate annually and adjusted for changes in a natural gas index.
|
•
|
Ozone NAAQS.
All areas of Minnesota currently meet the new standard based on the most recent available ambient monitoring data; however, some areas in the metropolitan Twin Cities and southwest portion of the state are close to exceeding the standard. As a result, voluntary efforts to reduce ground-level ozone continue in the state.
No
additional costs for compliance are anticipated at this time.
|
•
|
Particulate Matter NAAQS.
The EPA has designated the entire state of Minnesota as unclassifiable/attainment; however, Minnesota sources may ultimately be required to reduce their emissions to assist with attainment in neighboring states. In September 2016, environmental groups filed a lawsuit against the EPA in the U.S. District Court for the Northern District of California alleging the EPA had failed to fully implement the PM
2.5
standards in certain states, including Minnesota, by not enforcing states’ submittals of required infrastructure implementation plans for the 2012 PM
2.5
NAAQS. The outcome of this litigation is uncertain, and as such, any costs for complying with the final Particulate Matter NAAQS cannot be estimated at this time.
|
•
|
NO
2
NAAQS.
Ambient monitoring data indicates that Minnesota is likely in compliance with the one-hour NAAQS standard for NO
2
. On July 16, 2017, the EPA proposed retaining the current one-hour and annual NO
2
NAAQS. Additional compliance costs for the one-hour NO
2
NAAQS are
not
expected at this time.
|
•
|
SO
2
NAAQS.
In 2015, the EPA finalized the SO
2
data requirements rule (DRR) for the 2010 one-hour NAAQS to assist the states in implementing the standard. The MPCA initially informed Minnesota Power that compliant SO
2
modeling completed at Minnesota Power's Boswell and Taconite Harbor facilities would satisfy the DRR obligations and no further modeling would be required; however, the DRR also require facilities have federally-enforceable permit limits at which the one-hour SO
2
NAAQS compliance was modeled by January 13, 2017. Taconite Harbor was issued an amended air permit in September 2016, containing the new modeling limits at that facility. The MPCA did not meet the January 13, 2017, deadline to amend the Boswell permit. The MPCA is in discussions with the EPA on alternate compliance pathways to use existing completed modeling at current limits. On August 21, 2017, the EPA proposed retaining the current primary SO
2
one-hour NAAQS. Compliance costs for the one-hour SO
2
NAAQS are not expected to be material.
|
•
|
Expanding our renewable power supply;
|
•
|
Providing energy conservation initiatives for our customers and engaging in other demand side management efforts;
|
•
|
Improving efficiency of our generating facilities;
|
•
|
Supporting research of technologies to reduce carbon emissions from generating facilities and carbon sequestration efforts; and
|
•
|
Evaluating and developing less carbon intensive future generating assets such as efficient and flexible natural gas‑fired generating facilities.
|
Summary of Common Stock
|
Shares
|
|
Equity
|
|
|
|
Thousands
|
|
Millions
|
|
|
Balance as of December 31, 2014
|
45,929
|
|
|
$1,107.6
|
|
Employee Stock Purchase Plan
|
18
|
|
0.9
|
|
|
Invest Direct
|
383
|
|
19.0
|
|
|
Options and Stock Awards
|
43
|
|
8.6
|
|
|
Equity Issuance Program
|
1,289
|
|
69.9
|
|
|
Forward Sale Agreement and Issuance
|
1,413
|
|
65.4
|
|
|
Balance as of December 31, 2015
|
49,075
|
|
1,271.4
|
|
|
Employee Stock Purchase Plan
|
16
|
|
0.9
|
|
|
Invest Direct
|
344
|
|
20.0
|
|
|
Options and Stock Awards
|
65
|
|
3.7
|
|
|
Contributions to RSOP
|
60
|
|
3.3
|
|
|
Equity Issuance Program
|
130
|
|
8.0
|
|
|
Received for Sale of Land Inventory
|
(130
|
)
|
(8.0
|
)
|
|
Acquisition of Non-Controlling Interest
|
—
|
|
(4.0
|
)
|
|
Balance as of December 31, 2016
|
49,560
|
|
1,295.3
|
|
|
Employee Stock Purchase Plan
|
12
|
|
0.8
|
|
|
Invest Direct
|
257
|
|
19.0
|
|
|
Options and Stock Awards
|
22
|
|
3.6
|
|
|
Contributions to RSOP
|
50
|
|
3.5
|
|
|
Equity Issuance Program
|
1,000
|
|
65.7
|
|
|
Contributions to Pension
|
216
|
|
13.5
|
|
|
Balance as of December 31, 2017
|
51,117
|
|
|
$1,401.4
|
|
Reconciliation of Basic and Diluted
|
|
|
|
|||||
Earnings Per Share
|
|
|
Dilutive
|
|
|
|
||
Year Ended December 31
|
Basic
|
|
Securities
|
|
Diluted
|
|
||
Millions Except Per Share Amounts
|
|
|
|
|||||
2017
|
|
|
|
|||||
Net Income Attributable to ALLETE
|
|
$172.2
|
|
|
|
$172.2
|
|
|
Average Common Shares
|
50.8
|
|
0.2
|
|
51.0
|
|
||
Earnings Per Share
|
|
$3.39
|
|
|
|
$3.38
|
|
|
2016
|
|
|
|
|||||
Net Income Attributable to ALLETE
|
|
$155.3
|
|
|
|
$155.3
|
|
|
Average Common Shares
|
49.3
|
|
0.2
|
|
49.5
|
|
||
Earnings Per Share
|
|
$3.15
|
|
|
|
$3.14
|
|
|
2015
|
|
|
|
|||||
Net Income Attributable to ALLETE
|
|
$141.1
|
|
|
|
$141.1
|
|
|
Average Common Shares
|
48.3
|
|
0.1
|
|
48.4
|
|
||
Earnings Per Share
|
|
$2.92
|
|
|
|
$2.92
|
|
Income Tax Expense
|
|
|
|
||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Current Income Tax Expense
(a)
|
|
|
|
||||||
Federal
|
—
|
|
—
|
|
—
|
|
|||
State
|
$0.3
|
$0.4
|
$0.2
|
||||||
Total Current Income Tax Expense
|
|
$0.3
|
|
|
$0.4
|
|
|
$0.2
|
|
Deferred Income Tax Expense
|
|
|
|
||||||
Federal
|
|
$12.1
|
|
|
$12.0
|
|
|
$19.4
|
|
Federal – Remeasurement of Deferred Income Taxes
(b)
|
(13.0
|
)
|
—
|
|
—
|
|
|||
State
|
15.8
|
|
8.1
|
|
6.5
|
|
|||
Investment Tax Credit Amortization
|
(0.5
|
)
|
(0.7
|
)
|
(0.8
|
)
|
|||
Total Deferred Income Tax Expense
|
|
$14.4
|
|
|
$19.4
|
|
|
$25.1
|
|
Total Income Tax Expense
|
|
$14.7
|
|
|
$19.8
|
|
|
$25.3
|
|
(a)
|
For the years ended December 31,
2017
,
2016
and
2015
, the federal and state current tax expense was minimal due to NOLs which resulted from the bonus depreciation provisions of the Protecting Americans from Tax Hikes Act of 2015, the Tax Increase Prevention Act of 2014 and the American Taxpayer Relief Act of 2012. The federal and state NOLs will be carried forward to offset future taxable income.
|
(b)
|
Deferred income tax benefit from the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 1. Operations and Significant Accounting Policies.)
|
Reconciliation of Taxes from Federal Statutory
|
|
|
|
||||||
Rate to Total Income Tax Expense
|
|
|
|
||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Income Before Non-Controlling Interest and Income Taxes
|
|
$186.9
|
|
|
$175.6
|
|
|
$166.8
|
|
Statutory Federal Income Tax Rate
|
35
|
%
|
35
|
%
|
35
|
%
|
|||
Income Taxes Computed at 35 percent Statutory Federal Rate
|
|
$65.4
|
|
|
$61.5
|
|
|
$58.4
|
|
Increase (Decrease) in Tax Due to:
|
|
|
|
||||||
State Income Taxes – Net of Federal Income Tax Benefit
|
10.5
|
|
5.6
|
|
4.4
|
|
|||
Regulatory Differences for Utility Plant
|
—
|
|
(0.1
|
)
|
(0.6
|
)
|
|||
Production Tax Credits
|
(45.1
|
)
|
(41.5
|
)
|
(37.0
|
)
|
|||
Change in Fair Value of Contingent Consideration
|
—
|
|
(3.8
|
)
|
—
|
|
|||
Remeasurement of Deferred Income Taxes
(a)
|
(13.0
|
)
|
—
|
|
—
|
|
|||
Other
|
(3.1
|
)
|
(1.9
|
)
|
0.1
|
|
|||
Total Income Tax Expense
|
|
$14.7
|
|
|
$19.8
|
|
|
$25.3
|
|
(a)
|
Deferred income tax benefit from the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 1. Operations and Significant Accounting Policies.)
|
Deferred Income Tax Assets and Liabilities
|
|
|
||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Deferred Income Tax Assets
|
|
|
||||
Employee Benefits and Compensation
|
|
$65.9
|
|
|
$104.6
|
|
Property Related
|
104.3
|
|
110.5
|
|
||
NOL Carryforwards
|
99.1
|
|
185.6
|
|
||
Tax Credit Carryforwards
|
294.3
|
|
227.4
|
|
||
Power Sales Agreements
|
35.0
|
|
59.3
|
|
||
Regulatory Liabilities
|
117.7
|
|
7.3
|
|
||
Other
|
33.3
|
|
46.9
|
|
||
Gross Deferred Income Tax Assets
|
749.6
|
|
741.6
|
|
||
Deferred Income Tax Asset Valuation Allowance
|
(60.0
|
)
|
(43.0
|
)
|
||
Total Deferred Income Tax Assets
|
|
$689.6
|
|
|
$698.6
|
|
Deferred Income Tax Liabilities
|
|
|
||||
Property Related
|
|
$758.3
|
|
|
$1,039.6
|
|
Regulatory Asset for Benefit Obligations
|
61.4
|
|
91.9
|
|
||
Unamortized Investment Tax Credits
|
32.8
|
|
33.3
|
|
||
Partnership Basis Differences
|
34.9
|
|
50.9
|
|
||
Regulatory Assets
|
32.0
|
|
25.6
|
|
||
Other
|
0.7
|
|
11.9
|
|
||
Total Deferred Income Tax Liabilities
|
|
$920.1
|
|
|
$1,253.2
|
|
Net Deferred Income Taxes
(a)
|
|
$230.5
|
|
|
$554.6
|
|
(a)
|
Recorded as a net long-term Deferred Income Tax liability on the Consolidated Balance Sheet. Additionally, see Note 1. Operations and Significant Accounting Policies – Revision of Prior Balance Sheet.
|
NOL and Tax Credit Carryforwards
|
|
|
||
As of December 31
|
2017
|
2016
|
|
|
Millions
|
|
|
||
Federal NOL Carryforwards
(a)
|
$375.2
|
|
$485.3
|
|
Federal Tax Credit Carryforwards
|
$209.2
|
$163.7
|
||
State NOL Carryforwards
(a)
|
$289.9
|
$294.4
|
||
State Tax Credit Carryforwards
(b)
|
$25.6
|
$21.0
|
(a)
|
Pre-tax amounts.
|
(b)
|
Net of a
$59.5 million
valuation allowance as of
December 31, 2017
(
$42.7 million
as of
December 31, 2016
).
|
Gross Unrecognized Income Tax Benefits
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Balance at January 1
|
|
$2.0
|
|
|
$2.4
|
|
|
$2.0
|
|
Additions for Tax Positions Related to the Current Year
|
0.1
|
|
0.1
|
|
0.5
|
|
|||
Additions for Tax Positions Related to Prior Years
|
0.1
|
|
0.2
|
|
0.7
|
|
|||
Reductions for Tax Positions Related to Prior Years
|
(0.1
|
)
|
(0.3
|
)
|
(0.7
|
)
|
|||
Lapse of Statute
|
(0.4
|
)
|
(0.4
|
)
|
(0.1
|
)
|
|||
Balance as of December 31
|
|
$1.7
|
|
|
$2.0
|
|
|
$2.4
|
|
|
Unrealized Gain (Loss) on
Available-for-sale
Securities
|
Defined Benefit
Pension, Other
Postretirement
Items
(a)
|
Gain
(Loss) on
Cash Flow
Hedge
|
Total
|
||||
Millions
|
|
|
|
|
||||
Balance as of December 31, 2014
|
$(0.3)
|
$(20.7)
|
$(0.1)
|
$(21.1)
|
||||
Other Comprehensive Income (Loss) Before Reclassifications
|
(0.4
|
)
|
(4.3
|
)
|
0.1
|
|
(4.6
|
)
|
Amounts Reclassified From Accumulated Other Comprehensive Loss
|
(0.1
|
)
|
1.3
|
|
—
|
|
1.2
|
|
Net Other Comprehensive Income (Loss)
|
(0.5
|
)
|
(3.0
|
)
|
0.1
|
|
(3.4
|
)
|
Balance as of December 31, 2015
|
(0.8
|
)
|
(23.7
|
)
|
—
|
|
(24.5
|
)
|
Other Comprehensive Income (Loss) Before Reclassifications
|
—
|
|
(4.1
|
)
|
—
|
|
(4.1
|
)
|
Amounts Reclassified From Accumulated Other Comprehensive Loss
|
(0.2
|
)
|
0.6
|
|
—
|
|
0.4
|
|
Net Other Comprehensive Income (Loss)
|
(0.2
|
)
|
(3.5
|
)
|
—
|
|
(3.7
|
)
|
Balance as of December 31, 2016
|
(1.0
|
)
|
(27.2
|
)
|
—
|
|
(28.2
|
)
|
Other Comprehensive Income (Loss) Before Reclassifications
|
1.1
|
|
3.9
|
|
—
|
|
5.0
|
|
Amounts Reclassified From Accumulated Other Comprehensive Loss
|
(0.2
|
)
|
0.8
|
|
—
|
|
0.6
|
|
Net Other Comprehensive Income (Loss)
|
0.9
|
|
4.7
|
|
—
|
|
5.6
|
|
Balance as of December 31, 2017
|
$(0.1)
|
$(22.5)
|
—
|
|
$(22.6)
|
(a)
|
Defined benefit pension and other postretirement items excluded from our Regulated Operations are recognized in accumulated other comprehensive loss and are subsequently reclassified out of accumulated other comprehensive loss as components of net periodic pension and other postretirement benefit expense. (See Note 15. Pension and Other Postretirement Benefit Plans.)
|
Pension Obligation and Funded Status
|
||||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Accumulated Benefit Obligation
|
|
$745.4
|
|
|
$698.8
|
|
Change in Benefit Obligation
|
|
|
|
|
||
Obligation, Beginning of Year
|
|
$743.3
|
|
|
$709.8
|
|
Service Cost
|
10.2
|
|
8.1
|
|
||
Interest Cost
|
32.5
|
|
33.2
|
|
||
Actuarial Loss
|
44.8
|
|
12.4
|
|
||
Benefits Paid
|
(51.0
|
)
|
(44.5
|
)
|
||
Participant Contributions
|
13.4
|
|
24.3
|
|
||
Obligation, End of Year
|
|
$793.2
|
|
|
$743.3
|
|
Change in Plan Assets
|
|
|
|
|
||
Fair Value, Beginning of Year
|
|
$557.5
|
|
|
$521.3
|
|
Actual Return on Plan Assets
|
91.6
|
|
48.8
|
|
||
Employer Contribution
(a)
|
30.1
|
|
31.9
|
|
||
Benefits Paid
|
(51.0
|
)
|
(44.5
|
)
|
||
Fair Value, End of Year
|
|
$628.2
|
|
|
$557.5
|
|
Funded Status, End of Year
|
$(165.0)
|
$(185.8)
|
||||
|
|
|
||||
Net Pension Amounts Recognized in Consolidated Balance Sheet Consist of:
|
|
|
|
|
||
Current Liabilities
|
$(1.4)
|
$(1.4)
|
||||
Non-Current Liabilities
|
$(163.6)
|
$(184.4)
|
(a)
|
Includes Participant Contributions noted above.
|
Reconciliation of Net Pension Amounts Recognized in Consolidated Balance Sheet
|
||||
As of December 31
|
2017
|
|
2016
|
|
Millions
|
|
|
||
Net Loss
|
$(236.2)
|
$(250.4)
|
||
Accumulated Contributions in Excess of Net Periodic Benefit Cost (Prepaid Pension Asset)
|
71.2
|
|
64.6
|
|
Total Net Pension Amounts Recognized in Consolidated Balance Sheet
|
$(165.0)
|
$(185.8)
|
Components of Net Periodic Pension Cost
|
|||||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Service Cost
|
|
$10.2
|
|
|
$8.1
|
|
|
$10.1
|
|
Interest Cost
|
32.5
|
|
33.2
|
|
29.9
|
|
|||
Expected Return on Plan Assets
|
(42.4
|
)
|
(43.6
|
)
|
(40.7
|
)
|
|||
Amortization of Loss
|
9.9
|
|
9.5
|
|
17.9
|
|
|||
Amortization of Prior Service Cost
|
—
|
|
—
|
|
0.2
|
|
|||
Net Pension Cost
|
|
$10.2
|
|
|
$7.2
|
|
|
$17.4
|
|
Other Changes in Pension Plan Assets and Benefit Obligations Recognized in
Other Comprehensive Income and Regulatory Assets or Liabilities
|
|||||
Year Ended December 31
|
2017
|
|
2016
|
|
|
Millions
|
|
|
|||
Net (Gain) Loss
|
$(4.3)
|
|
$7.2
|
|
|
Amortization of Loss
|
(9.9
|
)
|
(9.5
|
)
|
|
Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
|
$(14.2)
|
$(2.3)
|
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets
|
||||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Projected Benefit Obligation
|
|
$793.2
|
|
|
$743.3
|
|
Accumulated Benefit Obligation
|
|
$745.4
|
|
|
$698.8
|
|
Fair Value of Plan Assets
|
|
$628.2
|
|
|
$557.5
|
|
Postretirement Health and Life Obligation and Funded Status
|
||||||
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Change in Benefit Obligation
|
|
|
||||
Obligation, Beginning of Year
|
|
$173.4
|
|
|
$160.2
|
|
Service Cost
|
4.4
|
|
3.9
|
|
||
Interest Cost
|
7.7
|
|
7.4
|
|
||
Actuarial Loss
|
15.5
|
|
11.9
|
|
||
Benefits Paid
|
(12.2
|
)
|
(13.1
|
)
|
||
Participant Contributions
|
3.1
|
|
3.1
|
|
||
Plan Amendments
|
(1.8
|
)
|
—
|
|
||
Obligation, End of Year
|
|
$190.1
|
|
|
$173.4
|
|
Change in Plan Assets
|
|
|
||||
Fair Value, Beginning of Year
|
|
$154.3
|
|
|
$153.4
|
|
Actual Return on Plan Assets
|
24.5
|
|
9.6
|
|
||
Employer Contribution
|
1.3
|
|
1.3
|
|
||
Participant Contributions
|
3.1
|
|
3.1
|
|
||
Benefits Paid
|
(12.2
|
)
|
(13.1
|
)
|
||
Fair Value, End of Year
|
|
$171.0
|
|
|
$154.3
|
|
Funded Status, End of Year
|
$(19.1)
|
$(19.1)
|
||||
|
|
|
||||
Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet Consist of:
|
|
|
||||
Non-Current Assets
|
$3.0
|
$1.4
|
||||
Current Liabilities
|
$(1.1)
|
$(1.1)
|
||||
Non-Current Liabilities
|
$(21.0)
|
$(19.4)
|
Reconciliation of Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet
|
||||
As of December 31
|
2017
|
|
2016
|
|
Millions
|
|
|
||
Net Loss
(a)
|
$(21.1)
|
$(19.8)
|
||
Prior Service Credit
|
4.6
|
|
4.7
|
|
Accumulated Net Periodic Benefit Cost in Excess of Contributions
(a)
|
(2.6
|
)
|
(4.0
|
)
|
Total Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet
|
$(19.1)
|
$(19.1)
|
(a)
|
Excludes gains, losses and contributions associated with irrevocable grantor trusts.
|
Components of Net Periodic Postretirement Health and Life Cost
|
|||||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Service Cost
|
|
$4.4
|
|
|
$3.9
|
|
|
$4.3
|
|
Interest Cost
|
7.7
|
|
7.4
|
|
7.2
|
|
|||
Expected Return on Plan Assets
|
(10.5
|
)
|
(11.2
|
)
|
(10.9
|
)
|
|||
Amortization of Loss
|
0.3
|
|
0.2
|
|
0.4
|
|
|||
Amortization of Prior Service Credit
|
(2.0
|
)
|
(2.9
|
)
|
(3.0
|
)
|
|||
Net Postretirement Health and Life Credit
|
$(0.1)
|
$(2.6)
|
$(2.0)
|
Other Changes in Postretirement Benefit Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
|
||||||
Year Ended December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
|
|||
Net Loss
|
|
$1.6
|
|
|
$13.5
|
|
Prior Service Credit Arising During the Period
|
(1.8
|
)
|
—
|
|
||
Amortization of Prior Service Credit
|
2.0
|
|
2.9
|
|
||
Amortization of Loss
|
(0.3
|
)
|
(0.2
|
)
|
||
Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
|
$1.5
|
$16.2
|
Estimated Future Benefit Payments
|
Pension
|
Postretirement Health and Life
|
||||
Millions
|
|
|
|
|||
2018
|
|
$46.3
|
|
|
$9.2
|
|
2019
|
|
$46.2
|
|
|
$9.5
|
|
2020
|
|
$45.9
|
|
|
$9.6
|
|
2021
|
|
$45.8
|
|
|
$9.6
|
|
2022
|
|
$45.8
|
|
|
$9.6
|
|
Years 2023 – 2027
|
|
$228.0
|
|
|
$49.7
|
|
|
Pension
|
Postretirement
Health and Life
|
||
Millions
|
|
|
||
Net Loss
|
$12.0
|
$0.7
|
||
Prior Service Credit
|
—
|
|
(1.8
|
)
|
Total Pension and Postretirement Health and Life Cost (Credit)
|
$12.0
|
$(1.1)
|
Assumptions Used to Determine Benefit Obligation
|
||
As of December 31
|
2017
|
2016
|
Discount Rate
|
|
|
Pension
|
3.81 - 3.96%
|
4.53%
|
Postretirement Health and Life
|
3.86%
|
4.57%
|
Rate of Compensation Increase
|
3.70 - 4.10%
|
3.70 - 4.30%
|
Health Care Trend Rates
|
|
|
Trend Rate
|
5.00 - 6.73%
|
5.00 - 7.00%
|
Ultimate Trend Rate
|
4.50%
|
4.50%
|
Year Ultimate Trend Rate Effective
|
2038
|
2038
|
Actual Plan Asset Allocations
|
Pension
|
Postretirement
Health and Life
(a)
|
||||||
|
2017
|
2016
|
2017
|
2016
|
||||
Equity Securities
|
53
|
%
|
49
|
%
|
64
|
%
|
60
|
%
|
Debt Securities
|
38
|
%
|
39
|
%
|
31
|
%
|
34
|
%
|
Private Equity
|
5
|
%
|
7
|
%
|
5
|
%
|
6
|
%
|
Real Estate
|
4
|
%
|
5
|
%
|
—
|
|
—
|
|
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
(a)
|
Includes VEBAs and irrevocable grantor trusts.
|
Plan Asset Target Allocations
|
Pension
|
Postretirement
Health and Life
(a)
|
||
Equity Securities
|
56
|
%
|
60
|
%
|
Debt Securities
|
35
|
%
|
37
|
%
|
Real Estate
|
9
|
%
|
3
|
%
|
|
100
|
%
|
100
|
%
|
(a)
|
Includes VEBAs and irrevocable grantor trusts.
|
|
Fair Value as of December 31, 2017
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities:
|
|
|
|
|
||||||||
U.S. Large-cap
(a)
|
—
|
|
|
$108.6
|
|
—
|
|
|
$108.6
|
|
||
U.S. Mid-cap Growth
(a)
|
—
|
|
51.9
|
|
—
|
|
51.9
|
|
||||
U.S. Small-cap
(a)
|
—
|
|
51.5
|
|
—
|
|
51.5
|
|
||||
International
|
—
|
|
122.3
|
|
—
|
|
122.3
|
|
||||
Debt Securities:
|
|
|
|
|
|
|
|
|
||||
Fixed Income
|
—
|
|
222.8
|
|
—
|
|
222.8
|
|
||||
Cash and Cash Equivalents
|
|
$12.4
|
|
—
|
|
—
|
|
12.4
|
|
|||
Private Equity Funds
|
—
|
|
—
|
|
|
$33.2
|
|
33.2
|
|
|||
Real Estate
|
—
|
|
—
|
|
25.5
|
|
25.5
|
|
||||
Total Fair Value of Assets
|
|
$12.4
|
|
|
$557.1
|
|
|
$58.7
|
|
|
$628.2
|
|
(a)
|
The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity securities large‑cap, mid-cap and small-cap indexes.
|
Recurring Fair Value Measures
|
|
|
||||
Activity in Level 3
|
Private Equity Funds
|
Real Estate
|
||||
Millions
|
|
|
||||
Balance as of December 31, 2016
|
|
$40.6
|
|
|
$25.6
|
|
Actual Return on Plan Assets
|
7.1
|
|
1.7
|
|
||
Purchases, Sales, and Settlements – Net
|
(14.5
|
)
|
(1.8
|
)
|
||
Balance as of December 31, 2017
|
|
$33.2
|
|
|
$25.5
|
|
|
Fair Value as of December 31, 2016
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities:
|
|
|
|
|
||||||||
U.S. Large-cap
(a)
|
|
$94.6
|
|
—
|
|
—
|
|
|
$94.6
|
|
||
U.S. Mid-cap Growth
(a)
|
—
|
|
|
$44.8
|
|
—
|
|
44.8
|
|
|||
U.S. Small-cap
(a)
|
—
|
|
45.0
|
|
—
|
|
45.0
|
|
||||
International
|
46.7
|
|
42.3
|
|
—
|
|
89.0
|
|
||||
Debt Securities:
|
|
|
|
|
|
|
|
|
||||
Fixed Income
|
—
|
|
200.1
|
|
—
|
|
200.1
|
|
||||
Cash and Cash Equivalents
|
17.8
|
|
—
|
|
—
|
|
17.8
|
|
||||
Private Equity Funds
|
—
|
|
—
|
|
|
$40.6
|
|
40.6
|
|
|||
Real Estate
|
—
|
|
—
|
|
25.6
|
|
25.6
|
|
||||
Total Fair Value of Assets
|
|
$159.1
|
|
|
$332.2
|
|
|
$66.2
|
|
|
$557.5
|
|
(a)
|
The underlying investments classified under U.S. Equity Securities consist of money market funds (Level 1), mutual funds (Level 1) and actively-managed funds (Level 2), which are combined with futures, and settle daily, to achieve the returns of the U.S. Equity Securities Mid-cap Growth and Small-cap funds. Our exposure with respect to these investments includes both the futures and the underlying investments.
|
Recurring Fair Value Measures
|
|
|
|
||||
Activity in Level 3
|
|
Private Equity Funds
|
Real Estate
|
||||
Millions
|
|
|
|
||||
Balance as of December 31, 2015
|
|
|
$43.3
|
|
|
$28.9
|
|
Actual Return on Plan Assets
|
|
5.0
|
|
2.3
|
|
||
Purchases, Sales, and Settlements – Net
|
|
(7.7
|
)
|
(5.6
|
)
|
||
Balance as of December 31, 2016
|
|
|
$40.6
|
|
|
$25.6
|
|
|
Fair Value as of December 31, 2017
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities:
(a)
|
|
|
|
|
||||||||
U.S. Large-cap
|
|
$32.1
|
|
—
|
|
—
|
|
|
$32.1
|
|
||
U.S. Mid-cap Growth
|
24.3
|
|
—
|
|
—
|
|
24.3
|
|
||||
U.S. Small-cap
|
15.5
|
|
—
|
|
—
|
|
15.5
|
|
||||
International
|
35.8
|
|
—
|
|
—
|
|
35.8
|
|
||||
Debt Securities:
|
|
|
|
|
|
|
|
|
||||
Mutual Funds
|
49.8
|
|
—
|
|
—
|
|
49.8
|
|
||||
Fixed Income
|
—
|
|
|
$4.5
|
|
—
|
|
4.5
|
|
|||
Cash and Cash Equivalents
|
0.8
|
|
—
|
|
—
|
|
0.8
|
|
||||
Private Equity Funds
|
—
|
|
—
|
|
|
$8.2
|
|
8.2
|
|
|||
Total Fair Value of Assets
|
|
$158.3
|
|
|
$4.5
|
|
|
$8.2
|
|
|
$171.0
|
|
(a)
|
The underlying investments consist of mutual funds (Level 1).
|
Recurring Fair Value Measures
|
|
||
Activity in Level 3
|
Private Equity Funds
|
||
Millions
|
|
||
Balance as of December 31, 2016
|
|
$9.5
|
|
Actual Return on Plan Assets
|
2.6
|
|
|
Purchases, Sales, and Settlements – Net
|
(3.9
|
)
|
|
Balance as of December 31, 2017
|
|
$8.2
|
|
|
Fair Value as of December 31, 2016
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities:
(a)
|
|
|
|
|
||||||||
U.S. Large-cap
|
|
$27.9
|
|
—
|
|
—
|
|
|
$27.9
|
|
||
U.S. Mid-cap Growth
|
20.7
|
|
—
|
|
—
|
|
20.7
|
|
||||
U.S. Small-cap
|
14.0
|
|
—
|
|
—
|
|
14.0
|
|
||||
International
|
27.9
|
|
—
|
|
—
|
|
27.9
|
|
||||
Debt Securities:
|
|
|
|
|
|
|
|
|
||||
Mutual Funds
|
48.6
|
|
—
|
|
—
|
|
48.6
|
|
||||
Fixed Income
|
—
|
|
|
$4.6
|
|
—
|
|
4.6
|
|
|||
Cash and Cash Equivalents
|
1.1
|
|
—
|
|
—
|
|
1.1
|
|
||||
Private Equity Funds
|
—
|
|
—
|
|
|
$9.5
|
|
9.5
|
|
|||
Total Fair Value of Assets
|
|
$140.2
|
|
|
$4.6
|
|
|
$9.5
|
|
|
$154.3
|
|
(a)
|
The underlying investments consist of mutual funds (Level 1).
|
Recurring Fair Value Measures
|
|
||
Activity in Level 3
|
Private Equity Funds
|
||
Millions
|
|
||
Balance as of December 31, 2015
|
|
$12.0
|
|
Actual Return on Plan Assets
|
1.4
|
|
|
Purchases, Sales, and Settlements – Net
|
(3.9
|
)
|
|
Balance as of December 31, 2016
|
|
$9.5
|
|
As of December 31
|
2017
|
|
2016
|
|
2015
|
|
Millions
|
|
|
|
|||
ESOP Shares
|
|
|
|
|||
Allocated
|
1.4
|
|
1.6
|
|
1.8
|
|
Unallocated
|
—
|
|
—
|
|
—
|
|
Total
|
1.4
|
|
1.6
|
|
1.8
|
|
Fair Value of Unallocated Shares
|
—
|
|
—
|
|
—
|
|
Share-Based Compensation Expense
|
|||||||||
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Performance Shares
|
|
$2.1
|
|
|
$1.8
|
|
|
$1.8
|
|
Restricted Stock Units
|
1.0
|
|
0.8
|
|
0.8
|
|
|||
Total Share-Based Compensation Expense
|
|
$3.1
|
|
|
$2.6
|
|
|
$2.6
|
|
Income Tax Benefit
|
|
$0.9
|
|
|
$1.1
|
|
|
$1.1
|
|
|
2017
|
2016
|
2015
|
||||||||||||
|
Number of
Options
|
Weighted-Average
Exercise
Price
|
Number of
Options
|
Weighted-Average
Exercise
Price
|
Number of
Options
|
Weighted-Average
Exercise
Price
|
|||||||||
Outstanding as of January 1
|
4,357
|
|
|
$40.29
|
|
39,654
|
|
|
$44.39
|
|
66,279
|
|
|
$44.39
|
|
Exercised
|
(4,357
|
)
|
|
$40.29
|
|
(35,297
|
)
|
|
$44.89
|
|
(24,456
|
)
|
|
$44.52
|
|
Forfeited
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,169
|
)
|
|
$42.93
|
|
||
Outstanding as of December 31
|
—
|
|
—
|
|
4,357
|
|
|
$40.29
|
|
39,654
|
|
|
$44.39
|
|
|
Exercisable as of December 31
|
—
|
|
—
|
|
4,357
|
|
|
$40.29
|
|
39,654
|
|
|
$44.39
|
|
|
2017
|
2016
|
2015
|
||||||||||||
|
Number of
Shares
|
Weighted-
Average
Grant Date
Fair Value
|
Number of
Shares
|
Weighted-
Average
Grant Date
Fair Value
|
Number of
Shares
|
Weighted-
Average
Grant Date
Fair Value
|
|||||||||
Non-vested as of January 1
|
127,580
|
|
|
$52.56
|
|
119,540
|
|
|
$52.72
|
|
119,635
|
|
|
$48.26
|
|
Granted
(a)
|
50,729
|
|
|
$62.90
|
|
57,189
|
|
|
$52.43
|
|
43,583
|
|
|
$58.95
|
|
Unearned Grant Award
|
(40,801
|
)
|
|
$46.27
|
|
(42,126
|
)
|
|
$52.70
|
|
(36,670
|
)
|
|
$45.41
|
|
Forfeited
|
(9,610
|
)
|
|
$58.29
|
|
(7,023
|
)
|
|
$53.45
|
|
(7,008
|
)
|
|
$53.49
|
|
Non-vested as of December 31
|
127,898
|
|
|
$58.23
|
|
127,580
|
|
|
$52.56
|
|
119,540
|
|
|
$52.72
|
|
|
2017
|
2016
|
2015
|
||||||||||||
|
Number of
Shares
|
Weighted- Average
Grant Date
Fair Value
|
Number of
Shares
|
Weighted- Average
Grant Date
Fair Value
|
Number of
Shares
|
Weighted- Average
Grant Date
Fair Value
|
|||||||||
Available as of January 1
|
54,728
|
|
|
$51.79
|
|
57,694
|
|
|
$49.86
|
|
53,888
|
|
|
$44.47
|
|
Granted
(a)
|
21,241
|
|
|
$62.20
|
|
20,351
|
|
|
$50.25
|
|
26,702
|
|
|
$54.81
|
|
Awarded
|
(17,281
|
)
|
|
$49.72
|
|
(19,661
|
)
|
|
$44.33
|
|
(19,464
|
)
|
|
$41.44
|
|
Forfeited
|
(3,440
|
)
|
|
$56.00
|
|
(3,656
|
)
|
|
$52.87
|
|
(3,432
|
)
|
|
$51.52
|
|
Available as of December 31
|
55,248
|
|
|
$56.18
|
|
54,728
|
|
|
$51.79
|
|
57,694
|
|
|
$49.86
|
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Operating Revenue
|
|
|
|
||||||
Regulated Operations
|
|
$1,063.8
|
|
|
$1,000.7
|
|
|
$991.2
|
|
|
|
|
|
||||||
Energy Infrastructure and Related Services
|
|
|
|
||||||
ALLETE Clean Energy
(a)
|
80.5
|
|
80.5
|
|
262.1
|
|
|||
U.S. Water Services
|
151.8
|
|
137.5
|
|
119.8
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
123.2
|
|
121.0
|
|
113.3
|
|
|||
Total Operating Revenue
|
|
$1,419.3
|
|
|
$1,339.7
|
|
|
$1,486.4
|
|
Net Income (Loss) Attributable to ALLETE
(b)(c)
|
|
|
|
||||||
Regulated Operations
|
|
$128.4
|
|
|
$135.5
|
|
|
$131.6
|
|
|
|
|
|
||||||
Energy Infrastructure and Related Services
|
|
|
|
||||||
ALLETE Clean Energy
|
41.5
|
|
13.4
|
|
29.9
|
|
|||
U.S. Water Services
|
10.7
|
|
1.5
|
|
0.9
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
(8.4
|
)
|
4.9
|
|
(21.3
|
)
|
|||
Total Net Income Attributable to ALLETE
|
|
$172.2
|
|
|
$155.3
|
|
|
$141.1
|
|
Depreciation and Amortization
|
|
|
|
||||||
Regulated Operations
|
|
$132.6
|
|
|
$154.3
|
|
|
$135.1
|
|
|
|
|
|
||||||
Energy Infrastructure and Related Services
|
|
|
|
||||||
ALLETE Clean Energy
|
23.4
|
|
22.3
|
|
18.7
|
|
|||
U.S. Water Services
|
9.8
|
|
8.9
|
|
7.3
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
11.7
|
|
10.3
|
|
8.9
|
|
|||
Total Depreciation and Amortization
|
|
$177.5
|
|
|
$195.8
|
|
|
$170.0
|
|
Operating Expenses – Other
(d)
|
|
|
|
||||||
ALLETE Clean Energy
|
—
|
|
|
$3.3
|
|
—
|
|
||
Corporate and Other
|
$(0.7)
|
(13.6
|
)
|
$36.3
|
|||||
Total Operating Expenses – Other
|
$(0.7)
|
$(10.3)
|
$36.3
|
||||||
Interest Expense
(c)
|
|
|
|
||||||
Regulated Operations
|
$57.0
|
$52.1
|
$53.9
|
||||||
|
|
|
|
||||||
Energy Infrastructure and Related Services
|
|
|
|
||||||
ALLETE Clean Energy
|
4.2
|
|
5.8
|
|
3.3
|
|
|||
U.S. Water Services
|
1.6
|
|
1.7
|
|
1.4
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
10.3
|
|
14.5
|
|
8.6
|
|
|||
|
|
|
|
||||||
Eliminations
|
(5.3
|
)
|
(3.8
|
)
|
(2.3
|
)
|
|||
Total Interest Expense
|
$67.8
|
$70.3
|
$64.9
|
||||||
Equity Earnings in ATC
|
|
|
|
||||||
Regulated Operations
|
$22.5
|
$18.5
|
$16.3
|
(a)
|
Includes the construction and sale of a wind energy facility by ALLETE Clean Energy to Montana-Dakota Utilities for
$197.7 million
in 2015.
|
(b)
|
Net income in 2017 included a favorable impact of
$13.0 million
after-tax due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA, which consisted of a
$23.6 million
after-tax benefit for ALLETE Clean Energy, a
$9.2 million
after-tax benefit for U.S. Water Services and a
$19.8 million
after-tax expense for Corporate and Other. The TCJA did
not
have an impact on net income for our Regulated Operations as the remeasurement of deferred income tax assets and liabilities primarily resulted in the recording of regulatory assets and liabilities. (See Note 1. Operations and Significant Accounting Policies, and Note 4. Regulatory Matters.)
|
(c)
|
Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation.
|
(d)
|
See Note 1. Operations and Significant Accounting Policies.
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
|||
Millions
|
|
|
|
||||||
Income Tax Expense (Benefit)
(a)
|
|
|
|
||||||
Regulated Operations
(b)
|
|
$27.2
|
|
|
$5.9
|
|
|
$24.4
|
|
|
|
|
|
||||||
Energy Infrastructure and Related Services
|
|
|
|
||||||
ALLETE Clean Energy
|
(14.2
|
)
|
8.1
|
|
21.0
|
|
|||
U.S. Water Services
|
(7.8
|
)
|
1.4
|
|
0.9
|
|
|||
|
|
|
|
||||||
Corporate and Other
(b)
|
9.5
|
|
4.4
|
|
(21.0
|
)
|
|||
Total Income Tax Expense
|
|
$14.7
|
|
|
$19.8
|
|
|
$25.3
|
|
(a)
|
Income tax expense in 2017 included an income tax benefit of
$13.0 million
due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA, which consisted of income tax benefits of
$23.6 million
for ALLETE Clean Energy and
$9.2 million
for U.S. Water Services as well as additional income tax expense of
$19.8 million
for Corporate and Other. The TCJA did
not
have an impact on income tax expense for our Regulated Operations as the remeasurement of deferred income tax assets and liabilities primarily resulted in the recording of regulatory assets and liabilities. (See Note 1. Operations and Significant Accounting Policies, and Note 4. Regulatory Matters.)
|
(b)
|
In 2017, Regulated Operations includes
$14.0 million
of income tax expense related to North Dakota investment tax credits transferred to Corporate and Other and higher pre-tax income for the favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of North Dakota investment tax credits. There was
no
impact to net income for Regulated Operations. Corporate and Other recorded an offsetting income tax benefit of
$7.9 million
in 2017. In 2016, Regulated Operations includes
$15.0 million
of income tax benefit for North Dakota investment tax credits transferred from Corporate and Other and lower pre-tax income related to the adverse impact for the regulatory outcome of the November 2016 MPUC order. There was no impact to net income for Regulated Operations. Corporate and Other recorded an offsetting income tax expense of
$8.8 million
in 2016. (See Note 4. Regulatory Matters.)
|
As of December 31
|
2017
|
|
2016
|
|
||
Millions
|
|
|
||||
Assets
|
|
|
||||
Regulated Operations
(a)
|
$3,886.6
|
$3,823.9
|
||||
|
|
|
||||
Energy Infrastructure and Related Services
|
|
|
||||
ALLETE Clean Energy
|
600.5
|
|
566.0
|
|
||
U.S. Water Services
|
292.4
|
|
264.1
|
|
||
|
|
|
||||
Corporate and Other
|
300.5
|
|
222.9
|
|
||
Total Assets
(a)
|
|
$5,080.0
|
|
|
$4,876.9
|
|
Capital Expenditures
|
|
|
||||
Regulated Operations
|
$177.1
|
$121.8
|
||||
|
|
|
||||
Energy Infrastructure and Related Services
|
|
|
||||
ALLETE Clean Energy
|
56.1
|
|
106.9
|
|
||
U.S. Water Services
|
4.4
|
|
3.7
|
|
||
|
|
|
||||
Corporate and Other
|
28.9
|
|
15.4
|
|
||
Total Capital Expenditures
|
|
$266.5
|
|
|
$247.8
|
|
(a)
|
See Note 1. Operations and Significant Accounting Policies – Revision of Prior Balance Sheet.
|
Quarter Ended
|
Mar. 31
|
|
Jun. 30
|
|
Sept. 30
|
|
Dec. 31
|
|
||||
Millions Except Earnings Per Share
|
|
|
|
|
||||||||
2017
|
|
|
|
|
||||||||
Operating Revenue
|
|
$365.6
|
|
|
$353.3
|
|
|
$362.5
|
|
|
$337.9
|
|
Operating Income
|
|
$72.6
|
|
|
$55.0
|
|
|
$69.0
|
|
|
$33.2
|
|
Net Income Attributable to ALLETE
|
|
$49.0
|
|
|
$36.9
|
|
|
$44.9
|
|
|
$41.4
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
||||||||
Basic
|
|
$0.97
|
|
|
$0.73
|
|
|
$0.88
|
|
|
$0.81
|
|
Diluted
|
|
$0.97
|
|
|
$0.72
|
|
|
$0.88
|
|
|
$0.81
|
|
2016
|
|
|
|
|
||||||||
Operating Revenue
|
|
$333.8
|
|
|
$314.8
|
|
|
$349.6
|
|
|
$341.5
|
|
Operating Income
|
|
$66.8
|
|
|
$42.2
|
|
|
$53.4
|
|
|
$61.1
|
|
Net Income Attributable to ALLETE
|
|
$45.9
|
|
|
$24.8
|
|
|
$40.3
|
|
|
$44.3
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
||||||||
Basic
|
|
$0.93
|
|
|
$0.50
|
|
|
$0.82
|
|
|
$0.89
|
|
Diluted
|
|
$0.93
|
|
|
$0.50
|
|
|
$0.81
|
|
|
$0.89
|
|
2015
|
|
|
|
|
||||||||
Operating Revenue
|
|
$320.0
|
|
|
$323.3
|
|
|
$462.5
|
|
|
$380.6
|
|
Operating Income
|
|
$56.4
|
|
|
$39.5
|
|
|
$85.2
|
|
|
$29.6
|
|
Net Income Attributable to ALLETE
|
|
$39.9
|
|
|
$22.5
|
|
|
$60.4
|
|
|
$18.3
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
||||||||
Basic
|
|
$0.85
|
|
|
$0.46
|
|
|
$1.24
|
|
|
$0.37
|
|
Diluted
|
|
$0.85
|
|
|
$0.46
|
|
|
$1.23
|
|
|
$0.37
|
|
|
Balance at
Beginning of
Period
|
Additions
|
Deductions
from
Reserves
(a)
|
Balance at
End of
Period
|
||||||||||
|
Charged to
Income
|
Other
Charges
|
||||||||||||
Millions
|
|
|
|
|
|
|||||||||
Reserve Deducted from Related Assets
|
|
|
|
|
|
|||||||||
Reserve For Uncollectible Accounts
|
|
|
|
|
|
|||||||||
2015 Trade Accounts Receivable
|
|
$1.1
|
|
|
$1.6
|
|
—
|
|
|
$1.7
|
|
|
$1.0
|
|
Finance Receivables – Long-Term
|
|
$0.6
|
|
—
|
|
—
|
|
—
|
|
|
$0.6
|
|
||
2016 Trade Accounts Receivable
|
|
$1.0
|
|
|
$4.1
|
|
—
|
|
|
$2.0
|
|
|
$3.1
|
|
Finance Receivables – Long-Term
|
|
$0.6
|
|
—
|
|
—
|
|
|
$0.6
|
|
—
|
|
||
2017 Trade Accounts Receivable
|
|
$3.1
|
|
$0.8
|
—
|
|
|
$1.8
|
|
|
$2.1
|
|
||
Finance Receivables – Long-Term
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Deferred Asset Valuation Allowance
|
|
|
|
|
|
|||||||||
2015 Deferred Tax Assets
|
|
$22.1
|
|
$9.5
|
—
|
|
—
|
|
|
$31.6
|
|
|||
2016 Deferred Tax Assets
|
|
$31.6
|
|
$11.4
|
—
|
|
—
|
|
|
$43.0
|
|
|||
2017 Deferred Tax Assets
|
|
$43.0
|
|
|
$17.0
|
|
—
|
|
—
|
|
|
$60.0
|
|
(a)
|
Includes uncollectible accounts written-off.
|
By:
|
|
|
Chairman, President & CEO
|
a)
|
Time Limits
. A Claimant seeking arbitration of any determination by the Claims Administrator must, within six (6) months of the date of the Claims Administrator’s final decision, file a demand for arbitration with the American Arbitration Association submitting the Claim to resolution by arbitration. A Claimant waives any claim not filed timely in accordance with this Section.
|
b)
|
Rules Applicable to Arbitration
. The arbitration process shall be conducted in accordance with the Commercial Law Rules of the American Arbitration Association.
|
c)
|
Venue
. The arbitration shall be conducted in Minneapolis, Minnesota.
|
d)
|
Binding Effect
. The decision of the arbitrator with respect to the claim will be final and binding upon the Company and the Claimant. BY PARTICIPATING IN THE PLAN, AND ACCEPTING THE GRANT, YOU, ON BEHALF OF YOURSELF AND ANY PERSON WITH A CLAIM RELATING TO YOUR GRANT, AGREE TO WAIVE ANY RIGHT TO SUE IN COURT OR TO PURSUE ANY OTHER LEGAL RIGHT OR REMEDY THAT MIGHT OTHERWISE BE AVAILABLE IN CONNECTION WITH THE RESOLUTION OF THE CLAIM.
|
e)
|
Enforceability
. Judgment upon any award entered by an arbitrator may be entered in any court having jurisdiction over the parties.
|
f)
|
Waiver of Class, Collective, and Representative Actions
. Any claim shall be heard without consolidation of such claims with any other person or entity. To the fullest extent permitted by law, whether in court or in arbitration, by participating in the Plan, you waive any right to commence, be a party to in any way, or be an actual or putative class member of any class, collective, or representative action arising out of or relating to any claim, and you agree that any claim may only be initiated or maintained and decided on an individual basis.
|
g)
|
Standard of Review
. Any decision of an arbitrator on a claim shall be limited to determining whether the Claims Administrator’s decision or action was arbitrary or capricious or was unlawful. The arbitrator shall adhere to and apply the deferential standard of review set out in
Conkright v. Frommert
, 130 S. Ct. 1640 (2010),
Metropolitan Life Insurance Co. v.
Glenn
,
554 U.S. 105 (2008), and
Firestone Tire and Rubber Company v. Bruch,
489 U.S. 101 (1989), and shall accord due deference to the determinations, interpretations, and construction of the Plan document by the Claim’s Administrator.
|
h)
|
General Procedures
.
|
i.
|
Arbitration Rules
. The arbitration hearing will be conducted under the AAA Commercial Arbitration Rules (as amended or revised from time to time by AAA) (hereinafter the “AAA Rules”), before one AAA arbitrator who is from the Large, Complex Case Panel and who has experience with matters involving executive compensation and equity compensation plans. The AAA Rules and the terms and procedures set forth here may conflict on certain issues. To the extent that the procedures set forth here conflict with the AAA Rules, the procedures set forth here shall control and be applied by the arbitrator. Notwithstanding the amount of the claim, the Procedures for Large, Complex Commercial Disputes shall not apply.
|
ii.
|
Substantive Law
. The arbitrator shall apply the substantive law (and the laws of remedies, if applicable), of Minnesota or federal law, or both, depending upon the claim. Except to the extent required by applicable law, the Claimant shall keep any arbitration decision or award strictly confidential and not disclose to anyone other than his or her spouse, attorney, or tax advisor.
|
iii.
|
Authority
. The arbitrator shall have jurisdiction to hear and rule on prehearing disputes and is authorized to hold prehearing conferences by telephone or in person as the arbitrator deems necessary. The arbitrator will have the authority to hear a motion to dismiss and/or a motion for summary judgment by any party and in doing so shall apply the standards governing such motions under the Federal Rules of Civil Procedure.
|
iv.
|
Pre-Hearing Procedures
. Each party may take the deposition of not more than one individual and the expert witness, if any, designated by another party. Each party will have the right to subpoena witnesses in accordance with the Federal Arbitration Act, Title 9 of the United States Code. Additional discovery may be had only if the arbitrator so orders, upon a showing of substantial need.
|
v.
|
Fees and Costs
. Administrative arbitration fees and arbitrator compensation shall be borne equally by the parties, and each party shall be responsible for its own attorney’s fees, if any; provided, however, that the Committee will authorize payment by the Company of all administrative arbitration fees, arbitrator compensation and attorney’s fees if the Committee concludes that a Claimant has substantially prevailed on his or her claims. Unless prohibited by statute, the arbitrator shall assess attorney’s fees against a party upon a showing that such party’s claim, defense or position is frivolous, or unreasonable, or factually groundless. If either party pursues a claim by any means other than those set forth in this Article, the responding party shall be entitled to dismissal of such action, and the recovery of all costs and attorney’s fees and losses related to such action, unless prohibited by statute.
|
(i)
|
Interstate Commerce and the Federal Arbitration Act
. The Company is involved in transactions involving interstate commerce, and the employee’s employment with the Company involves such commerce. Therefore, the Federal Arbitration Act, Title 9 of the United States Code, will govern the interpretation, enforcement, and all judicial proceedings regarding the arbitration procedures in this Section.
|
(i)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Company that, together with stock previously held by the acquirer, constitutes more than fifty (50%) percent of the total fair market value or total voting power of Company stock. If any one Person, or more than one Person acting as a group, is considered to own more than fifty (50%) percent of the total fair market value or total voting power of Company stock, the acquisition of additional stock by the same Person or Persons acting as a group does not cause a Change in Control. An increase in the percentage of stock owned by any one Person, or Persons acting as a group, as a result of a transaction in which Company acquires its stock in exchange for property, is treated as an acquisition of stock;
|
(ii)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person or Persons) ownership of Company stock possessing at least thirty (30%) percent of the total voting power of Company stock;
|
(iii)
|
the date a majority of the members of the Company’s board of directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of appointment or election; or
|
(iv)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person or Persons) assets from the Company that have a total gross fair market value equal to at least forty (40%) percent of the total gross fair market value of all the Company’s assets immediately prior to the acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the corporation’s assets, or the value of the assets being disposed of, without regard to any liabilities associated with these assets.
|
(i)
|
unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;
|
(ii)
|
by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the Employer’s accident and health plan;
|
(iii)
|
determined to be totally disabled by the Social Security Administration; or
|
(iv)
|
disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definition of disability applied under such disability insurance program complies with the foregoing definition of Disability.
|
Number of Performance Shares Granted:
|
|
Date of Grant:
|
|
Performance Period:
|
|
Performance Goals:
|
See
Annex B
|
By:
|
|
|
Chairman, President & CEO
|
a)
|
Time Limits
. A Claimant seeking arbitration of any determination by the Claims Administrator must, within six (6) months of the date of the Claims Administrator’s final decision, file a demand for arbitration with the American Arbitration Association submitting the claim to resolution by arbitration. A Claimant waives any claim not filed timely in accordance with this Section.
|
b)
|
Rules Applicable to Arbitration
. The arbitration process shall be conducted in accordance with the Commercial Law Rules of the American Arbitration Association.
|
c)
|
Venue
. The arbitration shall be conducted in Minneapolis, Minnesota.
|
d)
|
Binding Effect
. The decision of the arbitrator with respect to the claim will be final and binding upon the Company and the Claimant. BY PARTICIPATING IN THE PLAN, AND ACCEPTING THE GRANT, YOU, ON BEHALF OF YOURSELF AND ANY PERSON WITH A CLAIM RELATING TO YOUR GRANT, AGREE TO WAIVE ANY RIGHT TO SUE IN COURT OR TO PURSUE ANY OTHER LEGAL RIGHT OR REMEDY THAT MIGHT OTHERWISE BE AVAILABLE IN CONNECTION WITH THE RESOLUTION OF THE CLAIM.
|
e)
|
Enforceability
. Judgment upon any award entered by an arbitrator may be entered in any court having jurisdiction over the parties.
|
f)
|
Waiver of Class, Collective, and Representative Actions
. Any claim shall be heard without consolidation of such claims with any other person or entity. To the fullest extent permitted by law, whether in court or in arbitration, by participating in the Plan, you waive any right to commence, be a party to in any way, or be an actual or putative class member of any class, collective, or representative action arising out of or relating to any claim, and you agree that any claim may only be initiated or maintained and decided on an individual basis.
|
g)
|
Standard of Review
. Any decision of an arbitrator on a claim shall be limited to determining whether the Claims Administrator’s decision or action was arbitrary or capricious or was unlawful. The arbitrator shall adhere to and apply the deferential standard of review set out in
Conkright v. Frommert
, 130 S. Ct. 1640 (2010),
Metropolitan Life Insurance Co. v.
Glenn
,
554 U.S. 105 (2008), and
Firestone Tire and Rubber Company v. Bruch,
489 U.S. 101 (1989), and shall accord due deference to the determinations, interpretations, and construction of the Plan document by the Claims Administrator.
|
h)
|
General Procedures
.
|
i.
|
Arbitration Rules
. The arbitration hearing will be conducted under the AAA Commercial Arbitration Rules (as amended or revised from time to time by AAA) (hereinafter the “AAA Rules”), before one AAA arbitrator who is from the Large, Complex Case Panel and who has experience with matters involving executive compensation and equity compensation plans. The AAA Rules and the terms and procedures set forth here may conflict on certain issues. To the extent that the procedures set forth here conflict with the AAA Rules, the procedures set forth here shall control and be applied by the arbitrator. Notwithstanding the amount of the claim, the Procedures for Large, Complex Commercial Disputes shall not apply.
|
ii.
|
Substantive Law
. The arbitrator shall apply the substantive law (and the laws of remedies, if applicable), of Minnesota or federal law, or both, depending upon the claim. Except to the extent required by applicable law, the Claimant shall keep any arbitration decision or award strictly confidential and not disclose to anyone other than his or her spouse, attorney, or tax advisor.
|
iii.
|
Authority
. The arbitrator shall have jurisdiction to hear and rule on prehearing disputes and is authorized to hold prehearing conferences by telephone or in person as the arbitrator deems necessary. The arbitrator will have the authority to hear a motion to dismiss and/or a motion for summary judgment by any party and in doing so shall apply the standards governing such motions under the Federal Rules of Civil Procedure.
|
iv.
|
Pre-Hearing Procedures
. Each party may take the deposition of not more than one individual and the expert witness, if any, designated by another party. Each party will have the right to subpoena witnesses in accordance with the Federal Arbitration Act, Title 9 of the United States Code. Additional discovery may be had only if the arbitrator so orders, upon a showing of substantial need.
|
v.
|
Fees and Costs
. Administrative arbitration fees and arbitrator compensation shall be borne equally by the parties, and each party shall be responsible for its own attorney’s fees, if any; provided, however, that the Committee will authorize payment by the Company of all administrative arbitration fees, arbitrator compensation and attorney’s fees if the Committee concludes that a Claimant has substantially prevailed on his or her claims. Unless prohibited by statute, the arbitrator shall assess attorney’s fees against a party upon a showing that such party’s claim, defense or position is frivolous, or unreasonable, or factually groundless. If either party pursues a claim by any means other than those set forth in this Article, the responding party shall be entitled to dismissal of such action, and the recovery of all costs and attorney’s fees and losses related to such action, unless prohibited by statute.
|
i)
|
Interstate Commerce and the Federal Arbitration Act
. The Company is involved in transactions involving interstate commerce, and the employee’s employment with the Company involves such commerce. Therefore, the Federal Arbitration Act, Title 9 of the United States Code, will govern the interpretation, enforcement, and all judicial proceedings regarding the arbitration procedures in this Section.
|
(a)
|
unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;
|
(b)
|
by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the Employer’s accident and health plan;
|
(c)
|
determined to be totally disabled by the Social Security Administration; or
|
(d)
|
disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definition of disability applied under such disability insurance program complies with the foregoing definition of Disability.
|
Alliant Energy Corporation
|
Entergy Corporation
|
PG&E Corporation
|
Ameren Corporation
|
Eversource Energy
|
Pinnacle West Capital Corporation
|
American Electric Power Company
|
Exelon Corporation
|
PNM Resources, Inc.
|
Avangrid, Inc.
|
FirstEnergy Corporation
|
Portland General Electric Company
|
Avista Corporation
|
Great Plains Energy Incorporated
|
PPL Corporation
|
Black Hills Corporation
|
Hawaiian Electric Industries, Inc.
|
Public Service Enterprise Group, Inc.
|
CenterPoint Energy, Inc.
|
IDACORP, Inc.
|
SCANA Corporation
|
CMS Energy Corporation
|
MDU Resources Group, Inc.
|
Sempra Energy
|
Consolidated Edison, Inc.
|
MGE Energy, Inc.
|
Southern Company
|
Dominion Resources, Inc.
|
NextEra Energy, Inc
|
Unitil Corporation
|
DTE Energy Company
|
NiSource, Inc.
|
Vectren Corporation
|
Duke Energy Corporation
|
NorthWestern Corporation
|
WEC Energy Group, Inc
|
Edison International
|
OGE Energy Corp.
|
Westar Energy, Inc.
|
El Paso Electric Company
|
Otter Tail Corporation
|
Xcel Energy, Inc.
|
Year Ended December 31
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
|||||||
Millions
|
|
|
|
|
|
||||||||||||
Earnings as Defined
|
|
|
|
|
|
||||||||||||
|
Pretax Income Before Non-Controlling Interest
|
|
$186.9
|
|
|
$175.6
|
|
|
$166.8
|
|
|
$162.2
|
|
|
$133.3
|
|
|
|
Add:
|
Fixed Charges
|
68.7
|
|
73.0
|
|
71.9
|
|
62.5
|
|
56.7
|
|
|||||
|
Less:
|
Undistributed Income from Less than 50 percent Owned Equity Investment
|
3.3
|
|
5.7
|
|
1.8
|
|
2.6
|
|
4.1
|
|
|||||
|
Earnings as Defined
|
|
$252.3
|
|
|
$242.9
|
|
|
$236.9
|
|
|
$222.1
|
|
|
$185.9
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed Charges
|
|
|
|
|
|
||||||||||||
|
Interest on Long-Term Debt
|
|
$60.6
|
|
|
$64.7
|
|
|
$64.7
|
|
|
$55.6
|
|
|
$50.9
|
|
|
|
Other Interest Charges
|
2.3
|
|
2.6
|
|
1.4
|
|
2.0
|
|
1.2
|
|
||||||
|
Interest Component of All Rentals
(a)
|
5.8
|
|
5.7
|
|
5.8
|
|
4.9
|
|
4.6
|
|
||||||
|
Total Fixed Charges
|
|
$68.7
|
|
|
$73.0
|
|
|
$71.9
|
|
|
$62.5
|
|
|
$56.7
|
|
|
Ratio of Earnings to Fixed Charges
|
3.67
|
|
3.33
|
|
3.29
|
|
3.55
|
|
3.28
|
|
(a)
|
Represents interest portion of rents estimated at 33 1/3 percent.
|
Name of Organization
(a)
|
State or Country
|
ALLETE, Inc.
(d/b/a ALLETE; Minnesota Power; Minnesota Power, Inc.;
|
Minnesota
|
Minnesota Power & Light Company)
|
|
ALLETE Automotive Services, LLC
|
Minnesota
|
ALLETE Enterprises, Inc.
|
Minnesota
|
ALLETE Clean Energy, Inc.
|
Minnesota
|
ACE Wind LLC
|
Delaware
|
ACE Mid-West Holdings, LLC
|
Delaware
|
MWW Holdings, LLC
|
Delaware
|
Lake Benton Power Associates LLC
|
Delaware
|
Lake Benton Holdings LLC
|
Delaware
|
Lake Benton Power Partners L.L.C.
|
Delaware
|
Storm Lake Power Partners I LLC
|
Delaware
|
Storm Lake II Power Associates LLC
|
Delaware
|
Storm Lake II Holdings LLC
|
Delaware
|
Storm Lake Power Partners II LLC
|
Delaware
|
New Salem Holdings, LLC
|
Delaware
|
Glen Ullin Energy Center, LLC
|
Delaware
|
Northern Wind Energy, LLC
|
Delaware
|
Chanarambie Power Partners, LLC
|
Delaware
|
Viking Wind Holdings, LLC
|
Delaware
|
ACE West Holdings, LLC
|
Delaware
|
Condon Wind Power, LLC
|
Delaware
|
Armenia Holdings, LLC
|
Delaware
|
AMW I Holding, LLC
|
Delaware
|
Armenia Mountain Wind, LLC
|
Delaware
|
Armenia Mountain Wind II, LLC
|
Delaware
|
Thunder Spirit Wind, LLC
|
Delaware
|
ACE O&M, LLC
|
Delaware
|
ALLETE Power Systems, Inc.
|
Minnesota
|
ALLETE Renewable Resources, Inc.
|
North Dakota
|
ALLETE Transmission Holdings, Inc.
|
Wisconsin
|
BNI Energy, Inc.
|
North Dakota
|
BNI Coal, Ltd.
|
North Dakota
|
Global Water Services Holding Company, Inc.
|
Delaware
|
U.S Water Services, Inc.
|
Minnesota
|
U.S. Water Services – Canada, Inc.
|
Canada
|
MP Affiliate Resources, Inc.
|
Minnesota
|
Rainy River Energy Corporation
|
Minnesota
|
South Shore Energy, LLC
|
Wisconsin
|
Upper Minnesota Properties, Inc.
|
Minnesota
|
Upper Minnesota Properties - Development, Inc.
|
Minnesota
|
ALLETE Properties, LLC
(d/b/a ALLETE Properties)
|
Minnesota
|
ALLETE Commercial, LLC
|
Florida
|
Lehigh Acquisition, LLC
|
Delaware
|
Florida Landmark Communities, LLC
|
Florida
|
Lehigh Corporation
|
Florida
|
Mardem, LLC
|
Florida
|
Palm Coast Holdings, Inc.
|
Florida
|
Port Orange Holdings, LLC
|
Florida
|
Interlachen Lakes Estates, LLC
|
Florida
|
(a)
|
Certain insignificant subsidiaries are omitted.
|
Name of Organization
(a)
|
State or Country
|
Palm Coast Land, LLC
|
Florida
|
ALLETE Water Services, Inc.
|
Minnesota
|
Florida Water Services Corporation
|
Florida
|
Energy Replacement Property, LLC
|
Minnesota
|
Energy Land, Incorporated
|
Wisconsin
|
Lakeview Financial Corporation I
|
Minnesota
|
Lakeview Financial Corporation II
|
Minnesota
|
MP Investments, Inc.
|
Delaware
|
RendField Land Company, Inc.
|
Minnesota
|
Superior Water, Light and Power Company
|
Wisconsin
|
(a)
|
Certain insignificant subsidiaries are omitted.
|
1.
|
I have reviewed this annual report on Form 10-K for the fiscal year ended
December 31, 2017
, of ALLETE, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 15, 2018
|
/s/ Alan R. Hodnik
|
|
|
Alan R. Hodnik
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K for the fiscal year ended
December 31, 2017
, of ALLETE, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
February 15, 2018
|
/s/ Robert J. Adams
|
|
|
Robert J. Adams
|
|
|
Senior Vice President and Chief Financial Officer
|
1.
|
The Annual Report on Form 10-K of ALLETE for the fiscal year ended
December 31, 2017
, (Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ALLETE.
|
Date:
|
February 15, 2018
|
/s/ Alan R. Hodnik
|
|
|
Alan R. Hodnik
|
|
|
President and Chief Executive Officer
|
Date:
|
February 15, 2018
|
/s/ Robert J. Adams
|
|
|
Robert J. Adams
|
|
|
Senior Vice President and Chief Financial Officer
|
Mine or Operating Name/MSHA Identification Number
|
Section 104 S&S Citations (#)
|
Section 104(b) Orders (#)
|
Section 104(d) Citations and Orders (#)
|
Section 110(b)(2) Violations (#)
|
Section 107(a) Orders (#)
|
Total Dollar Value of MSHA Assessments Proposed ($)
|
Total Number of Mining- Related Fatalities (#)
|
Received Notice of Pattern of Violation Under Section 104(e) (yes/no)
|
Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no)
|
Legal Actions Pending as of Last Day of Period (#)
|
Legal Actions Initiated During Period (#)
|
Legal Actions Resolved During Period (#)
|
|
Center Mine / 3200218
|
—
|
—
|
—
|
—
|
—
|
$484
|
—
|
No
|
No
|
—
|
—
|
—
|
|
|
Exhibit 99
|
For Release:
|
February 15, 2018
|
|
Investor Contact:
|
Vince Meyer
|
|
|
218-723-3952
|
|
|
vmeyer@allete.com
|
|
|
|
|
NEWS
|
|
|
|
Quarter Ended
|
Year to Date
|
|||||||
|
2017
|
2016
|
2017
|
2016
|
|||||
Millions Except Per Share Amounts
|
|
|
|
|
|||||
Operating Revenue
|
|
|
|
|
|||||
Utility
|
$239.7
|
$260.2
|
$1,063.8
|
$1,000.7
|
|||||
Non-utility
|
98.2
|
|
81.3
|
|
355.5
|
|
339.0
|
|
|
Total Operating Revenue
|
337.9
|
|
341.5
|
|
1,419.3
|
|
1,339.7
|
|
|
Operating Expenses
|
|
|
|
|
|||||
Fuel, Purchased Power and Gas – Utility
|
113.7
|
|
89.3
|
|
396.9
|
|
339.9
|
|
|
Transmission Services – Utility
|
18.1
|
|
15.7
|
|
71.2
|
|
65.2
|
|
|
Cost of Sales – Non-utility
|
41.7
|
|
29.2
|
|
147.8
|
|
137.7
|
|
|
Operating and Maintenance
|
91.7
|
|
93.2
|
|
339.9
|
|
334.1
|
|
|
Depreciation and Amortization
|
26.0
|
|
50.1
|
|
177.5
|
|
195.8
|
|
|
Taxes Other than Income Taxes
|
14.2
|
|
13.2
|
|
56.9
|
|
53.8
|
|
|
Other
|
(0.7
|
)
|
(10.3
|
)
|
(0.7
|
)
|
(10.3
|
)
|
|
Total Operating Expenses
|
304.7
|
|
280.4
|
|
1,189.5
|
|
1,116.2
|
|
|
Operating Income
|
33.2
|
|
61.1
|
|
229.8
|
|
223.5
|
|
|
Other Income (Expense)
|
|
|
|
|
|||||
Interest Expense
|
(17.3
|
)
|
(17.3
|
)
|
(67.8
|
)
|
(70.3
|
)
|
|
Equity Earnings in ATC
|
5.2
|
|
3.5
|
|
22.5
|
|
18.5
|
|
|
Other
|
0.4
|
|
1.1
|
|
2.4
|
|
3.9
|
|
|
Total Other Expense
|
(11.7
|
)
|
(12.7
|
)
|
(42.9
|
)
|
(47.9
|
)
|
|
Income Before Non-Controlling Interest and Income Taxes
|
21.5
|
|
48.4
|
|
186.9
|
|
175.6
|
|
|
Income Tax Expense (Benefit)
|
(19.9
|
)
|
4.1
|
|
14.7
|
|
19.8
|
|
|
Net Income
|
41.4
|
|
44.3
|
|
172.2
|
|
155.8
|
|
|
Less: Non-Controlling Interest in Subsidiaries
|
—
|
|
—
|
|
—
|
|
0.5
|
|
|
Net Income Attributable to ALLETE
|
|
$41.4
|
|
$44.3
|
$172.2
|
$155.3
|
|||
Average Shares of Common Stock
|
|
|
|
|
|||||
Basic
|
51.1
|
|
49.5
|
|
50.8
|
|
49.3
|
|
|
Diluted
|
51.3
|
|
49.7
|
|
51.0
|
|
49.5
|
|
|
Basic Earnings Per Share of Common Stock
|
$0.81
|
$0.89
|
$3.39
|
$3.15
|
|||||
Diluted Earnings Per Share of Common Stock
|
$0.81
|
$0.89
|
$3.38
|
$3.14
|
|||||
Dividends Per Share of Common Stock
|
$0.535
|
$0.52
|
$2.14
|
$2.08
|
|
Dec. 31,
|
Dec. 31,
|
|
|
Dec. 31,
|
Dec. 31,
|
|
2017
|
2016
|
|
|
2017
|
2016
|
Assets
|
|
|
|
Liabilities and Equity
|
|
|
Cash and Cash Equivalents
|
$98.9
|
$27.5
|
|
Current Liabilities
|
$351.2
|
$399.5
|
Other Current Assets
|
268.6
|
267.0
|
|
Long-Term Debt
|
1,439.2
|
1,370.4
|
Property, Plant and Equipment – Net
|
3,822.4
|
3,741.2
|
|
Deferred Income Taxes
|
230.5
|
554.6
|
Regulatory Assets
|
384.7
|
330.1
|
|
Regulatory Liabilities
|
532.0
|
125.8
|
Investment in ATC
|
118.7
|
135.6
|
|
Defined Benefit Pension & Other Postretirement Benefit Plans
|
191.8
|
210.9
|
Other Investments
|
53.1
|
55.6
|
|
Other Non-Current Liabilities
|
267.1
|
322.7
|
Goodwill and Intangibles – Net
|
225.9
|
213.4
|
|
Equity
|
2,068.2
|
1,893.0
|
Other Non-Current Assets
|
107.7
|
106.5
|
|
|
|
|
Total Assets
|
$5,080.0
|
$4,876.9
|
|
Total Liabilities and Equity
|
$5,080.0
|
$4,876.9
|
|
Quarter Ended
|
Year to Date
|
||||||
ALLETE, Inc.
|
December 31,
|
December 31,
|
||||||
Income (Loss)
|
2017
|
2016
|
2017
|
2016
|
||||
Millions
|
|
|
|
|
||||
Regulated Operations
|
$18.3
|
$25.5
|
$128.4
|
$135.5
|
||||
|
|
|
|
|
||||
Energy Infrastructure and Related Services
|
|
|
|
|
||||
ALLETE Clean Energy
|
30.4
|
3.7
|
41.5
|
13.4
|
||||
U.S. Water Services
|
9.1
|
|
(0.5
|
)
|
10.7
|
1.5
|
||
|
|
|
|
|
||||
Corporate and Other
|
(16.4
|
)
|
15.6
|
|
(8.4
|
)
|
4.9
|
|
Net Income Attributable to ALLETE
|
$41.4
|
$44.3
|
$172.2
|
$155.3
|
||||
Diluted Earnings Per Share
|
$0.81
|
$0.89
|
$3.38
|
$3.14
|
Regulated Utility Revenue
|
|
|
|
|
||||||||
Millions
|
|
|
|
|
||||||||
Regulated Operations
|
|
|
|
|
||||||||
Retail and Municipal
|
|
|
|
|
||||||||
Residential
|
|
$33.5
|
|
|
$30.6
|
|
|
$119.9
|
|
|
$115.8
|
|
Commercial
|
35.6
|
|
33.6
|
|
139.5
|
|
133.7
|
|
||||
Municipal
|
12.8
|
|
17.2
|
|
57.9
|
|
67.6
|
|
||||
Industrial
|
123.7
|
|
110.0
|
|
486.5
|
|
412.5
|
|
||||
Reserve for Interim Rate Refunds
|
(31.6
|
)
|
—
|
|
(31.6
|
)
|
—
|
|
||||
Total Retail and Municipal
|
174.0
|
|
191.4
|
|
772.2
|
|
729.6
|
|
||||
Other Power Suppliers
|
37.8
|
|
41.9
|
|
161.8
|
|
175.1
|
|
||||
Other
|
27.9
|
|
26.9
|
|
129.8
|
|
96.0
|
|
||||
Total Regulated Utility Revenue
|
|
$239.7
|
|
|
$260.2
|
|
|
$1,063.8
|
|
|
$1,000.7
|
|