(Mark One)
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☒
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Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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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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Trading Symbol
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Name of each exchange on which registered
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Common Stock, without par value
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ALE
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New York Stock Exchange
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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
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ALLETE, Inc.
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ALLETE Clean Energy
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ALLETE Clean Energy, Inc. and its subsidiaries
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ALLETE Properties
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ALLETE Properties, LLC and its subsidiaries
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ALLETE South Wind
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ALLETE South Wind, LLC
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ALLETE Transmission Holdings
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ALLETE Transmission Holdings, Inc.
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ArcelorMittal
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ArcelorMittal USA, Inc.
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ATC
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American Transmission Company LLC
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Basin
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Basin Electric Power Cooperative
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Bison
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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
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Boswell Energy Center
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Camp Ripley
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Camp Ripley Solar Array
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CIP
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Conservation Improvement Program
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Cliffs
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Cleveland-Cliffs Inc.
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Company
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ALLETE, Inc. and its subsidiaries
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DC
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Direct Current
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EIS
|
Environmental Impact Statement
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EPA
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United States Environmental Protection Agency
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ESOP
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Employee Stock Ownership Plan
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FASB
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Financial Accounting Standards Board
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FERC
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Federal Energy Regulatory Commission
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Form 8-K
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ALLETE Current Report on Form 8-K
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Form 10-K
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ALLETE Annual Report on Form 10-K
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Form 10-Q
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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
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ALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan
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IRP
|
Integrated Resource Plan
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Item ___
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Item ___ of this Form 10-K
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kV
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Kilovolt(s)
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kW / kWh
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Kilowatt(s) / Kilowatt-hour(s)
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Laskin
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Laskin Energy Center
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Manitoba Hydro
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Manitoba Hydro-Electric Board
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MBtu
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Million British thermal units
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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
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Midcontinent Independent System Operator, Inc.
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Montana-Dakota Utilities
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Montana-Dakota Utilities Co., a subsidiary of MDU Resources Group, Inc.
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Moody’s
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Moody’s Investors Service, Inc.
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Abbreviation or Acronym
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Term
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MPCA
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Minnesota Pollution Control Agency
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MPUC
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Minnesota Public Utilities Commission
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MW / MWh
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Megawatt(s) / Megawatt-hour(s)
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NDPSC
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North Dakota Public Service Commission
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NERC
|
North American Electric Reliability Corporation
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Nobles 2
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Nobles 2 Power Partners, LLC
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NOL
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Net Operating Loss
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NOX
|
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
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Northshore Mining Company, a wholly-owned subsidiary of Cliffs
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Note ___
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Note ___ to the consolidated financial statements in this Form 10-K
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NTEC
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Nemadji Trail Energy Center
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NYSE
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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
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PolyMet Mining Corp.
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PPA / PSA
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Power Purchase Agreement / Power Sales Agreement
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PPACA
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Patient Protection and Affordable Care Act of 2010
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PSCW
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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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S&P
|
S&P Global Ratings
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Silver Bay Power
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Silver Bay Power Company, a wholly-owned subsidiary of Cliffs
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SO2
|
Sulfur Dioxide
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Square Butte
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Square Butte Electric Cooperative, a North Dakota cooperative corporation
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SWL&P
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Superior Water, Light and Power Company
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Taconite Harbor
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Taconite Harbor Energy Center
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Taconite Ridge
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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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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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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, Inc. 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, bank financing and other financing sources;
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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;
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•
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the impacts of commodity prices on ALLETE and our customers;
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•
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our ability to attract and retain qualified, skilled and experienced personnel;
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•
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effects of emerging technology;
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•
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war, acts of terrorism and cybersecurity attacks;
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•
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our ability to manage expansion and integrate acquisitions;
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•
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population growth rates and demographic patterns;
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•
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wholesale power market conditions;
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•
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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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•
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effects of competition, including competition for retail and wholesale customers;
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•
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effects of restructuring initiatives in the electric industry;
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•
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the impacts on our businesses of climate change and future regulation to restrict the emissions of GHG;
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•
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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;
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•
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pricing, availability and transportation of fuel and other commodities and the ability to recover the costs of such commodities;
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•
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our current and potential industrial and municipal customers’ ability to execute announced expansion plans;
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•
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real estate market conditions where our legacy Florida real estate investment is located may not improve; and
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•
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the success of efforts to realize value from, invest in, and develop new opportunities.
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Year Ended December 31
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2019
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2018
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2017
|
|
|||
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|
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||||||
Consolidated Operating Revenue – Millions (a)(b)
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$1,240.5
|
|
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$1,498.6
|
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$1,419.3
|
|
|
|
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||||||
Percentage of Consolidated Operating Revenue
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|
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||||||
Regulated Operations
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84
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%
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71
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%
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75
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%
|
|||
ALLETE Clean Energy (a)
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5
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%
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11
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%
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6
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%
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U.S. Water Services (b)
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3
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%
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11
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%
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11
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%
|
|||
Corporate and Other
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8
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%
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7
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%
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8
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%
|
|||
|
100
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%
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100
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%
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100
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%
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(a)
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Includes the sale of a wind energy facility to Montana-Dakota Utilities for $81.1 million in 2018.
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(b)
|
ALLETE sold U.S. Water Services in the first quarter of 2019.
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Industrial Customer Kilowatt-hours Sold
|
|
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|
|||
Year Ended December 31
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2019
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|
%
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2018
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|
%
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2017
|
|
%
|
Millions
|
|
|
|
|
|
|
|||
Taconite
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5,039
|
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69
|
5,039
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69
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4,930
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67
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Paper, Pulp and Secondary Wood Products
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1,014
|
|
14
|
987
|
|
14
|
1,104
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|
15
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Pipelines and Other Industrial
|
1,224
|
|
17
|
1,235
|
|
17
|
1,293
|
|
18
|
Total Industrial Customer Kilowatt-hours Sold
|
7,277
|
|
100
|
7,261
|
|
100
|
7,327
|
|
100
|
Minnesota Power Taconite Customer Production
|
||
Year
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|
Tons (Millions)
|
2019*
|
|
37
|
2018
|
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39
|
2017
|
|
38
|
2016
|
|
28
|
2015
|
|
31
|
2014
|
|
39
|
2013
|
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37
|
2012
|
|
39
|
2011
|
|
39
|
2010
|
|
35
|
Source: Minnesota Department of Revenue 2019 Mining Tax Guide for years 2010 - 2018.
|
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* Preliminary data from the Minnesota Department of Revenue.
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Customer
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Industry
|
Location
|
Ownership
|
Earliest
Termination Date
|
ArcelorMittal – Minorca Mine
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Taconite
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Virginia, MN
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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
|
December 31, 2023
|
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
|
December 31, 2023
|
Boise, Inc. (a)
|
Paper
|
International Falls, MN
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Packaging Corporation of America
|
December 31, 2023
|
UPM Blandin
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Paper
|
Grand Rapids, MN
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UPM-Kymmene Corporation
|
December 31, 2029
|
Verso Duluth Mill
|
Paper and Pulp
|
Duluth, MN
|
Verso Corporation
|
December 31, 2024
|
Sappi Cloquet LLC (a)
|
Paper and Pulp
|
Cloquet, MN
|
Sappi Limited
|
December 31, 2023
|
(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 December 31, 2023.
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(b)
|
USS Corporation owns both the Minntac Plant in Mountain Iron, MN, and the Keewatin Taconite Plant in Keewatin, MN.
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|
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|
|
Year Ended
|
|||
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Unit
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Year
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Net
|
|
December 31, 2019
|
|||
Regulated Utility Power Supply
|
No.
|
Installed
|
Capability
|
|
Generation and Purchases
|
|||
|
|
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MW
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|
MWh
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%
|
||
Coal-Fired
|
|
|
|
|
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|
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Boswell Energy Center (a)
|
3
|
1973
|
355
|
|
|
|
|
|
in Cohasset, MN
|
4
|
1980
|
468
|
|
(b)
|
|
|
|
|
|
|
823
|
|
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4,160,011
|
|
29.6
|
Taconite Harbor Energy Center
|
1
|
1957
|
75
|
|
|
|
|
|
in Schroeder, MN
|
2
|
1957
|
75
|
|
|
|
|
|
|
|
|
150
|
|
(c)
|
—
|
|
—
|
Total Coal-Fired
|
|
|
973
|
|
|
4,160,011
|
|
29.6
|
Biomass Co-Fired / Natural Gas
|
|
|
|
|
|
|
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Hibbard Renewable Energy Center in Duluth, MN
|
3 & 4
|
1949, 1951
|
62
|
|
|
21,846
|
|
0.2
|
Laskin Energy Center in Hoyt Lakes, MN
|
1 & 2
|
1953
|
110
|
|
|
19,454
|
|
0.1
|
Total Biomass Co-Fired / Natural Gas
|
|
|
172
|
|
|
41,300
|
|
0.3
|
Hydro (d)
|
|
|
|
|
|
|
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Group consisting of ten stations in MN
|
Multiple
|
Multiple
|
120
|
|
|
643,771
|
|
4.6
|
Wind (e)
|
|
|
|
|
|
|
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Taconite Ridge Energy Center in Mt. Iron, MN
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Multiple
|
2008
|
25
|
|
|
46,808
|
|
0.3
|
Bison Wind Energy Center in Oliver and Morton Counties, ND
|
Multiple
|
2010-2014
|
497
|
|
|
1,571,045
|
|
11.2
|
Total Wind
|
|
|
522
|
|
|
1,617,853
|
|
11.5
|
Solar
|
|
|
|
|
|
|
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Camp Ripley Solar Array near Little Falls, MN
|
Multiple
|
2016
|
10
|
|
|
14,069
|
|
0.1
|
Total Generation
|
|
|
1,797
|
|
|
6,477,004
|
|
46.1
|
|
|
|
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|
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Long-Term Purchased Power
|
|
|
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|
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|
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Lignite Coal - Square Butte near Center, ND (f)
|
|
|
|
|
1,435,546
|
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10.2
|
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Wind - Oliver County, ND
|
|
|
|
|
293,761
|
|
2.1
|
|
Hydro - Manitoba Hydro in Manitoba, Canada
|
|
|
|
|
331,019
|
|
2.3
|
|
Total Long-Term Purchased Power
|
|
|
|
|
|
2,060,326
|
|
14.6
|
Other Purchased Power (g)
|
|
|
|
|
5,521,456
|
|
39.3
|
|
Total Purchased Power
|
|
|
|
|
|
7,581,782
|
|
53.9
|
Total Regulated Utility Power Supply
|
|
|
1,797
|
|
|
14,058,786
|
|
100.0
|
(a)
|
Minnesota Power retired Boswell Units 1 and 2 in the fourth quarter of 2018. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook – EnergyForward.)
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(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 Assets.)
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(c)
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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.)
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(d)
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Hydro consists of 10 stations with 34 generating units.
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(e)
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Taconite Ridge consists of 10 WTGs and Bison consists of 165 WTGs.
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(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.)
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(g)
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Includes short-term market purchases in the MISO market and from Other Power Suppliers.
|
Wind Energy Facility
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Region
|
Capacity MW
|
PSA MW
|
PSA Expiration
|
Armenia Mountain
|
East
|
101
|
100%
|
2024
|
Chanarambie/Viking
|
Midwest
|
98
|
|
|
PSA 1 (a)
|
|
|
12%
|
2023
|
PSA 2
|
|
|
88%
|
2023
|
Condon
|
West
|
50
|
100%
|
2022
|
Glen Ullin
|
West
|
106
|
100%
|
2039
|
Lake Benton
|
Midwest
|
104
|
100%
|
2028
|
Storm Lake I
|
Midwest
|
108
|
100%
|
2027
|
Storm Lake II
|
Midwest
|
77
|
|
|
PSA 1
|
|
|
90%
|
2020
|
PSA 2
|
|
|
10%
|
2032
|
Other
|
Midwest
|
17
|
100%
|
2028
|
(a)
|
The PSA expiration assumes the exercise of four one-year renewal options that ALLETE Clean Energy has the sole right to exercise.
|
Summary of Project
|
|
|
|
Residential
|
|
Non-residential
|
|||
As of December 31, 2019
|
|
Acres (a)
|
|
Units (b)
|
|
Sq. Ft. (b)(c)
|
|||
Project
|
|
|
|
|
|
|
|||
Town Center at Palm Coast
|
|
807
|
|
|
1,739
|
|
|
1,872,700
|
|
(a)
|
Acreage is 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.
|
(a)
|
On January 30, 2020, the Board of Directors of ALLETE elected Bethany M. Owen as Chief Executive Officer of ALLETE effective February 3, 2020, after Alan R. Hodnik informed the Board of Directors on January 30, 2020, that he will retire in May 2021. As part of an orderly transition, Mr. Hodnik will continue as Executive Chairman until May 2021.
|
•
|
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.
|
|
2014
|
2015
|
2016
|
2017
|
2018
|
2019
|
ALLETE
|
$100
|
$96
|
$126
|
$150
|
$158
|
$174
|
S&P 500 Index
|
$100
|
$101
|
$113
|
$138
|
$132
|
$174
|
Philadelphia Utility Index
|
$100
|
$94
|
$110
|
$124
|
$129
|
$163
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
|||||
Millions Except Per Share Amounts
|
|
|
|
|
|
||||||||||
Operating Revenue (a)(b)
|
|
$1,240.5
|
|
|
$1,498.6
|
|
|
$1,419.3
|
|
|
$1,339.7
|
|
|
$1,486.4
|
|
Operating Expenses (a)(b)
|
|
$1,060.7
|
|
|
$1,297.4
|
|
|
$1,193.4
|
|
|
$1,122.7
|
|
|
$1,274.7
|
|
Net Income (c)
|
|
$185.5
|
|
|
$174.1
|
|
|
$172.2
|
|
|
$155.8
|
|
|
$141.5
|
|
Less: Non-Controlling Interest in Subsidiaries
|
$(0.1)
|
—
|
|
—
|
|
|
$0.5
|
|
|
$0.4
|
|
||||
Net Income Attributable to ALLETE (c)
|
|
$185.6
|
|
|
$174.1
|
|
|
$172.2
|
|
|
$155.3
|
|
|
$141.1
|
|
Common Stock Dividends
|
|
$121.4
|
|
|
$115.0
|
|
|
$108.7
|
|
|
$102.7
|
|
|
$97.9
|
|
Earnings Retained in Business (c)
|
|
$64.2
|
|
|
$59.1
|
|
|
$63.5
|
|
|
$52.6
|
|
|
$43.2
|
|
Shares Outstanding
|
|
|
|
|
|
||||||||||
Year-End
|
51.7
|
|
51.5
|
|
51.1
|
|
49.6
|
|
49.1
|
|
|||||
Average
|
|
|
|
|
|
||||||||||
Basic
|
51.6
|
|
51.3
|
|
50.8
|
|
49.3
|
|
48.3
|
|
|||||
Diluted
|
51.7
|
|
51.5
|
|
51.0
|
|
49.5
|
|
48.4
|
|
|||||
Diluted Earnings Per Share (c)
|
|
$3.59
|
|
|
$3.38
|
|
|
$3.38
|
|
|
$3.14
|
|
|
$2.92
|
|
Total Assets
|
|
$5,482.8
|
|
|
$5,165.0
|
|
|
$5,080.0
|
|
|
$4,876.9
|
|
|
$4,864.4
|
|
Long-Term Debt
|
|
$1,400.9
|
|
|
$1,428.5
|
|
|
$1,439.2
|
|
|
$1,370.4
|
|
|
$1,556.7
|
|
Return on Common Equity (c)
|
8.4
|
%
|
8.3
|
%
|
8.6
|
%
|
8.4
|
%
|
8.0
|
%
|
|||||
Common Equity Ratio
|
56
|
%
|
59
|
%
|
58
|
%
|
55
|
%
|
53
|
%
|
|||||
Dividends Declared per Common Share
|
|
$2.35
|
|
|
$2.24
|
|
|
$2.14
|
|
|
$2.08
|
|
|
$2.02
|
|
Dividend Payout Ratio (c)
|
65
|
%
|
66
|
%
|
63
|
%
|
66
|
%
|
69
|
%
|
|||||
Book Value Per Share at Year-End
|
|
$43.19
|
|
|
$41.85
|
|
|
$40.46
|
|
|
$38.17
|
|
|
$37.18
|
|
Capital Expenditures by Segment
|
|
|
|
|
|
||||||||||
Regulated Operations
|
|
$230.9
|
|
|
$211.9
|
|
|
$177.1
|
|
|
$121.8
|
|
|
$224.4
|
|
ALLETE Clean Energy
|
385.6
|
|
89.7
|
|
56.1
|
|
106.9
|
|
8.6
|
|
|||||
U.S. Water Services (b)
|
—
|
|
5.0
|
|
4.4
|
|
3.7
|
|
2.9
|
|
|||||
Corporate and Other
|
10.1
|
|
12.0
|
|
28.9
|
|
15.4
|
|
15.9
|
|
|||||
Total Capital Expenditures
|
|
$626.6
|
|
|
$318.6
|
|
|
$266.5
|
|
|
$247.8
|
|
|
$251.8
|
|
(a)
|
In 2015, operating revenue and operating expenses included $197.7 million and $162.9 million, respectively, for the sale of a wind energy facility by ALLETE Clean Energy to Montana-Dakota Utilities. In 2018, operating revenue and operating expenses included $81.1 million and $67.4 million, respectively, for the sale of a wind energy facility by ALLETE Clean Energy to Montana-Dakota Utilities.
|
(b)
|
In 2019, ALLETE sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd.
|
(c)
|
The year ended December 31, 2017 included the impact of the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 11. Income Tax Expense.)
|
Year Ended December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Operating Revenue – Utility
|
|
$1,042.4
|
|
|
$1,059.5
|
|
Fuel, Purchased Power and Gas – Utility
|
390.7
|
|
407.5
|
|
||
Transmission Services – Utility
|
69.8
|
|
69.9
|
|
||
Operating and Maintenance
|
201.9
|
|
220.1
|
|
||
Depreciation and Amortization
|
159.4
|
|
158.0
|
|
||
Taxes Other than Income Taxes
|
48.4
|
|
52.5
|
|
||
Operating Income
|
172.2
|
|
151.5
|
|
||
Interest Expense
|
(58.9
|
)
|
(60.2
|
)
|
||
Equity Earnings in ATC
|
21.7
|
|
17.5
|
|
||
Other Income
|
12.3
|
|
6.7
|
|
||
Income Before Income Taxes
|
147.3
|
|
115.5
|
|
||
Income Tax Expense (Benefit)
|
(7.1
|
)
|
(15.5
|
)
|
||
Net Income Attributable to ALLETE
|
$154.4
|
|
$131.0
|
|
Kilowatt-hours Sold
|
2019
|
|
2018
|
|
Quantity
Variance
|
%
Variance
|
||
Millions
|
|
|
|
|
||||
Regulated Utility
|
|
|
|
|
||||
Retail and Municipal
|
|
|
|
|
||||
Residential
|
1,130
|
|
1,140
|
|
(10
|
)
|
(0.9
|
)
|
Commercial
|
1,390
|
|
1,426
|
|
(36
|
)
|
(2.5
|
)
|
Industrial
|
7,277
|
|
7,261
|
|
16
|
|
0.2
|
|
Municipal
|
672
|
|
798
|
|
(126
|
)
|
(15.8
|
)
|
Total Retail and Municipal
|
10,469
|
|
10,625
|
|
(156
|
)
|
(1.5
|
)
|
Other Power Suppliers
|
3,185
|
|
3,953
|
|
(768
|
)
|
(19.4
|
)
|
Total Regulated Utility Kilowatt-hours Sold
|
13,654
|
|
14,578
|
|
(924
|
)
|
(6.3
|
)
|
Year Ended December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
|
||||
Contracts with Customers – Non-utility (a)
|
|
$48.0
|
|
|
$136.3
|
|
Other – Non-utility (b)
|
11.6
|
|
23.6
|
|
||
Cost of Sales – Non-utility (a)
|
—
|
|
67.4
|
|
||
Operating and Maintenance
|
29.5
|
|
29.9
|
|
||
Depreciation and Amortization
|
26.8
|
|
24.4
|
|
||
Taxes Other than Income Taxes
|
2.1
|
|
2.1
|
|
||
Operating Income
|
1.2
|
|
36.1
|
|
||
Interest Expense
|
(2.8
|
)
|
(3.6
|
)
|
||
Other Income
|
2.0
|
|
0.2
|
|
||
Income Before Income Taxes
|
0.4
|
|
32.7
|
|
||
Income Tax Expense (Benefit)
|
(11.9
|
)
|
(1.0
|
)
|
||
Net Income
|
12.3
|
|
33.7
|
|
||
Less: Non-Controlling Interest in Subsidiaries (c)
|
(0.1
|
)
|
—
|
|
||
Net Income Attributable to ALLETE (a)
|
$12.4
|
|
$33.7
|
|
(a)
|
In 2018, operating revenue and operating expenses included $81.1 million and $67.4 million, respectively, for the sale of a wind energy facility by ALLETE Clean Energy to Montana-Dakota Utilities.
|
(b)
|
Represents non-cash amortization of differences between contract prices and estimated market prices on assumed PSAs.
|
(c)
|
See Note 1. Operations and Significant Accounting Policies.
|
|
Year Ended December 31,
|
|||||||||
|
2019
|
2018
|
||||||||
Production and Operating Revenue
|
kWh
|
Revenue
|
kWh
|
Revenue
|
||||||
Millions
|
|
|
|
|
||||||
Wind Energy Regions
|
|
|
|
|
||||||
East
|
232.9
|
|
|
$21.0
|
|
264.5
|
|
|
$24.1
|
|
Midwest
|
805.8
|
|
32.4
|
|
791.6
|
|
46.6
|
|
||
West
|
87.8
|
|
6.2
|
|
99.6
|
|
8.1
|
|
||
Total Wind Energy Facilities
|
1,126.5
|
|
59.6
|
|
1,155.7
|
|
78.8
|
|
||
Sale of Wind Energy Facility
|
—
|
|
—
|
|
—
|
|
81.1
|
|
||
Total Production and Operating Revenue
|
1,126.5
|
|
$59.6
|
1,155.7
|
|
|
$159.9
|
|
Year Ended December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
$33.4
|
|
|
$172.1
|
|
Net Income (Loss) Attributable to ALLETE
|
$(1.1)
|
|
$3.2
|
|
Year Ended December 31
|
2018
|
|
2017
|
|
||
Millions
|
|
|
||||
Operating Revenue – Utility
|
|
$1,059.5
|
|
|
$1,063.8
|
|
Fuel, Purchased Power and Gas – Utility
|
407.5
|
|
396.9
|
|
||
Transmission Services – Utility
|
69.9
|
|
71.2
|
|
||
Operating and Maintenance
|
220.1
|
|
227.3
|
|
||
Depreciation and Amortization
|
158.0
|
|
132.6
|
|
||
Taxes Other than Income Taxes
|
52.5
|
|
51.1
|
|
||
Operating Income
|
151.5
|
|
184.7
|
|
||
Interest Expense
|
(60.2
|
)
|
(57.0
|
)
|
||
Equity Earnings in ATC
|
17.5
|
|
22.5
|
|
||
Other Income
|
6.7
|
|
5.4
|
|
||
Income Before Income Taxes
|
115.5
|
|
155.6
|
|
||
Income Tax Expense (Benefit)
|
(15.5
|
)
|
27.2
|
|
||
Net Income Attributable to ALLETE
|
$131.0
|
$128.4
|
Kilowatt-hours Sold
|
2018
|
|
2017
|
|
Quantity
Variance
|
%
Variance
|
||
Millions
|
|
|
|
|
||||
Regulated Utility
|
|
|
|
|
||||
Retail and Municipal
|
|
|
|
|
||||
Residential
|
1,140
|
|
1,096
|
|
44
|
|
4.0
|
|
Commercial
|
1,426
|
|
1,420
|
|
6
|
|
0.4
|
|
Industrial
|
7,261
|
|
7,327
|
|
(66
|
)
|
(0.9
|
)
|
Municipal
|
798
|
|
799
|
|
(1
|
)
|
(0.1
|
)
|
Total Retail and Municipal
|
10,625
|
|
10,642
|
|
(17
|
)
|
(0.2
|
)
|
Other Power Suppliers
|
3,953
|
|
4,039
|
|
(86
|
)
|
(2.1
|
)
|
Total Regulated Utility Kilowatt-hours Sold
|
14,578
|
|
14,681
|
|
(103
|
)
|
(0.7
|
)
|
Year Ended December 31
|
2018
|
|
2017
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
|
||||
Contracts with Customers – Non-utility (a)
|
|
$136.3
|
|
|
$56.9
|
|
Other – Non-utility (b)
|
23.6
|
|
23.6
|
|
||
Cost of Sales – Non-utility (a)
|
67.4
|
|
—
|
|
||
Operating and Maintenance
|
29.9
|
|
23.5
|
|
||
Depreciation and Amortization
|
24.4
|
|
23.4
|
|
||
Taxes Other than Income Taxes
|
2.1
|
|
2.2
|
|
||
Operating Income
|
36.1
|
|
31.4
|
|
||
Interest Expense
|
(3.6
|
)
|
(4.2
|
)
|
||
Other Income
|
0.2
|
|
0.1
|
|
||
Income Before Income Taxes
|
32.7
|
|
27.3
|
|
||
Income Tax Expense (Benefit) (c)
|
(1.0
|
)
|
(14.2
|
)
|
||
Net Income Attributable to ALLETE
|
$33.7
|
|
$41.5
|
|
(a)
|
In 2018, operating revenue and operating expenses included $81.1 million and $67.4 million, respectively, for the sale of a wind energy facility by ALLETE Clean Energy to Montana-Dakota Utilities.
|
(b)
|
Represents non-cash amortization of differences between contract prices and estimated market prices on assumed PSAs. (See Note 1. Operations and Significant Accounting Policies.)
|
(c)
|
Income Tax Benefit 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,
|
|||||||||
|
2018
|
2017
|
||||||||
Production and Operating Revenue
|
kWh
|
Revenue
|
kWh
|
Revenue
|
||||||
Millions
|
|
|
|
|
||||||
Wind Energy Regions
|
|
|
|
|
||||||
East
|
264.5
|
|
|
$24.1
|
|
267.4
|
|
|
$24.4
|
|
Midwest
|
791.6
|
|
46.6
|
|
873.5
|
|
48.6
|
|
||
West
|
99.6
|
|
8.1
|
|
90.7
|
|
7.5
|
|
||
Total Wind Energy Facilities
|
1,155.7
|
|
78.8
|
|
1,231.6
|
|
80.5
|
|
||
Sale of Wind Energy Facility
|
—
|
|
81.1
|
|
—
|
|
—
|
|
||
Total Production and Operating Revenue
|
1,155.7
|
|
$159.9
|
1,231.6
|
|
|
$80.5
|
|
Year Ended December 31
|
2018
|
|
2017
|
|
||
Millions
|
|
|
||||
Operating Revenue
|
|
$172.1
|
|
|
$151.8
|
|
Net Income Attributable to ALLETE (a)
|
$3.2
|
|
$10.7
|
|
(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.
|
(a)
|
The PSA expiration assumes the exercise of four one-year renewal options that ALLETE Clean Energy has the sole right to exercise.
|
As of December 31
|
2019
|
|
%
|
2018
|
|
%
|
2017
|
|
%
|
|||
Millions
|
|
|
|
|
|
|
||||||
ALLETE Equity
|
|
$2,231.9
|
|
56
|
|
$2,155.8
|
|
59
|
|
$2,068.2
|
|
58
|
Non-Controlling Interest
|
103.7
|
|
3
|
—
|
|
—
|
—
|
|
—
|
|||
Long-Term Debt (Including Long-Term Debt Due Within One Year)
|
1,622.6
|
|
41
|
1,495.2
|
|
41
|
1,513.3
|
|
42
|
|||
|
|
$3,958.2
|
|
100
|
|
$3,651.0
|
|
100
|
|
$3,581.5
|
|
100
|
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
|
|
$79.0
|
|
|
$110.1
|
|
|
$38.3
|
|
Cash Flows from (used for)
|
|
|
|
||||||
Operating Activities
|
249.5
|
|
433.1
|
|
402.9
|
|
|||
Investing Activities
|
(345.3
|
)
|
(349.0
|
)
|
(229.0
|
)
|
|||
Financing Activities
|
109.3
|
|
(115.2
|
)
|
(102.1
|
)
|
|||
Change in Cash, Cash Equivalents and Restricted Cash
|
13.5
|
|
(31.1
|
)
|
71.8
|
|
|||
Cash, Cash Equivalents and Restricted Cash at End of Period
|
|
$92.5
|
|
|
$79.0
|
|
|
$110.1
|
|
Maturity Date
|
Principal Amount
|
Interest Rate
|
March 1, 2029
|
$70 Million
|
4.08%
|
March 1, 2049
|
$30 Million
|
4.47%
|
|
Payments Due by Period
|
||||||||||||||
|
|
Less than
|
1 to 3
|
4 to 5
|
After
|
||||||||||
Contractual Obligations
|
Total
|
1 Year
|
Years
|
Years
|
5 Years
|
||||||||||
Millions
|
|
|
|
|
|
||||||||||
Long-Term Debt
|
|
$2,396.7
|
|
|
$277.0
|
|
|
$301.2
|
|
|
$259.2
|
|
|
$1,559.3
|
|
Pension (a)
|
490.7
|
|
51.2
|
|
100.8
|
|
99.4
|
|
239.3
|
|
|||||
Other Postretirement Benefit Plans (a)
|
81.3
|
|
8.6
|
|
16.6
|
|
16.0
|
|
40.1
|
|
|||||
Capital Purchase Obligations
|
292.7
|
|
292.7
|
|
—
|
|
—
|
|
—
|
|
|||||
Easement Obligations
|
197.1
|
|
5.0
|
|
10.7
|
|
11.0
|
|
170.4
|
|
|||||
Operating Lease Obligations
|
35.2
|
|
6.6
|
|
11.0
|
|
6.1
|
|
11.5
|
|
|||||
PPA Obligations (b)
|
2,051.8
|
|
113.0
|
|
268.0
|
|
284.1
|
|
1,386.7
|
|
|||||
Other Purchase Obligations
|
32.5
|
|
22.8
|
|
9.6
|
|
—
|
|
0.1
|
|
|||||
Total Contractual Obligations
|
|
$5,578.0
|
|
|
$776.9
|
|
|
$717.9
|
|
|
$675.8
|
|
|
$3,407.4
|
|
(a)
|
Represents the estimated future benefit payments for our defined benefit pension and other postretirement plans through 2029.
|
(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 Nobles 2 commencing in 2020 as it is subject to construction of a wind energy facility. (See Note 9. Commitments, Guarantees and Contingencies.)
|
Credit Ratings
|
S&P
|
Moody’s
|
Issuer Credit Rating
|
BBB+
|
Baa1
|
Commercial Paper
|
A-2
|
P-2
|
First Mortgage Bonds
|
(a)
|
A2
|
(a)
|
Not rated by S&P.
|
Capital Expenditures
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Total
|
|
|||||||
Millions
|
|
|
|
|
|
|
|||||||||||||
Regulated Operations
|
|
|
|
|
|
|
|||||||||||||
|
Base and Other
|
|
$145
|
|
|
$245
|
|
|
$300
|
|
|
$235
|
|
|
$130
|
|
|
$1,055
|
|
|
Transmission Cost Recovery (a)
|
25
|
|
—
|
|
—
|
|
—
|
|
—
|
|
25
|
|
||||||
|
Nemadji Trail Energy Center (b)
|
10
|
|
65
|
|
70
|
|
165
|
|
25
|
|
335
|
|
||||||
Regulated Operations Capital Expenditures
|
180
|
|
310
|
|
370
|
|
400
|
|
155
|
|
1,415
|
|
|||||||
ALLETE Clean Energy (c)
|
340
|
|
10
|
|
5
|
|
5
|
|
10
|
|
370
|
|
|||||||
Corporate and Other
|
15
|
|
15
|
|
25
|
|
30
|
|
15
|
|
100
|
|
|||||||
Total Capital Expenditures
|
|
$535
|
|
|
$335
|
|
|
$400
|
|
|
$435
|
|
|
$180
|
|
|
$1,885
|
|
(a)
|
Estimated capital expenditures eligible for cost recovery outside of a general rate case, including our portion of transmission capital expenditures related to construction of the GNTL. (See Item 1. Business – Regulated Operations – Transmission and Distribution.)
|
(b)
|
Our portion of estimated capital expenditures for construction of NTEC, a 525 MW to 625 MW combined-cycle natural gas-fired generating facility which will be jointly owned by Dairyland Power Cooperative and a subsidiary of ALLETE.
|
(c)
|
Capital expenditures in 2020 include construction of an 80 MW wind energy facility and a 300 MW wind energy facility that ALLETE Clean Energy will build, own and operate. These capital expenditures do not include the cost of safe harbor turbines purchased previously. (See Outlook – ALLETE Clean Energy.)
|
|
Expected Maturity Date
|
|||||||||||||||||||||||
Interest Rate Sensitive
Financial Instruments
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
Fair Value
|
|||||||||
Long-Term Debt
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed Rate – Millions
|
|
$89.8
|
|
|
$98.6
|
|
|
$88.8
|
|
|
$88.8
|
|
|
$73.5
|
|
|
$1,031.8
|
|
|
$1,471.3
|
|
|
$1,640.5
|
|
Average Interest Rate – %
|
4.2
|
|
3.9
|
|
3.7
|
|
5.9
|
|
3.9
|
|
4.4
|
|
4.4
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
Variable Rate – Millions
|
|
$123.5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
$27.8
|
|
|
$151.3
|
|
|
$151.3
|
|
||||
Average Interest Rate – %
|
2.7
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1.7
|
|
2.5
|
|
|
•
|
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) Delinquency. If applicable, information regarding Section 16(a) delinquencies will be included in a “Delinquent Section 16(a) Reports” 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 (a)
|
Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b)
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (c)
|
|||
|
|
|
|
|||
Equity Compensation Plans Approved by Security Holders
|
150,181
|
|
—
|
|
857,656
|
|
Equity Compensation Plans Not Approved by Security Holders
|
—
|
|
—
|
|
—
|
|
Total
|
150,181
|
|
—
|
|
857,656
|
|
(a)
|
Includes the following: (i) 25,196 securities representing the performance shares (including accrued dividends) granted under the executive long-term incentive compensation plan that vested but were not paid as of December 31, 2019; (ii) 60,656 securities representing the target number of performance share awards (including accrued dividends) granted under the executive long-term incentive compensation plan that were unvested as of December 31, 2019; and (iii) 64,329 director deferred stock units (including accrued dividends) under the non-employee director compensation deferral plan as of December 31, 2019. With respect to unvested performance share awards, the actual number of shares to be issued will vary from 0 percent to 200 percent of the target level depending upon the achievement of total shareholder return objectives established for such awards. For additional information about the performance shares, including payout calculations, see our 2020 Proxy Statement.
|
(b)
|
Earned performance share awards are paid in shares of ALLETE common stock on a one-for-one basis. Accordingly, these awards do not have a weighted-average exercise price.
|
(c)
|
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) 707,353 shares available for issuance under the executive long-term incentive compensation 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) 45,379 shares available for issuance under the Non-Employee Director Stock Plan as payment for a portion of the annual retainer payable to non-employee Directors; and (iii) 104,925 shares available for issuance under the ALLETE and Affiliated Companies Employee Stock Purchase Plan.
|
Exhibit Number
|
||||||
|
—
|
|
||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
Exhibit Number
|
||||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
—
|
|
|||||
101.INS
|
—
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|||
101.SCH
|
—
|
|
XBRL Schema
|
|||
101.CAL
|
—
|
|
XBRL Calculation
|
|||
101.DEF
|
—
|
|
XBRL Definition
|
|||
101.LAB
|
—
|
|
XBRL Label
|
|||
101.PRE
|
—
|
|
XBRL Presentation
|
|||
104
|
—
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
•
|
$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 13, 2020
|
By
|
/s/ Alan R. Hodnik
|
|
|
Alan R. Hodnik
|
|
|
|
Executive Chairman and Director
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Bethany M. Owen
|
|
President, Chief Executive Officer and Director
|
|
February 13, 2020
|
Bethany M. Owen
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Robert J. Adams
|
|
Senior Vice President and Chief Financial Officer
|
|
February 13, 2020
|
Robert J. Adams
|
|
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/ Steven W. Morris
|
|
Vice President, Controller and Chief Accounting Officer
|
|
February 13, 2020
|
Steven W. Morris
|
|
(Principal Accounting Officer)
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Kathryn W. Dindo
|
|
Director
|
|
February 13, 2020
|
Kathryn W. Dindo
|
|
|
|
|
|
|
|
|
|
/s/ George G. Goldfarb
|
|
Director
|
|
February 13, 2020
|
George G. Goldfarb
|
|
|
|
|
|
|
|
|
|
/s/ James J. Hoolihan
|
|
Director
|
|
February 13, 2020
|
James J. Hoolihan
|
|
|
|
|
|
|
|
|
|
/s/ Heidi E. Jimmerson
|
|
Director
|
|
February 13, 2020
|
Heidi E. Jimmerson
|
|
|
|
|
|
|
|
|
|
/s/ Madeleine W. Ludlow
|
|
Director
|
|
February 13, 2020
|
Madeleine W. Ludlow
|
|
|
|
|
|
|
|
|
|
/s/ Susan K. Nestegard
|
|
Director
|
|
February 13, 2020
|
Susan K. Nestegard
|
|
|
|
|
|
|
|
|
|
/s/ Douglas C. Neve
|
|
Director
|
|
February 13, 2020
|
Douglas C. Neve
|
|
|
|
|
|
|
|
|
|
/s/ Robert P. Powers
|
|
Director
|
|
February 13, 2020
|
Robert P. Powers
|
|
|
|
|
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Assets
|
|
|
||||
Current Assets
|
|
|
||||
Cash and Cash Equivalents
|
|
$69.3
|
|
|
$69.1
|
|
Accounts Receivable (Less Allowance of $0.9 and $1.7)
|
96.4
|
|
144.4
|
|
||
Inventories – Net
|
72.8
|
|
86.7
|
|
||
Prepayments and Other
|
31.0
|
|
34.1
|
|
||
Total Current Assets
|
269.5
|
|
334.3
|
|
||
Property, Plant and Equipment – Net
|
4,377.0
|
|
3,904.4
|
|
||
Regulatory Assets
|
420.5
|
|
389.5
|
|
||
Equity Investments
|
197.6
|
|
161.1
|
|
||
Goodwill and Intangible Assets – Net
|
1.0
|
|
223.3
|
|
||
Other Non-Current Assets
|
217.2
|
|
152.4
|
|
||
Total Assets
|
|
$5,482.8
|
|
|
$5,165.0
|
|
Liabilities and Equity
|
|
|
||||
Liabilities
|
|
|
||||
Current Liabilities
|
|
|
||||
Accounts Payable
|
|
$165.2
|
|
|
$149.8
|
|
Accrued Taxes
|
50.8
|
|
51.4
|
|
||
Accrued Interest
|
18.1
|
|
17.9
|
|
||
Long-Term Debt Due Within One Year
|
212.9
|
|
57.5
|
|
||
Other
|
60.4
|
|
128.5
|
|
||
Total Current Liabilities
|
507.4
|
|
405.1
|
|
||
Long-Term Debt
|
1,400.9
|
|
1,428.5
|
|
||
Deferred Income Taxes
|
212.8
|
|
223.6
|
|
||
Regulatory Liabilities
|
560.3
|
|
512.1
|
|
||
Defined Benefit Pension and Other Postretirement Benefit Plans
|
172.8
|
|
177.3
|
|
||
Other Non-Current Liabilities
|
293.0
|
|
262.6
|
|
||
Total Liabilities
|
3,147.2
|
|
3,009.2
|
|
||
Commitments, Guarantees and Contingencies (Note 9)
|
|
|
||||
Equity
|
|
|
||||
ALLETE’s Equity
|
|
|
||||
Common Stock Without Par Value, 80.0 Shares Authorized, 51.7 and 51.5 Shares Issued and Outstanding
|
1,436.7
|
|
1,428.5
|
|
||
Accumulated Other Comprehensive Loss
|
(23.6
|
)
|
(27.3
|
)
|
||
Retained Earnings
|
818.8
|
|
754.6
|
|
||
Total ALLETE Equity
|
2,231.9
|
|
2,155.8
|
|
||
Non-Controlling Interest in Subsidiaries
|
103.7
|
|
—
|
|
||
Total Equity
|
2,335.6
|
|
2,155.8
|
|
||
Total Liabilities and Equity
|
|
$5,482.8
|
|
|
$5,165.0
|
|
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions Except Per Share Amounts
|
|
|
|
||||||
Operating Revenue
|
|
|
|
||||||
Contracts with Customers – Utility
|
|
$1,042.4
|
|
|
$1,059.5
|
|
|
$1,063.8
|
|
Contracts with Customers – Non-utility
|
186.5
|
|
415.5
|
|
331.9
|
|
|||
Other – Non-utility
|
11.6
|
|
23.6
|
|
23.6
|
|
|||
Total Operating Revenue
|
1,240.5
|
|
1,498.6
|
|
1,419.3
|
|
|||
Operating Expenses
|
|
|
|
||||||
Fuel, Purchased Power and Gas – Utility
|
390.7
|
|
407.5
|
|
396.9
|
|
|||
Transmission Services – Utility
|
69.8
|
|
69.9
|
|
71.2
|
|
|||
Cost of Sales – Non-utility
|
80.6
|
|
218.0
|
|
147.5
|
|
|||
Operating and Maintenance
|
264.3
|
|
340.5
|
|
344.1
|
|
|||
Depreciation and Amortization
|
202.0
|
|
205.6
|
|
177.5
|
|
|||
Taxes Other than Income Taxes
|
53.3
|
|
57.9
|
|
56.9
|
|
|||
Other
|
—
|
|
(2.0
|
)
|
(0.7
|
)
|
|||
Total Operating Expenses
|
1,060.7
|
|
1,297.4
|
|
1,193.4
|
|
|||
Operating Income
|
179.8
|
|
201.2
|
|
225.9
|
|
|||
Other Income (Expense)
|
|
|
|
||||||
Interest Expense
|
(64.9
|
)
|
(67.9
|
)
|
(67.8
|
)
|
|||
Equity Earnings
|
21.7
|
|
17.5
|
|
22.5
|
|
|||
Gain on Sale of U.S. Water Services
|
23.6
|
|
—
|
|
—
|
|
|||
Other
|
18.7
|
|
7.8
|
|
6.3
|
|
|||
Total Other Expense
|
(0.9
|
)
|
(42.6
|
)
|
(39.0
|
)
|
|||
Income Before Non-Controlling Interest and Income Taxes
|
178.9
|
|
158.6
|
|
186.9
|
|
|||
Income Tax Expense (Benefit)
|
(6.6
|
)
|
(15.5
|
)
|
14.7
|
|
|||
Net Income
|
185.5
|
|
174.1
|
|
172.2
|
|
|||
Less: Non-Controlling Interest in Subsidiaries
|
(0.1
|
)
|
—
|
|
—
|
|
|||
Net Income Attributable to ALLETE
|
|
$185.6
|
|
|
$174.1
|
|
|
$172.2
|
|
Average Shares of Common Stock
|
|
|
|
||||||
Basic
|
51.6
|
|
51.3
|
|
50.8
|
|
|||
Diluted
|
51.7
|
|
51.5
|
|
51.0
|
|
|||
Basic Earnings Per Share of Common Stock
|
|
$3.59
|
|
|
$3.39
|
|
|
$3.39
|
|
Diluted Earnings Per Share of Common Stock
|
|
$3.59
|
|
|
$3.38
|
|
|
$3.38
|
|
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Net Income
|
|
$185.5
|
|
|
$174.1
|
|
|
$172.2
|
|
Other Comprehensive Income (Loss)
|
|
|
|
||||||
Unrealized Gain (Loss) on Securities
|
|
|
|
||||||
Net of Income Tax Expense of $0.1, $– and $0.7
|
0.2
|
|
(0.1
|
)
|
0.9
|
|
|||
Defined Benefit Pension and Other Postretirement Benefit Plans
|
|
|
|
||||||
Net of Income Tax Expense of $1.4, $0.3 and $2.2
|
3.5
|
|
1.0
|
|
4.7
|
|
|||
Total Other Comprehensive Income
|
3.7
|
|
0.9
|
|
5.6
|
|
|||
Total Comprehensive Income
|
189.2
|
|
175.0
|
|
177.8
|
|
|||
Less: Non-Controlling Interest in Subsidiaries
|
(0.1
|
)
|
—
|
|
—
|
|
|||
Total Comprehensive Income Attributable to ALLETE
|
|
$189.3
|
|
|
$175.0
|
|
|
$177.8
|
|
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Operating Activities
|
|
|
|
||||||
Net Income
|
|
$185.5
|
|
|
$174.1
|
|
|
$172.2
|
|
AFUDC – Equity
|
(2.3
|
)
|
(1.2
|
)
|
(1.2
|
)
|
|||
Income from Equity Investments – Net of Dividends
|
(5.6
|
)
|
(2.3
|
)
|
(3.2
|
)
|
|||
Change in Fair Value of Contingent Consideration
|
—
|
|
(2.0
|
)
|
(0.7
|
)
|
|||
Deferred Fuel Adjustment Clause Charge
|
—
|
|
—
|
|
19.5
|
|
|||
Loss (Gain) on Sales of Investments and Property, Plant and Equipment
|
(1.7
|
)
|
1.0
|
|
0.4
|
|
|||
Depreciation Expense
|
200.6
|
|
200.1
|
|
171.9
|
|
|||
Amortization of PSAs
|
(11.6
|
)
|
(23.6
|
)
|
(23.6
|
)
|
|||
Amortization of Other Intangible Assets and Other Assets
|
13.0
|
|
10.4
|
|
10.2
|
|
|||
Deferred Income Tax Expense (Benefit)
|
(6.7
|
)
|
(15.8
|
)
|
14.4
|
|
|||
Share-Based and ESOP Compensation Expense
|
6.3
|
|
6.8
|
|
6.6
|
|
|||
Defined Benefit Pension and Other Postretirement Benefit Expense
|
1.2
|
|
8.6
|
|
10.1
|
|
|||
Bad Debt Expense
|
(0.1
|
)
|
1.1
|
|
0.8
|
|
|||
Provision (Payments) for Interim Rate Refund
|
(40.0
|
)
|
16.3
|
|
32.3
|
|
|||
Provision (Payments) for Tax Reform Refund
|
(10.4
|
)
|
10.7
|
|
—
|
|
|||
Gain on Sale of U.S. Water Services
|
(23.6
|
)
|
—
|
|
—
|
|
|||
Changes in Operating Assets and Liabilities
|
|
|
|
||||||
Accounts Receivable
|
22.6
|
|
(10.7
|
)
|
(8.0
|
)
|
|||
Inventories
|
(4.1
|
)
|
55.5
|
|
11.9
|
|
|||
Prepayments and Other
|
0.3
|
|
(4.0
|
)
|
(5.3
|
)
|
|||
Accounts Payable
|
(8.8
|
)
|
13.6
|
|
(7.5
|
)
|
|||
Other Current Liabilities
|
(13.7
|
)
|
6.7
|
|
1.8
|
|
|||
Cash Contributions to Defined Benefit Pension Plans
|
(10.4
|
)
|
(15.0
|
)
|
(1.7
|
)
|
|||
Changes in Regulatory and Other Non-Current Assets
|
(25.1
|
)
|
6.7
|
|
33.7
|
|
|||
Changes in Regulatory and Other Non-Current Liabilities
|
(15.9
|
)
|
(3.9
|
)
|
(31.7
|
)
|
|||
Cash from Operating Activities
|
249.5
|
|
433.1
|
|
402.9
|
|
|||
Investing Activities
|
|
|
|
||||||
Proceeds from Sale of Available-for-sale Securities
|
12.1
|
|
10.2
|
|
10.1
|
|
|||
Payments for Purchase of Available-for-sale Securities
|
(12.2
|
)
|
(13.3
|
)
|
(8.6
|
)
|
|||
Acquisitions of Subsidiaries – Net of Cash and Restricted Cash Acquired
|
—
|
|
—
|
|
(18.5
|
)
|
|||
Equity Investments
|
(37.9
|
)
|
(39.2
|
)
|
(7.8
|
)
|
|||
Return of Capital from Equity Investments
|
8.3
|
|
—
|
|
—
|
|
|||
Additions to Property, Plant and Equipment
|
(597.1
|
)
|
(312.4
|
)
|
(208.5
|
)
|
|||
Proceeds from Sale of U.S. Water Services – Net of Transaction Costs and Cash Retained
|
268.6
|
|
—
|
|
—
|
|
|||
Other Investing Activities
|
12.9
|
|
5.7
|
|
4.3
|
|
|||
Cash for Investing Activities
|
(345.3
|
)
|
(349.0
|
)
|
(229.0
|
)
|
|||
Financing Activities
|
|
|
|
||||||
Proceeds from Issuance of Common Stock
|
1.9
|
|
20.3
|
|
86.0
|
|
|||
Proceeds from Issuance of Long-Term Debt
|
201.9
|
|
75.6
|
|
131.5
|
|
|||
Repayments of Long-Term Debt
|
(72.2
|
)
|
(95.5
|
)
|
(189.6
|
)
|
|||
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs
|
103.8
|
|
—
|
|
—
|
|
|||
Acquisition-Related Contingent Consideration Payments
|
(3.8
|
)
|
—
|
|
(19.7
|
)
|
|||
Dividends on Common Stock
|
(121.4
|
)
|
(115.0
|
)
|
(108.7
|
)
|
|||
Other Financing Activities
|
(0.9
|
)
|
(0.6
|
)
|
(1.6
|
)
|
|||
Cash (for) from Financing Activities
|
109.3
|
|
(115.2
|
)
|
(102.1
|
)
|
|||
Change in Cash, Cash Equivalents and Restricted Cash
|
13.5
|
|
(31.1
|
)
|
71.8
|
|
|||
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
|
79.0
|
|
110.1
|
|
38.3
|
|
|||
Cash, Cash Equivalents and Restricted Cash at End of Period
|
|
$92.5
|
|
|
$79.0
|
|
|
$110.1
|
|
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions Except Per Share Amounts
|
|
|
|
||||||
Common Stock
|
|
|
|
||||||
Balance, Beginning of Period
|
|
$1,428.5
|
|
|
$1,401.4
|
|
|
$1,295.3
|
|
Common Stock Issued
|
8.2
|
|
27.1
|
|
106.1
|
|
|||
Balance, End of Period
|
1,436.7
|
|
1,428.5
|
|
1,401.4
|
|
|||
|
|
|
|
||||||
Accumulated Other Comprehensive Loss
|
|
|
|
||||||
Balance, Beginning of Period
|
(27.3
|
)
|
(22.6
|
)
|
(28.2
|
)
|
|||
Adjustments to Opening Balance – Net of Income Taxes (a)
|
—
|
|
(5.6
|
)
|
—
|
|
|||
Other Comprehensive Income – Net of Income Taxes
|
|
|
|
||||||
Unrealized Gain (Loss) on Debt Securities
|
0.2
|
|
(0.1
|
)
|
0.9
|
|
|||
Defined Benefit Pension and Other Postretirement Plans
|
3.5
|
|
1.0
|
|
4.7
|
|
|||
Balance, End of Period
|
(23.6
|
)
|
(27.3
|
)
|
(22.6
|
)
|
|||
|
|
|
|
||||||
Retained Earnings
|
|
|
|
||||||
Balance, Beginning of Period
|
754.6
|
|
689.4
|
|
625.9
|
|
|||
Adjustments to Opening Balance – Net of Income Taxes (a)
|
—
|
|
6.1
|
|
—
|
|
|||
Net Income
|
185.6
|
|
174.1
|
|
172.2
|
|
|||
Common Stock Dividends
|
(121.4
|
)
|
(115.0
|
)
|
(108.7
|
)
|
|||
Balance, End of Period
|
818.8
|
|
754.6
|
|
689.4
|
|
|||
|
|
|
|
||||||
Non-Controlling Interest in Subsidiaries
|
|
|
|
||||||
Balance, Beginning of Period
|
—
|
|
—
|
|
—
|
|
|||
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs
|
103.8
|
|
—
|
|
—
|
|
|||
Net Loss
|
(0.1
|
)
|
—
|
|
—
|
|
|||
Balance, End of Period
|
103.7
|
|
—
|
|
—
|
|
|||
|
|
|
|
||||||
Total Equity
|
|
$2,335.6
|
|
|
$2,155.8
|
|
|
$2,068.2
|
|
|
|
|
|
||||||
Dividends Per share of Common Stock
|
|
$2.35
|
|
|
$2.24
|
|
|
$2.14
|
|
(a)
|
Reflects the impacts associated with the adoption of accounting standards concerning Financial Instruments, Revenue from Contracts with Customers and the Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. (See Note 1. Operations and Significant Accounting Policies.)
|
Cash, Cash Equivalents and Restricted Cash
|
December 31,
2019 |
|
|
December 31,
2018 |
|
|
December 31,
2017 |
|
|||
Millions
|
|
|
|
|
|
||||||
Cash and Cash Equivalents
|
|
$69.3
|
|
|
|
$69.1
|
|
|
|
$98.9
|
|
Restricted Cash included in Prepayments and Other
|
2.8
|
|
|
1.3
|
|
|
2.6
|
|
|||
Restricted Cash included in Other Non-Current Assets
|
20.4
|
|
|
8.6
|
|
|
8.6
|
|
|||
Cash, Cash Equivalents and Restricted Cash on the Consolidated Statement of Cash Flows
|
|
$92.5
|
|
|
|
$79.0
|
|
|
|
$110.1
|
|
Consolidated Statement of Cash Flows
|
|
|
|
||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Cash Paid During the Period for Interest – Net of Amounts Capitalized
|
|
$63.5
|
|
|
$66.0
|
|
|
$64.5
|
|
Recognition of Right-of-use Assets and Lease Liabilities (a)
|
|
$28.7
|
|
—
|
|
—
|
|
||
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
|
$33.9
|
$(0.1)
|
$67.2
|
||||||
Reclassification of Property, Plant and Equipment to Inventory (b)
|
—
|
|
|
$46.3
|
|
—
|
|
||
Capitalized Asset Retirement Costs
|
$20.7
|
$14.2
|
$(15.6)
|
||||||
AFUDC–Equity
|
|
$2.3
|
|
|
$1.2
|
|
|
$1.2
|
|
ALLETE Common Stock Contributed to Pension Plans
|
—
|
|
—
|
|
|
$13.5
|
|
(a)
|
See Leases.
|
(b)
|
In February 2018, Montana-Dakota Utilities exercised its option to purchase the Thunder Spirit II wind energy facility upon completion, resulting in a reclassification from Property, Plant and Equipment – Net to Inventories – Net for project costs incurred in the prior year. On the Consolidated Statement of Cash Flows, the sale of the wind energy facility in the fourth quarter of 2018 resulted in Operating Activities – Inventories increasing by $46.3 million in 2018 due to the project costs incurred in the prior year.
|
Accounts Receivable
|
|
|
|
||||
As of December 31
|
2019
|
|
|
2018
|
|
||
Millions
|
|
|
|
||||
Trade Accounts Receivable (a)
|
|
|
|
||||
Billed
|
|
$77.2
|
|
|
|
$121.7
|
|
Unbilled
|
20.1
|
|
|
24.4
|
|
||
Less: Allowance for Doubtful Accounts
|
0.9
|
|
|
1.7
|
|
||
Total Accounts Receivable
|
|
$96.4
|
|
|
|
$144.4
|
|
(a)
|
On March 26, 2019, ALLETE sold U.S. Water Services which resulted in the removal of the related accounts receivable from the Consolidated Balance Sheet.
|
Inventories – Net
|
|
|
|
||||
As of December 31
|
2019
|
|
|
2018
|
|
||
Millions
|
|
|
|
||||
Fuel (a)
|
|
$25.9
|
|
|
|
$26.0
|
|
Materials and Supplies
|
46.9
|
|
|
44.2
|
|
||
Raw Materials (b)
|
—
|
|
|
2.8
|
|
||
Work in Progress (b)
|
—
|
|
|
6.1
|
|
||
Finished Goods (b)
|
—
|
|
|
8.4
|
|
||
Reserve for Obsolescence (b)
|
—
|
|
|
(0.8
|
)
|
||
Total Inventories – Net
|
|
$72.8
|
|
|
|
$86.7
|
|
(a)
|
Fuel consists primarily of coal inventory at Minnesota Power.
|
Other Non-Current Assets
|
|
|
|
||||
As of December 31
|
2019
|
|
|
2018
|
|
||
Millions
|
|
|
|
||||
Contract Assets (a)
|
|
$28.0
|
|
|
|
$30.7
|
|
Finance Receivable (b)
|
—
|
|
|
10.4
|
|
||
Operating Lease Right-of-use Assets (c)
|
28.6
|
|
|
—
|
|
||
ALLETE Properties
|
21.9
|
|
|
24.4
|
|
||
Restricted Cash
|
20.4
|
|
|
8.6
|
|
||
Other Postretirement Benefit Plans
|
37.5
|
|
|
0.4
|
|
||
Other
|
80.8
|
|
|
77.9
|
|
||
Total Other Non-Current Assets
|
|
$217.2
|
|
|
|
$152.4
|
|
(a)
|
Contract Assets include payments made to customers as an incentive to execute or extend service agreements. The contract payments are being amortized over the term of the respective agreements as a reduction to revenue.
|
(b)
|
Finance Receivable related to the 2016 sale of Ormond Crossings and Lake Swamp, which was collected in the second quarter of 2019.
|
(c)
|
See Leases.
|
Other Current Liabilities
|
|
|
|
||||
As of December 31
|
2019
|
|
|
2018
|
|
||
Millions
|
|
|
|
||||
Provision for Interim Rate Refund (a)
|
—
|
|
|
|
$40.0
|
|
|
PSAs
|
|
$12.3
|
|
|
12.6
|
|
|
Contract Liabilities (b)
|
—
|
|
|
7.6
|
|
||
Provision for Tax Reform Refund (c)
|
0.2
|
|
|
10.7
|
|
||
Contingent Consideration (d)
|
—
|
|
|
3.8
|
|
||
Operating Lease Liabilities (e)
|
6.9
|
|
|
—
|
|
||
Other
|
41.0
|
|
|
53.8
|
|
||
Total Other Current Liabilities
|
|
$60.4
|
|
|
|
$128.5
|
|
(b)
|
Contract Liabilities consist of deposits received as a result of entering into contracts with our customers prior to completing our performance obligations.
|
(c)
|
Provision for Tax Reform Refund related to the income tax benefits of the TCJA in 2018 was refunded to Minnesota Power customers in the first quarter of 2019 and is being returned to SWL&P customers through 2020.
|
(d)
|
Contingent Consideration related to the earnings-based payment resulting from the U.S. Water Services acquisition was paid in the first quarter of 2019.
|
(e)
|
See Leases.
|
Other Non-Current Liabilities
|
|
|
|
||||
As of December 31
|
2019
|
|
|
2018
|
|
||
Millions
|
|
|
|
||||
Asset Retirement Obligation
|
|
$160.3
|
|
|
|
$138.6
|
|
PSAs
|
64.6
|
|
|
76.9
|
|
||
Operating Lease Liabilities (a)
|
21.8
|
|
|
—
|
|
||
Other
|
46.3
|
|
|
47.1
|
|
||
Total Other Non-Current Liabilities
|
|
$293.0
|
|
|
|
$262.6
|
|
(a)
|
See Leases.
|
|
December 31, 2019
|
|
|
Millions
|
|
||
Operating Lease Cost
|
|
$9.4
|
|
|
|
||
Other Information:
|
|
||
Operating Cash Flows From Operating Leases
|
|
$9.4
|
|
|
December 31, 2019
|
|
|
Millions
|
|
||
Balance Sheet Information Related to Leases:
|
|
||
Other Non-Current Assets
|
|
$28.6
|
|
Total Operating Lease Right-of-use Assets
|
|
$28.6
|
|
|
|
||
Other Current Liabilities
|
|
$6.9
|
|
Other Non-Current Liabilities
|
21.8
|
|
|
Total Operating Lease Liabilities
|
|
$28.7
|
|
|
|
||
Weighted Average Remaining Lease Term (Years):
|
|
||
Operating Leases - Vehicles and Equipment
|
4
|
|
|
Operating Leases - Land and Other
|
28
|
|
|
|
|
||
Weighted Average Discount Rate:
|
|
||
Operating Leases - Vehicles and Equipment
|
3.7
|
%
|
|
Operating Leases - Land and Other
|
4.1
|
%
|
|
December 31, 2019
|
|
|
Millions
|
|
||
2020
|
|
$6.6
|
|
2021
|
6.0
|
|
|
2022
|
5.0
|
|
|
2023
|
3.2
|
|
|
2024
|
2.9
|
|
|
Thereafter
|
11.5
|
|
|
Total Lease Payments Due
|
35.2
|
|
|
Less: Imputed Interest
|
6.5
|
|
|
Total Lease Obligations
|
28.7
|
|
|
Less: Current Lease Obligations
|
6.9
|
|
|
Total Long-term Lease Obligations
|
|
$21.8
|
|
Operating Expenses – Other
|
|
|
|
Year Ended December 31
|
2019
|
2018
|
2017
|
Millions
|
|
|
|
Change in Fair Value of Contingent Consideration (a)
|
—
|
$(2.0)
|
$(0.7)
|
Total Operating Expenses – Other
|
—
|
$(2.0)
|
$(0.7)
|
(a)
|
Contingent Consideration related to the earnings-based payment resulting from the U.S. Water Services acquisition was paid in the first quarter of 2019. (See Note 7. Fair Value.)
|
Other Income (Expense) - Other
|
|
|
|
||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Pension and Other Postretirement Benefit Plan Non-Service Credit (a)
|
|
$7.7
|
|
|
$4.6
|
|
|
$3.9
|
|
Interest and Investment Earnings
|
4.4
|
|
0.5
|
|
1.8
|
|
|||
AFUDC - Equity
|
2.3
|
|
1.2
|
|
1.2
|
|
|||
Gain (Loss) on Land Sales
|
2.1
|
|
0.9
|
|
(0.5
|
)
|
|||
Other
|
2.2
|
|
0.6
|
|
(0.1
|
)
|
|||
Total Other Income (Expense) - Other
|
|
$18.7
|
|
|
$7.8
|
|
|
$6.3
|
|
(a)
|
These are components of net periodic pension and other postretirement benefit cost other than service cost. (See Note 12. Pension and Other Postretirement Benefit Plans.)
|
Property, Plant and Equipment
|
|
|
|
||||
As of December 31
|
2019
|
|
|
2018
|
|
||
Millions
|
|
|
|
||||
Regulated Operations
|
|
|
|
||||
Property, Plant and Equipment in Service
|
|
$4,555.8
|
|
|
|
$4,490.6
|
|
Construction Work in Progress
|
383.6
|
|
|
251.1
|
|
||
Accumulated Depreciation
|
(1,635.3
|
)
|
|
(1,549.6
|
)
|
||
Regulated Operations – Net
|
3,304.1
|
|
|
3,192.1
|
|
||
ALLETE Clean Energy
|
|
|
|
||||
Property, Plant and Equipment in Service
|
686.0
|
|
|
488.4
|
|
||
Construction Work in Progress
|
351.3
|
|
|
164.5
|
|
||
Accumulated Depreciation
|
(86.8
|
)
|
|
(73.0
|
)
|
||
ALLETE Clean Energy – Net
|
950.5
|
|
|
579.9
|
|
||
U.S. Water Services (a)
|
|
|
|
||||
Property, Plant and Equipment in Service
|
—
|
|
|
30.1
|
|
||
Accumulated Depreciation
|
—
|
|
|
(14.0
|
)
|
||
U.S. Water Services – Net
|
—
|
|
|
16.1
|
|
||
Corporate and Other (b)
|
|
|
|
||||
Property, Plant and Equipment in Service
|
231.9
|
|
|
214.3
|
|
||
Construction Work in Progress
|
3.8
|
|
|
6.6
|
|
||
Accumulated Depreciation
|
(113.3
|
)
|
|
(104.6
|
)
|
||
Corporate and Other – Net
|
122.4
|
|
|
116.3
|
|
||
Property, Plant and Equipment – Net
|
|
$4,377.0
|
|
|
|
$3,904.4
|
|
(a)
|
On March 26, 2019, ALLETE completed the sale of U.S. Water Services. (See Note 1. Operations and Significant Accounting Policies.)
|
(b)
|
Primarily includes BNI Energy and a small amount of non-rate base generation.
|
Asset Retirement Obligations
|
|
|
||
Millions
|
|
|
||
Obligation as of December 31, 2017
|
|
|
$122.7
|
|
Accretion
|
|
7.0
|
|
|
Liabilities Settled
|
|
(5.3
|
)
|
|
Revisions in Estimated Cash Flows
|
|
14.2
|
|
|
Obligation as of December 31, 2018
|
|
138.6
|
|
|
Accretion
|
|
7.2
|
|
|
Liabilities Recognized
|
|
1.4
|
|
|
Liabilities Settled
|
|
(4.6
|
)
|
|
Revisions in Estimated Cash Flows
|
|
17.7
|
|
|
Obligation as of December 31, 2019
|
|
|
$160.3
|
|
Regulated Utility Plant
|
Plant in Service
|
Accumulated Depreciation
|
Construction Work in Progress
|
% Ownership
|
||||||
Millions
|
|
|
|
|
||||||
As of December 31, 2019
|
|
|
|
|
||||||
Boswell Unit 4
|
|
$662.7
|
|
|
$258.9
|
|
|
$5.7
|
|
80
|
CapX2020
|
101.0
|
|
13.5
|
|
—
|
|
9.3 - 14.7
|
|||
Total
|
|
$763.7
|
|
|
$272.4
|
|
|
$5.7
|
|
|
As of December 31, 2018
|
|
|
|
|
||||||
Boswell Unit 4
|
|
$650.1
|
|
|
$229.9
|
|
|
$6.4
|
|
80
|
CapX2020
|
101.0
|
|
11.0
|
|
—
|
|
9.3 - 14.7
|
|||
Total
|
|
$751.1
|
|
|
$240.9
|
|
|
$6.4
|
|
|
Regulatory Assets and Liabilities
|
|
|
||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Non-Current Regulatory Assets
|
|
|
||||
Defined Benefit Pension and Other Postretirement Benefit Plans (a)
|
|
$212.9
|
|
|
$218.5
|
|
Income Taxes (b)
|
123.4
|
|
105.5
|
|
||
Asset Retirement Obligations (c)
|
32.0
|
|
32.6
|
|
||
Cost Recovery Riders (d)
|
24.7
|
|
—
|
|
||
Boswell 1 & 2 Net Plant and Equipment (e)
|
10.7
|
|
16.3
|
|
||
Manufactured Gas Plant (f)
|
8.2
|
|
8.0
|
|
||
PPACA Income Tax Deferral
|
4.8
|
|
5.0
|
|
||
Other
|
3.8
|
|
3.6
|
|
||
Total Non-Current Regulatory Assets
|
|
$420.5
|
|
|
$389.5
|
|
Current Regulatory Liabilities (g)
|
|
|
||||
Provision for Interim Rate Refund (h)
|
—
|
|
|
$40.0
|
|
|
Provision for Tax Reform Refund (i)
|
|
$0.2
|
|
10.7
|
|
|
Transmission Formula Rates
|
1.7
|
|
4.4
|
|
||
Total Current Regulatory Liabilities
|
1.9
|
|
55.1
|
|
||
Non-Current Regulatory Liabilities
|
|
|
||||
Income Taxes (b)
|
407.2
|
|
396.4
|
|
||
Wholesale and Retail Contra AFUDC (j)
|
79.3
|
|
64.4
|
|
||
Plant Removal Obligations (k)
|
35.5
|
|
25.1
|
|
||
Defined Benefit Pension and Other Postretirement Benefit Plans (a)
|
17.0
|
|
—
|
|
||
North Dakota Investment Tax Credits (l)
|
12.3
|
|
14.7
|
|
||
Conservation Improvement Program (m)
|
5.4
|
|
1.5
|
|
||
Cost Recovery Riders (d)
|
—
|
|
6.9
|
|
||
Transmission Formula Rates
|
—
|
|
1.6
|
|
||
Other
|
3.6
|
|
1.5
|
|
||
Total Non-Current Regulatory Liabilities
|
560.3
|
|
512.1
|
|
||
Total Regulatory Liabilities
|
|
$562.2
|
|
|
$567.2
|
|
(a)
|
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 12. Pension and Other Postretirement Benefit Plans.)
|
(b)
|
These costs represent the difference between deferred income taxes recognized for financial reporting purposes and amounts previously billed to our customers. The balances will primarily decrease over the remaining life of the related temporary differences.
|
(c)
|
Asset retirement obligations will accrete and be amortized over the lives of the related property with asset retirement obligations.
|
(d)
|
The cost recovery rider regulatory assets and liabilities are revenue 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. The cost recovery rider regulatory assets as of December 31, 2019, will be recovered within the next two years.
|
(e)
|
In December 2018, Minnesota Power retired Boswell Units 1 and 2 and reclassified the remaining net book value from property, plant and equipment to a regulatory asset on the Consolidated Balance Sheet. The remaining net book value is currently included in Minnesota Power’s rate base and Minnesota Power is earning a return on the outstanding balance.
|
(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)
|
Current regulatory liabilities are presented within Other Current Liabilities on the Consolidated Balance Sheet.
|
(h)
|
This amount was refunded to Minnesota Power’s regulated retail customers in the second quarter of 2019.
|
(i)
|
Provision for Tax Reform Refund related to the income tax benefits of the TCJA in 2018 was refunded to Minnesota Power customers in the first quarter of 2019 and is being returned to SWL&P customers through 2020.
|
(j)
|
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.
|
(k)
|
Non-legal plant removal obligations included in retail customer rates that have not yet been incurred.
|
(l)
|
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 filings as the tax credits are utilized.
|
(m)
|
The conservation improvement program regulatory liability represents CIP expenditures, any financial incentive earned for cost-effective program achievements and a carrying charge deferred for future refund over the next year following MPUC approval.
|
ALLETE’s Investment in ATC
|
|
|
||||
Year Ended December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Equity Investment Beginning Balance
|
|
$128.1
|
|
|
$118.7
|
|
Cash Investments
|
6.6
|
|
6.2
|
|
||
Equity in ATC Earnings
|
21.7
|
|
17.5
|
|
||
Distributed ATC Earnings
|
(16.1
|
)
|
(15.2
|
)
|
||
Amortization of the Remeasurement of Deferred Income Taxes
|
1.3
|
|
0.9
|
|
||
Equity Investment Ending Balance
|
|
$141.6
|
|
|
$128.1
|
|
ATC Summarized Financial Data
|
|
|
||||
Balance Sheet Data
|
|
|
||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Current Assets
|
|
$84.6
|
|
|
$87.2
|
|
Non-Current Assets
|
5,244.3
|
|
4,928.8
|
|
||
Total Assets
|
|
$5,328.9
|
|
|
$5,016.0
|
|
Current Liabilities
|
|
$502.6
|
|
|
$640.0
|
|
Long-Term Debt
|
2,312.8
|
|
2,014.0
|
|
||
Other Non-Current Liabilities
|
298.9
|
|
295.3
|
|
||
Members’ Equity
|
2,214.6
|
|
2,066.7
|
|
||
Total Liabilities and Members’ Equity
|
|
$5,328.9
|
|
|
$5,016.0
|
|
Income Statement Data
|
|
|
|
||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Revenue
|
|
$744.4
|
|
|
$690.5
|
|
|
$721.6
|
|
Operating Expense
|
373.5
|
|
358.7
|
|
344.9
|
|
|||
Other Expense
|
110.5
|
|
108.3
|
|
104.1
|
|
|||
Net Income
|
|
$260.4
|
|
|
$223.5
|
|
|
$272.6
|
|
ALLETE’s Equity in Net Income
|
|
$21.7
|
|
|
$17.5
|
|
|
$22.5
|
|
|
December 31,
2018 |
|
|
Amortization
|
|
Other (b)
|
|
December 31,
2019 |
|
||
Millions
|
|
|
|
|
|
|
|
||||
Intangible Assets
|
|
|
|
|
|
|
|
||||
Definite-Lived Intangible Assets
|
|
|
|
|
|
|
|
||||
Customer Relationships
|
|
$50.7
|
|
|
$(1.1)
|
|
$(49.6)
|
|
—
|
|
|
Developed Technology and Other (a)
|
7.5
|
|
|
(0.4)
|
|
(6.1)
|
|
|
$1.0
|
|
|
Total Definite-Lived Intangible Assets
|
58.2
|
|
|
(1.5)
|
|
(55.7)
|
|
1.0
|
|
||
Indefinite-Lived Intangible Assets
|
|
|
|
|
|
|
|
||||
Trademarks and Trade Names
|
16.6
|
|
|
n/a
|
|
(16.6)
|
|
—
|
|
||
Total Intangible Assets
|
|
$74.8
|
|
|
$(1.5)
|
|
$(72.3)
|
|
|
$1.0
|
|
(a)
|
Developed Technology and Other includes land easements and trade names with finite lives.
|
|
Fair Value as of December 31, 2019
|
|||||||||||||
Recurring Fair Value Measures
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|||
Millions
|
|
|
|
|
|
|
|
|||||||
Assets:
|
|
|
|
|
|
|
|
|||||||
Investments (a)
|
|
|
|
|
|
|
|
|||||||
Available-for-sale – Equity Securities
|
|
$11.1
|
|
|
—
|
|
|
—
|
|
|
|
$11.1
|
|
|
Available-for-sale – Corporate and Governmental Debt Securities (b)
|
—
|
|
|
|
$9.7
|
|
|
—
|
|
|
9.7
|
|
||
Cash Equivalents
|
0.9
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|||
Total Fair Value of Assets
|
|
$12.0
|
|
|
|
$9.7
|
|
|
—
|
|
|
|
$21.7
|
|
|
|
|
|
|
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|||||||
Deferred Compensation (c)
|
—
|
|
|
|
$21.2
|
|
|
—
|
|
|
|
$21.2
|
|
|
Total Fair Value of Liabilities
|
—
|
|
|
|
$21.2
|
|
|
—
|
|
|
|
$21.2
|
|
|
Total Net Fair Value of Assets (Liabilities)
|
|
$12.0
|
|
|
$(11.5)
|
|
—
|
|
|
$0.5
|
(a)
|
Included in Other Non-Current Assets on the Consolidated Balance Sheet.
|
(b)
|
As of December 31, 2019, the aggregate amount of available-for-sale corporate and governmental debt securities maturing in one year or less was $2.1 million, in one year to less than three years was $7.2 million, in three years to less than five years was zero and in five or more years was $0.4 million.
|
(c)
|
Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.
|
|
Fair Value as of December 31, 2018
|
||||||||||||||
Recurring Fair Value Measures
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
||||
Millions
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Investments (a)
|
|
|
|
|
|
|
|
||||||||
Available-for-sale – Equity Securities
|
|
$12.2
|
|
|
—
|
|
|
—
|
|
|
|
$12.2
|
|
||
Available-for-sale – Corporate and Governmental Debt Securities
|
—
|
|
|
|
$8.0
|
|
|
—
|
|
|
8.0
|
|
|||
Cash Equivalents
|
1.0
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
||||
Total Fair Value of Assets
|
|
$13.2
|
|
|
|
$8.0
|
|
|
—
|
|
|
|
$21.2
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities: (b)
|
|
|
|
|
|
|
|
||||||||
Deferred Compensation
|
—
|
|
|
|
$19.8
|
|
|
—
|
|
|
|
$19.8
|
|
||
U.S. Water Services Contingent Consideration
|
—
|
|
|
—
|
|
|
|
$3.8
|
|
|
3.8
|
|
|||
Total Fair Value of Liabilities
|
—
|
|
|
|
$19.8
|
|
|
|
$3.8
|
|
|
|
$23.6
|
|
|
Total Net Fair Value of Assets (Liabilities)
|
|
$13.2
|
|
|
$(11.8)
|
|
$(3.8)
|
|
$(2.4)
|
(a)
|
Included in Other Non-Current Assets on the Consolidated Balance Sheet.
|
(b)
|
Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.
|
Financial Instruments
|
Carrying Amount
|
|
Fair Value
|
Millions
|
|
|
|
Long-Term Debt, Including Long-Term Debt Due Within One Year
|
|
|
|
December 31, 2019
|
$1,622.6
|
|
$1,791.8
|
December 31, 2018
|
$1,495.2
|
|
$1,534.6
|
Maturity Date
|
Principal Amount
|
Interest Rate
|
March 1, 2029
|
$70 Million
|
4.08%
|
March 1, 2049
|
$30 Million
|
4.47%
|
Long-Term Debt
|
|
|
||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
First Mortgage Bonds
|
|
|
||||
8.17% Series Due 2019
|
—
|
|
|
$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
|
|
||
4.08% Series Due 2029
|
70.0
|
|
—
|
|
||
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
|
|
||
4.07% Series Due 2048
|
60.0
|
|
60.0
|
|
||
4.47% Series Due 2049
|
30.0
|
|
—
|
|
||
Variable Demand Revenue Refunding Bonds Series 1997 A Due 2020
|
13.5
|
|
13.5
|
|
||
Unsecured Term Loan Variable Rate Due 2020
|
110.0
|
|
10.0
|
|
||
Armenia Mountain Senior Secured Notes 3.26% Due 2024
|
47.8
|
|
57.2
|
|
||
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
|
|
80.0
|
|
||
SWL&P First Mortgage Bonds 4.15% Series Due 2028
|
15.0
|
|
15.0
|
|
||
SWL&P First Mortgage Bonds 4.14% Series Due 2048
|
12.0
|
|
12.0
|
|
||
Other Long-Term Debt, 3.11% – 5.75% Due 2020 – 2037
|
46.5
|
|
67.7
|
|
||
Unamortized Debt Issuance Costs
|
(8.8
|
)
|
(9.2
|
)
|
||
Total Long-Term Debt
|
1,613.8
|
|
1,486.0
|
|
||
Less: Due Within One Year
|
212.9
|
|
57.5
|
|
||
Net Long-Term Debt
|
|
$1,400.9
|
|
|
$1,428.5
|
|
As of December 31, 2019
|
|
|
|
|
|
|
||||||||||||
Millions
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
||||||
Capital Purchase Obligations
|
|
$292.7
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||
Easements (a)
|
|
$5.0
|
|
|
$5.3
|
|
|
$5.4
|
|
|
$5.5
|
|
|
$5.5
|
|
|
$170.4
|
|
PPAs (b)
|
|
$113.0
|
|
|
$122.5
|
|
|
$145.5
|
|
|
$145.6
|
|
|
$138.5
|
|
|
$1,386.7
|
|
Other Purchase Obligations (c)
|
|
$22.8
|
|
|
$9.6
|
|
—
|
|
—
|
|
—
|
|
|
$0.1
|
|
(a)
|
Easement obligations represent the minimum payments for our land easement agreements at our 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 Nobles 2 commencing in 2020 as it is subject to construction of a wind energy facility. (See Power Purchase Agreements.)
|
(c)
|
Consists of long-term service agreements for wind energy facilities and minimum purchase commitments under coal and rail contracts.
|
(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 the GNTL and MMTP. (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 will 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 PPA provides for the purchase of all output from a 250 MW wind energy facility to be constructed in southwest Minnesota for 20 years beginning upon commercial operation of the wind energy facility which is currently expected in fourth quarter of 2020. (See Note 4. Regulatory Matters and Note 5. Equity Investments.)
|
(i)
|
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.
|
Counterparty
|
Quantity
|
Product
|
Commencement
|
Expiration
|
Pricing
|
PSAs
|
|
|
|
|
|
Basin
|
|
|
|
|
|
PSA 1
|
100 MW
|
Capacity / Energy
|
May 2010
|
April 2020
|
(a)
|
PSA 2
|
(b)
|
Capacity
|
June 2022
|
May 2025
|
Fixed
|
PSA 3
|
100 MW
|
Capacity
|
June 2025
|
May 2028
|
Fixed
|
Minnkota Power
|
(c)
|
Capacity / Energy
|
June 2014
|
December 2026
|
(c)
|
Oconto Electric Cooperative
|
25 MW
|
Capacity / Energy
|
January 2019
|
May 2026
|
Fixed
|
Silver Bay Power
|
(d)
|
Energy
|
January 2017
|
December 2031
|
(e)
|
(a)
|
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.
|
(b)
|
The agreement provides for 75 MW of capacity from June 1, 2022, through May 31, 2023, and increases to 125 MW of capacity from June 1, 2023, through May 31, 2025.
|
(c)
|
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 2019 (28 percent in 2018 and in 2017). (See Square Butte PPA.)
|
(d)
|
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. Minnesota Power supplied Silver Bay Power with at least 50 MW of energy and Silver Bay Power had the option to purchase additional energy from Minnesota Power as it transitioned away from self-generation. In the third quarter of 2019, Silver Bay Power ceased self-generation and Minnesota Power began supplying the full energy requirements for Silver Bay Power.
|
(e)
|
The energy pricing was fixed through 2019 with pricing in later years escalating at a fixed rate annually and adjusted for changes in a natural gas index.
|
•
|
Expanding renewable power supply for both our operations and the operations of others;
|
•
|
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;
|
•
|
Evaluating and developing less carbon intensive future generating assets such as efficient and flexible natural gas‑fired generating facilities;
|
•
|
Managing vegetation on right-of-way corridors to reduce potential wildfire or storm damage risks; and
|
•
|
Practicing sound forestry management in our service territories to create landscapes more resilient to disruption from climate-related changes, including planting and managing long-lived conifer species.
|
Summary of Common Stock
|
Shares
|
|
Equity
|
|
|
|
Thousands
|
|
Millions
|
|
|
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
|
|
|
Employee Stock Purchase Plan
|
11
|
|
0.8
|
|
|
Invest Direct
|
277
|
|
20.7
|
|
|
Options and Stock Awards
|
57
|
|
2.1
|
|
|
Contributions to RSOP
|
47
|
|
3.5
|
|
|
Balance as of December 31, 2018
|
51,509
|
|
1,428.5
|
|
|
Employee Stock Purchase Plan
|
8
|
|
0.7
|
|
|
Invest Direct
|
38
|
|
3.0
|
|
|
Options and Stock Awards
|
85
|
|
1.3
|
|
|
Contributions to RSOP
|
39
|
|
3.2
|
|
|
Balance as of December 31, 2019
|
51,679
|
|
|
$1,436.7
|
|
Reconciliation of Basic and Diluted
|
|
|
|
|||||
Earnings Per Share
|
|
|
Dilutive
|
|
|
|
||
Year Ended December 31
|
Basic
|
|
Securities
|
|
Diluted
|
|
||
Millions Except Per Share Amounts
|
|
|
|
|||||
2019
|
|
|
|
|||||
Net Income Attributable to ALLETE
|
|
$185.6
|
|
|
|
$185.6
|
|
|
Average Common Shares
|
51.6
|
|
0.1
|
|
51.7
|
|
||
Earnings Per Share
|
|
$3.59
|
|
|
|
$3.59
|
|
|
2018
|
|
|
|
|||||
Net Income Attributable to ALLETE
|
|
$174.1
|
|
|
|
$174.1
|
|
|
Average Common Shares
|
51.3
|
|
0.2
|
|
51.5
|
|
||
Earnings Per Share
|
|
$3.39
|
|
|
|
$3.38
|
|
|
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
|
|
Income Tax Expense
|
|
|
|
||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Current Income Tax Expense (a)
|
|
|
|
||||||
Federal
|
—
|
|
—
|
|
—
|
|
|||
State
|
$0.1
|
$0.3
|
$0.3
|
||||||
Total Current Income Tax Expense
|
|
$0.1
|
|
|
$0.3
|
|
|
$0.3
|
|
Deferred Income Tax Expense (Benefit)
|
|
|
|
||||||
Federal (b)
|
$(27.8)
|
$(26.2)
|
|
$12.1
|
|
||||
Federal – Remeasurement of Deferred Income Taxes (c)
|
—
|
|
—
|
|
(13.0
|
)
|
|||
State
|
21.7
|
|
11.0
|
|
15.8
|
|
|||
Investment Tax Credit Amortization
|
(0.6
|
)
|
(0.6
|
)
|
(0.5
|
)
|
|||
Total Deferred Income Tax Expense (Benefit)
|
$(6.7)
|
$(15.8)
|
|
$14.4
|
|
||||
Total Income Tax Expense (Benefit)
|
$(6.6)
|
$(15.5)
|
|
$14.7
|
|
(a)
|
For the years ended December 31, 2019, 2018 and 2017, 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. Federal and state NOLs are being carried forward to offset current and future taxable income.
|
(b)
|
For the years ended December 31, 2019, and 2018, the federal tax benefit is primarily due to production tax credits, and the reduction of the federal statutory tax rate from 35 percent to 21 percent enacted as part of the TCJA.
|
(c)
|
For the year ended December 31, 2017, the federal deferred income tax benefit is due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.
|
Reconciliation of Taxes from Federal Statutory
|
|
|
|
||||||
Rate to Total Income Tax Expense
|
|
|
|
||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Income Before Non-Controlling Interest and Income Taxes
|
|
$178.9
|
|
|
$158.6
|
|
|
$186.9
|
|
Statutory Federal Income Tax Rate
|
21
|
%
|
21
|
%
|
35
|
%
|
|||
Income Taxes Computed at Statutory Federal Rate
|
|
$37.6
|
|
|
$33.3
|
|
|
$65.4
|
|
Increase (Decrease) in Tax Due to:
|
|
|
|
||||||
State Income Taxes – Net of Federal Income Tax Benefit
|
17.2
|
|
8.9
|
|
10.5
|
|
|||
Production Tax Credits
|
(50.7
|
)
|
(45.0
|
)
|
(45.1
|
)
|
|||
Regulatory Differences – Excess Deferred Tax Benefit (a)
|
(8.8
|
)
|
(8.2
|
)
|
1.2
|
|
|||
U.S. Water Services Sale of Stock Basis Difference
|
1.7
|
|
—
|
|
—
|
|
|||
Change in Fair Value of Contingent Consideration
|
—
|
|
(0.4
|
)
|
—
|
|
|||
Remeasurement of Deferred Income Taxes (b)
|
—
|
|
—
|
|
(13.0
|
)
|
|||
Other
|
(3.6
|
)
|
(4.1
|
)
|
(4.3
|
)
|
|||
Total Income Tax Expense (Benefit)
|
|
($6.6
|
)
|
|
($15.5
|
)
|
|
$14.7
|
|
(a)
|
Excess deferred income taxes are being returned to customers under both the Average Rate Assumption Method and amortization periods as approved by regulators. (See Note 4. Regulatory Matters.)
|
(b)
|
Deferred income tax benefit from the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.
|
Deferred Income Tax Assets and Liabilities
|
|
|
||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Deferred Income Tax Assets
|
|
|
||||
Employee Benefits and Compensation
|
|
$49.9
|
|
|
$62.2
|
|
Property-Related
|
76.9
|
|
95.2
|
|
||
NOL Carryforwards
|
63.2
|
|
86.1
|
|
||
Tax Credit Carryforwards
|
395.5
|
|
349.8
|
|
||
Power Sales Agreements
|
23.7
|
|
27.5
|
|
||
Regulatory Liabilities
|
116.9
|
|
113.4
|
|
||
Other
|
23.4
|
|
25.1
|
|
||
Gross Deferred Income Tax Assets
|
749.5
|
|
759.3
|
|
||
Deferred Income Tax Asset Valuation Allowance
|
(70.0
|
)
|
(66.5
|
)
|
||
Total Deferred Income Tax Assets
|
|
$679.5
|
|
|
$692.8
|
|
Deferred Income Tax Liabilities
|
|
|
||||
Property-Related
|
|
$713.4
|
|
|
$752.5
|
|
Regulatory Asset for Benefit Obligations
|
54.5
|
|
61.0
|
|
||
Unamortized Investment Tax Credits
|
31.6
|
|
32.2
|
|
||
Partnership Basis Differences
|
49.4
|
|
40.8
|
|
||
Regulatory Assets
|
35.4
|
|
29.9
|
|
||
Other
|
8.0
|
|
—
|
|
||
Total Deferred Income Tax Liabilities
|
|
$892.3
|
|
|
$916.4
|
|
Net Deferred Income Taxes (a)
|
|
$212.8
|
|
|
$223.6
|
|
(a)
|
Recorded as a net long-term Deferred Income Tax liability on the Consolidated Balance Sheet
|
NOL and Tax Credit Carryforwards
|
|
|
||
As of December 31
|
2019
|
2018
|
|
|
Millions
|
|
|
||
Federal NOL Carryforwards (a)
|
$211.3
|
|
$319.0
|
|
Federal Tax Credit Carryforwards
|
$302.5
|
$256.4
|
||
State NOL Carryforwards (a)
|
$274.8
|
$305.8
|
||
State Tax Credit Carryforwards (b)
|
$23.4
|
$27.4
|
(a)
|
Pre-tax amounts.
|
(b)
|
Net of a $69.6 million valuation allowance as of December 31, 2019 ($66.0 million as of December 31, 2018).
|
Gross Unrecognized Income Tax Benefits
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Balance at January 1
|
|
$1.6
|
|
|
$1.7
|
|
|
$2.0
|
|
Additions for Tax Positions Related to the Current Year
|
0.1
|
|
0.1
|
|
0.1
|
|
|||
Additions for Tax Positions Related to Prior Years
|
0.1
|
|
0.1
|
|
0.1
|
|
|||
Reductions for Tax Positions Related to Prior Years
|
(0.4
|
)
|
(0.2
|
)
|
(0.1
|
)
|
|||
Lapse of Statute
|
—
|
|
(0.1
|
)
|
(0.4
|
)
|
|||
Balance as of December 31
|
|
$1.4
|
|
|
$1.6
|
|
|
$1.7
|
|
Pension Obligation and Funded Status
|
||||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Accumulated Benefit Obligation
|
|
$812.0
|
|
|
$713.7
|
|
Change in Benefit Obligation
|
|
|
|
|
||
Obligation, Beginning of Year
|
|
$747.0
|
|
|
$793.2
|
|
Service Cost
|
9.3
|
|
11.0
|
|
||
Interest Cost
|
31.9
|
|
29.6
|
|
||
Plan Amendments
|
—
|
|
(1.5
|
)
|
||
Plan Curtailments
|
—
|
|
(6.9
|
)
|
||
Actuarial (Gain) Loss
|
98.3
|
|
(53.0
|
)
|
||
Benefits Paid
|
(53.4
|
)
|
(49.5
|
)
|
||
Participant Contributions
|
20.9
|
|
24.1
|
|
||
Obligation, End of Year
|
|
$854.0
|
|
|
$747.0
|
|
Change in Plan Assets
|
|
|
|
|
||
Fair Value, Beginning of Year
|
|
$598.0
|
|
|
$628.2
|
|
Actual Return on Plan Assets
|
122.1
|
|
(21.2
|
)
|
||
Employer Contribution (a)
|
32.9
|
|
40.5
|
|
||
Benefits Paid
|
(53.4
|
)
|
(49.5
|
)
|
||
Fair Value, End of Year
|
|
$699.6
|
|
|
$598.0
|
|
Funded Status, End of Year
|
$(154.4)
|
$(149.0)
|
||||
|
|
|
||||
Net Pension Amounts Recognized in Consolidated Balance Sheet Consist of:
|
|
|
|
|
||
Current Liabilities
|
$(1.6)
|
$(1.6)
|
||||
Non-Current Liabilities
|
$(152.8)
|
$(147.4)
|
(a)
|
Includes Participant Contributions noted above.
|
Components of Net Periodic Pension Cost
|
|||||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Service Cost
|
|
$9.3
|
|
|
$11.0
|
|
|
$10.2
|
|
Non-Service Cost Components (a)
|
|
|
|
||||||
Interest Cost
|
31.9
|
|
29.6
|
|
32.5
|
|
|||
Expected Return on Plan Assets
|
(44.2
|
)
|
(44.4
|
)
|
(42.4
|
)
|
|||
Amortization of Loss
|
7.5
|
|
11.4
|
|
9.9
|
|
|||
Amortization of Prior Service Credit
|
(0.1
|
)
|
(0.1
|
)
|
—
|
|
|||
Net Pension Cost
|
|
$4.4
|
|
|
$7.5
|
|
|
$10.2
|
|
(a)
|
These components of net periodic pension cost are included in the line item “Other” under Other Income (Expense) on the Consolidated Statement of Income.
|
Other Changes in Pension Plan Assets and Benefit Obligations Recognized in
Other Comprehensive Income and Regulatory Assets or Liabilities
|
||||
Year Ended December 31
|
2019
|
|
2018
|
|
Millions
|
|
|
||
Net Loss
|
$20.4
|
$5.8
|
||
Amortization of Prior Service Credit
|
0.1
|
|
0.1
|
|
Prior Service Credit Arising During the Period
|
—
|
|
(1.6
|
)
|
Amortization of Loss
|
(7.5
|
)
|
(11.4
|
)
|
Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
|
$13.0
|
$(7.1)
|
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets
|
||||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Projected Benefit Obligation
|
|
$854.0
|
|
|
$747.0
|
|
Accumulated Benefit Obligation
|
|
$812.0
|
|
|
$713.7
|
|
Fair Value of Plan Assets
|
|
$699.6
|
|
|
$598.0
|
|
Postretirement Health and Life Obligation and Funded Status
|
||||||
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Change in Benefit Obligation
|
|
|
||||
Obligation, Beginning of Year
|
|
$176.0
|
|
|
$190.1
|
|
Service Cost
|
3.9
|
|
4.7
|
|
||
Interest Cost
|
7.3
|
|
7.1
|
|
||
Actuarial (Gain) Loss
|
10.5
|
|
(15.8
|
)
|
||
Benefits Paid
|
(14.7
|
)
|
(11.6
|
)
|
||
Participant Contributions
|
3.5
|
|
3.6
|
|
||
Plan Amendments (a)
|
(34.6
|
)
|
(2.1
|
)
|
||
Plan Curtailments
|
(2.1
|
)
|
—
|
|
||
Obligation, End of Year
|
|
$149.8
|
|
|
$176.0
|
|
Change in Plan Assets
|
|
|
||||
Fair Value, Beginning of Year
|
|
$154.3
|
|
|
$171.0
|
|
Actual Return on Plan Assets
|
29.5
|
|
(9.6
|
)
|
||
Employer Contribution
|
1.1
|
|
1.0
|
|
||
Participant Contributions
|
3.5
|
|
3.6
|
|
||
Benefits Paid
|
(14.7
|
)
|
(11.7
|
)
|
||
Fair Value, End of Year
|
|
$173.7
|
|
|
$154.3
|
|
Funded Status, End of Year
|
$23.9
|
$(21.7)
|
||||
|
|
|
||||
Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet Consist of:
|
|
|
||||
Non-Current Assets
|
$37.5
|
$0.4
|
||||
Current Liabilities
|
$(0.7)
|
$(1.0)
|
||||
Non-Current Liabilities
|
$(12.9)
|
$(21.1)
|
(a)
|
Plan design changes under the other postretirement benefit plans resulted in a decrease to the benefit obligation of $34.6 million in 2019.
|
Reconciliation of Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet
|
||||
As of December 31
|
2019
|
|
2018
|
|
Millions
|
|
|
||
Net Loss (a)
|
$(16.0)
|
$(25.0)
|
||
Prior Service Credit
|
36.3
|
|
4.6
|
|
Accumulated Net Periodic Benefit Cost in Excess of Contributions (a)
|
3.6
|
|
(1.3
|
)
|
Total Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet
|
$23.9
|
$(21.7)
|
(a)
|
Excludes gains, losses and contributions associated with irrevocable grantor trusts.
|
(a)
|
These components of net periodic postretirement health and life cost are included in the line item “Other” under Other Income (Expense) on the Consolidated Statement of Income.
|
Other Changes in Postretirement Benefit Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
|
|||||
Year Ended December 31
|
2019
|
|
2018
|
|
|
Millions
|
|
|
|
||
Net (Gain) Loss
|
$(10.6)
|
|
$4.7
|
|
|
Prior Service Credit Arising During the Period
|
(34.6
|
)
|
(2.1
|
)
|
|
Amortization of Prior Service Credit
|
2.8
|
|
2.1
|
|
|
Amortization of Loss
|
(0.5
|
)
|
(0.8
|
)
|
|
Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
|
$(42.9)
|
$3.9
|
Estimated Future Benefit Payments
|
Pension
|
Postretirement Health and Life
|
||||
Millions
|
|
|
||||
2020
|
|
$51.2
|
|
|
$8.6
|
|
2021
|
|
$50.7
|
|
|
$8.4
|
|
2022
|
|
$50.1
|
|
|
$8.2
|
|
2023
|
|
$49.8
|
|
|
$8.0
|
|
2024
|
|
$49.6
|
|
|
$8.0
|
|
Years 2025 – 2029
|
|
$239.3
|
|
|
$40.1
|
|
|
Pension
|
Postretirement
Health and Life
|
||
Millions
|
|
|
||
Net Loss
|
$12.8
|
$1.0
|
||
Prior Service Credit
|
(0.2
|
)
|
(8.0
|
)
|
Total Pension and Postretirement Health and Life Cost (Credit)
|
$12.6
|
$(7.0)
|
(a)
|
The expected long-term rates of return used to determine net periodic benefit expense for 2020 have been reduced to 6.75 percent for pension expense and 5.40 percent to 6.75 percent for postretirement health and life expense.
|
Actual Plan Asset Allocations
|
Pension
|
Postretirement
Health and Life (a)
|
||||||
|
2019
|
2018
|
2019
|
2018
|
||||
Equity Securities
|
34
|
%
|
32
|
%
|
66
|
%
|
62
|
%
|
Fixed Income Securities
|
62
|
%
|
60
|
%
|
33
|
%
|
34
|
%
|
Private Equity
|
1
|
%
|
5
|
%
|
1
|
%
|
4
|
%
|
Real Estate
|
3
|
%
|
3
|
%
|
—
|
|
—
|
|
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
(a)
|
Includes VEBAs and irrevocable grantor trusts.
|
Plan Asset Target Allocations
|
Pension
|
Postretirement
Health and Life (a)
|
||
Equity Securities
|
32
|
%
|
60
|
%
|
Fixed Income Securities
|
56
|
%
|
37
|
%
|
Private Equity
|
6
|
%
|
—
|
|
Real Estate
|
6
|
%
|
3
|
%
|
|
100
|
%
|
100
|
%
|
(a)
|
Includes VEBAs and irrevocable grantor trusts.
|
|
Fair Value as of December 31, 2019
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities:
|
|
|
|
|
||||||||
U.S. Large-cap (a)
|
—
|
|
|
$78.5
|
|
—
|
|
|
$78.5
|
|
||
U.S. Mid-cap Growth (a)
|
—
|
|
35.9
|
|
—
|
|
35.9
|
|
||||
U.S. Small-cap (a)
|
—
|
|
34.6
|
|
—
|
|
34.6
|
|
||||
International
|
—
|
|
92.1
|
|
—
|
|
92.1
|
|
||||
Fixed Income Securities (a)
|
—
|
|
425.4
|
|
—
|
|
425.4
|
|
||||
Cash and Cash Equivalents
|
|
$7.1
|
|
—
|
|
—
|
|
7.1
|
|
|||
Private Equity Funds
|
—
|
|
—
|
|
|
$8.0
|
|
8.0
|
|
|||
Real Estate
|
—
|
|
—
|
|
18.0
|
|
18.0
|
|
||||
Total Fair Value of Assets
|
|
$7.1
|
|
|
$666.5
|
|
|
$26.0
|
|
|
$699.6
|
|
(a)
|
The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity and fixed income securities indexes.
|
Recurring Fair Value Measures
|
|
|
||||
Activity in Level 3
|
Private Equity Funds
|
Real Estate
|
||||
Millions
|
|
|
||||
Balance as of December 31, 2018
|
|
$27.8
|
|
|
$20.8
|
|
Actual Return on Plan Assets
|
0.4
|
|
(1.3
|
)
|
||
Purchases, Sales, and Settlements – Net
|
(20.2
|
)
|
(1.5
|
)
|
||
Balance as of December 31, 2019
|
|
$8.0
|
|
|
$18.0
|
|
|
Fair Value as of December 31, 2018
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities:
|
|
|
|
|
||||||||
U.S. Large-cap (a)
|
—
|
|
|
$59.1
|
|
—
|
|
|
$59.1
|
|
||
U.S. Mid-cap Growth (a)
|
—
|
|
28.1
|
|
—
|
|
28.1
|
|
||||
U.S. Small-cap (a)
|
—
|
|
27.2
|
|
—
|
|
27.2
|
|
||||
International
|
—
|
|
75.8
|
|
—
|
|
75.8
|
|
||||
Fixed Income Securities (a)
|
—
|
|
352.9
|
|
—
|
|
352.9
|
|
||||
Cash and Cash Equivalents
|
|
$6.3
|
|
—
|
|
—
|
|
6.3
|
|
|||
Private Equity Funds
|
—
|
|
—
|
|
|
$27.8
|
|
27.8
|
|
|||
Real Estate
|
—
|
|
—
|
|
20.8
|
|
20.8
|
|
||||
Total Fair Value of Assets
|
|
$6.3
|
|
|
$543.1
|
|
|
$48.6
|
|
|
$598.0
|
|
(a)
|
The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity and fixed income securities indexes.
|
Recurring Fair Value Measures
|
|
|
|
||||
Activity in Level 3
|
|
Private Equity Funds
|
Real Estate
|
||||
Millions
|
|
|
|
||||
Balance as of December 31, 2017
|
|
|
$33.2
|
|
|
$25.5
|
|
Actual Return on Plan Assets
|
|
2.8
|
|
0.7
|
|
||
Purchases, Sales, and Settlements – Net
|
|
(8.2
|
)
|
(5.4
|
)
|
||
Balance as of December 31, 2018
|
|
|
$27.8
|
|
|
$20.8
|
|
|
Fair Value as of December 31, 2019
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities: (a)
|
|
|
|
|
||||||||
U.S. Large-cap
|
|
$33.6
|
|
—
|
|
—
|
|
|
$33.6
|
|
||
U.S. Mid-cap Growth
|
27.7
|
|
—
|
|
—
|
|
27.7
|
|
||||
U.S. Small-cap
|
14.3
|
|
—
|
|
—
|
|
14.3
|
|
||||
International
|
37.8
|
|
—
|
|
—
|
|
37.8
|
|
||||
Fixed Income Securities:
|
|
|
|
|
|
|
|
|
||||
Mutual Funds
|
53.4
|
|
—
|
|
—
|
|
53.4
|
|
||||
Debt Securities
|
—
|
|
|
$4.1
|
|
—
|
|
4.1
|
|
|||
Cash and Cash Equivalents
|
1.1
|
|
—
|
|
—
|
|
1.1
|
|
||||
Private Equity Funds
|
—
|
|
—
|
|
|
$1.7
|
|
1.7
|
|
|||
Total Fair Value of Assets
|
|
$167.9
|
|
|
$4.1
|
|
|
$1.7
|
|
|
$173.7
|
|
(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, 2018
|
|
$6.5
|
|
Actual Return on Plan Assets
|
0.7
|
|
|
Purchases, Sales, and Settlements – Net
|
(5.5
|
)
|
|
Balance as of December 31, 2019
|
|
$1.7
|
|
|
Fair Value as of December 31, 2018
|
|||||||||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Millions
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
||||||||
Equity Securities: (a)
|
|
|
|
|
||||||||
U.S. Large-cap
|
|
$29.1
|
|
—
|
|
—
|
|
|
$29.1
|
|
||
U.S. Mid-cap Growth
|
21.2
|
|
—
|
|
—
|
|
21.2
|
|
||||
U.S. Small-cap
|
12.9
|
|
—
|
|
—
|
|
12.9
|
|
||||
International
|
30.4
|
|
—
|
|
—
|
|
30.4
|
|
||||
Fixed Income Securities:
|
|
|
|
|
|
|
|
|
||||
Mutual Funds
|
49.6
|
|
—
|
|
—
|
|
49.6
|
|
||||
Debt Securities
|
—
|
|
|
$4.0
|
|
—
|
|
4.0
|
|
|||
Cash and Cash Equivalents
|
0.6
|
|
—
|
|
—
|
|
0.6
|
|
||||
Private Equity Funds
|
—
|
|
—
|
|
|
$6.5
|
|
6.5
|
|
|||
Total Fair Value of Assets
|
|
$143.8
|
|
|
$4.0
|
|
|
$6.5
|
|
|
$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, 2017
|
|
$8.2
|
|
Actual Return on Plan Assets
|
0.9
|
|
|
Purchases, Sales, and Settlements – Net
|
(2.6
|
)
|
|
Balance as of December 31, 2018
|
|
$6.5
|
|
Share-Based Compensation Expense
|
|||||||||
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Performance Shares
|
|
$2.3
|
|
|
$2.3
|
|
|
$2.1
|
|
Restricted Stock Units
|
0.8
|
|
0.9
|
|
1.0
|
|
|||
Total Share-Based Compensation Expense
|
|
$3.1
|
|
|
$3.2
|
|
|
$3.1
|
|
Income Tax Benefit
|
|
$0.9
|
|
|
$0.9
|
|
|
$0.9
|
|
|
2019
|
2018
|
2017
|
||||||||||||
|
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
|
129,693
|
|
|
$66.12
|
|
127,898
|
|
|
$58.23
|
|
127,580
|
|
|
$52.56
|
|
Granted (a)
|
60,747
|
|
|
$63.89
|
|
66,557
|
|
|
$76.42
|
|
50,729
|
|
|
$62.90
|
|
Awarded
|
(75,943
|
)
|
$53.44
|
(58,293
|
)
|
|
$59.82
|
|
—
|
|
—
|
|
|||
Unearned Grant Award
|
—
|
|
—
|
|
—
|
|
—
|
|
(40,801
|
)
|
|
$46.27
|
|
||
Forfeited
|
(14,912
|
)
|
|
$77.14
|
|
(6,469
|
)
|
|
$72.99
|
|
(9,610
|
)
|
|
$58.29
|
|
Non-vested as of December 31
|
99,585
|
|
|
$72.78
|
|
129,693
|
|
|
$66.12
|
|
127,898
|
|
|
$58.23
|
|
|
2019
|
2018
|
2017
|
||||||||||||
|
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
|
49,771
|
|
|
$60.74
|
|
55,248
|
|
|
$56.18
|
|
54,728
|
|
|
$51.79
|
|
Granted (a)
|
13,927
|
|
|
$74.93
|
|
16,573
|
|
|
$71.11
|
|
21,241
|
|
|
$62.20
|
|
Awarded
|
(21,110
|
)
|
|
$52.44
|
|
(18,881
|
)
|
|
$55.78
|
|
(17,281
|
)
|
|
$49.72
|
|
Forfeited
|
(2,645
|
)
|
|
$72.43
|
|
(3,169
|
)
|
|
$64.92
|
|
(3,440
|
)
|
|
$56.00
|
|
Available as of December 31
|
39,943
|
|
|
$69.30
|
|
49,771
|
|
|
$60.74
|
|
55,248
|
|
|
$56.18
|
|
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Operating Revenue
|
|
|
|
||||||
Residential
|
|
$139.6
|
|
|
$139.7
|
|
|
$127.4
|
|
Commercial
|
145.7
|
|
147.9
|
|
139.8
|
|
|||
Municipal
|
48.6
|
|
54.9
|
|
57.9
|
|
|||
Industrial
|
476.4
|
|
469.5
|
|
470.5
|
|
|||
Other Power Suppliers
|
153.7
|
|
170.3
|
|
161.8
|
|
|||
CIP Financial Incentive
|
2.8
|
|
3.0
|
|
5.5
|
|
|||
Other
|
75.6
|
|
74.2
|
|
100.9
|
|
|||
Total Regulated Operations
|
1,042.4
|
|
1,059.5
|
|
1,063.8
|
|
|||
|
|
|
|
||||||
ALLETE Clean Energy
|
|
|
|
||||||
Long-term PSA
|
48.0
|
|
55.2
|
|
56.9
|
|
|||
Sale of Wind Energy Facility
|
—
|
|
81.1
|
|
—
|
|
|||
Other
|
11.6
|
|
23.6
|
|
23.6
|
|
|||
Total ALLETE Clean Energy
|
59.6
|
|
159.9
|
|
80.5
|
|
|||
|
|
|
|
||||||
U.S. Water Services (e)
|
|
|
|
||||||
Point-in-time
|
19.0
|
|
100.3
|
|
95.8
|
|
|||
Contract
|
9.2
|
|
38.3
|
|
36.2
|
|
|||
Capital Project
|
5.2
|
|
33.5
|
|
19.8
|
|
|||
Total U.S. Water Services
|
33.4
|
|
172.1
|
|
151.8
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
|
|
|
||||||
Long-term Contract
|
82.8
|
|
85.5
|
|
89.3
|
|
|||
Other
|
22.3
|
21.6
|
|
33.9
|
|
||||
Total Corporate and Other
|
105.1
|
107.1
|
123.2
|
||||||
Total Operating Revenue
|
|
$1,240.5
|
|
|
$1,498.6
|
|
|
$1,419.3
|
|
Net Income (Loss) Attributable to ALLETE (a)(b)
|
|
|
|
||||||
Regulated Operations
|
$154.4
|
$131.0
|
$128.4
|
||||||
|
|
|
|
||||||
ALLETE Clean Energy (c)
|
12.4
|
|
33.7
|
|
41.5
|
|
|||
U.S. Water Services
|
(1.1
|
)
|
3.2
|
|
10.7
|
|
|||
|
|
|
|
||||||
Corporate and Other (d)(e)
|
19.9
|
|
6.2
|
|
(8.4
|
)
|
|||
Total Net Income Attributable to ALLETE
|
$185.6
|
$174.1
|
$172.2
|
(b)
|
Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation.
|
(c)
|
Net income in 2018 includes the recognition of profit for the sale of a wind energy facility to Montana-Dakota Utilities.
|
(d)
|
Net income in 2017 included a $7.9 million after-tax 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.
|
Year Ended December 31
|
2019
|
|
2018
|
|
2017
|
|
|||
Millions
|
|
|
|
||||||
Depreciation and Amortization
|
|
|
|
||||||
Regulated Operations
|
|
$159.4
|
|
|
$158.0
|
|
|
$132.6
|
|
|
|
|
|
||||||
ALLETE Clean Energy
|
26.8
|
|
24.4
|
|
23.4
|
|
|||
U.S. Water Services
|
2.3
|
|
10.2
|
|
9.8
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
13.5
|
|
13.0
|
|
11.7
|
|
|||
Total Depreciation and Amortization
|
|
$202.0
|
|
|
$205.6
|
|
|
$177.5
|
|
Operating Expenses – Other (a)
|
|
|
|
||||||
Corporate and Other
|
—
|
|
$(2.0)
|
$(0.7)
|
|||||
Total Operating Expenses – Other
|
—
|
|
$(2.0)
|
$(0.7)
|
|||||
Interest Expense (b)
|
|
|
|
||||||
Regulated Operations
|
|
$58.9
|
|
|
$60.2
|
|
|
$57.0
|
|
|
|
|
|
||||||
ALLETE Clean Energy
|
2.8
|
|
3.6
|
|
4.2
|
|
|||
U.S. Water Services
|
0.2
|
|
1.5
|
|
1.6
|
|
|||
|
|
|
|
||||||
Corporate and Other
|
8.0
|
|
7.3
|
|
10.3
|
|
|||
|
|
|
|
||||||
Eliminations
|
(5.0
|
)
|
(4.7
|
)
|
(5.3
|
)
|
|||
Total Interest Expense
|
|
$64.9
|
|
|
$67.9
|
|
|
$67.8
|
|
Equity Earnings
|
|
|
|
||||||
Regulated Operations
|
|
$21.7
|
|
|
$17.5
|
|
|
$22.5
|
|
Income Tax Expense (Benefit) (c)
|
|
|
|
||||||
Regulated Operations (d)
|
$(7.1)
|
$(15.5)
|
|
$27.2
|
|
||||
|
|
|
|
||||||
ALLETE Clean Energy
|
(11.9
|
)
|
(1.0
|
)
|
(14.2
|
)
|
|||
U.S. Water Services
|
(0.4
|
)
|
1.0
|
|
(7.8
|
)
|
|||
|
|
|
|
||||||
Corporate and Other (d)(e)
|
12.8
|
|
—
|
|
9.5
|
|
|||
Total Income Tax Expense (Benefit)
|
$(6.6)
|
$(15.5)
|
|
$14.7
|
|
(a)
|
See Note 1. Operations and Significant Accounting Policies.
|
(b)
|
Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation.
|
(c)
|
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.)
|
(d)
|
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. (See Note 4. Regulatory Matters.)
|
As of December 31
|
2019
|
|
2018
|
|
||
Millions
|
|
|
||||
Assets
|
|
|
||||
Regulated Operations
|
$4,130.8
|
$3,952.5
|
||||
|
|
|
||||
ALLETE Clean Energy
|
1,001.5
|
|
606.6
|
|
||
U.S. Water Services (a)
|
—
|
|
295.8
|
|
||
|
|
|
||||
Corporate and Other
|
350.5
|
|
310.1
|
|
||
Total Assets
|
|
$5,482.8
|
|
|
$5,165.0
|
|
Capital Expenditures
|
|
|
||||
Regulated Operations
|
$230.9
|
$211.9
|
||||
|
|
|
||||
ALLETE Clean Energy
|
385.6
|
|
89.7
|
|
||
U.S. Water Services (a)
|
—
|
|
5.0
|
|
||
|
|
|
||||
Corporate and Other
|
10.1
|
|
12.0
|
|
||
Total Capital Expenditures
|
|
$626.6
|
|
|
$318.6
|
|
Quarter Ended
|
Mar. 31
|
|
Jun. 30
|
|
Sept. 30
|
|
Dec. 31
|
|
||||
Millions Except Earnings Per Share
|
|
|
|
|
||||||||
2019
|
|
|
|
|
||||||||
Operating Revenue
|
|
$357.2
|
|
|
$290.4
|
|
|
$288.3
|
|
|
$304.6
|
|
Operating Income
|
|
$56.8
|
|
|
$36.2
|
|
|
$37.0
|
|
|
$49.8
|
|
Net Income Attributable to ALLETE
|
|
$70.5
|
|
|
$34.2
|
|
|
$31.2
|
|
|
$49.7
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
||||||||
Basic
|
|
$1.37
|
|
|
$0.66
|
|
|
$0.60
|
|
|
$0.96
|
|
Diluted
|
|
$1.37
|
|
|
$0.66
|
|
|
$0.60
|
|
|
$0.96
|
|
2018
|
|
|
|
|
||||||||
Operating Revenue
|
|
$358.2
|
|
|
$344.1
|
|
|
$348.0
|
|
|
$448.3
|
|
Operating Income
|
|
$57.4
|
|
|
$36.5
|
|
|
$43.3
|
|
|
$64.0
|
|
Net Income Attributable to ALLETE
|
|
$51.0
|
|
|
$31.3
|
|
|
$30.7
|
|
|
$61.1
|
|
Earnings Per Share of Common Stock
|
|
|
|
|
||||||||
Basic
|
|
$1.00
|
|
|
$0.61
|
|
|
$0.59
|
|
|
$1.19
|
|
Diluted
|
|
$0.99
|
|
|
$0.61
|
|
|
$0.59
|
|
|
$1.18
|
|
2017
|
|
|
|
|
||||||||
Operating Revenue
|
|
$365.6
|
|
|
$353.3
|
|
|
$362.5
|
|
|
$337.9
|
|
Operating Income
|
|
$71.6
|
|
|
$54.0
|
|
|
$68.0
|
|
|
$32.3
|
|
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
|
|
|
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
|
|
|
|
|
|
|||||||||
2017 Trade Accounts Receivable
|
|
$3.1
|
|
|
$0.8
|
|
—
|
|
|
$1.8
|
|
|
$2.1
|
|
Finance Receivables – Long-Term
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
2018 Trade Accounts Receivable
|
|
$2.1
|
|
|
$0.9
|
|
—
|
|
|
$1.3
|
|
|
$1.7
|
|
Finance Receivables – Long-Term
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
2019 Trade Accounts Receivable
|
|
$1.7
|
|
$(0.1)
|
—
|
|
|
$0.7
|
|
|
$0.9
|
|
||
Finance Receivables – Long-Term
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Deferred Asset Valuation Allowance
|
|
|
|
|
|
|||||||||
2017 Deferred Tax Assets
|
|
$43.0
|
|
$17.0
|
—
|
|
—
|
|
|
$60.0
|
|
|||
2018 Deferred Tax Assets
|
|
$60.0
|
|
$6.5
|
—
|
|
—
|
|
|
$66.5
|
|
|||
2019 Deferred Tax Assets
|
|
$66.5
|
|
|
$3.5
|
|
—
|
|
—
|
|
|
$70.0
|
|
(a)
|
Includes uncollectible accounts written-off.
|
|
|
|
|
|
|
|
|
|
|
1.01
|
Defined Terms. 1
|
1.02
|
Other Interpretive Provisions. 15
|
1.03
|
Accounting Terms. 15
|
1.04
|
Rounding. 16
|
2.01
|
Term Loans. 16
|
2.02
|
Term Borrowings, Conversions and Continuations of Term Loans 17
|
2.03
|
Optional Prepayments. 17
|
2.04
|
Termination or Reduction of Term Commitment. 18
|
2.05
|
Repayment of Term Loans. 18
|
2.06
|
Interest and Default Rate. 18
|
2.07
|
Fees. 19
|
2.08
|
Computation of Interest and Fees. 19
|
2.09
|
Payments Generally. 19
|
3.01
|
Taxes. 19
|
3.02
|
Illegality. 20
|
3.03
|
Inability to Determine Rates. 20
|
3.04
|
Increased Costs; Reserves on Eurodollar Rate Loans. 21
|
3.05
|
Compensation for Losses. 22
|
3.06
|
Survival. 23
|
4.01
|
Conditions of Initial Term Borrowing. 23
|
4.02
|
Conditions to all Term Borrowings. 24
|
5.01
|
Organization; Powers. 24
|
5.02
|
Authorization; Enforceability. 25
|
5.03
|
Governmental Approvals; No Conflicts. 25
|
5.04
|
Financial Condition; No Material Adverse Change. 25
|
5.05
|
Litigation. 25
|
5.06
|
Environmental Matters. 26
|
5.07
|
Investment Company Status. 26
|
5.08
|
ERISA. 26
|
5.09
|
Disclosure. 26
|
5.10
|
Subsidiaries. 26
|
5.11
|
Use of Proceeds; Federal Reserve Regulations. 27
|
5.12
|
EEA Financial Institutions. 27
|
5.13
|
Anti-Money Laundering and Anti-Terrorism Finance Laws 27
|
5.14
|
Foreign Corrupt Practices Act. 27
|
5.15
|
Sanctions Laws. 27
|
5.16
|
Plan Assets; Prohibited Transactions. 28
|
6.01
|
Financial Statements and Other Information. 28
|
6.02
|
Notices of Material Events. 29
|
6.03
|
Legal Existence 30
|
6.04
|
Taxes. 30
|
6.05
|
Insurance. 30
|
6.06
|
Condition of Property. 30
|
6.07
|
Observance of Legal Requirements. 30
|
7.01
|
Liens. 31
|
7.02
|
Merger; Consolidation. 32
|
7.03
|
Transactions with Affiliates. 33
|
7.04
|
Permitted Hedge Agreements. 33
|
7.05
|
Financial Covenant. 33
|
7.06
|
Anti-Money Laundering and Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act; Sanctions Laws; Restricted Person.. 34
|
7.07
|
Use of Proceeds.. 34
|
8.01
|
Events of Default. 34
|
8.02
|
Remedies upon Event of Default. 36
|
8.03
|
Application of Funds. 37
|
10.01
|
Amendments, Etc. 37
|
10.02
|
Notices; Effectiveness; Electronic Communications. 37
|
10.03
|
No Waiver; Cumulative Remedies; Enforcement. 38
|
10.04
|
Expenses; Indemnity; Damage Waiver. 38
|
10.05
|
Payments Set Aside. 40
|
10.06
|
Successors and Assigns. 40
|
10.07
|
Treatment of Certain Information; Confidentiality. 41
|
10.08
|
Right of Setoff. 41
|
10.09
|
Interest Rate Limitation. 42
|
10.10
|
Counterparts; Integration; Effectiveness. 42
|
10.11
|
Survival of Representations and Warranties. 42
|
10.12
|
Severability. 43
|
10.13
|
Governing Law; Jurisdiction; Etc. 43
|
10.14
|
Waiver of Jury Trial. 44
|
10.15
|
Acknowledgment Regarding Any Support QFCs. 44
|
10.16
|
No Advisory or Fiduciary Responsibility. 45
|
10.17
|
Electronic Execution. 46
|
10.18
|
USA PATRIOT Act Notice. 46
|
BORROWER:
|
ALLETE, INC.
|
To:
|
Bank of America, N.A., as Lender
|
RE:
|
Term Loan Agreement, dated as of January 10, 2020 by and between ALLETE, Inc., a Minnesota corporation (the “Borrower”) and Bank of America, N.A., as Lender (as amended, modified, extended, restated, replaced, or supplemented from time to time, the “Term Loan Agreement”; capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Term Loan Agreement)
|
•
|
quorums;
|
•
|
terms of directors elected;
|
•
|
vacancies;
|
•
|
class voting;
|
•
|
meetings; and
|
•
|
adjournments.
|
•
|
a provision requiring the affirmative vote of 75 percent of the outstanding shares of all classes of ALLETE’s capital stock, present and entitled to vote, in order to authorize certain mergers or consolidations, or sales or leases of a significant amount of assets, of ALLETE, and other significant transactions that may have an effect on the control of ALLETE. Any of those transactions are required to meet certain “fair price” and procedural requirements. Neither a 75 percent shareholder vote nor a “fair price” is required for any of those transactions that have been approved by a majority of the “Disinterested Directors,” as that term is defined in the Articles of Incorporation;
|
•
|
a provision permitting a majority of the Disinterested Directors to determine whether the above requirements have been satisfied; and
|
•
|
a provision providing that some parts of the Articles of Incorporation cannot be altered unless approved by 75 percent of the outstanding shares of all classes of ALLETE’s capital stock, present and entitled to vote, unless the alteration is recommended to the shareholders by a majority of the Disinterested Directors. The parts of the Articles of Incorporation that cannot be altered except as stated above include some parts relating to:
|
◦
|
mergers or consolidations, or sales or leases of a significant amount of assets, of ALLETE, and other significant transactions that may have an effect on the control of ALLETE; and
|
◦
|
the number, election, terms of office and removal of directors of ALLETE and the way in which vacancies on the board of directors are filled.
|
Base Salary
|
$
|
|
|
Times
|
|
|
|
Award Opportunity (percent of base salary)
|
%
|
|
|
Equals
|
|
|
|
Target Award
|
$
|
Goal Performance Level
|
Payout as Percent of
Target Award
|
Award Amount
|
Superior
|
200%
|
$
|
Target
|
100%
|
$
|
Threshold
|
44%
|
$
|
Below Threshold
|
0%
|
$
|
|
|
|
|
|
|
|
Goal
|
|
|
|
|
|
|
|
|
Weighting
|
|
|
Financial Goals
|
|
|
|
|
|
||
|
|
Net Income
|
50%
|
|||||
|
|
Cash from Operating Activities
|
|
20%
|
||||
|
|
|
|
|
|
|
|
|
|
Strategic & Operational & Values Goals
|
|
|
|
30%
|
|||
|
|
|
|
|
|
|
100%
|
By:
|
|
|
Chairman & 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
|
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.
|
(a)
|
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,
|
(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
|
(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.
|
(v)
|
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;
|
(vi)
|
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;
|
(vii)
|
determined to be totally disabled by the Social Security Administration; or
|
(viii)
|
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 & 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.
|
(a)
|
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.
|
a)
|
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.
|
b)
|
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.
|
c)
|
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.
|
d)
|
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
|
El Paso Electric Company
|
OGE Energy Corp.
|
Ameren Corporation
|
Entergy Corporation
|
Otter Tail Corporation
|
American Electric Power Company
|
Evergy Inc.
|
PG&E Corporation
|
Avangrid, Inc.
|
Eversource Energy
|
Pinnacle West Capital Corporation
|
Avista Corporation
|
Exelon Corporation
|
PNM Resources, Inc.
|
Black Hills Corporation
|
FirstEnergy Corporation
|
Portland General Electric Company
|
CenterPoint Energy, Inc.
|
Hawaiian Electric Industries, Inc.
|
PPL Corporation
|
CMS Energy Corporation
|
IDACORP, Inc.
|
Public Service Enterprise Group, Inc.
|
Consolidated Edison, Inc.
|
MDU Resources Group, Inc.
|
Sempra Energy
|
Dominion Energy, Inc.
|
MGE Energy, Inc.
|
The Southern Company
|
DTE Energy Company
|
NextEra Energy, Inc.
|
Unitil Corporation
|
Duke Energy Corporation
|
NiSource, Inc.
|
WEC Energy Group, Inc.
|
Edison International
|
NorthWestern Corporation
|
Xcel Energy, Inc.
|
Compound Annual Growth Rate
|
Payout Percentage (% of Target Award)
|
Superior [ ]%
|
200%
|
Target [ ]%
|
100%
|
Threshold [ ]%
|
50%
|
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 O&M, LLC
|
Delaware
|
ACE Solar LLC
|
Delaware
|
Red Lake Solar, LLC
|
Delaware
|
ACE Wind LLC
|
Delaware
|
ACE Mid-West Holdings, LLC
|
Delaware
|
ACE Gopher Holdings, LLC
|
Delaware
|
ACE Lincoln Heights Holdings, LLC
|
Delaware
|
Cisco Holdings, LLC
|
Delaware
|
MINNIGAN HOLDCO, 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
|
Northern Wind Energy, LLC
|
Delaware
|
Chanarambie Power Partners, LLC
|
Delaware
|
Viking Wind Holdings, LLC
|
Delaware
|
ACE South Holdings, LLC
|
Delaware
|
Diamond Spring QOZB, LLC
|
Delaware
|
ACE DS Class B LLC
|
Delaware
|
Diamond Spring, LLC
|
Delaware
|
Diamond Spring Renewables, LLC
|
Delaware
|
ACE West Holdings, LLC
|
Delaware
|
ACE GAWW Class B LLC
|
Delaware
|
Great American West Wind, LLC
|
Deleware
|
Glen Ullin Energy Center, LLC
|
Delaware
|
South Peak Wind 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
|
ALLETE Enterprises QOF, LLC
|
Delaware
|
ALLETE Power Systems, Inc.
|
Minnesota
|
ALLETE Renewable Resources, Inc.
|
North Dakota
|
ALLETE Transmission Holdings, Inc.
|
Wisconsin
|
ASW Partners, LLC
|
Delaware
|
ALLETE South Wind, LLC
|
Delaware
|
Nobles 2 Power Partners, LLC
|
Delaware
|
BNI Energy, Inc.
|
North Dakota
|
BNI Coal, Ltd.
|
North Dakota
|
Name of Organization (a)
|
State or Country
|
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
|
Palm Coast Land, LLC
|
Florida
|
ALLETE Water Services, Inc.
|
Minnesota
|
Florida Water Services Corporation
|
Florida
|
Energy Replacement Property, LLC
|
Minnesota
|
Energy Land, Incorporated
|
Wisconsin
|
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, 2019, 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 13, 2020
|
/s/ Bethany M. Owen
|
|
|
Bethany M. Owen
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2019, 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 13, 2020
|
/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, 2019, (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 13, 2020
|
/s/ Bethany M. Owen
|
|
|
Bethany M. Owen
|
|
|
President and Chief Executive Officer
|
Date:
|
February 13, 2020
|
/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
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
No
|
No
|
—
|
—
|
—
|
|
|
Exhibit 99
|
For Release:
|
February 13, 2020
|
|
Investor Contact:
|
Vince Meyer
|
|
|
218-723-3952
|
|
|
vmeyer@allete.com
|
|
NEWS
|
|
|
|
|
|
Quarter Ended
|
Year to Date
|
|||||||
|
2019
|
2018
|
2019
|
2018
|
|||||
Millions Except Per Share Amounts
|
|
|
|
|
|||||
Operating Revenue
|
|
|
|
|
|||||
Contracts with Customer – Utility
|
$256.3
|
$270.2
|
$1,042.4
|
$1,059.5
|
|||||
Contracts with Customer – Non-utility
|
45.4
|
|
172.4
|
|
186.5
|
|
415.5
|
|
|
Other – Non-utility
|
2.9
|
|
5.7
|
|
11.6
|
|
23.6
|
|
|
Total Operating Revenue
|
304.6
|
|
448.3
|
|
1,240.5
|
|
1,498.6
|
|
|
Operating Expenses
|
|
|
|
|
|||||
Fuel, Purchased Power and Gas – Utility
|
94.8
|
|
106.9
|
|
390.7
|
|
407.5
|
|
|
Transmission Services – Utility
|
14.0
|
|
16.8
|
|
69.8
|
|
69.9
|
|
|
Cost of Sales – Non-utility
|
18.8
|
|
109.4
|
|
80.6
|
|
218.0
|
|
|
Operating and Maintenance
|
63.3
|
|
86.9
|
|
264.3
|
|
340.5
|
|
|
Depreciation and Amortization
|
50.4
|
|
52.2
|
|
202.0
|
|
205.6
|
|
|
Taxes Other than Income Taxes
|
13.5
|
|
14.1
|
|
53.3
|
|
57.9
|
|
|
Other
|
—
|
|
(2.0
|
)
|
—
|
|
(2.0
|
)
|
|
Total Operating Expenses
|
254.8
|
|
384.3
|
|
1,060.7
|
|
1,297.4
|
|
|
Operating Income
|
49.8
|
|
64.0
|
|
179.8
|
|
201.2
|
|
|
Other Income (Expense)
|
|
|
|
|
|||||
Interest Expense
|
(16.0
|
)
|
(16.3
|
)
|
(64.9
|
)
|
(67.9
|
)
|
|
Equity Earnings
|
6.4
|
|
4.5
|
|
21.7
|
|
17.5
|
|
|
Gain on Sale of U.S. Water Services
|
3.0
|
|
—
|
|
23.6
|
|
—
|
|
|
Other
|
4.1
|
|
2.1
|
|
18.7
|
|
7.8
|
|
|
Total Other Expense
|
(2.5
|
)
|
(9.7
|
)
|
(0.9
|
)
|
(42.6
|
)
|
|
Income Before Non-Controlling Interest and Income Taxes
|
47.3
|
|
54.3
|
|
178.9
|
|
158.6
|
|
|
Income Tax Benefit
|
(2.3
|
)
|
(6.8
|
)
|
(6.6
|
)
|
(15.5
|
)
|
|
Net Income
|
$49.6
|
$61.1
|
$185.5
|
$174.1
|
|||||
Less: Non-Controlling Interest in Subsidiaries
|
(0.1
|
)
|
—
|
|
(0.1
|
)
|
—
|
|
|
Net Income Attributable to ALLETE
|
|
$49.7
|
|
$61.1
|
$185.6
|
$174.1
|
|||
Average Shares of Common Stock
|
|
|
|
|
|||||
Basic
|
51.7
|
|
51.5
|
|
51.6
|
|
51.3
|
|
|
Diluted
|
51.8
|
|
51.7
|
|
51.7
|
|
51.5
|
|
|
Basic Earnings Per Share of Common Stock
|
$0.96
|
$1.19
|
$3.59
|
$3.39
|
|||||
Diluted Earnings Per Share of Common Stock
|
$0.96
|
$1.18
|
$3.59
|
$3.38
|
|||||
Dividends Per Share of Common Stock
|
$0.5875
|
$0.56
|
$2.35
|
$2.24
|
|
Dec. 31,
|
Dec. 31,
|
|
|
Dec. 31,
|
Dec. 31,
|
|
2019
|
2018
|
|
|
2019
|
2018
|
Assets
|
|
|
|
Liabilities and Equity
|
|
|
Cash and Cash Equivalents
|
$69.3
|
$69.1
|
|
Current Liabilities
|
$507.4
|
$405.1
|
Other Current Assets
|
200.2
|
265.2
|
|
Long-Term Debt
|
1,400.9
|
1,428.5
|
Property, Plant and Equipment – Net
|
4,377.0
|
3,904.4
|
|
Deferred Income Taxes
|
212.8
|
223.6
|
Regulatory Assets
|
420.5
|
389.5
|
|
Regulatory Liabilities
|
560.3
|
512.1
|
Equity Investments
|
197.6
|
161.1
|
|
Defined Benefit Pension & Other Postretirement Benefit Plans
|
172.8
|
177.3
|
Goodwill and Intangibles – Net
|
1.0
|
223.3
|
|
Other Non-Current Liabilities
|
293.0
|
262.6
|
Other Non-Current Assets
|
217.2
|
152.4
|
|
Equity
|
2,335.6
|
2,155.8
|
Total Assets
|
$5,482.8
|
$5,165.0
|
|
Total Liabilities and Equity
|
$5,482.8
|
$5,165.0
|
|
Quarter Ended
|
Year to Date
|
||||||
ALLETE, Inc.
|
December 31,
|
December 31,
|
||||||
Income (Loss)
|
2019
|
2018
|
2019
|
2018
|
||||
Millions
|
|
|
|
|
||||
Regulated Operations
|
$40.2
|
$31.3
|
$154.4
|
$131.0
|
||||
|
|
|
|
|
||||
ALLETE Clean Energy
|
5.9
|
17.8
|
12.4
|
33.7
|
||||
U.S. Water Services
|
—
|
|
2.7
|
|
(1.1)
|
3.2
|
||
|
|
|
|
|
||||
Corporate and Other
|
3.6
|
|
9.3
|
|
19.9
|
|
6.2
|
|
Net Income Attributable to ALLETE
|
$49.7
|
$61.1
|
$185.6
|
$174.1
|
||||
Diluted Earnings Per Share
|
$0.96
|
$1.18
|
$3.59
|
$3.38
|
Regulated Utility Revenue
|
|
|
|
|
||||||||
Millions
|
|
|
|
|
||||||||
Regulated Utility Revenue
|
|
|
|
|
||||||||
Retail and Municipal Electric Revenue
|
|
|
|
|
||||||||
Residential
|
|
$31.9
|
|
|
$33.6
|
|
|
$125.9
|
|
|
$126.1
|
|
Commercial
|
33.4
|
|
35.5
|
|
139.5
|
|
141.9
|
|
||||
Industrial
|
117.9
|
|
120.3
|
|
473.9
|
|
465.2
|
|
||||
Municipal
|
9.2
|
|
13.1
|
|
48.6
|
|
54.9
|
|
||||
Total Retail and Municipal
|
192.4
|
|
202.5
|
|
787.9
|
|
788.1
|
|
||||
Other Power Suppliers
|
41.8
|
|
43.0
|
|
153.7
|
|
170.3
|
|
||||
Other (Includes Water and Gas Revenue)
|
22.1
|
|
24.7
|
|
100.8
|
|
101.1
|
|
||||
Total Regulated Utility Revenue
|
|
$256.3
|
|
|
$270.2
|
|
|
$1,042.4
|
|
|
$1,059.5
|
|