Strong Revenue Growth Drives ALLETE's Second Quarter Results

  Strong Revenue Growth Drives ALLETE's Second Quarter Results

                  Full year earnings guidance is reaffirmed

Business Wire

DULUTH, Minn. -- August 1, 2014

ALLETE, Inc. (NYSE:ALE) today reported second quarter 2014 earnings of 40
cents per share on net income of $16.8 million compared to 35 cents per share
on net income of $14.0 million during the same period last year. Included in
this quarter’s results was a $2.5 million after-tax, or 6 cents per share,
non-recurring charge associated with a settlement agreement with the
Environmental Protection Agency (EPA).

Revenue for the second quarter of 2014 rose by 10.7 percent to $260.7 million
versus $235.6 million a year ago. This quarter’s earnings per share included 2
cents per share of dilution due to an increase in common shares year over
year.

Net income at ALLETE’s Regulated Operations segment, which includes Minnesota
Power, Superior Water, Light and Power and the company’s investment in the
American Transmission Co., rose to $17.5 million compared to $16.3 million in
the same period of 2013, despite the inclusion of the aforementioned
non-recurring charge in this quarter’s results. The net income increase was
primarily due to higher cost recovery revenue as a result of ongoing work on
the Boswell 4 environmental retrofit and Bison 4 wind energy projects.
Electric sales were similar to the second quarter of 2013, and reflected
continued strong demand from Minnesota Power’s industrial customers.

The Investments and Other segment, which includes BNI Coal, ALLETE Clean
Energy, ALLETE Properties, and miscellaneous corporate income and expense,
reported a net loss of $0.7 million for the quarter, an improvement of $1.6
million from the same period in 2013. ALLETE Clean Energy posted a profit from
its newly acquired wind energy facilities in Minnesota, Iowa and Oregon.
Results at BNI Coal and ALLETE Properties were similar to the second quarter
of last year.

“Demand nominations we’ve just received indicate our taconite customers will
continue to operate at full demand levels through the remainder of 2014,” said
ALLETE Chairman, President and CEO Al Hodnik. “We’re pleased to be on track
with the earnings projections we made earlier this year.” Hodnik said the 2014
full year earnings guidance range remains unchanged at $2.75 to $2.95,
excluding 3 cents per share of costs recorded in the first quarter associated
with an ALLETE Clean Energy acquisition, and this quarter’s non-recurring 6
cents per share charge associated with the EPA settlement.

The company will host a conference call and webcast at 10 a.m. Eastern time
today to discuss details of its quarterly performance. Interested parties may
listen live by calling (877) 303-5852, or by accessing the webcast at
www.allete.com. A replay of the call will be available through August 3, 2014
by dialing (855) 859-2056, pass code 72262344. The webcast will be accessible
for one year at www.allete.com.

ALLETE is an energy company headquartered in Duluth, Minn. In addition to its
electric utilities, Minnesota Power and Superior Water, Light and Power of
Wisconsin, ALLETE owns BNI Coal in Center, N.D., ALLETE Clean Energy, based in
Duluth, and has an eight percent equity interest in the American Transmission
Co. More information about ALLETE is available at www.allete.com.

The statements contained in this release and statements that ALLETE may make
orally in connection with this release that are not historical facts, are
forward-looking statements. Actual results may differ materially from those
projected in the forward-looking statements. These forward-looking statements
involve risks and uncertainties and investors are directed to the risks
discussed in documents filed by ALLETE with the Securities and Exchange
Commission.

ALLETE's press releases and other communications may include certain
non-Generally Accepted Accounting Principles (GAAP) financial measures. A
"non-GAAP financial measure" is defined as a numerical measure of a company's
financial performance, financial position or cash flows that excludes (or
includes) amounts that are included in (or excluded from) the most directly
comparable measure calculated and presented in accordance with GAAP in the
company's financial statements

Non-GAAP financial measures utilized by the Company include presentations of
earnings (loss) per share. ALLETE's management believes that these non-GAAP
financial measures provide useful information to investors by removing the
effect of variances in GAAP reported results of operations that are not
indicative of changes in the fundamental earnings power of the Company's
operations. Management believes that the presentation of the non-GAAP
financial measures is appropriate and enables investors and analysts to more
accurately compare the company's ongoing financial performance over the
periods presented.


ALLETE, Inc.
Consolidated Statement of Income
Millions Except Per Share Amounts - Unaudited

                         Quarter Ended             Six Months Ended
                           June 30,                    June 30,
                        2014        2013        2014        2013
                                                                
Operating Revenue        $ 260.7    $ 235.6    $ 557.2    $ 499.4 
                                                                     
Operating Expenses
Fuel and Purchased           83.6          78.7          179.8         165.2
Power
Operating and                115.1         103.8         234.9         208.5
Maintenance
Depreciation              33.8      28.7      66.0      56.9  
Total Operating              232.5         211.2         480.7         430.6
Expenses
                                                                     
Operating Income          28.2      24.4      76.5      68.8  
                                                                     
Other Income (Expense)
Interest Expense             (13.5 )       (12.8 )       (26.3 )       (25.1 )
Equity Earnings in ATC       5.2           5.0           10.3          10.2
Other                     1.9       1.5       3.9       4.2   
Total Other Expense       (6.4  )    (6.3  )    (12.1 )    (10.7 )
                                                                     
Income Before
Non-Controlling              21.8          18.1          64.4          58.1
Interest and Income
Taxes
Income Tax Expense        4.9       4.1       13.7      11.6  
Net Income                16.9      14.0      50.7      46.5  
Less: Non-Controlling
Interest in               0.1       —         0.4       —     
Subsidiaries
Net Income               $ 16.8     $ 14.0     $ 50.3     $ 46.5  
Attributable to ALLETE
                                                                     
Average Shares of
Common Stock
Basic                        42.1          39.4          41.7          39.2
Diluted                   42.3      39.6      41.9      39.3  
                                                                     
Basic Earnings Per         $ 0.40        $ 0.36        $ 1.21        $ 1.19
Share of Common Stock
Diluted Earnings Per       $ 0.40        $ 0.35        $ 1.20        $ 1.18
Share of Common Stock
                                                                     
Dividends Per Share of   $ 0.49     $ 0.475    $ 0.98     $ 0.95  
Common Stock
                                                                             


Consolidated Balance Sheet
Millions - Unaudited

              Jun. 30,    Dec. 31,                      Jun. 30,    Dec. 31,
             2014        2013                         2014        2013
                                              Liabilities
Assets                                        and
                                              Shareholders’
                                              Equity
Cash and                                      Current
Cash            $ 83.6        $ 97.3          Liabilities        $ 213.4       $ 230.2
Equivalents
Other
Current           209.9         209.7         Long-Term Debt       1,316.8       1,083.0
Assets
Property,
Plant and         3,020.4       2,576.5       Deferred             496.3         479.1
Equipment -                                   Income Taxes
Net
Regulatory        270.8         263.8         Regulatory           100.1         81.0
Assets                                        Liabilities
                                              Defined
                                              Benefit
Investment                                    Pension &
in ATC            118.8         114.6         Other                117.0         133.4

                                              Postretirement
                                              Benefit Plans
Other                                         Other
Investments       116.7         146.3         Non-Current          234.5         127.2
                                              Liabilities
Other                                         Shareholders’
Non-Current    75.4       68.6       Equity            1,417.5    1,342.9
Assets
                                              Total
Total                                         Liabilities
Assets        $ 3,895.6   $ 3,476.8    and              $ 3,895.6   $ 3,476.8
                                              Shareholders’
                                              Equity
                                                                                 

                                                  
                           Quarter Ended               Six Months Ended
ALLETE, Inc.               June 30,                    June 30,
Income (Loss)            2014        2013        2014        2013
Millions                                                        
Regulated Operations       $ 17.5        $ 16.3        $ 51.4        $ 48.4
Investments and Other     (0.7  )    (2.3  )    (1.1  )    (1.9  )
Net Income               $ 16.8     $ 14.0     $ 50.3     $ 46.5  
Attributable to ALLETE
Diluted Earnings Per     $ 0.40     $ 0.35     $ 1.20     $ 1.18  
Share
                                                                     
Statistical Data                                          
Corporate
Common Stock
High                       $ 52.54       $ 52.25       $ 52.73       $ 52.25
Low                        $ 47.51       $ 46.85       $ 47.51       $ 41.39
Close                      $ 51.35       $ 49.85       $ 51.35       $ 49.85
Book Value                 $ 33.22       $ 31.12       $ 33.22       $ 31.12
                                                                     
Kilowatt-hours Sold                                       
Millions
Regulated Utility
Retail and Municipals
Residential                  249           251           647           605
Commercial                   333           335           728           712
Municipals                   198           225           440           499
Industrial                1,788     1,769     3,604     3,614 
Total Retail and             2,568         2,580         5,419         5,430
Municipal
Other Power Suppliers     631       610       1,331     1,201 
Total Regulated              3,199         3,190         6,750         6,631
Utility
Non-regulated Energy      30        33        64        64    
Operations
Total Kilowatt-hours      3,229     3,223     6,814     6,695 
Sold
                                                                     
Regulated Utility                                         
Revenue
Millions
Regulated Utility
Revenue
Retail and Municipals
Residential                $ 25.7        $ 24.7        $ 65.8        $ 59.8
Commercial                   30.9          29.3          66.0          62.5
Municipals                   14.5          15.8          31.0          32.4
Industrial                108.7     101.6     220.1     210.1 
Total Retail and             179.8         171.4         382.9         364.8
Municipals
Other Power Suppliers        24.1          22.4          53.7          44.7
Other                     25.7      22.0      57.2      47.7  
Total Regulated          $ 229.6    $ 215.8    $ 493.8    $ 457.2 
Utility Revenue
                                                                             

Contact:

ALLETE, Inc.
Investor Contact:
Tim Thorp, 218-723-3953
tthorp@allete.com
 
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