Market Overview

ALLETE, Inc. Reports Second Quarter 2018 Earnings; Reaffirms Earnings Guidance

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ALLETE, Inc. (NYSE:ALE) today reported second quarter 2018 earnings of
61 cents per share on net income of $31.3 million and operating revenue
of $344.1 million. Last year's results were 72 cents per share on net
income of $36.9 million and operating revenue of $353.3 million.

"Financial results from ALLETE's businesses reflect strong power demand
from taconite customers, impacts from Minnesota Power's recent rate case
and notable progress from ALLETE Clean Energy on its wind turbine
refurbishment strategy," said ALLETE Chairman, President and CEO Al
Hodnik. "Setting aside year over year timing differentials, ALLETE
posted a solid quarter and we remain confident in our full year 2018
earnings guidance range of $3.20 to $3.50 per share. We are well
positioned for growth as our diverse family of businesses captures value
in a growing domestic economy, and our nation focuses on sustainable
energy and water solutions."

ALLETE's Regulated Operations segment, which includes Minnesota Power,
Superior Water, Light and Power, and the Company's investment in the
American Transmission Co. (ATC), recorded net income of $26.0 million
for the second quarter of 2018, a decrease of $6.4 million from 2017.
Earnings decreased primarily due to lower net income at Minnesota Power
resulting from the timing of reserves for an interim rate refund of $5.6
million after-tax, the timing of approval for financial incentives under
the Minnesota conservation improvement program of $3.9 million
after-tax, and lower transmission revenue. These decreases were
partially offset by higher sales to residential, commercial and
municipal customers due to more favorable weather conditions, and lower
operating and maintenance expense.

ALLETE's Energy Infrastructure and Related Services businesses, which
include ALLETE Clean Energy and U.S. Water Services, recorded net income
of $6.8 million and $0.2 million for the second quarter of 2018,
respectively. Earnings at ALLETE Clean Energy increased $3.0 million
from 2017. Net income in 2018 included $3.9 million after-tax of
additional production tax credits generated as ALLETE Clean Energy
executes on its refurbishment strategy and a lower federal income tax
rate, partially offset by higher operating and maintenance expenses and
lower revenue resulting from lower wind resources compared to the same
period in 2017. Earnings from U.S. Water Services reflect higher
operating expenses, partially offset by higher revenue primarily from
the September 2017 acquisition of Tonka Water. Results this period were
also negatively impacted by the timing of capital project sales.

ALLETE will host a conference call and webcast at 10 a.m. Eastern Time
this morning to discuss details of its financial 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 6, 2018 by calling
(855) 859-2056, pass code 9699879. 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 ALLETE Clean Energy, based
in Duluth, BNI Energy in Bismarck, N.D., U.S. Water Services
headquartered in St. Michael, Minn., and has an eight percent equity
interest in the American Transmission Co. More information
about ALLETE is available at www.allete.com.
ALE-CORP

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,
      2018     2017     2018     2017
Operating Revenue        
Contracts with Customers – Utility $257.8 $264.9 $528.0 $546.5
Contracts with Customers – Non-utility 80.4 82.5 162.4 160.6
Other – Non-utility     5.9       5.9       11.9       11.8  
Total Operating Revenue     344.1       353.3       702.3       718.9  
Operating Expenses
Fuel, Purchased Power and Gas – Utility 96.5 93.1 197.4 189.7
Transmission Services – Utility 16.8 17.6 35.2 34.2
Cost of Sales – Non-utility 37.0 38.4 69.9 69.9
Operating and Maintenance 86.8 85.9 173.3 170.3
Depreciation and Amortization 56.1 50.1 101.9 100.6
Taxes Other than Income Taxes     14.4       14.2       30.7       28.6  
Total Operating Expenses     307.6       299.3       608.4       593.3  
Operating Income     36.5       54.0       93.9       125.6  
Other Income (Expense)
Interest Expense (17.1 ) (16.7 ) (34.0 ) (33.9 )
Equity Earnings in ATC 4.3 5.3 9.0 11.4
Other     2.2       1.6       4.3       3.2  
Total Other Expense     (10.6 )     (9.8 )     (20.7 )     (19.3 )
Income Before Income Taxes 25.9 44.2 73.2 106.3
Income Tax Expense (Benefit)     (5.4 )     7.3       (9.1 )     20.4  
Net Income     $31.3       $36.9       $82.3       $85.9  
Average Shares of Common Stock
Basic 51.3 50.9 51.2 50.5
Diluted     51.5       51.1       51.4       50.7  
Basic Earnings Per Share of Common Stock $0.61 $0.73 $1.61 $1.70
Diluted Earnings Per Share of Common Stock $0.61 $0.72 $1.60 $1.69
Dividends Per Share of Common Stock     $0.56       $0.535       $1.12       $1.07  
 
 
Consolidated Balance Sheet

Millions - Unaudited

                   
Jun. 30, Dec. 31, Jun. 30, Dec. 31,
      2018     2017           2018     2017
Assets Liabilities and Shareholders' Equity
Cash and Cash Equivalents $121.9 $98.9 Current Liabilities $350.2 $351.2
Other Current Assets 302.1 268.6 Long-Term Debt 1,462.2 1,439.2
Property, Plant and Equipment – Net 3,809.3 3,822.4 Deferred Income Taxes 228.5 230.5
Regulatory Assets 374.5 384.7 Regulatory Liabilities 516.0 532.0
Investment in ATC 123.6 118.7 Defined Benefit Pension and Other Postretirement Benefit Plans 175.2 191.8
Other Investments 52.5 53.1 Other Non-Current Liabilities 274.4 267.1
Goodwill and Intangibles – Net 225.8 225.9 Shareholders' Equity 2,108.2 2,068.2
Other Non-Current Assets     105.0     107.7                  
Total Assets     $5,114.7     $5,080.0     Total Liabilities and Shareholders' Equity     $5,114.7     $5,080.0
 
       
Quarter Ended Six Months Ended
ALLETE, Inc. June 30, June 30,
Income (Loss)     2018     2017     2018     2017
Millions        
Regulated Operations $26.0 $32.4 $69.9 $75.9
 
Energy Infrastructure and Related Services
ALLETE Clean Energy 6.8 3.8 14.9 10.5
U.S. Water Services 0.2 0.6 (1.2 ) 0.3
 
Corporate and Other     (1.7 )     0.1     (1.3 )     (0.8 )
Net Income Attributable to ALLETE     $31.3       $36.9     $82.3       $85.9  
Diluted Earnings Per Share     $0.61       $0.72     $1.60       $1.69  
 
Statistical Data                        
Corporate
Common Stock
High $79.86 $74.59 $79.86 $74.59
Low $70.40 $66.81 $66.64 $61.64
Close $77.41 $71.68 $77.41 $71.68
Book Value     $41.05       $39.58     $41.05       $39.58  
 
Kilowatt-hours Sold                        
Millions
Regulated Utility
Retail and Municipal
Residential 243 229 585 552
Commercial 339 328 706 697
Industrial 1,781 1,816 3,624 3,578
Municipal     188       181     407       396  
Total Retail and Municipal 2,551 2,554 5,322 5,223
Other Power Suppliers     1,005       1,004     2,008       2,045  
Total Regulated Utility Kilowatt-hours Sold     3,556       3,558     7,330       7,268  
 
Regulated Utility Revenue                        
Millions
Regulated Utility Revenue
Retail and Municipal Electric Revenue
Residential $28.0 $25.1 $63.5 $59.8
Commercial 35.2 32.4 69.2 68.4
Industrial 114.7 121.0 228.0 241.5
Municipal     13.7       12.3     27.7       30.5  
Total Retail and Municipal Electric Revenue 191.6 190.8 388.4 400.2
Other Power Suppliers 42.7 41.7 86.4 82.9
Other (Includes Water and Gas Revenue)     23.5       32.4     53.2       63.4  
Total Regulated Utility Revenue     $257.8       $264.9     $528.0       $546.5  
 

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