Group 1 - The article emphasizes the importance of creating a portfolio that generates income without the need for selling assets, aiming to alleviate the stress of retirement investing [1] - High Dividend Opportunities focuses on long-term income investments and offers a model portfolio with buy/sell alerts, preferred and baby bond portfolios for conservative investors, and community support [2] - The service promotes a philosophy of community and education, encouraging investors to avoid solitary investing [2] Group 2 - The article mentions that recommendations are closely monitored, with buy and sell alerts provided exclusively to members [4] - It highlights the involvement of various contributors who support the High Dividend Opportunities service [4]

Group 1 - The core message emphasizes creating a portfolio that generates income without the need for selling assets, aiming to simplify retirement investing [1] - The focus of High Dividend Opportunities is on long-term income investments, with a new opportunity being revealed that was previously exclusive to the group's members [2] - The service offers features such as a model portfolio with buy/sell alerts, conservative investment options, active community engagement, and regular market updates, promoting a philosophy of community and education [3] Group 2 - The article mentions that various contributors support High Dividend Opportunities, and recommendations are closely monitored with exclusive alerts for members [5]

Core Insights - The article discusses the author's extensive experience in large mining projects, financial management, and project assessment, emphasizing the importance of evaluating future value per share for investment decisions rather than present value [1] Group 1: Experience and Background - The author has a background in large mining projects, food processing, and commercialization of university intellectual property, showcasing a diverse skill set [1] - The author has held financial controller positions in notable companies such as Utah International Inc, General Electric Inc, and BHP Billiton, indicating a strong professional history in finance [1] Group 2: Investment Philosophy - The author believes that using projections to calculate future value per share is more beneficial for determining potential exit value and rate of return than calculating present value [1]

[Definitions](index=3&type=section&id=Definitions) This section provides a glossary of abbreviations and acronyms used throughout the report, defining key terms related to ALLETE, its subsidiaries, regulatory bodies, and financial concepts, also introducing parties in the pending merger - This section provides a glossary of abbreviations and acronyms used throughout the report, defining key terms related to ALLETE, its subsidiaries (e.g., ALLETE Clean Energy, Minnesota Power), regulatory bodies (e.g., MPUC, FERC, EPA), and financial concepts (e.g., AFUDC, GAAP). It also introduces the parties involved in the pending merger: Alloy Parent LLC and Alloy Merger Sub LLC[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from expectations - The report contains forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from expectations. Key factors include the ability to implement strategic objectives, global and domestic economic conditions, changes in laws and regulations, interest rates, project delays, commodity prices, and the outcome of the pending merger with Alloy Parent LLC[13](index=13&type=chunk)[14](index=14&type=chunk)[16](index=16&type=chunk) [Part I. Financial Information](index=7&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Consolidated Financial Statements - Unaudited](index=7&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20-%20Unaudited) This section presents ALLETE's unaudited consolidated financial statements for the quarter and six months ended June 30, 2025, including the Balance Sheet, Statement of Income, Statement of Comprehensive Income, Statement of Cash Flows, Statement of Equity, and detailed notes on accounting policies, regulatory matters, equity investments, fair value measurements, debt, commitments, earnings per share, income taxes, pension plans, business segments, and the pending merger [Consolidated Balance Sheet](index=7&type=section&id=Consolidated%20Balance%20Sheet) Consolidated Balance Sheet (Millions) | Millions | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Total Current Assets | $452.9 | $435.2 | | Property, Plant and Equipment – Net | 5,324.0 | 5,181.5 | | Total Assets | $6,913.2 | $6,754.3 | | **Liabilities and Equity** | | | | Total Current Liabilities | $337.9 | $404.2 | | Long-Term Debt | 1,931.8 | 1,704.7 | | Total Liabilities | 3,546.1 | 3,363.8 | | Total Equity | 3,366.3 | 3,390.1 | | Total Liabilities, Redeemable Non-Controlling Interest and Equity | $6,913.2 | $6,754.3 | - Total assets increased by **$158.9 million (2.35%)** from December 31, 2024, to June 30, 2025, primarily driven by an increase in Property, Plant and Equipment – Net. Total liabilities increased by **$182.3 million (5.42%)**, mainly due to higher long-term debt, while total equity slightly decreased by **$23.8 million (0.70%)**[19](index=19&type=chunk) [Consolidated Statement of Income](index=8&type=section&id=Consolidated%20Statement%20of%20Income) Consolidated Statement of Income (Millions Except Per Share Amounts) | Millions Except Per Share Amounts | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenue | $360.3 | $354.5 | $760.5 | $757.8 | | Operating Income | 18.0 | 29.4 | 71.0 | 76.7 | | Net Income Attributable to ALLETE | $31.9 | $33.0 | $88.0 | $83.7 | | Basic Earnings Per Share of Common Stock | $0.55 | $0.57 | $1.52 | $1.45 | | Diluted Earnings Per Share of Common Stock | $0.55 | $0.57 | $1.52 | $1.45 | - For the quarter ended June 30, 2025, Net Income Attributable to ALLETE decreased by **$1.1 million (3.3%)** YoY, while for the six months ended June 30, 2025, it increased by **$4.3 million (5.1%)** YoY. Diluted EPS for the quarter decreased by **$0.02**, but for the six months, it increased by **$0.07**[21](index=21&type=chunk) [Consolidated Statement of Comprehensive Income](index=9&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) Consolidated Statement of Comprehensive Income (Millions) | Millions | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $6.6 | $19.7 | $41.3 | $56.7 | | Total Other Comprehensive Loss | — | — | — | (0.4) | | Total Comprehensive Income Attributable to ALLETE | $31.9 | $33.0 | $88.0 | $83.3 | - Total Comprehensive Income Attributable to ALLETE for the quarter decreased by **$1.1 million** YoY, but for the six months, it increased by **$4.7 million** YoY[24](index=24&type=chunk) [Consolidated Statement of Cash Flows](index=10&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) Consolidated Statement of Cash Flows (Millions) | Millions | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash provided by Operating Activities | $149.6 | $176.5 | | Cash used in Investing Activities | (273.7) | (136.8) | | Cash provided by (used in) Financing Activities | 126.8 | (75.4) | | Change in Cash, Cash Equivalents and Restricted Cash | 2.7 | (35.7) | | Cash, Cash Equivalents and Restricted Cash at End of Period | $57.9 | $43.7 | - Cash provided by operating activities decreased by **$26.9 million** YoY for the six months ended June 30, 2025. Cash used in investing activities significantly increased by **$136.9 million** YoY, primarily due to higher capital expenditures. Financing activities shifted from using **$75.4 million** cash in 2024 to providing **$126.8 million** in 2025, mainly due to debt issuance[27](index=27&type=chunk) [Consolidated Statement of Equity](index=11&type=section&id=Consolidated%20Statement%20of%20Equity) Consolidated Statement of Equity (Millions Except Per Share Amounts) | Millions Except Per Share Amounts | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Common Stock, End of Period | $1,833.7 | $1,813.8 | | Retained Earnings, End of Period | 1,046.3 | 1,028.8 | | Non-Controlling Interest in Subsidiaries, End of Period | 504.4 | 573.0 | | Total Equity, End of Period | $3,366.3 | $3,394.7 | | Dividends Per Share of Common Stock | $1.46 | $1.41 | - Total equity decreased by **$28.4 million** YoY for the six months ended June 30, 2025, primarily due to a decrease in Non-Controlling Interest in Subsidiaries. Dividends per share increased from **$1.41 to $1.46** YoY[30](index=30&type=chunk) [Note 1. Operations and Significant Accounting Policies](index=12&type=section&id=Note%201.%20Operations%20and%20Significant%20Accounting%20Policies) - A budget reconciliation bill (H.R. 1) enacted on July 4, 2025, modifies energy tax credits, and ALLETE is evaluating its potentially material impact on financial statements[35](index=35&type=chunk) Inventories – Net (Millions) | Inventories – Net (Millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Fuel | $23.8 | $22.5 | | Materials and Supplies | 125.3 | 107.6 | | Renewable Energy Facilities Under Development | 29.1 | 24.5 | | Total Inventories – Net | $178.2 | $154.6 | - Total Inventories – Net increased by **$23.6 million (15.26%)** from December 31, 2024, to June 30, 2025, driven by increases across all categories, particularly Materials and Supplies and Renewable Energy Facilities Under Development[38](index=38&type=chunk) [Note 2. Regulatory Matters](index=14&type=section&id=Note%202.%20Regulatory%20Matters) - Minnesota Power's 2024 retail rate increase request was settled and approved, resulting in a **$33.97 million** rate increase and a **9.78%** return on equity. Final rates were implemented in Q1 2025, with interim rate refunds in Q2 2025[48](index=48&type=chunk)[49](index=49&type=chunk) - Minnesota Power's 2025 Integrated Resource Plan (IRP) outlines adding **400 MW** of new wind energy by 2035 (in addition to **700 MW** from 2021 IRP), **100 MW** of energy storage by 2035, and approximately **1,000 MW** of natural gas capacity, including converting Boswell Unit 3 to natural gas by 2030, to meet carbon-free standards[56](index=56&type=chunk) Regulatory Assets and Liabilities (Millions) | Regulatory Assets and Liabilities (Millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Regulatory Assets | $4.8 | $1.6 | | Total Non-Current Regulatory Assets | 363.0 | 371.7 | | Total Current Regulatory Liabilities | $3.3 | $31.5 | | Total Non-Current Regulatory Liabilities | 586.7 | 570.5 | [Note 3. Equity Investments](index=16&type=section&id=Note%203.%20Equity%20Investments) ALLETE's Investment in ATC (Millions) | ALLETE's Investment in ATC (Millions) | Amount | | :--- | :--- | | Equity Investment Balance as of December 31, 2024 | $194.4 | | Cash Investments | 11.3 | | Equity in ATC Earnings | 12.9 | | Distributed ATC Earnings | (12.3) | | Amortization of the Remeasurement of Deferred Income Taxes | 0.6 | | Equity Investment Balance as of June 30, 2025 | $206.9 | - ALLETE's equity investment in ATC increased by **$12.5 million (6.43%)** from December 31, 2024, to June 30, 2025, primarily due to cash investments and equity in ATC earnings[63](index=63&type=chunk) ALLETE's Investment in Nobles 2 (Millions) | ALLETE's Investment in Nobles 2 (Millions) | Amount | | :--- | :--- | | Equity Investment Balance as of December 31, 2024 | $145.7 | | Equity in Nobles 2 Earnings | (1.0) | | Distributed Nobles 2 Earnings | (1.1) | | Equity Investment Balance as of June 30, 2025 | $143.6 | [Note 4. Fair Value](index=17&type=section&id=Note%204.%20Fair%20Value) Recurring Fair Value Measures (Millions) | Recurring Fair Value Measures (Millions) | June 30, 2025 Total | December 31, 2024 Total | | :--- | :--- | :--- | | **Assets** | | | | Investments (Available-for-sale Equity Securities) | $5.0 | $8.6 | | Investments (Available-for-sale Corporate and Governmental Debt Securities) | 5.4 | 6.8 | | Cash Equivalents | 16.5 | 8.5 | | Total Fair Value of Assets | $26.9 | $23.9 | | **Liabilities** | | | | Deferred Compensation | $20.8 | $21.1 | | Total Fair Value of Liabilities | $20.8 | $21.1 | Financial Instruments (Millions) | Financial Instruments (Millions) | Carrying Amount (June 30, 2025) | Fair Value (June 30, 2025) | | :--- | :--- | :--- | | Short-Term and Long-Term Debt | $2,004.2 | $1,892.2 | | Financial Instruments (Millions) | Carrying Amount (December 31, 2024) | Fair Value (December 31, 2024) | | :--- | :--- | :--- | | Short-Term and Long-Term Debt | $1,808.0 | $1,668.0 | - The fair value of short-term and long-term debt was **$1,892.2 million** as of June 30, 2025, which was **$112.0 million** less than its carrying amount of **$2,004.2 million**, indicating that the debt is trading at a discount[74](index=74&type=chunk) [Note 5. Short-Term and Long-Term Debt](index=19&type=section&id=Note%205.%20Short-Term%20and%20Long-Term%20Debt) Total Debt (Millions) | Total Debt (Millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Short-Term Debt | $63.6 | $94.7 | | Long-Term Debt | 1,931.8 | 1,704.7 | | Total Debt | $1,995.4 | $1,799.4 | - Total debt increased by **$196.0 million (10.89%)** from December 31, 2024, to June 30, 2025, primarily due to an increase in long-term debt. ALLETE issued **$150 million** of senior unsecured notes in March 2025 and **$250 million** of first mortgage bonds in July 2025 to refinance debt and fund utility capital expenditures[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - As of June 30, 2025, ALLETE was in compliance with its financial covenants, maintaining a ratio of indebtedness to total capitalization of approximately **0.39 to 1.00**, well below the maximum allowed ratio of **0.65 to 1.00**[80](index=80&type=chunk) [Note 6. Commitments, Guarantees and Contingencies](index=20&type=section&id=Note%206.%20Commitments%2C%20Guarantees%20and%20Contingencies) - ALLETE's businesses are subject to extensive environmental regulations. The company is actively managing compliance with various EPA rules, including CSAPR, NAAQS, Good Neighbor Plan, Industrial Boiler MACT, and MATS, with potential material costs for compliance, which would be sought for recovery through rate proceedings[87](index=87&type=chunk)[88](index=88&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Minnesota Power incurred approximately **$2 million** pre-tax in remediation costs in the first half of 2025 related to an ash wastewater spill at Boswell in August 2024. Total costs and potential penalties are currently unquantifiable but could be material[109](index=109&type=chunk) - Compliance costs for the EPA's CCR Legacy Impoundment Rule at Boswell and Laskin facilities are estimated between **$50 million and $85 million** over the next 10 years, with recovery expected through rate proceedings[113](index=113&type=chunk) [Note 7. Earnings Per Share and Common Stock](index=28&type=section&id=Note%207.%20Earnings%20Per%20Share%20and%20Common%20Stock) Earnings Per Share and Common Stock (Millions Except Per Share Amounts) | Millions Except Per Share Amounts | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to ALLETE | $31.9 | $33.0 | $88.0 | $83.7 | | Average Common Shares (Basic) | 58.0 | 57.7 | 58.0 | 57.7 | | Basic Earnings Per Share | $0.55 | $0.57 | $1.52 | $1.45 | | Diluted Earnings Per Share | $0.55 | $0.57 | $1.52 | $1.45 | - Basic and diluted EPS for the quarter ended June 30, 2025, decreased by **$0.02** YoY to **$0.55**. For the six months ended June 30, 2025, basic and diluted EPS increased by **$0.07** YoY to **$1.52**[126](index=126&type=chunk) [Note 8. Income Tax Expense](index=28&type=section&id=Note%208.%20Income%20Tax%20Expense) Income Tax Expense (Millions) | Millions | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Current Income Tax Expense | $2.6 | $6.5 | $10.4 | $13.4 | | Total Deferred Income Tax Benefit | $(3.2) | $(5.1) | $(3.5) | $(8.0) | | Total Income Tax Expense (Benefit) | $(0.6) | $1.4 | $6.9 | $5.4 | - For the quarter ended June 30, 2025, the company recorded an income tax benefit of **$0.6 million**, compared to an expense of **$1.4 million** in the prior year. For the six months, income tax expense increased to **$6.9 million** from **$5.4 million** YoY[127](index=127&type=chunk) - The effective tax rate for the six months ended June 30, 2025, was **14.3%**, up from **8.7%** in the prior year, primarily due to higher loss attributable to non-controlling interest and lower tax credits[131](index=131&type=chunk)[206](index=206&type=chunk) [Note 9. Pension and Other Postretirement Benefit Plans](index=30&type=section&id=Note%209.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) Components of Net Periodic Benefit Cost (Credit) (Millions) | Components of Net Periodic Benefit Cost (Credit) (Millions) | Pension (2025) | Pension (2024) | Other Postretirement (2025) | Other Postretirement (2024) | | :--- | :--- | :--- | :--- | :--- | | **Quarter Ended June 30,** | | | | | | Service Cost | $1.6 | $1.7 | $0.5 | $0.4 | | Net Periodic Benefit Cost (Credit) | $2.5 | $1.7 | $(3.3) | $(5.2) | | **Six Months Ended June 30,** | | | | | | Service Cost | $3.2 | $3.3 | $0.9 | $0.8 | | Net Periodic Benefit Cost (Credit) | $5.0 | $3.4 | $(6.7) | $(10.3) | - For the six months ended June 30, 2025, ALLETE contributed **$19.1 million** in cash to defined benefit pension plans, a decrease from **$25.0 million** in the prior year, with no expected additional contributions in 2025. No contributions were made to other postretirement benefit plans in either period[136](index=136&type=chunk) [Note 10. Business Segments](index=32&type=section&id=Note%2010.%20Business%20Segments) - ALLETE updated its reportable segment presentation in Q1 2025 to reflect New Energy's increased contribution to net income, now comprising Regulated Operations, ALLETE Clean Energy, and New Energy. Prior periods were restated for comparability[137](index=137&type=chunk)[153](index=153&type=chunk) Net Income (Loss) Attributable to ALLETE (Millions) | Net Income (Loss) Attributable to ALLETE (Millions) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Regulated Operations | $23.0 | $33.7 | $61.4 | $77.9 | | ALLETE Clean Energy | 0.9 | 2.4 | 8.3 | 6.2 | | New Energy | 4.7 | 7.7 | 13.9 | 11.7 | | Corporate and Other | 3.3 | (10.8) | 4.4 | (12.1) | | Total Net Income Attributable to ALLETE | $31.9 | $33.0 | $88.0 | $83.7 | - For the six months ended June 30, 2025, Regulated Operations' net income decreased by **$16.5 million** YoY, while ALLETE Clean Energy's net income increased by **$2.1 million** YoY, and New Energy's net income increased by **$2.2 million** YoY. Corporate and Other shifted from a net loss of **$12.1 million** to a net income of **$4.4 million**, largely due to lower merger-related expenses[140](index=140&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) [Note 11. Agreement and Plan of Merger](index=34&type=section&id=Note%2011.%20Agreement%20and%20Plan%20of%20Merger) - ALLETE entered into a Merger Agreement on May 5, 2024, to be acquired by Alloy Parent LLC for **$67.00 per share** in cash, totaling approximately **$3.9 billion** in equity value[144](index=144&type=chunk)[145](index=145&type=chunk) - The merger is subject to regulatory approvals. Shareholders approved the merger on August 21, 2024. FERC and PSCW approvals were received in December 2024 and June 2025, respectively. CFIUS and international approvals were obtained in Q3 2024. MPUC approval is pending, with a settlement agreement reached with the Minnesota Department of Commerce in July 2025, but an Administrative Law Judge recommended denial[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - ALLETE has the option to raise up to **$300 million** in equity capital in H2 2025, with Alloy Parent having the first right to participate. If Alloy Parent declines, ALLETE can issue common stock in public markets[147](index=147&type=chunk)[232](index=232&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on ALLETE's financial condition and results of operations for the quarter and six months ended June 30, 2025, compared to the prior year, detailing segment performance, critical accounting policies, outlook, liquidity, and capital resources, emphasizing the impact of the pending merger and regulatory changes [Comparison of the Quarters Ended June 30, 2025 and 2024](index=37&type=section&id=Comparison%20of%20the%20Quarters%20Ended) Regulated Operations (Millions) | Regulated Operations (Millions) | Quarter Ended June 30, 2025 | Quarter Ended June 30, 2024 | | :--- | :--- | :--- | | Operating Revenue – Utility | $305.1 | $279.8 | | Operating Income | 36.7 | 43.0 | | Net Income Attributable to ALLETE | $23.0 | $33.7 | - Regulated Operations' utility revenue increased by **$25.3 million (9.04%)** YoY, driven by higher kWh sales to other power suppliers, residential, and municipal customers, and increased transmission and cost recovery rider revenue. However, net income decreased by **$10.7 million (31.75%)** YoY due to lower industrial sales, higher operating expenses (including ash wastewater spill mitigation costs), and higher depreciation[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - New Energy's net income attributable to ALLETE decreased by **$3.0 million (38.96%)** YoY to **$4.7 million**, primarily due to lower sales of renewable energy projects, partially offset by higher earnings from tax equity financed solar facilities[178](index=178&type=chunk) - Corporate and Other shifted from a net loss of **$10.8 million** in Q2 2024 to a net income of **$3.3 million** in Q2 2025, mainly due to significantly lower merger-related expenses (**$3.4 million** after-tax in 2025 vs. **$14.5 million** after-tax in 2024)[181](index=181&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=41&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended) Regulated Operations (Millions) | Regulated Operations (Millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Operating Revenue – Utility | $637.9 | $618.1 | | Operating Income | 93.5 | 96.0 | | Net Income Attributable to ALLETE | $61.4 | $77.9 | - Regulated Operations' utility revenue increased by **$19.8 million (3.20%)** YoY, driven by higher kWh sales to residential, commercial, municipal customers, and other power suppliers, as well as increased cost recovery rider and transmission revenue. However, net income decreased by **$16.5 million (21.18%)** YoY due to lower industrial sales, higher operating and maintenance expenses (including ash wastewater spill mitigation), and increased depreciation[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - ALLETE Clean Energy's net income attributable to ALLETE increased by **$2.1 million (33.87%)** YoY to **$8.3 million**, reflecting higher production at tax equity financed wind energy facilities, despite less favorable pricing at Diamond Spring[196](index=196&type=chunk)[197](index=197&type=chunk)[201](index=201&type=chunk) - New Energy's net income attributable to ALLETE increased by **$2.2 million (18.80%)** YoY to **$13.9 million**, driven by higher earnings from tax equity financed solar facilities and increased investment tax credits, partially offset by lower sales of renewable energy projects[203](index=203&type=chunk) [Critical Accounting Policies](index=44&type=section&id=Critical%20Accounting%20Policies) - Key accounting policies involving significant management judgment include regulatory accounting, pension and postretirement benefit actuarial assumptions, goodwill, impairment of long-lived assets, and taxation[207](index=207&type=chunk) [Outlook](index=45&type=section&id=Outlook) - ALLETE aims for **5-7%** consolidated EPS growth, expecting Regulated Operations to contribute approximately **75%** of total consolidated net income in 2025. The company's strategy focuses on remaining a regulated utility while growing its clean energy and New Energy businesses[210](index=210&type=chunk)[211](index=211&type=chunk) - Minnesota Power's 2025 IRP outlines plans to add **400 MW** of new wind energy by 2035, **100 MW** of energy storage by 2035, and approximately **1,000 MW** of natural gas capacity, including converting Boswell Unit 3 to natural gas by 2030, to meet Minnesota's **100%** carbon-free energy by 2040 standard[214](index=214&type=chunk) - Industrial sales for full-year 2025 are projected to be approximately **6.3 million MWh**, reflecting lower sales to taconite customers. USS Corporation provided a four-year notice of termination for its electric service agreement, effective January 27, 2029. Cliffs temporarily idled its Minorca Mine and partially idled Hibbing Taconite[216](index=216&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, ALLETE had **$55.4 million** in cash and cash equivalents, **$245.8 million** in available consolidated lines of credit, and a debt-to-capital ratio of **37%**[226](index=226&type=chunk) Capital Structure (Millions) | Capital Structure (Millions) | June 30, 2025 | % | December 31, 2024 | % | | :--- | :--- | :--- | :--- | :--- | | ALLETE Equity | $2,861.9 | 54 | $2,848.0 | 55 | | Non-Controlling Interest in Subsidiaries | 504.4 | 9 | 542.1 | 10 | | Short-Term and Long-Term Debt | 2,004.2 | 37 | 1,808.0 | 35 | | Redeemable Non-Controlling Interest | 0.8 | — | 0.4 | — | | Total | $5,371.3 | 100 | $5,198.5 | 100 | - Capital expenditures for 2025 are expected to be approximately **$900 million**, reflecting higher spending at Minnesota Power, primarily for the HVDC transmission system project. For the six months ended June 30, 2025, capital expenditures totaled **$275.7 million**, up from **$143.7 million** in the prior year[236](index=236&type=chunk) [Other](index=50&type=section&id=Other) - As of June 30, 2025, ALLETE had **1,673 employees**, with a significant portion covered by collective bargaining agreements with IBEW Local 31 (Minnesota Power and SWL&P) and IBEW Local 1593 (BNI Energy)[239](index=239&type=chunk)[240](index=240&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses ALLETE's exposure to various market risks, including securities investments, commodity price risk, power marketing credit risk, and interest rate risk, outlining how the company manages these risks through regulatory frameworks, contractual agreements, and financial instruments - ALLETE's regulated utility operations mitigate commodity price risk for power, fuel, and natural gas through ratemaking processes that allow recovery of costs or distribution of savings to ratepayers[244](index=244&type=chunk) - The company is exposed to credit risk in power marketing activities, managed through credit policies, approval processes, and counterparty limits[246](index=246&type=chunk) - Interest rate risk from variable rate debt is managed by varying fixed rate debt issuance/maturity, limiting variable rate debt, and monitoring market changes. A hypothetical **100 basis point** increase in interest rates would impact pre-tax interest expense by **$1.3 million**[247](index=247&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of ALLETE's disclosure controls and procedures as of June 30, 2025, and states no material changes in internal control over financial reporting occurred during the most recent fiscal quarter - ALLETE's disclosure controls and procedures were deemed effective as of June 30, 2025, ensuring timely and accurate reporting of information[249](index=249&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[250](index=250&type=chunk) [Part II. Other Information](index=52&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to disclosures in the notes to consolidated financial statements regarding legal and regulatory proceedings, reiterating that routine litigation and governmental audits are not expected to materially affect the company's financial position, results of operations, or cash flows - ALLETE is involved in routine litigation, tax, regulatory, and governmental audits, but does not expect these to have a material effect on its financial position, results of operations, or cash flows[252](index=252&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in ALLETE's 2024 Form 10-K - No material changes to the risk factors disclosed in the 2024 Form 10-K have occurred[253](index=253&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[254](index=254&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report - No defaults upon senior securities to report[255](index=255&type=chunk) [Item 4. Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section refers to Exhibit 95 for information concerning mine safety violations or other regulatory matters as required by the Dodd-Frank Act - Mine safety disclosures, as required by the Dodd-Frank Act, are included in Exhibit 95[256](index=256&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) This section reports that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[257](index=257&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Agreement and Plan of Merger, amendments to articles of incorporation, supplemental indentures, certifications by executive officers, mine safety disclosures, and XBRL-related documents - Key exhibits include the Agreement and Plan of Merger, corporate governance documents, officer certifications (Sarbanes-Oxley Act), and mine safety disclosures[258](index=258&type=chunk) [Signatures](index=54&type=section&id=Signatures) - The report is signed by Jeffrey J. Scissons, Vice President, Chief Financial Officer and Corporate Treasurer, and Colin B. Anderson, Vice President, Chief Accounting Officer, and Controller, on August 7, 2025[264](index=264&type=chunk)

Core Viewpoint - Allete's shares have entered oversold territory with a Relative Strength Index (RSI) reading of 29.7, indicating potential buying opportunities as heavy selling may be exhausting [1][2][3] Group 1: Stock Performance - Allete shares traded as low as $63.555, with a current trading price of $63.65, reflecting a decrease of approximately 0.3% on the day [1][3] - The 52-week range for Allete shares is between $61.51 (low) and $66.40 (high) [3] Group 2: Technical Indicators - The average RSI for the energy stocks universe is 51.1, while WTI Crude Oil has an RSI of 47.5, and Henry Hub Natural Gas is at 41.4 [2] - The 3-2-1 Crack Spread RSI is currently at 45.6, indicating a relatively stronger position compared to Allete's RSI [2]

Part I. Financial Information [Consolidated Financial Statements - Unaudited](index=7&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20-%20Unaudited) ALLETE's Q1 2025 unaudited consolidated financial statements report net income attributable to ALLETE of **$56.1 million**, an increase from **$50.7 million** in Q1 2024 Consolidated Balance Sheet (Unaudited) | (Millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $477.9 | $435.2 | | **Total Assets** | **$6,866.3** | **$6,754.3** | | **Total Current Liabilities** | $380.6 | $404.2 | | **Total Liabilities** | $3,477.5 | $3,363.8 | | **Total ALLETE Equity** | $2,866.0 | $2,848.0 | | **Total Equity** | $3,388.3 | $3,390.1 | | **Total Liabilities, Redeemable Non-Controlling Interest and Equity** | **$6,866.3** | **$6,754.3** | Consolidated Statement of Income (Unaudited) | (Millions Except Per Share Amounts) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Total Operating Revenue** | $400.2 | $403.3 | | **Operating Income** | $53.0 | $47.3 | | **Income Before Income Taxes** | $42.2 | $41.0 | | **Net Income** | $34.7 | $37.0 | | **Net Income Attributable to ALLETE** | **$56.1** | **$50.7** | | **Diluted Earnings Per Share** | **$0.97** | **$0.88** | Consolidated Statement of Cash Flows (Unaudited) | (Millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Cash provided by Operating Activities** | $110.2 | $60.1 | | **Cash used in Investing Activities** | ($160.2) | ($60.8) | | **Cash provided by (used in) Financing Activities** | $89.2 | ($38.4) | | **Change in Cash, Cash Equivalents and Restricted Cash** | $39.2 | ($39.1) | [Note 1. Operations and Significant Accounting Policies](index=12&type=section&id=Note%201.%20Operations%20and%20Significant%20Accounting%20Policies) This note outlines the basis of preparation for unaudited financial statements and details key accounting policies for cash, inventories, and goodwill Inventories – Net | (Millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Fuel | $22.3 | $22.5 | | Materials and Supplies | 122.2 | 107.6 | | Renewable Energy Facilities Under Development | 26.6 | 24.5 | | **Total Inventories – Net** | **$171.1** | **$154.6** | - The carrying amount of goodwill was **$154.9 million** as of March 31, 2025, with no changes during the quarter[38](index=38&type=chunk) [Note 2. Regulatory Matters](index=15&type=section&id=Note%202.%20Regulatory%20Matters) This note details regulatory activities, including a **$33.97 million** rate increase approval, a **$27.9 million** interim rate refund reserve, and the 2025 IRP for future energy capacity - In the 2024 Minnesota General Rate Case, a settlement was approved for a **$33.97 million** rate increase, a **9.78%** return on equity, and a **$27.9 million** pre-tax reserve for an interim rate refund as of March 31, 2025[48](index=48&type=chunk) - The 2025 Integrated Resource Plan (IRP) filed on March 3, 2025, proposes adding **400 MW** of new wind, **100 MW** of energy storage, and **~1,000 MW** of natural gas capacity by 2035, aiming to cease coal use at the Boswell Energy Center[55](index=55&type=chunk) Regulatory Assets and Liabilities Summary | (Millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Non-Current Regulatory Assets** | $364.6 | $371.7 | | **Total Non-Current Regulatory Liabilities** | $580.6 | $570.5 | [Note 3. Equity Investments](index=17&type=section&id=Note%203.%20Equity%20Investments) This note details ALLETE's equity method investments in ATC and Nobles 2, with balances of **$199.5 million** and **$144.5 million** respectively as of March 31, 2025 ALLETE's Investment in ATC | (Millions) | Amount | | :--- | :--- | | Equity Investment Balance as of December 31, 2024 | $194.4 | | Cash Investments | 5.5 | | Equity in ATC Earnings | 6.5 | | Distributed ATC Earnings | (7.2) | | **Equity Investment Balance as of March 31, 2025** | **$199.5** | ALLETE's Investment in Nobles 2 | (Millions) | Amount | | :--- | :--- | | Equity Investment Balance as of December 31, 2024 | $145.7 | | Equity in Nobles 2 Earnings | (0.5) | | Distributed Nobles 2 Earnings | (0.7) | | **Equity Investment Balance as of March 31, 2025** | **$144.5** | [Note 4. Fair Value](index=18&type=section&id=Note%204.%20Fair%20Value) This note describes fair value measurements for ALLETE's financial assets and liabilities, with recurring assets totaling **$25.8 million** and debt fair value at **$1.82 billion** Recurring Fair Value Measures as of March 31, 2025 | (Millions) | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **Total Fair Value of Assets** | $19.4 | $6.4 | — | $25.8 | | **Total Fair Value of Liabilities** | — | $18.8 | — | $18.8 | Fair Value of Financial Instruments | (Millions) | Carrying Amount | Fair Value | | :--- | :--- | :--- | | **Short-Term and Long-Term Debt (March 31, 2025)** | $1,936.1 | $1,820.1 | - No indicators of impairment were identified for non-financial assets such as goodwill, intangible assets, and property, plant and equipment for the three months ended March 31, 2025[74](index=74&type=chunk) [Note 5. Short-Term and Long-Term Debt](index=20&type=section&id=Note%205.%20Short-Term%20and%20Long-Term%20Debt) This note details ALLETE's debt structure, including **$1.936 billion** in total debt and the issuance of **$150 million** in senior unsecured notes, with covenant compliance maintained Total Debt Summary | (Millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Short-Term Debt | $94.2 | $94.7 | | Long-Term Debt | $1,832.8 | $1,704.7 | | **Total Debt (Principal)** | **$1,936.1** | **$1,808.0** | - On March 25, 2025, ALLETE issued **$150 million** of senior unsecured notes, consisting of **$120 million** at **5.38%** due 2030 and **$30 million** at **5.82%** due 2035[76](index=76&type=chunk) - As of March 31, 2025, ALLETE's ratio of indebtedness to total capitalization was approximately **0.38 to 1.00**, compliant with the covenant limit of **0.65 to 1.00**[77](index=77&type=chunk) [Note 6. Commitments, Guarantees and Contingencies](index=21&type=section&id=Note%206.%20Commitments%2C%20Guarantees%20and%20Contingencies) This note covers significant commitments and contingencies, including environmental compliance costs for the CCR Rule and **$142.8 million** in outstanding letters of credit - The EPA's final CCR Legacy Impoundment Rule is estimated to result in compliance costs for Minnesota Power's Boswell and Laskin facilities between **$50 million** and **$85 million** over the next 10 years[108](index=108&type=chunk) - A wastewater spill at the Boswell facility in July 2024 resulted in remediation costs of approximately **$2 million** pre-tax in the first quarter of 2025, with total costs potentially being material[105](index=105&type=chunk) - As of March 31, 2025, ALLETE had **$142.8 million** of outstanding letters of credit and **$133.2 million** in outstanding surety bonds across its businesses[110](index=110&type=chunk) [Note 7. Earnings Per Share and Common Stock](index=28&type=section&id=Note%207.%20Earnings%20Per%20Share%20and%20Common%20Stock) This note provides basic and diluted EPS calculations, reporting **$0.97** for Q1 2025 based on **$56.1 million** net income attributable to ALLETE Reconciliation of Basic and Diluted Earnings Per Share | (Millions Except Per Share Amounts) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net Income Attributable to ALLETE** | $56.1 | $50.7 | | **Average Common Shares - Basic** | 57.9 | 57.6 | | **Dilutive Securities** | 0.1 | 0.1 | | **Average Common Shares - Diluted** | 58.0 | 57.7 | | **Earnings Per Share - Basic** | $0.97 | $0.88 | | **Earnings Per Share - Diluted** | **$0.97** | **$0.88** | [Note 8. Income Tax Expense](index=28&type=section&id=Note%208.%20Income%20Tax%20Expense) This note details income tax expense, with Q1 2025 total expense of **$7.5 million** and an effective tax rate of **17.8%**, primarily impacted by tax credits - The effective tax rate for Q1 2025 was **17.8%**, compared to **9.7%** for Q1 2024. The rates for both periods were primarily impacted by tax credits[124](index=124&type=chunk) Income Tax Expense Summary | (Millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total Current Income Tax Expense | $7.8 | $6.9 | | Total Deferred Income Tax Benefit | $(0.3) | $(2.9) | | **Total Income Tax Expense** | **$7.5** | **$4.0** | [Note 9. Pension and Other Postretirement Benefit Plans](index=30&type=section&id=Note%209.%20Pension%20and%20Other%20Postretirement%20Benefit%20Plans) This note outlines net periodic benefit costs and employer contributions for pension and postretirement plans, with **$19.1 million** contributed to pension plans in Q1 2025 - For the three months ended March 31, 2025, ALLETE contributed **$19.1 million** in cash to its defined benefit pension plans and expects to make no further contributions in 2025[129](index=129&type=chunk) Net Periodic Benefit Cost (Credit) for Q1 2025 | (Millions) | Pension | Other Postretirement | | :--- | :--- | :--- | | **Net Periodic Benefit Cost (Credit)** | **$2.5** | **$(3.4)** | [Note 10. Business Segments](index=30&type=section&id=Note%2010.%20Business%20Segments) This note details updated reportable segments: Regulated Operations, ALLETE Clean Energy, and New Energy, with New Energy showing significant growth in Q1 2025 net income - In Q1 2025, the company updated its reportable segments to: Regulated Operations, ALLETE Clean Energy, and New Energy, reflecting New Energy's increased contribution to net income[130](index=130&type=chunk) Net Income (Loss) Attributable to ALLETE by Segment | (Millions) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Regulated Operations | $38.4 | $44.2 | | ALLETE Clean Energy | 7.4 | 3.8 | | New Energy | 9.2 | 4.0 | | Corporate and Other | 1.1 | (1.3) | | **Total Net Income Attributable to ALLETE** | **$56.1** | **$50.7** | Total Assets by Segment | (Millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Regulated Operations | $4,560.2 | $4,489.4 | | ALLETE Clean Energy | 1,464.2 | 1,477.4 | | New Energy | 351.4 | 335.7 | | Corporate and Other | 490.5 | 451.8 | | **Total Assets** | **$6,866.3** | **$6,754.3** | [Note 11. Agreement and Plan of Merger](index=33&type=section&id=Note%2011.%20Agreement%20and%20Plan%20of%20Merger) This note describes the May 2024 merger agreement for ALLETE's acquisition by Alloy Parent for **$3.9 billion**, with shareholder and key regulatory approvals received - On May 5, 2024, ALLETE entered into a merger agreement to be acquired by Alloy Parent for **$67.00 per share** in cash, an aggregate equity value of approximately **$3.9 billion**[136](index=136&type=chunk)[137](index=137&type=chunk) - Shareholders approved the merger on August 21, 2024. ALLETE has received approvals from FERC, PSCW, and CFIUS[141](index=141&type=chunk)[142](index=142&type=chunk) - The MPUC has referred the merger for a contested case proceeding, with an Administrative Law Judge's report and recommendation requested by July 15, 2025[142](index=142&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Q1 2025 financial results, highlighting increased net income driven by ALLETE Clean Energy and New Energy segments - Q1 2025 net income attributable to ALLETE was **$56.1 million** (**$0.97 per diluted share**), up from **$50.7 million** (**$0.88 per diluted share**) in Q1 2024. Results include after-tax transaction expenses of **$2.1 million** related to the pending merger[150](index=150&type=chunk) - Growth was driven by ALLETE Clean Energy (net income up to **$7.4M** from **$3.8M**) and New Energy (net income up to **$9.2M** from **$4.0M**), while Regulated Operations net income declined to **$38.4M** from **$44.2M**[150](index=150&type=chunk)[151](index=151&type=chunk) [Comparison of the Three Months Ended](index=36&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended) This subsection provides a detailed segment-by-segment analysis of Q1 2025 financial performance, noting decreased Regulated Operations net income offset by growth in other segments - Regulated Operations' net income decreased by **$5.8 million**, primarily due to lower sales to industrial customers (down **12.5%** in kWh) and higher O&M and depreciation expenses[153](index=153&type=chunk)[156](index=156&type=chunk) - ALLETE Clean Energy's net income increased by **$3.6 million**, driven by higher production at tax equity financed wind facilities and recovery from a 2024 network outage near its Caddo facility[150](index=150&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - New Energy's net income increased by **$5.2 million**, reflecting higher sales of renewable energy projects and investment tax credits compared to 2024[169](index=169&type=chunk) [Critical Accounting Policies](index=39&type=section&id=Critical%20Accounting%20Policies) This section confirms no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - The company's critical accounting policies, which are regularly reviewed by the Audit Committee, remain unchanged from those disclosed in the 2024 Form 10-K[171](index=171&type=chunk) [Outlook](index=40&type=section&id=Outlook) The company maintains a long-term objective of **5% to 7%** consolidated EPS growth, with Regulated Operations expected to contribute **75%** of net income, supported by the 2025 IRP and transmission investments - ALLETE has a long-term objective of achieving **5% to 7%** consolidated EPS growth and expects Regulated Operations to comprise approximately **75%** of total consolidated net income in 2025[174](index=174&type=chunk)[175](index=175&type=chunk) - Minnesota Power filed its 2025 IRP to align with the state's **100%** carbon-free energy by 2040 law, planning significant additions of wind, solar, storage, and natural gas generation[179](index=179&type=chunk) - A key transmission project is the modernization of the HVDC line, estimated to cost between **$800 million** and **$940 million**, with construction beginning in 2025[187](index=187&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) ALLETE reports strong liquidity with **$92.0 million** in cash and **$341.8 million** in available credit, alongside increased 2025 capital expenditures of approximately **$900 million** - As of March 31, 2025, ALLETE had **$92.0 million** in cash and **$341.8 million** available under consolidated lines of credit[192](index=192&type=chunk) Capital Structure as of March 31, 2025 | (Millions) | Amount | % | | :--- | :--- | :--- | | ALLETE Equity | $2,866.0 | 54 | | Non-Controlling Interest in Subsidiaries | 522.3 | 10 | | Short-Term and Long-Term Debt | 1,936.1 | 36 | | **Total** | **$5,324.9** | **100** | - Capital expenditures for 2025 are now expected to be approximately **$900 million**, an increase reflecting higher spending at Minnesota Power, mainly for the HVDC transmission project[202](index=202&type=chunk) [Other](index=45&type=section&id=Other) This section covers environmental matters, including efforts to reduce coal reliance, and employee relations, noting **1,638 employees** with collective bargaining agreements in place - As of March 31, 2025, ALLETE had **1,638 employees**, with **502** at Minnesota Power and SWL&P, and **134** at BNI Energy covered by collective bargaining agreements[205](index=205&type=chunk)[206](index=206&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses market risks, including commodity prices and interest rates, noting mitigation strategies and a **$0.3 million** impact from a **100 basis point** interest rate increase - The company's exposure to commodity price risk (coal, natural gas) is largely mitigated by regulatory frameworks that allow for cost recovery from customers[210](index=210&type=chunk) - Based on variable rate debt outstanding as of March 31, 2025, a **100 basis point** increase in interest rates would result in a pre-tax interest expense increase of **$0.3 million**[213](index=213&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2025, the principal executive and financial officers concluded that the company's disclosure controls and procedures are effective[215](index=215&type=chunk) - No changes occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[216](index=216&type=chunk) Part II. Other Information [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal and regulatory proceedings by reference, stating that normal course litigation is not expected to materially affect financial position or results - Information regarding material legal and regulatory proceedings is detailed in Note 2 (Regulatory Matters) and Note 6 (Commitments, Guarantees and Contingencies)[217](index=217&type=chunk) - The company does not expect the outcome of litigation arising in the normal course of business to have a material effect on its financial position, results of operations, or cash flows[218](index=218&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There have been no material changes from the risk factors disclosed in Part I, Item 1A of the 2024 Form 10-K[219](index=219&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[220](index=220&type=chunk) [Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[221](index=221&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety violation information, as required by the Dodd-Frank Act, is included in Exhibit 95 - Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act is included in Exhibit 95 to this Form 10-Q[222](index=222&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - During the quarter ended March 31, 2025, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement[223](index=223&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Merger Agreement, Note Purchase Agreement, and CEO/CFO certifications - Key exhibits filed include the Agreement and Plan of Merger, a Note Purchase Agreement dated March 25, 2025, CEO/CFO certifications, and Mine Safety disclosures (Exhibit 95)[224](index=224&type=chunk)

Company Leadership Transition - New Energy Equity announced the promotion of Josh Kunkel to Chief Executive Officer effective June 1, 2025, as part of a planned transition [1] - Matt Hankey, the co-founder and current CEO, will take on a new role as Emerging Technologies Officer at ALLETE while remaining on the New Energy Equity Board of Directors [1][2] Company Growth and Achievements - Under Matt Hankey's leadership, New Energy Equity has grown to over 125 employees and has implemented over 270 solar projects across the United States, totaling 600MW and more than $1.5 billion in project investment [2] - The company focuses on developing, financing, operating, and managing solar power generation assets, providing clean electricity to various customers under long-term contracts [4] Future Outlook - Josh Kunkel expressed confidence in leading the company into its next phase of growth, emphasizing the strong foundation built by Hankey and the team [2][3] - ALLETE CEO Bethany Owen highlighted Kunkel's results-driven leadership and commitment to the company's culture and mission, indicating a positive outlook for New Energy Equity's future in the renewable energy industry [3]

Core Points - New Energy Equity's Lift as We Climb Foundation donated $100,000 to Civic Works to enhance solar access for Baltimore households [1][4] - The donation will enable 80 households to receive free solar installations, potentially reducing their electricity bills by 80% to 100% [4] - Civic Works aims to strengthen communities through education and skills development while increasing access to clean energy [5] Company Overview - New Energy Equity LLC, a subsidiary of ALLETE, specializes in developing, financing, operating, and managing solar power generation assets, with over 550MW of solar projects developed and more than $1.2 billion in clean energy investments closed [9] - The Lift As We Climb Foundation was established by New Energy Equity to support local communities through charitable donations, focusing on solar energy projects, education, and workforce training [10] Community Impact - The funding will allow Civic Works to expand its rooftop solar team by hiring two new employees, ensuring sustainable solar deployment in the community [4] - Melvin Brennan, Director of Energy Programs at Civic Works, expressed gratitude for New Energy Equity's commitment to clean energy and its values [7][8]

Core Insights - New Energy Equity has partnered with the Harlem Consolidated School District to develop a 5.54 MWdc solar energy project in Illinois, marking its first initiative in the state's Public Schools Program [1][2]. Company Overview - New Energy Equity is a national leader in developing and financing community and commercial solar projects, having developed over 550 MW of solar projects and closed more than $1.2 billion in clean energy investments [8]. - The company emphasizes its commitment to advancing clean energy in educational settings and empowering communities [5]. Project Details - The solar project will provide significant economic benefits, including discounted electricity, to the Harlem Consolidated School District and residential customers in the Commonwealth Edison service area [2]. - The project aims to offset the energy needs of the school district, which supports over 39,000 students across 11 schools, and expand renewable energy access to the local community [4]. Industry Impact - This initiative is part of Illinois' Adjustable Block Program (ABP), which promotes renewable energy growth across the state [2]. - The collaboration is expected to foster environmental stewardship and sustainability, allowing public schools and communities to transition to renewable energy sources [4][6]. Developer Background - BOW Renewables, the original developer of the project, is committed to providing local community benefits and advancing Illinois' clean energy objectives [7].

Part I [Item 1. Business](index=8&type=section&id=Item%201.%20Business) ALLETE is an energy company pursuing a clean-energy transformation and a pending merger into a private entity - ALLETE is undergoing a significant clean-energy transition, aiming for **70% renewable energy by 2030** and **100% carbon-free energy by 2040**; in 2024, it delivered 55% renewable energy to its Minnesota customers[27](index=27&type=chunk)[28](index=28&type=chunk)[95](index=95&type=chunk) - On May 5, 2024, ALLETE entered into a merger agreement with Alloy Parent LLC; upon completion, ALLETE will become a **private subsidiary** of Alloy Parent[30](index=30&type=chunk) Consolidated Operating Revenue by Segment | Percentage of Consolidated Operating Revenue | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Regulated Operations | 81% | 66% | 80% | | ALLETE Clean Energy | 6% | 22% | 8% | | Corporate and Other | 13% | 12% | 12% | [Regulated Operations](index=10&type=section&id=Regulated%20Operations) This largest segment serves 150,000 retail customers, with industrial clients comprising 56% of kWh sales Regulated Utility Kilowatt-hours (kWh) Sold (Millions) | Customer Type | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Residential | 1,069 | 1,089 | 1,148 | | Commercial | 1,322 | 1,347 | 1,359 | | Industrial | 7,022 | 7,044 | 6,745 | | Municipal | 469 | 466 | 540 | | **Total Retail and Municipal** | **9,882** | **9,946** | **9,792** | | Other Power Suppliers | 2,680 | 2,819 | 3,149 | | **Total kWh Sold** | **12,562** | **12,765** | **12,941** | - Industrial customers, primarily taconite mining, are critical, representing **56% of total regulated utility kWh sales** in 2024; a one-million-ton change in taconite production is estimated to impact annual EPS by approximately **$0.07**[39](index=39&type=chunk)[43](index=43&type=chunk) - On January 27, 2025, major customer USS Corporation provided a **four-year notice of termination** for its electric service agreement, effective January 2029[50](index=50&type=chunk) [Power Supply](index=13&type=section&id=Power%20Supply) The company's power supply was 55% renewable in 2024 and is actively transitioning away from coal operations Regulated Utility Power Supply (2024) | Source | Net Capability (MW) | Generation & Purchases (MWh) | % of Total | | :--- | :--- | :--- | :--- | | Total Generation (Owned) | 1,630 | 5,832,105 | 44.9% | | - Coal-Fired | 820 | 3,794,254 | 29.2% | | - Wind | 522 | 1,279,468 | 9.9% | | Total Purchased Power | - | 7,147,244 | 55.1% | | - Long-Term Purchased Power | - | 4,348,790 | 33.5% | | **Total Regulated Utility Power Supply** | **-** | **12,979,349** | **100.0%** | - Coal consumption for electric generation at Minnesota Power's stations was **2.3 million tons** in 2024, down from 2.7 million tons in 2023[63](index=63&type=chunk) - Minnesota Power has long-term PPAs to purchase **250 MW of hydro capacity** from Manitoba Hydro through 2035 and the output from a **250 MW wind facility** (Nobles 2) through 2040[67](index=67&type=chunk)[68](index=68&type=chunk) [Regulatory Matters](index=17&type=section&id=Regulatory%20Matters) The company is regulated by state and federal commissions, with recent rate cases supporting its financial structure - The 2024 Minnesota General Rate Case was settled, resulting in an MPUC-approved rate increase of **$33.97 million**, a **9.78% ROE**, and a **53.00% equity ratio**[80](index=80&type=chunk) - The 2021 IRP, approved by the MPUC, outlines plans to add up to **700 MW of new wind and solar** resources and achieve coal-free operations by 2035[85](index=85&type=chunk) - The 2024 Wisconsin General Rate Case for SWL&P was approved, resulting in a **$5.5 million annual rate increase** and a **9.80% ROE**[87](index=87&type=chunk) [ALLETE Clean Energy](index=20&type=section&id=ALLETE%20Clean%20Energy) This segment develops and operates over 1,600 MW of wind generation across eight states under long-term contracts ALLETE Clean Energy Operating Wind Portfolio | Wind Energy Facility | Capacity (MW) | PSA Expiration | | :--- | :--- | :--- | | Armenia Mountain | 101 | 2031 | | Lake Benton | 104 | 2028 | | Storm Lake I | 108 | 2027 | | Storm Lake II | 77 | 2032 (10% PSA) | | Caddo | 303 | 2034 | | Diamond Spring | 303 | 2032-2035 | | Condon | 50 | 2028 | | Glen Ullin | 106 | 2039 | | South Peak | 80 | 2035 | [Corporate and Other](index=21&type=section&id=Corporate%20and%20Other) This segment includes renewable development, lignite coal supply, and development of a natural gas facility - New Energy, acquired in 2022, is a key growth driver with a development pipeline of over **2,000 MW of renewable projects**[104](index=104&type=chunk) - South Shore Energy is developing the NTEC, an approximately **600 MW natural gas facility**, with an estimated total project cost of **$700 million**[106](index=106&type=chunk) - BNI Energy produces approximately **4 million tons of lignite coal annually** under cost-plus fixed fee agreements extending through 2037[107](index=107&type=chunk) [Human Capital Management](index=23&type=section&id=Human%20Capital%20Management) ALLETE employed 1,616 people at year-end 2024, with a significant portion of its workforce unionized - As of year-end 2024, ALLETE had **1,616 employees**, with 1,564 being full-time[116](index=116&type=chunk) - **490 employees** at Minnesota Power and SWL&P are covered under collective bargaining agreements, mostly with IBEW Local 31, with agreements expiring in 2026 and 2027[116](index=116&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from customer concentration, regulatory compliance, operations, and its pending merger - A primary risk is customer concentration in the cyclical taconite industry, which accounted for **27% of consolidated operating revenue** in 2024[133](index=133&type=chunk)[134](index=134&type=chunk) - The company is subject to extensive environmental laws, with potential for **material costs** related to GHG emissions, coal ash management, and water discharge regulations[143](index=143&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - Risks related to the pending merger include potential delays, business disruptions, and substantial transaction costs, of which **$22.6 million after-tax** were incurred in 2024[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk) [Item 1C. Cybersecurity](index=38&type=section&id=Item%201C.%20Cybersecurity) Cybersecurity risk is managed via a multilayered approach based on the NIST framework with board-level oversight - The company's cybersecurity program is based on the **NIST framework** and is managed by a dedicated team with oversight from the CTO and the Audit Committee of the Board of Directors[204](index=204&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - Defenses include a comprehensive cybersecurity policy, required annual employee training, random phishing tests, and **multiple cyber event simulation exercises** per year[205](index=205&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock underperformed peers, and the pending merger restricts share repurchases and dividend increases - A quarterly dividend of **$0.73 per share** is payable on March 1, 2025; the pending Merger Agreement **restricts share repurchases** and limits dividend increases[217](index=217&type=chunk)[340](index=340&type=chunk) Cumulative Total Shareholder Return (2019-2024) | Index | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | ALLETE | $100 | $80 | $88 | $90 | $89 | $99 | | S&P 500 Index | $100 | $118 | $152 | $125 | $157 | $197 | | Philadelphia Utility Index | $100 | $103 | $121 | $122 | $111 | $134 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income decreased to $179.3 million in 2024, impacted by merger costs and the absence of a prior-year gain [2024 Compared to 2023](index=43&type=section&id=2024%20Compared%20to%202023) Net income fell due to lower results in clean energy and corporate segments, despite growth in regulated operations Net Income Attributable to ALLETE by Segment (Millions) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Regulated Operations | $160.9 | $147.2 | | ALLETE Clean Energy | $17.8 | $71.7 | | Corporate and Other | $0.6 | $28.2 | | **Total** | **$179.3** | **$247.1** | - The decrease in 2024 net income was primarily due to **$22.6 million after-tax merger expenses** and the absence of a 2023 after-tax gain of **$40.5 million** from a favorable arbitration ruling[229](index=229&type=chunk) Regulated Operations Financial Summary (Millions) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Operating Revenue – Utility | $1,242.7 | $1,238.3 | | Operating Income | $199.6 | $195.0 | | Net Income Attributable to ALLETE | $160.9 | $147.2 | [Critical Accounting Policies](index=48&type=section&id=Critical%20Accounting%20Policies) Key policies involve significant estimates for regulatory accounting, pensions, business combinations, and taxation - **Regulatory Accounting** allows the deferral of certain costs as regulatory assets based on the probability of future recovery through customer rates[258](index=258&type=chunk) - Pension expense calculations in 2024 used a weighted average expected long-term rate of return on assets of **6.84%** and a discount rate of **5.38%**[258](index=258&type=chunk)[259](index=259&type=chunk) - **Goodwill of $154.9 million** related to the New Energy acquisition is tested for impairment annually; the 2024 test indicated no impairment[262](index=262&type=chunk) [Outlook](index=50&type=section&id=Outlook) ALLETE targets 5-7% long-term EPS growth, driven by significant investments in regulated and renewable projects - The company has a long-term objective of **5% to 7% consolidated EPS growth** and expects Regulated Operations to comprise about **75% of consolidated net income** in 2025[267](index=267&type=chunk)[268](index=268&type=chunk) - Major transmission projects are underway, including the **North Plains Connector (~$3.2B HVDC line)** and an **$800M-$940M modernization** of its existing HVDC system[302](index=302&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - Minnesota Power is advancing its clean energy goals with RFPs for up to **400 MW of wind** and **300 MW of solar** resources[297](index=297&type=chunk)[299](index=299&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position and plans $5.0 billion in capital expenditures through 2029 Capital Structure (as of Dec 31) | Category (Millions) | 2024 | 2023 | | :--- | :--- | :--- | | ALLETE Equity | $2,848.0 | $2,809.6 | | Short-Term and Long-Term Debt | $1,808.0 | $1,799.4 | | **Debt-to-Capital Ratio** | **35%** | **35%** | Projected Capital Expenditures 2025-2029 (Millions) | Segment | 2025-2029 Total | | :--- | :--- | | Regulated Operations | $4,610 | | ALLETE Clean Energy | $40 | | Corporate and Other | $355 | | **Total Capital Expenditures** | **$5,005** | - The company's dividend payout ratio was **91%** in 2024, above its target range of 60% to 70%[339](index=339&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=64&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The audited financial statements show 2024 operating revenues of $1.53 billion and net income of $179.3 million Consolidated Statement of Income Highlights (Millions, except per share data) | Metric | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Operating Revenue | $1,529.8 | $1,879.8 | $1,570.7 | | Operating Income | $160.1 | $180.9 | $134.2 | | Net Income Attributable to ALLETE | $179.3 | $247.1 | $189.3 | | Diluted EPS | $3.10 | $4.30 | $3.38 | Consolidated Balance Sheet Highlights (Millions) | As of December 31 | 2024 | 2023 | | :--- | :--- | :--- | | Total Current Assets | $435.2 | $468.1 | | Property, Plant and Equipment – Net | $5,181.5 | $5,013.4 | | **Total Assets** | **$6,754.3** | **$6,656.4** | | Total Current Liabilities | $404.2 | $377.6 | | Long-Term Debt | $1,704.7 | $1,679.9 | | **Total Liabilities** | **$3,363.8** | **$3,249.3** | | **Total ALLETE Equity** | **$2,848.0** | **$2,809.6** | Consolidated Statement of Cash Flows Highlights (Millions) | Activity | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Cash from Operating Activities | $457.1 | $585.3 | $221.3 | | Cash used in Investing Activities | $(340.7) | $(283.6) | $(384.0) | | Cash used in Financing Activities | $(140.6) | $(262.5) | $155.2 | Part III [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=66&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of year-end 2024, 783,025 securities remained available for issuance under equity compensation plans Equity Compensation Plan Information (as of Dec 31, 2024) | Plan Category | Securities to be Issued Upon Exercise (a) | Weighted-Average Exercise Price (b) | Securities Remaining Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Approved by Security Holders | 227,422 | — | 783,025 | | Not Approved by Security Holders | — | — | — | | **Total** | **227,422** | **—** | **783,025** | Part IV [Item 15. Exhibits and Financial Statement Schedules](index=67&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all filed documents and includes Schedule II detailing valuation and qualifying account activity Schedule II – Valuation and Qualifying Accounts and Reserves (Millions) | Reserve Type | Balance at Beg. of 2024 | Additions Charged to Income | Deductions | Balance at End of 2024 | | :--- | :--- | :--- | :--- | :--- | | Reserve For Uncollectible Accounts | $1.6 | $1.4 | $1.3 | $1.7 | | Deferred Tax Asset Valuation Allowance | $58.0 | $(13.1) | — | $44.9 |