ALLETE, Inc. (NYSE:ALE) Q4 2021 Earnings Conference Call February 16, 2022 10:00 AM ET Company Participants Bethany Owen – President & Chief Executive Officer Steve Morris – Vice President & Chief Accounting Officer Bob Adams – Senior Vice President & Chief Financial Officer Al Rudeck – President of ALLETE Clean Energy Frank Frederickson – Vice President of Customer Experience, Minnesota Power Conference Call Participants Peter Bourdon – Mizuho Brian Russo – Sidoti Operator Good day, and welcome to the ALL ...

Part I [Business Overview](index=7&type=section&id=Item%201.%20Business) ALLETE operates primarily as a regulated utility through Minnesota Power and SWL&P, complemented by its clean energy and other businesses, focusing on a clean-energy transformation * ALLETE's strategy is to remain a predominantly regulated utility while investing in ALLETE Clean Energy and other businesses to complement its regulated operations and provide long-term growth[13](index=13&type=chunk) * Minnesota Power, ALLETE's largest business, has a vision to deliver **100% carbon-free energy by 2050** and has already achieved **50% renewable energy supply**[10](index=10&type=chunk)[55](index=55&type=chunk) Consolidated Operating Revenue by Segment | Segment | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Regulated Operations | 87% | 84% | 84% | | ALLETE Clean Energy | 6% | 7% | 5% | | U.S. Water Services | — | — | 3% | | Corporate and Other | 7% | 9% | 8% | [Regulated Operations](index=9&type=section&id=Regulated%20Operations) Regulated Operations, including Minnesota Power and SWL&P, form the core of ALLETE's business, with industrial customers accounting for 47% of kWh sales in 2021 Regulated Utility Kilowatt-hours Sold (Millions) | Customer Category | 2021 | % of Total | 2020 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Residential | 1,135 | 7% | 1,134 | 9% | | Commercial | 1,359 | 9% | 1,306 | 10% | | Industrial | 7,196 | 47% | 6,192 | 47% | | Municipal | 590 | 4% | 584 | 4% | | **Total Retail & Municipal** | **10,280** | **67%** | **9,216** | **70%** | | Other Power Suppliers | 5,102 | 33% | 4,039 | 30% | | **Total kWh Sold** | **15,382** | **100%** | **13,255** | **100%** | Regulated Utility Power Supply Mix (2021) | Source | Generation & Purchases (MWh) | % of Total | | :--- | :--- | :--- | | Coal-Fired | 4,451,706 | 28.2% | | Biomass / Natural Gas | 201,403 | 1.3% | | Hydro | 344,025 | 2.2% | | Wind | 1,588,226 | 10.0% | | Solar | 17,263 | 0.1% | | Long-Term Purchased Power | 4,259,314 | 27.0% | | Other Purchased Power | 4,930,066 | 31.2% | | **Total Power Supply** | **15,792,003** | **100.0%** | * Minnesota Power's 2021 Integrated Resource Plan (IRP) proposes expanding renewable energy to **70% by 2030**, retiring Boswell Unit 3 by 2030, and making Boswell Unit 4 coal-free by 2035[54](index=54&type=chunk) * On November 1, 2021, Minnesota Power filed for an **18% retail rate increase**, seeking a **10.25% return on equity**, with an interim rate increase authorized effective January 1, 2022[52](index=52&type=chunk) [ALLETE Clean Energy](index=18&type=section&id=ALLETE%20Clean%20Energy) ALLETE Clean Energy develops, acquires, and operates renewable energy projects, primarily wind, with over 1,300 MW of capacity under long-term Power Sales Agreements * ALLETE Clean Energy owns and operates over **1,300 MW of wind energy generation** and is developing approximately **200 MW of wind facilities** to be sold to others[65](index=65&type=chunk) ALLETE Clean Energy Operating Portfolio Highlights | Wind Energy Facility | Capacity (MW) | PSA Expiration(s) | | :--- | :--- | :--- | | Armenia Mountain | 101 | 2024 | | Chanarambie/Viking | 98 | 2023 | | Lake Benton | 104 | 2028 | | Storm Lake I & II | 185 | 2022-2032 | | Caddo | 303 | 2034 | | Diamond Spring | 303 | 2032-2035 | | Condon | 50 | 2022 | | Glen Ullin | 106 | 2039 | | South Peak | 80 | 2035 | [Corporate and Other](index=19&type=section&id=Corporate%20and%20Other) The Corporate and Other segment includes BNI Energy, a lignite coal supplier, an equity investment in Nobles 2, South Shore Energy, and ALLETE Properties * BNI Energy produces approximately **4 million tons of lignite coal annually**, sold under cost-plus fixed fee agreements extending through 2037[70](index=70&type=chunk) * ALLETE owns a **49% equity interest in Nobles 2**, a **250 MW wind energy facility** that sells its output to Minnesota Power under a 20-year PPA[72](index=72&type=chunk) * South Shore Energy sold a portion of its interest in the NTEC natural gas project, recognizing an **$8.5 million after-tax gain** in Q4 2021, now holding a **20% interest**[74](index=74&type=chunk) [Human Capital Management](index=22&type=section&id=Human%20Capital%20Management) ALLETE had 1,365 employees at year-end 2021, with a focus on talent, health, safety, and diversity, equity, and inclusion * ALLETE had **1,365 employees** at year-end 2021, with **1,340 being full-time**, and **469 employees** covered under collective bargaining agreements[82](index=82&type=chunk) * The company emphasizes a 'Zero Injury' safety culture, encouraging reporting of near misses and using data to improve safety programs[84](index=84&type=chunk) * ALLETE is advancing diversity, equity, and inclusion through initiatives in workforce, supply chain, and community engagement, including partnerships and scholarships for underrepresented groups[88](index=88&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) ALLETE faces several material risks, including reliance on industrial customers, regulatory changes, meteorological variability, and cybersecurity threats * A significant risk is the concentration of revenue from Large Power Customers, particularly in the cyclical taconite industry, which accounted for **32% of Regulated Operations operating revenue in 2021**[96](index=96&type=chunk) * The business is subject to an extensive legal and regulatory framework, where changes or inability to recover costs could adversely impact financial results[102](index=102&type=chunk)[104](index=104&type=chunk) * ALLETE Clean Energy's results are highly dependent on suitable meteorological conditions for wind generation, and unfavorable weather can cause generation and revenue to be substantially below expectations[121](index=121&type=chunk) * Entity-wide risks include health pandemics impacting the economy and supply chains, reliance on access to capital markets for funding growth, and vulnerability to cybersecurity attacks on critical infrastructure[131](index=131&type=chunk)[135](index=135&type=chunk)[149](index=149&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in litigation arising in the normal course of business, with one specific lawsuit where a loss is reasonably possible but not estimable * Minnesota Power is named in a lawsuit from a contractor seeking compensatory damages for an injury, where a loss is deemed reasonably possible but not probable, and no loss amount can be estimated[157](index=157&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Information regarding mine safety violations or other regulatory matters is included in Exhibit 95 of the Form 10-K * Information concerning mine safety violations required by Section 1503(a) of the Dodd-Frank Act is included in Exhibit 95 to this Form 10-K[158](index=158&type=chunk) Part II [Common Stock Market and Shareholder Matters](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ALLETE's common stock is traded on the NYSE under symbol ALE, with a history of uninterrupted dividends since 1948 and approximately 20,000 shareholders * ALLETE common stock is listed on the NYSE under the symbol **ALE**, and the company has paid dividends continuously since 1948[159](index=159&type=chunk) Comparison of 5-Year Cumulative Total Return | Investment | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | ALLETE | $100 | $119 | $126 | $138 | $110 | $122 | | S&P 500 Index | $100 | $122 | $116 | $153 | $181 | $233 | | Philadelphia Utility Index | $100 | $113 | $117 | $148 | $152 | $180 | [Management's Discussion and Analysis (MD&A)](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) ALLETE's 2021 net income was $169.2 million, influenced by a winter storm, a fuel adjustment refund, and a gain from the NTEC project sale, with a long-term EPS growth target of 5-7% Financial Overview | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Income Attributable to ALLETE | $169.2 million | $174.2 million | | Diluted EPS | $3.23 | $3.35 | * Key events in 2021 included an **$8.5 million after-tax gain** from the NTEC project interest sale, a **$5 million after-tax negative impact** at Diamond Spring wind facility from a winter storm, and a **$3.6 million after-tax charge** for a fuel adjustment clause refund[168](index=168&type=chunk) * The company has a long-term objective of achieving **5% to 7% average annual EPS growth**[196](index=196&type=chunk) [Results of Operations: 2021 vs. 2020](index=39&type=section&id=2021%20Compared%20to%202020) In 2021, Regulated Operations net income decreased due to higher costs, while ALLETE Clean Energy's income fell due to a winter storm, partially offset by a gain in Corporate and Other Net Income Attributable to ALLETE by Segment (Millions) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Regulated Operations | $129.1 | $136.3 | | ALLETE Clean Energy | $26.3 | $29.9 | | Corporate and Other | $13.8 | $8.0 | * Regulated Operations revenue increased by **$240.6 million**, mainly from higher fuel adjustment recoveries and a **16.2% increase in kWh sales** to industrial customers as business conditions improved post-COVID-19[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) * ALLETE Clean Energy's operating revenue increased to **$86.9 million from $79.6 million**, driven by new facilities, but net income was negatively impacted by a winter storm event and lower wind resources[181](index=181&type=chunk) [Critical Accounting Policies](index=43&type=section&id=Critical%20Accounting%20Policies) ALLETE's critical accounting policies involve significant management estimates for regulatory accounting, pension assumptions, asset impairment, and taxation * Regulatory Accounting allows the deferral of incurred costs as regulatory assets if future recovery in rates is probable, requiring significant judgment and quarterly assessment[190](index=190&type=chunk) * Pension and postretirement benefit calculations rely on key assumptions, including a **6.50% expected long-term rate of return** on pension assets and a **2.87% discount rate for 2021**[191](index=191&type=chunk)[192](index=192&type=chunk) * Taxation policy requires judgments on the sustainability of tax positions and the valuation of deferred tax assets, including NOL and tax credit carryforwards[194](index=194&type=chunk) [Outlook](index=45&type=section&id=Outlook) ALLETE targets 5-7% annual EPS growth, with Regulated Operations contributing ~75% of net income in 2022, supported by the EnergyForward strategy and $1.8 billion in projected capital expenditures * Minnesota Power's EnergyForward strategy aims for **100% carbon-free energy by 2050**, with interim goals of **70% renewables by 2030** and retiring/converting coal units[198](index=198&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) * Industrial sales are expected to be approximately **6.5 million MWh in 2022**, with taconite production estimated at **35 million tons**[203](index=203&type=chunk)[205](index=205&type=chunk) Projected Capital Expenditures (2022-2026, Millions) | Segment | 2022 | 2023 | 2024 | 2025 | 2026 | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Regulated Operations | $125 | $260 | $370 | $365 | $415 | $1,535 | | ALLETE Clean Energy | $10 | $5 | $5 | $5 | $5 | $30 | | Corporate and Other | $75 | $80 | $55 | $15 | $10 | $235 | | **Total** | **$210** | **$345** | **$430** | **$385** | **$430** | **$1,800** | [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, ALLETE maintained strong liquidity with $45.1 million cash and $240.8 million available credit, planning to fund $1.8 billion in capital expenditures through internal funds, debt, and equity Capital Structure as of Dec 31, 2021 (Millions) | Component | Amount | % of Total | | :--- | :--- | :--- | | ALLETE Equity | $2,413.1 | 49% | | Non-Controlling Interest | $533.2 | 11% | | Short-Term and Long-Term Debt | $1,986.4 | 40% | | **Total Capitalization** | **$4,932.7** | **100%** | Cash Flow Summary (Millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Operating Activities | $263.5 | $299.8 | | Investing Activities | ($485.2) | ($812.8) | | Financing Activities | $204.2 | $485.7 | * ALLETE plans to finance its projected **$1.8 billion in capital expenditures** from 2022-2026 through internally generated funds, debt, and equity, while maintaining its current capital structure[253](index=253&type=chunk)[255](index=255&type=chunk) [Controls and Procedures](index=59&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that ALLETE's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, confirmed by PricewaterhouseCoopers LLP * Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[265](index=265&type=chunk) * Based on an evaluation using the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2021, audited and confirmed by PricewaterhouseCoopers LLP[266](index=266&type=chunk)[267](index=267&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=60&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement, with a Code of Ethics applicable to all employees * Most information required by this item, including details on directors and corporate governance, is incorporated by reference from the 2022 Proxy Statement[269](index=269&type=chunk) * ALLETE has a Code of Ethics that applies to all employees, including senior financial officers, and is available on the company's website[270](index=270&type=chunk) [Executive Compensation](index=60&type=section&id=Item%2011.%20Executive%20Compensation) All information regarding executive and director compensation is incorporated by reference from the company's 2022 Proxy Statement * Information on executive and director compensation is incorporated by reference from the "Compensation Discussion and Analysis" and other related sections of the 2022 Proxy Statement[272](index=272&type=chunk) [Security Ownership and Equity Compensation Plans](index=61&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated from the 2022 Proxy Statement, with 772,469 securities available for future issuance under approved equity compensation plans Equity Compensation Plan Information as of December 31, 2021 | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | Number of Securities Remaining Available for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Equity Compensation Plans Approved by Security Holders | 127,075 | — | 772,469 | | Equity Compensation Plans Not Approved by Security Holders | — | — | — | | **Total** | **127,075** | **—** | **772,469** | [Principal Accountant Fees and Services](index=62&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) PricewaterhouseCoopers LLP is the independent registered public accounting firm, with fee information incorporated from the 2022 Proxy Statement * The independent registered public accounting firm is PricewaterhouseCoopers LLP[280](index=280&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=62&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of financial statements, schedules, and exhibits filed as part of the Form 10-K, including the auditor's report and consolidated financial statements * This section lists all financial statements, schedules, and exhibits filed with the report, including the Consolidated Balance Sheet, Statement of Income, Statement of Cash Flows, and Statement of Equity[281](index=281&type=chunk) * Schedule II, detailing Valuation and Qualifying Accounts and Reserves, is included in the report[281](index=281&type=chunk)[541](index=541&type=chunk) Consolidated Financial Statements (Audited) [Auditor's Report](index=69&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on ALLETE's 2021 financial statements and internal controls, identifying regulatory accounting as a Critical Audit Matter * PricewaterhouseCoopers LLP issued an unqualified audit opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[296](index=296&type=chunk) * The audit identified one Critical Audit Matter: the accounting for the effects of regulatory matters, due to the significant management judgment required to determine the probability of recovering deferred costs through future rates[303](index=303&type=chunk)[304](index=304&type=chunk) [Consolidated Financial Statements](index=71&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show ALLETE's total assets at $6.44 billion and total equity at $2.41 billion as of December 31, 2021, with $1.42 billion in operating revenue Consolidated Balance Sheet Highlights (Millions) | As of December 31, | 2021 | 2020 | | :--- | :--- | :--- | | Total Current Assets | $291.3 | $254.9 | | Property, Plant and Equipment – Net | $5,100.2 | $4,840.8 | | **Total Assets** | **$6,435.0** | **$6,084.6** | | Total Current Liabilities | $543.4 | $459.6 | | Long-Term Debt | $1,763.2 | $1,593.2 | | **Total Liabilities** | **$3,488.7** | **$3,284.4** | | **Total ALLETE Equity** | **$2,413.1** | **$2,294.6** | Consolidated Statement of Income Highlights (Millions) | For Year Ended Dec 31, | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Operating Revenue | $1,419.2 | $1,169.1 | $1,240.5 | | Operating Income | $151.3 | $150.9 | $179.8 | | **Net Income Attributable to ALLETE** | **$169.2** | **$174.2** | **$185.6** | | **Diluted EPS** | **$3.23** | **$3.35** | **$3.59** | [Notes to Consolidated Financial Statements](index=76&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on ALLETE's accounting policies, business segments, regulatory assets/liabilities, debt, commitments, and pension obligations * Minnesota Power's taconite customers accounted for **32% of Regulated Operations operating revenue** and **28% of consolidated operating revenue in 2021**[329](index=329&type=chunk) * As of Dec 31, 2021, the company had regulatory assets of **$511.8 million** and regulatory liabilities of **$544.7 million**, reflecting the impact of rate regulation on cost and revenue timing[409](index=409&type=chunk)[412](index=412&type=chunk) * The company's pension plans were underfunded by **$166.0 million** as of Dec 31, 2021, an improvement from a **$206.3 million underfunding** at year-end 2020, while postretirement health and life plans were overfunded by **$53.6 million**[488](index=488&type=chunk)[494](index=494&type=chunk)

ALLETE, Inc. (NYSE:ALE) Q3 2021 Earnings Conference Call November 4, 2021 10:00 AM ET Company Participants Bethany Owen - President & Chief Executive Officer Steve Morris - Vice President & Chief Accounting Officer Bob Adams - Senior Vice President & Chief Financial Officer Al Rudeck - President of ALLETE Clean Energy Frank Frederickson - Vice President of Customer Experience, Minnesota Power Conference Call Participants Richard Sunderland - JPMorgan Brian Russo - Sidoti Operator Good day and welcome to t ...

ALLETE, Inc. (NYSE:ALE) Q2 2021 Earnings Conference Call August 4, 2021 10:00 AM ET Company Participants Bethany Owen - President & CEO Steven Morris - VP, Controller & CAO Robert Adams - SVP & CFO Jeff Scissons - Director, Corporate Development Frank Frederickson - VP, Customer Experience, Minnesota Power Conference Call Participants Richard Sunderland - JPMorgan Chase & Co. Peter Bourdon - Mizuho Securities Chris Ellinghaus - Siebert Williams Operator Good day, and welcome to the ALLETE Second Quarter 202 ...

ALLETE, Inc. (NYSE:ALE) Q1 2021 Earnings Conference Call May 6, 2021 10:00 AM ET Company Participants Bethany Owen - President and CEO Bob Adams - SVP and CFO Steve Morris - VP, Controller, and CAO Al Rudeck - VP, ALLETE Clean Energy Frank Frederickson - VP, Customer Experience at Minnesota Power Conference Call Participants Brian Russo - Sidoti Peter Bourdon - Mizuho Operator Good day and welcome to the ALLETE First Quarter 2021 Financial Results Call. Today's call is being recorded. Certain statements con ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2021 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ Commission File Number 1-3548 ALLETE, Inc. (Exact name of registrant as specified in its charter) Minnesota 41-0418150 (State ...

ALLETE, Inc. (NYSE:ALE) Q4 2020 Earnings Conference Call February 17, 2021 10:00 AM ET Company Participants Bethany Owen - President, Chief Executive Officer Steve Morris - Vice President, Controller, Chief Accounting Officer Bob Adams - Chief Financial Officer, Senior Vice President Frank Frederickson - Vice President of Customer Experience at Minnesota Power Al Rudeck - President of ALLETE Clean Energy Conference Call Participants Richard Sunderland - J. P. Morgan Peter Bourdon - Mizuho Brian Russo - Sido ...