ALLETE
Annual Report 2019

Plain-text annual report

United StatesSecurities and Exchange CommissionWashington, D.C. 20549Form 10-K(Mark One) Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the year ended December 31, 2019 ☐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 1-3548ALLETE, Inc.(Exact name of registrant as specified in its charter)Minnesota 41-0418150(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)30 West Superior Street, Duluth, Minnesota 55802-2093(Address of principal executive offices, including zip code)(218) 279-5000(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading SymbolName of each exchange on which registeredCommon Stock, without par valueALENew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T duringthe preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer☒ Accelerated Filer ☐Non-Accelerated Filer ☐ Smaller Reporting Company ☐Emerging Growth Company ☐If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ The aggregate market value of voting stock held by nonaffiliates on June 28, 2019, was $4,285,299,935. As of February 1, 2020, there were 51,696,497 shares of ALLETE Common Stock, without par value, outstanding. Documents Incorporated By ReferencePortions of the Proxy Statement for the 2020 Annual Meeting of Shareholders are incorporated by reference in Part III.IndexDefinitions 4 Forward-Looking Statements 6 Part I 7 Item 1. Business 7 Regulated Operations 8 Electric Sales / Customers 8 Seasonality 11 Power Supply 11 Transmission and Distribution 13 Investment in ATC 14 Properties 14 Regulatory Matters 14 Regional Organizations 15 Minnesota Legislation 15 Competition 16 Franchises 16 ALLETE Clean Energy 16 U.S. Water Services 17 Corporate and Other 17 BNI Energy 17 Investment in Nobles 2 18 ALLETE Properties 18 Non-Rate Base Generation and Miscellaneous 18 Environmental Matters 19 Employees 19 Availability of Information 19 Information about our Executive Officers 20 Item 1A. Risk Factors 21 Item 1B. Unresolved Staff Comments 28 Item 2. Properties 28 Item 3. Legal Proceedings 28 Item 4. Mine Safety Disclosures 28Part II 29 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities 29 Item 6. Selected Financial Data 30 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Overview 31 2019 Compared to 2018 32 2018 Compared to 2017 36 Critical Accounting Policies 40 Outlook 41 Liquidity and Capital Resources 47 Capital Requirements 51 Environmental and Other Matters 52 Market Risk 52 Recently Adopted Accounting Standards 53 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53 Item 8. Financial Statements and Supplementary Data 53ALLETE, Inc. 2019 Form 10-K2Index (Continued) Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53 Item 9A. Controls and Procedures 53 Item 9B. Other Information 54Part III 54 Item 10. Directors, Executive Officers and Corporate Governance 54 Item 11. Executive Compensation 55 Item 12. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters 55 Item 13. Certain Relationships and Related Transactions, and Director Independence 55 Item 14. Principal Accounting Fees and Services 56Part IV 56 Item 15. Exhibits and Financial Statement Schedules 56 Item 16. Form 10-K Summary 61 Signatures 62 Report of Independent Registered Public Accounting Firm 64 Consolidated Financial Statements - Audited 66 Consolidated Balance Sheet 66 Consolidated Statement of Income 67 Consolidated Statement of Comprehensive Income 68 Consolidated Statement of Cash Flows 69 Consolidated Statement of Equity 70 Notes to Consolidated Financial Statements 71 Note 1. Operations and Significant Accounting Policies 71 Note 2. Property, Plant and Equipment 84 Note 3. Jointly-Owned Facilities and Assets 85 Note 4. Regulatory Matters 86 Note 5. Equity Investments 90 Note 6. Goodwill and Intangible Assets 91 Note 7. Fair Value 91 Note 8. Short-Term and Long-Term Debt 94 Note 9. Commitments, Guarantees and Contingencies 96 Note 10. Common Stock and Earnings Per Share 103 Note 11. Income Tax Expense 104 Note 12. Pension and Other Postretirement Benefit Plans 107 Note 13. Employee Stock and Incentive Plans 116 Note 14. Business Segments 118 Note 15. Quarterly Financial Data (Unaudited) 121Schedule II 122ALLETE, Inc. 2019 Form 10-K3DefinitionsThe following abbreviations or acronyms are used in the text. References in this report to “we,” “us” and “our” are to ALLETE, Inc. and its subsidiaries,collectively.Abbreviation or AcronymTermAFUDCAllowance for Funds Used During Construction - the cost of both debt and equity funds used to finance utility plantadditions during construction periodsALLETEALLETE, Inc.ALLETE Clean EnergyALLETE Clean Energy, Inc. and its subsidiariesALLETE PropertiesALLETE Properties, LLC and its subsidiariesALLETE South WindALLETE South Wind, LLCALLETE Transmission HoldingsALLETE Transmission Holdings, Inc.ArcelorMittalArcelorMittal USA, Inc.ATCAmerican Transmission Company LLCBasinBasin Electric Power CooperativeBisonBison Wind Energy CenterBNI EnergyBNI Energy, Inc. and its subsidiaryBoswellBoswell Energy CenterCamp RipleyCamp Ripley Solar ArrayCIPConservation Improvement ProgramCliffsCleveland-Cliffs Inc.CompanyALLETE, Inc. and its subsidiariesDCDirect CurrentEISEnvironmental Impact StatementEPAUnited States Environmental Protection AgencyESOPEmployee Stock Ownership PlanFASBFinancial Accounting Standards BoardFERCFederal Energy Regulatory CommissionForm 8-KALLETE Current Report on Form 8-KForm 10-KALLETE Annual Report on Form 10-KForm 10-QALLETE Quarterly Report on Form 10-QGAAPGenerally Accepted Accounting Principles in the United States of AmericaGHGGreenhouse GasesGNTLGreat Northern Transmission LineInvest DirectALLETE’s Direct Stock Purchase and Dividend Reinvestment PlanIRPIntegrated Resource PlanItem ___Item ___ of this Form 10-KkVKilovolt(s)kW / kWhKilowatt(s) / Kilowatt-hour(s)LaskinLaskin Energy CenterManitoba HydroManitoba Hydro-Electric BoardMBtuMillion British thermal unitsMinnesota PowerAn operating division of ALLETE, Inc.Minnkota PowerMinnkota Power Cooperative, Inc.MISOMidcontinent Independent System Operator, Inc.Montana-Dakota UtilitiesMontana-Dakota Utilities Co., a subsidiary of MDU Resources Group, Inc.Moody’sMoody’s Investors Service, Inc.ALLETE, Inc. 2019 Form 10-K4Definitions (continued)Abbreviation or AcronymTermMPCAMinnesota Pollution Control AgencyMPUCMinnesota Public Utilities CommissionMW / MWhMegawatt(s) / Megawatt-hour(s)NDPSCNorth Dakota Public Service CommissionNERCNorth American Electric Reliability CorporationNobles 2Nobles 2 Power Partners, LLCNOLNet Operating LossNOXNitrogen OxidesNorthern States PowerNorthern States Power Company, a subsidiary of Xcel Energy Inc.Northshore MiningNorthshore Mining Company, a wholly-owned subsidiary of CliffsNote ___Note ___ to the consolidated financial statements in this Form 10-KNTECNemadji Trail Energy CenterNYSENew York Stock ExchangeOliver Wind IOliver Wind I Energy CenterOliver Wind IIOliver Wind II Energy CenterPalm Coast Park DistrictPalm Coast Park Community Development District in FloridaPolyMetPolyMet Mining Corp.PPA / PSAPower Purchase Agreement / Power Sales AgreementPPACAPatient Protection and Affordable Care Act of 2010PSCWPublic Service Commission of WisconsinRSOPRetirement Savings and Stock Ownership PlanSECSecurities and Exchange CommissionS&PS&P Global RatingsSilver Bay PowerSilver Bay Power Company, a wholly-owned subsidiary of CliffsSO2Sulfur DioxideSquare ButteSquare Butte Electric Cooperative, a North Dakota cooperative corporationSWL&PSuperior Water, Light and Power CompanyTaconite HarborTaconite Harbor Energy CenterTaconite RidgeTaconite Ridge Energy CenterTenaskaTenaska Energy, Inc. and Tenaska Energy Holdings, LLCTCJATax Cuts and Jobs Act of 2017 (Public Law 115-97)Tonka WaterTonka Equipment CompanyTown Center DistrictTown Center at Palm Coast Community Development District in FloridaUnited TaconiteUnited Taconite LLC, a wholly-owned subsidiary of CliffsUPM BlandinUPM, Blandin paper mill owned by UPM-Kymmene CorporationU.S.United States of AmericaU.S. Water ServicesU.S. Water Services, Inc. and its subsidiariesUSS CorporationUnited States Steel CorporationWTGWind Turbine GeneratorALLETE, Inc. 2019 Form 10-K5Forward-Looking StatementsStatements in this report that are not statements of historical facts are considered “forward-looking” and, accordingly, involve risks and uncertainties that couldcause actual results to differ materially from those discussed. Although such forward-looking statements have been made in good faith and are based on reasonableassumptions, there can be no assurance that the expected results will be achieved. Any statements that express, or involve discussions as to, future expectations,risks, beliefs, plans, objectives, assumptions, events, uncertainties, financial performance, or growth strategies (often, but not always, through the use of words orphrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “likely,” “will continue,” “could,” “may,” “potential,” “target,”“outlook” or words of similar meaning) are not statements of historical facts and may be forward-looking.In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we are providing this cautionary statement to identifyimportant factors that could cause our actual results to differ materially from those indicated in forward-looking statements made by or on behalf of ALLETE inthis Form 10-K, in presentations, on our website, in response to questions or otherwise. These statements are qualified in their entirety by reference to, and areaccompanied by, the following important factors, in addition to any assumptions and other factors referred to specifically in connection with such forward-lookingstatements that could cause our actual results to differ materially from those indicated in the forward-looking statements:•our ability to successfully implement our strategicobjectives;•global and domestic economic conditions affecting us or ourcustomers;•changes in and compliance with laws andregulations;•changes in tax rates or policies or in rates ofinflation;•the outcome of legal and administrative proceedings (whether civil or criminal) andsettlements;•weather conditions, natural disasters and pandemicdiseases;•our ability to access capital markets, bank financing and other financingsources;•changes in interest rates and the performance of the financialmarkets;•project delays or changes in project costs;•changes in operating expenses and capital expenditures and our ability to raise revenues from ourcustomers;•the impacts of commodity prices on ALLETE and ourcustomers;•our ability to attract and retain qualified, skilled and experiencedpersonnel;•effects of emergingtechnology;•war, acts of terrorism and cybersecurity attacks;•our ability to manage expansion and integrateacquisitions;•population growth rates and demographic patterns;•wholesale power marketconditions;•federal and state regulatory and legislative actions that impact regulated utility economics, including our allowed rates of return, capital structure, ability tosecure financing, industry and rate structure, acquisition and disposal of assets and facilities, operation and construction of plant facilities and utilityinfrastructure, recovery of purchased power, capital investments and other expenses, including present or prospective environmental matters;•effects of competition, including competition for retail and wholesalecustomers;•effects of restructuring initiatives in the electricindustry;•the impacts on our businesses of climate change and future regulation to restrict the emissions ofGHG;•effects of increased deployment of distributed low-carbon electricity generationresources;•the impacts of laws and regulations related to renewable and distributedgeneration;•pricing, availability and transportation of fuel and other commodities and the ability to recover the costs of suchcommodities;•our current and potential industrial and municipal customers’ ability to execute announced expansionplans;•real estate market conditions where our legacy Florida real estate investment is located may not improve;and•the success of efforts to realize value from, invest in, and develop newopportunities.Additional disclosures regarding factors that could cause our results or performance to differ from those anticipated by this report are discussed in Part 1, Item 1Aunder the heading “Risk Factors” of this Form 10-K. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertakeno obligation to update any forward‑looking statement to reflect events or circumstances after the date on which that statement is made or to reflect the occurrenceof unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of these factors, nor can it assess the impact ofeach of these factors on the businesses of ALLETE or the extent to which any factor, or combination of factors, may cause actual results to differ materially fromthose contained in any forward-looking statement. Readers are urged to carefully review and consider the various disclosures made by ALLETE in this Form 10-Kand in other reports filed with the SEC that attempt to identify the risks and uncertainties that may affect ALLETE’s business.ALLETE, Inc. 2019 Form 10-K6Part IItem 1. BusinessRegulated Operations includes our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC, a Wisconsin-based regulated utility thatowns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. Minnesota Power provides regulated utility electricservice in northeastern Minnesota to approximately 145,000 retail customers. Minnesota Power also has 15 non-affiliated municipal customers in Minnesota.SWL&P is a Wisconsin utility and a wholesale customer of Minnesota Power. SWL&P provides regulated utility electric, natural gas and water service innorthwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers and 10,000 water customers. Our regulated utility operationsinclude retail and wholesale activities under the jurisdiction of state and federal regulatory authorities. (See Note 4. Regulatory Matters.)ALLETE Clean Energy focuses on developing, acquiring, and operating clean and renewable energy projects. ALLETE Clean Energy currently owns andoperates, in five states, approximately 660 MW of nameplate capacity wind energy generation that is contracted under PSAs of various durations. In addition,ALLETE Clean Energy currently has approximately 380 MW of wind energy facilities under construction that it will own and operate with long-term PSAs inplace. ALLETE Clean Energy also engages in the development of wind energy facilities to operate under long-term PSAs or for sale to others upon completion.U.S. Water Services provided integrated water management for industry by combining chemical, equipment, engineering and service for customized solutions toreduce water and energy usage, and improve efficiency. On March 26, 2019, the Company sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd.pursuant to a stock purchase agreement for approximately $270 million in cash, net of transaction costs and cash retained.Corporate and Other is comprised of BNI Energy, our coal mining operations in North Dakota, our investment in Nobles 2, a 49 percent equity interest in theentity that will own and operate a 250 MW wind energy facility in southwestern Minnesota, ALLETE Properties, our legacy Florida real estate investment, otherbusiness development and corporate expenditures, unallocated interest expense, a small amount of non-rate base generation, approximately 4,000 acres of land inMinnesota, and earnings on cash and investments.ALLETE is incorporated under the laws of Minnesota. Our corporate headquarters are in Duluth, Minnesota. Statistical information is presented as ofDecember 31, 2019, unless otherwise indicated. All subsidiaries are wholly-owned unless otherwise specifically indicated. References in this report to “we,” “us”and “our” are to ALLETE and its subsidiaries, collectively.Year Ended December 31201920182017 Consolidated Operating Revenue – Millions (a)(b)$1,240.5$1,498.6$1,419.3 Percentage of Consolidated Operating Revenue Regulated Operations84%71%75%ALLETE Clean Energy (a)5%11%6%U.S. Water Services (b)3%11%11%Corporate and Other8%7%8% 100%100%100%(a)Includes the sale of a wind energy facility to Montana-Dakota Utilities for $81.1 million in 2018.(b)ALLETE sold U.S. Water Services in the first quarter of 2019.For a detailed discussion of results of operations and trends, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.For business segment information, see Note 1. Operations and Significant Accounting Policies and Note 14. Business Segments.ALLETE, Inc. 2019 Form 10-K7REGULATED OPERATIONSElectric Sales / CustomersRegulated Utility Kilowatt-hours Sold Year Ended December 312019%2018%2017%Millions Retail and Municipal Residential1,13081,14081,0967Commercial1,390101,426101,42010Industrial7,277547,261507,32750Municipal672579857995Total Retail and Municipal10,4697710,6257310,64272Other Power Suppliers3,185233,953274,03928Total Regulated Utility Kilowatt-hours Sold13,65410014,57810014,681100Industrial Customers. In 2019, industrial customers represented 54 percent of total regulated utility kWh sales. Our industrial customers are primarily in thetaconite mining, paper, pulp and secondary wood products, and pipeline industries.Industrial Customer Kilowatt-hours Sold Year Ended December 312019%2018%2017%Millions Taconite5,039695,039694,93067Paper, Pulp and Secondary Wood Products1,01414987141,10415Pipelines and Other Industrial1,224171,235171,29318Total Industrial Customer Kilowatt-hours Sold7,2771007,2611007,327100Six taconite facilities served by Minnesota Power made up approximately 80 percent of 2018 iron ore pellet production in the U.S. according to data from theMinnesota Department of Revenue 2019 Mining Tax Guide. Sales to taconite customers represented 5,039 million kWh, or 69 percent of total industrial customerkWh sales in 2019. Taconite, an iron‑bearing rock of relatively low iron content, is abundantly available in northern Minnesota and an important domestic sourceof raw material for the steel industry. Taconite processing plants use large quantities of electric power to grind the iron-bearing rock, and agglomerate and pelletizethe iron particles into taconite pellets.Minnesota Power’s taconite customers are capable of producing approximately 41 million tons of taconite pellets annually. Taconite pellets produced in Minnesotaare primarily shipped to North American steel making facilities that are part of the integrated steel industry. Steel produced from these North American facilities isused primarily in the manufacture of automobiles, appliances, pipe and tube products for the gas and oil industry, and in the construction industry. Historically, lessthan 10 percent of Minnesota taconite production has been exported outside of North America.There has been a general historical correlation between U.S. steel production and Minnesota taconite production. The American Iron and Steel Institute, anassociation of North American steel producers, reported that U.S. raw steel production operated at approximately 80 percent of capacity in 2019 (78 percent in2018 and 74 percent in 2017). The World Steel Association, an association of over 160 steel producers, national and regional steel industry associations, and steelresearch institutes representing approximately 85 percent of world steel production, projected U.S. steel consumption in 2020 will increase by approximatelyone percent compared to 2019.ALLETE, Inc. 2019 Form 10-K8REGULATED OPERATIONS (Continued)Industrial Customers (Continued)The following table reflects Minnesota Power’s taconite customers’ production levels for the past ten years:Minnesota Power Taconite Customer ProductionYear Tons (Millions)2019* 372018 392017 382016 282015 312014 392013 372012 392011 392010 35Source: Minnesota Department of Revenue 2019 Mining Tax Guide for years 2010 - 2018.* Preliminary data from the Minnesota Department of Revenue.Minnesota Power’s taconite customers may experience annual variations in production levels due to such factors as economic conditions, short-term demandchanges or maintenance outages. We estimate that a one million ton change in Minnesota Power’s taconite customers’ production would impact our annualearnings per share by approximately $0.04, net of expected power marketing sales at current prices. Changes in wholesale electric prices or customer contractualdemand nominations could impact this estimate. Minnesota Power proactively sells power in the wholesale power markets that is temporarily not required byindustrial customers to optimize the value of its generating facilities. Long-term reductions in taconite production or a permanent shut down of a taconite customermay lead Minnesota Power to file a general rate case to recover lost revenue.In addition to serving the taconite industry, Minnesota Power serves a number of customers in the paper, pulp and secondary wood products industry, whichrepresented 1,014 million kWh, or 14 percent of total industrial customer kWh sales in 2019. Minnesota Power also has agreements to provide steam for two of itspaper and pulp customers for use in the customers’ operations. The four major paper and pulp mills we serve reported operating at similar levels in 2019 comparedto 2018.Large Power Customer Contracts. Minnesota Power has eight Large Power Customer contracts, each serving requirements of 10 MW or more of customer load.The customers consist of six taconite facilities and four paper and pulp mills. Certain facilities have common ownership and are served under combined contracts.Large Power Customer contracts require Minnesota Power to have a certain amount of generating capacity available. In turn, each Large Power Customer isrequired to pay a minimum monthly demand charge that covers the fixed costs associated with having this capacity available to serve the customer, including areturn on common equity. Most contracts allow customers to establish the level of megawatts subject to a demand charge on a four-month basis and require that aportion of their megawatt needs be committed on a take-or-pay basis for at least a portion of the term of the agreement. In addition to the demand charge, eachLarge Power Customer is billed an energy charge for each kWh used that recovers the variable costs incurred in generating electricity. Five of the Large PowerCustomer contracts have interruptible service which provides a discounted demand rate in exchange for the ability to interrupt the customers during systememergencies. Minnesota Power also provides incremental production service for customer demand levels above the contractual take-or-pay levels. There is nodemand charge for this service and energy is priced at an increment above Minnesota Power’s cost. Incremental production service is interruptible.ALLETE, Inc. 2019 Form 10-K9REGULATED OPERATIONS (Continued)Large Power Customer Contracts (Continued)All contracts with Large Power Customers continue past the contract termination date unless the required advance notice of cancellation has been given. Therequired advance notice of cancellation varies from two to four years. Such contracts minimize the impact on earnings that otherwise would result from significantreductions in kWh sales to such customers. Large Power Customers are required to take all of their purchased electric service requirements from Minnesota Powerfor the duration of their contracts. The rates and corresponding revenue associated with capacity and energy provided under these contracts are subject to changethrough the same regulatory process governing all retail electric rates. (See Regulatory Matters – Electric Rates.)Minnesota Power, as permitted by the MPUC, requires its taconite-producing Large Power Customers to pay weekly for electric usage based on monthly energyusage estimates. These customers receive estimated bills based on Minnesota Power’s estimate of the customer’s energy usage, forecasted energy prices and fueladjustment clause estimates. Minnesota Power’s taconite‑producing Large Power Customers have generally predictable energy usage on a week-to-week basis andany differences that occur are trued-up the following month.Contract Status for Minnesota Power Large Power CustomersAs of December 31, 2019CustomerIndustryLocationOwnershipEarliestTermination DateArcelorMittal – Minorca MineTaconiteVirginia, MNArcelorMittal S.A.December 31, 2025Hibbing Taconite Co. (a)TaconiteHibbing, MN62.3% ArcelorMittal S.A.23.0% Cliffs14.7% USS CorporationDecember 31, 2023United Taconite and NorthshoreMiningTaconiteEveleth, MN and Babbitt,MNCliffsDecember 31, 2026USS Corporation(USS – Minnesota Ore) (a)(b)TaconiteMt. Iron, MN and Keewatin,MNUSS CorporationDecember 31, 2023Boise, Inc. (a)PaperInternational Falls, MNPackaging Corporation of AmericaDecember 31, 2023UPM BlandinPaperGrand Rapids, MNUPM-Kymmene CorporationDecember 31, 2029Verso Duluth MillPaper and PulpDuluth, MNVerso CorporationDecember 31, 2024Sappi Cloquet LLC (a)Paper and PulpCloquet, MNSappi LimitedDecember 31, 2023(a)The contract will terminate four years from the date of written notice from either Minnesota Power or the customer. No notice of contract cancellation has been given byeither party. Thus, the earliest date of cancellation is December 31, 2023.(b)USS Corporation owns both the Minntac Plant in Mountain Iron, MN, and the Keewatin Taconite Plant in Keewatin, MN.Residential and Commercial Customers. In 2019, residential and commercial customers represented 18 percent of total regulated utility kWh sales.Municipal Customers. In 2019, municipal customers represented five percent of total regulated utility kWh sales. All of the municipal contracts include atermination clause requiring a three-year notice to terminate.Minnesota Power’s wholesale electric contracts with 15 non-affiliated municipal customers in Minnesota have termination dates ranging from 2024 through atleast 2032, with a majority of contracts effective through at least 2024. (See Note 4. Regulatory Matters.)The contract with another municipal customer expired on June 30, 2019. Minnesota Power historically provided approximately 29 MW of average monthlydemand to this customer.ALLETE, Inc. 2019 Form 10-K10REGULATED OPERATIONS (Continued)Other Power Suppliers. The Company also enters into off-system sales with Other Power Suppliers. These sales are at market‑based prices into the MISO marketon a daily basis or through bilateral agreements of various durations.Our PSAs are detailed in Note 9. Commitments, Guarantees and Contingencies, with additional disclosure provided in the following paragraphs.Basin PSAs. Minnesota Power has an agreement to sell 100 MW of capacity and energy to Basin for a ten-year period which expires in April 2020. The capacitycharge is based on a fixed monthly schedule with a minimum annual escalation provision. The energy charge is based on a fixed monthly schedule and providesfor annual escalation based on the cost of fuel. The agreement also allows Minnesota Power to recover a pro rata share of increased costs related to emissions thatoccur during the last five years of the contract. Minnesota Power has two additional agreements to sell capacity to Basin at fixed prices. (See Note 9.Commitments, Guarantees and Contingencies.)Minnkota Power PSA. Minnesota Power has a PSA with Minnkota Power where Minnesota Power is selling a portion of its entitlement from Square Butte toMinnkota Power, resulting in Minnkota Power’s net entitlement increasing and Minnesota Power’s net entitlement decreasing until Minnesota Power’s share iseliminated at the end of 2025. Of Minnesota Power’s 50 percent output entitlement, it sold approximately 28 percent to Minnkota Power in 2019 (28 percent in2018 and in 2017). (See Power Supply – Long-Term Purchased Power.)Silver Bay Power PSA. In 2016, Minnesota Power and Silver Bay Power entered into a PSA through 2031. Silver Bay Power supplies approximately 90 MW ofload to Northshore Mining, an affiliate of Silver Bay Power, which had previously been served predominately through self-generation by Silver Bay Power.Starting in 2016, Minnesota Power supplied Silver Bay Power with at least 50 MW of energy and Silver Bay Power had the option to purchase additional energyfrom Minnesota Power as it transitioned away from self-generation. In the third quarter of 2019, Silver Bay Power ceased self-generation and Minnesota Powerbegan supplying the full energy requirements for Silver Bay Power.SeasonalityThe operations of our industrial customers, which make up a large portion of our electric sales, are not typically subject to significant seasonal variations. (SeeElectric Sales / Customers.) As a result, Minnesota Power is generally not subject to significant seasonal fluctuations in electric sales; however, Minnesota Powerand SWL&P electric and natural gas sales to other customers may be affected by seasonal differences in weather. In general, peak electric sales occur in the winterand summer months with fewer electric sales in the spring and fall months. Peak sales of natural gas generally occur in the winter months. Additionally, ourregulated utilities have historically generated fewer sales and less revenue when weather conditions are milder in the winter and summer.Power SupplyIn order to meet its customers’ electric requirements, Minnesota Power utilizes a mix of its own generation and purchased power. As of December 31, 2019,Minnesota Power’s generating capability is primarily coal-fired, but also includes wind energy, hydroelectric, natural gas-fired, biomass co-fired and solargeneration. Purchased power primarily consists of long-term coal, wind and hydro PPAs as well as market purchases. The following table reflects MinnesotaPower’s generating capabilities as of December 31, 2019, and total electrical supply for 2019. Minnesota Power had an annual net peak load of 1,573 MW onNovember 11, 2019.ALLETE, Inc. 2019 Form 10-K11REGULATED OPERATIONS (Continued)Power Supply (Continued) Year Ended UnitYearNet December 31, 2019Regulated Utility Power SupplyNo.InstalledCapability Generation and Purchases MW MWh%Coal-Fired Boswell Energy Center (a)31973355 in Cohasset, MN41980468(b) 823 4,160,01129.6Taconite Harbor Energy Center1195775 in Schroeder, MN2195775 150(c)——Total Coal-Fired 973 4,160,01129.6Biomass Co-Fired / Natural Gas Hibbard Renewable Energy Center in Duluth, MN3 & 41949, 195162 21,8460.2Laskin Energy Center in Hoyt Lakes, MN1 & 21953110 19,4540.1Total Biomass Co-Fired / Natural Gas 172 41,3000.3Hydro (d) Group consisting of ten stations in MNMultipleMultiple120 643,7714.6Wind (e) Taconite Ridge Energy Center in Mt. Iron, MNMultiple200825 46,8080.3Bison Wind Energy Center in Oliver and Morton Counties, NDMultiple2010-2014497 1,571,04511.2Total Wind 522 1,617,85311.5Solar Camp Ripley Solar Array near Little Falls, MNMultiple201610 14,0690.1Total Generation 1,797 6,477,00446.1 Long-Term Purchased Power Lignite Coal - Square Butte near Center, ND (f) 1,435,54610.2Wind - Oliver County, ND 293,7612.1Hydro - Manitoba Hydro in Manitoba, Canada 331,0192.3Total Long-Term Purchased Power 2,060,32614.6Other Purchased Power (g) 5,521,45639.3Total Purchased Power 7,581,78253.9Total Regulated Utility Power Supply 1,797 14,058,786100.0(a)Minnesota Power retired Boswell Units 1 and 2 in the fourth quarter of 2018. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations – Outlook – EnergyForward.)(b)Boswell Unit 4 net capability shown above reflects Minnesota Power’s ownership percentage of 80 percent. WPPI Energy owns 20 percent of Boswell Unit 4. (See Note 3.Jointly-Owned Facilities and Assets.)(c)Taconite Harbor Units 1 and 2 were idled in 2016. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook –EnergyForward.)(d)Hydro consists of 10 stations with 34 generating units.(e)Taconite Ridge consists of 10 WTGs and Bison consists of 165 WTGs.(f)Minnesota Power has a PSA with Minnkota Power whereby Minnesota Power is selling a portion of its entitlement from Square Butte to Minnkota Power. (See ElectricSales / Customers.)(g)Includes short-term market purchases in the MISO market and from Other Power Suppliers.ALLETE, Inc. 2019 Form 10-K12REGULATED OPERATIONS (Continued)Power Supply (Continued)Fuel. Minnesota Power purchases low-sulfur, sub-bituminous coal from the Powder River Basin region located in Montana and Wyoming. Coal consumption in2019 for electric generation at Minnesota Power’s coal-fired generating stations was 2.5 million tons (3.8 million tons in 2018; 3.8 million tons in 2017). As ofDecember 31, 2019, Minnesota Power had coal inventories of 0.9 million tons (0.9 million tons as of December 31, 2018). Minnesota Power has coal supplyagreements providing for the purchase of a significant portion of its coal requirements through December 2021. In 2020, Minnesota Power expects to obtain coalunder these coal supply agreements and in the spot market. Minnesota Power continues to explore other future coal supply options and believes that adequatesupplies of low-sulfur, sub‑bituminous coal will continue to be available.Minnesota Power also has coal transportation agreements in place for the delivery of a significant portion of its coal requirements through December 2021. Thecosts of fuel and related transportation costs for Minnesota Power’s generation are recoverable from Minnesota Power’s utility customers through the fueladjustment clause.Coal Delivered to Minnesota PowerYear Ended December 31201920182017Average Price per Ton$35.31$38.89$36.50Average Price per MBtu$1.94$2.10$2.01Long-Term Purchased Power. Minnesota Power has contracts to purchase capacity and energy from various entities, including output from certain coal, wind,hydro and solar generating facilities.Our PPAs are detailed in Note 9. Commitments, Guarantees and Contingencies, with additional disclosure provided in the following paragraph.Square Butte PPA. Under the PPA with Square Butte that extends through 2026, Minnesota Power is entitled to 50 percent of the output of Square Butte’s 455 MWcoal-fired generating unit. (See Note 9. Commitments, Guarantees and Contingencies.) BNI Energy mines and sells lignite coal to Square Butte. This lignite supplyis sufficient to provide fuel for the anticipated useful life of the generating unit. Square Butte’s cost of lignite consumed in 2019 was approximately $1.88 perMBtu ($1.60 per MBtu in 2018; $1.71 per MBtu in 2017). (See Electric Sales / Customers – Minnkota Power PSA.)Transmission and DistributionWe have electric transmission and distribution lines of 500 kV (8 miles), 345 kV (242 miles), 250 kV (465 miles), 230 kV (717 miles), 161 kV (43 miles), 138 kV(190 miles), 115 kV (1,285 miles) and less than 115 kV (6,345 miles). We own and operate 158 substations with a total capacity of 8,875 megavoltamperes. Someof our transmission and distribution lines interconnect with other utilities.Great Northern Transmission Line. As a condition of a 250 MW long-term PPA entered into with Manitoba Hydro, construction of additional transmissioncapacity is required. As a result, Minnesota Power is constructing the GNTL, an approximately 220‑mile 500-kV transmission line between Manitoba andMinnesota’s Iron Range that was proposed by Minnesota Power and Manitoba Hydro in order to strengthen the electric grid, enhance regional reliability andpromote a greater exchange of sustainable energy.In a 2016 order, the MPUC approved the route permit for the GNTL, and in 2016, the U.S. Department of Energy issued a presidential permit to cross the U.S.-Canadian border, which was the final major regulatory approval needed before construction in the U.S. could begin. Construction activities commenced in the firstquarter of 2017, and Minnesota Power expects the GNTL to be complete and in-service by mid-2020. The total project cost in the U.S., including substation work,is estimated to be approximately $700 million, of which Minnesota Power’s portion is expected to be approximately $325 million; the difference will be recoveredfrom a subsidiary of Manitoba Hydro as non-shareholder contributions to capital. Total project costs of $633.3 million have been incurred through December 31,2019, of which $339.6 million has been recovered from a subsidiary of Manitoba Hydro. (See Note 9. Commitments, Guarantees and Contingencies.)ALLETE, Inc. 2019 Form 10-K13REGULATED OPERATIONS (Continued)Investment in ATCOur wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based utility that owns and maintains electrictransmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. We account for our investment in ATC under the equity method of accounting. Asof December 31 2019, our equity investment in ATC was $141.6 million ($128.1 million as of December 31, 2018). (See Note 5. Equity Investments.)ATC’s authorized return on equity is 9.88 percent, or 10.38 percent including an incentive adder for participation in a regional transmission organization, based ona November 2019 FERC order. In this order, the FERC reduced the base return on equity for regional transmission organizations as recommended by anadministrative law judge with refunds ordered for prior periods. Multiple parties to the complaint have appealed the FERC order.ATC’s 10-year transmission assessment, which covers the years 2019 through 2028, identifies a need for between $2.9 billion and $3.6 billion in transmissionsystem investments. These investments by ATC, if undertaken, are expected to be funded through a combination of internally generated cash, debt and investorcontributions. As opportunities arise, we plan to make additional investments in ATC through general capital calls based upon our pro rata ownership interest inATC.PropertiesOur Regulated Operations businesses own office and service buildings, an energy control center, repair shops, electric plants, transmission facilities andstorerooms in various localities in Minnesota, Wisconsin and North Dakota. All of the electric plants are subject to mortgages, which collateralize the outstandingfirst mortgage bonds of Minnesota Power and SWL&P. Most of the generating plants and substations are located on real property owned by Minnesota Power orSWL&P, subject to the lien of a mortgage, whereas most of the electric lines are located on real property owned by others with appropriate easement rights ornecessary permits from governmental authorities. WPPI Energy owns 20 percent of Boswell Unit 4. WPPI Energy has the right to use our transmission linefacilities to transport its share of Boswell generation. (See Note 3. Jointly-Owned Facilities and Assets.)Regulatory MattersWe are subject to the jurisdiction of various regulatory authorities and other organizations.Electric Rates. All rates and contract terms in our Regulated Operations are subject to approval by applicable regulatory authorities. Minnesota Power andSWL&P design their retail electric service rates based on cost of service studies under which allocations are made to the various classes of customers as approvedby the MPUC or the PSCW. Nearly all retail sales include billing adjustment clauses, which may adjust electric service rates for changes in the cost of fuel andpurchased energy, recovery of current and deferred conservation improvement program expenditures and recovery of certain transmission, renewable andenvironmental investments.Minnesota Public Utilities Commission. The MPUC has regulatory authority over Minnesota Power’s retail service area in Minnesota, retail rates, retail services,capital structure, issuance of securities and other matters. Minnesota Power’s current retail rates are based on a March 2018 MPUC retail rate order that allows fora 9.25 percent return on common equity and a 53.81 percent equity ratio. As authorized by the MPUC, Minnesota Power also recognizes revenue under costrecovery riders for transmission, renewable and environmental investments.2020 Minnesota General Rate Case. On November 1, 2019, Minnesota Power filed a retail rate increase request with the MPUC seeking an average increase ofapproximately 10.6 percent for retail customers. The rate filing seeks a return on equity of 10.05 percent and a 53.81 percent equity ratio. On an annualized basis,the requested final rate increase would generate approximately $66 million in additional revenue. In orders dated December 23, 2019, the MPUC accepted thefiling as complete and authorized an annual interim rate increase of $36.1 million beginning January 1, 2020.Additional regulatory proceedings pending with the MPUC are detailed in Note 4. Regulatory Matters.ALLETE, Inc. 2019 Form 10-K14REGULATED OPERATIONS (Continued)Regulatory Matters (Continued)Public Service Commission of Wisconsin. The PSCW has regulatory authority over SWL&P’s retail sales of electricity, natural gas and water, issuances ofsecurities and other matters. SWL&P’s current retail rates are based on a December 2018 order that allows for a return on equity of 10.4 percent and a 55.0 percentequity ratio. SWL&P anticipates filing a general rate case in the second quarter of 2020.North Dakota Public Service Commission. The NDPSC has jurisdiction over site and route permitting of generation and transmission facilities in North Dakota.Federal Energy Regulatory Commission. The FERC has jurisdiction over the licensing of hydroelectric projects, the establishment of rates and charges fortransmission of electricity in interstate commerce, electricity sold at wholesale (including the rates for Minnesota Power’s municipal and wholesale customers),natural gas transportation, certain accounting and record‑keeping practices, certain activities of our regulated utilities and the operations of ATC. FERCjurisdiction also includes enforcement of NERC mandatory electric reliability standards. Violations of FERC rules are subject to enforcement action by the FERCincluding financial penalties up to $1 million per day per violation. Regulatory proceedings pending with the FERC are detailed in Note 4. Regulatory Matters.Regional OrganizationsMidcontinent Independent System Operator, Inc. Minnesota Power, SWL&P and ATC are members of MISO, a regional transmission organization. WhileMinnesota Power and SWL&P retain ownership of their respective transmission assets, their transmission networks are under the regional operational control ofMISO. Minnesota Power and SWL&P take and provide transmission service under the MISO open access transmission tariff. In cooperation with stakeholders,MISO manages the delivery of electric power across 15 states and the Canadian province of Manitoba which includes nearly 200,000 MW of generating capacity.North American Electric Reliability Corporation. The NERC has been certified by the FERC as the national electric reliability organization. The NERC ensuresthe reliability of the North American bulk power system. The NERC oversees six regional entities that establish requirements, approved by the FERC, for reliableoperation and maintenance of power generation facilities and transmission systems. Minnesota Power is subject to these reliability requirements and can incursignificant penalties for non‑compliance.Midwest Reliability Organization (MRO). Minnesota Power and ATC are members of the MRO, one of the six regional entities overseen by the NERC. TheMRO's primary responsibilities are to: ensure compliance with mandatory reliability standards by entities who own, operate or use the interconnected, internationalbulk power system; conduct assessments of the grid's ability to meet electricity demand in the region; and analyze regional system events.The MRO region spans the Canadian provinces of Saskatchewan and Manitoba, and all or parts of 16 states. The region includes more than 200 organizations thatare involved in the production and delivery of electricity. These organizations include municipal utilities, cooperatives, investor-owned utilities, transmissionsystem operators, a federal power marketing agency, Canadian Crown corporations and independent power producers.Minnesota LegislationRenewable Energy. Minnesota law requires 25 percent of electric utilities’ applicable retail and municipal energy sales in Minnesota to be from renewable energysources by 2025. Minnesota law also requires Minnesota Power to meet interim milestones including 20 percent by 2020. The law allows the MPUC to modify ordelay meeting a milestone if implementation will cause significant ratepayer cost or technical reliability issues. If a utility is not in compliance with a milestone,the MPUC may order the utility to construct facilities, purchase renewable energy or purchase renewable energy credits. Minnesota Power’s 2015 IRP, which wasfiled with the MPUC in 2015 and approved with modifications by the MPUC in a 2016 order, included an update on its plans and progress in meeting theMinnesota renewable energy milestones through 2025. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations –Outlook – EnergyForward.)ALLETE, Inc. 2019 Form 10-K15REGULATED OPERATIONS (Continued)Minnesota Legislation (Continued)Minnesota Power continues to execute its renewable energy strategy through renewable projects that will ensure it meets the identified state mandate at the lowestcost for customers. Minnesota Power has exceeded the interim milestone requirements to date with 27 percent of its applicable retail and municipal energy salessupplied by renewable energy sources in 2019.Minnesota Solar Energy Standard. Minnesota law requires at least 1.5 percent of total retail electric sales, excluding sales to certain customers, to be generated bysolar energy by the end of 2020. At least 10 percent of the 1.5 percent mandate must be met by solar energy generated by or procured from solar photovoltaicdevices with a nameplate capacity of 40 kW or less and community solar garden subscriptions. Minnesota Power expects to meet both parts of the solar mandate.(See Note 4. Regulatory Matters.)CompetitionRetail electric energy sales in Minnesota and Wisconsin are made to customers in assigned service territories. As a result, most retail electric customers inMinnesota do not have the ability to choose their electric supplier. Large energy users of 2 MW and above that are located outside of a municipality are allowed tochoose a supplier upon MPUC approval. Minnesota Power serves 10 Large Power facilities over 10 MW, none of which have engaged in a competitive rateprocess. No other large commercial or small industrial customers in Minnesota Power’s service territory have sought a provider outside Minnesota Power’s serviceterritory. Retail electric and natural gas customers in Wisconsin do not have the ability to choose their energy supplier. In both states, however, electricity maycompete with other forms of energy. Customers may also choose to generate their own electricity, or substitute other forms of energy for their manufacturingprocesses.In 2019, five percent of total regulated utility kWh sales were to municipal customers in Minnesota by contract. These customers have the right to seek an energysupply from any wholesale electric service provider upon contract expiration. Minnesota Power’s wholesale electric contract with the Nashwauk Public UtilitiesCommission is effective through at least December 31, 2032. Minnesota Power wholesale electric contracts with 14 municipal customers are effective throughvarying dates ranging from 2024 through 2029. The contract with another municipal customer expired on June 30, 2019. (See Electric Sales / Customers.)The FERC has continued with its efforts to promote a competitive wholesale market through open-access electric transmission and other means. As a result, ourelectric sales to Other Power Suppliers and our purchases to supply our retail and wholesale load are made in a competitive market.FranchisesMinnesota Power holds franchises to construct and maintain an electric distribution and transmission system in 91 cities. The remaining cities, villages and townsserved by Minnesota Power do not require a franchise to operate. SWL&P serves customers under electric, natural gas or water franchises in 1 city and 14 villagesor towns.ALLETE CLEAN ENERGYALLETE Clean Energy focuses on developing, acquiring, and operating clean and renewable energy projects. ALLETE Clean Energy currently owns andoperates, in five states, approximately 660 MW of nameplate capacity wind energy generation that is contracted under PSAs of various durations. In addition,ALLETE Clean Energy currently has approximately 380 MW of wind energy facilities under construction that it will own and operate with long-term PSAs inplace. ALLETE Clean Energy also engages in the development of wind energy facilities to operate under long-term PSAs or for sale to others upon completion.(See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook – ALLETE Clean Energy.)ALLETE Clean Energy believes the market for renewable energy in North America is robust, driven by several factors including environmental regulation, taxincentives, societal expectations and continual technology advances. State renewable portfolio standards and state or federal regulations to limit GHG emissionsare examples of environmental regulation or public policy that we believe will drive renewable energy development.ALLETE Clean Energy’s strategy includes the safe, reliable, optimal and profitable operation of its existing facilities. This includes a strong safety culture, thecontinuous pursuit of operational efficiencies at existing facilities and cost controls. ALLETE Clean Energy generally acquires facilities in liquid power marketsand its strategy includes the exploration of PSA extensions upon expiration of existing contracts and production tax credit requalification of existing facilities.ALLETE, Inc. 2019 Form 10-K16ALLETE CLEAN ENERGY (Continued)ALLETE Clean Energy manages risk by having a diverse portfolio of assets, which includes PSA expiration, technology and geographic diversity. The currentoperating portfolio of approximately 660 MW is subject to variations in seasonal wind with higher wind resources typically available in the winter months. Themajority of its planned maintenance leverages this seasonality and is performed during lower wind periods. The current mix of PSA expiration and geographiclocation for existing facilities is as follows:Wind Energy FacilityRegionCapacity MWPSA MWPSA ExpirationArmenia MountainEast101100%2024Chanarambie/VikingMidwest98 PSA 1 (a) 12%2023PSA 2 88%2023CondonWest50100%2022Glen UllinWest106100%2039Lake BentonMidwest104100%2028Storm Lake IMidwest108100%2027Storm Lake IIMidwest77 PSA 1 90%2020PSA 2 10%2032OtherMidwest17100%2028(a)The PSA expiration assumes the exercise of four one-year renewal options that ALLETE Clean Energy has the sole right to exercise.The majority of ALLETE Clean Energy’s wind operations are located on real property owned by others with appropriate easement rights or necessary consents ofgovernmental authorities. One of ALLETE Clean Energy’s wind energy facilities is encumbered by liens against its assets securing financing. ALLETE CleanEnergy’s Glen Ullin wind energy facility is owned through a tax equity financing structure. (See Note 1. Operations and Significant Accounting Policies.)U.S. WATER SERVICESU.S. Water Services provided integrated water management for industry by combining chemical, equipment, engineering and service for customized solutions toreduce water and energy usage, and improve efficiency.On February 8, 2019, the Company entered into a stock purchase agreement providing for the sale of U.S. Water Services to a subsidiary of Kurita Water IndustriesLtd. On March 26, 2019, ALLETE completed the sale, and received approximately $270 million in cash, net of transaction costs and cash retained. The Companyrecognized a gain on the sale of U.S. Water Services of $13.2 million after-tax in 2019. ALLETE used the proceeds from the sale of U.S. Water Services to reinvestin growth initiatives at our Regulated Operations and ALLETE Clean Energy.CORPORATE AND OTHERBNI EnergyBNI Energy is a supplier of lignite coal in North Dakota, producing approximately 4 million tons annually and has an estimated 650 million tons of lignite coalreserves. Two electric generating cooperatives, Minnkota Power and Square Butte, consume virtually all of BNI Energy’s production of lignite under cost-plusfixed fee coal supply agreements extending through December 31, 2037. (See Item 1. Business – Regulated Operations – Power Supply – Long-Term PurchasedPower and Note 9. Commitments, Guarantees and Contingencies.) The mining process disturbs and reclaims between 200 and 250 acres per year. Laws requirethat the reclaimed land be at least as productive as it was prior to mining. As of December 31, 2019, BNI Energy had a $43.4 million asset reclamation obligation($26.5 million as of December 31, 2018) included in Other Non-Current Liabilities on the Consolidated Balance Sheet. These costs are included in the cost-plusfixed fee contract, for which an asset reclamation cost receivable was included in Other Non-Current Assets on the Consolidated Balance Sheet. The assetreclamation obligation is guaranteed by surety bonds and a letter of credit. (See Note 9. Commitments, Guarantees and Contingencies.)ALLETE, Inc. 2019 Form 10-K17CORPORATE AND OTHER (Continued)Investment in Nobles 2In December 2018, our wholly-owned subsidiary, ALLETE South Wind, entered into an agreement with Tenaska to purchase a 49 percent equity interest in Nobles2, the entity that will own and operate a 250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA with Minnesota Power. The windenergy facility will be built in Nobles County, Minnesota and is expected to be completed in late 2020, with an estimated total project cost of approximately $350million to $400 million. In the fourth quarter of 2019, we entered into a tax equity funding agreement to finance up to $125 million of the project costs. We accountfor our investment in Nobles 2 under the equity method of accounting. As of December 31, 2019, our equity investment in Nobles 2 was $56.0 million ($33.0million at December 31, 2018). We expect to invest approximately $115 million in 2020. (See Note 5. Equity Investments.)ALLETE PropertiesALLETE Properties represents our legacy Florida real estate investment. ALLETE Properties’ major project in Florida is Town Center at Palm Coast.Summary of Project Residential Non-residentialAs of December 31, 2019 Acres (a) Units (b) Sq. Ft. (b)(c)Project Town Center at Palm Coast 807 1,739 1,872,700(a)Acreage is approximate and shown on a gross basis, including wetlands.(b)Units and square footage are estimated. Density at build out may differ from these estimates.(c)Includes retail and non-retail commercial, office, industrial, warehouse, storage and institutional square footage.In addition to the Town Center at Palm Coast project, ALLETE Properties has approximately 600 acres of other land available for sale. (See Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations – Outlook – Corporate and Other – ALLETE Properties.)Seller Financing. ALLETE Properties occasionally provides seller financing to qualified buyers. As of December 31, 2019, outstanding finance receivables were$5.6 million, net of reserves, with maturities through 2024. These finance receivables accrue interest at market-based rates and are collateralized by the financedproperties.Regulation. A substantial portion of our development properties in Florida are subject to federal, state and local regulations, and restrictions that may imposesignificant costs or limitations on our ability to develop the properties. Much of our property is vacant land and some is located in areas where development mayaffect the natural habitats of various protected wildlife species or in sensitive environmental areas such as wetlands.Non-Rate Base Generation and MiscellaneousCorporate and Other also includes other business development and corporate expenditures, unallocated interest expense, a small amount of non-rate basegeneration, approximately 4,000 acres of land in Minnesota, and earnings on cash and investments.As of December 31, 2019, non-rate base generation consists of 29 MW of natural gas and hydro generation at Rapids Energy Center in Grand Rapids, Minnesota.In 2019, we sold less than 0.1 million MWh of non-rate base generation (0.1 million MWh in 2018 and in 2017). Net generation is primarily dedicated to the needsof one customer, UPM Blandin.ALLETE, Inc. 2019 Form 10-K18ENVIRONMENTAL MATTERSOur businesses are subject to regulation of environmental matters by various federal, state and local authorities. A number of regulatory changes to the Clean AirAct, the Clean Water Act and various waste management requirements have been promulgated by both the EPA and state authorities over the past several years.Minnesota Power’s facilities are subject to additional requirements under many of these regulations. Minnesota Power is reshaping its generation portfolio, overtime, to reduce its reliance on coal, has installed cost-effective emission control technology, and advocates for sound science and policy during rulemakingimplementation.We consider our businesses to be in substantial compliance with currently applicable environmental regulations and believe all necessary permits have beenobtained. We anticipate that with many state and federal environmental regulations and requirements finalized, or to be finalized in the near future, potentialexpenditures for future environmental matters may be material and require significant capital investments. Minnesota Power has evaluated various environmentalcompliance scenarios using possible outcomes of environmental regulations to project power supply trends and impacts on customers.We review environmental matters on a quarterly basis. Accruals for environmental matters are recorded when it is probable that a liability has been incurred andthe amount of the liability can be reasonably estimated based on current law and existing technologies. Accruals are adjusted as assessment and remediation effortsprogress, or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the Consolidated Balance Sheet atundiscounted amounts and exclude claims for recoveries from insurance or other third parties. Costs related to environmental contamination treatment and cleanupare expensed unless recoverable in rates from customers. (See Note 9. Commitments, Guarantees and Contingencies.)EMPLOYEESAs of December 31, 2019, ALLETE had 1,339 employees, of which 1,316 were full-time.Minnesota Power and SWL&P have an aggregate of 465 employees who are members of the International Brotherhood of Electrical Workers (IBEW) Local 31.The current labor agreements with IBEW Local 31 expire on April 30, 2020, for Minnesota Power and February 1, 2021, for SWL&P.BNI Energy has 179 employees, of which 133 are members of IBEW Local 1593. The current labor agreement with IBEW Local 1593 expires on March 31, 2023.AVAILABILITY OF INFORMATIONALLETE makes its SEC filings, including its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments tothose reports filed or furnished pursuant to Section 13(e) or 15(d) of the Securities Exchange Act of 1934, available free of charge on ALLETE’s website,www.allete.com, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.ALLETE, Inc. 2019 Form 10-K19INFORMATION ABOUT OUR EXECUTIVE OFFICERSAs of February 13, 2020, these are the executive officers of ALLETE:Executive OfficersInitial Effective Date Alan R. Hodnik, Age 60 Executive Chairman (a)February 3, 2020Chairman and Chief Executive OfficerJanuary 31, 2019Chairman, President and Chief Executive OfficerMay 10, 2011 Bethany M. Owen, Age 54 President and Chief Executive Officer (a)February 3, 2020PresidentJanuary 31, 2019Senior Vice President and Chief Legal and Administrative OfficerNovember 26, 2016 Robert J. Adams, Age 57 Senior Vice President and Chief Financial OfficerMarch 4, 2017Senior Vice President – Energy-Centric Businesses and Chief Risk OfficerNovember 14, 2015Vice President – Energy-Centric Businesses and Chief Risk OfficerJune 23, 2014 Patrick L. Cutshall, Age 54 Vice President and Corporate TreasurerDecember 18, 2017TreasurerJanuary 1, 2016 Nicole R. Johnson, Age 45 Vice President and Chief Administrative OfficerJune 28, 2019 Steven W. Morris, Age 58 Vice President, Controller and Chief Accounting OfficerDecember 24, 2016ControllerMarch 3, 2014 Margaret A. Thickens, Age 53 Vice President, Chief Legal Officer and Corporate SecretaryFebruary 13, 2019(a)On January 30, 2020, the Board of Directors of ALLETE elected Bethany M. Owen as Chief Executive Officer of ALLETE effective February 3, 2020, after Alan R. Hodnikinformed the Board of Directors on January 30, 2020, that he will retire in May 2021. As part of an orderly transition, Mr. Hodnik will continue as Executive Chairmanuntil May 2021.All of the executive officers have been employed by us for more than five years in executive or management positions. Prior to election to the position listedabove, the following executives held other positions with the Company during the past five years.Mr. Cutshall was Director – Investments and Tax.Ms. Johnson was Vice President – Human Resources; Director – Compensation and Benefits.Ms. Owen was Vice President – Information Technology Solutions and President – SWL&P.Ms. Thickens was General Counsel and Director of Compliance – ALLETE Clean Energy; General Counsel and Secretary – ALLETE Clean Energy;Senior Attorney.There are no family relationships between any of the executive officers. All officers and directors are elected or appointed annually.The present term of office of the executive officers listed in the preceding table extends to the first meeting of our Board of Directors after the next annual meetingof shareholders. Both meetings are scheduled for May 12, 2020.ALLETE, Inc. 2019 Form 10-K20Item 1A. Risk FactorsThe risks and uncertainties discussed below could materially affect our business operations, financial position, results of operations and cash flows, and should becarefully considered by stakeholders. The risks and uncertainties in this section are not the only ones we face; additional risks and uncertainties that we are notpresently aware of, or that we currently consider immaterial, may also affect our business operations, financial position, results of operations and cash flows.Accordingly, the risks described below should be carefully considered together with other information set forth in this report and in future reports that we file withthe SEC.Entity-wide RisksWe rely on access to financing sources and capital markets. If we do not have access to capital on acceptable terms or are unable to obtain capital whenneeded, our ability to execute our business plans, make capital expenditures or pursue other strategic actions that we may otherwise rely on for futuregrowth would be adversely affected.We rely on access to financing sources and the capital markets, on acceptable terms and at reasonable costs, as sources of liquidity for capital requirements notsatisfied by our cash flows from operations. Market disruptions or a downgrade of our credit ratings may increase the cost of borrowing or adversely affect ourability to access and finance in the capital markets or to access other financing sources. Such disruptions or causes of a downgrade could include but are not limitedto: the effects of the TCJA on the Company’s cash flow metrics; a loss of, or a reduction in sales to, our taconite, paper and pipeline customers if we are unable tooffset the related lost margins; weaker operating performance; adverse regulatory outcomes; disproportionate increase in the contribution to net income fromALLETE Clean Energy and our Corporate and Other businesses as compared to that from our Regulated Operations; deteriorating economic or capital marketconditions; or volatility in commodity prices. If we are not able to access capital on acceptable terms in sufficient amounts and when needed, or at all, the ability to maintain our businesses or to implement ourbusiness plans would be adversely affected.A deterioration in general economic conditions may have adverse impacts on our financial position, results of operations and cash flows.If economic conditions deteriorate on a national or regional level, it may have a negative impact on the Company’s financial position, results of operations andcash flows as well as on our customers. This impact may include volatility and unpredictability in the demand for the products and services offered by ourbusinesses, the loss of existing customers, tempered growth strategies, customer production cutbacks or customer bankruptcies. An uncertain economy could alsoadversely affect expenses including pension costs, interest costs, and uncollectible accounts, or lead to reductions in the value of certain real estate and otherinvestments.We are subject to extensive state and federal legislation and regulation, compliance with which could have an adverse effect on our businesses.We are subject to, and affected by, extensive state and federal legislation and regulation. If it was determined that our businesses failed to comply with applicablelaws and regulations, we could become subject to fines or penalties or be required to implement additional compliance measures or actions, the cost of which couldbe material. Adoption of new laws, rules, regulations, principles, or practices by federal and state agencies, or changes to or a failure to comply with current laws,rules, regulations, principles, or practices and their interpretations, could have an adverse effect on our financial position, results of operations and cash flows.The inability to attract and retain a qualified workforce including, but not limited to, executive officers, key employees and employees with specializedskills, could have an adverse effect on our operations.The success of our business heavily depends on the leadership of our executive officers and key employees to implement our business strategy. The inability tomaintain a qualified workforce including, but not limited to, executive officers, key employees and employees with specialized skills, may negatively affect ourability to service our existing or new customers, or successfully manage our business or achieve our business objectives. Personnel costs may increase due tocompetitive pressures or terms of collective bargaining agreements with union employees.ALLETE, Inc. 2019 Form 10-K21Item 1A. Risk Factors (Continued)Entity-wide Risks (Continued)Market performance and other changes could decrease the value of pension and other postretirement benefit plan assets, which may result in significantadditional funding requirements and increased annual expenses.The performance of the capital markets impacts the values of the assets that are held in trust to satisfy future obligations under our pension and other postretirementbenefit plans. We have significant obligations to these plans and the trusts hold significant assets. These assets are subject to market fluctuations and will yielduncertain returns, which may fall below our projected rates of return. A decline in the market value of the pension and other postretirement benefit plan assetswould increase the funding requirements under our benefit plans if asset returns do not recover. Additionally, our pension and other postretirement benefit planliabilities are sensitive to changes in interest rates. As interest rates decrease, the liabilities increase, potentially increasing benefit expense and fundingrequirements. Our pension and other postretirement benefit plan costs are generally recoverable in our electric rates as allowed by our regulators or through ourcost-plus fixed fee coal supply agreements at BNI Energy; however, there is no certainty that regulators will continue to allow recovery of these rising costs in thefuture.We are exposed to significant reputational risk.The Company could suffer negative impacts to its reputation as a result of operational incidents, violations of corporate compliance policies, regulatory violations,or other events which may result in negative customer perception and increased regulatory oversight, each of which could have an adverse effect on our financialposition, results of operations and cash flows.Catastrophic events, such as natural disasters and acts of war, may adversely affect our operations.Catastrophic events such as fires, including wildfires, earthquakes, explosions, and floods, severe weather, such as ice storms, hailstorms, or tornadoes or similaroccurrences, as well as acts of war, could adversely affect the Company’s facilities, operations, financial position, results of operations and cash flows. Althoughthe Company has contingency plans and employs crisis management to respond and recover operations in the event of a severe disruption resulting from acatastrophic event, these measures may not be successful. Furthermore, despite these measures, if a catastrophic event were to occur, our financial position, resultsof operations and cash flows could be adversely affected.We are vulnerable to acts of terrorism or cybersecurity attacks.Our operations may be targets of terrorist activities or cybersecurity attacks, which could disrupt our ability to provide utility service at our regulated utilities,develop or operate our renewable energy projects at ALLETE Clean Energy, or operate our other businesses. The impacts may also impair the fulfillment ofcritical business functions, negatively impact our reputation, subject us to litigation or increased regulation, or compromise sensitive, confidential and other data.There have been cybersecurity attacks on U.S. energy infrastructure in the past and there may be such attacks in the future. Our generation, transmission anddistribution facilities, information technology systems and other infrastructure facilities and systems could be direct targets of, or otherwise be materially adverselyaffected by such activities. Hacking, computer viruses, terrorism, theft and sabotage could impact our systems and facilities, or those of third parties on which werely, which may disrupt our operations.Our businesses require the continued operation of sophisticated custom-developed, purchased, and leased information technology systems and networkinfrastructure as well as the collection and retention of personally identifiable information of our customers, shareholders and employees. Although we maintainsecurity measures designed to prevent cybersecurity incidents and protect our information technology and control systems, network infrastructure and other assets,our technology systems, or those of third parties on which we rely, may be vulnerable to disability, failures or unauthorized access due to hacking, viruses, acts ofwar or terrorism as well as other causes. If those technology systems fail or are breached and not recovered in a timely manner, we may be unable to performcritical business functions including effectively maintaining certain internal controls over financial reporting, our reputation may be negatively impacted, we maybecome subject to litigation or increased regulation, and sensitive, confidential and other data could be compromised. If our business were impacted by terroristactivities or cybersecurity attacks, such impacts could have an adverse effect on our financial position, results of operations and cash flows.ALLETE, Inc. 2019 Form 10-K22Item 1A. Risk Factors (Continued)Entity-wide Risks (Continued)We maintain insurance against some, but not all, of the risks and uncertainties we face.We maintain insurance against some, but not all, of the risks and uncertainties we face. The occurrence of these risks and uncertainties, if not fully covered byinsurance, could have a material effect on our financial position, results of operations and cash flows.Government challenges to our tax positions, as well as tax law changes and the inherent difficulty in quantifying potential tax effects of our operationsand business decisions, could adversely affect our results of operations and liquidity.We are required to make judgments regarding the potential tax effects of various financial transactions and our ongoing operations in order to estimate ourobligations to taxing authorities. The obligations, which include income taxes and taxes other than income taxes, involve complex matters that ultimately could belitigated. We also estimate our ability to use tax benefits, including those in the form of carryforwards and tax credits that are recorded as deferred tax assets onour Consolidated Balance Sheet. A disallowance of these tax benefits could have an adverse impact on our financial position, results of operations and cash flows.We are currently utilizing, and plan to utilize in the future, our carryforwards and tax credits to reduce our income tax obligations. If we cannot generate enoughtaxable income in the future to utilize all of our carryforwards and tax credits before they expire, we may incur adverse charges to earnings. If federal or state taxauthorities deny any deductions or tax credits, our financial position, results of operations and cash flows may be adversely impacted.Regulated Operations RisksOur results of operations could be negatively impacted if our taconite, paper and pipeline customers experience an economic downturn, incur workstoppages, fail to compete effectively, experience decreased demand, fail to economically obtain raw materials, fail to renew or obtain necessary permits,or experience a decline in prices for their product.Minnesota Power’s eight Large Power Customers accounted for 28 percent of our 2019 consolidated operating revenue (24 percent in 2018 and 25 percent in2017), of which one of these customers accounted for approximately 12 percent of consolidated revenue in 2019 (10 percent in 2018 and in 2017). These customersare involved in cyclical industries that by their nature are adversely impacted by economic downturns and are subject to strong competition in the marketplace.Additionally, the North American paper and pulp industry also faces declining demand due to the impact of electronic substitution for print and changing customerneeds. As a result, certain paper and pulp customers have reduced their existing operations in recent years and have pursued or are pursuing product changes inresponse to declining demand.Accordingly, if our industrial customers experience an economic downturn, incur a work stoppage (including strikes, lock-outs or other events), fail to competeeffectively, experience decreased demand, fail to economically obtain raw materials, fail to renew or obtain necessary permits, or experience a decline in prices fortheir product, there could be adverse effects on their operations and, consequently, this could have a negative impact on our results of operations if we are unable toremarket at similar prices the energy that would otherwise have been sold to such customers.ALLETE, Inc. 2019 Form 10-K23Item 1A. Risk Factors (Continued)Regulated Operations Risks (Continued)Our utility operations are subject to an extensive legal and regulatory framework under federal and state laws as well as regulations imposed by otherorganizations that may have a negative impact on our business and results of operations.We are subject to an extensive legal and regulatory framework imposed under federal and state law including regulations administered by the FERC, MPUC,MPCA, PSCW, NDPSC and EPA as well as regulations administered by other organizations including the NERC. These laws and regulations relate to allowedrates of return, capital structure, financings, rate and cost structure, acquisition and disposal of assets and facilities, construction and operation of generation,transmission and distribution facilities (including the ongoing maintenance and reliable operation of such facilities), recovery of purchased power costs and capitalinvestments, approval of integrated resource plans and present or prospective wholesale and retail competition, renewable portfolio standards that require utilitiesto obtain specified percentages of electric supply from eligible renewable generation sources, among other things. Energy policy initiatives at the state or federallevel could increase renewable portfolio standards or incentives for distributed generation, municipal utility ownership, or local initiatives could introducegeneration or distribution requirements that could change the current integrated utility model. Our transmission systems and electric generation facilities are subjectto the NERC mandatory reliability standards, including cybersecurity standards. Compliance with these standards may lead to increased operating costs and capitalexpenditures which are subject to regulatory approval for recovery. If it was determined that we were not in compliance with these mandatory reliability standardsor other statutes, rules and orders, we could incur substantial monetary penalties and other sanctions, which could adversely affect our results of operations.These laws and regulations significantly influence our operations and may affect our ability to recover costs from our customers. We are required to havenumerous permits, licenses, approvals and certificates from the agencies and other organizations that regulate our business. We believe we have obtained thenecessary permits, licenses, approvals and certificates for our existing operations and that our business is conducted in accordance with applicable laws; however,we are unable to predict the impact on our operating results from the future regulatory activities of any of these agencies and other organizations. Changes inregulations, the adoption of new regulations or the expansion of jurisdiction by these agencies and other organizations could have an adverse impact on ourbusiness and results of operations.Our ability to obtain rate adjustments to maintain reasonable rates of return depends upon regulatory action under applicable statutes and regulations, and wecannot provide assurance that rate adjustments will be obtained or reasonable authorized rates of return on capital will be earned. Minnesota Power and SWL&P,from time to time, file general rate cases with, or otherwise seek cost recovery authorization from, federal and state regulatory authorities. If Minnesota Power andSWL&P do not receive an adequate amount of rate relief in general rate cases, including if rates are reduced, if increased rates are not approved on a timely basis,if cost recovery is not granted at the requested level, or costs are otherwise unable to be recovered through rates, we may experience an adverse impact on ourfinancial position, results of operations and cash flows. We are unable to predict the impact on our business and results of operations from future legislation orregulatory activities of any of these agencies or organizations.Our regulated operations present certain environmental risks that could adversely affect our financial position and results of operations, including effectsof environmental laws and regulations, physical risks associated with climate change and initiatives designed to reduce the impact of GHG emissions.We are subject to extensive environmental laws and regulations affecting many aspects of our past, present and future operations, including air quality, waterquality and usage, waste management, reclamation, hazardous wastes, avian mortality and natural resources. These laws and regulations can result in increasedcapital expenditures and increased operating and other costs as a result of compliance, remediation, containment and monitoring obligations, particularly withregard to laws relating to emissions, coal ash and water discharge at generating facilities.These laws and regulations could restrict the output of some existing facilities, limit the use of some fuels in the production of electricity, require the installation ofadditional pollution control equipment, require participation in environmental emission allowance trading, and lead to other environmental considerations andcosts, which could have an adverse impact on our business, operations and results of operations.These laws and regulations generally require us to obtain and comply with a wide variety of environmental licenses, permits, inspections and other approvals.Violations of these laws and regulations could expose us to regulatory and legal proceedings, disputes with, and legal challenges by, governmental authorities andprivate parties, as well as potential significant civil fines criminal penalties and other sanctions.ALLETE, Inc. 2019 Form 10-K24Item 1A. Risk Factors (Continued)Regulated Operations Risks (Continued)Existing environmental regulations may be revised and new environmental regulations may be adopted or become applicable to us. Revised or additionalregulations which result in increased compliance costs or additional operating restrictions, particularly if those costs are not fully recoverable from customers,could have an adverse effect on our results of operations.The scientific community generally accepts that emissions of GHG are linked to global climate change. Physical risks of climate change, such as more frequent ormore extreme weather events, changes in temperature and precipitation patterns, changes to ground and surface water availability, and other related phenomena,could affect some, or all, of our operations. Severe weather or other natural disasters could be destructive, which could result in increased costs. An extremeweather event within our utility service areas can also directly affect our capital assets, causing disruption in service to customers due to downed wires and poles ordamage to other operating equipment. These all have the potential to adversely affect our business and operations.There is significant uncertainty regarding if and when new laws or regulations will be adopted to reduce or limit GHG and the impact any such laws or regulationswould have on us. In 2019, coal was the primary fuel source for 64 percent of the energy produced by our generating facilities. Any future limits on GHG emissionsat the federal or state level, or action taken by regulators, may require us to incur significant capital expenditures and increases in operating costs, or could result inthe closure of certain coal-fired generating facilities, an impairment of assets, or otherwise adversely affect our results of operations, particularly if resultingexpenditures and costs are not fully recoverable from customers.We cannot predict the amount or timing of all future expenditures related to environmental matters because of uncertainty as to applicable regulations orrequirements. There is also uncertainty in quantifying liabilities under environmental laws that impose joint and several liability on all potentially responsibleparties. Violations of certain environmental statutes, rules and regulations could expose ALLETE to third party disputes and potentially significant monetarypenalties, as well as other sanctions for non‑compliance.The operation and maintenance of our regulated electric generation and transmission facilities are subject to operational risks that could adversely affectour financial position, results of operations and cash flows.The operation of generating facilities involves many risks, including start-up operational risks, breakdown or failure of facilities, the dependence on a specific fuelsource, inadequate fuel supply, availability of fuel transportation, and the impact of unusual or adverse weather conditions or other natural events, as well as therisk of performance below expected levels of output or efficiency. A significant portion of our facilities contain older generating equipment, which, even ifmaintained in accordance with good engineering practices, may require significant capital expenditures to continue operating at peak efficiency. Generation andtransmission facilities and equipment are also likely to require periodic upgrades and improvements due to changing environmental standards and technologicaladvances. We could be subject to costs associated with any unexpected failure to produce or deliver power, including failure caused by breakdown or forcedoutage, as well as repairing damage to facilities due to storms, natural disasters, wars, sabotage, terrorist acts and other catastrophic events.Our ability to successfully and timely complete capital improvements to existing regulated facilities or other capital projects is contingent upon manyvariables.We expect to incur significant capital expenditures in making capital improvements to our existing electric generation and transmission facilities and in thedevelopment and construction of new electric generation and transmission facilities. Should any such efforts be unsuccessful or not completed in a timely manner,we could be subject to additional costs or impairments which could have an adverse impact on our financial position, results of operation and cash flows.Our regulated electric generating operations may not have access to adequate and reliable transmission and distribution facilities necessary to deliverelectricity to our customers.We depend on our own transmission and distribution facilities, as well as facilities owned by other utilities, to deliver the electricity produced and sold to ourcustomers, and to other energy suppliers. If transmission capacity is inadequate, our ability to sell and deliver electricity may be limited. We may have to forgosales or may have to buy more expensive wholesale electricity that is available in the capacity-constrained area. In addition, any infrastructure failure thatinterrupts or impairs delivery of electricity to our customers could negatively impact the satisfaction of our customers, which could have an adverse impact on ourbusiness and results of operations.ALLETE, Inc. 2019 Form 10-K25Item 1A. Risk Factors (Continued)Regulated Operations Risks (Continued)Our results of operations could be impacted by declining wholesale power prices.Wholesale prices for electricity have declined in recent years primarily due to low natural gas prices. If there are reductions in demand from customers or if we losecustomers, we will market any available power to Other Power Suppliers in an effort to mitigate any earnings impact. Sales to Other Power Suppliers are sold atmarket-based prices into the MISO market on a daily basis or through bilateral agreements of various durations. Due to the low wholesale prices for electricity, wedo not expect that our power marketing efforts would fully offset the reduction in earnings resulting from the lower demand from existing customers or the loss ofcustomers. (See Item 1. Business – Regulated Operations – Electric Sales / Customers.)The price of electricity and fuel may be volatile.Volatility in market prices for electricity and fuel could adversely impact our financial position and results of operations and may result from:•severe or unexpected weather conditions and naturaldisasters;•seasonality;•changes in electricity usage;•transmission or transportation constraints, inoperability orinefficiencies;•availability of competitively priced alternative energysources;•changes in supply and demand for energy;•changes in power productioncapacity;•outages at our generating facilities or those of ourcompetitors;•availability of fuel transportation;•changes in production and storage levels of natural gas, lignite, coal, crude oil and refinedproducts;•wars, sabotage, terrorist acts or other catastrophic events; and•federal, state, local and foreign energy, environmental, or other regulation andlegislation.Fluctuations in our fuel and purchased power costs related to our retail and municipal customers are passed on to customers through the fuel adjustment clause.Volatility in market prices for our fuel and purchase power costs primarily impacts our sales to Other Power Suppliers.Demand for energy may decrease.Our results of operations are impacted by the demand for energy in our service territories, our municipal customers and other power suppliers. There could belower demand for energy due to a loss of customers as a result of economic conditions, customers constructing or installing their own generation facilities, highercosts and rates charged to customers, eligible municipal and other power suppliers choosing an alternative energy provider, or loss of service territory orfranchises. Further, energy conservation and technological advances that increased energy efficiency may temporarily or permanently reduce the demand forenergy products. In addition, we are impacted by state and federal regulations requiring mandatory conservation measures, which reduce the demand for energyproducts. Continuing technology improvements and regulatory developments may make customer and third party-owned generation technologies such as rooftopsolar systems, WTGs, microturbines and battery storage systems more cost effective and feasible for of our customers. If customers utilize their own generation,demand for energy from us would decline. There may not be future economic growth opportunities that would enable us to replace the lost energy demand fromthese customers. Therefore, a decrease in demand for energy could adversely impact our financial position, results of operations and cash flows.We may not be able to successfully implement our strategic objectives of growing load at our utilities if current or potential industrial or municipalcustomers are unable to successfully implement expansion plans, including the inability to obtain necessary governmental permits.As part of our long-term strategy, we pursue new wholesale and retail loads in and around our service territories. Currently, there are several companies innortheastern Minnesota that are in the process of developing natural resource-based projects that represent long-term growth potential and load diversity for ourRegulated Operations businesses. These projects may include construction of new facilities and restarts of old facilities, both of which require permitting andapprovals to be obtained before the projects can be successfully implemented. If a project does not obtain any necessary governmental (including environmental)permits and approvals or if these customers are unable to successfully implement expansion plans, our long-term strategy and thus our results of operations couldbe adversely impacted.ALLETE, Inc. 2019 Form 10-K26Item 1A. Risk Factors (Continued)ALLETE Clean Energy / Corporate and Other RisksThe inability to successfully manage and grow ALLETE Clean Energy and our Corporate and Other businesses could adversely affect our results ofoperations.The Company's strategy for ALLETE Clean Energy includes adding customers, new geographies, project development for others and growth through acquisitions.This strategy depends, in part, on the Company’s ability to successfully identify and evaluate acquisition opportunities and consummate acquisitions on acceptableterms. The Company may compete with other companies for these acquisition opportunities, which may increase the Company’s cost of making acquisitions andthe Company may be unsuccessful in pursuing these acquisition opportunities. Other companies may be able to pay more for acquisitions and may be able toidentify, evaluate, bid for and purchase a greater number of assets than the Company’s financial or human resources permit. Additionally, tax law changes mayadversely impact the economic characteristics of potential acquisitions or investments. If the Company is unable to execute its strategy of growth throughacquisitions, project development for others, or the addition of new customers and geographies, it may impede our long-term objectives and business strategy.Acquisitions are subject to uncertainties. If we are unable to successfully integrate and manage future acquisitions or strategic investments, this could have anadverse impact on our results of operations. Our actual results may also differ from our expectations due to factors such as the ability to obtain timely regulatory orgovernmental approvals, integration and operational issues and the ability to retain management and other key personnel.The generation of electricity from our wind energy facilities depends heavily on suitable meteorological conditions.Although our wind energy facilities are located in diverse geographic regions to reduce the potential impact that may be caused by unfavorable weather in aparticular region, suitable meteorological conditions are variable and difficult to predict. If wind conditions are unfavorable or meteorological conditions areunsuitable, our electricity generation and revenue from wind energy facilities may be substantially below our expectations. The electricity produced, productiontax credits received, and revenues generated by a wind energy facility are highly dependent on suitable wind conditions and associated weather conditions, whichare variable and beyond our control. We base our decisions about which wind projects to build or acquire as well as our electricity generation estimates, in part, onthe findings of long-term wind and other meteorological studies conducted on the project site and its region; however, the unpredictable nature of wind conditions,weather and meteorological conditions can result in material deviations from these studies and our expectations. Furthermore, components of our systems could bedamaged by severe weather, such as hailstorms, lightning or tornadoes. In addition, replacement and spare parts for key components of our diverse turbineportfolio may be difficult or costly to acquire or may be unavailable. Unfavorable wind conditions, weather or changes to meteorological patterns could impair theeffectiveness of our wind energy facility assets, reduce their output beneath their rated capacity or require shutdown of key equipment, impeding operation of ourwind energy facilities.The construction, operation and maintenance of our electric generation facilities or investment in facilities are subject to operational risks that couldadversely affect our financial position, results of operations and cash flows.The construction and operation of generating facilities involves many risks, including the performance by key contracted suppliers and maintenance providers,start-up operations risks, breakdown or failure of facilities, the dependence on the availability of wind resources, or the impact of unusual, adverse weatherconditions or other natural events, as well as the risk of performance below expected levels of output or efficiency. Some of our facilities contain older generatingequipment, which even if maintained in accordance with good engineering practices, may require significant capital expenditures to continue operating at peakefficiency. We could be subject to costs associated with any unexpected failure to produce and deliver power, including failure caused by breakdown or forcedoutage, as well as repairing damage to facilities due to storms, natural disasters, wars, sabotage, terrorist acts and other catastrophic events.As contracts with counterparties expire, we may not be able to replace them with agreements on similar terms.ALLETE Clean Energy is party to PSAs which expire in various years between 2020 and 2039. These PSA expirations are prior to the end of the estimated usefullives of the respective wind energy facilities. If, for any reason, ALLETE Clean Energy is unable to enter into new agreements with existing or new counterpartieson similar terms once the current agreements expire, or sell energy in the wholesale market resulting in similar revenue, our financial position, results of operationsand cash flows could be adversely affected, which includes potential impairment of property, plant and equipment.ALLETE, Inc. 2019 Form 10-K27Item 1A. Risk Factors (Continued)ALLETE Clean Energy / Corporate and Other Risks (Continued)Counterparties to turbine supply, service and maintenance, or power sale agreements may not fulfill their obligations.ALLETE Clean Energy is party to turbine supply agreements, service and maintenance agreements, and PSAs under various durations with a limited number ofcreditworthy counterparties. If, for any reason, any of the counterparties under these agreements do not fulfill their related contractual obligations, and ALLETEClean Energy is unable to mitigate non-performance by a key supplier or maintenance provider or remarket PSA energy resulting in similar revenue, our financialposition, results of operations and cash flows could be adversely affected.BNI Energy may be adversely impacted by its exposure to customer concentration, and environmental laws and regulations.BNI Energy sells lignite coal to two electric generating cooperatives, Minnkota Power and Square Butte, and could be adversely impacted if these customers wereunable or unwilling to fulfill their related contractual obligations. In addition, BNI Energy and its customers may be adversely impacted by environmental lawsand regulations which could have an adverse effect on our financial position, results of operations and cash flows. In addition, insurance companies have decreasedthe available coverage for policy holders in the mining industry, impacting the availability of coverage, and leading to higher deductibles and premiums.Real estate market conditions where our legacy Florida real estate investment is located may not improve.The Company’s strategy related to the real estate assets of ALLETE Properties incorporates the possibility of a bulk sale of its entire portfolio, in addition to salesover time, however, continued adverse market conditions could impact the timing of land sales, which could result in little to no sales, while still incurringoperating expenses such as community development district assessments and property taxes, resulting in net operating losses at ALLETE Properties. Furthermore,weak market conditions could put the properties at risk for an impairment charge. An impairment charge would result in a non-cash charge to earnings that couldhave an adverse effect on our results of operations.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesA discussion of our properties is included in Item 1. Business and is incorporated by reference herein.Item 3. Legal ProceedingsDiscussions of material regulatory and environmental proceedings are included in Note 4. Regulatory Matters and Note 9. Commitments, Guarantees andContingencies, and are incorporated by reference herein.We are involved in litigation arising in the normal course of business. Also in the normal course of business, we are involved in tax, regulatory and othergovernmental audits, inspections, investigations and other proceedings that involve state and federal taxes, safety, and compliance with regulations, rate base andcost of service issues, among other things. We do not expect the outcome of these matters to have a material effect on our financial position, results of operationsor cash flows.Item 4. Mine Safety DisclosuresThe Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires issuers to include in periodic reports filed with the SEC certaininformation relating to citations or orders for violations of standards under the Federal Mine Safety and Health Act of 1977 (Mine Safety Act). Informationconcerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and this Item are included in Exhibit 95 to thisForm 10-K.ALLETE, Inc. 2019 Form 10-K28Part IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock is listed on the NYSE under the symbol ALE. We have paid dividends, without interruption, on our common stock since 1948. A quarterlydividend of $0.6175 per share on our common stock is payable on March 1, 2020, to the shareholders of record on February 14, 2020. The timing and amount offuture dividends will depend upon earnings, cash requirements, the financial condition of the Company, applicable government regulations and other factorsdeemed relevant by the ALLETE Board of Directors. As of February 1, 2020, there were approximately 21,000 common stock shareholders of record.Performance Graph.The following graph compares ALLETE’s cumulative Total Shareholder Return on its common stock with the cumulative return of the S&P 500 Index and thePhiladelphia Utility Index. The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economythrough changes in the aggregate market value of 500 stocks representing all major industries. Because this composite index has a broad industry base, itsperformance may not closely track that of a composite index comprised solely of electric utilities. The Philadelphia Utility Index is a capitalization-weighted indexof 20 utility companies involved in the generation of electricity.The calculations assume a $100 investment on December 31, 2014, and reinvestment of dividends. 201420152016201720182019ALLETE$100$96$126$150$158$174S&P 500 Index$100$101$113$138$132$174Philadelphia Utility Index$100$94$110$124$129$163ALLETE, Inc. 2019 Form 10-K29Item 6. Selected Financial Data 20192018201720162015Millions Except Per Share Amounts Operating Revenue (a)(b)$1,240.5$1,498.6$1,419.3$1,339.7$1,486.4Operating Expenses (a)(b)$1,060.7$1,297.4$1,193.4$1,122.7$1,274.7Net Income (c)$185.5$174.1$172.2$155.8$141.5Less: Non-Controlling Interest in Subsidiaries$(0.1)——$0.5$0.4Net Income Attributable to ALLETE (c)$185.6$174.1$172.2$155.3$141.1Common Stock Dividends$121.4$115.0$108.7$102.7$97.9Earnings Retained in Business (c)$64.2$59.1$63.5$52.6$43.2Shares Outstanding Year-End51.751.551.149.649.1Average Basic51.651.350.849.348.3Diluted51.751.551.049.548.4Diluted Earnings Per Share (c)$3.59$3.38$3.38$3.14$2.92Total Assets$5,482.8$5,165.0$5,080.0$4,876.9$4,864.4Long-Term Debt$1,400.9$1,428.5$1,439.2$1,370.4$1,556.7Return on Common Equity (c)8.4%8.3%8.6%8.4%8.0%Common Equity Ratio56%59%58%55%53%Dividends Declared per Common Share$2.35$2.24$2.14$2.08$2.02Dividend Payout Ratio (c)65%66%63%66%69%Book Value Per Share at Year-End$43.19$41.85$40.46$38.17$37.18Capital Expenditures by Segment Regulated Operations$230.9$211.9$177.1$121.8$224.4ALLETE Clean Energy385.689.756.1106.98.6U.S. Water Services (b)—5.04.43.72.9Corporate and Other10.112.028.915.415.9Total Capital Expenditures$626.6$318.6$266.5$247.8$251.8(a)In 2015, operating revenue and operating expenses included $197.7 million and $162.9 million, respectively, for the sale of a wind energy facility by ALLETE CleanEnergy to Montana-Dakota Utilities. In 2018, operating revenue and operating expenses included $81.1 million and $67.4 million, respectively, for the sale of a windenergy facility by ALLETE Clean Energy to Montana-Dakota Utilities.(b)In 2019, ALLETE sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd.(c)The year ended December 31, 2017 included the impact of the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 11. IncomeTax Expense.)Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion should be read in conjunction with our Consolidated Financial Statements and notes to those statements and the other financialinformation appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this Form 10-K contain forward-looking information that involves risks and uncertainties. Readers are cautioned that forward-looking statements should be read in conjunction with ourdisclosures in this Form 10-K under the headings: “Forward‑Looking Statements” located on page 6 and “Risk Factors” located in Item 1A. The risks anduncertainties described in this Form 10-K are not the only risks facing our Company. Additional risks and uncertainties that we are not presently aware of, or thatwe currently consider immaterial, may also affect our business operations. Our business, financial condition or results of operations could suffer if the risks arerealized.ALLETE, Inc. 2019 Form 10-K30OverviewBasis of Presentation. We present three reportable segments: Regulated Operations, ALLETE Clean Energy and U.S. Water Services. Our segments weredetermined in accordance with the guidance on segment reporting. We measure performance of our operations through budgeting and monitoring of contributionsto consolidated net income by each business segment.Regulated Operations includes our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC, a Wisconsin-based regulated utility thatowns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. Minnesota Power provides regulated utility electricservice in northeastern Minnesota to approximately 145,000 retail customers. Minnesota Power also has 15 non-affiliated municipal customers in Minnesota.SWL&P is a Wisconsin utility and a wholesale customer of Minnesota Power. SWL&P provides regulated utility electric, natural gas and water service innorthwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers and 10,000 water customers. Our regulated utility operationsinclude retail and wholesale activities under the jurisdiction of state and federal regulatory authorities. (See Note 4. Regulatory Matters.)ALLETE Clean Energy focuses on developing, acquiring, and operating clean and renewable energy projects. ALLETE Clean Energy currently owns andoperates, in five states, approximately 660 MW of nameplate capacity wind energy generation that is contracted under PSAs of various durations. In addition,ALLETE Clean Energy currently has approximately 380 MW of wind energy facilities under construction that it will own and operate with long-term PSAs inplace. ALLETE Clean Energy also engages in the development of wind energy facilities to operate under long-term PSAs or for sale to others upon completion.U.S. Water Services provided integrated water management for industry by combining chemical, equipment, engineering and service for customized solutions toreduce water and energy usage, and improve efficiency. On March 26, 2019, the Company sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd.pursuant to a stock purchase agreement for approximately $270 million in cash, net of transaction costs and cash retained.Corporate and Other is comprised of BNI Energy, our coal mining operations in North Dakota, our investment in Nobles 2, a 49 percent equity interest in theentity that will own and operate a 250 MW wind energy facility in southwestern Minnesota, ALLETE Properties, our legacy Florida real estate investment, otherbusiness development and corporate expenditures, unallocated interest expense, a small amount of non-rate base generation, approximately 4,000 acres of land inMinnesota, and earnings on cash and investments.ALLETE is incorporated under the laws of Minnesota. Our corporate headquarters are in Duluth, Minnesota. Statistical information is presented as ofDecember 31, 2019, unless otherwise indicated. All subsidiaries are wholly-owned unless otherwise specifically indicated. References in this report to “we,” “us”and “our” are to ALLETE and its subsidiaries, collectively.2019 Financial OverviewThe following net income discussion summarizes a comparison of the year ended December 31, 2019, to the year ended December 31, 2018.Net income attributable to ALLETE in 2019 was $185.6 million, or $3.59 per diluted share, compared to $174.1 million, or $3.38 per diluted share, in 2018. Netincome in 2019 included the gain on sale of U.S. Water Services of $13.2 million after-tax, or $0.26 per share, and U.S. Water Services results of operationsamounted to a net loss of $1.1 million after-tax, or $0.02 per share. Net income in 2018 included $10.2 million after-tax, or $0.20 per share, for the sale of a windenergy facility to Montana-Dakota Utilities, $3.2 million after-tax, or $0.06 per share, from U.S. Water Services and a $2.0 million after-tax, or $0.04 per share,benefit for the change in fair value of the contingent consideration liability. Earnings per share dilution in 2019 was $0.01 due to additional shares of commonstock outstanding as of December 31, 2019.Regulated Operations net income attributable to ALLETE was $154.4 million in 2019, compared to $131.0 million in 2018. Net income at Minnesota Power washigher than 2018 primarily due to lower operating and maintenance and property tax expenses, increased cost recovery rider revenue, higher transmission marginsand higher fuel adjustment clause recoveries. These increases were partially offset by lower kWh sales. Net income at SWL&P was higher than 2018 primarily dueto higher rates resulting from the implementation of new rates on January 1, 2019. Our after-tax equity earnings in ATC were higher than 2018 primarily due toadditional investments and period over period changes in ATC’s estimate of a refund liability related to the FERC decision on MISO return on equity complaints.(See Note 5. Equity Investments.)ALLETE, Inc. 2019 Form 10-K312019 Financial Overview (Continued)ALLETE Clean Energy net income attributable to ALLETE was $12.4 million in 2019 compared to $33.7 million in 2018. Net income in 2018 included $10.2million after-tax for the sale of a wind energy facility to Montana-Dakota Utilities and $3.0 million of production tax credits that resulted from the retrospectivequalification of additional wind turbine generators in 2016 and 2017. Net income in 2019 included lower revenue resulting from lower non-cash amortizationrelated to the expiration of power sales agreements as well as lower wind resources and availability, and higher depreciation expense. These decreases werepartially offset by $5.3 million of additional production tax credits generated in 2019 compared to production tax credits generated in 2018 as ALLETE CleanEnergy continues to execute its refurbishment strategy.U.S. Water Services net loss attributable to ALLETE was $1.1 million in 2019, compared to net income of $3.2 million in 2018. ALLETE completed the sale ofU.S. Water Services in the first quarter of 2019.Corporate and Other net income attributable to ALLETE was $19.9 million in 2019 compared to $6.2 million in 2018. Net income in 2019 included the gain onsale of U.S. Water Services of $13.2 million after-tax, of which $2.1 million after-tax was recognized in the fourth quarter of 2019 for the favorable settlement of aU.S. Water Services patent infringement case. Net income in 2019 also included higher earnings on cash and investments. Net income in 2018 included a $2.0million after-tax benefit for the change in fair value of the contingent consideration liability.2019 Compared to 2018(See Note 14. Business Segments for financial results by segment.)Regulated OperationsYear Ended December 3120192018Millions Operating Revenue – Utility$1,042.4$1,059.5Fuel, Purchased Power and Gas – Utility390.7407.5Transmission Services – Utility69.869.9Operating and Maintenance201.9220.1Depreciation and Amortization159.4158.0Taxes Other than Income Taxes48.452.5Operating Income172.2151.5Interest Expense(58.9)(60.2)Equity Earnings in ATC21.717.5Other Income12.36.7Income Before Income Taxes147.3115.5Income Tax Expense (Benefit)(7.1)(15.5)Net Income Attributable to ALLETE$154.4$131.0Operating Revenue – Utility decreased $17.1 million from 2018 primarily due to lower revenue from kWh sales and conservation improvement recoveries,partially offset by increased cost recovery rider revenue, higher fuel adjustment clause recoveries and higher FERC formula-based rates.Revenue from kWh sales decreased $43.3 million from 2018 reflecting lower sales to residential, commercial and municipal customers as well as lower salesto other power suppliers. Sales to residential and commercial customers decreased from 2018 primarily due to milder weather conditions in 2019. Sales toindustrial customers in 2019 were similar to 2018 reflecting higher sales to Silver Bay Power as it ceased self-generation in the third quarter of 2019, partiallyoffset by lower sales to Husky Energy due to an April 2018 fire at its refinery in Superior, Wisconsin. Sales to municipal customers decreased from 2018 as aresult of additional customer self-generation in 2019 and the expiration of a contract with a municipal customer on June 30, 2019. Sales to other powersuppliers decreased in 2019 primarily due to fewer market sales and sales under PSAs as a result of less generation available for sale, partially offset by thecommencement of Minnesota Power’s PSA with Oconto Electric Cooperative in January 2019. Sales to other power suppliers are sold at market-based pricesinto the MISO market on a daily basis or through PSAs of various durations.ALLETE, Inc. 2019 Form 10-K322019 Compared to 2018 (Continued)Regulated Operations (Continued) Kilowatt-hours Sold20192018QuantityVariance%VarianceMillions Regulated Utility Retail and Municipal Residential1,1301,140(10)(0.9)Commercial1,3901,426(36)(2.5)Industrial7,2777,261160.2Municipal672798(126)(15.8)Total Retail and Municipal10,46910,625(156)(1.5)Other Power Suppliers3,1853,953(768)(19.4)Total Regulated Utility Kilowatt-hours Sold13,65414,578(924)(6.3)Revenue from electric sales to taconite customers accounted for 25 percent of consolidated operating revenue in 2019 (21 percent in 2018). Revenue fromelectric sales to paper, pulp and secondary wood product customers accounted for 6 percent of consolidated operating revenue in 2019 (4 percent in 2018).Revenue from electric sales to pipelines and other industrial customers accounted for 7 percent of consolidated operating revenue in 2019 (6 percent in 2018).Conservation improvement program recoveries decreased $5.9 million from 2018 primarily due to a decrease in related expenditures.Cost recovery rider revenue contributed an incremental $14.0 million over current base rates compared to 2018 (see Note 4. Regulatory Matters) primarily dueto higher expenditures related to the construction of the GNTL and lower transmission margins related to our portion of CapX2020 transmission lines.Transmission margins for CapX2020 transmission lines recognized below those assumed in Minnesota Power base rates result in increased cost recovery riderrevenue to offset the impact of the lower margins.Fuel adjustment clause revenue increased $13.1 million due to period over period timing of recoveries for fuel and purchased power costs attributable to retailand municipal customers. Beginning in 2020, the method of accounting for all Minnesota electric utilities changed to a monthly budgeted, forward-lookingFAC with annual prudence review and true-up to actual allowed costs. (See Note 4. Regulatory Matters.)Revenue from wholesale customers under FERC formula-based rates increased $3.3 million from 2018 primarily due to higher rates.Transmission revenue was similar to 2018 reflecting a $4.4 million out-of-period adjustment in 2018 for an estimated true-up of MISO rates that were billed in2017 and credited to customers in 2019, mostly offset by lower MISO-related revenue in 2019.Operating Expenses decreased $37.8 million, or 4 percent, from 2018.Fuel, Purchased Power and Gas – Utility expense decreased $16.8 million, or 4 percent, from 2018 primarily due to lower kWh sales, purchased power pricesand fuel costs, partially offset by higher costs of purchased power from Square Butte. Fuel and purchased power expense related to our retail and municipalcustomers is recovered through the fuel adjustment clause.Operating and Maintenance expense decreased $18.2 million, or 8 percent, from 2018 primarily due to lower salary and benefit expenses, maintenancecontract expenses and materials purchased for generation facilities as well as a decrease in severance expense of $2.3 million in 2019.Taxes Other than Income Taxes decreased $4.1 million, or 8 percent, from 2018 primarily due to lower property tax expenses resulting from lower estimatedtaxable market values.ALLETE, Inc. 2019 Form 10-K332019 Compared to 2018 (Continued)Regulated Operations (Continued)Interest Expense decreased $1.3 million, or 2 percent, from 2018 primarily due to lower average long-term debt balances for our Regulated Operations andinterest on Minnesota Power’s reserve for interim rate refunds. We record interest expense for Regulated Operations primarily based on rate base andauthorized capital structure, and allocate the balance to Corporate and Other.Equity Earnings in ATC increased $4.2 million, or 24 percent, from 2018 primarily due to additional investments and period over period changes in ATC’sestimate of a refund liability related to the FERC decision on MISO return on equity complaints. (See Note 5. Equity Investments.)Other Income increased $5.6 million from 2018 reflecting higher AFUDC – Equity and lower pension and other postretirement benefit plan non-service costs.(See Note 12. Pension and Other Postretirement Benefit Plans.)Income Tax Benefit was $7.1 million in 2019 compared to income tax benefit of $15.5 million in 2018. The income tax benefit in 2019 reflects higher pre-taxincome, partially offset by higher production tax credits.ALLETE Clean EnergyYear Ended December 3120192018Millions Operating Revenue Contracts with Customers – Non-utility (a)$48.0$136.3Other – Non-utility (b)11.623.6Cost of Sales – Non-utility (a)—67.4Operating and Maintenance29.529.9Depreciation and Amortization26.824.4Taxes Other than Income Taxes2.12.1Operating Income1.236.1Interest Expense(2.8)(3.6)Other Income2.00.2Income Before Income Taxes0.432.7Income Tax Expense (Benefit)(11.9)(1.0)Net Income12.333.7Less: Non-Controlling Interest in Subsidiaries (c)(0.1)—Net Income Attributable to ALLETE (a)$12.4$33.7(a)In 2018, operating revenue and operating expenses included $81.1 million and $67.4 million, respectively, for the sale of a wind energy facility by ALLETE CleanEnergy to Montana-Dakota Utilities.(b)Represents non-cash amortization of differences between contract prices and estimated market prices on assumed PSAs.(c)See Note 1. Operations and Significant Accounting Policies.Operating Revenue decreased $100.3 million from 2018 primarily due to the sale of a wind energy facility to Montana-Dakota Utilities in 2018 and lowerkWh sales resulting from lower wind resources and availability. In addition, revenue decreased $12.0 million due to lower non-cash amortization related to theexpiration of power sales agreements. In 2019, two PSAs expired and the related non-cash revenue was fully amortized. (See Note 1. Operations andSignificant Accounting Policies – Revenue – ALLETE Clean Energy – Other and Item 7. Management’s Discussion and Analysis – Outlook – ALLETEClean Energy.)ALLETE, Inc. 2019 Form 10-K342019 Compared to 2018 (Continued)ALLETE Clean Energy (Continued) Year Ended December 31, 20192018Production and Operating RevenuekWhRevenuekWhRevenueMillions Wind Energy Regions East232.9$21.0264.5$24.1Midwest805.832.4791.646.6West87.86.299.68.1Total Wind Energy Facilities1,126.559.61,155.778.8Sale of Wind Energy Facility———81.1Total Production and Operating Revenue1,126.5$59.61,155.7$159.9Cost of Sales decreased $67.4 million from 2018 due to the sale of a wind energy facility to Montana-Dakota Utilities in 2018.Depreciation and Amortization expense increased $2.4 million, or 10 percent, from 2018 primarily due to additional property, plant and equipment in service.Other Income increased $1.8 million from 2018 reflecting various individually immaterial items.Income Tax Benefit increased $10.9 million from 2018 primarily due to additional production tax credits generated in 2019 and lower pre-tax income. Theincome tax benefit reflected production tax credits generated of $10.9 million in 2019 and $5.6 million in 2018. The income tax benefit in 2018 also reflected$3.0 million of production tax credits that resulted from the retrospective qualification of additional wind turbine generators in 2016 and 2017.U.S. Water ServicesYear Ended December 3120192018Millions Operating Revenue$33.4$172.1Net Income (Loss) Attributable to ALLETE$(1.1)$3.2Operating Revenue decreased $138.7 million from 2018. ALLETE sold U.S. Water Services in the first quarter of 2019. (See Note 1. Operations andSignificant Accounting Policies.)Corporate and OtherOperating Revenue decreased $2.0 million, or 2 percent, from 2018 primarily due to lower revenue from non-rate base generation and lower revenue at BNIEnergy, which operates under cost-plus fixed fee contracts, as a result of lower expenses and fewer tons sold in 2019 compared to 2018. These increases werepartially offset by higher land sales at ALLETE Properties.Net Income Attributable to ALLETE was $19.9 million in 2019 compared to $6.2 million in 2018. Net income in 2019 included the gain on sale of U.S. WaterServices of $13.2 million after-tax, of which $2.1 million after-tax was recognized in the fourth quarter of 2019 for the favorable settlement of a U.S. WaterServices patent infringement case. Net income in 2019 also included higher earnings on cash and investments. Net income in 2018 included a $2.0 millionafter-tax benefit for the change in fair value of the contingent consideration liability. Net income at BNI Energy was $7.4 million in 2019 compared to $6.8million in 2018, reflecting higher earnings from investments in 2019. Net income at ALLETE Properties was $0.3 million in 2019 compared to a net loss of$0.5 million in 2018 reflecting higher land sales in 2019.Income Taxes – ConsolidatedFor the year ended December 31, 2019, the effective tax rate was a benefit of 3.7 percent (benefit of 9.8 percent for the year ended December 31, 2018). Theeffective tax rate for 2019 was a lower benefit primarily due to higher pre-tax income resulting from the gain on sale of U.S. Water Services and a highereffective tax rate on the gain, partially offset by higher production tax credits. (See Note 11. Income Tax Expense.)ALLETE, Inc. 2019 Form 10-K352018 Compared to 2017(See Note 14. Business Segments for financial results by segment.)Regulated OperationsYear Ended December 3120182017Millions Operating Revenue – Utility$1,059.5$1,063.8Fuel, Purchased Power and Gas – Utility407.5396.9Transmission Services – Utility69.971.2Operating and Maintenance220.1227.3Depreciation and Amortization158.0132.6Taxes Other than Income Taxes52.551.1Operating Income151.5184.7Interest Expense(60.2)(57.0)Equity Earnings in ATC17.522.5Other Income6.75.4Income Before Income Taxes115.5155.6Income Tax Expense (Benefit)(15.5)27.2Net Income Attributable to ALLETE$131.0$128.4Operating Revenue – Utility decreased $4.3 million from 2017 primarily due to lower transmission revenue, the impact of a regulatory outcome in 2017related to the allocation of North Dakota investment tax credits, provision for tax reform refund related to income tax changes resulting from the TCJA, andlower financial incentives under the Minnesota conservation improvement program, partially offset by higher revenue from kWh sales, cost recovery riderrevenue, fuel clause adjustment recoveries, and conservation improvement program recoveries.Transmission revenue decreased $15.0 million primarily due to lower MISO-related revenue and a $4.4 million out-of-period adjustment for an estimated true-up of MISO rates that were billed in 2017 and credited to customers in 2019.Revenue decreased $14.0 million due to the impact of a regulatory outcome in 2017 related to the allocation of North Dakota investment tax credits. Thisdecrease in revenue was offset by the income tax impacts of the regulatory outcome resulting in no impact to net income for Regulated Operations. (See Note4. Regulatory Matters and Income Tax Benefit.)Revenue decreased $11.9 million from 2017 reflecting income tax changes resulting from the TCJA primarily related to a provision for tax reform refund forthe benefit of excess deferred income taxes in 2018. We have recorded the benefit of these excess deferred income taxes for Minnesota Power and SWL&P asregulatory liabilities. (See Note 4. Regulatory Matters.)Financial incentives under the Minnesota conservation improvement program were lower by $2.5 million from 2017 as a result of MPUC-approvedmodifications to the mechanism for calculating the financial incentives.Interim retail rates of $29.5 million collected in 2018 were fully offset by the recognition of a corresponding reserve throughout the year. In the fourth quarterof 2017, Minnesota Power recognized interim retail rate refund reserves of $31.6 million to fully offset interim retail rates collected throughout the year in2017 due to the regulatory outcome of the MPUC’s decision in Minnesota Power’s 2016 general rate case at a hearing on January 18, 2018.Revenue increased $13.5 million from 2017 reflecting higher kWh sales to Residential and Commercial customers, and higher pricing on sales to Other PowerSuppliers. Sales to Residential and Commercial customers increased in 2018 primarily due to more favorable weather conditions in 2018 compared to 2017.Sales to Industrial customers decreased 0.9 percent reflecting lower sales to UPM Blandin as a result of the closure of the smaller of its two paper machines inthe fourth quarter of 2017 and Husky Energy due to an April 2018 fire at its refinery in Superior, Wisconsin, partially offset by increased taconite production.Revenue from Other Power Suppliers increased due to higher pricing on sales, partially offset by a 2.1 percent decrease in kWh sales from 2017. Sales toOther Power Suppliers are sold at market-based prices into the MISO market on a daily basis or through PSAs of various durations.ALLETE, Inc. 2019 Form 10-K362018 Compared to 2017 (Continued)Regulated Operations (Continued) Kilowatt-hours Sold20182017QuantityVariance%VarianceMillions Regulated Utility Retail and Municipal Residential1,1401,096444.0Commercial1,4261,42060.4Industrial7,2617,327(66)(0.9)Municipal798799(1)(0.1)Total Retail and Municipal10,62510,642(17)(0.2)Other Power Suppliers3,9534,039(86)(2.1)Total Regulated Utility Kilowatt-hours Sold14,57814,681(103)(0.7)Revenue from electric sales to taconite customers accounted for 21 percent of consolidated operating revenue in 2018 (22 percent in 2017). Revenue fromelectric sales to paper, pulp and secondary wood product customers accounted for 4 percent of consolidated operating revenue in 2018 (5 percent in 2017).Revenue from electric sales to pipelines and other industrial customers accounted for 6 percent of consolidated operating revenue in 2018 (7 percent in 2017).Cost recovery rider revenue increased $13.0 million primarily due to higher expenditures related to the construction of the GNTL and fewer production taxcredits recognized by Minnesota Power. If production tax credits are recognized at a level below those assumed in Minnesota Power’s base rates, an increasein cost recovery rider revenue is recognized to offset the impact of lower production tax credits on income tax expense.Fuel adjustment clause recoveries increased $7.9 million due to higher fuel and purchased power costs attributable to retail and municipal customers.Conservation improvement program recoveries increased $3.5 million from 2017 primarily due to an increase in related expenditures. (See OperatingExpenses - Operating and Maintenance.)Operating Expenses increased $28.9 million, or 3 percent, from 2017.Fuel, Purchased Power and Gas – Utility expense increased $10.6 million, or 3 percent, from 2017 primarily due to higher purchased power prices and higherfuel costs, partially offset by a $19.5 million expense in 2017 for the MPUC’s decision disallowing recovery of Minnesota Power’s regulatory asset fordeferred fuel adjustment clause costs. At a hearing on January 18, 2018, the MPUC disallowed Minnesota Power’s regulatory asset for deferred fueladjustment clause costs due to the anticipated adoption of a forward-looking fuel adjustment clause methodology resulting in a $19.5 million charge in thefourth quarter of 2017. Fuel and purchased power expense related to our retail and municipal customers is recovered through the fuel adjustment clause.(See Operating Revenue – Utility.) Operating and Maintenance expense decreased $7.2 million, or 3 percent, from 2017 primarily due to lower salary and benefit expenses, and lower materialspurchased for generation facilities, partially offset by a $3.5 million increase in conservation improvement program expenses and additional severanceexpense of $1.9 million in 2018. (See Operating Revenue – Utility.)Depreciation and Amortization expense increased $25.4 million, or 19 percent, from 2017 primarily due to modifications of the depreciable lives for Boswelland additional property, plant and equipment in service. As part of its decision in Minnesota Power’s 2016 general rate case, the MPUC extended thedepreciable lives of Boswell Unit 3, Unit 4 and common facilities to 2050, and shortened the depreciable lives of Boswell Unit 1 and Unit 2 to 2022, resultingin a net decrease to depreciation expense of approximately $25 million in 2017. Subsequently, as part of the reconsideration of its decision in MinnesotaPower’s 2016 general rate case, the MPUC reduced the depreciable lives of Boswell Unit 3, Unit 4 and common facilities to 2035, resulting in higherdepreciation expense in 2018. The increase in depreciation expense in 2018 was offset mostly by the benefits of the lower federal income tax rate enacted aspart of the TCJA. (See Note 4. Regulatory Matters and Income Tax Benefit.)ALLETE, Inc. 2019 Form 10-K372018 Compared to 2017 (Continued)Regulated Operations (Continued)Interest Expense increased $3.2 million, or 6 percent, from 2017 primarily due to higher average long-term debt balances, higher interest rates and $0.5million of interest on Minnesota Power’s reserve for interim rate refunds. We record interest expense for Regulated Operations primarily based on rate baseand authorized capital structure, and allocate the balance to Corporate and Other.Equity Earnings in ATC decreased $5.0 million, or 22 percent, from 2017 primarily due to the federal income tax rate change enacted as part of the TCJA,partially offset by additional investments in ATC. (See Note 5. Equity Investments.)Income Tax Benefit was $15.5 million in 2018 compared to income tax expense of $27.2 million in 2017. The income tax benefit in 2018 reflects thereduction of the federal income tax rate from 35 percent to 21 percent enacted as part of the TCJA, the amortization of excess deferred income tax benefitresulting from the TCJA and lower pre-tax income. Income tax expense in 2017 included the impact of a regulatory outcome in 2017 related to the allocationof North Dakota investment tax credits.In 2017, as a result of the favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of NorthDakota investment tax credits, Regulated Operations increased operating revenue and reduced the corresponding regulatory liability by $14.0 million resultingin an income tax expense of $6.1 million. In addition, Regulated Operations recorded an income tax expense of $7.9 million for North Dakota investment taxcredits transferred to Corporate and Other, resulting in no impact to net income for Regulated Operations. Corporate and Other recorded an offsetting incometax benefit of $7.9 million for the North Dakota investment tax credits transferred from Regulated Operations.ALLETE Clean EnergyYear Ended December 3120182017Millions Operating Revenue Contracts with Customers – Non-utility (a)$136.3$56.9Other – Non-utility (b)23.623.6Cost of Sales – Non-utility (a)67.4—Operating and Maintenance29.923.5Depreciation and Amortization24.423.4Taxes Other than Income Taxes2.12.2Operating Income36.131.4Interest Expense(3.6)(4.2)Other Income0.20.1Income Before Income Taxes32.727.3Income Tax Expense (Benefit) (c)(1.0)(14.2)Net Income Attributable to ALLETE$33.7$41.5(a)In 2018, operating revenue and operating expenses included $81.1 million and $67.4 million, respectively, for the sale of a wind energy facility by ALLETE CleanEnergy to Montana-Dakota Utilities.(b)Represents non-cash amortization of differences between contract prices and estimated market prices on assumed PSAs. (See Note 1. Operations and SignificantAccounting Policies.)(c)Income Tax Benefit in 2017 include a $23.6 million after-tax benefit due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.Operating Revenue increased $79.4 million from 2017 due to the sale of a wind energy facility to Montana-Dakota Utilities in 2018.ALLETE, Inc. 2019 Form 10-K382018 Compared to 2017 (Continued)ALLETE Clean Energy (Continued) Year Ended December 31, 20182017Production and Operating RevenuekWhRevenuekWhRevenueMillions Wind Energy Regions East264.5$24.1267.4$24.4Midwest791.646.6873.548.6West99.68.190.77.5Total Wind Energy Facilities1,155.778.81,231.680.5Sale of Wind Energy Facility—81.1——Total Production and Operating Revenue1,155.7$159.91,231.6$80.5Cost of Sales increased $67.4 million from 2017 due to the sale of a wind energy facility to Montana-Dakota Utilities in 2018.Operating and Maintenance expense increased $6.4 million, or 27 percent, from 2017 primarily due higher professional services and routine maintenancecosts.Income Tax Benefit decreased $13.2 million from 2017. Income tax benefit in 2017 included a $23.6 million after-tax benefit due to the remeasurement ofdeferred income tax assets and liabilities resulting from the TCJA. The income tax benefit in 2018 reflected production tax credits generated of $5.6 million,$3.0 million of production tax credits that resulted from the retrospective qualification of additional wind turbine generators in 2016 and 2017, and higher pre-tax income.U.S. Water ServicesYear Ended December 3120182017Millions Operating Revenue$172.1$151.8Net Income Attributable to ALLETE (a)$3.2$10.7(a)Results in 2017 include a $9.2 million after-tax benefit due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.Operating Revenue increased $20.3 million from 2017. Revenue from chemical sales and related services was $138.6 million in 2018 compared to$132.0 million in 2017. Revenue from capital projects was $33.5 million for 2018 compared to $19.8 million in 2017. Revenue in 2018 reflected a full year ofsales from Tonka Water, which was acquired in September 2017.Net Income Attributable to ALLETE decreased $7.5 million from 2017. Net income in 2017 included a $9.2 million after-tax benefit due to theremeasurement of deferred income tax assets and liabilities resulting from the TCJA. Net income in 2018 included increased revenue primarily due to highercapital project sales and higher sales of chemicals and related services, partially offset by higher operating expenses. Net income in 2018 included $0.6 millionof after-tax expense recognized as cost of sales related to purchase accounting for sales backlog.Corporate and OtherOperating Revenue decreased $16.1 million, or 13 percent, from 2017 primarily due to a decrease in land sales at ALLETE Properties and lower revenue atBNI Energy, which operates under cost-plus fixed fee contracts, as a result of lower expenses and fewer tons sold in 2018 compared to 2017.Net Income Attributable to ALLETE was $6.2 million in 2018 compared to a net loss of $8.4 million in 2017. The net loss in 2017 included additional incometax expense of $19.8 million after-tax for the remeasurement of deferred income tax assets and liabilities resulting from the TCJA and a $7.9 million after-taxfavorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of North Dakota investment taxcredits. Net income in 2018 included an increase for the change in fair value of the contingent consideration liability of $1.3 million after-tax.ALLETE, Inc. 2019 Form 10-K392018 Compared to 2017 (Continued)Corporate and Other (Continued)Net income at BNI Energy was $6.8 million in 2018 compared to $4.5 million in 2017. Net income in 2017 included a $3.1 million after-tax expense due tothe remeasurement of deferred income tax assets and liabilities resulting from the TCJA. The net loss at ALLETE Properties was $0.5 million in 2018compared to a net loss of $8.8 million in 2017. The net loss in 2017 included a $7.8 million after-tax expense for the remeasurement of deferred income taxassets and liabilities resulting from the TCJA.Income Taxes – ConsolidatedFor the year ended December 31, 2018, the effective tax rate was a benefit of 9.8 percent (expense of 7.9 percent for the year ended December 31, 2017). Thedecrease from 2017 was primarily due to the reduction of the federal income tax rate from 35 percent to 21 percent enacted as part of the TCJA, theamortization of excess deferred income tax benefit resulting from the TCJA and lower pre-tax income in 2018, partially offset by the remeasurement ofdeferred income tax assets and liabilities resulting from the TCJA in 2017. The effective rate deviated from the combined statutory rate of approximately28 percent primarily due to production tax credits. (See Note 11. Income Tax Expense.)Critical Accounting PoliciesThe preparation of financial statements and related disclosures in conformity with GAAP requires management to make various estimates and assumptions thataffect amounts reported in the Consolidated Financial Statements. These estimates and assumptions may be revised, which may have a material effect on theConsolidated Financial Statements. Actual results may differ from these estimates and assumptions. These policies are discussed with the Audit Committee of ourBoard of Directors on a regular basis. We believe the following policies are most critical to our business and the understanding of our results of operations.Regulatory Accounting. Our regulated utility operations are accounted for in accordance with the accounting standards for the effects of certain types ofregulation. These standards require us to reflect the effect of regulatory decisions in our financial statements. Regulatory assets represent incurred costs that havebeen deferred as they are probable for recovery in customer rates. Regulatory liabilities represent obligations to make refunds to customers and amounts collectedin rates for which the related costs have not yet been incurred. The Company assesses quarterly whether regulatory assets and liabilities meet the criteria forprobability of future recovery or deferral. This assessment considers factors such as, but not limited to, changes in the regulatory environment and recent rateorders to other regulated entities under the same jurisdiction. If future recovery or refund of costs becomes no longer probable, the assets and liabilities would berecognized in current period net income or other comprehensive income. (See Note 4. Regulatory Matters.)Pension and Postretirement Health and Life Actuarial Assumptions. We account for our pension and other postretirement benefit obligations in accordancewith the accounting standards for defined benefit pension and other postretirement plans. These standards require the use of several important assumptions,including the expected long-term rate of return on plan assets, the discount rate and mortality assumptions, among others, in determining our obligations and theannual cost of our pension and other postretirement benefits. In establishing the expected long-term rate of return on plan assets, we determine the long-termhistorical performance of each asset class and adjust these for current economic conditions while utilizing the target allocation of our plan assets to forecast theexpected long-term rate of return. Our pension asset allocation as of December 31, 2019, was approximately 34 percent equity securities, 62 percent fixed income,1 percent private equity and 3 percent real estate. Our postretirement health and life asset allocation as of December 31, 2019, was approximately 66 percent equitysecurities, 33 percent fixed income and 1 percent private equity. Equity securities consist of a mix of market capitalization sizes with domestic and internationalsecurities. In 2019, we used expected long-term rates of return of 7.25 percent in our actuarial determination of our pension expense and 5.80 percent to7.25 percent in our actuarial determination of our other postretirement expense. The actuarial determination uses an asset smoothing methodology for actual returnsto reduce the volatility of varying investment performance over time. We review our expected long-term rate of return assumption annually and will adjust it torespond to changing market conditions. A one‑quarter percent decrease in the expected long-term rate of return would increase the annual expense for pension andother postretirement benefits by approximately $1.9 million, pre-tax.ALLETE, Inc. 2019 Form 10-K40Critical Accounting Policies (Continued)Pension and Postretirement Health and Life Actuarial Assumptions (Continued)The discount rate is computed using a bond matching study which utilizes a portfolio of high quality bonds that produce cash flows similar to the projected costs ofour pension and other postretirement plans. In 2019, we used discount rates of 4.39 percent to 4.53 percent and 4.47 percent in our actuarial determination of ourpension and other postretirement expense, respectively. We review our discount rates annually and will adjust them to respond to changing market conditions. Aone-quarter percent decrease in the discount rate would increase the annual expense for pension and other postretirement benefits by approximately $0.9 million,pre‑tax.The mortality assumptions used to calculate our pension and other postretirement benefit obligations as of December 31, 2019, considered a modified PRI-2012mortality table and mortality projection scale. (See Note 12. Pension and Other Postretirement Benefit Plans.)Impairment of Long-Lived Assets. We review our long-lived assets, which include the legacy real estate assets of ALLETE Properties, for indicators ofimpairment in accordance with the accounting standards for property, plant and equipment on a quarterly basis.In accordance with the accounting standards for property, plant and equipment, if indicators of impairment exist, we test our long‑lived assets for recoverability bycomparing the carrying amount of the asset to the undiscounted future net cash flows expected to be generated by the asset. Cash flows are assessed at the lowestlevel of identifiable cash flows. The undiscounted future net cash flows are impacted by trends and factors known to us at the time they are calculated and ourexpectations related to: management’s best estimate of future sales prices; holding period and timing of sales; method of disposition; and future expendituresnecessary to maintain the operations.Taxation. We are required to make judgments regarding the potential tax effects of various financial transactions and our ongoing operations to estimate ourobligations to taxing authorities. These tax obligations include income taxes and taxes other than income taxes. Judgments related to income taxes require therecognition in our financial statements of the largest tax benefit of a tax position that is “more-likely-than-not” to be sustained on audit. Tax positions that do notmeet the “more-likely-than-not” criteria are reflected as a tax liability in accordance with the accounting standards for uncertainty in income taxes. We record avaluation allowance against our deferred tax assets to the extent it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.We are subject to income taxes in various jurisdictions. We make assumptions and judgments each reporting period to estimate our income tax assets, liabilities,benefits and expenses. Judgments and assumptions are supported by historical data and reasonable projections. Our assumptions and judgments include theapplication of tax statutes and regulations, and projections of future federal taxable income, state taxable income, and state apportionment to determine our abilityto utilize NOL and credit carryforwards prior to their expiration. Significant changes in assumptions regarding future federal and state taxable income or a changein tax rates could require new or increased valuation allowances which could result in a material impact on our results of operations.OutlookALLETE is an energy company committed to earning a financial return that rewards our shareholders, allows for reinvestment in our businesses and sustainsgrowth. The Company has long-term objectives of achieving average annual earnings per share growth of 5 percent to 7 percent, and providing a dividend payoutcompetitive with our industry. Regulated Operations is projected to have average annual earnings growth of 4 percent to 5 percent. ALLETE Clean Energy and ourCorporate and Other businesses are projected to have average annual earnings growth of at least 15 percent over the long-term.ALLETE is predominately a regulated utility through Minnesota Power, SWL&P and an investment in ATC. ALLETE’s strategy is to remain predominately aregulated utility while investing in ALLETE Clean Energy and our Corporate and Other businesses to complement its regulated businesses, balance exposure to theutility’s industrial customers and provide potential long-term earnings growth. ALLETE expects net income from Regulated Operations to be approximately 80percent of total consolidated net income in 2020. Over the next several years, the contribution of ALLETE Clean Energy and our Corporate and Other businessesto net income is expected to increase as ALLETE grows these operations. ALLETE expects its businesses to provide regulated, contracted or recurring revenues,and to support sustained growth in net income and cash flow.On March 26, 2019, the Company sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd. pursuant to a stock purchase agreement forapproximately $270 million in cash, net of transaction costs and cash retained.ALLETE, Inc. 2019 Form 10-K41Outlook (Continued)Regulated Operations. Minnesota Power’s long-term strategy is to be the leading electric energy provider in northeastern Minnesota by providing safe, reliableand cost-competitive electric energy, while complying with environmental permit conditions and renewable energy requirements. Keeping the cost of energyproduction competitive enables Minnesota Power to effectively compete in the wholesale power markets and minimizes retail rate increases to help maintaincustomer viability. As part of maintaining cost competitiveness, Minnesota Power intends to reduce its exposure to possible future carbon and GHG legislation byreshaping its generation portfolio, over time, to reduce its reliance on coal. (See EnergyForward.) We will monitor and review proposed environmental regulationsand may challenge those that add considerable cost with limited environmental benefit. Minnesota Power will continue to pursue customer growth opportunitiesand cost recovery rider approvals for transmission, renewable and environmental investments, as well as work with regulators to earn a fair rate of return.Regulatory Matters. Entities within our Regulated Operations segment are under the jurisdiction of the MPUC, FERC, PSCW and NDPSC. See Note 4.Regulatory Matters for discussion of regulatory matters within these jurisdictions.2016 Minnesota General Rate Case. The MPUC issued a March 2018 order in Minnesota Power’s general rate case approving a return on common equity of 9.25percent and a 53.81 percent equity ratio. Final rates went into effect in December 2018.2020 Minnesota General Rate Case. On November 1, 2019, Minnesota Power filed a retail rate increase request with the MPUC seeking an average increase ofapproximately 10.6 percent for retail customers. The rate filing seeks a return on equity of 10.05 percent and a 53.81 percent equity ratio. On an annualized basis,the requested final rate increase would generate approximately $66 million in additional revenue. In orders dated December 23, 2019, the MPUC accepted thefiling as complete and authorized an annual interim rate increase of $36.1 million beginning January 1, 2020.2018 Wisconsin General Rate Case. In a December 2018 order, the PSCW approved a rate increase for SWL&P including a return on equity of 10.4 percent and a55.0 percent equity ratio. Final rates went into effect January 1, 2019, which resulted in additional revenue of approximately $3 million. SWL&P anticipates filinga general rate case in the second quarter of 2020.Industrial Customers and Prospective Additional LoadIndustrial Customers. Electric power is one of several key inputs in the taconite mining, paper, pulp and secondary wood products, pipeline and other industries.Approximately 54 percent of our regulated utility kWh sales in 2019 (50 percent in 2018 and 2017) were made to our industrial customers. We expect industrialsales of approximately 7.0 million to 7.5 million MWh in 2020 (7.3 million MWh in 2019 and in 2018). (See Item 1. Business – Regulated Operations – ElectricSales / Customers.)Taconite. Minnesota Power’s taconite customers are capable of producing up to approximately 41 million tons of taconite pellets annually. Taconite pelletsproduced in Minnesota are primarily shipped to North American steel making facilities that are part of the integrated steel industry. Steel produced from theseNorth American facilities is used primarily in the manufacture of automobiles, appliances, pipe and tube products for the gas and oil industry, and in theconstruction industry. Historically, less than 10 percent of Minnesota taconite production has been exported outside of North America.There has been a general historical correlation between U.S. steel production and Minnesota taconite production. The American Iron and Steel Institute, anassociation of North American steel producers, reported that U.S. raw steel production operated at approximately 80 percent of capacity in 2019 (78 percent in2018 and 74 percent in 2017). The World Steel Association, an association of over 160 steel producers, national and regional steel industry associations, and steelresearch institutes representing approximately 85 percent of world steel production, projected U.S. steel consumption in 2020 will increase by approximatelyone percent compared to 2019.Minnesota Power’s taconite customers may experience annual variations in production levels due to such factors as economic conditions, short-term demandchanges or maintenance outages. We estimate that a one million ton change in Minnesota Power’s taconite customers’ production would impact our annualearnings per share by approximately $0.04, net of expected power marketing sales at current prices. Changes in wholesale electric prices or customer contractualdemand nominations could impact this estimate. Minnesota Power proactively sells power in the wholesale power markets that is temporarily not required byindustrial customers to optimize the value of its generating facilities. Long-term reductions in taconite production or a permanent shut down of a taconite customermay lead Minnesota Power to file a general rate case to recover lost revenue.ALLETE, Inc. 2019 Form 10-K42Outlook (Continued)Industrial Customers and Prospective Additional Load (Continued)USS Corporation. On October 17, 2019, USS Corporation announced that it had idled one of its pellet production lines at its Minnesota Ore Operations - Minntacplant in Mountain Iron, Minnesota, citing changing market conditions and the need to adjust its raw materials accordingly. USS Corporation also noted it plans toperform additional maintenance during this time in preparation for improved market conditions and does not anticipate any employment impacts.Northshore Mining. Cliffs has announced that it has made an approximately $90 million investment in its Minnesota ore operations to expand capacity forproducing direct reduced-grade pellets at Northshore Mining. Cliffs is currently constructing a hot briquetted iron production plant in Toledo, Ohio, and has begunshipping direct reduced-grade pellets to the Toledo plant in anticipation of the planned start of operations in mid-2020. Minnesota Power has a PSA through 2031with Silver Bay Power, which provides the majority of the electric service requirements for Northshore Mining. (See Silver Bay Power.)Silver Bay Power. In 2016, Minnesota Power and Silver Bay Power entered into a PSA through 2031. Silver Bay Power supplies approximately 90 MW of load toNorthshore Mining, an affiliate of Silver Bay Power, which had previously been served predominately through self-generation by Silver Bay Power. Starting in2016, Minnesota Power supplied Silver Bay Power with at least 50 MW of energy and Silver Bay Power had the option to purchase additional energy fromMinnesota Power as it transitioned away from self-generation. In the third quarter of 2019, Silver Bay Power ceased self-generation and Minnesota Power begansupplying the full energy requirements for Silver Bay Power.Paper, Pulp and Secondary Wood Products. The North American paper and pulp industry faces declining demand due to the impact of electronic substitution forprint and changing customer needs. As a result, certain paper and pulp customers have reduced their existing operations in recent years and have pursued or arepursuing product changes in response to the declining demand. We expect operating levels in 2020 at the four major paper and pulp mills we serve to be similar to2019.Pipeline and Other Industries.Husky Energy. In April 2018, a fire at Husky Energy’s refinery in Superior, Wisconsin, disrupted operations at the facility. Under normal operating conditions,SWL&P provides approximately 14 MW of average monthly demand to Husky Energy in addition to water service. On September 30, 2019, Husky Energyannounced that it had received the required permit approvals to begin reconstruction. The facility remains at minimal operations, and the refinery is not expected toresume normal operations until 2021.Prospective Additional Load. Minnesota Power is pursuing new wholesale and retail loads in and around its service territory. Currently, several companies innortheastern Minnesota continue to progress in the development of natural resource-based projects that represent long-term growth potential and load diversity forMinnesota Power. We cannot predict the outcome of these projects.PolyMet. PolyMet is planning to start a new copper-nickel and precious metal (non-ferrous) mining operation in northeastern Minnesota. In 2015, PolyMetannounced the completion of the final EIS by state and federal agencies, which was subsequently published in the Federal Register and Minnesota EnvironmentalQuality Board Monitor. The Minnesota Department of Natural Resources (DNR) and the U.S. Army Corps of Engineers have both issued final Records ofDecision, finding the final EIS adequate.In 2016, PolyMet submitted applications for water-related permits with the DNR and MPCA, an air quality permit with the MPCA, and a state permit to mineapplication with the DNR detailing its operational plans for the mine. In June 2018, the U.S. Forest Service and PolyMet closed on a land exchange, which resultedin PolyMet obtaining surface rights to land needed to develop its mining operation. In November 2018, the DNR issued PolyMet’s permit to mine and certainwater-related permits. In December 2018, the MPCA issued PolyMet’s final state water and air quality permits. On March 21, 2019, the U.S. Army Corps ofEngineers issued PolyMet’s final federal permit. PolyMet was issued all necessary permits to construct and operate its new mining operation; however, on January13, 2020, the Minnesota Court of Appeals reversed the DNR’s decisions granting PolyMet’s permit to mine and dam-safety permits, and remanded them back tothe DNR to hold a contested-case hearing. On February 11, 2020, PolyMet announced it has filed a petition for further review with the Minnesota Supreme Courtseeking to overturn the Minnesota Court of Appeals decision. Minnesota Power could supply between 45 MW and 50 MW of load under a 10‑year power supplycontract with PolyMet that would begin upon start-up of operations.ALLETE, Inc. 2019 Form 10-K43Outlook (Continued)EnergyForward. Minnesota Power is executing EnergyForward, a strategic plan for assuring reliability, protecting affordability and further improvingenvironmental performance. The plan includes completed and planned investments in wind, solar, natural gas and hydroelectric power, construction of additionaltransmission capacity, the installation of emissions control technology and the idling of certain coal-fired generating facilities.In 2017, Minnesota Power submitted a resource package to the MPUC which included requesting approval of a PPA for the output of a 250 MW wind energyfacility (see Nobles 2 PPA) as well as approval of a 250 MW natural gas capacity dedication agreement. The natural gas capacity dedication agreement was subjectto MPUC approval of the construction of NTEC, a 525 MW to 625 MW combined-cycle natural gas‑fired generating facility which will be jointly owned byDairyland Power Cooperative and a subsidiary of ALLETE. Minnesota Power would purchase approximately 50 percent of the facility's output starting in 2025. Inan order dated January 24, 2019, the MPUC approved Minnesota Power’s request for approval of the NTEC natural gas capacity dedication agreement. Separately,the MPUC required a baseload retirement evaluation in Minnesota Power’s next IRP filing analyzing its existing fleet including potential early retirementscenarios of Boswell Units 3 and 4, as well as a securitization plan. On December 23, 2019, the Minnesota Court of Appeals reversed and remanded the MPUC’sdecision to approve certain affiliated-interest agreements. The MPUC was ordered to determine whether NTEC may have the potential for significantenvironmental effects and, if so, to prepare an environmental assessment worksheet before reassessing the agreements. On January 22, 2020, Minnesota Powerfiled a petition for further review with the Minnesota Supreme Court requesting that it review and overturn the Minnesota Court of Appeals decision. OnJanuary 8, 2019, an application for a certificate of public convenience and necessity for NTEC was submitted to the PSCW, which was approved by the PSCW at ahearing on January 16, 2020. Construction of NTEC is subject to obtaining additional permits from local, state and federal authorities. The total project cost isestimated to be approximately $700 million, of which ALLETE’s portion is expected to be approximately $350 million. ALLETE’s portion of NTEC project costsincurred through December 31, 2019, is approximately $12 million.Integrated Resource Plan. In a 2016 order, the MPUC approved Minnesota Power’s 2015 IRP with modifications. The order accepted Minnesota Power’s plans forthe economic idling of Taconite Harbor Units 1 and 2 and the ceasing of coal-fired operations at Taconite Harbor in 2020, directed Minnesota Power to retireBoswell Units 1 and 2 no later than 2022, required an analysis of generation and demand response alternatives to be filed with a natural gas resource proposal, andrequired Minnesota Power to conduct requests for proposal for additional wind, solar and demand response resource additions. Minnesota Power retired BoswellUnits 1 and 2 in the fourth quarter of 2018. Minnesota Power’s next IRP filing is due October 1, 2020. (See Note 4. Regulatory Matters.)Renewable Energy. Minnesota Power’s 2015 IRP includes an update on its plans and progress in meeting the Minnesota renewable energy milestones through2025. Minnesota Power continues to execute its renewable energy strategy through renewable projects that will ensure it meets the identified state mandate at thelowest cost for customers. Minnesota Power has exceeded the interim milestone requirements to date and expects between 25 percent and 30 percent of itsapplicable retail and municipal energy sales will be supplied by renewable energy sources in 2020. (See Item 1. Business – Regulated Operations – MinnesotaLegislation and EnergyForward.)Minnesota Power continues to execute its renewable energy strategy and expects approximately 50 percent of its energy will be supplied by renewable energysources by 2021.Solar Energy. Minnesota Power’s solar energy supply consists of Camp Ripley, a 10 MW solar energy facility at the Camp Ripley Minnesota Army NationalGuard base and training facility near Little Falls, Minnesota, and a community solar garden project in northeastern Minnesota, which is comprised of a 1 MW solararray owned and operated by a third party with the output purchased by Minnesota Power and a 40 kW solar array that is owned and operated by Minnesota Power.Minnesota Power has approval for current cost recovery of investments and expenditures related to compliance with the Minnesota Solar Energy Standard.Currently, there is no approved customer billing rate for solar costs.Wind Energy. Minnesota Power’s wind energy facilities consist of Bison (497 MW) located in North Dakota, and Taconite Ridge (25 MW) located in northeasternMinnesota. Minnesota Power also has two long-term wind energy PPAs with an affiliate of NextEra Energy, Inc. to purchase the output from Oliver Wind I(50 MW) and Oliver Wind II (48 MW) located in North Dakota.ALLETE, Inc. 2019 Form 10-K44Outlook (Continued)EnergyForward (Continued)Minnesota Power uses the 465-mile, 250-kV DC transmission line that runs from Center, North Dakota, to Duluth, Minnesota, to transport wind energy fromNorth Dakota while gradually phasing out coal-based electricity delivered to its system over this transmission line from Square Butte’s lignite coal-fired generatingunit. Minnesota Power is currently pursuing a modernization and capacity upgrade of its DC transmission system to continue providing reliable operations andadditional system capabilities.Minnesota Power has an approved cost recovery rider for certain renewable investments and expenditures. The cost recovery rider allows Minnesota Power tocharge retail customers on a current basis for the costs of certain renewable investments plus a return on the capital invested. Updated customer billing rates for therenewable cost recovery rider were provisionally approved by the MPUC in a November 2018 order.Nobles 2 PPA. In the third quarter of 2018, Minnesota Power and Nobles 2 signed an amended long-term PPA that provides for Minnesota Power to purchase theenergy and associated capacity from a 250 MW wind energy facility in southwestern Minnesota for a 20-year period beginning in 2020. The agreement providesfor the purchase of output from the facility at fixed energy prices. There are no fixed capacity charges, and Minnesota Power will only pay for energy as it isdelivered. This agreement is subject to construction of the wind energy facility. (See Note 5. Equity Investments.)Manitoba Hydro. Minnesota Power has five long-term PPAs with Manitoba Hydro. The first PPA expires in May 2020. Under this agreement, Minnesota Power ispurchasing 50 MW of capacity and the energy associated with that capacity. Both the capacity price and the energy price are adjusted annually by the change in agovernmental inflationary index. Under the second PPA, Minnesota Power is purchasing surplus energy through April 2022. This energy-only agreement primarilyconsists of surplus hydro energy on Manitoba Hydro’s system that is delivered to Minnesota Power on a non-firm basis. The pricing is based on forward marketprices. Under this agreement, Minnesota Power will purchase at least one million MWh of energy over the contract term.The third PPA provides for Minnesota Power to purchase 250 MW of capacity and energy from Manitoba Hydro for 15 years beginning in 2020. The PPA issubject to the construction of the GNTL and MMTP. (See Note 9. Commitments, Guarantees and Contingencies.) The capacity price is adjusted annually until2020 by the change in a governmental inflationary index. The energy price is based on a formula that includes an annual fixed price component adjusted for thechange in a governmental inflationary index and a natural gas index, as well as market prices.The fourth PPA provides for Minnesota Power to purchase up to 133 MW of energy from Manitoba Hydro for 20 years beginning in 2020. The pricing under thisPPA is based on forward market prices. The PPA is subject to the construction of the GNTL and MMTP. (See Note 9. Commitments, Guarantees andContingencies.)The fifth PPA provides for Minnesota Power to purchase 50 MW of capacity from Manitoba Hydro at fixed prices. The PPA began in June 2017 and expires inMay 2020.Transmission. We continue to make investments in transmission opportunities that strengthen or enhance the transmission grid or take advantage of ourgeographical location between sources of renewable energy and end users. These include the GNTL, investments to enhance our own transmission facilities,investments in other transmission assets (individually or in combination with others) and our investment in ATC. See Item 1. Business – Regulated Operations andNote 9. Commitments, Guarantees and Contingencies.ALLETE, Inc. 2019 Form 10-K45Outlook (Continued)ALLETE Clean Energy.ALLETE Clean Energy will pursue growth through acquisitions or project development. ALLETE Clean Energy is targeting acquisitions of existing facilities up to200 MW each, which have long-term PSAs in place for the facilities’ output. At this time, ALLETE Clean Energy expects acquisitions or development of newfacilities will be primarily wind or solar facilities in North America. ALLETE Clean Energy is also targeting the development of new facilities up to 200 MWeach, which will have long‑term PSAs in place for the output or may be sold upon completion.Federal production tax credit qualification is important to the economics of project development, and in 2016, 2017 and 2018 ALLETE Clean Energy invested inequipment to meet production tax credit safe harbor provisions which provides an opportunity to seek development of up to approximately 1,500 MW ofproduction tax credit qualified wind projects through 2022. ALLETE Clean Energy will also invest approximately $80 million through 2020 for production taxcredit requalification of up to approximately 500 WTGs at its Storm Lake I, Storm Lake II, Lake Benton and Condon wind energy facilities. We anticipate annualproduction tax credits relating to these projects of approximately $20 million in 2020, $17 million to $22 million annually in 2021 through 2027 and decreasingthereafter through 2030.In 2017, ALLETE Clean Energy announced it will build, own and operate a 100 MW wind energy facility pursuant to a 20-year PSA with Northern States Power;construction was completed and tax equity funding was received in the fourth quarter of 2019. In March 2018, ALLETE Clean Energy announced that it will build,own and operate an 80 MW wind energy facility pursuant to a 15-year PSA with NorthWestern Corporation; construction is expected to be completed in the firstquarter of 2020.On May 3, 2019, ALLETE Clean Energy acquired the Diamond Spring wind project in Oklahoma from Apex Clean Energy. ALLETE Clean Energy will build,own and operate the approximately 300 MW wind energy facility. The Diamond Spring wind project is fully contracted to sell wind power under long-term powersales agreements. Construction is expected to be completed in late 2020.ALLETE Clean Energy manages risk by having a diverse portfolio of assets, which includes PSA expiration, technology and geographic diversity. The currentoperating portfolio of approximately 660 MW is subject to typical variations in seasonal wind with higher wind resources typically available in the winter months.The majority of its planned maintenance leverages this seasonality and is performed during lower wind periods. The current mix of PSA expiration and geographiclocation for existing facilities is as follows:Wind Energy FacilityLocationCapacity MWPSA MWPSA ExpirationArmenia MountainEast101100%2024Chanarambie/VikingMidwest98 PSA 1 (a) 12%2023PSA 2 88%2023CondonWest50100%2022Glen UllinWest106100%2039Lake BentonMidwest104100%2028Storm Lake IMidwest108100%2027Storm Lake IIMidwest77 PSA 1 90%2020PSA 2 10%2032OtherMidwest17100%2028(a)The PSA expiration assumes the exercise of four one-year renewal options that ALLETE Clean Energy has the sole right to exercise.Non-cash amortization to revenue recognized by ALLETE Clean Energy relates to the amortization of differences between contract prices and estimated marketprices on assumed PSAs. As part of wind energy facility acquisitions, ALLETE Clean Energy assumed various PSAs that were above or below estimated marketprices at the time of acquisition; the resulting differences between contract prices and estimated market prices are amortized to revenue over the remaining PSAterm. Non-cash amortization is expected to be approximately $11.5 million annually in 2020 through 2023, $5.5 million annually in 2024 through 2027, anddecreasing thereafter through 2032.ALLETE, Inc. 2019 Form 10-K46Outlook (Continued)Corporate and Other.BNI Energy. In 2019, BNI Energy sold 4.1 million tons of coal (4.3 million tons in 2018) and anticipates 2020 sales will be higher than 2019 reflecting no majorplanned customer outages anticipated in 2020. BNI Energy operates under cost-plus fixed fee agreements extending through December 31, 2037.Investment in Nobles 2. In December 2018, our wholly-owned subsidiary, ALLETE South Wind, entered into an agreement with Tenaska to purchase a 49 percentequity interest in Nobles 2, the entity that will own and operate a 250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA withMinnesota Power. The wind energy facility will be built in Nobles County, Minnesota and is expected to be completed in late 2020, with an estimated total projectcost of approximately $350 million to $400 million. In the fourth quarter of 2019, we entered into a tax equity funding agreement to finance up to $125 million ofthe project costs. We account for our investment in Nobles 2 under the equity method of accounting. (See Note 5. Equity Investments.)ALLETE Properties. Our strategy incorporates the possibility of a bulk sale of the entire ALLETE Properties portfolio. Proceeds from a bulk sale would bestrategically deployed to support growth initiatives at our Regulated Operations and ALLETE Clean Energy. ALLETE Properties also continues to pursue sales ofindividual parcels over time and will continue to maintain key entitlements and infrastructure. Market conditions can impact land sales and could result in ourinability to cover our cost basis and operating expenses including fixed carrying costs such as community development district assessments and property taxes.Income TaxesALLETE’s aggregate federal and multi-state statutory tax rate is approximately 28 percent for 2019. ALLETE also has tax credits and other tax adjustments thatreduce the combined statutory rate to the effective tax rate. These tax credits and adjustments historically have included items such as investment tax credits,production tax credits, AFUDC‑Equity, depletion, as well as other items. The annual effective rate can also be impacted by such items as changes in income beforeincome taxes, state and federal tax law changes that become effective during the year, business combinations, tax planning initiatives and resolution of prior years’tax matters. We expect our effective tax rate to be a benefit of approximately 15 percent to 20 percent for 2020 primarily due to federal production tax credits as aresult of wind energy generation. We also expect that our effective tax rate will be lower than the combined statutory rate over the next 11 years due to productiontax credits attributable to our wind energy generation.Liquidity and Capital ResourcesLiquidity Position. ALLETE is well-positioned to meet its liquidity needs. As of December 31, 2019, we had cash and cash equivalents of $69.3 million, $345.0million in available consolidated lines of credit and a debt-to-capital ratio of 41 percent.On March 26, 2019, the Company sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd. pursuant to a stock purchase agreement forapproximately $270 million in cash, net of transaction costs and cash retained.Capital Structure. ALLETE’s capital structure for each of the last three years is as follows:As of December 312019 %2018 %2017 %Millions ALLETE Equity$2,231.956$2,155.859$2,068.258Non-Controlling Interest103.73————Long-Term Debt (Including Long-Term Debt Due Within One Year)1,622.6411,495.2411,513.342 $3,958.2100$3,651.0100$3,581.5100ALLETE, Inc. 2019 Form 10-K47Liquidity and Capital Resources (Continued)Cash Flows. Selected information from ALLETE’s Consolidated Statement of Cash Flows is as follows:Year Ended December 31201920182017Millions Cash, Cash Equivalents and Restricted Cash at Beginning of Period$79.0$110.1$38.3Cash Flows from (used for) Operating Activities249.5433.1402.9Investing Activities(345.3)(349.0)(229.0)Financing Activities109.3(115.2)(102.1)Change in Cash, Cash Equivalents and Restricted Cash13.5(31.1)71.8Cash, Cash Equivalents and Restricted Cash at End of Period$92.5$79.0$110.1Operating Activities. Cash from operating activities was lower in 2019 compared to 2018 primarily due to the refund of Minnesota Power’s provisions for taxreform and interim rates to customers, fewer customer deposits received and lower recoveries from customers under cost recovery riders in 2019. These decreaseswere partially offset by the timing of collections of accounts receivable.Cash from operating activities was higher in 2018 compared to 2017 primarily due to the sale of a wind energy facility to Montana-Dakota Utilities in 2018 and thetiming of accounts payable, partially offset by lower recoveries from customers under cost recovery riders and higher contributions to the defined benefit pensionplans in 2018.Investing Activities. Cash used for investing activities in 2019 was similar to 2018 reflecting proceeds received from the sale of U.S. Water Services, mostly offsetby higher additions to property, plant and equipment.Cash used for investing activities was higher in 2018 compared to 2017 primarily due to higher capital expenditures and additional contributions to equity methodinvestments in 2018. (See Note 5. Equity Investments.) These increases in cash used for investing activities were partially offset by the acquisition of Tonka Waterin 2017.Financing Activities. Cash from financing activities was higher in 2019 primarily due to higher proceeds from the issuance of long-term debt and proceeds from atax equity financing (non-controlling interest in subsidiaries), partially offset by higher dividends on common stock.Cash used for financing activities was higher in 2018 compared to 2017 primarily due to higher dividends on common stock as well as lower proceeds from theissuance of common stock and long-term debt in 2018, partially offset by lower repayments of long-term debt in 2018.Working Capital. Additional working capital, if and when needed, generally is provided by consolidated bank lines of credit and the issuance of securities,including long-term debt, common stock and commercial paper. As of December 31, 2019, we had consolidated bank lines of credit aggregating $407.0 million($407.0 million as of December 31, 2018), most of which expire in January 2024. We had $62.0 million outstanding in standby letters of credit and no outstandingdraws under our lines of credit as of December 31, 2019 ($18.4 million in standby letters of credit and no outstanding draws as of December 31, 2018). In addition,as of December 31, 2019, we had 3.7 million original issue shares of our common stock available for issuance through Invest Direct and 2.9 million original issueshares of common stock available for issuance through a distribution agreement with Lampert Capital Markets, Inc. (See Securities.) The amount and timing offuture sales of our securities will depend upon market conditions and our specific needs.On January 10, 2019, ALLETE entered into an amended and restated $400 million credit agreement (Credit Agreement). The Credit Agreement amended andrestated ALLETE’s $400 million credit facility, which was scheduled to expire in October 2020. The Credit Agreement is unsecured, has a variable interest rateand will expire in January 2024. At ALLETE’s request and subject to certain conditions, the Credit Agreement may be increased by up to $150 million andALLETE may make two requests to extend the maturity date, each for a one‑year extension. Advances may be used by ALLETE for general corporate purposes, toprovide liquidity in support of ALLETE's commercial paper program and to issue up to $100 million in letters of credit.ALLETE, Inc. 2019 Form 10-K48Liquidity and Capital Resources (Continued)Securities. We entered into a distribution agreement with Lampert Capital Markets, Inc., in 2008, as amended most recently in 2016, with respect to the issuanceand sale of up to an aggregate of 13.6 million shares of our common stock, without par value, of which 2.9 million shares remain available for issuance as ofDecember 31, 2019. For the year ended December 31, 2019, no shares of common stock were issued under this agreement (none in 2018; 1 million shares for netproceeds of $65.7 million in 2017). The shares issued in 2017 were offered and sold pursuant to Registration Statement No. 333-212794. On July 31, 2019, wefiled Registration Statement No. 333-232905, pursuant to which the remaining shares will continue to be offered for sale, from time to time.During the year ended December 31, 2019, we issued 0.2 million shares of common stock through Invest Direct, the Employee Stock Purchase Plan, and theRetirement Savings and Stock Ownership Plan, resulting in net proceeds of $1.9 million (0.4 million shares for net proceeds of $20.3 million in 2018; 0.3 millionshares for net proceeds of $20.3 million in 2017). These shares of common stock were registered under Registration Statement Nos. 333-231030, 333-211075, 333-183051 and 333-162890. See Note 10. Common Stock and Earnings Per Share for additional detail regarding ALLETE’s equity securities.On March 1, 2019, ALLETE issued and sold the following First Mortgage Bonds (the Bonds):Maturity DatePrincipal AmountInterest RateMarch 1, 2029$70 Million4.08%March 1, 2049$30 Million4.47%ALLETE has the option to prepay all or a portion of the Bonds at its discretion, subject to a make-whole provision. The Bonds are subject to additional terms andconditions which are customary for these types of transactions. ALLETE used the proceeds from the sale of the Bonds to fund utility capital investment and forgeneral corporate purposes. The Bonds were sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, toinstitutional accredited investors.On August 14, 2019, ALLETE entered into a $110.0 million term loan agreement (Term Loan). The Term Loan is an unsecured, single draw loan that is due onAugust 25, 2020, and may be prepaid at any time subject to a make-whole provision. Interest on the Term Loan is payable monthly at a rate per annum equal toLIBOR plus 1.025 percent. Proceeds from the Term Loan were used for general corporate purposes.On January 10, 2020, ALLETE entered into a $200 million term loan agreement (Term Loan) and borrowed $60 million upon execution. The unsecured TermLoan provides for the ability to borrow up to an additional $140 million, is due on February 10, 2021, and may be repaid at any time. Interest is payable monthly ata rate per annum equal to LIBOR plus 0.55 percent. Proceeds from the Term Loan will be used for construction-related expenditures. See Note 8. Short-Term andLong-Term Debt for additional detail regarding ALLETE’s debt securities.Financial Covenants. See Note 8. Short-Term and Long-Term Debt for information regarding our financial covenants.Pension and Other Postretirement Benefit Plans. Management considers various factors when making funding decisions, such as regulatory requirements,actuarially determined minimum contribution requirements and contributions required to avoid benefit restrictions for the defined benefit pension plans. For theyear ended December 31, 2019, we contributed $10.4 million in cash to the defined benefit pension plans. On January 15, 2020, we contributed $10.7 million incash to the defined benefit pension plans. We do not expect to make any additional contributions to our defined benefit pension plans in 2020, and we do not expectto make any contributions to our other postretirement benefit plans in 2020. (See Note 10. Common Stock and Earnings Per Share and Note 12. Pension and OtherPostretirement Benefit Plans.)Off-Balance Sheet Arrangements. Off-balance sheet arrangements are discussed in Note 9. Commitments, Guarantees and Contingencies.ALLETE, Inc. 2019 Form 10-K49Liquidity and Capital Resources (Continued)Contractual Obligations and Commercial Commitments. ALLETE has contractual obligations and other commitments that will need to be funded in the future,in addition to its capital expenditure programs. The following table summarizes contractual obligations and other commercial commitments as of December 31,2019: Payments Due by Period Less than1 to 34 to 5AfterContractual ObligationsTotal1 YearYearsYears5 YearsMillions Long-Term Debt$2,396.7$277.0$301.2$259.2$1,559.3Pension (a)490.751.2100.899.4239.3Other Postretirement Benefit Plans (a)81.38.616.616.040.1Capital Purchase Obligations292.7292.7———Easement Obligations197.15.010.711.0170.4Operating Lease Obligations35.26.611.06.111.5PPA Obligations (b)2,051.8113.0268.0284.11,386.7Other Purchase Obligations32.522.89.6—0.1Total Contractual Obligations$5,578.0$776.9$717.9$675.8$3,407.4(a)Represents the estimated future benefit payments for our defined benefit pension and other postretirement plans through 2029.(b)Does not include the agreement with Manitoba Hydro expiring in 2022, as this contract is for surplus energy only; Oliver Wind I and Oliver Wind II, as Minnesota Poweronly pays for energy as it is delivered; and the agreement with Nobles 2 commencing in 2020 as it is subject to construction of a wind energy facility. (See Note 9.Commitments, Guarantees and Contingencies.)Long-Term Debt. Our long-term debt obligations, including long-term debt due within one year, represent the principal amount of bonds, notes and loans whichare recorded on the Consolidated Balance Sheet, plus interest. The table above assumes that the interest rates in effect at December 31, 2019, remain constantthrough the remaining term. (See Note 8. Short-Term and Long‑Term Debt.)Pension and Other Postretirement Benefit Plans. Our pension and other postretirement benefit plan obligations represent our current estimate of future benefitpayments through 2029. Pension contributions will be dependent on several factors including realized asset performance, future discount rate and other actuarialassumptions, Internal Revenue Service and other regulatory requirements, and contributions required to avoid benefit restrictions for the pension plans. Fundingfor the other postretirement benefit plans is impacted by realized asset performance, future discount rate and other actuarial assumptions, and utility regulatoryrequirements. These amounts are estimates and will change based on actual market performance, changes in interest rates and any changes in governmentalregulations. (See Note 12. Pension and Other Postretirement Benefit Plans.)Easement Obligations. Easement obligations represent the minimum payments for our land easement agreements at our wind energy facilities.PPA Obligations. PPA obligations represent our Square Butte, Manitoba Hydro, Minnkota Power and other PPAs. (See Note 9. Commitments, Guarantees andContingencies.)Other Purchase Obligations. Other purchase obligations represents our minimum purchase commitments under coal and rail contracts, and long-term serviceagreements for wind energy facilities. (See Note 9. Commitments, Guarantees and Contingencies.)Credit Ratings. Access to reasonably priced capital markets is dependent in part on credit and ratings. Our securities have been rated by S&P and by Moody’s.Rating agencies use both quantitative and qualitative measures in determining a company’s credit rating. These measures include business risk, liquidity risk,competitive position, capital mix, financial condition, predictability of cash flows, management strength and future direction. Some of the quantitative measurescan be analyzed through a few key financial ratios, while the qualitative ones are more subjective. Our current credit ratings are listed in the following table:ALLETE, Inc. 2019 Form 10-K50Liquidity and Capital Resources (Continued)Credit Ratings (Continued)Credit RatingsS&PMoody’sIssuer Credit RatingBBB+Baa1Commercial PaperA-2P-2First Mortgage Bonds(a)A2(a)Not rated by S&P.On March 26, 2019, Moody’s downgraded the long-term ratings of ALLETE, including its issuer rating to Baa1 from A3, and changed its credit rating outlook tostable from negative. Moody’s noted the combined impact of the 2018 adverse general rate case outcome at Minnesota Power as well as its debt coverage ratiosgoing forward as its rationale for the downgrade.The Company believes it is well-positioned to meet its liquidity needs. As of December 31, 2019, we had cash and cash equivalents of $69.3 million, $345.0million in available consolidated lines of credit and a debt-to-capital ratio of 41 percent. Our cash from operating activities for the year ended December 31, 2019was $249.5 million. In addition, as of December 31, 2019, we had 3.7 million original issue shares of our common stock available for issuance through InvestDirect and 2.9 million original issue shares of common stock available for issuance through a distribution agreement with Lampert Capital Markets, Inc.Common Stock Dividends. ALLETE is committed to providing a competitive dividend to its shareholders while at the same time funding its growth. ALLETE’slong-term objective is to maintain a dividend payout ratio similar to our peers and provide for future dividend increases. Our targeted payout range is between 60percent and 65 percent. In 2019, we paid out 65 percent (66 percent in 2018; 63 percent in 2017) of our per share earnings in dividends. On January 30, 2020, ourBoard of Directors declared a dividend of $0.6175 per share, which is payable on March 1, 2020, to shareholders of record at the close of business onFebruary 14, 2020.Capital RequirementsALLETE’s projected capital expenditures for the years 2020 through 2024 are presented in the following table. Actual capital expenditures may vary from theprojections due to changes in forecasted plant maintenance, regulatory decisions or approvals, future environmental requirements, base load growth, capital marketconditions or executions of new business strategies.Capital Expenditures20202021202220232024TotalMillions Regulated Operations Base and Other$145$245$300$235$130$1,055 Transmission Cost Recovery (a)25————25 Nemadji Trail Energy Center (b)10657016525335Regulated Operations Capital Expenditures1803103704001551,415ALLETE Clean Energy (c)340105510370Corporate and Other1515253015100Total Capital Expenditures$535$335$400$435$180$1,885(a)Estimated capital expenditures eligible for cost recovery outside of a general rate case, including our portion of transmission capital expenditures related to construction ofthe GNTL. (See Item 1. Business – Regulated Operations – Transmission and Distribution.)(b)Our portion of estimated capital expenditures for construction of NTEC, a 525 MW to 625 MW combined-cycle natural gas-fired generating facility which will be jointlyowned by Dairyland Power Cooperative and a subsidiary of ALLETE.(c)Capital expenditures in 2020 include construction of an 80 MW wind energy facility and a 300 MW wind energy facility that ALLETE Clean Energy will build, own andoperate. These capital expenditures do not include the cost of safe harbor turbines purchased previously. (See Outlook – ALLETE Clean Energy.)We are well positioned to meet our financing needs due to adequate operating cash flows, available additional working capital and access to capital markets. Wewill finance capital expenditures from a combination of internally generated funds, debt and equity issuance proceeds. We intend to maintain a capital structurewith capital ratios near current levels. (See Capital Structure.)ALLETE, Inc. 2019 Form 10-K51Environmental and Other MattersOur businesses are subject to regulation of environmental matters by various federal, state and local authorities. A number of regulatory changes to the Clean AirAct, the Clean Water Act and various waste management requirements have been promulgated by both the EPA and state authorities over the past several years.Minnesota Power’s facilities are subject to additional requirements under many of these regulations. Minnesota Power is reshaping its generation portfolio, overtime, to reduce its reliance on coal, has installed cost-effective emission control technology, and advocates for sound science and policy during rulemakingimplementation. (See Note 9. Commitments, Guarantees and Contingencies.)Market RiskSecurities Investments.Available-for-Sale Securities. As of December 31, 2019, our available-for-sale securities portfolio consisted primarily of securities held in other postretirementplans to fund employee benefits.INTEREST RATE RISKWe are exposed to risks resulting from changes in interest rates as a result of our issuance of variable rate debt. We manage our interest rate risk by varying theissuance and maturity dates of our fixed rate debt, limiting the amount of variable rate debt, and continually monitoring the effects of market changes in interestrates. We may also enter into derivative financial instruments, such as interest rate swaps, to mitigate interest rate exposure. The following table presents the long-term debt obligations and the corresponding weighted average interest rate as of December 31, 2019: Expected Maturity DateInterest Rate SensitiveFinancial Instruments20202021202220232024ThereafterTotalFair ValueLong-Term Debt Fixed Rate – Millions$89.8$98.6$88.8$88.8$73.5$1,031.8$1,471.3$1,640.5Average Interest Rate – %4.23.93.75.93.94.44.4 Variable Rate – Millions$123.5————$27.8$151.3$151.3Average Interest Rate – %2.7————1.72.5 Interest rates on variable rate long-term debt are reset on a periodic basis reflecting prevailing market conditions. Based on the variable rate debt outstanding as ofDecember 31, 2019, an increase of 100 basis points in interest rates would impact the amount of pre-tax interest expense by $1.5 million. This amount wasdetermined by considering the impact of a hypothetical 100 basis point increase to the average variable interest rate on the variable rate debt outstanding as ofDecember 31, 2019.COMMODITY PRICE RISKOur regulated utility operations incur costs for power and fuel (primarily coal and related transportation) in Minnesota, and power and natural gas purchased forresale in our regulated service territory in Wisconsin. Minnesota Power’s exposure to price risk for these commodities is significantly mitigated by the currentratemaking process and regulatory framework, which allows recovery of fuel costs in excess of those included in base rates or distribution of savings in fuel coststo ratepayers. SWL&P’s exposure to price risk for natural gas is significantly mitigated by the current ratemaking process and regulatory framework, which allowsthe commodity cost to be passed through to customers. We seek to prudently manage our customers’ exposure to price risk by entering into contracts of variousdurations and terms for the purchase of power and coal and related transportation costs (Minnesota Power) and natural gas (SWL&P).ALLETE, Inc. 2019 Form 10-K52Market Risk (Continued)POWER MARKETINGMinnesota Power’s power marketing activities consist of: (1) purchasing energy in the wholesale market to serve its regulated service territory when energyrequirements exceed generation output; and (2) selling excess available energy and purchased power. From time to time, Minnesota Power may have excess energythat is temporarily not required by retail and municipal customers in our regulated service territory. Minnesota Power actively sells any excess energy to thewholesale market to optimize the value of its generating facilities.We are exposed to credit risk primarily through our power marketing activities. We use credit policies to manage credit risk, which includes utilizing anestablished credit approval process and monitoring counterparty limits.Recently Adopted Accounting Pronouncements.New accounting pronouncements are discussed in Note 1. Operations and Significant Accounting Policies of this Form 10-K.Item 7A. Quantitative and Qualitative Disclosures about Market RiskSee Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk for information related to quantitative andqualitative disclosure about market risk.Item 8. Financial Statements and Supplementary DataSee our Consolidated Financial Statements as of December 31, 2019 and 2018, and for the years ended December 31, 2019, 2018 and 2017, and supplementarydata, which are indexed in Item 15(a).Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable.Item 9A. Controls and ProceduresConclusion Regarding the Effectiveness of Disclosure Controls and ProceduresAs of December 31, 2019, evaluations were performed, under the supervision and with the participation of management, including our principal executive officerand principal financial officer, on the effectiveness of the design and operation of ALLETE’s disclosure controls and procedures, as defined in Rules 13a-15(e) and15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act). Based upon those evaluations, our principal executive officer and principal financial officerhave concluded that such disclosure controls and procedures are effective to provide assurance that information required to be disclosed in ALLETE’s reports filedor submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and suchinformation is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timelydecisions regarding required disclosure.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule13a-15(f) or 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financialofficer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control – Integrated Framework(framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework, our managementconcluded that our internal control over financial reporting was effective as of December 31, 2019.ALLETE, Inc. 2019 Form 10-K53Item 9A. Controls and Procedures (Continued)The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report which is included herein.Changes in Internal ControlsThere has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other InformationNot applicable.Part IIIItem 10. Directors, Executive Officers and Corporate GovernanceUnless otherwise stated, the information required by this Item is incorporated by reference herein from our Proxy Statement for the 2020 Annual Meeting ofShareholders (2020 Proxy Statement) under the following headings:•Directors. The information regarding directors will be included in the “Election of Directors”section;•Audit Committee Financial Expert. The information regarding the Audit Committee financial expert will be included in the “Corporate Governance”section and the “Audit Committee Report” section;•Audit Committee Members. The identity of the Audit Committee members will be included in the “Corporate Governance” section and the “AuditCommittee Report” section;•Executive Officers. The information regarding executive officers is included in Part I of this Form 10-K;and•Section 16(a) Delinquency. If applicable, information regarding Section 16(a) delinquencies will be included in a “Delinquent Section 16(a) Reports”section.Our 2020 Proxy Statement will be filed with the SEC within 120 days after the end of our 2019 fiscal year.Code of Ethics. We have adopted a written Code of Ethics that applies to all of our employees, including our Chief Executive Officer, Chief Financial Officer andChief Accounting Officer. A copy of our Code of Ethics is available on our website at www.allete.com and print copies are available without charge upon requestto ALLETE, Inc., Attention: Secretary, 30 West Superior St., Duluth, Minnesota 55802. Any amendment to the Code of Ethics or any waiver of the Code ofEthics will be disclosed on our website at www.allete.com promptly following the date of such amendment or waiver.Corporate Governance. The following documents are available on our website at www.allete.com and print copies are available upon request:•Corporate Governance Guidelines;•Audit Committee Charter;•Executive Compensation Committee Charter; and•Corporate Governance and Nominating Committee Charter.Any amendment to these documents will be disclosed on our website at www.allete.com promptly following the date of such amendment.ALLETE, Inc. 2019 Form 10-K54Item 11. Executive CompensationThe information required by this Item is incorporated by reference herein from the “Compensation Discussion and Analysis,” the “Compensation of ExecutiveOfficers,” the “Compensation Committee Report” and the “Director Compensation” sections in our 2020 Proxy Statement.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item is incorporated by reference herein from the “Ownership of ALLETE Common Stock – Securities Owned by CertainBeneficial Owners” and the “Ownership of ALLETE Common Stock – Securities Owned by Directors and Management” sections in our 2020 Proxy Statement.Securities Authorized for Issuance Under Equity Compensation PlansThe following table sets forth the shares of ALLETE common stock available for issuance under the Company's equity compensation plans as of December 31,2019:Plan CategoryNumber of Securities to beIssued Upon Exercise ofOutstanding Options, Warrants,and Rights (a)Weighted-Average ExercisePrice of Outstanding Options,Warrants, and Rights (b)Number of SecuritiesRemaining Available forFuture Issuance Under EquityCompensation Plans (c) Equity Compensation Plans Approved by SecurityHolders150,181—857,656Equity Compensation Plans Not Approved by SecurityHolders———Total150,181—857,656(a)Includes the following: (i) 25,196 securities representing the performance shares (including accrued dividends) granted under the executive long-term incentivecompensation plan that vested but were not paid as of December 31, 2019; (ii) 60,656 securities representing the target number of performance share awards (includingaccrued dividends) granted under the executive long-term incentive compensation plan that were unvested as of December 31, 2019; and (iii) 64,329 director deferredstock units (including accrued dividends) under the non-employee director compensation deferral plan as of December 31, 2019. With respect to unvested performanceshare awards, the actual number of shares to be issued will vary from 0 percent to 200 percent of the target level depending upon the achievement of total shareholderreturn objectives established for such awards. For additional information about the performance shares, including payout calculations, see our 2020 Proxy Statement.(b)Earned performance share awards are paid in shares of ALLETE common stock on a one-for-one basis. Accordingly, these awards do not have a weighted-averageexercise price.(c)Excludes the number of securities shown in the first column as to be issued upon exercise of outstanding options, warrants, and rights. The amount shown is comprised of:(i) 707,353 shares available for issuance under the executive long-term incentive compensation plan in the form of options, rights, restricted stock units, performance shareawards, and other grants as approved by the Executive Compensation Committee of the Company’s Board of Directors; (ii) 45,379 shares available for issuance under theNon-Employee Director Stock Plan as payment for a portion of the annual retainer payable to non-employee Directors; and (iii) 104,925 shares available for issuanceunder the ALLETE and Affiliated Companies Employee Stock Purchase Plan.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item is incorporated by reference herein from the “Corporate Governance” section in our 2020 Proxy Statement.We have adopted a Related Person Transaction Policy which is available on our website at www.allete.com. Print copies are available without charge, uponrequest. Any amendment to this policy will be disclosed on our website at www.allete.com promptly following the date of such amendment.ALLETE, Inc. 2019 Form 10-K55Item 14. Principal Accounting Fees and ServicesThe information required by this Item is incorporated by reference herein from the “Audit Committee Report” section in our 2020 Proxy Statement.Part IVItem 15. Exhibits and Financial Statement Schedules(a)Certain Documents Filed as Part of this Form 10-K. (1)Financial StatementsPage ALLETE Report of Independent Registered Public Accounting Firm 64 Consolidated Balance Sheet as of December 31, 2019 and 2018 66 For the Years Ended December 31, 2019, 2018 and 2017 Consolidated Statement of Income 67 Consolidated Statement of Comprehensive Income 68 Consolidated Statement of Cash Flows 69 Consolidated Statement of Equity 70 Notes to Consolidated Financial Statements 71(2)Financial Statement Schedules Schedule II – ALLETE Valuation and Qualifying Accounts and Reserves 122 All other schedules have been omitted either because the information is not required to be reported by ALLETE or because the information is includedin the Consolidated Financial Statements or the notes.(3)Exhibits including those incorporated by reference. ALLETE, Inc. 2019 Form 10-K56Exhibit Number*2—Stock Purchase Agreement by and among Global Water Services Holding Company, Inc., ALLETE Enterprises, Inc., and Kurita American HoldingsInc., dated February 8, 2019 (filed as Exhibit 2 to the March 31, 2019, Form 10-Q, File No. 1-3548).*3(a)1—Articles of Incorporation, amended and restated as of May 8, 2001 (filed as Exhibit 3(b) to the March 31, 2001, Form 10‑Q, File No. 1-3548).*3(a)2—Amendment to Articles of Incorporation, dated as of September 20, 2004 (filed as Exhibit 3 to the September 21, 2004, Form 8-K, File No. 1-3548).*3(a)3—Amendment to Articles of Incorporation, dated as of May 12, 2009 (filed as Exhibit 3 to the June 30, 2009, Form 10-Q, File No. 1-3548).*3(a)4—Amendment to Articles of Incorporation, dated as of May 11, 2010 (filed as Exhibit 3(a) to the May 14, 2010, Form 8-K, File No. 1-3548).*3(a)5—Amendment to Certificate of Assumed Name, filed with the Minnesota Secretary of State on May 8, 2001 (filed as Exhibit 3(a) to the March 31, 2001,Form 10-Q, File No. 1-3548).*3(b)—Bylaws, as amended effective May 11, 2010 (filed as Exhibit 3(b) to the May 14, 2010, Form 8-K, File No. 1-3548).*4(a)1—Mortgage and Deed of Trust, dated as of September 1, 1945, between Minnesota Power & Light Company (now ALLETE) and The Bank of NewYork Mellon (formerly Irving Trust Company) and Andres Serrano (successor to Richard H. West), Trustees (filed as Exhibit 7(c), File No. 2-5865).*4(a)2—Supplemental Indentures to ALLETE’s Mortgage and Deed of Trust: NumberDated as ofReference FileExhibit FirstMarch 1, 19492-78267(b) SecondJuly 1, 19512-90367(c) ThirdMarch 1, 19572-130752(c) FourthJanuary 1, 19682-277942(c) FifthApril 1, 19712-395372(c) SixthAugust 1, 19752-541162(c) SeventhSeptember 1, 19762-570142(c) EighthSeptember 1, 19772-596902(c) NinthApril 1, 19782-608662(c) TenthAugust 1, 19782-628522(d)2 EleventhDecember 1, 19822-566494(a)3 TwelfthApril 1, 198733-302244(a)3 ThirteenthMarch 1, 199233-474384(b) FourteenthJune 1, 199233-552404(b) FifteenthJuly 1, 199233-552404(c) SixteenthJuly 1, 199233-552404(d) SeventeenthFebruary 1, 199333-501434(b) EighteenthJuly 1, 199333-501434(c) NineteenthFebruary 1, 19971-3548 (1996 Form 10-K)4(a)3 TwentiethNovember 1, 19971-3548 (1997 Form 10-K)4(a)3 Twenty-firstOctober 1, 2000333-543304(c)3 Twenty-secondJuly 1, 20031-3548 (June 30, 2003, Form 10-Q)4 Twenty-thirdAugust 1, 20041-3548 (Sept. 30, 2004, Form 10-Q)4(a) Twenty-fourthMarch 1, 20051-3548 (March 31, 2005, Form 10-Q)4 Twenty-fifthDecember 1, 20051-3548 (March 31, 2006, Form 10-Q)4 Twenty-sixthOctober 1, 20061-3548 (2006 Form 10-K)4(a)3 Twenty-seventhFebruary 1, 20081-3548 (2007 Form 10-K)4(a)3 Twenty-eighthMay 1, 20081-3548 (June 30, 2008, Form 10-Q)4 Twenty-ninthNovember 1, 20081-3548 (2008 Form 10-K)4(a)3 ThirtiethJanuary 1, 20091-3548 (2008 Form 10-K)4(a)4 Thirty-firstFebruary 1, 20101-3548 (March 31, 2010, Form 10-Q)4 Thirty-secondAugust 1, 20101-3548 (Sept. 30, 2010, Form 10-Q)4 Thirty-thirdJuly 1, 20121-3548 (July 2, 2012, Form 8-K)4 Thirty-fourthApril 1, 20131-3548 (April 2, 2013, Form 8-K)4 Thirty-fifthMarch 1, 20141-3548 (March 31, 2014, Form 10-Q)4ALLETE, Inc. 2019 Form 10-K57Exhibit Number Thirty-sixthJune 1, 20141-3548 (June 30, 2014, Form 10-Q)4 Thirty-seventhSeptember 1, 20141-3548 (Sept. 30, 2014, Form 10-Q)4 Thirty-eighthSeptember 1, 20151-3548 (Sept. 30, 2015, Form 10-Q)4(a) Thirty-ninthApril 1, 20181-3548 (March 31, 2018, Form 10-Q)4 FortiethMarch 1, 20191-3548 (March 31, 2019, Form 10-Q)4(a)*4(b)1—Mortgage and Deed of Trust, dated as of March 1, 1943, between Superior Water, Light and Power Company and Chemical Bank & Trust Companyand Howard B. Smith, as Trustees, both succeeded by U.S. Bank National Association, as Trustee (filed as Exhibit 7(c), File No. 2-8668).*4(b)2—Supplemental Indentures to Superior Water, Light and Power Company’s Mortgage and Deed of Trust: NumberDated as ofReference FileExhibit FirstMarch 1, 19512-596902(d)(1) SecondMarch 1, 19622-277942(d)1 ThirdJuly 1, 19762-574782(e)1 FourthMarch 1, 19852-786414(b) FifthDecember 1, 19921-3548 (1992 Form 10-K)4(b)1 SixthMarch 24, 19941-3548 (1996 Form 10-K)4(b)1 SeventhNovember 1, 19941-3548 (1996 Form 10-K)4(b)2 EighthJanuary 1, 19971-3548 (1996 Form 10-K)4(b)3 NinthOctober 1, 20071-3548 (2007 Form 10-K)4(c)3 TenthOctober 1, 20071-3548 (2007 Form 10-K)4(c)4 EleventhDecember 1, 20081-3548 (2008 Form 10-K)4(c)3 TwelfthDecember 2, 20131-3548 (2013 Form 10-K)4(c)3 ThirteenthMay 29, 20181-3548 (June 30, 2018, Form 10-Q)4*4(c)—Note Purchase and Guarantee Agreement dated as of November 5, 2015, among Armenia Mountain Wind LLC, AMW I Holding, LLC and thepurchasers named therein (filed as Exhibit 4 to the November 12, 2015, Form 8-K, File No. 1-3548).*4(d)—Note Purchase Agreement, dated December 8, 2016, between ALLETE and Hartford Investment Management Company, Northwestern MutualInvestment Management Company, The Northwestern Mutual Life Insurance Company and Nationwide Life insurance Company (filed as Exhibit 4to the December 12, 2016, Form 8-K, File No. 1-3548).*4(e)—Term Loan Agreement dated as of August 25, 2017, among ALLETE, as Borrower, the Lenders party hereto, JPMorgan Chase Bank, N.A., asAdministrative Agent, Bank of America, N.A., as Syndication Agent, and JPMorgan Chase Bank, N.A., as Sole Lead Arranger and Sole Book Runner(filed as Exhibit 4 to the September 30, 2017, Form 10-Q, File No. 1-3548).*4(f)—Amended and Restated Term Loan Agreement dated as of August 14, 2019 among ALLETE, Inc., as Borrower, the Lenders Party Hereto, JPMorganChase Bank, N.A., as Administrative Agent, and Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, N.A., as Sole LeadArranger and Sole Bookrunner (filed as Exhibit 4 to the September 30, 2019, Form 10-Q, File No. 1-3548)4(g)—Term Loan Agreement dated as of January 10, 2020 among ALLETE, Inc., as the Borrower and Bank of America, N.A., as the Lender4(h)—Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934*10(a)—Power Purchase and Sale Agreement, dated as of May 29, 1998, between Minnesota Power, Inc. (now ALLETE) and Square Butte ElectricCooperative (filed as Exhibit 10 to the June 30, 1998, Form 10-Q, File No. 1-3548).*10(b)1—Amended and Restated Credit Agreement dated as of January 10, 2019 among ALLETE, as Borrower, the lenders party hereto, JPMorgan ChaseBank, N.A., as Administrative Agent, and J.P. Morgan Chase Bank, N.A., as Sole Lead Arranger and Sole Book Runner (filed as Exhibit 10(b)2 to the2018 Form 10-K, File No. 1-3548).*10(b)2—First Amendment to Credit Agreement dated May 15, 2019, among ALLETE, as Borrower, the Lenders party hereto, and JPMorgan Chase Bank,N.A., as Administrative Agent (filed as Exhibit 4 to the June 30, 2019, Form 10-Q, File No. 1-3548).*10(c)1—Financing Agreement between Collier County Industrial Development Authority and ALLETE dated as of July 1, 2006 (filed as Exhibit 10(b)1 to theJune 30, 2006, Form 10-Q, File No. 1-3548).*10(c)2—Amended and Restated Letter of Credit Agreement, dated as of June 3, 2011, among ALLETE, the participating banks and Wells Fargo Bank,National Association, as Administrative Agent and Issuing Bank (filed as Exhibit 10(b) to the June 30, 2011, Form 10-Q, File No. 1-3548).*10(c)3—First Amendment to Amended and Restated Letter of Credit Agreement, dated as of June 1, 2013, between ALLETE and Wells Fargo Bank, NationalAssociation, as Issuing Bank, Administrative Agent and Sole Participating Bank (filed as Exhibit 10(b) to the June 30, 2013, Form 10-Q, File No. 1-3548).*10(d)—Agreement dated December 16, 2005, among ALLETE, Wisconsin Public Service Corporation and WPS Investments, LLC (filed as Exhibit 10(g) tothe 2009 Form 10-K, File No. 1-3548).ALLETE, Inc. 2019 Form 10-K58Exhibit Number+*10(e)1—ALLETE Executive Annual Incentive Plan, as amended and restated, effective January 1, 2011 (filed as Exhibit 10(h)1 to the 2010 Form 10-K, FileNo. 1-3548).+*10(e)2—ALLETE Executive Annual Incentive Plan Form of Award Effective 2016 (filed as Exhibit 10(e)6 to the 2015 Form 10‑K, File No. 1-3548).+*10(e)3—ALLETE Executive Annual Incentive Plan Form of Award Effective 2017 (filed as Exhibit 10(e)6 to the 2016 Form 10-K, File No. 1-3548).+*10(e)4—ALLETE Executive Annual Incentive Plan Form of Award Superior Water, Light and Power Effective 2017 (filed as Exhibit 10(e)7 to the 2016 Form10-K, File No. 1-3548).+*10(e)5—ALLETE Executive Annual Incentive Plan Form of Award Effective 2018 (filed as Exhibit 10(a)1 to the March 31, 2018, Form 10-Q, File No. 1-3548).+*10(e)6—ALLETE Executive Annual Incentive Plan Form of Award Superior Water, Light and Power Effective 2018 (filed as Exhibit 10(a)2 to the March 31,2018, Form 10-Q, File No. 1-3548).+*10(e)7—ALLETE Executive Annual Incentive Plan Form of Award Effective 2019 (filed as Exhibit 10(e)7 to the 2018 Form 10-K, File No. 1-3548).+10(e)8—ALLETE Executive Annual Incentive Plan Form of Award Effective 2020.+*10(f)1—ALLETE and Affiliated Companies Supplemental Executive Retirement Plan (SERP I), as amended and restated, effective January 1, 2009 (filed asExhibit 10(i)4 to the 2008 Form 10-K, File No. 1-3548).+*10(f)2—Amendment to the ALLETE and Affiliated Companies Supplemental Executive Retirement Plan (SERP I), effective January 1, 2011 (filed as Exhibit10(i)2 to the 2010 Form 10-K, File No. 1-3548).+*10(f)3—ALLETE and Affiliated Companies Supplemental Executive Retirement Plan II (SERP II), as amended and restated, effective January 1, 2015 (filedas Exhibit 10(f)3 to the 2014 Form 10-K, File No. 1-3548).+*10(f)4—ALLETE and Affiliated Companies Supplemental Executive Retirement Plan II (SERP II), as amended and restated, effective January 1, 2019 (filedas Exhibit 10(f)4 to the 2018 Form 10-K, File No. 1-3548).+*10(g)—ALLETE Deferred Compensation Trust Agreement, as amended and restated, effective December 15, 2012 (filed as Exhibit 10(j) to the 2012 Form10-K, File No. 1-3548).+*10(h)1—ALLETE Executive Long-Term Incentive Compensation Plan as amended and restated effective January 1, 2006 (filed as Exhibit 10 to the May 16,2005, Form 8-K, File No. 1-3548).+*10(h)2—Amendment to the ALLETE Executive Long-Term Incentive Compensation Plan, effective January 1, 2011 (filed as Exhibit 10(m)2 to the 2010 Form10-K, File No. 1-3548).+*10(h)3—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2014 (filed as Exhibit 10(j)14 to the 2013Form 10-K, File No. 1-3548).+*10(h)4—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2014 (filed as Exhibit 10(j)15 to the2013 Form 10-K, File No. 1-3548).+*10(h)5—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2015 (filed as Exhibit 10(j)16 to the 2014Form 10-K, File No. 1-3548).+*10(h)6—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2015 (filed as Exhibit 10(j)17 to the2014 Form 10-K, File No. 1-3548).+*10(i)1—ALLETE Executive Long-Term Incentive Compensation Plan effective January 1, 2016 (filed November 6, 2015, as Exhibit 99 to Form S-8, File No.333-207846).+*10(i)2—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2016 (filed as Exhibit 10(k)3 to the 2015Form 10-K, File No. 1-3548).+*10(i)3—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2016 (filed as Exhibit 10(k)2 to the 2015Form 10-K, File No. 1-3548).+*10(i)4—Form of ALLETE Executive Long-Term Incentive Compensation Plan Cash Award Effective 2017 (filed as Exhibit 10(i)4 to the 2016 Form 10-K,File No. 1-3548).+*10(i)5—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2017 (filed as Exhibit 10(i)5 to the 2016Form 10-K, File No. 1-3548).+*10(i)6—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2017 (filed as Exhibit 10(i)6 to the 2016Form 10-K, File No. 1-3548).+*10(i)7—Form of ALLETE Executive Long-Term Incentive Compensation Plan Cash Award Effective 2018 (filed as Exhibit 10(b) to the March 31, 2018,Form 10-Q, File No. 1-3548).+*10(i)8—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2018 (filed as Exhibit 10(i)7 to the 2017Form 10-K, File No. 1-3548).+*10(i)9—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2018 (filed as Exhibit 10(i)8 to the 2017Form 10-K, File No. 1-3548).+*10(i)10—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2019 (filed as Exhibit 10(i)10 to the2018 Form 10-K, File No. 1-3548).+*10(i)11—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2019 (filed as Exhibit 10(i)11 to the 2018Form 10-K, File No. 1-3548).ALLETE, Inc. 2019 Form 10-K59Exhibit Number+10(i)12—Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2020.+10(i)13—Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2020.+*10(i)14—Description of Compensation Arrangement 2021 with respect to Alan R. Hodnik (incorporated by reference from the Form 8-K, dated January 30,2020, File No. 1-3548).+*10(j)1—Amended and Restated ALLETE Non-Employee Director Stock Plan, effective May 15, 2013 (filed as Exhibit 10(a) to the June 30, 2013, Form 10-Q,File No. 1-3548).+*10(k)1—ALLETE Non-Employee Director Compensation Summary effective January 1, 2017 (filed as Exhibit 10(k)3 to the 2016 Form 10-K, File No. 1-3548).+*10(k)2—ALLETE Non-Employee Director Compensation Summary effective January 1, 2019 (filed as Exhibit 10(k)3 to the 2018 Form 10-K, File No. 1-3548).+*10(l)1—Minnesota Power (now ALLETE) Non-Employee Director Compensation Deferral Plan Amended and Restated, effective January 1, 1990 (filed asExhibit 10(ac) to the 2002 Form 10-K, File No. 1-3548).+*10(l)2—October 2003 Amendment to the Minnesota Power (now ALLETE) Non-Employee Director Compensation Deferral Plan (filed as Exhibit 10(aa)2 tothe 2003 Form 10-K, File No. 1-3548).+*10(l)3—January 2005 Amendment to the ALLETE Non-Employee Director Compensation Deferral Plan (filed as Exhibit 10(c) to the March 31, 2005, Form10-Q, File No. 1-3548).+*10(l)4—October 2006 Amendment to the ALLETE Non-Employee Director Compensation Deferral Plan (filed as Exhibit 10(d) to the September 30, 2006,Form 10-Q, File No. 1-3548).+*10(l)5—July 2012 Amendment to the ALLETE Non-Employee Director Compensation Deferral Plan (filed as Exhibit 10(n)5 to the 2012 Form 10-K, File No.1-3548).+*10(m)1—ALLETE Non-Employee Director Compensation Deferral Plan II, effective May 1, 2009 (filed as Exhibit 10(a) to the June 30, 2009, Form 10-Q, FileNo. 1-3548).+*10(m)2—ALLETE Non-Employee Director Compensation Deferral Plan II, as amended and restated, effective July 24, 2012 (filed as Exhibit 10(o)2 to the2012 Form 10-K, File No. 1-3548).+*10(n)—ALLETE Non-Employee Director Compensation Trust Agreement, as amended and restated, effective December 15, 2012 (filed as Exhibit 10(p)2 tothe 2012 Form 10-K, File No. 1-3548).+*10(o)1—ALLETE and Affiliated Companies Change in Control Severance Plan, as amended and restated, effective January 19, 2011 (filed as Exhibit 10(q) tothe 2010 Form 10-K, File No. 1-3548).+*10(o)2—ALLETE and Affiliated Companies Change in Control Severance Plan, as amended and restated, effective April 23, 2018 (filed as Exhibit 10(c) to theMarch 31, 2018, Form 10-Q, File No. 1-3548).+*10(p)—ALLETE Executive Separation Agreement effective November 29, 2018 (filed as Exhibit 10(p) to the 2018 Form 10-K, File No. 1-3548).21—Subsidiaries of the Registrant.23—Consent of Independent Registered Public Accounting Firm.31(a)—Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31(b)—Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32—Section 1350 Certification of Annual Report by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.95—Mine Safety.99—ALLETE News Release dated February 13, 2020, announcing earnings for the year ended December 31, 2019. (This exhibit has beenfurnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemedincorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in suchfiling.)101.INS—XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the InlineXBRL document.101.SCH—XBRL Schema101.CAL—XBRL Calculation101.DEF—XBRL Definition101.LAB—XBRL Label101.PRE—XBRL Presentation104—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)ALLETE, Inc. 2019 Form 10-K60Exhibits (Continued)ALLETE or its subsidiaries are obligors under various long-term debt instruments including, but not limited to, the following:•$38,995,000 original principal amount, of City of Cohasset, Minnesota, Variable Rate Demand Revenue Refunding Bonds (ALLETE, formerlyMinnesota Power & Light Company, Project) Series 1997A ($13,500,000 remaining principal balance);•$27,800,000 of Collier County Industrial Development Authority, Industrial Development Variable Rate Demand Refunding Revenue Bonds Series2006;•$6,370,000 of City of Superior, Wisconsin, Collateralized Utility Revenue Refunding Bonds Series 2007A;and•$6,130,000 of City of Superior, Wisconsin, Collateralized Utility Revenue Bonds Series2007B.Pursuant to Item 601(b)(4)(iii) of Regulation S-K, these and other long-term debt instruments are not filed as exhibits because the total amount of debt authorizedunder each omitted instrument does not exceed 10 percent of our total consolidated assets. We will furnish copies of these instruments to the SEC upon its request.*Incorporated herein by reference as indicated.+Management contract or compensatory plan or arrangement pursuant to Item 15(b).Item 16. Form 10-K SummaryNone.ALLETE, Inc. 2019 Form 10-K61SignaturesPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized. ALLETE, Inc. Dated:February 13, 2020By /s/ Alan R. Hodnik Alan R. Hodnik Executive Chairman and DirectorPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.Signature Title Date /s/ Bethany M. Owen President, Chief Executive Officer and Director February 13, 2020Bethany M. Owen (Principal Executive Officer) /s/ Robert J. Adams Senior Vice President and Chief Financial Officer February 13, 2020Robert J. Adams (Principal Financial Officer) /s/ Steven W. Morris Vice President, Controller and Chief Accounting Officer February 13, 2020Steven W. Morris (Principal Accounting Officer) ALLETE, Inc. 2019 Form 10-K62Signatures (Continued)Signature Title Date /s/ Kathryn W. Dindo Director February 13, 2020Kathryn W. Dindo /s/ George G. Goldfarb Director February 13, 2020George G. Goldfarb /s/ James J. Hoolihan Director February 13, 2020James J. Hoolihan /s/ Heidi E. Jimmerson Director February 13, 2020Heidi E. Jimmerson /s/ Madeleine W. Ludlow Director February 13, 2020Madeleine W. Ludlow /s/ Susan K. Nestegard Director February 13, 2020Susan K. Nestegard /s/ Douglas C. Neve Director February 13, 2020Douglas C. Neve /s/ Robert P. Powers Director February 13, 2020Robert P. Powers ALLETE, Inc. 2019 Form 10-K63Report of Independent Registered Public Accounting FirmTo the Board of Directors and Shareholders of ALLETE, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheet of ALLETE, Inc. and its subsidiaries (the Company) as of December 31, 2019 and 2018, and therelated consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31,2019, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) for each of the three years in the period endedDecember 31, 2019 (collectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reportingas of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity withaccounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.Change in Accounting PrincipleAs discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and forits assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reportingappearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control overfinancial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts andALLETE, Inc. 2019 Form 10-K64expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Critical Audit MattersThe critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated orrequired to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii)involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on theconsolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the criticalaudit matter or on the accounts or disclosures to which it relates.Accounting for the Effects of Regulatory MattersAs described in Notes 1 and 4 to the consolidated financial statements, the Company’s regulated utility operations are subject to accounting standards for theeffects of certain types of regulation. As of December 31, 2019, there was $421 million of regulatory assets and $562 million of regulatory liabilities recorded.Regulatory assets represent incurred costs that have been deferred as they are probable for recovery in customer rates. Regulatory liabilities represent obligationsto make refunds to customers and amounts collected in rates for which the related costs have not yet been incurred. Management assesses quarterly whetherregulatory assets and liabilities meet the criteria for probability of future recovery or deferral. As disclosed by management, these standards require the Companyto reflect the effect of regulatory decisions in its financial statements. This assessment considers factors such as, but not limited to, changes in the regulatoryenvironment and recent rate orders to other regulated entities under the same jurisdiction. If future recovery or refund of costs becomes no longer probable, theassets and liabilities would be recognized in current period net income or other comprehensive income.The principal consideration for our determination that performing procedures relating to the Company’s accounting for the effects of regulatory matters is a criticalaudit matter are there was significant judgment by management in determining the recoverability of costs. This in turn led to a high degree of auditor judgment,subjectivity and effort in performing procedures and evaluating audit evidence obtained related to the recoverability of costs.Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financialstatements. These procedures included testing the effectiveness of controls relating to management’s implementation of new regulatory orders, changes to existingregulatory orders, and assessing the recoverability of costs. These procedures also included, among others, evaluating (i) the reasonableness of management’sassessment of impacts arising from correspondence with regulators and changes in laws and regulations, (ii) management’s judgments related to the recoverabilityof regulatory assets and the establishment of regulatory liabilities, and (iii) the sufficiency of the disclosures in the consolidated financial statements. Testing theregulatory assets and liabilities involved considering the provisions and formulas outlined in rate orders, other regulatory correspondence, and application ofrelevant regulatory precedents./s/ PricewaterhouseCoopers LLPMinneapolis, MinnesotaFebruary 13, 2020We have served as the Company’s auditor since 1963.ALLETE, Inc. 2019 Form 10-K65CONSOLIDATED FINANCIAL STATEMENTSALLETE Consolidated Balance SheetAs of December 3120192018Millions Assets Current Assets Cash and Cash Equivalents$69.3$69.1Accounts Receivable (Less Allowance of $0.9 and $1.7)96.4144.4Inventories – Net72.886.7Prepayments and Other31.034.1Total Current Assets269.5334.3Property, Plant and Equipment – Net4,377.03,904.4Regulatory Assets420.5389.5Equity Investments197.6161.1Goodwill and Intangible Assets – Net1.0223.3Other Non-Current Assets217.2152.4Total Assets$5,482.8$5,165.0Liabilities and Equity Liabilities Current Liabilities Accounts Payable$165.2$149.8Accrued Taxes50.851.4Accrued Interest18.117.9Long-Term Debt Due Within One Year212.957.5Other60.4128.5Total Current Liabilities507.4405.1Long-Term Debt1,400.91,428.5Deferred Income Taxes212.8223.6Regulatory Liabilities560.3512.1Defined Benefit Pension and Other Postretirement Benefit Plans172.8177.3Other Non-Current Liabilities293.0262.6Total Liabilities3,147.23,009.2Commitments, Guarantees and Contingencies (Note 9)Equity ALLETE’s Equity Common Stock Without Par Value, 80.0 Shares Authorized, 51.7 and 51.5 Shares Issued and Outstanding1,436.71,428.5Accumulated Other Comprehensive Loss(23.6)(27.3)Retained Earnings818.8754.6Total ALLETE Equity2,231.92,155.8Non-Controlling Interest in Subsidiaries103.7—Total Equity2,335.62,155.8Total Liabilities and Equity$5,482.8$5,165.0The accompanying notes are an integral part of these statements.ALLETE, Inc. 2019 Form 10-K66ALLETE Consolidated Statement of IncomeYear Ended December 31201920182017Millions Except Per Share Amounts Operating Revenue Contracts with Customers – Utility$1,042.4$1,059.5$1,063.8Contracts with Customers – Non-utility186.5415.5331.9Other – Non-utility11.623.623.6Total Operating Revenue1,240.51,498.61,419.3Operating Expenses Fuel, Purchased Power and Gas – Utility390.7407.5396.9Transmission Services – Utility69.869.971.2Cost of Sales – Non-utility80.6218.0147.5Operating and Maintenance264.3340.5344.1Depreciation and Amortization202.0205.6177.5Taxes Other than Income Taxes53.357.956.9Other—(2.0)(0.7)Total Operating Expenses1,060.71,297.41,193.4Operating Income179.8201.2225.9Other Income (Expense) Interest Expense(64.9)(67.9)(67.8)Equity Earnings21.717.522.5Gain on Sale of U.S. Water Services23.6——Other18.77.86.3Total Other Expense(0.9)(42.6)(39.0)Income Before Non-Controlling Interest and Income Taxes178.9158.6186.9Income Tax Expense (Benefit)(6.6)(15.5)14.7Net Income185.5174.1172.2Less: Non-Controlling Interest in Subsidiaries(0.1)——Net Income Attributable to ALLETE$185.6$174.1$172.2Average Shares of Common Stock Basic51.651.350.8Diluted51.751.551.0Basic Earnings Per Share of Common Stock$3.59$3.39$3.39Diluted Earnings Per Share of Common Stock$3.59$3.38$3.38The accompanying notes are an integral part of these statements.ALLETE, Inc. 2019 Form 10-K67ALLETE Consolidated Statement of Comprehensive IncomeYear Ended December 31201920182017Millions Net Income$185.5$174.1$172.2Other Comprehensive Income (Loss) Unrealized Gain (Loss) on Securities Net of Income Tax Expense of $0.1, $– and $0.70.2(0.1)0.9Defined Benefit Pension and Other Postretirement Benefit Plans Net of Income Tax Expense of $1.4, $0.3 and $2.23.51.04.7Total Other Comprehensive Income3.70.95.6Total Comprehensive Income189.2175.0177.8Less: Non-Controlling Interest in Subsidiaries(0.1)——Total Comprehensive Income Attributable to ALLETE$189.3$175.0$177.8The accompanying notes are an integral part of these statements.ALLETE, Inc. 2019 Form 10-K68ALLETE Consolidated Statement of Cash FlowsYear Ended December 31201920182017Millions Operating Activities Net Income$185.5$174.1$172.2AFUDC – Equity(2.3)(1.2)(1.2)Income from Equity Investments – Net of Dividends(5.6)(2.3)(3.2)Change in Fair Value of Contingent Consideration—(2.0)(0.7)Deferred Fuel Adjustment Clause Charge——19.5Loss (Gain) on Sales of Investments and Property, Plant and Equipment(1.7)1.00.4Depreciation Expense200.6200.1171.9Amortization of PSAs(11.6)(23.6)(23.6)Amortization of Other Intangible Assets and Other Assets13.010.410.2Deferred Income Tax Expense (Benefit)(6.7)(15.8)14.4Share-Based and ESOP Compensation Expense6.36.86.6Defined Benefit Pension and Other Postretirement Benefit Expense1.28.610.1Bad Debt Expense(0.1)1.10.8Provision (Payments) for Interim Rate Refund(40.0)16.332.3Provision (Payments) for Tax Reform Refund(10.4)10.7—Gain on Sale of U.S. Water Services(23.6)——Changes in Operating Assets and Liabilities Accounts Receivable22.6(10.7)(8.0)Inventories(4.1)55.511.9Prepayments and Other0.3(4.0)(5.3)Accounts Payable(8.8)13.6(7.5)Other Current Liabilities(13.7)6.71.8Cash Contributions to Defined Benefit Pension Plans(10.4)(15.0)(1.7)Changes in Regulatory and Other Non-Current Assets(25.1)6.733.7Changes in Regulatory and Other Non-Current Liabilities(15.9)(3.9)(31.7)Cash from Operating Activities249.5433.1402.9Investing Activities Proceeds from Sale of Available-for-sale Securities12.110.210.1Payments for Purchase of Available-for-sale Securities(12.2)(13.3)(8.6)Acquisitions of Subsidiaries – Net of Cash and Restricted Cash Acquired——(18.5)Equity Investments(37.9)(39.2)(7.8)Return of Capital from Equity Investments8.3——Additions to Property, Plant and Equipment(597.1)(312.4)(208.5)Proceeds from Sale of U.S. Water Services – Net of Transaction Costs and Cash Retained268.6——Other Investing Activities12.95.74.3Cash for Investing Activities(345.3)(349.0)(229.0)Financing Activities Proceeds from Issuance of Common Stock1.920.386.0Proceeds from Issuance of Long-Term Debt201.975.6131.5Repayments of Long-Term Debt(72.2)(95.5)(189.6)Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs103.8——Acquisition-Related Contingent Consideration Payments(3.8)—(19.7)Dividends on Common Stock(121.4)(115.0)(108.7)Other Financing Activities(0.9)(0.6)(1.6)Cash (for) from Financing Activities109.3(115.2)(102.1)Change in Cash, Cash Equivalents and Restricted Cash13.5(31.1)71.8Cash, Cash Equivalents and Restricted Cash at Beginning of Period79.0110.138.3Cash, Cash Equivalents and Restricted Cash at End of Period$92.5$79.0$110.1The accompanying notes are an integral part of these statements.ALLETE, Inc. 2019 Form 10-K69ALLETE Consolidated Statement of Equity 201920182017Millions Except Per Share Amounts Common Stock Balance, Beginning of Period$1,428.5$1,401.4$1,295.3Common Stock Issued8.227.1106.1Balance, End of Period1,436.71,428.51,401.4 Accumulated Other Comprehensive Loss Balance, Beginning of Period(27.3)(22.6)(28.2)Adjustments to Opening Balance – Net of Income Taxes (a)—(5.6)—Other Comprehensive Income – Net of Income TaxesUnrealized Gain (Loss) on Debt Securities0.2(0.1)0.9Defined Benefit Pension and Other Postretirement Plans3.51.04.7Balance, End of Period(23.6)(27.3)(22.6) Retained Earnings Balance, Beginning of Period754.6689.4625.9Adjustments to Opening Balance – Net of Income Taxes (a)—6.1—Net Income185.6174.1172.2Common Stock Dividends(121.4)(115.0)(108.7)Balance, End of Period818.8754.6689.4 Non-Controlling Interest in Subsidiaries Balance, Beginning of Period———Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs103.8——Net Loss(0.1)——Balance, End of Period103.7—— Total Equity$2,335.6$2,155.8$2,068.2 Dividends Per share of Common Stock$2.35$2.24$2.14(a)Reflects the impacts associated with the adoption of accounting standards concerning Financial Instruments, Revenue from Contracts with Customers and theReclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. (See Note 1. Operations and Significant Accounting Policies.)The accompanying notes are an integral part of these statements.ALLETE, Inc. 2019 Form 10-K70NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIESFinancial Statement Preparation. References in this report to “we,” “us,” and “our” are to ALLETE and its subsidiaries, collectively. We prepare our financialstatements in conformity with GAAP. These principles require management to make informed judgments, best estimates, and assumptions that affect the reportedamounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates.Subsequent Events. The Company performed an evaluation of subsequent events for potential recognition and disclosure through the time of the financialstatements issuance.Principles of Consolidation. Our Consolidated Financial Statements include the accounts of ALLETE , all of our majority‑owned subsidiary companies andvariable interest entities of which ALLETE is the primary beneficiary. All material intercompany balances and transactions have been eliminated in consolidation.Variable Interest Entities. The accounting guidance for “Variable Interest Entities” (VIE) is a consolidation model that considers if a company has a variableinterest in a VIE. A VIE is a legal entity that possesses any of the following conditions: the entity’s equity at risk is not sufficient to permit the legal entity tofinance its activities without additional subordinated financial support, equity owners are unable to direct the activities that most significantly impact the legalentity’s economic performance (or they possess disproportionate voting rights in relation to the economic interest in the legal entity), or the equity owners lack theobligation to absorb the legal entity’s expected losses or the right to receive the legal entity’s expected residual returns. Entities are required to consolidate a VIEwhen it is determined that they have a controlling financial interest in a VIE and therefore, are the primary beneficiary of that VIE, as defined by the accountingguidance for “Variable Interest Entities.” In determining whether ALLETE is the primary beneficiary of a VIE, management considers whether ALLETE has thepower to direct the most significant activities of the VIE and is obligated to absorb losses or receive the expected residual returns that are significant to theVIE. The accounting guidance for VIEs applies to certain ALLETE Clean Energy wind energy facilities. (See Tax Equity Financing.)Business Segments. We present three reportable segments: Regulated Operations, ALLETE Clean Energy and U.S. Water Services. Our segments weredetermined in accordance with the guidance on segment reporting. We measure performance of our operations through budgeting and monitoring of contributionsto consolidated net income by each business segment.Regulated Operations includes our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC, a Wisconsin-based regulated utility thatowns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. Minnesota Power provides regulated utility electricservice in northeastern Minnesota to approximately 145,000 retail customers. Minnesota Power also has 15 non-affiliated municipal customers in Minnesota.SWL&P is a Wisconsin utility and a wholesale customer of Minnesota Power. SWL&P provides regulated utility electric, natural gas and water service innorthwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers and 10,000 water customers. Our regulated utility operationsinclude retail and wholesale activities under the jurisdiction of state and federal regulatory authorities.ALLETE Clean Energy focuses on developing, acquiring, and operating clean and renewable energy projects. ALLETE Clean Energy currently owns andoperates, in five states, approximately 660 MW of nameplate capacity wind energy generation that is contracted under PSAs of various durations. In addition,ALLETE Clean Energy currently has approximately 380 MW of wind energy facilities under construction that it will own and operate with long-term PSAs inplace. ALLETE Clean Energy also engages in the development of wind energy facilities to operate under long-term PSAs or for sale to others upon completion.U.S. Water Services provided integrated water management for industry by combining chemical, equipment, engineering and service for customized solutions toreduce water and energy usage, and improve efficiency. On March 26, 2019, the Company sold U.S. Water Services to a subsidiary of Kurita Water Industries Ltd.pursuant to a stock purchase agreement for approximately $270 million in cash, net of transaction costs and cash retained.ALLETE, Inc. 2019 Form 10-K71NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Corporate and Other is comprised of BNI Energy, our investment in Nobles 2, ALLETE Properties, other business development and corporate expenditures,unallocated interest expense, a small amount of non-rate base generation, approximately 4,000 acres of land in Minnesota, and earnings on cash and investments.BNI Energy mines and sells lignite coal to two North Dakota mine-mouth generating units, one of which is Square Butte. In 2019, Square Butte supplied 50 percent(227.5 MW) of its output to Minnesota Power under long-term contracts. (See Note 9. Commitments, Guarantees and Contingencies.)Our investment in Nobles 2 represents a 49 percent equity interest in Nobles 2, the entity that will own and operate a 250 MW wind energy facility in southwesternMinnesota pursuant to a 20-year PPA with Minnesota Power.ALLETE Properties represents our legacy Florida real estate investment. Our strategy incorporates the possibility of a bulk sale of the entire ALLETE Propertiesportfolio. Proceeds from a bulk sale would be strategically deployed to support growth at our Regulated Operations and ALLETE Clean Energy. ALLETEProperties continues to pursue sales of individual parcels over time and will continue to maintain key entitlements and infrastructure.Cash, Cash Equivalents and Restricted Cash. We consider all investments purchased with original maturities of three months or less to be cash equivalents. Asof December 31, 2019, restricted cash amounts included in Prepayments and Other on the Consolidated Balance Sheet include collateral deposits required under anALLETE Clean Energy loan agreement. In prior periods presented, the amounts also include U.S. Water Services' standby letters of credit. The restricted cashamounts included in Other Non-Current Assets represent collateral deposits required under an ALLETE Clean Energy loan agreement, PSAs and a tax equityfinancing agreement. In prior periods presented, the amounts also include deposits from a SWL&P customer in aid of future capital expenditures. The followingtable provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet that aggregate to the amounts presentedin the Consolidated Statement of Cash Flows.Cash, Cash Equivalents and Restricted CashDecember 31, 2019 December 31, 2018 December 31, 2017Millions Cash and Cash Equivalents$69.3 $69.1 $98.9Restricted Cash included in Prepayments and Other2.8 1.3 2.6Restricted Cash included in Other Non-Current Assets20.4 8.6 8.6Cash, Cash Equivalents and Restricted Cash on the Consolidated Statementof Cash Flows$92.5 $79.0 $110.1ALLETE, Inc. 2019 Form 10-K72NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Supplemental Statement of Cash Flow Information.Consolidated Statement of Cash Flows Year Ended December 31201920182017Millions Cash Paid During the Period for Interest – Net of Amounts Capitalized$63.5$66.0$64.5Recognition of Right-of-use Assets and Lease Liabilities (a)$28.7——Remeasurement of Deferred Income Taxes Resulting from the TCJA Increase in Regulatory Assets——$80.9Decrease in Investment in ATC——$(27.9)Decrease in Deferred Income Taxes——$(353.6)Increase in Regulatory Liabilities——$393.6Noncash Investing and Financing Activities Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant and Equipment$33.9$(0.1)$67.2Reclassification of Property, Plant and Equipment to Inventory (b)—$46.3—Capitalized Asset Retirement Costs$20.7$14.2$(15.6)AFUDC–Equity$2.3$1.2$1.2ALLETE Common Stock Contributed to Pension Plans——$13.5(a)See Leases.(b)In February 2018, Montana-Dakota Utilities exercised its option to purchase the Thunder Spirit II wind energy facility upon completion, resulting in a reclassificationfrom Property, Plant and Equipment – Net to Inventories – Net for project costs incurred in the prior year. On the Consolidated Statement of Cash Flows, the sale of thewind energy facility in the fourth quarter of 2018 resulted in Operating Activities – Inventories increasing by $46.3 million in 2018 due to the project costs incurred in theprior year.Accounts Receivable. Accounts receivable are reported on the Consolidated Balance Sheet net of an allowance for doubtful accounts. The allowance is based onour evaluation of the receivable portfolio under current conditions, overall portfolio quality, review of specific situations and such other factors that, in ourjudgment, deserve recognition in estimating losses.Accounts Receivable As of December 312019 2018Millions Trade Accounts Receivable (a) Billed$77.2 $121.7Unbilled20.1 24.4Less: Allowance for Doubtful Accounts0.9 1.7Total Accounts Receivable$96.4 $144.4(a)On March 26, 2019, ALLETE sold U.S. Water Services which resulted in the removal of the related accounts receivable from the Consolidated Balance Sheet.Concentration of Credit Risk. We are subject to concentration of credit risk primarily as a result of accounts receivable. Minnesota Power sells electricity to eightLarge Power Customers. Receivables from these customers totaled $7.8 million as of December 31, 2019 ($11.7 million as of December 31, 2018). MinnesotaPower does not obtain collateral to support utility receivables, but monitors the credit standing of major customers. In addition, Minnesota Power, as permitted bythe MPUC, requires its taconite-producing Large Power Customers to pay weekly for electric usage based on monthly energy usage estimates, which allows us toclosely manage collection of amounts due. One of these customers accounted for 12 percent of consolidated operating revenue in 2019 (10 percent in 2018 and2017).ALLETE, Inc. 2019 Form 10-K73NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Long-Term Finance Receivables. Long-term finance receivables relating to our real estate operations are collateralized by property sold, accrue interest atmarket-based rates and are net of an allowance for doubtful accounts. We assess delinquent finance receivables by comparing the balance of such receivables to theestimated fair value of the collateralized property. If the fair value of the property is less than the finance receivable, we record a reserve for the difference. Weestimate fair value based on recent property tax assessed values or current appraisals.Available-for-Sale Securities. Available-for-sale debt and equity securities are recorded at fair value. Unrealized gains and losses on available-for-sale debtsecurities are included in accumulated other comprehensive income (loss), net of tax. Unrealized gains and losses on available-for-sale equity securities arerecognized in earnings. We use the specific identification method as the basis for determining the cost of securities sold.Inventories – Net. Inventories are stated at the lower of cost or net realizable value. Inventories in our Regulated Operations segment are carried at an averagecost or first-in, first-out basis. Inventories in our ALLETE Clean Energy segment and Corporate and Other businesses are carried at an average cost, first-in, first-out or specific identification basis.Inventories – Net As of December 312019 2018Millions Fuel (a)$25.9 $26.0Materials and Supplies46.9 44.2Raw Materials (b)— 2.8Work in Progress (b)— 6.1Finished Goods (b)— 8.4Reserve for Obsolescence (b)— (0.8)Total Inventories – Net$72.8 $86.7(a)Fuel consists primarily of coal inventory at Minnesota Power.(b) On March 26, 2019, ALLETE sold U.S. Water Services which resulted in the removal of the related inventory items from the Consolidated Balance Sheet.Property, Plant and Equipment. Property, plant and equipment are recorded at original cost and are reported on the Consolidated Balance Sheet net ofaccumulated depreciation. Expenditures for additions, significant replacements, improvements and major plant overhauls are capitalized; maintenance and repaircosts are expensed as incurred. Gains or losses on property, plant and equipment for Corporate and Other operations are recognized when they are retired orotherwise disposed. When property, plant and equipment in our Regulated Operations and ALLETE Clean Energy segments are retired or otherwise disposed, nogain or loss is recognized in accordance with the accounting standards for component depreciation except for certain circumstances where the retirement isunforeseen or unexpected. Our Regulated Operations capitalize AFUDC, which includes both an interest and equity component. AFUDC represents the cost ofboth debt and equity funds used to finance utility plant additions during construction periods. AFUDC amounts capitalized are included in rate base and arerecovered from customers as the related property is depreciated. Upon MPUC approval of cost recovery, the recognition of AFUDC ceases. (See Note 2. Property,Plant and Equipment.)We believe that long-standing ratemaking practices approved by applicable state and federal regulatory commissions allow for the recovery of the remaining bookvalue of retired plant assets. In 2015, Minnesota Power retired Taconite Harbor Unit 3 and converted Laskin to operate on natural gas. Minnesota Power’s 2015IRP contained steps in Minnesota Power’s EnergyForward plan including the economic idling of Taconite Harbor Units 1 and 2 in 2016, and the ceasing of coal-fired operations at Taconite Harbor in 2020. (See Note 4. Regulatory Matters.) The MPUC order for the 2015 IRP also directed Minnesota Power to retire BoswellUnits 1 and 2 no later than 2022. Minnesota Power retired Boswell Units 1 and 2 in the fourth quarter of 2018. As part of the 2016 general retail rate case, theMPUC allowed recovery of the remaining book value of Boswell Units 1 and 2 through 2022. We do not expect to record any impairment charge as a result of theretirement of Taconite Harbor Unit 3, the ceasing of coal-fired operations at Taconite Harbor Units 1 and 2 or the conversion of Laskin to operate on natural gas. Inaddition, we expect to be able to continue depreciating these assets for at least their established remaining useful lives; however, we are unable to predict theimpact of regulatory outcomes resulting in changes to their established remaining useful lives.ALLETE, Inc. 2019 Form 10-K74NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)ALLETE Clean Energy Asset Acquisition. On May 3, 2019, ALLETE Clean Energy acquired the Diamond Spring wind project in Oklahoma from Apex CleanEnergy. ALLETE Clean Energy will build, own and operate the approximately 300 MW wind energy facility. The Diamond Spring wind project is fully contractedto sell wind power under long-term power sales agreements. Construction is expected to be completed in late 2020.Impairment of Long-Lived Assets. We review our long-lived assets for indicators of impairment in accordance with the accounting standards for property, plantand equipment on a quarterly basis. This includes our property, plant and equipment (see Property, Plant and Equipment) and land inventory. Land inventory isaccounted for as held for use and is recorded at cost, unless the carrying value is determined not to be recoverable in accordance with the accounting standards forproperty, plant and equipment, in which case the land inventory is written down to estimated fair value.In accordance with the accounting standards for property, plant and equipment, if indicators of impairment exist, we test our long‑lived assets for recoverability bycomparing the carrying amount of the asset to the undiscounted future net cash flows expected to be generated by the asset. Cash flows are assessed at the lowestlevel of identifiable cash flows. The undiscounted future net cash flows are impacted by trends and factors known to us at the time they are calculated and ourexpectations related to: management’s best estimate of future use; sales prices; holding period and timing of sales; method of disposition; and future expendituresnecessary to maintain the operations.In 2019, 2018, and 2017, there were no indicators of impairment for our property, plant, and equipment or land inventory. As a result, no impairment was recordedin 2019, 2018 or 2017.Derivatives. ALLETE is exposed to certain risks relating to its business operations that can be managed through the use of derivative instruments. ALLETE mayenter into derivative instruments to manage those risks including interest rate risk related to certain variable-rate borrowings.Accounting for Stock-Based Compensation. We apply the fair value recognition guidance for share-based payments. Under this guidance, we recognize stock-based compensation expense for all share-based payments granted, net of an estimated forfeiture rate. (See Note 13. Employee Stock and Incentive Plans.)Other Non-Current Assets As of December 312019 2018Millions Contract Assets (a)$28.0 $30.7Finance Receivable (b)— 10.4Operating Lease Right-of-use Assets (c)28.6 —ALLETE Properties21.9 24.4Restricted Cash20.4 8.6Other Postretirement Benefit Plans37.5 0.4Other80.8 77.9Total Other Non-Current Assets$217.2 $152.4(a)Contract Assets include payments made to customers as an incentive to execute or extend service agreements. The contract payments are being amortized over the term ofthe respective agreements as a reduction to revenue.(b)Finance Receivable related to the 2016 sale of Ormond Crossings and Lake Swamp, which was collected in the second quarter of 2019.(c)See Leases.ALLETE, Inc. 2019 Form 10-K75NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Other Current Liabilities As of December 312019 2018Millions Provision for Interim Rate Refund (a)— $40.0PSAs$12.3 12.6Contract Liabilities (b)— 7.6Provision for Tax Reform Refund (c)0.2 10.7Contingent Consideration (d)— 3.8Operating Lease Liabilities (e)6.9 —Other41.0 53.8Total Other Current Liabilities$60.4 $128.5(a) Provision for Interim Rate Refund was refunded to Minnesota Power’s retail customers in the second quarter of 2019.(b)Contract Liabilities consist of deposits received as a result of entering into contracts with our customers prior to completing our performance obligations.(c)Provision for Tax Reform Refund related to the income tax benefits of the TCJA in 2018 was refunded to Minnesota Power customers in the first quarter of 2019 and isbeing returned to SWL&P customers through 2020.(d)Contingent Consideration related to the earnings-based payment resulting from the U.S. Water Services acquisition was paid in the first quarter of 2019.(e)See Leases.Other Non-Current Liabilities As of December 312019 2018Millions Asset Retirement Obligation$160.3 $138.6PSAs64.6 76.9Operating Lease Liabilities (a)21.8 —Other46.3 47.1Total Other Non-Current Liabilities$293.0 $262.6(a)See Leases.Leases.We determine if a contract is, or contains, a lease at inception and recognize a right-of-use asset and lease liability for all leases with a term greater than 12 months.Our right-of-use assets and lease liabilities for operating leases are included in Other Non-Current Assets, Other Current Liabilities and Other Non-CurrentLiabilities, respectively, in our Consolidated Balance Sheet. We currently do not have any finance leases.Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arisingfrom the lease. Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the estimated present value of leasepayments over the lease term. As our leases do not provide an explicit rate, we determine the present value of future lease payments based on our estimatedincremental borrowing rate using information available at the lease commencement date. The operating lease right-of-use asset includes lease payments to be madeduring the lease term and any lease incentives, as applicable.Our leases may include options to extend or buy out the lease at certain points throughout the term, and if it is reasonably certain that we will exercise that optionat lease commencement, we include those rental payments in our calculation of the right-of-use asset and lease liability. Lease and rent expense is recognized on astraight-line basis over the lease term. Leases with a term of 12 months or less are not recognized on the Consolidated Balance Sheet.ALLETE, Inc. 2019 Form 10-K76NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Leases (Continued)The majority of our operating leases are for heavy equipment, vehicles and land with fixed monthly payments which we group into two categories: Vehicles andEquipment; and Land and Other. Our largest operating lease is for the dragline at BNI Energy which includes a termination payment at the end of the lease term ifwe do not exercise our purchase option. The amount of this payment is $3 million and is included in our calculation of the right-of-use asset and lease liabilityrecorded. None of our other leases contain residual value guarantees.Additional information on the components of lease cost and presentation of cash flows were as follows: December 31, 2019Millions Operating Lease Cost$9.4 Other Information: Operating Cash Flows From Operating Leases$9.4Additional information related to leases was as follows: December 31, 2019Millions Balance Sheet Information Related to Leases: Other Non-Current Assets$28.6Total Operating Lease Right-of-use Assets$28.6 Other Current Liabilities$6.9Other Non-Current Liabilities21.8Total Operating Lease Liabilities$28.7 Weighted Average Remaining Lease Term (Years): Operating Leases - Vehicles and Equipment4Operating Leases - Land and Other28 Weighted Average Discount Rate: Operating Leases - Vehicles and Equipment3.7%Operating Leases - Land and Other4.1%ALLETE, Inc. 2019 Form 10-K77NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Leases (Continued)Maturities of lease liabilities were as follows: December 31, 2019Millions 2020$6.620216.020225.020233.220242.9Thereafter11.5Total Lease Payments Due35.2Less: Imputed Interest6.5Total Lease Obligations28.7Less: Current Lease Obligations6.9Total Long-term Lease Obligations$21.8Environmental Liabilities. We review environmental matters on a quarterly basis. Accruals for environmental matters are recorded when it is probable that aliability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. Accruals are adjusted asassessment and remediation efforts progress, or as additional technical or legal information becomes available. Accruals for environmental liabilities are includedin the Consolidated Balance Sheet at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. Costs related to environmentalcontamination treatment and cleanup are expensed unless recoverable in rates from customers. (See Note 9. Commitments, Guarantees and Contingencies.)Revenue.Contracts with Customers – Utility includes sales from our regulated operations for generation, transmission and distribution of electric service, and distribution ofwater and gas services to our customers. Also included is an immaterial amount of regulated steam generation that is used by customers in the production of paperand pulp.Contracts with Customers – Non-utility includes sales of goods and services to customers from ALLETE Clean Energy, U.S. Water Services and our Corporateand Other businesses.Other – Non-utility is the non-cash adjustments to revenue recognized by ALLETE Clean Energy for the amortization of differences between contract prices andestimated market prices for PSAs that were assumed during the acquisition of various wind energy facilities.Revenue RecognitionRevenue is recognized upon transfer of control of promised goods or services to our customers in an amount that reflects the consideration we expect to receive inexchange for those products or services. Revenue is recognized net of allowance for returns and any taxes collected from customers, which are subsequentlyremitted to the appropriate governmental authorities. We account for shipping and handling activities that occur after the customer obtains control of goods as acost rather than an additional performance obligation thereby recognizing revenue at time of shipment and accruing shipping and handling costs when controltransfers to our customers. We have a right to consideration from our customers in an amount that corresponds directly with the value to the customer for ourperformance completed to date; therefore, we may recognize revenue in the amount to which we have a right to invoice.ALLETE, Inc. 2019 Form 10-K78NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Revenue (Continued)Nature of Revenue StreamsUtilityResidential and Commercial includes sales for electric, gas or water service to customers, who have implied contracts with the utility, under rates governed by theMPUC, PSCW or FERC. Customers are billed on a monthly cycle basis and revenue is recognized for electric, gas or water service delivered during the billingperiod. Revenue is accrued for service provided but not yet billed at period end. Performance obligations with these customers are satisfied at time of delivery tocustomer meters and simultaneously consumed.Municipal includes sales to 15 non-affiliated municipal customers in Minnesota under long-term wholesale electric contracts. All wholesale electric contractsinclude a termination clause requiring a three-year notice to terminate. These contracts have termination dates ranging through at least 2032, with a majority ofcontracts effective through at least 2024. Performance obligations with these customers are satisfied at the time energy is delivered to an agreed upon municipalsubstation or meter.Industrial includes sales recognized from contracts with customers in the taconite mining, paper, pulp and secondary wood products, pipeline and other industries.Industrial sales accounted for approximately 54 percent of total regulated utility kWh sales for the year ended December 31, 2019. Within industrial revenue,Minnesota Power has eight Large Power Customer contracts, each serving requirements of 10 MW or more of customer load. These contracts automatically renewpast the contract term unless a four-year advanced written notice is given. Large Power Customer contracts have earliest termination dates ranging from 2023through 2029. We satisfy our performance obligations for these customers at the time energy is delivered to an agreed upon customer substation. Revenue isaccrued for energy provided but not yet billed at period end. Based on current contracts with industrial customers, we expect to recognize minimum revenue for thefixed contract components of approximately $55 million per annum in 2020 through 2023, $20 million in 2024, and $65 million in total thereafter, which reflectsthe termination notice period in these contracts. When determining minimum revenue, we assume that customer contracts will continue under the contract renewalprovision; however, if long-term contracts are renegotiated and subsequently approved by the MPUC or there are changes within our industrial customer class,these amounts may be impacted. Contracts with customers that contain variable pricing or quantity components are excluded from the expected minimum revenueamounts.Other Power Suppliers includes the sale of energy under long-term PSAs with two customers as well as MISO market and liquidation sales. Expiration dates ofthese PSAs range from 2020 through 2028. Performance obligations with these customers are satisfied at the time energy is delivered to an agreed upon deliverypoint defined in the contract (generally the MISO pricing node). Based on current contracts with two customers, we expect to recognize minimum revenue for fixedcontract components of approximately $3 million in 2020. Other power supplier contracts that extend beyond 2020 contain variable pricing components thatprevent us from estimating future minimum revenue, and therefore are not included.Other Revenue includes all remaining individually immaterial revenue streams for Minnesota Power and SWL&P, and is comprised of steam sales to paper andpulp mills, wheeling revenue and other sources. Revenue for steam sales to customers is recognized at the time steam is delivered and simultaneously consumed.Revenue is recognized at the time each performance obligation is satisfied.CIP Financial Incentive reflects certain revenue that is a result of the achievement of certain objectives for our CIP financial incentives. This revenue is accountedfor in accordance with the accounting standards for alternative revenue programs which allow for the recognition of revenue under an alternative revenue programif the program is established by an order from the utility’s regulatory commission, the order allows for automatic adjustment of future rates, the amount of revenuerecognized is objectively determinable and probable of recovery, and the revenue will be collected within 24 months following the end of the annual period inwhich it is recognized. CIP financial incentives are recognized in the period in which the MPUC approves the filing, which is typically mid-year.ALLETE, Inc. 2019 Form 10-K79NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Revenue (Continued)Non-utilityALLETE Clean EnergyLong-term PSA revenue includes all sales recognized under long-term contracts for production, curtailment, capacity and associated renewable energy credits fromALLETE Clean Energy wind energy facilities. Expiration dates of these PSAs range from 2020 through 2039. Performance obligations for these contracts aresatisfied at the time energy is delivered to an agreed upon point, or production is curtailed at the request of the customer, at specified prices. Revenue from the saleof renewable energy credits is recognized at the same time the related energy is delivered to the customer when sold to the same party.Sale of Wind Energy Facility includes revenue recognized for the design, development, construction, and sale of a wind energy facility to a customer. Performanceobligations for these types of agreements are satisfied at the time the completed project is transferred to the customer at the commercial operation date. Revenuefrom the sale of a wind energy facility is recognized at the time of asset transfer.Other is the non-cash adjustments to revenue recognized by ALLETE Clean Energy for the amortization of differences between contract prices and estimatedmarket prices on assumed PSAs. As part of wind energy facility acquisitions, ALLETE Clean Energy assumed various PSAs that were above or below estimatedmarket prices at the time of acquisition; the resulting differences between contract prices and estimated market prices are amortized to revenue over the remainingPSA term.U.S. Water ServicesPoint-in-time revenue is recognized for purchases by customers for chemicals, consumable equipment (e.g., filters, pumps and valves) or related maintenance andrepair services as the customer’s usage and needs change over time. These goods and services are purchased on an as-needed basis by customers and thereforerevenue can be variable. Products are shipped to customers in accordance with the terms of each purchase order, and performance obligations are satisfied at thetime of shipment of goods or when services are rendered to the customer.Contract includes monthly revenue from contracts with customers to provide chemicals, consumable equipment and services to meet customer needs during thecontract period. As agreed with the customer, a fixed amount is invoiced based on the goods and services to be provided under the contract. The duration of thesecontracts generally range in length from three months to five years and automatically renew. A 30-day notice is required to terminate such contracts withoutpenalty. Performance obligations are satisfied during the period as goods and service are delivered in accordance with the terms of the contract.Capital Project includes the sale of equipment and other components assembled to create a water treatment system for a customer. These projects are providedunder contracts at an agreed upon price to meet a customer's specifications and typically take less than one year to complete. In general, progress payments arereceived throughout the project period and are recorded as contract liabilities until performance obligations are satisfied at the time the equipment and othercomponents are delivered to the customer’s site.Corporate and OtherLong-term Contract encompasses the sale and delivery of coal to customer generation facilities. Revenue is recognized on a monthly basis at the cost of productionplus a specified profit per ton of coal delivered to the customer. Coal sales are secured under long-term coal supply agreements extending through 2037.Performance obligations are satisfied during the period as coal is delivered to customer generation facilities.Other primarily includes revenue from BNI Energy unrelated to coal, the sale of real estate from ALLETE Properties, and non‑rate base steam generation that issold for use during production of paper and pulp. Performance obligations are satisfied when control transfers to the customer.ALLETE, Inc. 2019 Form 10-K80NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Revenue (Continued)Payment TermsPayment terms and conditions vary across our businesses. Aside from taconite-producing Large Power Customers, payment terms generally require payment to bemade within 15 to 30 days from the end of the period that the service has been rendered or goods provided. In the case of its taconite-producing Large PowerCustomers, as permitted by the MPUC, Minnesota Power requires weekly payments for electric usage based on monthly energy usage estimates. These customersreceive estimated bills based on Minnesota Power’s estimate of the customers’ energy usage, forecasted energy prices and fuel adjustment clause estimates.Minnesota Power’s taconite-producing Large Power Customers have generally predictable energy usage on a weekly basis and any differences that occur aretrued-up the following month. Due to the timing difference of revenue recognition from the timing of invoicing and payment, the customer receives credit for thetime value of money; however, we have determined that our contracts do not include a significant financing component as the period between when we transfer theservice to the customer and when they pay for such service is minimal.Assets Recognized From the Costs to Obtain a Contract with a CustomerWe recognize as an asset the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. Weexpense incremental costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. As ofDecember 31, 2019, we have $28.0 million of assets recognized for costs incurred to obtain contracts with our customers ($30.7 million as of December 31, 2018).Management determined the amount of costs to be recognized as assets based on actual costs incurred and paid to obtain and fulfill these contracts to providegoods and services to our customers. Assets recognized to obtain contracts are amortized on a straight-line basis over the contract term as a non-cash reduction torevenue. We recognized $2.6 million of non-cash amortization for the years ended December 31, 2019 and 2018.Operating Expenses – Other Year Ended December 31201920182017Millions Change in Fair Value of Contingent Consideration (a)—$(2.0)$(0.7)Total Operating Expenses – Other—$(2.0)$(0.7)(a)Contingent Consideration related to the earnings-based payment resulting from the U.S. Water Services acquisition was paid in the first quarter of 2019. (See Note 7. FairValue.)Unamortized Discount and Premium on Debt. Discount and premium on debt are deferred and amortized over the terms of the related debt instruments using amethod which approximates the effective interest method.Tax Equity Financings. In the fourth quarter of 2019, certain subsidiaries of ALLETE entered into tax equity financings that include forming limited liabilitycompanies (LLC) with third-party investors for certain wind projects. Tax equity financings have specific terms that dictate distributions of cash and the allocationof tax attributes among the partners, who are divided into two categories: the sponsor and third-party investor. ALLETE subsidiaries are the sponsors in these taxequity financings. The distributions of cash and allocation of tax attributes in these financings are generally different than the underlying percentage ownershipinterests in the related LLC. A disproportionate share of tax attributes (including accelerated depreciation and production tax credits) are allocated to third-partyinvestors in order to achieve targeted after-tax rates of return, or target yield, from project operations, while a disproportionate share of cash distributions are madeto the sponsor.The target yield and terms vary by financing agreement, by third-party investor, and sponsor project. Once the third-party investor’s target yield has been achieved,a “flip point” is recognized. Prior to the flip point, tax attributes are disproportionately allocated to the third-party investor with cash distributionsdisproportionately made to the sponsor. In addition, cash distributions can be temporarily increased to the third-party investors in order to meet cumulativedistribution thresholds. After the flip point, tax attributes and cash distributions are both typically disproportionately allocated to the sponsor.Tax equity financings impose a range of affirmative and negative covenants that are similar to what a project lender would require, such as financial reporting,insurance, maintenance and prudent operator standards. Most of these restrictions end once the flip point occurs and any other obligations of the third-partyinvestor have been eliminated.ALLETE, Inc. 2019 Form 10-K81NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Tax Equity Financings (Continued)The third-party investor’s portion of equity ownership in tax equity LLC is recorded as non-controlling interest in subsidiaries on the Consolidated Balance Sheet.Non-Controlling Interest in Subsidiaries. Non-controlling interest in subsidiaries represents the portion of equity ownership, net income (loss), andcomprehensive income (loss) in subsidiaries that is not attributable to equity holders of ALLETE.For those wind projects with tax equity financing structures where the economic benefits are not allocated based on the underlying ownership percentage interests,we have determined that the appropriate methodology for calculating the non-controlling interest in subsidiaries balance is the hypothetical liquidation at bookvalue (HLBV) method. The HLBV method is a balance sheet approach which reflects the substantive economic arrangements in the tax equity financing structures.Under the HLBV method, amounts reported as non-controlling interest in subsidiaries on the Consolidated Balance Sheet represent the amounts the third-partyinvestors would hypothetically receive at each balance sheet reporting date under the liquidation provisions of the LLC operating agreements, assuming the netassets of the wind projects were liquidated at amounts determined in accordance with GAAP and distributed to the third-party investor and sponsor. The resultingnon-controlling interest in subsidiaries balance in these projects is reported as a component of equity on the Consolidated Balance Sheet.The results of operations for these projects attributable to non-controlling interests under the HLBV method is determined as the difference in non-controllinginterest in subsidiaries on the Consolidated Balance Sheet at the start and end of each reporting period, after taking into account any capital transactions betweenthe projects and the third-party investors.Factors used in the HLBV calculation include GAAP income, taxable income (loss), tax attributes such as accelerated depreciation and production tax credits,capital contributions, cash distributions, and the stipulated third-party investor target after-tax return specified in the tax equity LLC operating agreements.Changes in these factors could have a significant impact on the amounts that third-party investors and sponsors would receive upon a hypothetical liquidation. Theuse of the HLBV method to allocate income to the non-controlling interest in subsidiaries may create variability in our results of operations as the application ofthe HLBV method can drive variability in net income or loss attributable to non-controlling interest in subsidiaries from period to period.Other Income (Expense) - Other Year Ended December 31201920182017Millions Pension and Other Postretirement Benefit Plan Non-Service Credit (a)$7.7$4.6$3.9Interest and Investment Earnings4.40.51.8AFUDC - Equity2.31.21.2Gain (Loss) on Land Sales2.10.9(0.5)Other2.20.6(0.1)Total Other Income (Expense) - Other$18.7$7.8$6.3(a)These are components of net periodic pension and other postretirement benefit cost other than service cost. (See Note 12. Pension and Other Postretirement Benefit Plans.)Income Taxes. ALLETE and its subsidiaries file a consolidated federal income tax return as well as combined and separate state income tax returns. We accountfor income taxes using the liability method in accordance with GAAP for income taxes. Under the liability method, deferred income tax assets and liabilities areestablished for all temporary differences in the book and tax basis of assets and liabilities, based upon enacted tax laws and rates applicable to the periods in whichthe taxes become payable.Due to the effects of regulation on Minnesota Power and SWL&P, certain adjustments made to deferred income taxes are, in turn, recorded as regulatory assets orliabilities. Federal investment tax credits have been recorded as deferred credits and are being amortized to income tax expense over the service lives of the relatedproperty. In accordance with GAAP for uncertainty in income taxes, we are required to recognize in our financial statements the largest tax benefit of a tax positionthat is “more‑likely‑than‑not” to be sustained on audit, based solely on the technical merits of the position as of the reporting date. The term “more‑likely‑than‑not”means more than 50 percent likely. (See Note 11. Income Tax Expense.)ALLETE, Inc. 2019 Form 10-K82NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)Excise Taxes. We collect excise taxes from our customers levied by government entities. These taxes are stated separately on the billing to the customer andrecorded as a liability to be remitted to the government entity. We account for the collection and payment of these taxes on a net basis.New Accounting Pronouncements.Recently Adopted PronouncementsDisclosure Update and Simplification. In November 2018, the SEC adopted amendments to certain disclosure requirements. The amendments adopted includerequirements that interim financial statements should include comparative statements for the same period in the prior financial year, except that the requirement forcomparative balance sheet information may be satisfied by presenting the year-end balance sheet. It further includes a requirement analyzing the changes in eachcaption of shareholders’ equity either separately in a note or on the face of the financial statement. These amendments were effective for ALLETE in the firstquarter of 2019. We have included the presentation of our Statement of Shareholders’ Equity to meet these requirements.Leases. In 2016, the FASB issued an accounting standard update which revised the existing guidance for leases. Under the revised guidance, lessees are required torecognize right-of-use assets and lease liabilities on the Consolidated Balance Sheet for leases with terms greater than 12 months. The new standard also requiresadditional qualitative and quantitative disclosures by lessees and lessors to enable users of the financial statements to assess the amount, timing and uncertainty ofcash flows arising from leases. The accounting for leases by lessors and the recognition, measurement and presentation of expenses and cash flows from leases isnot expected to significantly change as a result of the new guidance. The Company adopted this guidance in the first quarter of 2019 using the optional transitionmethod and the package of practical expedients, which allowed for the adoption of the standard as of January 1, 2019, without restating previously disclosedinformation. Management elected the optional transition method of adoption due to the overall immateriality of the balance sheet gross up in the period ofadoption. The package of practical expedients allowed management to not reassess the lease classification for leases, including those that had expired during theperiods presented or that still existed at the time of adoption. We have included additional disclosures in the notes to the consolidated financial statements.ALLETE, Inc. 2019 Form 10-K83NOTE 2. PROPERTY, PLANT AND EQUIPMENTProperty, Plant and Equipment As of December 312019 2018Millions Regulated Operations Property, Plant and Equipment in Service$4,555.8 $4,490.6Construction Work in Progress383.6 251.1Accumulated Depreciation(1,635.3) (1,549.6)Regulated Operations – Net3,304.1 3,192.1ALLETE Clean Energy Property, Plant and Equipment in Service686.0 488.4Construction Work in Progress351.3 164.5Accumulated Depreciation(86.8) (73.0)ALLETE Clean Energy – Net950.5 579.9U.S. Water Services (a) Property, Plant and Equipment in Service— 30.1Accumulated Depreciation— (14.0)U.S. Water Services – Net— 16.1Corporate and Other (b) Property, Plant and Equipment in Service231.9 214.3Construction Work in Progress3.8 6.6Accumulated Depreciation(113.3) (104.6)Corporate and Other – Net122.4 116.3Property, Plant and Equipment – Net$4,377.0 $3,904.4(a)On March 26, 2019, ALLETE completed the sale of U.S. Water Services. (See Note 1. Operations and Significant Accounting Policies.)(b)Primarily includes BNI Energy and a small amount of non-rate base generation.Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets.Estimated Useful Lives of Property, Plant and Equipment (Years)Regulated Operations Generation4 to 50 ALLETE Clean Energy5 to 35 Transmission52 to 71 Corporate and Other3 to 50 Distribution19 to 68 Asset Retirement Obligations. We recognize, at fair value, obligations associated with the retirement of certain tangible, long‑lived assets that result from theacquisition, construction, development or normal operation of the asset. Asset retirement obligations (AROs) relate primarily to the decommissioning of our coal-fired and wind energy facilities, and land reclamation at BNI Energy. AROs are included in Other Non-Current Liabilities on the Consolidated Balance Sheet. Theassociated retirement costs are capitalized as part of the related long-lived asset and depreciated over the useful life of the asset. Removal costs associated withcertain distribution and transmission assets have not been recognized, as these facilities have indeterminate useful lives.Conditional asset retirement obligations have been identified for treated wood poles and remaining polychlorinated biphenyl and asbestos-containing assets;however, the period of remediation is indeterminable and removal liabilities have not been recognized.Long-standing ratemaking practices approved by applicable state and federal regulatory authorities have allowed provisions for future plant removal costs indepreciation rates. These plant removal cost recoveries are classified either as AROs or as a regulatory liability for non-AROs. To the extent annual accruals forplant removal costs differ from accruals under approved depreciation rates, a regulatory asset has been established in accordance with GAAP for AROs. (See Note4. Regulatory Matters.)ALLETE, Inc. 2019 Form 10-K84NOTE 2. PROPERTY, PLANT AND EQUIPMENT (Continued)Asset Retirement Obligations Millions Obligation as of December 31, 2017 $122.7Accretion 7.0Liabilities Settled (5.3)Revisions in Estimated Cash Flows 14.2Obligation as of December 31, 2018 138.6Accretion 7.2Liabilities Recognized 1.4Liabilities Settled (4.6)Revisions in Estimated Cash Flows 17.7Obligation as of December 31, 2019 $160.3NOTE 3. JOINTLY-OWNED FACILITIES AND ASSETSBoswell Unit 4. Minnesota Power owns 80 percent of the 585 MW Boswell Unit 4. While Minnesota Power operates the plant, certain decisions about theoperations of Boswell Unit 4 are subject to the oversight of a committee on which it and WPPI Energy, the owner of the remaining 20 percent, have equalrepresentation and voting rights. Each owner must provide its own financing and is obligated to its ownership share of operating costs. Minnesota Power’s share ofoperating expenses for Boswell Unit 4 is included in Operating Expenses on the Consolidated Statement of Income.CapX2020. Minnesota Power was a participant in the CapX2020 initiative which represented an effort to ensure electric transmission and distribution reliability inMinnesota and the surrounding region for the future. CapX2020, which consisted of electric cooperatives and municipal and investor-owned utilities, includingMinnesota’s largest transmission owners, assessed the transmission system and projected growth in customer demand for electricity through 2020. MinnesotaPower participated in certain CapX2020 projects which were completed and placed in service by 2015.Minnesota Power’s investments in jointly-owned facilities and assets and the related ownership percentages are as follows:Regulated Utility PlantPlant in ServiceAccumulatedDepreciationConstruction Work inProgress% OwnershipMillions As of December 31, 2019 Boswell Unit 4$662.7$258.9$5.780CapX2020101.013.5—9.3 - 14.7Total$763.7$272.4$5.7 As of December 31, 2018 Boswell Unit 4$650.1$229.9$6.480CapX2020101.011.0—9.3 - 14.7Total$751.1$240.9$6.4 ALLETE, Inc. 2019 Form 10-K85NOTE 4. REGULATORY MATTERSElectric Rates. Entities within our Regulated Operations segment file for periodic rate revisions with the MPUC, PSCW or FERC. As authorized by the MPUC,Minnesota Power also recognizes revenue under cost recovery riders for transmission, renewable and environmental investments and expenditures. (SeeTransmission Cost Recovery Rider, Renewable Cost Recovery Rider and Environmental Improvement Rider.) Revenue from cost recovery riders was $31.8 millionin 2019 ($103.8 million in 2018; $96.9 million in 2017). With the implementation of final rates in Minnesota Power’s general rate case, certain revenue previouslyrecognized under cost recovery riders was incorporated into base rates. (See 2016 Minnesota General Rate Case.)2016 Minnesota General Rate Case. The MPUC issued a March 2018 order in Minnesota Power’s general rate case approving a return on common equity of 9.25percent and a 53.81 percent equity ratio. Final rates went into effect on December 1, 2018, which results in additional revenue of approximately $13 million on anannualized basis.2020 Minnesota General Rate Case. On November 1, 2019, Minnesota Power filed a retail rate increase request with the MPUC seeking an average increase ofapproximately 10.6 percent for retail customers. The rate filing seeks a return on equity of 10.05 percent and a 53.81 percent equity ratio. On an annualized basis,the requested final rate increase would generate approximately $66 million in additional revenue. In orders dated December 23, 2019, the MPUC accepted thefiling as complete and authorized an annual interim rate increase of $36.1 million beginning January 1, 2020.FERC-Approved Wholesale Rates. Minnesota Power has 15 non-affiliated municipal customers in Minnesota. SWL&P is a Wisconsin utility and a wholesalecustomer of Minnesota Power. All wholesale contracts include a termination clause requiring a three-year notice to terminate.Minnesota Power’s wholesale electric contract with the Nashwauk Public Utilities Commission is effective through at least December 31, 2032. No terminationnotice may be given for this contract prior to July 1, 2029. The wholesale electric service contract with SWL&P is effective through at least February 28, 2023.Under the agreement with SWL&P, no termination notice has been given. The rates included in these two contracts are set each July 1 based on a cost-basedformula methodology, using estimated costs and a rate of return that is equal to Minnesota Power’s authorized rate of return for Minnesota retail customers. Theformula-based rate methodology also provides for a yearly true-up calculation for actual costs incurred.Minnesota Power’s wholesale electric contracts with 14 municipal customers are effective through varying dates ranging from 2024 through 2029. No terminationnotices may be given prior to three years before maturity. These contracts had fixed capacity charges through 2018; beginning in 2019, the capacity charge isdetermined using a cost-based formula methodology with limits on the annual change from the previous year’s capacity charge. The base energy charge for eachyear of the contract term is set each January 1, subject to monthly adjustment, and is determined using a cost-based formula methodology.The contract with another municipal customer expired on June 30, 2019. Minnesota Power historically provided approximately 29 MW of average monthlydemand to this customer.Transmission Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place for certain transmission investments and expenditures. In a 2016order, the MPUC approved Minnesota Power’s updated customer billing rates allowing Minnesota Power to charge retail customers on a current basis for the costsof constructing certain transmission facilities plus a return on the capital invested. On July 9, 2019, Minnesota Power filed a petition seeking MPUC approval toupdate the customer billing factor to include investments made for the GNTL. (See Note 9. Commitments, Guarantees and Contingencies.)Renewable Cost Recovery Rider. Minnesota Power has an approved cost recovery rider for certain renewable investments and expenditures. The cost recoveryrider allows Minnesota Power to charge retail customers on a current basis for the costs of certain renewable investments plus a return on the capital invested.Current customer billing rates for the renewable cost recovery rider were approved by the MPUC in a November 2018 order. On August 15, 2019, MinnesotaPower filed a petition seeking MPUC approval to update the customer billing factor.Minnesota Power also has approval for current cost recovery of investments and expenditures related to compliance with the Minnesota Solar Energy Standard.(See Minnesota Solar Energy Standard.) Currently, there is no approved customer billing rate for solar costs.ALLETE, Inc. 2019 Form 10-K86NOTE 4. REGULATORY MATTERS (Continued)Electric Rates (Continued)Environmental Improvement Rider. Minnesota Power has an approved environmental improvement rider for investments and expenditures related to theimplementation of the Boswell Unit 4 mercury emissions reduction plan completed in 2015. Updated customer billing rates for the environmental improvementrider were approved by the MPUC in a November 2018 order.Fuel Adjustment Clause Reform. In a 2017 order, the MPUC adopted a program to implement certain procedural reforms to Minnesota utilities’ automatic fueladjustment clause (FAC) for fuel and purchased power. With this order, the method of accounting for all Minnesota electric utilities changed to a monthlybudgeted, forward-looking FAC with annual prudence review and true-up to actual allowed costs. On May 1, 2019, Minnesota Power filed its fuel adjustmentforecast for 2020, which was accepted by the MPUC in an order dated November 14, 2019, for purposes of setting fuel adjustment clause rates for 2020, subject toa true-up filing in 2021.2018 Wisconsin General Rate Case. In a December 2018 order, the PSCW approved a rate increase for SWL&P including a return on equity of 10.4 percent and a55.0 percent equity ratio. Final rates went into effect January 1, 2019, which resulted in additional revenue of approximately $3 million.Integrated Resource Plan. In a 2016 order, the MPUC approved Minnesota Power’s 2015 IRP with modifications. The order accepted Minnesota Power’s plansfor the economic idling of Taconite Harbor Units 1 and 2 and the ceasing of coal-fired operations at Taconite Harbor in 2020, directed Minnesota Power to retireBoswell Units 1 and 2 no later than 2022, required an analysis of generation and demand response alternatives to be filed with a natural gas resource proposal, andrequired Minnesota Power to conduct requests for proposal for additional wind, solar and demand response resource additions. Minnesota Power retired BoswellUnits 1 and 2 in the fourth quarter of 2018. Minnesota Power’s next IRP filing is due October 1, 2020.In 2017, Minnesota Power submitted a resource package to the MPUC which included requesting approval of a PPA for the output of a 250 MW wind energyfacility as well as approval of a 250 MW natural gas capacity dedication agreement. The natural gas capacity dedication agreement was subject to MPUC approvalof the construction of NTEC, a 525 MW to 625 MW combined-cycle natural gas‑fired generating facility which will be jointly owned by Dairyland PowerCooperative and a subsidiary of ALLETE. Minnesota Power would purchase approximately 50 percent of the facility's output starting in 2025. In an order datedJanuary 24, 2019, the MPUC approved Minnesota Power’s request for approval of the NTEC natural gas capacity dedication agreement. Separately, the MPUCrequired a baseload retirement evaluation in Minnesota Power’s next IRP filing analyzing its existing fleet, including potential early retirement scenarios ofBoswell Units 3 and 4, as well as a securitization plan. On December 23, 2019, the Minnesota Court of Appeals reversed and remanded the MPUC’s decision toapprove certain affiliated-interest agreements. The MPUC was ordered to determine whether NTEC may have the potential for significant environmental effectsand, if so, to prepare an environmental assessment worksheet before reassessing the agreements. On January 22, 2020, Minnesota Power filed a petition for furtherreview with the Minnesota Supreme Court requesting that it review and overturn the Minnesota Court of Appeals decision. On January 8, 2019, an application for acertificate of public convenience and necessity for NTEC was submitted to the PSCW, which was approved by the PSCW at a hearing on January 16, 2020.Construction of NTEC is subject to obtaining additional permits from local, state and federal authorities. The total project cost is estimated to be approximately$700 million, of which ALLETE’s portion is expected to be approximately $350 million. ALLETE’s portion of NTEC project costs incurred throughDecember 31, 2019, is approximately $12 million.In August 2018, Minnesota Power filed a separate petition for approval of an amended PPA for the output of the 250 MW wind energy facility to be located insouthwestern Minnesota which was approved in an order dated January 23, 2019. (See Note 5. Equity Investments.)Conservation Improvement Program. Minnesota requires electric utilities to spend a minimum of 1.5 percent of gross operating revenues, excluding revenuereceived from exempt customers, from service provided in the state on energy CIPs each year. In 2017, the Minnesota Department of Commerce approvedMinnesota Power’s modified CIP triennial filing for 2017 through 2019, which outlined Minnesota Power’s CIP spending and energy-saving goals for those years.Minnesota Power’s CIP investment goal was $10.5 million for 2019 ($10.3 million for 2018 and 2017), with actual spending of $8.3 million in 2019 ($9.0 millionin 2018; $8.1 million in 2017). The investment goal for 2020 is $10.5 million based on approval of an extension for Minnesota Power’s next CIP triennial filing bythe Minnesota Department of Commerce on November 26, 2019.ALLETE, Inc. 2019 Form 10-K87NOTE 4. REGULATORY MATTERS (Continued)Conservation Improvement Program (Continued)On April 1, 2019, Minnesota Power submitted its 2018 consolidated filing, which detailed Minnesota Power’s CIP program results and requested a CIP financialincentive of $2.8 million based upon MPUC procedures, which was approved by the MPUC in an order dated July 19, 2019. In 2018, the CIP financial incentiveof $3.0 million was recognized in the third quarter upon approval by the MPUC of Minnesota Power’s 2017 CIP consolidated filing. CIP financial incentives arerecognized in the period in which the MPUC approves the filing.MISO Return on Equity Complaint. MISO transmission owners, including ALLETE and ATC, have an authorized return on equity of 9.88 percent, or 10.38percent including an incentive adder for participation in a regional transmission organization, based on a November 2019 FERC order. In this order, the FERCreduced the base return on equity for regional transmission organizations as recommended by an administrative law judge with refunds ordered for prior periods,which are immaterial to ALLETE. Multiple parties to the complaint have appealed the FERC order.Minnesota Solar Energy Standard. Minnesota law requires at least 1.5 percent of total retail electric sales, excluding sales to certain customers, to be generatedby solar energy by the end of 2020. At least 10 percent of the 1.5 percent mandate must be met by solar energy generated by or procured from solar photovoltaicdevices with a nameplate capacity of 40 kW or less and community solar garden subscriptions.Minnesota Power’s solar energy supply consists of Camp Ripley, a 10 MW solar energy facility at the Camp Ripley Minnesota Army National Guard base andtraining facility near Little Falls, Minnesota, and a community solar garden project in northeastern Minnesota, which is comprised of a 1 MW solar array ownedand operated by a third party with the output purchased by Minnesota Power and a 40 kW solar array that is owned and operated by Minnesota Power. MinnesotaPower expects that Camp Ripley, the community solar garden arrays, and an increase in solar rebates will allow Minnesota Power to meet both parts of the solarmandate.Regulatory Assets and Liabilities. Our regulated utility operations are subject to accounting guidance for the effect of certain types of regulation. Regulatoryassets represent incurred costs that have been deferred as they are probable for recovery in customer rates. Regulatory liabilities represent obligations to makerefunds to customers and amounts collected in rates for which the related costs have not yet been incurred. The Company assesses quarterly whether regulatoryassets and liabilities meet the criteria for probability of future recovery or deferral. With the exception of the regulatory asset for Boswell Units 1 and 2 net plantand equipment, no other regulatory assets are currently earning a return. The recovery, refund or credit to rates for these regulatory assets and liabilities will occurover the periods either specified by the applicable regulatory authority or over the corresponding period related to the asset or liability.ALLETE, Inc. 2019 Form 10-K88NOTE 4. REGULATORY MATTERS (Continued)Regulatory Assets and Liabilities As of December 3120192018Millions Non-Current Regulatory Assets Defined Benefit Pension and Other Postretirement Benefit Plans (a)$212.9$218.5Income Taxes (b)123.4105.5Asset Retirement Obligations (c)32.032.6Cost Recovery Riders (d)24.7—Boswell 1 & 2 Net Plant and Equipment (e)10.716.3Manufactured Gas Plant (f)8.28.0PPACA Income Tax Deferral4.85.0Other3.83.6Total Non-Current Regulatory Assets$420.5$389.5Current Regulatory Liabilities (g) Provision for Interim Rate Refund (h)—$40.0Provision for Tax Reform Refund (i)$0.210.7Transmission Formula Rates1.74.4Total Current Regulatory Liabilities1.955.1Non-Current Regulatory Liabilities Income Taxes (b)407.2396.4Wholesale and Retail Contra AFUDC (j)79.364.4Plant Removal Obligations (k)35.525.1Defined Benefit Pension and Other Postretirement Benefit Plans (a)17.0—North Dakota Investment Tax Credits (l)12.314.7Conservation Improvement Program (m)5.41.5Cost Recovery Riders (d)—6.9Transmission Formula Rates—1.6Other3.61.5Total Non-Current Regulatory Liabilities560.3512.1Total Regulatory Liabilities$562.2$567.2(a)Defined benefit pension and other postretirement items included in our Regulated Operations, which are otherwise required to be recognized in accumulated othercomprehensive income as actuarial gains and losses as well as prior service costs and credits, are recognized as regulatory assets or regulatory liabilities on theConsolidated Balance Sheet. The asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. (See Note12. Pension and Other Postretirement Benefit Plans.)(b)These costs represent the difference between deferred income taxes recognized for financial reporting purposes and amounts previously billed to our customers. Thebalances will primarily decrease over the remaining life of the related temporary differences.(c)Asset retirement obligations will accrete and be amortized over the lives of the related property with asset retirement obligations.(d)The cost recovery rider regulatory assets and liabilities are revenue not yet collected from our customers and cash collections from our customers in excess of the revenuerecognized, respectively, primarily due to capital expenditures related to Bison, investment in CapX2020 projects, the Boswell Unit 4 environmental upgrade and theGNTL. The cost recovery rider regulatory assets as of December 31, 2019, will be recovered within the next two years.(e)In December 2018, Minnesota Power retired Boswell Units 1 and 2 and reclassified the remaining net book value from property, plant and equipment to a regulatory asseton the Consolidated Balance Sheet. The remaining net book value is currently included in Minnesota Power’s rate base and Minnesota Power is earning a return on theoutstanding balance.(f)The manufactured gas plant regulatory asset represents costs of remediation for a former manufactured gas plant site located in Superior, Wisconsin, and formerlyoperated by SWL&P. We expect recovery of these remediation costs to be allowed by the PSCW in rates over time.(g)Current regulatory liabilities are presented within Other Current Liabilities on the Consolidated Balance Sheet.(h)This amount was refunded to Minnesota Power’s regulated retail customers in the second quarter of 2019.(i)Provision for Tax Reform Refund related to the income tax benefits of the TCJA in 2018 was refunded to Minnesota Power customers in the first quarter of 2019 and isbeing returned to SWL&P customers through 2020.(j)Wholesale and retail contra AFUDC represents amortization to offset AFUDC Equity and Debt recorded during the construction period of our cost recovery rider projectsprior to placing the projects in service. The regulatory liability will decrease over the remaining depreciable life of the related asset.(k)Non-legal plant removal obligations included in retail customer rates that have not yet been incurred.(l)North Dakota investment tax credits expected to be realized from Bison that will be credited to Minnesota Power’s regulated retail customers through future renewablecost recovery rider filings as the tax credits are utilized.(m)The conservation improvement program regulatory liability represents CIP expenditures, any financial incentive earned for cost-effective program achievements and acarrying charge deferred for future refund over the next year following MPUC approval.ALLETE, Inc. 2019 Form 10-K89NOTE 5. EQUITY INVESTMENTSInvestment in ATC. Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based utility that ownsand maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. We account for our investment in ATC under the equitymethod of accounting. For the year ended December 31, 2019, we invested $6.6 million in ATC and on January 31, 2020, we invested an additional $0.4 million inATC. In total, we expect to invest approximately $2.7 million in 2020.ALLETE’s Investment in ATC Year Ended December 3120192018Millions Equity Investment Beginning Balance$128.1$118.7Cash Investments6.66.2Equity in ATC Earnings21.717.5Distributed ATC Earnings(16.1)(15.2)Amortization of the Remeasurement of Deferred Income Taxes1.30.9Equity Investment Ending Balance$141.6$128.1ATC Summarized Financial Data Balance Sheet Data As of December 3120192018Millions Current Assets$84.6$87.2Non-Current Assets5,244.34,928.8Total Assets$5,328.9$5,016.0Current Liabilities$502.6$640.0Long-Term Debt2,312.82,014.0Other Non-Current Liabilities298.9295.3Members’ Equity2,214.62,066.7Total Liabilities and Members’ Equity$5,328.9$5,016.0Income Statement Data Year Ended December 31201920182017Millions Revenue$744.4$690.5$721.6Operating Expense373.5358.7344.9Other Expense110.5108.3104.1Net Income$260.4$223.5$272.6ALLETE’s Equity in Net Income$21.7$17.5$22.5ATC’s authorized return on equity is 9.88 percent, or 10.38 percent including an incentive adder for participation in a regional transmission organization, based ona November 2019 FERC order. (See Note 4. Regulatory Matters.)ALLETE, Inc. 2019 Form 10-K90NOTE 5. EQUITY INVESTMENTS (Continued)Investment in Nobles 2. In December 2018, our wholly-owned subsidiary, ALLETE South Wind, entered into an agreement with Tenaska to purchase a 49percent equity interest in Nobles 2, the entity that will own and operate a 250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA withMinnesota Power. The wind energy facility will be built in Nobles County, Minnesota and is expected to be completed in late 2020, with an estimated total projectcost of approximately $350 million to $400 million. In the fourth quarter of 2019, we entered into a tax equity funding agreement to finance up to $125 million ofthe project costs. We account for our investment in Nobles 2 under the equity method of accounting. As of December 31, 2019, our equity investment in Nobles 2was $56.0 million ($33.0 million at December 31, 2018). In the first quarter of 2019, Nobles 2 returned capital of $8.3 million based on its cash needs. For theyear ended December 31, 2019, we invested $31.3 million in Nobles 2. We expect to invest approximately $115 million in 2020.NOTE 6. GOODWILL AND INTANGIBLE ASSETSAs a result of completing the sale of U.S. Water Services on March 26, 2019, there was no goodwill recorded as of December 31, 2019 ($148.5 million atDecember 31, 2018).The balance of intangible assets, net, for the year ended December 31, 2019: December 31, 2018 Amortization Other (b) December 31, 2019Millions Intangible Assets Definite-Lived Intangible Assets Customer Relationships$50.7 $(1.1) $(49.6) —Developed Technology and Other (a)7.5 (0.4) (6.1) $1.0Total Definite-Lived Intangible Assets58.2 (1.5) (55.7) 1.0Indefinite-Lived Intangible Assets Trademarks and Trade Names16.6 n/a (16.6) —Total Intangible Assets$74.8 $(1.5) $(72.3) $1.0(a)Developed Technology and Other includes land easements and trade names with finite lives.(b) On March 26, 2019, ALLETE completed the sale of U.S. Water Services which resulted in the removal of the related intangible assets from the Consolidated Balance Sheet.Amortization expense for intangible assets was $1.5 million for the year ended December 31, 2019 ($5.6 million for the year ended December 31, 2018). Theremaining definite-lived intangible assets will continue to be amortized ratably through 2028.NOTE 7. FAIR VALUEFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurementdate (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and therisks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily applythe market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques thatmaximize the use of observable inputs and minimize the use of unobservable inputs. These inputs, which are used to measure fair value, are prioritized through thefair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement)and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reported date. Active markets are those in which transactions forthe asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. This category includes primarily equitysecurities.ALLETE, Inc. 2019 Form 10-K91NOTE 7. FAIR VALUE (Continued)Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assetsand liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated fromrecent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices andvolatilities. This category includes deferred compensation and fixed income securities.Level 3 — Significant inputs that are generally less observable from objective sources. The types of assets and liabilities included in Level 3 are those with inputsrequiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value. This categoryincluded the U.S. Water Services contingent consideration liability.The following tables set forth by level within the fair value hierarchy, our assets and liabilities that were accounted for at fair value on a recurring basis as ofDecember 31, 2019, and December 31, 2018. Each asset and liability is classified based on the lowest level of input that is significant to the fair valuemeasurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of theseassets and liabilities and their placement within the fair value hierarchy levels. The estimated fair value of Cash and Cash Equivalents listed on the ConsolidatedBalance Sheet approximates the carrying amount and therefore is excluded from the recurring fair value measures in the following tables. Fair Value as of December 31, 2019Recurring Fair Value MeasuresLevel 1 Level 2 Level 3 TotalMillions Assets: Investments (a) Available-for-sale – Equity Securities$11.1 — — $11.1Available-for-sale – Corporate and Governmental Debt Securities (b)— $9.7 — 9.7Cash Equivalents0.9 — — 0.9Total Fair Value of Assets$12.0 $9.7 — $21.7 Liabilities: Deferred Compensation (c)— $21.2 — $21.2Total Fair Value of Liabilities— $21.2 — $21.2Total Net Fair Value of Assets (Liabilities)$12.0 $(11.5) — $0.5(a)Included in Other Non-Current Assets on the Consolidated Balance Sheet.(b)As of December 31, 2019, the aggregate amount of available-for-sale corporate and governmental debt securities maturing in one year or less was $2.1 million, in oneyear to less than three years was $7.2 million, in three years to less than five years was zero and in five or more years was $0.4 million.(c)Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.ALLETE, Inc. 2019 Form 10-K92NOTE 7. FAIR VALUE (Continued) Fair Value as of December 31, 2018Recurring Fair Value MeasuresLevel 1 Level 2 Level 3 TotalMillions Assets: Investments (a) Available-for-sale – Equity Securities$12.2 — — $12.2Available-for-sale – Corporate and Governmental Debt Securities— $8.0 — 8.0Cash Equivalents1.0 — — 1.0Total Fair Value of Assets$13.2 $8.0 — $21.2 Liabilities: (b) Deferred Compensation— $19.8 — $19.8U.S. Water Services Contingent Consideration— — $3.8 3.8Total Fair Value of Liabilities— $19.8 $3.8 $23.6Total Net Fair Value of Assets (Liabilities)$13.2 $(11.8) $(3.8) $(2.4)(a)Included in Other Non-Current Assets on the Consolidated Balance Sheet.(b)Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.The Level 3 liability in the preceding table is related to the contingent consideration liability that resulted from the 2015 acquisition of U.S. Water Services. Basedon the terms and conditions of the acquisition agreement, a final payout of $3.8 million was made in the first quarter of 2019.The Company’s policy is to recognize transfers in and transfers out of Levels as of the actual date of the event or change in circumstances that caused the transfer.For the years ended December 31, 2019 and 2018, there were no transfers in or out of Levels 1, 2 or 3.Fair Value of Financial Instruments. With the exception of the item listed in the following table, the estimated fair value of all financial instrumentsapproximates the carrying amount. The fair value for the item listed in the following table was based on quoted market prices for the same or similar instruments(Level 2).Financial InstrumentsCarrying Amount Fair ValueMillions Long-Term Debt, Including Long-Term Debt Due Within One Year December 31, 2019$1,622.6 $1,791.8December 31, 2018$1,495.2 $1,534.6Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis. Non-financial assets such as equity method investments, goodwill, intangible assets,and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment isrecognized.Equity Method Investments. The aggregate carrying amount of our equity investments was $197.6 million as of December 31, 2019 ($161.1 million as ofDecember 31, 2018). The Company assesses our equity investments in ATC and Nobles 2 for impairment whenever events or changes in circumstances indicatethat the carrying amount of our investments may not be recoverable. For the years ended December 31, 2019 and 2018, there were no indicators of impairment.(See Note 5. Equity Investments.)Property, Plant and Equipment. The Company assesses the impairment of property, plant, and equipment whenever events or changes in circumstances indicatethat the carrying amount of property, plant, and equipment assets may not be recoverable. (See Note 1. Operations and Significant Accounting Policies.) For theyears ended December 31, 2019, and 2018, there was no impairment of property, plant, and equipment.ALLETE, Inc. 2019 Form 10-K93NOTE 7. FAIR VALUE (Continued)We believe that long-standing ratemaking practices approved by applicable state and federal regulatory commissions allow for the recovery of the remaining bookvalue of retired plant assets. In a 2016 order, the MPUC accepted Minnesota Power’s plans for Taconite Harbor, directed Minnesota Power to retire Boswell Units1 and 2 no later than 2022, required an analysis of generation and demand response alternatives to be filed with a natural gas resource proposal, and requiredMinnesota Power to conduct request for proposals for additional wind, solar and demand response resource additions subject to further MPUC approvals.Minnesota Power retired Boswell Units 1 and 2 in the fourth quarter of 2018. As part of the 2016 general retail rate case, the MPUC allowed recovery of theremaining book value of Boswell Units 1 and 2 through 2022. We do not expect to record any impairment charge as a result of the retirement of Taconite HarborUnit 3, ceasing of coal-fired operations at Taconite Harbor Units 1 and 2 or the conversion of Laskin to operate on natural gas. In addition, we expect to be able tocontinue depreciating these assets for at least their established remaining useful lives; however, we are unable to predict the impact of regulatory outcomesresulting in changes to their established remaining useful lives. (See Note 4. Regulatory Matters.)NOTE 8. SHORT-TERM AND LONG-TERM DEBTShort-Term Debt. As of December 31, 2019, total short-term debt outstanding was $212.9 million ($57.5 million as of December 31, 2018), consisted of long-term debt due within one year and included $0.4 million of unamortized debt issuance costs.As of December 31, 2019, we had consolidated bank lines of credit aggregating $407.0 million ($407.0 million as of December 31, 2018), most of which expire inJanuary 2024. We had $62.0 million outstanding in standby letters of credit and no outstanding draws under our lines of credit as of December 31, 2019($18.4 million in standby letters of credit and no outstanding draws as of December 31, 2018).On January 10, 2019, ALLETE entered into an amended and restated $400 million credit agreement (Credit Agreement). The Credit Agreement amended andrestated ALLETE’s $400 million credit facility, which was scheduled to expire in October 2020. The Credit Agreement is unsecured, has a variable interest rateand will expire in January 2024. At ALLETE’s request and subject to certain conditions, the Credit Agreement may be increased by up to$150 million andALLETE may make two requests to extend the maturity date, each for a one‑year extension. Advances may be used by ALLETE for general corporate purposes, toprovide liquidity in support of ALLETE's commercial paper program and to issue up to $100 million in letters of credit.Long-Term Debt. As of December 31, 2019, total long-term debt outstanding was $1,400.9 million ($1,428.5 million as of December 31, 2018) and included $8.4million of unamortized debt issuance costs. The aggregate amount of long-term debt maturing in 2020 is $213.3 million; $98.6 million in 2021; $88.8 million in2022; $88.8 million in 2023; $73.5 million in 2024; and $1,059.6 million thereafter. Substantially all of our regulated electric plant is subject to the lien of themortgages collateralizing outstanding first mortgage bonds. The mortgages contain non-financial covenants customary in utility mortgages, including restrictionson our ability to incur liens, dispose of assets, and merge with other entities.Minnesota Power is obligated to make financing payments for the Camp Ripley solar array totaling $1.4 million annually during the financing term, which expiresin 2027. Minnesota Power has the option at the end of the financing term to renew for a two‑year term, or to purchase the solar array for approximately $4 million.Minnesota Power anticipates exercising the purchase option when the term expires.On March 1, 2019, ALLETE issued and sold the following First Mortgage Bonds (the Bonds):Maturity DatePrincipal AmountInterest RateMarch 1, 2029$70 Million4.08%March 1, 2049$30 Million4.47%ALLETE has the option to prepay all or a portion of the Bonds at its discretion, subject to a make-whole provision. The Bonds are subject to additional terms andconditions which are customary for these types of transactions. ALLETE used the proceeds from the sale of the Bonds to fund utility capital investment and forgeneral corporate purposes. The Bonds were sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, toinstitutional accredited investors.ALLETE, Inc. 2019 Form 10-K94NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)Long-Term Debt (Continued)On August 14, 2019, ALLETE entered into an amended and restated $110.0 million term loan agreement (Term Loan). The Term Loan is unsecured and due onAugust 25, 2020, and may be prepaid at any time, subject to a make-whole provision. Interest on the Term Loan is payable monthly at a rate per annum equal toLIBOR plus 1.025 percent. Proceeds from the Term Loan were used for construction-related expenditures.Long-Term Debt As of December 3120192018Millions First Mortgage Bonds 8.17% Series Due 2019—$42.05.28% Series Due 2020$35.035.02.80% Series Due 202040.040.04.85% Series Due 202115.015.03.02% Series Due 202160.060.03.40% Series Due 202275.075.06.02% Series Due 202375.075.03.69% Series Due 202460.060.04.90% Series Due 202530.030.05.10% Series Due 202530.030.03.20% Series Due 202675.075.05.99% Series Due 202760.060.03.30% Series Due 202840.040.04.08% Series Due 202970.0—3.74% Series Due 202950.050.03.86% Series Due 203060.060.05.69% Series Due 203650.050.06.00% Series Due 204035.035.05.82% Series Due 204045.045.04.08% Series Due 204285.085.04.21% Series Due 204360.060.04.95% Series Due 204440.040.05.05% Series Due 204440.040.04.39% Series Due 204450.050.04.07% Series Due 204860.060.04.47% Series Due 204930.0—Variable Demand Revenue Refunding Bonds Series 1997 A Due 202013.513.5Unsecured Term Loan Variable Rate Due 2020110.010.0Armenia Mountain Senior Secured Notes 3.26% Due 202447.857.2Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006, Due 202527.827.8Senior Unsecured Notes 3.11% Due 202780.080.0SWL&P First Mortgage Bonds 4.15% Series Due 202815.015.0SWL&P First Mortgage Bonds 4.14% Series Due 204812.012.0Other Long-Term Debt, 3.11% – 5.75% Due 2020 – 203746.567.7Unamortized Debt Issuance Costs(8.8)(9.2)Total Long-Term Debt1,613.81,486.0Less: Due Within One Year212.957.5Net Long-Term Debt$1,400.9$1,428.5ALLETE, Inc. 2019 Form 10-K95NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)Long-Term Debt (Continued)On January 10, 2020, ALLETE entered into a $200 million term loan agreement (Term Loan) and borrowed $60 million upon execution. The unsecured TermLoan provides for the ability to borrow up to an additional $140 million, is due on February 10, 2021, and may be repaid at any time. Interest is payable monthlyat a rate per annum equal to LIBOR plus 0.55 percent. Proceeds from the Term Loan will be used for construction-related expenditures.Financial Covenants. Our long-term debt arrangements contain customary covenants. In addition, our lines of credit and letters of credit supporting certain long-term debt arrangements contain financial covenants. Our compliance with financial covenants is not dependent on debt ratings. The most restrictive financialcovenant requires ALLETE to maintain a ratio of indebtedness to total capitalization (as the amounts are calculated in accordance with the respective long-termdebt arrangements) of less than or equal to 0.65 to 1.00, measured quarterly. As of December 31, 2019, our ratio was approximately 0.42 to 1.00. Failure to meetthis covenant would give rise to an event of default if not cured after notice from the lender, in which event ALLETE may need to pursue alternative sources offunding. Some of ALLETE’s debt arrangements contain “cross-default” provisions that would result in an event of default if there is a failure under other financingarrangements to meet payment terms or to observe other covenants that would result in an acceleration of payments due. ALLETE has no significant restrictions onits ability to pay dividends from retained earnings or net income. As of December 31, 2019, ALLETE was in compliance with its financial covenants.NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES The following table details the estimated minimum payments for certain long-term commitments:As of December 31, 2019 Millions20202021202220232024ThereafterCapital Purchase Obligations$292.7—————Easements (a)$5.0$5.3$5.4$5.5$5.5$170.4PPAs (b)$113.0$122.5$145.5$145.6$138.5$1,386.7Other Purchase Obligations (c)$22.8$9.6———$0.1(a)Easement obligations represent the minimum payments for our land easement agreements at our wind energy facilities.(b)Does not include the agreement with Manitoba Hydro expiring in 2022, as this contract is for surplus energy only; Oliver Wind I and Oliver Wind II, as Minnesota Poweronly pays for energy as it is delivered; and the agreement with Nobles 2 commencing in 2020 as it is subject to construction of a wind energy facility. (See Power PurchaseAgreements.)(c)Consists of long-term service agreements for wind energy facilities and minimum purchase commitments under coal and rail contracts.Power Purchase and Sales Agreements. Our long-term PPAs have been evaluated under the accounting guidance for variable interest entities. We havedetermined that either we have no variable interest in the PPAs, or where we do have variable interests, we are not the primary beneficiary; therefore, consolidationis not required. These conclusions are based on the fact that we do not have both control over activities that are most significant to the entity and an obligation toabsorb losses or receive benefits from the entity’s performance. Our financial exposure relating to these PPAs is limited to capacity and energy payments.These agreements have also been evaluated under the accounting guidance for derivatives. We have determined that either these agreements are not derivatives, orif they are derivatives, the agreements qualify for the normal purchases and normal sales exemption to the accounting guidance; therefore, derivative accounting isnot required.Square Butte PPA. Minnesota Power has a PPA with Square Butte that extends through 2026 (Agreement). Minnesota Power is obligated to pay its pro rata shareof Square Butte’s costs based on its entitlement to the output of Square Butte’s 455 MW coal‑fired generating unit. Minnesota Power’s output entitlement underthe Agreement is 50 percent for the remainder of the Agreement, subject to the provisions of the Minnkota Power PSA described in the following table. MinnesotaPower’s payment obligation will be suspended if Square Butte fails to deliver any power, whether produced or purchased, for a period of one year. Square Butte’scosts consist primarily of debt service, operating and maintenance, depreciation and fuel expenses. As of December 31, 2019, Square Butte had total debtoutstanding of $280.7 million. Annual debt service for Square Butte is expected to be approximately $48.7 million annually through 2023 and $33.6 million in2024, of which Minnesota Power’s obligation is 50 percent. Fuel expenses are recoverable through Minnesota Power’s fuel adjustment clause and include the costof coal purchased from BNI Energy under a long-term contract.ALLETE, Inc. 2019 Form 10-K96NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)Power Purchase and Sales Agreements (Continued)Minnesota Power’s cost of power purchased from Square Butte during 2019 was $82.7 million ($78.0 million in 2018; $75.7 million in 2017). This reflectsMinnesota Power’s pro rata share of total Square Butte costs based on the 50 percent output entitlement. Included in this amount was Minnesota Power’s pro ratashare of interest expense of $8.3 million in 2019 ($9.1 million in 2018; $9.4 million in 2017). Minnesota Power’s payments to Square Butte are approved as apurchased power expense for ratemaking purposes by both the MPUC and the FERC.Minnesota Power has also entered into the following PPAs for the purchase of capacity and energy as of December 31, 2019:CounterpartyQuantityProductCommencementExpirationPricingPPAs Calpine Corporation25 MWCapacityJune 2019May 2026FixedGreat River Energy PPA 150 MWCapacity / EnergyJune 2016May 2020(a)PPA 250 MWCapacityJune 2016May 2020FixedPPA 350 MWCapacityJune 2017May 2020FixedManitoba Hydro PPA 1(b)EnergyMay 2011April 2022Forward Market PricesPPA 250 MWCapacity / EnergyJune 2015May 2020(c)PPA 350 MWCapacityJune 2017May 2020FixedPPA 4 (d)250 MWCapacity / EnergyJune 2020May 2035(e)PPA 5 (d)133 MWEnergy(f)(f)Forward Market PricesMinnkota Power50 MWCapacity / EnergyJune 2016May 2020(g)Nobles 2 (h)(h)Capacity / Energy(h)(h)FixedOliver Wind I(i)EnergyDecember 2006December 2040FixedOliver Wind II(i)EnergyDecember 2007December 2040Fixed(a)The capacity price is fixed and the energy price is based on a formula that includes an annual fixed price component adjusted for changes in a natural gas index, as wellas market prices.(b)The energy purchased consists primarily of surplus hydro energy on Manitoba Hydro's system and is delivered on a non-firm basis. Minnesota Power will purchase atleast one million MWh of energy over the contract term.(c)The capacity and energy prices are adjusted annually by the change in a governmental inflationary index.(d)Agreements are subject to the construction of the GNTL and MMTP. (See Great Northern Transmission Line.)(e)The capacity price is adjusted annually until 2020 by the change in a governmental inflationary index. The energy price is based on a formula that includes an annualfixed component adjusted for the change in a governmental inflationary index and a natural gas index, as well as market prices.(f)The contract term will be the 20-year period beginning on the in-service date for the GNTL. (See Great Northern Transmission Line.)(g)The agreement includes a fixed capacity charge and energy prices that escalate at a fixed rate annually over the term.(h)The PPA provides for the purchase of all output from a 250 MW wind energy facility to be constructed in southwest Minnesota for 20 years beginning upon commercialoperation of the wind energy facility which is currently expected in fourth quarter of 2020. (See Note 4. Regulatory Matters and Note 5. Equity Investments.)(i)The PPAs provide for the purchase of all output from the 50 MW Oliver Wind I and 48 MW Oliver Wind II wind energy facilities.ALLETE, Inc. 2019 Form 10-K97NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)Power Purchase and Sales Agreements (Continued)Minnesota Power has also entered into the following PSAs for the sale of capacity and energy as of December 31, 2019:CounterpartyQuantityProductCommencementExpirationPricingPSAs Basin PSA 1100 MWCapacity / EnergyMay 2010April 2020(a)PSA 2(b)CapacityJune 2022May 2025FixedPSA 3100 MWCapacityJune 2025May 2028FixedMinnkota Power(c)Capacity / EnergyJune 2014December 2026(c)Oconto Electric Cooperative25 MWCapacity / EnergyJanuary 2019May 2026FixedSilver Bay Power(d)EnergyJanuary 2017December 2031(e)(a)The capacity charge is based on a fixed monthly schedule with a minimum annual escalation provision. The energy charge is based on a fixed monthly schedule andprovides for annual escalation based on the cost of fuel. The agreement also allows Minnesota Power to recover a pro rata share of increased costs related to emissionsthat occur during the last five years of the contract.(b)The agreement provides for 75 MW of capacity from June 1, 2022, through May 31, 2023, and increases to 125 MW of capacity from June 1, 2023, through May 31, 2025.(c)Minnesota Power is selling a portion of its entitlement from Square Butte to Minnkota Power, resulting in Minnkota Power’s net entitlement increasing and MinnesotaPower’s net entitlement decreasing until Minnesota Power’s share is eliminated at the end of 2025. Of Minnesota Power’s 50 percent output entitlement, it sold toMinnkota Power approximately 28 percent in 2019 (28 percent in 2018 and in 2017). (See Square Butte PPA.)(d)Silver Bay Power supplies approximately 90 MW of load to Northshore Mining, an affiliate of Silver Bay Power, which has been served predominately through self-generation by Silver Bay Power. Minnesota Power supplied Silver Bay Power with at least 50 MW of energy and Silver Bay Power had the option to purchase additionalenergy from Minnesota Power as it transitioned away from self-generation. In the third quarter of 2019, Silver Bay Power ceased self-generation and Minnesota Powerbegan supplying the full energy requirements for Silver Bay Power.(e)The energy pricing was fixed through 2019 with pricing in later years escalating at a fixed rate annually and adjusted for changes in a natural gas index.Coal, Rail and Shipping Contracts. Minnesota Power has coal supply agreements providing for the purchase of a significant portion of its coal requirementsthrough December 2021. Minnesota Power also has coal transportation agreements in place for the delivery of a significant portion of its coal requirements throughDecember 2021. The costs of fuel and related transportation costs for Minnesota Power’s generation are recoverable from Minnesota Power’s utility customersthrough the fuel adjustment clause.Transmission. We continue to make investments in transmission opportunities that strengthen or enhance the transmission grid or take advantage of ourgeographical location between sources of renewable energy and end users. These include the GNTL, investments to enhance our own transmission facilities,investments in other transmission assets (individually or in combination with others) and our investment in ATC.Great Northern Transmission Line. As a condition of a 250 MW long-term PPA entered into with Manitoba Hydro, construction of additional transmissioncapacity is required. As a result, Minnesota Power is constructing the GNTL, an approximately 220‑mile 500-kV transmission line between Manitoba andMinnesota’s Iron Range that was proposed by Minnesota Power and Manitoba Hydro in order to strengthen the electric grid, enhance regional reliability andpromote a greater exchange of sustainable energy.In a 2016 order, the MPUC approved the route permit for the GNTL, and in 2016, the U.S. Department of Energy issued a presidential permit to cross the U.S.-Canadian border, which was the final major regulatory approval needed before construction in the U.S. could begin. Construction activities commenced in the firstquarter of 2017, and Minnesota Power expects the GNTL to be complete and in-service by mid-2020. The total project cost in the U.S., including substation work,is estimated to be approximately $700 million, of which Minnesota Power’s portion is expected to be approximately $325 million; the difference will be recoveredfrom a subsidiary of Manitoba Hydro as non-shareholder contributions to capital. Total project costs of $633.3 million have been incurred through December 31,2019, of which $339.6 million has been recovered from a subsidiary of Manitoba Hydro.ALLETE, Inc. 2019 Form 10-K98NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)Transmission (Continued)In 2015, Manitoba Hydro submitted the final preferred route and EIS for the MMTP to the Manitoba Conservation and Water Stewardship for siting andenvironmental approval, which was received on April 4, 2019. In 2016, Manitoba Hydro filed an application with the Canadian National Energy Board (NEB)requesting authorization to construct and operate the MMTP, which was recommended for approval on November 15, 2018. On June 14, 2019, Manitoba Hydroannounced Canada’s federal government approved the MMTP project and on August 22, 2019, the NEB granted final pre-construction approvals. Construction onthe MMTP commenced in the third quarter of 2019.The MMTP is subject to legal and regulatory challenges which Minnesota Power is actively monitoring. Manitoba Hydro has informed Minnesota Power that itcontinues to work towards completing the MMTP on schedule. In order to meet the transmission in‑service requirements in PPAs with Minnesota Power, ManitobaHydro had indicated that it would need to start construction of the MMTP by September 2019. We are unable to predict the outcome of the Canadian regulatoryreview process, including the timing thereof or whether any onerous conditions may be imposed, or the timing of the completion of the MMTP, including theimpact of any delays that may result in construction schedule adjustments. In the event the MMTP is delayed and not in-service by June 1, 2020, Minnesota Powerhas construction and related agreements in place with Manitoba Hydro and a Manitoba Hydro subsidiary that will protect Minnesota Power and its customers.Construction of Manitoba Hydro’s Keeyask hydroelectric generation facility, which will provide the power to be sold under PPAs with Minnesota Power andtransmitted on the MMTP and the GNTL, commenced in 2014 and is anticipated to be completely in service by early 2021.Environmental Matters.Our businesses are subject to regulation of environmental matters by various federal, state and local authorities. A number of regulatory changes to the Clean AirAct, the Clean Water Act and various waste management requirements have been promulgated by both the EPA and state authorities over the past several years.Minnesota Power’s facilities are subject to additional requirements under many of these regulations. Minnesota Power is reshaping its generation portfolio, overtime, to reduce its reliance on coal, has installed cost-effective emission control technology, and advocates for sound science and policy during rulemakingimplementation.We consider our businesses to be in substantial compliance with currently applicable environmental regulations and believe all necessary permits have beenobtained. We anticipate that with many state and federal environmental regulations and requirements finalized, or to be finalized in the near future, potentialexpenditures for future environmental matters may be material and require significant capital investments. Minnesota Power has evaluated various environmentalcompliance scenarios using possible outcomes of environmental regulations to project power supply trends and impacts on customers.We review environmental matters on a quarterly basis. Accruals for environmental matters are recorded when it is probable that a liability has been incurred andthe amount of the liability can be reasonably estimated based on current law and existing technologies. Accruals are adjusted as assessment and remediation effortsprogress, or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the Consolidated Balance Sheet atundiscounted amounts and exclude claims for recoveries from insurance or other third parties. Costs related to environmental contamination treatment and cleanupare expensed unless recoverable in rates from customers.Air. The electric utility industry is regulated both at the federal and state level to address air emissions. Minnesota Power’s generating facilities mainly burn low-sulfur western sub-bituminous coal. All of Minnesota Power’s coal-fired generating facilities are equipped with pollution control equipment such as scrubbers,baghouses and low NOX technologies. Under currently applicable environmental regulations, these facilities are substantially compliant with emissionrequirements.Cross-State Air Pollution Rule (CSAPR). The CSAPR requires certain states in the eastern half of the U.S., including Minnesota, to reduce power plant emissionsthat contribute to ozone or fine particulate pollution in other states. The CSAPR does not require installation of controls but does require facilities have sufficientallowances to cover their emissions on an annual basis. These allowances are allocated to facilities from each state’s annual budget, and can be bought and sold.Based on our review of the NOx and SO2 allowances issued and pending issuance, we currently expect generation levels and emission rates will result in continuedcompliance with the CSAPR.ALLETE, Inc. 2019 Form 10-K99NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)Environmental Matters (Continued)National Ambient Air Quality Standards (NAAQS). The EPA is required to review the NAAQS every five years. If the EPA determines that a state’s air quality isnot in compliance with the NAAQS, the state is required to adopt plans describing how it will reduce emissions to attain the NAAQS. None of the compliance costsfor proposed or current NAAQS revisions are expected to be material. Climate Change. The scientific community generally accepts that emissions of GHG are linked to global climate change which creates physical and financial risks.Physical risks could include, but are not limited to: increased or decreased precipitation and water levels in lakes and rivers; increased temperatures; and changes inthe intensity and frequency of extreme weather events. These all have the potential to affect the Company’s business and operations. We are addressing climatechange by taking the following steps that also ensure reliable and environmentally compliant generation resources to meet our customers’ requirements:•Expanding renewable power supply for both our operations and the operations ofothers;•Providing energy conservation initiatives for our customers and engaging in other demand side managementefforts;•Improving efficiency of our generatingfacilities;•Supporting research of technologies to reduce carbon emissions from generating facilities and carbon sequestrationefforts;•Evaluating and developing less carbon intensive future generating assets such as efficient and flexible natural gas‑fired generatingfacilities;•Managing vegetation on right-of-way corridors to reduce potential wildfire or storm damage risks;and•Practicing sound forestry management in our service territories to create landscapes more resilient to disruption from climate-related changes, includingplanting and managing long-lived conifer species.EPA Regulation of GHG Emissions. On June 19, 2019, the EPA finalized several separate rulemakings regarding regulating carbon emissions from electric utilitygenerating units.The EPA repealed the Clean Power Plan (CPP), following a determination by the EPA that the CPP exceeded the EPA’s statutory authority under the Clean AirAct (CAA). The primary reason for this was that the CPP attempted to regulate electric generating unit’s carbon emissions through measures outside of the affectedunit’s direct control. The CPP was first announced as a proposed rule under Section 111(d) of the Clean Air Act for existing power plants entitled “CarbonPollution Emission Guidelines for Existing Stationary Sources: Electric Generating Units”.With the repeal of the CPP, the Affordable Clean Energy Rule was finalized. The rule establishes emissions guidelines for states to use when developing plans tolimit carbon dioxide at coal-fired power plants. The rule identifies heat rate improvements made at individual units as the best system of emission reduction.Affected facilities for Minnesota Power include Boswell Units 3 and 4 and Taconite Harbor 1 and 2. Based on our initial review of the rule, many of the candidateheat rate improvements are already installed on Boswell Units 3 and 4.Additionally, the EPA finalized new regulations for the state implementation of the Affordable Clean Energy Rule and any future emission guidelines issued underCAA Section 111(d). States will have three years to submit State Implementation Plans (SIP), and the EPA has 12 months to review and approve those plans.Since the Affordable Clean Energy Rule allows states considerable flexibility in how to best implement its requirements, Minnesota Power plans to work closelywith the MPCA and the Minnesota Department of Commerce, who are currently co-reviewing the rule as the state develops its SIP. If a state does not submit a SIPor submits a SIP that is unacceptable to the EPA, the EPA will develop a Federal Implementation Plan.Minnesota had already initiated several measures consistent with those called for under the now repealed CPP and finalized Affordable Clean Energy Rule.Minnesota Power continues implementing its EnergyForward strategic plan that provides for significant emission reductions and diversifying its electricitygeneration mix to include more renewable and natural gas energy. (See Note 4. Regulatory Matters.) We are unable to predict the GHG emission compliance costswe might incur as a result of the Affordable Clean Energy Rule and the resulting SIP; however, the costs could be material. Minnesota Power would seek recoveryof additional costs through a rate proceeding.Water. The Clean Water Act requires NPDES permits be obtained from the EPA (or, when delegated, from individual state pollution control agencies) for anywastewater discharged into navigable waters. We have obtained all necessary NPDES permits, including NPDES storm water permits for applicable facilities, toconduct our operations.ALLETE, Inc. 2019 Form 10-K100NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)Environmental Matters (Continued)Steam Electric Power Generating Effluent Limitations Guidelines. In 2015, the EPA issued revised federal effluent limitation guidelines (ELG) for steam electricpower generating stations under the Clean Water Act. It set effluent limits and prescribed BACT for several wastewater streams, including flue gasdesulphurization (FGD) water, bottom ash transport water and coal combustion landfill leachate. In 2017, the EPA announced a two-year postponement of theELG compliance date of November 1, 2018, to November 1, 2020, while the agency reconsiders the bottom ash transport water and FGD wastewater provisions.On April 12, 2019, the U.S. Court of Appeals for the Fifth Circuit vacated and remanded back to the EPA portions of the ELG that allowed for continueddischarge of legacy wastewater and leachate. On November 22, 2019, the EPA published a draft rulemaking that proposes to allow re-use of bottom ash transportwater in FGD scrubber systems with minor discharges related to maintaining system water balance. The proposed rulemaking would also allow future discharge ofFGD wastewater discharge provided it meets new BACT standards. A final rulemaking is anticipated in mid to late 2020.The final ELG's potential impact on Minnesota Power operations is primarily at Boswell. Boswell currently discharges bottom ash contact water through itsNPDES permit, and also has a closed-loop FGD system that does not discharge to surface waters, but may do so in the future if additional water treatmentmeasures are implemented. Under the current ELG rule, bottom ash transport water discharge to surface waters must cease no later than December 31, 2023.Bottom ash contact water will either need to be re-used in a closed-loop process, routed to a FGD scrubber, or the bottom ash handling system will need to beconverted to a dry process. The ELG rule provision regarding these two waste-streams are being reconsidered and may change prior to November 1, 2020. Effortshave been underway at Boswell to reduce the amount of water discharged and evaluate potential re‑use options in its plant processes. The EPA’s additionalreconsideration of legacy wastewater discharge requirements have the potential to reduce timelines for dewatering Boswell’s existing bottom ash pond. The timingof a draft rule addressing legacy wastewater and leachate is currently unknown.At this time, we cannot estimate what compliance costs we might incur related to these or other potential future water discharge regulations; however, the costscould be material, including costs associated with retrofits for bottom ash handling, pond dewatering, pond closure, and wastewater treatment and re-use.Minnesota Power would seek recovery of additional costs through a rate proceeding.Solid and Hazardous Waste. The Resource Conservation and Recovery Act of 1976 regulates the management and disposal of solid and hazardous wastes. We arerequired to notify the EPA of hazardous waste activity and, consequently, routinely submit reports to the EPA.Coal Ash Management Facilities. Minnesota Power stores or disposes coal ash at four of its electric generating facilities by the following methods: storing ash inlined onsite impoundments (ash ponds), disposing of dry ash in a lined dry ash landfill, applying ash to land as an approved beneficial use and trucking ash to statepermitted landfills.Coal Combustion Residuals from Electric Utilities (CCR). In 2015, the EPA published the final rule regulating CCR as nonhazardous waste under Subtitle D of theResource Conservation and Recovery Act (RCRA) in the Federal Register. The rule includes requirements for new landfill and impoundment construction, andregulates closure activities for existing impoundments. In 2017, the EPA announced its intention to formally reconsider certain provisions of the CCR rule underSubtitle D of the RCRA and on March 15, 2018, published the first phase of the proposed rule revisions in the Federal Register. In July 2018, the EPA finalized aportion of those proposed revisions that extended certain deadlines by two years, and established alternative groundwater protection standards for certainconstituents and the potential for risk‑based management options at facilities based on site characteristics. In August 2018, a U.S. District Court for the District ofColumbia decision vacated specific provisions of the CCR rule related to operation of clay-lined impoundments. In response to the August 2018 court decision andoutstanding issues from litigation, the EPA proposed additional rule revisions in August and December 2019.The EPA’s most recent proposed rule revisions are anticipated to be finalized in the first quarter of 2020 and could impact the timing of closure activities forBoswell’s existing clay-lined impoundments. Costs of CCR compliance at Boswell are currently estimated to be between approximately $65 million and$120 million, and are expected to occur primarily over the next 15 years. Compliance costs for CCR at Taconite Harbor and Laskin are not expected to be materialgiven CCR units at these facilities are closed. Minnesota Power continues to work on minimizing costs through evaluation of beneficial re-use and recycling ofCCR and CCR‑related waters. Minnesota Power would seek recovery of additional costs through a rate proceeding.ALLETE, Inc. 2019 Form 10-K101NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)Environmental Matters (Continued)Other Environmental MattersManufactured Gas Plant Site. We are reviewing and addressing environmental conditions at a former manufactured gas plant site located in Superior, Wisconsin,and formerly operated by SWL&P. SWL&P has been working with the Wisconsin Department of Natural Resources (WDNR) in determining the extent andlocation of contamination at the site and surrounding properties. In June 2019, the WDNR approved the site investigation and authorized SWL&P to transition intothe remedial design process. As of December 31, 2019, we have recorded a liability of approximately $7 million for remediation costs at this site (approximately$7 million as of December 31, 2018), and an associated regulatory asset as we expect recovery of these remediation costs to be allowed by the PSCW. We expectto incur these costs over the next four years.Other MattersALLETE Clean Energy. ALLETE Clean Energy’s wind energy facilities have PSAs in place for their entire output and expire in various years between 2020 and2039. As of December 31, 2019, ALLETE Clean Energy has $64.3 million outstanding in standby letters of credit.BNI Energy. As of December 31, 2019, BNI Energy had surety bonds outstanding of $67.7 million related to the reclamation liability for closing costs associatedwith its mine and mine facilities. Although its coal supply agreements obligate the customers to provide for the closing costs, additional assurance is required byfederal and state regulations. BNI Energy’s total reclamation liability is currently estimated at $67.3 million. BNI Energy does not believe it is likely that any ofthese outstanding surety bonds or the letter of credit will be drawn upon.ALLETE Properties. As of December 31, 2019, ALLETE Properties had surety bonds outstanding and letters of credit to governmental entities totaling$4.8 million primarily related to development and maintenance obligations for various projects. The estimated cost of the remaining development work is$2.3 million. ALLETE Properties does not believe it is likely that any of these outstanding surety bonds or letters of credit will be drawn upon.Community Development District Obligations. In 2005, the Town Center District issued $26.4 million of tax-exempt, 6.0 percent capital improvement revenuebonds, and in 2006, the Palm Coast Park District issued $31.8 million of tax-exempt, 5.7 percent special assessment bonds. The capital improvement revenuebonds and the special assessment bonds are payable over 31 years (by May 1, 2036 and 2037, respectively) and are secured by special assessments on the benefitedland. The bond proceeds were used to pay for the construction of a portion of the major infrastructure improvements in each district and to mitigate traffic andenvironmental impacts. The assessments were billed to the landowners beginning in 2006 for the Town Center District and 2007 for the Palm Coast Park District.To the extent that ALLETE Properties still owns land at the time of the assessment, it will incur the cost of its portion of these assessments, based upon itsownership of benefited property.As of December 31, 2019, we owned 53 percent of the assessable land in the Town Center District (68 percent as of December 31, 2018) and none of theassessable land in the Palm Coast Park District (19 percent as of December 31, 2018). As of December 31, 2019, ownership levels, our annual assessments relatedto capital improvement and special assessment bonds for the ALLETE Properties projects within these districts are $1.4 million for Town Center at Palm Coast. Aswe sell property at these projects, the obligation to pay special assessments will pass to the new landowners. In accordance with accounting guidance, these bondsare not reflected as debt on our Consolidated Balance Sheet.Legal Proceedings.We are involved in litigation arising in the normal course of business. Also in the normal course of business, we are involved in tax, regulatory and othergovernmental audits, inspections, investigations and other proceedings that involve state and federal taxes, safety, and compliance with regulations, rate base andcost of service issues, among other things. We do not expect the outcome of these matters to have a material effect on our financial position, results of operationsor cash flows.ALLETE, Inc. 2019 Form 10-K102NOTE 10. COMMON STOCK AND EARNINGS PER SHARESummary of Common StockSharesEquity ThousandsMillionsBalance as of December 31, 201649,560$1,295.3Employee Stock Purchase Plan120.8Invest Direct25719.0Options and Stock Awards223.6Contributions to RSOP503.5Equity Issuance Program1,00065.7Contributions to Pension21613.5Balance as of December 31, 201751,1171,401.4Employee Stock Purchase Plan110.8Invest Direct27720.7Options and Stock Awards572.1Contributions to RSOP473.5Balance as of December 31, 201851,5091,428.5Employee Stock Purchase Plan80.7Invest Direct383.0Options and Stock Awards851.3Contributions to RSOP393.2Balance as of December 31, 201951,679$1,436.7Equity Issuance Program. We entered into a distribution agreement with Lampert Capital Markets, Inc., in 2008, as amended most recently in 2016, with respectto the issuance and sale of up to an aggregate of 13.6 million shares of our common stock, without par value, of which 2.9 million shares remain available forissuance as of December 31, 2019. For the year ended December 31, 2019, no shares of common stock were issued under this agreement (none in 2018; 1.0 millionshares for net proceeds of $65.7 million in 2017). The shares issued in 2017 were offered and sold pursuant to Registration Statement No. 333-212794. On July 31,2019, we filed Registration Statement No. 333-232905, pursuant to which the remaining shares will continue to be offered for sale, from time to time.Contributions to Pension. For the year ended December 31, 2019, we contributed no shares of ALLETE common stock to our pension plan (none in 2018 and 0.2million shares, which had an aggregate value of $13.5 million in 2017). The shares of ALLETE common stock contributed in 2017 were contributed in relianceupon an exemption available pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.Earnings Per Share. We compute basic earnings per share using the weighted average number of shares of common stock outstanding during each period. Thedifference between basic and diluted earnings per share, if any, arises from non-vested restricted stock units and performance share awards granted under ourExecutive Long-Term Incentive Compensation Plan.ALLETE, Inc. 2019 Form 10-K103NOTE 10. COMMON STOCK AND EARNINGS PER SHARE (Continued)Reconciliation of Basic and Diluted Earnings Per Share Dilutive Year Ended December 31BasicSecuritiesDilutedMillions Except Per Share Amounts 2019 Net Income Attributable to ALLETE$185.6 $185.6Average Common Shares51.60.151.7Earnings Per Share$3.59 $3.592018 Net Income Attributable to ALLETE$174.1 $174.1Average Common Shares51.30.251.5Earnings Per Share$3.39 $3.382017 Net Income Attributable to ALLETE$172.2 $172.2Average Common Shares50.80.251.0Earnings Per Share$3.39 $3.38NOTE 11. INCOME TAX EXPENSEIncome Tax Expense Year Ended December 31201920182017Millions Current Income Tax Expense (a) Federal———State$0.1$0.3$0.3Total Current Income Tax Expense$0.1$0.3$0.3Deferred Income Tax Expense (Benefit) Federal (b)$(27.8)$(26.2)$12.1Federal – Remeasurement of Deferred Income Taxes (c)——(13.0)State21.711.015.8Investment Tax Credit Amortization(0.6)(0.6)(0.5)Total Deferred Income Tax Expense (Benefit)$(6.7)$(15.8)$14.4Total Income Tax Expense (Benefit)$(6.6)$(15.5)$14.7(a)For the years ended December 31, 2019, 2018 and 2017, the federal and state current tax expense was minimal due to NOLs which resulted from the bonus depreciationprovisions of the Protecting Americans from Tax Hikes Act of 2015, the Tax Increase Prevention Act of 2014 and the American Taxpayer Relief Act of 2012. Federal andstate NOLs are being carried forward to offset current and future taxable income.(b)For the years ended December 31, 2019, and 2018, the federal tax benefit is primarily due to production tax credits, and the reduction of the federal statutory tax ratefrom 35 percent to 21 percent enacted as part of the TCJA.(c)For the year ended December 31, 2017, the federal deferred income tax benefit is due to the remeasurement of deferred income tax assets and liabilities resulting from theTCJA.ALLETE, Inc. 2019 Form 10-K104NOTE 11. INCOME TAX EXPENSE (Continued).Reconciliation of Taxes from Federal Statutory Rate to Total Income Tax Expense Year Ended December 31201920182017Millions Income Before Non-Controlling Interest and Income Taxes$178.9$158.6$186.9Statutory Federal Income Tax Rate21%21%35%Income Taxes Computed at Statutory Federal Rate$37.6$33.3$65.4Increase (Decrease) in Tax Due to: State Income Taxes – Net of Federal Income Tax Benefit17.28.910.5Production Tax Credits(50.7)(45.0)(45.1)Regulatory Differences – Excess Deferred Tax Benefit (a)(8.8)(8.2)1.2U.S. Water Services Sale of Stock Basis Difference1.7——Change in Fair Value of Contingent Consideration—(0.4)—Remeasurement of Deferred Income Taxes (b)——(13.0)Other(3.6)(4.1)(4.3)Total Income Tax Expense (Benefit)($6.6)($15.5)$14.7(a)Excess deferred income taxes are being returned to customers under both the Average Rate Assumption Method and amortization periods as approved by regulators. (SeeNote 4. Regulatory Matters.)(b)Deferred income tax benefit from the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.The effective tax rate was a benefit of 3.7 percent for 2019 (benefit of 9.8 percent for 2018; expense of 7.9 percent for 2017). The 2019 effective tax rate wasprimarily impacted by production tax credits and the gain on sale of U.S. Water Services. The 2018 effective tax rate was primarily impacted by production taxcredits and the reduction of the federal income tax rate from 35 percent to 21 percent enacted as part of the TCJA. The 2017 effective tax rate was primarilyimpacted by production tax credits and the remeasurement of deferred income tax assets and liabilities resulting from the TCJA.Deferred Income Tax Assets and Liabilities As of December 3120192018Millions Deferred Income Tax Assets Employee Benefits and Compensation$49.9$62.2Property-Related76.995.2NOL Carryforwards63.286.1Tax Credit Carryforwards395.5349.8Power Sales Agreements23.727.5Regulatory Liabilities116.9113.4Other23.425.1Gross Deferred Income Tax Assets749.5759.3Deferred Income Tax Asset Valuation Allowance(70.0)(66.5)Total Deferred Income Tax Assets$679.5$692.8Deferred Income Tax Liabilities Property-Related$713.4$752.5Regulatory Asset for Benefit Obligations54.561.0Unamortized Investment Tax Credits31.632.2Partnership Basis Differences49.440.8Regulatory Assets35.429.9Other8.0—Total Deferred Income Tax Liabilities$892.3$916.4Net Deferred Income Taxes (a)$212.8$223.6(a)Recorded as a net long-term Deferred Income Tax liability on the Consolidated Balance SheetALLETE, Inc. 2019 Form 10-K105NOTE 11. INCOME TAX EXPENSE (Continued).NOL and Tax Credit Carryforwards As of December 3120192018Millions Federal NOL Carryforwards (a)$211.3$319.0Federal Tax Credit Carryforwards$302.5$256.4State NOL Carryforwards (a)$274.8$305.8State Tax Credit Carryforwards (b)$23.4$27.4(a)Pre-tax amounts.(b)Net of a $69.6 million valuation allowance as of December 31, 2019 ($66.0 million as of December 31, 2018).The federal NOL and tax credit carryforward periods expire between 2031 and 2039. We expect to fully utilize the federal NOL and federal tax creditcarryforwards; therefore, no federal valuation allowance has been recognized as of December 31, 2019. The state NOL and tax credit carryforward periods expirebetween 2024 and 2045. We have established a valuation allowance against certain state NOL and tax credits that we do not expect to utilize before theirexpiration.Gross Unrecognized Income Tax Benefits201920182017Millions Balance at January 1$1.6$1.7$2.0Additions for Tax Positions Related to the Current Year0.10.10.1Additions for Tax Positions Related to Prior Years0.10.10.1Reductions for Tax Positions Related to Prior Years(0.4)(0.2)(0.1)Lapse of Statute—(0.1)(0.4)Balance as of December 31$1.4$1.6$1.7Unrecognized tax benefits are the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured pursuantto the “more-likely-than-not” criteria. The unrecognized tax benefit balance includes permanent tax positions which, if recognized would affect the annual effectiveincome tax rate. In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but forwhich there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the effective tax rate but would acceleratethe payment of cash to the taxing authority to an earlier period. The gross unrecognized tax benefits as of December 31, 2019, included $0.6 million of netunrecognized tax benefits which, if recognized, would affect the annual effective income tax rate.As of December 31, 2019, we had no accrued interest (none as of December 31, 2018, and 2017) related to unrecognized tax benefits included on the ConsolidatedBalance Sheet due to our NOL carryforwards. We classify interest related to unrecognized tax benefits as interest expense and tax-related penalties in operatingexpenses on the Consolidated Statement of Income. Interest expense related to unrecognized tax benefits on the Consolidated Statement of Income was immaterialin 2019, 2018 and 2017). There were no penalties recognized in 2019, 2018 or 2017. The unrecognized tax benefit amounts have been presented as reductions to thetax benefits associated with NOL and tax credit carryforwards on the Consolidated Balance Sheet.No material changes to unrecognized tax benefits are expected during the next 12 months.ALLETE and its subsidiaries file a consolidated federal income tax return as well as combined and separate state income tax returns in various jurisdictions.ALLETE has no open federal or state audits, and is no longer subject to federal examination for years before 2016 or state examination for years before 2015.ALLETE, Inc. 2019 Form 10-K106NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANSWe have noncontributory union, non-union and combined retiree defined benefit pension plans covering eligible employees. The combined retiree defined benefitpension plan was created in 2016, to include all union and non-union retirees from the existing plans as of January 1, 2016. The plans provide defined benefitsbased on years of service and final average pay. We contributed $10.4 million in cash to the plans in 2019 ($15.0 million in 2018; $1.7 million in 2017). Wecontributed no shares of ALLETE common stock to the plans in 2019 (none in 2018; 0.2 million shares, which had an aggregate value of $13.5 million in 2017).We also have a defined contribution RSOP covering substantially all employees. The 2019 plan year employer contributions, which are made through theemployee stock ownership plan portion of the RSOP, totaled $10.8 million ($11.4 million for the 2018 plan year; $11.0 million for the 2017 plan year). (SeeNote 10. Common Stock and Earnings Per Share and Note 13. Employee Stock and Incentive Plans.)The non-union defined benefit pension plan was frozen in 2018, and does not allow further crediting of service or earnings to the plan. Further, it is closed to newparticipants. The Minnesota Power union defined benefit pension plan is also closed to new participants.We have postretirement health care and life insurance plans covering eligible employees. In 2010, the postretirement health care plan was closed to employeeshired after January 31, 2011, and the eligibility requirements were amended. In 2014, the postretirement life plan was amended to close the plan to non-unionemployees retiring after December 31, 2015, and in 2018, the postretirement life plan was amended to limit the benefit level for union employees retiring afterDecember 31, 2018. The postretirement health and life plans are contributory with participant contributions adjusted annually. Postretirement health and lifebenefits are funded through a combination of Voluntary Employee Benefit Association trusts (VEBAs), established under section 501(c)(9) of the InternalRevenue Code, and irrevocable grantor trusts. In 2019, no contributions were made to the VEBAs (none in 2018; none in 2017) and no contributions were made tothe grantor trusts (none in 2018; none in 2017).Management considers various factors when making funding decisions such as regulatory requirements, actuarially determined minimum contributionrequirements and contributions required to avoid benefit restrictions for the pension plans. Contributions are based on estimates and assumptions which are subjectto change. On January 15, 2020, we contributed $10.7 million in cash to the defined benefit pension plans. We do not expect to make any additional contributionsto the defined benefit pension plans in 2020, and we do not expect to make any contributions to the defined benefit postretirement health and life plans in 2020.Accounting for defined benefit pension and other postretirement benefit plans requires that employers recognize on a prospective basis the funded status of theirdefined benefit pension and other postretirement plans on their balance sheet and recognize as a component of other comprehensive income, net of tax, the gains orlosses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost.The defined benefit pension and postretirement health and life benefit expense (credit) recognized annually by our regulated utilities are expected to be recovered(refunded) through rates filed with our regulatory jurisdictions. As a result, these amounts that are required to otherwise be recognized in accumulated othercomprehensive income have been recognized as a long-term regulatory asset (regulatory liability) on the Consolidated Balance Sheet, in accordance with theaccounting standards for the effect of certain types of regulation applicable to our Regulated Operations. The defined benefit pension and postretirement health andlife benefit expense (credits) associated with our other operations are recognized in accumulated other comprehensive income.ALLETE, Inc. 2019 Form 10-K107NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Pension Obligation and Funded StatusAs of December 3120192018Millions Accumulated Benefit Obligation$812.0$713.7Change in Benefit Obligation Obligation, Beginning of Year$747.0$793.2Service Cost9.311.0Interest Cost31.929.6Plan Amendments—(1.5)Plan Curtailments—(6.9)Actuarial (Gain) Loss98.3(53.0)Benefits Paid(53.4)(49.5)Participant Contributions20.924.1Obligation, End of Year$854.0$747.0Change in Plan Assets Fair Value, Beginning of Year$598.0$628.2Actual Return on Plan Assets122.1(21.2)Employer Contribution (a)32.940.5Benefits Paid(53.4)(49.5)Fair Value, End of Year$699.6$598.0Funded Status, End of Year$(154.4)$(149.0) Net Pension Amounts Recognized in Consolidated Balance Sheet Consist of: Current Liabilities$(1.6)$(1.6)Non-Current Liabilities$(152.8)$(147.4)(a)Includes Participant Contributions noted above.The pension costs that are reported as a component within the Consolidated Balance Sheet, reflected in long-term regulatory assets or liabilities and accumulatedother comprehensive income, consist of a net loss of $243.4 million and prior service credit of $1.3 million as of December 31, 2019 (net loss of $230.5 millionand prior service credit of $1.4 million as of December 31, 2018).Reconciliation of Net Pension Amounts Recognized in Consolidated Balance SheetAs of December 3120192018Millions Net Loss$(243.4)$(230.5)Prior Service Credit1.31.4Accumulated Contributions in Excess of Net Periodic Benefit Cost (Prepaid Pension Asset)87.780.1Total Net Pension Amounts Recognized in Consolidated Balance Sheet$(154.4)$(149.0)ALLETE, Inc. 2019 Form 10-K108NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Components of Net Periodic Pension CostYear Ended December 31201920182017Millions Service Cost$9.3$11.0$10.2Non-Service Cost Components (a) Interest Cost31.929.632.5Expected Return on Plan Assets(44.2)(44.4)(42.4)Amortization of Loss7.511.49.9Amortization of Prior Service Credit(0.1)(0.1)—Net Pension Cost$4.4$7.5$10.2(a)These components of net periodic pension cost are included in the line item “Other” under Other Income (Expense) on the Consolidated Statement of Income.Other Changes in Pension Plan Assets and Benefit Obligations Recognized inOther Comprehensive Income and Regulatory Assets or LiabilitiesYear Ended December 3120192018Millions Net Loss$20.4$5.8Amortization of Prior Service Credit0.10.1Prior Service Credit Arising During the Period—(1.6)Amortization of Loss(7.5)(11.4)Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities$13.0$(7.1)Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan AssetsAs of December 3120192018Millions Projected Benefit Obligation$854.0$747.0Accumulated Benefit Obligation$812.0$713.7Fair Value of Plan Assets$699.6$598.0ALLETE, Inc. 2019 Form 10-K109NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Postretirement Health and Life Obligation and Funded StatusAs of December 3120192018Millions Change in Benefit Obligation Obligation, Beginning of Year$176.0$190.1Service Cost3.94.7Interest Cost7.37.1Actuarial (Gain) Loss10.5(15.8)Benefits Paid(14.7)(11.6)Participant Contributions3.53.6Plan Amendments (a)(34.6)(2.1)Plan Curtailments(2.1)—Obligation, End of Year$149.8$176.0Change in Plan Assets Fair Value, Beginning of Year$154.3$171.0Actual Return on Plan Assets29.5(9.6)Employer Contribution1.11.0Participant Contributions3.53.6Benefits Paid(14.7)(11.7)Fair Value, End of Year$173.7$154.3Funded Status, End of Year$23.9$(21.7) Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet Consist of: Non-Current Assets$37.5$0.4Current Liabilities$(0.7)$(1.0)Non-Current Liabilities$(12.9)$(21.1)(a)Plan design changes under the other postretirement benefit plans resulted in a decrease to the benefit obligation of $34.6 million in 2019.According to the accounting standards for retirement benefits, only assets in the VEBAs are treated as plan assets in the preceding table for the purpose ofdetermining funded status. In addition to the postretirement health and life assets reported in the previous table, we had $19.1 million in irrevocable grantor trustsincluded in Other Investments on the Consolidated Balance Sheet as of December 31, 2019 ($18.3 million as of December 31, 2018).The postretirement health and life costs that are reported as a component within the Consolidated Balance Sheet, reflected in regulatory long-term assets orliabilities and accumulated other comprehensive income, consist of the following:Unrecognized Postretirement Health and Life CostsAs of December 3120192018Millions Net Loss$16.0$25.0Prior Service Credit(36.3)(4.6)Total Unrecognized Postretirement Health and Life Cost$(20.3)$20.4ALLETE, Inc. 2019 Form 10-K110NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Reconciliation of Net Postretirement Health and Life Amounts Recognized in Consolidated Balance SheetAs of December 3120192018Millions Net Loss (a)$(16.0)$(25.0)Prior Service Credit36.34.6Accumulated Net Periodic Benefit Cost in Excess of Contributions (a)3.6(1.3)Total Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet$23.9$(21.7)(a)Excludes gains, losses and contributions associated with irrevocable grantor trusts.Components of Net Periodic Postretirement Health and Life CostYear Ended December 31201920182017Millions Service Cost$3.9$4.7$4.4Non-Service Cost Components (a) Interest Cost7.37.17.7Expected Return on Plan Assets(10.5)(10.9)(10.5)Amortization of Loss0.50.80.3Amortization of Prior Service Credit(2.8)(2.1)(2.0)Effect of Plan Curtailment(2.1)——Net Postretirement Health and Life Credit$(3.7)$(0.4)$(0.1)(a)These components of net periodic postretirement health and life cost are included in the line item “Other” under Other Income (Expense) on the Consolidated Statement ofIncome.Other Changes in Postretirement Benefit Plan Assets and Benefit ObligationsRecognized in Other Comprehensive Income and Regulatory Assets or LiabilitiesYear Ended December 3120192018Millions Net (Gain) Loss$(10.6)$4.7Prior Service Credit Arising During the Period(34.6)(2.1)Amortization of Prior Service Credit2.82.1Amortization of Loss(0.5)(0.8)Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities$(42.9)$3.9Estimated Future Benefit Payments PensionPostretirementHealth and LifeMillions 2020$51.2$8.62021$50.7$8.42022$50.1$8.22023$49.8$8.02024$49.6$8.0Years 2025 – 2029$239.3$40.1ALLETE, Inc. 2019 Form 10-K111NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)The pension and postretirement health and life costs recorded in regulatory long-term assets or liabilities and accumulated other comprehensive income expectedto be recognized as a component of net pension and postretirement benefit costs for the year ending December 31, 2020, are as follows: PensionPostretirementHealth and LifeMillions Net Loss$12.8$1.0Prior Service Credit(0.2)(8.0)Total Pension and Postretirement Health and Life Cost (Credit)$12.6$(7.0)Assumptions Used to Determine Benefit ObligationAs of December 3120192018Discount Rate Pension3.34 - 3.47%4.39 - 4.53%Postretirement Health and Life3.45%4.47%Rate of Compensation Increase3.70 - 4.10%3.70 - 4.10%Health Care Trend Rates Trend Rate5.00 - 6.20%5.00 - 6.46%Ultimate Trend Rate4.50%4.50%Year Ultimate Trend Rate Effective20382038Assumptions Used to Determine Net Periodic Benefit CostsYear Ended December 31201920182017Discount Rate4.39 - 4.53%3.81 - 3.96%4.53 - 4.57%Expected Long-Term Return on Plan Assets (a) Pension7.25%7.50%7.50%Postretirement Health and Life5.80 - 7.25%6.00 - 7.50%6.00 - 7.50%Rate of Compensation Increase3.70 - 4.10%3.70 - 4.10%3.70 - 4.30%(a)The expected long-term rates of return used to determine net periodic benefit expense for 2020 have been reduced to 6.75 percent for pension expense and 5.40 percent to6.75 percent for postretirement health and life expense.In establishing the expected long-term rate of return on plan assets, we determine the long-term historical performance of each asset class, adjust these for currenteconomic conditions, and utilizing the target allocation of our plan assets, forecast the expected long-term rate of return.The discount rate is computed using a bond matching study which utilizes a portfolio of high quality bonds that produce cash flows similar to the projected costs ofour pension and other postretirement plans.The Company utilizes actuarial assumptions about mortality to calculate the pension and postretirement health and life benefit obligations. The mortalityassumptions used to calculate our pension and other postretirement benefit obligations as of December 31, 2019, considered a modified PRI-2012 mortality tableand mortality projection scale.Sensitivity of a One Percent Change in Health Care Trend Rates One PercentIncreaseOne PercentDecreaseMillions Effect on Total of Postretirement Health and Life Service and Interest Cost$1.8$(1.4)Effect on Postretirement Health and Life Obligation$16.5$(13.6)ALLETE, Inc. 2019 Form 10-K112NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Actual Plan Asset AllocationsPensionPostretirementHealth and Life (a) 2019201820192018Equity Securities34%32%66%62%Fixed Income Securities62%60%33%34%Private Equity1%5%1%4%Real Estate3%3%—— 100%100%100%100%(a)Includes VEBAs and irrevocable grantor trusts.There were no shares of ALLETE common stock included in pension plan equity securities as of December 31, 2019 (no shares as of December 31, 2018).The defined benefit pension plans have adopted a dynamic asset allocation strategy (glide path) that increases the invested allocation to fixed income assets as thefunding level of the plan increases to better match the sensitivity of the plan’s assets and liabilities to changes in interest rates. This is expected to reduce thevolatility of reported pension plan expenses. The postretirement health and life plans’ assets are diversified to achieve strong returns within managed risk. Equitysecurities are diversified among domestic companies with large, mid and small market capitalizations, as well as investments in international companies. Themajority of debt securities are made up of investment grade bonds.Following are the current targeted allocations as of December 31, 2019:Plan Asset Target Allocations PensionPostretirementHealth and Life (a)Equity Securities32%60%Fixed Income Securities56%37%Private Equity6%—Real Estate6%3% 100%100%(a)Includes VEBAs and irrevocable grantor trusts.Fair ValueFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurementdate (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and therisks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily applythe market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques thatmaximize the use of observable inputs and minimize the use of unobservable inputs. These inputs, which are used to measure fair value, are prioritized through thefair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement)and the lowest priority to unobservable inputs (Level 3 measurement). (See Note 7. Fair Value)ALLETE, Inc. 2019 Form 10-K113NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Fair Value (Continued)Pension Fair Value Fair Value as of December 31, 2019Recurring Fair Value MeasuresLevel 1Level 2Level 3TotalMillions Assets: Equity Securities: U.S. Large-cap (a)—$78.5—$78.5U.S. Mid-cap Growth (a)—35.9—35.9U.S. Small-cap (a)—34.6—34.6International—92.1—92.1Fixed Income Securities (a)—425.4—425.4Cash and Cash Equivalents$7.1——7.1Private Equity Funds——$8.08.0Real Estate——18.018.0Total Fair Value of Assets$7.1$666.5$26.0$699.6(a)The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity and fixed income securities indexes.Recurring Fair Value Measures Activity in Level 3Private Equity Funds Real EstateMillions Balance as of December 31, 2018$27.8$20.8Actual Return on Plan Assets0.4(1.3)Purchases, Sales, and Settlements – Net(20.2)(1.5)Balance as of December 31, 2019$8.0$18.0 Fair Value as of December 31, 2018Recurring Fair Value MeasuresLevel 1Level 2Level 3TotalMillions Assets: Equity Securities: U.S. Large-cap (a)—$59.1—$59.1U.S. Mid-cap Growth (a)—28.1—28.1U.S. Small-cap (a)—27.2—27.2International—75.8—75.8Fixed Income Securities (a)—352.9—352.9Cash and Cash Equivalents$6.3——6.3Private Equity Funds——$27.827.8Real Estate——20.820.8Total Fair Value of Assets$6.3$543.1$48.6$598.0(a)The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity and fixed income securities indexes.ALLETE, Inc. 2019 Form 10-K114NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Fair Value (Continued)Recurring Fair Value Measures Activity in Level 3 Private Equity Funds Real EstateMillions Balance as of December 31, 2017 $33.2$25.5Actual Return on Plan Assets 2.80.7Purchases, Sales, and Settlements – Net (8.2)(5.4)Balance as of December 31, 2018 $27.8$20.8Postretirement Health and Life Fair Value Fair Value as of December 31, 2019Recurring Fair Value MeasuresLevel 1Level 2Level 3TotalMillions Assets: Equity Securities: (a) U.S. Large-cap$33.6——$33.6U.S. Mid-cap Growth27.7——27.7U.S. Small-cap14.3——14.3International37.8——37.8Fixed Income Securities: Mutual Funds53.4——53.4Debt Securities—$4.1—4.1Cash and Cash Equivalents1.1——1.1Private Equity Funds——$1.71.7Total Fair Value of Assets$167.9$4.1$1.7$173.7(a)The underlying investments consist of mutual funds (Level 1). Recurring Fair Value Measures Activity in Level 3Private Equity FundsMillions Balance as of December 31, 2018$6.5Actual Return on Plan Assets0.7Purchases, Sales, and Settlements – Net(5.5)Balance as of December 31, 2019$1.7ALLETE, Inc. 2019 Form 10-K115NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)Fair Value (Continued) Fair Value as of December 31, 2018Recurring Fair Value MeasuresLevel 1Level 2Level 3TotalMillions Assets: Equity Securities: (a) U.S. Large-cap$29.1——$29.1U.S. Mid-cap Growth21.2——21.2U.S. Small-cap12.9——12.9International30.4——30.4Fixed Income Securities: Mutual Funds49.6——49.6Debt Securities—$4.0—4.0Cash and Cash Equivalents0.6——0.6Private Equity Funds——$6.56.5Total Fair Value of Assets$143.8$4.0$6.5$154.3(a)The underlying investments consist of mutual funds (Level 1). Recurring Fair Value Measures Activity in Level 3Private Equity FundsMillions Balance as of December 31, 2017$8.2Actual Return on Plan Assets0.9Purchases, Sales, and Settlements – Net(2.6)Balance as of December 31, 2018$6.5Accounting and disclosure requirements for the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) provide guidance for employersthat sponsor postretirement health care plans that provide prescription drug benefits. We provide a fully insured postretirement health benefit, including aprescription drug benefit, which qualifies us for a federal subsidy under the Act. The federal subsidy is reflected in the premiums charged to us by the insurancecompany.NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANSEmployee Stock Ownership Plan. We sponsor an ESOP within the RSOP. Eligible employees may contribute to the RSOP plan as of their date of hire. Thedividends received by the ESOP are distributed to participants. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. ESOPemployer allocations are funded with contributions paid in either cash or the issuance of ALLETE common stock at the Company’s discretion. We recordcompensation expense equal to the cash or current market price of stock contributed. ESOP compensation expense was $10.8 million in 2019 ($11.4 million in2018; $11.0 million in 2017).According to the accounting standards for stock compensation, unallocated shares of ALLETE common stock held and purchased by the ESOP were treated asunearned ESOP shares and not considered outstanding for earnings per share computations. All ESOP shares have been allocated to participants as ofDecember 31, 2019, 2018 and 2017.Stock-Based Compensation.Stock Incentive Plan. Under our Executive Long-Term Incentive Compensation Plan (Executive Plan), share-based awards may be issued to key employeesthrough a broad range of methods, including non-qualified and incentive stock options, performance shares, performance units, restricted stock, restricted stockunits, stock appreciation rights and other awards. There are 0.8 million shares of ALLETE common stock reserved for issuance under the Executive Plan, of which0.7 million of these shares remain available for issuance as of December 31, 2019.ALLETE, Inc. 2019 Form 10-K116NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANS (Continued)Stock-Based Compensation (Continued)The following types of share-based awards were outstanding in 2019, 2018 or 2017:Performance Shares. Under the performance share awards, the number of shares earned is contingent upon attaining specific market and performance goalsover a three-year performance period. Market goals are measured by total shareholder return relative to a group of peer companies while performance goalsare measured by earnings per share growth. In the case of qualified retirement, death, or disability during a performance period, a pro rata portion of the awardwill be earned at the conclusion of the performance period based on the market goals achieved. In the case of termination of employment for any reason otherthan qualified retirement, death, or disability, no award will be earned. If there is a change in control, a pro rata portion of the award will be paid based on thegreater of actual performance up to the date of the change in control or target performance. The fair value of these awards incorporates the probability ofmeeting the total shareholder return goals. Compensation cost is recognized over the three-year performance period based on our estimate of the number ofshares which will be earned by the award recipients.Restricted Stock Units. Under the restricted stock unit awards, shares for participants eligible for retirement vest monthly over a three-year period. Forparticipants not eligible for retirement, shares vest at the end of the three-year period. In the case of qualified retirement, death or disability, a pro rata portionof the award will be earned. In the case of termination of employment for any reason other than qualified retirement, death or disability, no award will beearned. If there is a change in control, a pro rata portion of the award will be earned. The fair value of these awards is equal to the grant date fair value.Compensation cost is recognized over the three-year vesting period based on our estimate of the number of shares which will be earned by the awardrecipients.Employee Stock Purchase Plan (ESPP). Under our ESPP, eligible employees may purchase ALLETE common stock at a 5 percent discount from the marketprice; we are not required to apply fair value accounting to these awards as the discount is not greater than 5 percent.RSOP. The RSOP is a contributory defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended,and qualifies as an employee stock ownership plan and profit sharing plan. The RSOP provides eligible employees an opportunity to save for retirement.The following share-based compensation expense amounts were recognized in our Consolidated Statement of Income for the periods presented.Share-Based Compensation ExpenseYear Ended December 31201920182017Millions Performance Shares$2.3$2.3$2.1Restricted Stock Units0.80.91.0Total Share-Based Compensation Expense$3.1$3.2$3.1Income Tax Benefit$0.9$0.9$0.9There were no capitalized share-based compensation costs during the years ended December 31, 2019, 2018 or 2017.As of December 31, 2019, the total unrecognized compensation cost for the performance share awards and restricted stock units not yet recognized in ourConsolidated Statement of Income was $2.2 million and $0.9 million, respectively. These amounts are expected to be recognized over a weighted-average period of1.6 years.ALLETE, Inc. 2019 Form 10-K117NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANS (Continued)Stock-Based Compensation (Continued)Performance Shares. The following table presents information regarding our non-vested performance shares. 201920182017 Number ofSharesWeighted-AverageGrant DateFair ValueNumber ofSharesWeighted-AverageGrant DateFair ValueNumber ofSharesWeighted-AverageGrant DateFair ValueNon-vested as of January 1129,693$66.12127,898$58.23127,580$52.56Granted (a)60,747$63.8966,557$76.4250,729$62.90Awarded(75,943)$53.44(58,293)$59.82——Unearned Grant Award————(40,801)$46.27Forfeited(14,912)$77.14(6,469)$72.99(9,610)$58.29Non-vested as of December 3199,585$72.78129,693$66.12127,898$58.23(a) Shares granted include accrued dividends.There were approximately 22,000 performance shares granted in January 2020 for the three-year performance period ending in 2022. The ultimate issuance iscontingent upon the attainment of certain goals of ALLETE during the performance periods. The grant date fair value of the performance shares granted was$1.8 million. There were approximately 25,000 performance shares awarded in February 2020. The grant date fair value of the shares awarded was $1.6 million.Restricted Stock Units. The following table presents information regarding our available restricted stock units. 201920182017 Number ofSharesWeighted-AverageGrant DateFair ValueNumber ofSharesWeighted-AverageGrant DateFair ValueNumber ofSharesWeighted-AverageGrant DateFair ValueAvailable as of January 149,771$60.7455,248$56.1854,728$51.79Granted (a)13,927$74.9316,573$71.1121,241$62.20Awarded(21,110)$52.44(18,881)$55.78(17,281)$49.72Forfeited(2,645)$72.43(3,169)$64.92(3,440)$56.00Available as of December 3139,943$69.3049,771$60.7455,248$56.18(a) Shares granted include accrued dividends.There were approximately 14,000 restricted stock units granted in January 2020 for the vesting period ending in 2022. The grant date fair value of the restrictedstock units granted was $1.1 million. There were approximately 15,000 restricted stock units awarded in February 2020. The grant date fair value of the sharesawarded was $0.9 million.NOTE 14. BUSINESS SEGMENTSWe present three reportable segments: Regulated Operations, ALLETE Clean Energy, and U.S. Water Services. We measure performance of our operationsthrough budgeting and monitoring of contributions to consolidated net income by each business segment.Regulated Operations includes three operating segments which consist of our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC.ALLETE Clean Energy is our business focused on developing, acquiring and operating clean and renewable energy projects. U.S. Water Services was ourintegrated water management company, which reflects operating results until the date of its sale on March 26, 2019. We also present Corporate and Other whichincludes two operating segments, BNI Energy, our coal mining operations in North Dakota, and ALLETE Properties, our legacy Florida real estate investment,along with our investment in Nobles 2, other business development and corporate expenditures, unallocated interest expense, a small amount of non-rate basegeneration, approximately 4,000 acres of land in Minnesota, and earnings on cash and investments.ALLETE, Inc. 2019 Form 10-K118NOTE 14. BUSINESS SEGMENTS (Continued)Year Ended December 31201920182017Millions Operating Revenue Residential$139.6$139.7$127.4Commercial145.7147.9139.8Municipal48.654.957.9Industrial476.4469.5470.5Other Power Suppliers153.7170.3161.8CIP Financial Incentive2.83.05.5Other75.674.2100.9Total Regulated Operations1,042.41,059.51,063.8 ALLETE Clean Energy Long-term PSA48.055.256.9Sale of Wind Energy Facility—81.1—Other11.623.623.6Total ALLETE Clean Energy59.6159.980.5 U.S. Water Services (e) Point-in-time19.0100.395.8Contract9.238.336.2Capital Project5.233.519.8Total U.S. Water Services33.4172.1151.8 Corporate and Other Long-term Contract82.885.589.3Other22.321.633.9Total Corporate and Other105.1107.1123.2Total Operating Revenue$1,240.5$1,498.6$1,419.3Net Income (Loss) Attributable to ALLETE (a)(b) Regulated Operations$154.4$131.0$128.4 ALLETE Clean Energy (c)12.433.741.5U.S. Water Services(1.1)3.210.7 Corporate and Other (d)(e)19.96.2(8.4)Total Net Income Attributable to ALLETE$185.6$174.1$172.2(a) Net income in 2017 included a favorable impact of $13.0 million after-tax due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA,which consisted of a $23.6 million after-tax benefit for ALLETE Clean Energy, a $9.2 million after-tax benefit for U.S. Water Services and a $19.8 million after-taxexpense for Corporate and Other. The TCJA did not have an impact on net income for our Regulated Operations as the remeasurement of deferred income tax assets andliabilities primarily resulted in the recording of regulatory assets and liabilities. (See Note 1. Operations and Significant Accounting Policies and Note 4. RegulatoryMatters.)(b)Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation. (c)Net income in 2018 includes the recognition of profit for the sale of a wind energy facility to Montana-Dakota Utilities. (d)Net income in 2017 included a $7.9 million after-tax favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on theallocation of North Dakota investment tax credits. (e) On March 26, 2019, ALLETE sold U.S. Water Services. The Company recognized a gain on the sale of $13.2 million after-tax which is reflected in Corporate and Other.(See Note 1. Operations and Significant Accounting Policies.)ALLETE, Inc. 2019 Form 10-K119NOTE 14. BUSINESS SEGMENTS (Continued)Year Ended December 31201920182017Millions Depreciation and Amortization Regulated Operations$159.4$158.0$132.6 ALLETE Clean Energy26.824.423.4U.S. Water Services2.310.29.8 Corporate and Other13.513.011.7Total Depreciation and Amortization$202.0$205.6$177.5Operating Expenses – Other (a) Corporate and Other—$(2.0)$(0.7)Total Operating Expenses – Other—$(2.0)$(0.7)Interest Expense (b) Regulated Operations$58.9$60.2$57.0 ALLETE Clean Energy2.83.64.2U.S. Water Services0.21.51.6 Corporate and Other8.07.310.3 Eliminations(5.0)(4.7)(5.3)Total Interest Expense$64.9$67.9$67.8Equity Earnings Regulated Operations$21.7$17.5$22.5Income Tax Expense (Benefit) (c) Regulated Operations (d)$(7.1)$(15.5)$27.2 ALLETE Clean Energy(11.9)(1.0)(14.2)U.S. Water Services(0.4)1.0(7.8) Corporate and Other (d)(e)12.8—9.5Total Income Tax Expense (Benefit)$(6.6)$(15.5)$14.7(a)See Note 1. Operations and Significant Accounting Policies.(b)Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are eliminated in consolidation. (c)Income tax expense in 2017 included an income tax benefit of $13.0 million due to the remeasurement of deferred income tax assets and liabilities resulting from the TCJA,which consisted of income tax benefits of $23.6 million for ALLETE Clean Energy and $9.2 million for U.S. Water Services as well as additional income tax expense of$19.8 million for Corporate and Other. The TCJA did not have an impact on income tax expense for our Regulated Operations as the remeasurement of deferred incometax assets and liabilities primarily resulted in the recording of regulatory assets and liabilities. (See Note 1. Operations and Significant Accounting Policies and Note 4.Regulatory Matters.)(d)In 2017, Regulated Operations includes $14.0 million of income tax expense related to North Dakota investment tax credits transferred to Corporate and Other and higherpre-tax income for the favorable impact for the regulatory outcome of the MPUC’s modification of its November 2016 order on the allocation of North Dakota investmenttax credits. There was no impact to net income for Regulated Operations. Corporate and Other recorded an offsetting income tax benefit of $7.9 million in 2017. (SeeNote 4. Regulatory Matters.)(e) On March 26, 2019, ALLETE sold U.S. Water Services. The Company recognized income tax expense of $10.4 million for the gain on sale of U.S. Water Services which isreflected in Corporate and Other. (See Note 1. Operations and Significant Accounting Policies.)ALLETE, Inc. 2019 Form 10-K120NOTE 14. BUSINESS SEGMENTS (Continued)As of December 3120192018Millions Assets Regulated Operations$4,130.8$3,952.5 ALLETE Clean Energy1,001.5606.6U.S. Water Services (a)—295.8 Corporate and Other350.5310.1Total Assets$5,482.8$5,165.0Capital Expenditures Regulated Operations$230.9$211.9 ALLETE Clean Energy385.689.7U.S. Water Services (a)—5.0 Corporate and Other10.112.0Total Capital Expenditures$626.6$318.6(a) On March 26, 2019, ALLETE sold U.S. Water Services. (See Note 1. Operations and Significant Accounting Policies.)NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)Information for any one quarterly period is not necessarily indicative of the results which may be expected for the year.Quarter EndedMar. 31Jun. 30Sept. 30Dec. 31Millions Except Earnings Per Share 2019 Operating Revenue$357.2$290.4$288.3$304.6Operating Income$56.8$36.2$37.0$49.8Net Income Attributable to ALLETE$70.5$34.2$31.2$49.7Earnings Per Share of Common Stock Basic$1.37$0.66$0.60$0.96Diluted$1.37$0.66$0.60$0.962018 Operating Revenue$358.2$344.1$348.0$448.3Operating Income$57.4$36.5$43.3$64.0Net Income Attributable to ALLETE$51.0$31.3$30.7$61.1Earnings Per Share of Common Stock Basic$1.00$0.61$0.59$1.19Diluted$0.99$0.61$0.59$1.182017 Operating Revenue$365.6$353.3$362.5$337.9Operating Income$71.6$54.0$68.0$32.3Net Income Attributable to ALLETE$49.0$36.9$44.9$41.4Earnings Per Share of Common Stock Basic$0.97$0.73$0.88$0.81Diluted$0.97$0.72$0.88$0.81ALLETE, Inc. 2019 Form 10-K121Schedule IIALLETEValuation and Qualifying Accounts and Reserves Balance atBeginning ofPeriodAdditionsDeductionsfromReserves (a)Balance atEnd ofPeriod Charged toIncomeOtherChargesMillions Reserve Deducted from Related Assets Reserve For Uncollectible Accounts 2017 Trade Accounts Receivable$3.1$0.8—$1.8$2.1Finance Receivables – Long-Term—————2018 Trade Accounts Receivable$2.1$0.9—$1.3$1.7Finance Receivables – Long-Term—————2019 Trade Accounts Receivable$1.7$(0.1)—$0.7$0.9Finance Receivables – Long-Term—————Deferred Asset Valuation Allowance 2017 Deferred Tax Assets$43.0$17.0——$60.02018 Deferred Tax Assets$60.0$6.5——$66.52019 Deferred Tax Assets$66.5$3.5——$70.0(a)Includes uncollectible accounts written-off.ALLETE, Inc. 2019 Form 10-K122Exhibit 4(g) TERM LOAN AGREEMENTDated as of January 10, 2020amongALLETE, INC.,as the BorrowerandBANK OF AMERICA, N.A.,as the Lender Exhibit 4(g)TABLE OF CONTENTSPageARTICLE I DEFINITIONS AND ACCOUNTING TERMS 11.01Defined Terms. 11.02Other Interpretive Provisions. 151.03Accounting Terms. 151.04Rounding. 161.05 Times of Day; Rates. 16ARTICLE II TERM COMMITMENT AND TERM BORROWINGS 162.01Term Loans. 162.02Term Borrowings, Conversions and Continuations of Term Loans 172.03Optional Prepayments. 172.04Termination or Reduction of Term Commitment. 182.05Repayment of Term Loans. 182.06Interest and Default Rate. 182.07Fees. 192.08Computation of Interest and Fees. 192.09Payments Generally. 19ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 193.01Taxes. 193.02Illegality. 203.03Inability to Determine Rates. 203.04Increased Costs; Reserves on Eurodollar Rate Loans. 213.05Compensation for Losses. 223.06Survival. 23ARTICLE IV CONDITIONS PRECEDENT TO TERM BORROWINGS 234.01Conditions of Initial Term Borrowing. 234.02Conditions to all Term Borrowings. 24ARTICLE V REPRESENTATIONS AND WARRANTIES 245.01Organization; Powers. 245.02Authorization; Enforceability. 255.03Governmental Approvals; No Conflicts. 255.04Financial Condition; No Material Adverse Change. 255.05Litigation. 255.06Environmental Matters. 265.07Investment Company Status. 265.08ERISA. 265.09Disclosure. 265.10Subsidiaries. 265.11Use of Proceeds; Federal Reserve Regulations. 275.12EEA Financial Institutions. 275.13Anti-Money Laundering and Anti-Terrorism Finance Laws 275.14Foreign Corrupt Practices Act. 275.15Sanctions Laws. 27Exhibit 4(g)5.16Plan Assets; Prohibited Transactions. 28ARTICLE VI AFFIRMATIVE COVENANTS 286.01Financial Statements and Other Information. 286.02Notices of Material Events. 296.03Legal Existence 306.04Taxes. 306.05Insurance. 306.06Condition of Property. 306.07Observance of Legal Requirements. 30ARTICLE VII NEGATIVE COVENANTS 317.01Liens. 317.02Merger; Consolidation. 327.03Transactions with Affiliates. 337.04Permitted Hedge Agreements. 337.05Financial Covenant. 337.06Anti-Money Laundering and Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act; Sanctions Laws;Restricted Person.. 347.07Use of Proceeds.. 34ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 348.01Events of Default. 348.02Remedies upon Event of Default. 368.03Application of Funds. 37ARTICLE IX RESERVED 37ARTICLE X MISCELLANEOUS 3710.01Amendments, Etc. 3710.02Notices; Effectiveness; Electronic Communications. 3710.03No Waiver; Cumulative Remedies; Enforcement. 3810.04Expenses; Indemnity; Damage Waiver. 3810.05Payments Set Aside. 4010.06Successors and Assigns. 4010.07Treatment of Certain Information; Confidentiality. 4110.08Right of Setoff. 4110.09Interest Rate Limitation. 4210.10Counterparts; Integration; Effectiveness. 4210.11Survival of Representations and Warranties. 4210.12Severability. 4310.13Governing Law; Jurisdiction; Etc. 4310.14Waiver of Jury Trial. 4410.15Acknowledgment Regarding Any Support QFCs. 4410.16No Advisory or Fiduciary Responsibility. 4510.17Electronic Execution. 4610.18USA PATRIOT Act Notice. 46Exhibit 4(g)SCHEDULESSchedule 1.01 Certain Addresses for NoticesSchedule 5.05/5.06 Disclosed MattersSchedule 5.10 List of SubsidiariesEXHIBITSExhibit A Form of Compliance CertificateExhibit B Form of Loan NoticeExhibit C Form of Notice of Loan Prepayment1CHAR1\1686577v5TERM LOAN AGREEMENTThis TERM LOAN AGREEMENT is entered into as of January 10, 2020, between ALLETE, INC., a Minnesota corporation, as theBorrower, and BANK OF AMERICA, N.A., as the Lender.PRELIMINARY STATEMENTS:WHEREAS, the Borrower has requested that the Lender make loans and other financial accommodations to the Borrower.WHEREAS, the Lender has agreed to make such loans and other financial accommodations to the Borrower on the terms and subjectto the conditions set forth herein.NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant andagree as follows:ARTICLE IDEFINITIONS AND ACCOUNTING TERMS1.01 Defined Terms.As used in this Agreement, the following terms shall have the meanings set forth below:“Accountants” means PricewaterhouseCoopers, L.L.P. or another registered public accounting firm of recognized national standing.“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries,Controls or is Controlled by or is under common Control with the Person specified.“Agreement” means this Term Loan Agreement.“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of itsSubsidiaries from time to time concerning or relating to bribery or corruption.“Anti-Terrorism Laws” has the meaning assigned to such term in Section 5.13.Exhibit 4(g)“Applicable Rate” means (a) with respect to Eurodollar Rate Loans, 0.55% per annum and (b) with respect to Base Rate Loans,0.00% per annum.“Availability Period” means the period from and including the Closing Date to the earlier of (a) the Maturity Date for the TermFacility and (b) the date of termination of the Term Commitment of the Lender to make Term Loans pursuant to Section 8.02.“Bank of America” means Bank of America, N.A. and its successors.“Base Rate” means for any day a fluctuating rate of interest per annum equal to the highest of (a) the Federal Funds Rate plus one-half of one percent (0.50%), (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its“prime rate,” and (c) the Eurodollar Rate plus one percent (1.00%); and if the Base Rate shall be less than zero, such rate shall be deemedzero for purposes of this Agreement. The “prime rate” is a rate set by Bank of America based upon various factors including Bank ofAmerica’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans,which may be priced at, above, or below such announced rate. Any change in such prime rate announced by Bank of America shall takeeffect at the opening of business on the day specified in the public announcement of such change.“Base Rate Loan” means a Term Loan that bears interest based on the Base Rate.“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the BeneficialOwnership Regulation.“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.“Board” means the Board of Governors of the Federal Reserve System of the United States of America.“Borrower” has the meaning specified in the introductory paragraph hereto.“Borrower Financial Statements” has the meaning assigned to such term in Section 5.04(a).“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close underthe laws of, or are in fact closed in, the state where the Lender’s Office is located and, if such day relates to any Eurodollar Rate Loan, meansany such day that is also a London Banking Day.“Capital Lease Obligations” means with respect to any Person, obligations of such Person to pay rent or other amounts under anylease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations arerequired to be classified and accounted for as capital lease obligations or finance lease obligations on a balance sheet of such Personunder GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP,provided that no power purchase agreement or operating lease shall constitute a Capital Lease Obligation. “Change in Control” means the occurrence of any of the following: (a) the consummation of any transaction the result of which isthat any “person” or “group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 but excluding any employeebenefit plan of the Borrower or its Subsidiaries, and any Person acting in its capacity as trustee, agent or other fiduciary or administrator ofany such plan) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of morethan 30% of the total voting power in the aggregate of all classes of the Voting Securities of the Borrower then outstanding, (b) during anyperiod of two consecutive calendar years, individuals who at the beginning of such period constituted the board of directors of the Borrowercease for any reason to constitute a majority of the directors of the Borrower then in office unless (i) such new directors were elected ornominated by a majority of the directors of the Borrower who constituted the board of directors of the Borrower at the beginning of suchperiod or (ii) the reason for such directors failing to constitute a majority is a result of retirement by directors due to age, death or disability or(c) any event or condition relating to a change of control of the Borrower shall occur which requires or permits the holder or holders ofindebtedness of theExhibit 4(g)Borrower in an aggregate principal amount of $35,000,000 or more, or any agent or trustee for such holders, to require payment, purchase,redemption or defeasance of such indebtedness prior to its expressed maturity.“Change in Law” means the occurrence, after the Closing Date, of any of the following: (a) the adoption or taking effect of any law,rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation orapplication thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or nothaving the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (i) the Dodd-FrankWall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewithand (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on BankingSupervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III,shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.“Closing Date” means the date hereof.“CoBank Equities” means all of the Borrower’s cash patronage, stock and other equities in CoBank ACB acquired in connection withits patronage loan from CoBank ACB (or its Affiliate).“Code” means the Internal Revenue Code of 1986.“Compliance Certificate” means a certificate substantially in the form of Exhibit A.“Consolidated Assets” means the total amount of assets shown on the consolidated balance sheet of the Borrower and itsSubsidiaries, determined in accordance with GAAP and prepared as of the end of the fiscal quarter then most recently ended forwhich financial statements have been filed with the SEC.“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of aPerson, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” havemeanings correlative thereto.“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy,assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws ofthe United States or other applicable jurisdictions from time to time in effect.“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time,or both, would be an Event of Default.“Default Rate” means (a) with respect to any Obligation for which a rate is specified, a rate per annum equal to two percent (2%) inexcess of the rate otherwise applicable thereto and (b) with respect to any Obligation for which a rate is not specified or available, a rate perannum equal to the Base Rate plus the Applicable Rate for Base Rate Loans plus two percent (2%), in each case, to the fullest extentpermitted by applicable law.“Disclosed Matters” means the actions, suits, proceedings and environmental matters disclosed in (a) Schedule 5.05/5.06, (b) thecurrent and periodic reports filed by the Borrower from time to time with the SEC pursuant to the requirements of the Securities ExchangeAct of 1934 and the rules and regulations promulgated thereunder, or (c) disclosed by the Borrower to the Lender in writing.“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible or forwhich it is exchangeable at the option of the holder thereof), or upon the happening of any event, matures (excluding any maturity as a resultof an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or isredeemable at the unconditional sole option of the holderExhibit 4(g)thereof (other than solely for Equity Interests that do not constitute Disqualified Stock), in whole or in part, on or prior to the date that is 180days after the Maturity Date.“Dollar” and “$” mean lawful money of the United States.“EEA Financial Institution” means (a) any institution established in any EEA Member Country which is subject to the supervision ofan EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause(a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clauses(a) or (b) of this definition and is subject to consolidated supervision with its parent.“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authorityof any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.“Environmental Law” means any and all applicable present and future treaties, laws, rules, regulations, codes, ordinances, orders,decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority,relating in any way to the environment, preservation or reclamation of natural resources, the presence, management, release or threatenedrelease of any Hazardous Material or to health and safety matters.“Equity Interest” means (a) shares of corporate stock, partnership interests, limited liability company membership interests, and anyother interest that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing Person,and (b) all warrants, options or other rights to acquire any Equity Interest set forth in the foregoing clause (a).“ERISA” means the Employee Retirement Income Security Act of 1974.“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower or any Subsidiary, istreated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of theCode, is treated as a single employer under Section 414 of the Code.“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder withrespect to a Plan (other than an event for which the 30 day notice period is waived), (b) any failure to satisfy the minimum funding standardsof Section 412 of the Code or Section 302 of ERISA with respect to any Plan, whether or not waived, (c) the incurrence by the Borrower, anySubsidiary or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan, (d) the receipt by theBorrower, any Subsidiary or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminateany Plan or Plans or to appoint a trustee to administer any Plan, (e) the incurrence by the Borrower, any Subsidiary or any ERISA Affiliate ofany liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan or (f) the receipt by the Borrower, anySubsidiary or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower, any Subsidiary or any ERISAAffiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected tobe, insolvent or in reorganization, within the meaning of Title IV of ERISA.“Eurodollar Rate” means:(a) for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to the London Interbank OfferedRate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate forDollars for a period equal in length to such Interest Period), as published on the applicable Bloomberg screen page (or such othercommercially available source providingExhibit 4(g)such quotations as may be designated by the Lender from time to time) (in such case, the “LIBOR Rate”) at or about 11:00 a.m.,London time, two (2) Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the firstday of such Interest Period) with a term equivalent to such Interest Period; and(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to the LIBOR Rate, ator about 11:00 a.m., London time, two (2) Business Days prior to such date for Dollar deposits with a term of one (1) monthcommencing that day;provided that (i) to the extent a comparable or successor rate is approved by the Lender in connection herewith, the approved rateshall be applied in a manner consistent with market practice; provided, further that to the extent such market practice is notadministratively feasible for the Lender, such approved rate shall be applied in a manner as otherwise reasonably determined by theLender and (ii) if the Eurodollar Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.“Eurodollar Rate Loan” means a Term Loan that bears interest at a rate based on clause (a) of the definition of “Eurodollar Rate.”“Event of Default” has the meaning specified in Section 8.01.“Excluded Taxes” means any taxes measured by net income (however denominated), franchise taxes, and branch profits taxesimposed on or with respect to the Lender or required to be withheld or deducted from a payment to the Lender, in each case, (a) imposed as aresult of the lender being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdictionimposing such tax (or any political subdivision thereof) or (b) that are Other Connection Taxes.“Facility Termination Date” means the date as of which all of the following shall have occurred: (a) the Term Commitment hasterminated and (b) all Obligations have been paid in full (other than contingent indemnification obligations).“FASB ASC” means the Accounting Standards Codification of the Financial Accounting Standards Board.“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal fundstransactions with members of the Federal Reserve System, as published by the Federal Reserve Bank of New York on the Business Day nextsucceeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on suchtransactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so publishedon such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to awhole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Lender.“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.“Fitch” means Fitch Ratings, Inc. or any successor thereto.“Funding Indemnity Letter” means a funding indemnity letter in form and substance reasonably acceptable to the Lender.“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting PrinciplesBoard and the American Institute of Certified Public Accountants and in the statements and pronouncements of the Financial AccountingStandards Board or in such other statement by such other entity as may be approved by a significant segment of the accounting profession,which are applicable to the circumstances as of the date of determination, consistently applied; provided that in the event Borrower convertsto use the International Financial Reporting Standards by the International Accounting Standards Board or other method of accounting, asmay hereafter be required or permitted by the SEC, then the term “GAAP” as used in this Agreement shall be deemedExhibit 4(g)to mean and refer to such International Financial Reporting Standards or such other method of accounting instead, which are applicable to thecircumstances as of the date of determination, consistently applied.“Governmental Authority” means the government of the United States, any other nation or any political subdivision thereof, whetherstate or local, and any agency, commission, exchange, association, board, authority, instrumentality, regulatory body, court, central bank orother entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government(including supranational bodies such as the European Union or European Central Bank).“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing orhaving the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner,whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supplyfunds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of)any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of suchIndebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statementcondition or liquidity of the primary obligor as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an accountparty in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation, provided that the term“Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guaranteed” has ameaning correlative thereto. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinableamount of the primary obligation in respect of which such Guarantee is made (or, if less, the maximum amount of such primary obligation forwhich such Person may be liable pursuant to the terms of the instrument evidencing such Guarantee) or, if not stated or determinable, themaximum reasonably anticipated liability in respect thereof as determined by such Person in good faith, provided that, notwithstandinganything in this definition to the contrary, the amount of any Guarantee of a Person in respect of any Permitted Hedge Agreement by anyother Person with a counterparty shall be deemed to be the maximum reasonably anticipated liability of such other Person, as determined ingood faith by such Person, net of any obligation or liability of such counterparty in respect of any Permitted Hedge Agreement with suchPerson, provided further that the obligations of such other Person under such Permitted Hedge Agreement with such counterparty shall beterminable at the election of such other Person in the event of a default by such counterparty in its obligations to such other Person.“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or otherpollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.“Hedge Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity priceprotection agreement or other interest rate, currency exchange rate or commodity price hedge, future, forward, swap, option, cap, floor, collaror similar agreement or arrangement (including both physical and financial settlement transactions).“Immaterial Subsidiary” means a Subsidiary that (a) has consolidated total assets with a book value not exceeding 5% ofConsolidated Assets as of the end of the most recent fiscal quarter for which financial statements have been filed with the SEC and (b) hadtotal revenues not exceeding 5% of the Borrower’s consolidated total revenues for the period ending on the last day of such fiscal quarter.“Immaterial Transaction” means any transaction or event described in Section 8.01(i) or Section 8.01(j) so long as, after giving effectto such transaction or event, all Subsidiaries that have become subject to such transactions or events during the 12-month period ending onthe date of such transaction or event (a) had consolidated total assets with a fair market value not exceeding 5% of Consolidated Assets as ofthe end of the most recent fiscal quarter for which financial statements have been filed with the SEC and (b) had total revenues not exceeding5% of the Borrower’s consolidated total revenues for the period ending on the last day of such fiscal quarter.Exhibit 4(g)“Indebtedness” means as to any Person, at a particular time, all items which constitute, without duplication, (a) indebtedness forborrowed money or the deferred purchase price of property (excluding trade payables incurred in the ordinary course of business andexcluding any such obligations payable solely through the Borrower’s issuance of Equity Interests (other than the Disqualified Stock andEquity Interests convertible into Disqualified Stock)), (b) indebtedness evidenced by notes, bonds, debentures or similar instruments, (c)obligations with respect to any conditional sale or title retention agreement, (d) indebtedness arising under acceptance facilities and theamount available to be drawn under all letters of credit issued for the account of such Person and, without duplication, all drafts drawnthereunder to the extent such Person shall not have reimbursed the issuer in respect of the issuer’s payment of such drafts, (e) all liabilitiessecured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for thepayment thereof, provided that the amount of such liabilities included for purposes of this definition will be the amount equal to the lesser ofthe fair market value of such property and the amount of the liabilities so secured, (f) indebtedness in respect of Disqualified Stock valued atthe greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends, (g) liabilities in respect of any obligation(contingent or otherwise) to purchase, redeem, retire, acquire or make any other payment in respect of any shares of equity securities or anyoption, warrant or other right to acquire any shares of equity securities, (h) obligations under Capital Lease Obligations, (i) Guarantees ofsuch Person in respect of Indebtedness of others, and (i) to the extent not otherwise included, all net obligations of such Person underPermitted Hedge Agreements.“Indemnified Taxes” means (a) taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on accountof any obligation of the Borrower under any Loan Document and (b) to the extent not otherwise described in (a) hereof, Other Taxes.“Indemnitees” has the meaning specified in Section 10.04(b).“Information” has the meaning specified in Section 10.07.“Intellectual Property” means all copyrights, trademarks, service marks, patents, trade names and service names.“Interest Payment Date” means, (a) as to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Term Loanand the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three (3) months, the respectivedates that fall every three (3) months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any BaseRate Loan, the last Business Day of each March, June, September and December and the Maturity Date.“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursedor converted to or continued as a Eurodollar Rate Loan and ending on the date one (1), two (2), three (3) or six (6) months thereafter (in eachcase, subject to availability), as selected by the Borrower in its Loan Notice or such other period that is twelve months or less requested bythe Borrower and consented to by the Lender; provided that:(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the nextsucceeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end onthe next preceding Business Day;(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is nonumerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of thecalendar month at the end of such Interest Period; and(c) no Interest Period shall extend beyond the Maturity Date.“Investment Grade Rating” has the meaning assigned to such term in Section 7.02.“Lender” means Bank of America, N.A. and its successors and assigns.Exhibit 4(g)“Lender’s Office” means the Lender’s address and, as appropriate, account as set forth on Schedule 1.01(a), or such other address oraccount as the Lender may from time to time notify the Borrower; which office may include any Affiliate of the Lender or any domestic orforeign branch of the Lender or such Affiliate. “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien (statutory or other), assignment, deposit arrangement,pledge, hypothecation, encumbrance or preference, priority, charge or other security interest in, on or of such asset, (b) the interest of avendor or a lessor under any conditional sale agreement, capital lease or title retention agreement relating to such asset and (c) in the case ofsecurities, any purchase option, call or similar right of a third party with respect to such securities.“Loan Documents” means, collectively, this Agreement and all other certificates, agreements, documents and instruments executedand delivered, in each case, by or on behalf of the Borrower pursuant to the foregoing.“Loan Notice” means a notice of (a) a Term Borrowing, (b) a conversion of Term Loans from one Type to the other, or (c) acontinuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit B orsuch other form as may be approved by the Lender (including any form on an electronic platform or electronic transmission system as shallbe approved by the Lender), appropriately completed and signed by a Responsible Officer of the Borrower“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the Londoninterbank eurodollar market.“Margin Stock” has the meaning assigned to such term in Regulation U.“Material Adverse Change” means a material adverse change in (a) the financial condition, operations, business or property of (i) theBorrower or (ii) the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under the LoanDocuments or (c) the ability of the Lender to enforce its rights and remedies under the Loan Documents.“Material Adverse Effect” means a material adverse effect on (a) the financial condition, operations, business or property of (i) theBorrower or (ii) the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under the LoanDocuments or (c) the ability of the Lender to enforce its rights and remedies under the Loan Documents.“Material Obligations” means as of any date, Indebtedness (other than Indebtedness under the Loan Documents) or operating leasesof any one or more of the Borrower or any Subsidiary or, in the case of the Borrower only, any Guarantee, in an aggregate principal amountexceeding $35,000,000. For purposes of determining Material Obligations, the “principal amount” of Indebtedness, operating leases orGuarantees at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or suchSubsidiary, as applicable, would be required to pay if such Indebtedness, operating leases or Guarantees became due and payable on suchday.“Maturity Date” means February 10, 2021; provided, however, that, if such date is not a Business Day, the Maturity Date shall be thenext preceding Business Day.“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.“Mortgage” means the Mortgage and Deed of Trust, dated as of September 1, 1945, among the Borrower, The Bank of New YorkMellon (formerly Irving Trust Company) and Andres Serrano (successor to Philip L. Watson), Trustees.“MPUC” means the Minnesota Public Utilities Commission or any Governmental Authority succeeding to the functions thereof.“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.Exhibit 4(g)“Notice of Loan Prepayment” means a notice of prepayment with respect to a Term Loan, which shall be substantially in the form ofExhibit C or such other form as may be approved by the Lender (including any form on an electronic platform or electronic transmissionsystem as shall be approved by the Lender), appropriately completed and signed by a Responsible Officer of the Borrower.“Obligations” means (a) all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under anyLoan Document or otherwise with respect to any Term Loan and (b) all costs and expenses incurred in connection with enforcement andcollection of the foregoing, including the fees, charges and disbursements of counsel, in each case whether direct or indirect (including thoseacquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, expenses andfees that accrue after the commencement by or against the Borrower or any Affiliate thereof pursuant to any proceeding under any DebtorRelief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, expenses and fees are allowed claimsin such proceeding.“OFAC” has the meaning assigned to such term in Section 5.15.“Other Connection Taxes” means taxes imposed as a result of a present or former connection between the Lender and the jurisdictionimposing such tax (other than connections arising from the Lender having executed, delivered, become a party to, performed its obligationsunder, received payment under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced anyLoan Document, or sold or assigned an interest in any Term Loan or Loan Document).“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar taxes that arise fromany payment made under from the execution, delivery performance, enforcement or registration of, from the receipt or perfection of asecurity interest under, or otherwise with respect to, any Loan Document, except any such taxes that are Other Connection Taxes imposedwith respect to any assignment.“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA.“Permitted Encumbrances” means:(a)Liens imposed by law for taxes, assessments or similar charges incurred in the ordinary course of business that arenot yet due or are being contested in compliance with Section 6.04, provided that enforcement of such Liens is stayed pending suchcontest;(b)landlords’, vendors’, carriers’, warehousemen’s, mechanics’, materialmen’s, contractors’, repairmen’s and otherlike Liens imposed by law, arising in the ordinary course of business and securing obligations which are not delinquent or are beingcontested, provided that enforcement of such Liens is stayed pending such contest;(c)pledges and deposits made in the ordinary course of business in compliance with workers’ compensation,unemployment insurance and other social security laws or regulations (but not ERISA);(d)pledges and deposits to secure the performance of bids, trade contracts, leases, purchase agreements, governmentcontracts, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in theordinary course of business, and other than promissory notes and contracts for the repayment of borrowed money;(e)Liens (including contractual security interests) in favor of a financial institution (including securities firms)encumbering deposit accounts or checks or instruments for collection, commodity accounts or securities accounts (including the rightof set-off) at or held by such financial institution in the ordinary course of its commercial business and which secure only liabilitiesowed to such financial institution arising out of or resulting from its maintenance of such account or otherwise are within the generalparameters customary in the financial industry;(f)judgment liens in respect of judgments that do not constitute an Event of Default under Section 8.01(k);Exhibit 4(g)(g)any interest of a lessor or licensor in property under an operating lease under which the Borrower or anySubsidiary is lessee or licensee, and any restriction or encumbrance to which the interest of such lessor or licensor is subject;(h)Liens arising from filed UCC-1 financing statements relating solely to leases not prohibited by this Agreement;(i)leases or subleases granted to others that do not materially interfere with the ordinary conduct of business of theBorrower and its Subsidiaries;(j)licenses of Intellectual Property granted by the Borrower or any Subsidiary in the ordinary course of business andnot materially interfering with the ordinary conduct of the business of the Borrower and its Subsidiaries;(k)easements, servitudes (contractual and legal), zoning restrictions, rights of way, encroachments, minor defects andirregularities in title and other similar encumbrances on real property imposed by law or arising in the ordinary course of businessthat do not secure any monetary obligations and do not render title to such property unmarketable or materially interfere with theability of the Borrower and its Subsidiaries, as the case may be, to utilize their respective properties for their intended purposes;(l)Liens securing obligations, neither assumed by the Borrower or any Subsidiary nor on account of which theBorrower or any Subsidiary customarily pays interest, upon real estate on which the Borrower or any Subsidiary has a right-of-way,easement, franchise or other servitude or of which the Borrower or any Subsidiary is the lessee, for the purpose of locatingtransmission and distribution lines and related support structures, pipe lines, substations, measuring stations, tanks, pumping ordelivery equipment or similar equipment, or service buildings incidental to any of the foregoing;(m)Liens with respect to properties involved in the production of oil, gas and other minerals, unitization and poolingagreements and orders, operating agreements, royalties, reversionary interests, preferential purchase rights, farmout agreements, gasbalancing agreements and other agreements, in each case that are customary in the oil, gas and mineral production business in thegeneral area of such property and that are entered into in the ordinary course of business;(n)Liens in favor of Governmental Authorities encumbering assets acquired in connection with a government grantprogram, and the right reserved to, or vested in, any Governmental Authority by the terms of any right, power, franchise, grant,license, or permit, or by any provision of law, to purchase, condemn, recapture or designate a purchaser of any property;(o)Liens on Margin Stock to the extent that a prohibition on such Liens would violate Regulation U;(p)Liens on any cash collateral for letters of credit issued under the Borrower’s primary revolving credit facility uponthe occurrence of an event of default thereunder or to cover an issuing lender’s credit exposure under such facility with respect to adefaulting lender thereunder;(q)customary Liens for the fees and expenses of trustees and escrow agents pursuant to any indenture, escrowagreement or similar agreement establishing a trust or escrow arrangement;(r)agreements for and obligations (other than repayment of borrowed money) relating to the joint or commonownership, operation, and use of property, including Liens under joint venture or similar agreements securing obligations incurred inthe conduct of operations or consisting of a purchase option, call or right of first refusal with respect to the Equity Interests in suchjointly owned Person; and(s)Liens granted on cash or invested funds constituting proceeds of any sale or disposition of property deposited intoescrow accounts to secure indemnification, adjustment of purchase price or similar obligations incurred in connection with such saleor disposition, in an amount not to exceed the amount of gross proceeds received from such sale or disposition.(t)“Permitted Hedge Agreement” means any Hedge Agreement engaged in by a Person as part of its normal business operations withthe purpose and effect of hedging and protecting such Person against fluctuations or adverse changes in the prices of electricity, gas, fuel orother commodities, interest rates or currency exchange rates, which Hedge Agreement is part of a risk management strategy and not forpurposes of speculation and not intended primarily as a borrowing of funds.Exhibit 4(g)“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership,Governmental Authority or other entity.“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA orSection 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower, any Subsidiary or any ERISA Affiliate is (or, if suchplan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time totime.“Rating Agencies” means Fitch, Moody’s and S&P (or, if any of the foregoing ceases to provide Senior Debt Ratings ascontemplated hereby, such other nationally recognized rating agency as shall be agreed by the Borrower and the Lender).“Regulation T” means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunderor thereof.“Regulation U” means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunderor thereof.“Regulation W” means Regulation W of the Board as from time to time in effect and all official rulings and interpretations thereunderor thereof.“Regulation X” means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunderor thereof.“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents,trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates. “Request for Term Borrowing” means, with respect to a Term Borrowing, conversion or continuation of Term Loans, a Loan Notice.“Responsible Officer” means (a) the chief executive officer, president, chief financial officer, treasurer, assistant treasurer orcontroller of the Borrower and (b) solely for purposes of the delivery of incumbency certificates pursuant to Section 4.01, the secretary or anyassistant secretary of the Borrower and (c) solely for purposes of notices given pursuant to Article II, any other officer or employee of theBorrower so designated by any of the foregoing officers in a notice to the Lender or any other officer or employee of the Borrower designatedin or pursuant to an agreement between the Borrower and the Lender. Any document delivered hereunder that is signed by a ResponsibleOfficer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other actionon the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower. To theextent requested by the Lender, each Responsible Officer will provide an incumbency certificate and to the extent requested by the Lender,appropriate authorization documentation, in form and substance satisfactory to the Lender.“Restricted Person” has the meaning assigned to such term in Section 5.15.“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successorthereto.“SEC” means the United States Securities and Exchange Commission or any Governmental Authority succeeding to the functionsthereof.Exhibit 4(g)“Senior Debt Rating” means, at any date, the credit rating identified by a Rating Agency as the credit rating that (a) it has assigned tolong term unsecured senior debt of the Borrower or (b) would assign to long term unsecured senior debt of the Borrower were the Borrowerto issue or have outstanding any long term unsecured senior debt on such date.“Subsidiary” means, as to any Person, any corporation, association, partnership, limited liability company, joint venture or otherbusiness entity of which such Person or any Subsidiary of such Person, directly or indirectly, either (a) in respect of a corporation, owns orcontrols more than 50% of the outstanding Equity Interests having ordinary voting power to elect a majority of the board of directors orsimilar managing body, irrespective of whether a class or classes shall or might have voting power by reason of the happening of anycontingency or (b) in respect of an association, partnership, joint venture or other business entity, is entitled to share in more than 50% of theprofits and losses, however determined. Unless the context otherwise requires, any reference to a Subsidiary shall be deemed to refer to aSubsidiary of the Borrower.“SWLP Mortgage” means the Mortgage and Deed of Trust, dated as of March 1, 1943, between Superior Water, Light and PowerCompany and U.S. Bank National Association (successor to First Bank (N.A.) as successor to Chemical Bank and Trust Company asCorporate Trustee and Howard B. Smith as Co-Trustee) as Trustee.“Term Borrowing” means a borrowing consisting of simultaneous Term Loans of the same Type and, in the case of Eurodollar RateLoans, having the same Interest Period made by the Lender pursuant to Section 2.01.“Term Commitment” means the Lender’s obligation to make Term Loans to the Borrower pursuant to Section 2.01. The TermCommitment on the Closing Date shall be $200,000,000.“Term Facility” means (a) at any time during the Availability Period, the sum of (i) the aggregate amount of the Term Commitmentat such time and (ii) the aggregate principal amount of the Term Loans outstanding at such time and (b) thereafter, the aggregate principalamount of the Term Loans outstanding at such time.“Term Loan” means an advance made by the Lender under the Term Facility.“Total Capitalization” means, at any time, the difference between (a) the sum of each of the following at such time with respect to theBorrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP: (i) preferred Equity Interests, plus (ii) commonEquity Interests and any premium on Equity Interests thereon (as such term is used in the Borrower Financial Statements), excludingaccumulated other comprehensive income or loss, plus (iii) retained earnings, plus (iv) Total Indebtedness, and (b) (i) stock of the Borroweracquired by the Borrower and (ii) stock of a Subsidiary acquired by such Subsidiary, in each case at such time, as applicable, determined on aconsolidated basis in accordance with GAAP.“Total Indebtedness” means, at any time, all Indebtedness (net of unamortized premium and discount (as such term is used in theBorrower Financial Statements)) at such time of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance withGAAP.“Transactions” means (a) the execution, delivery and performance by the Borrower of each Loan Document to which it is a party, (b)the borrowing of the Term Loans and (c) the use of the proceeds of the Term Loans. “Type” means, with respect to a Term Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan.“United States” and “U.S.” mean the United States of America.“Voting Security” means a security which ordinarily has voting power for the election of the board of directors (or other governingbody), whether at all times or only so long as no senior class of Equity Interests has such voting power by reason of any contingency.Exhibit 4(g)“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from suchMultiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.“WPS” means the Public Service Commission of Wisconsin or any Governmental Authority succeeding to the functions thereof.1.02 Other Interpretive Provisions.With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the contextmay require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and“including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaningand effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or otherdocument (including the Loan Documents and any articles, bylaws, operation agreement or other organizational document) shall be construedas referring to such agreement, instrument or other document as from time to time amended, amended and restated, modified, extended,restated, replaced or supplemented from time to time (subject to any restrictions on such amendments, supplements or modifications set forthherein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors andassigns, (iii) the words “hereto,” “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall beconstrued to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document toArticles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and PreliminaryStatements, Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include allstatutory and regulatory rules, regulations, orders and provisions consolidating, amending, replacing or interpreting such law and anyreference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified, extended, restated,replaced or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning andeffect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.(b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from andincluding;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect theinterpretation of this Agreement or any other Loan Document.1.03 Accounting Terms.(a) Except as otherwise expressly provided herein, as used in the Loan Documents and in any certificate, opinion or other documentmade or delivered pursuant thereto, accounting terms not defined in Section 1.01, and accounting terms partly defined in Section 1.01, to theextent not defined, shall have the respective meanings given to them under GAAP. If at any time any change in GAAP (including any changeto the International Financial Reporting Standards by the International Accounting Standards Board or other method of accounting, as mayhereafter be required or permitted by the SEC) would affect the computation of any financial requirement set forth in this Agreement, theLender and the Borrower shall negotiate in good faith to amend such requirement to reflect such change in GAAP, provided that, until soamended, (i) such requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrowershall provide to the Lender financial statements and other documents required under this Agreement or as reasonably requested hereundersetting forth a reconciliation between calculations of such requirement made before and after giving effect to such change in GAAP.(b) Notwithstanding anything to the contrary contained in Section 1.03(a) or in the definition of “Capital Lease Obligations,” in theevent of an accounting change requiring all leases to be capitalized, only those leasesExhibit 4(g)(assuming for purposes hereof that such leases were in existence on the date hereof) that would constitute capital leases in conformity withGAAP on the date hereof shall be considered capital leases, and all calculations and deliverables under this Agreement or any other LoanDocument shall be made or delivered, as applicable, in accordance therewith.1.04 Rounding.Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing theappropriate component by the other component, carrying the result to one place more than the number of places by which such ratio isexpressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).1.05 Times of Day; Rates.Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, asapplicable).The Lender does not warrant, nor accept responsibility, nor shall the Lender have any liability with respect to the administration,submission or any other matter related to the rates in the definition of “Eurodollar Rate” or with respect to any comparable or successor ratethereto.ARTICLE IITERM COMMITMENT AND TERM BORROWINGS2.01 Term Loans.Subject to the terms and conditions set forth herein, the Lender agrees to make loans to the Borrower, in Dollars, from time to time inup to six (6) draws, on any Business Day during the Availability Period for the Term Facility, in an aggregate amount not to exceed the TermFacility. Each Term Borrowing shall consist of Term Loans made by the Lender. Term Borrowings repaid or prepaid may not be reborrowed.Term Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, any Term Borrowing madeon the Closing Date or any of the three (3) Business Days following the Closing Date shall be made as Base Rate Loans unless the Borrowerdelivers a Funding Indemnity Letter not less than three (3) Business Days prior to the date of such Term Borrowing.2.02 Term Borrowings, Conversions and Continuations of Term Loans.(a) Notice of Term Borrowing. Each Term Borrowing, each conversion of Term Loans from one Type to the other, and eachcontinuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Lender, which may be given by (i)telephone or (ii) a Loan Notice; provided that any telephonic notice must be confirmed promptly by delivery to the Lender of a Loan Notice.Each such notice must be received by the Lender not later than 11:00 a.m. (A) three (3) Business Days prior to the requested date of anyTerm Borrowing of, conversion to or continuation of Eurodollar Rate Loans or of any conversion of Eurodollar Rate Loans to Base RateLoans, and (B) on the requested date of any Term Borrowing of Base Rate Loans; provided, however, that if the Borrower wishes to requestEurodollar Rate Loans having an Interest Period other than one (1), two (2), three (3) or six (6) months in duration as provided in thedefinition of “Interest Period”, the applicable notice must be received by the Lender not later than 11:00 a.m. four (4) Business Days prior tothe requested date of such Term Borrowing, conversion or continuation. Not later than 11:00 a.m., three (3) Business Days before therequested date of such Term Borrowing, conversion or continuation, the Lender shall notify the Borrower (which notice may be bytelephone) whether or not the requested Interest Period is available. Each Term Borrowing of, conversion to or continuation of EurodollarRate Loans shall be, unless otherwise agreed by Lender, in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excessthereof (or, in connection with any conversion or continuation of a Term Loan, if less, the entire principal thereof then outstanding). EachTerm Borrowing of or conversion to Base Rate Loans shall be, unless otherwise agreedExhibit 4(g)by Lender, in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof (or, in connection with any conversion orcontinuation of a Term Loan, if less, the entire principal thereof then outstanding). Each Loan Notice (whether telephonic or written) shallspecify (i) whether the Borrower is requesting a Term Borrowing, a conversion of Term Loans from one Type to the other, or a continuationof Term Loans, as the case may be, under the Term Facility, (ii) the requested date of the Term Borrowing, conversion or continuation, as thecase may be (which shall be a Business Day), (iii) the principal amount of Term Loans to be borrowed, converted or continued, (iv) the Typeof Term Loans to be borrowed or to which existing Term Loans are to be converted, and (v) if applicable, the duration of the Interest Periodwith respect thereto. If the Borrower fails to specify a Type of Term Loan in a Loan Notice or if the Borrower fails to give a timely noticerequesting a conversion or continuation, then the applicable Term Loans shall be made as, or converted to, Base Rate Loans. Any suchautomatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicableEurodollar Rate Loans. If the Borrower requests a Term Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any suchLoan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one (1) month.(b) Advances. Following receipt of a Loan Notice, upon satisfaction of the applicable conditions set forth in Section 4.02 (and, ifsuch Term Borrowing is the initial Term Borrowing, Section 4.01), the Lender shall make the requested funds available to the Borrowereither by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer ofsuch funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Lender by the Borrower.(c) Eurodollar Rate Loans. Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on thelast day of an Interest Period for such Eurodollar Rate Loan. During the existence of a Default, no Term Loans may be requested as,converted to or continued as Eurodollar Rate Loans without the consent of the Lender, and the Lender may demand that any or all of theoutstanding Eurodollar Rate Loans be converted immediately to Base Rate Loans.(d) Interest Periods. After giving effect to all Term Borrowings, all conversions of Term Loans from one Type to the other, and allcontinuations of Term Loans as the same Type, there shall not be more than ten Interest Periods in effect in respect of the Term Facility.2.03 Optional Prepayments.The Borrower may, upon notice to the Lender pursuant to delivery to the Lender of a Notice of Loan Prepayment, at any time or fromtime to time voluntarily prepay Term Loans in whole or in part without premium or penalty subject to Section 3.05; provided that, unlessotherwise agreed by the Lender (a) such notice must be received by Lender not later than 11:00 a.m. (i) three (3) Business Days prior to anydate of prepayment of Eurodollar Rate Loans and (ii) on the date of prepayment of Base Rate Loans; (b) any prepayment of Eurodollar RateLoans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; and (c) any prepayment of Base RateLoans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entireprincipal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment and the Type(s) of TermLoans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Term Loans. If such notice is given by theBorrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the datespecified therein. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, togetherwith any additional amounts required pursuant to Section 3.05.2.04 Termination or Reduction of Term Commitment.(a) Mandatory. The aggregate Term Commitment shall be automatically and permanently reduced to zero on the last day of theAvailability Period for the Term Facility.(b) Voluntary. The Borrower may at any time terminate, or from time to time reduce, the Term Commitment upon three (3)Business Days’ notice to the Lender, provided that the Borrower shall not terminate or reduce the Term Commitment to an amount belowwhich, after giving effect to any concurrent prepayment or repayment of the TermExhibit 4(g)Loans in accordance with Section 2.03, the aggregate principal amount of the Term Loans outstanding at such time would exceed the TermCommitment.(c) Payment of Fees. All fees in respect of the Term Facility accrued until the effective date of any termination of the Term Facilityshall be paid on the effective date of such termination.2.05 Repayment of Term Loans. The Borrower promises to repay to the Lender the aggregate principal amount of all Term Loansoutstanding on the Maturity Date, unless accelerated sooner pursuant to Section 8.02.2.06 Interest and Default Rate.(a) Interest. Subject to the provisions of Section 2.06(b), (i) each Eurodollar Rate Loan under the Term Facility shall bear intereston the outstanding principal amount thereof for each Interest Period from the applicable borrowing date at a rate per annum equal to theEurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan under the Term Facility shall bear interest onthe outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the ApplicableRate. To the extent that any calculation of interest or any fee required to be paid under this Agreement shall be based on (or result in) a ratethat is less than zero, such rate shall be deemed zero for purposes of this Agreement.(b) Default Rate.(i) If any amount of principal of any Term Loan is not paid when due (without regard to any applicable grace periods),whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate perannum at all times equal to the Default Rate to the fullest extent permitted by applicable laws.(ii) If any amount (other than principal of any Term Loan) payable by the Borrower under any Loan Document is not paidwhen due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon therequest of the Lender such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to theDefault Rate to the fullest extent permitted by applicable laws.(iii) Upon the request of the Lender, while any Event of Default exists (including a payment default), all outstandingObligations may accrue at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted byapplicable laws.(iv) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upondemand.(c) Interest Payments. Interest on each Term Loan shall be due and payable in arrears on each Interest Payment Date applicablethereto and at such other times as may be specified herein. Interest hereunder shall be due and payable in accordance with the terms hereofbefore and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.2.07 Fees.The Borrower shall pay to the Lender such fees as shall have been separately agreed upon in writing in the amounts and at the timesso specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.2.08 Computation of Interest and Fees.All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) shall bemade on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shallbe made on the basis of a 360-day year and actual days elapsed (whichExhibit 4(g)results in more fees or interest, as applicable, being paid than if computed on the basis of a 365 day year). Interest shall accrue on each TermLoan for the day on which the Term Loan is made, and shall not accrue on a Term Loan, or any portion thereof, for the day on which theTerm Loan or such portion is paid, provided that any Term Loan that is repaid on the same day on which it is made shall bear interest for one(1) day. Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absentmanifest error.2.09 Payments Generally.All payments to be made by the Borrower shall be made free and clear of and without condition or deduction for any counterclaim,defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to theLender at the Lender’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. Allpayments received by the Lender after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interestor fee shall continue to accrue. Except as otherwise specifically provided for in this Agreement, if any payment to be made by the Borrowershall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of timeshall be reflected in computing interest or fees, as the case may be.ARTICLE IIITAXES, YIELD PROTECTION AND ILLEGALITY3.01 Taxes.If any payments to the Lender under this Agreement are made from outside the United States, the Borrower will not deduct anyforeign taxes from any payments it makes to the Lender. If any such taxes are imposed on any payments made by the Borrower (includingpayments under this paragraph), the Borrower will pay the taxes and will also pay to the Lender, at the time interest is paid, any additionalamount which the Lender specifies as necessary to preserve the after-tax yield the Lender would have received if such taxes had not beenimposed. As soon as practicable after any payment of taxes by the Borrower to a Governmental Authority, as provided in this Section 3.01,the Borrower will deliver to the Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing suchpayment, a copy of any return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.The Borrower will confirm that it has paid the taxes by giving the Lender official tax receipts (or notarized copies) within thirty (30)days after the due date.3.02 Illegality.If Lender determines that any law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, forLender or its Lender’s Office to perform any of its obligations hereunder or to make, maintain or fund or charge interest with respect to anyTerm Borrowing or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposedmaterial restrictions on the authority of Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, onnotice thereof by Lender to the Borrower, (a) any obligation of Lender to issue, make, maintain, fund or charge interest with respect to anysuch Term Borrowing or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and(b) if such notice asserts the illegality of Lender making or maintaining Base Rate Loans the interest rate on which is determined by referenceto the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of Lender shall, if necessary to avoid suchillegality, be determined by Lender without reference to the Eurodollar Rate component of the Base Rate, in each case until Lender notifiesthe Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (i) the Borrower shall,upon demand from Lender, prepay or, if applicable, convert all Eurodollar Rate Loans of Lender to Base Rate Loans (the interest rate on suchBase Rate Loans shall, if necessary to avoid such illegality, be determined by Lender without reference to the Eurodollar Rate component ofthe Base Rate), either on the last day of the Interest Period therefor, if Lender may lawfully continue to maintain such Eurodollar Rate Loansto such day, or immediately, if Lender may not lawfully continue to maintainExhibit 4(g)such Eurodollar Rate Loans and (ii) if such notice asserts the illegality of Lender determining or charging interest rates based upon theEurodollar Rate, the Lender shall during the period of such suspension compute the Base Rate applicable to Lender without reference to theEurodollar Rate component thereof until the Borrower is advised in writing by Lender that it is no longer illegal for Lender to determine orcharge interest rates based upon the Eurodollar Rate. Upon any such prepayment or conversion, the Borrower shall also pay accrued intereston the amount so prepaid or converted.3.03 Inability to Determine Rates.If in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof, the Lender determines that(a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period ofsuch Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested InterestPeriod with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan, or (c) the EurodollarRate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to theLender of funding such Eurodollar Rate Loan, the Lender will promptly so notify the Borrower. Thereafter, (i) the obligation of the Lender tomake or maintain Eurodollar Rate Loans shall be suspended (to the extent of the affected Eurodollar Rate Loans or Interest Periods), and(ii) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, theutilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Lender revokes suchnotice. Upon receipt of such notice, the Borrower may revoke any pending request for a Term Borrowing of, conversion to or continuation ofEurodollar Rate Loans (to the extent of the affected Eurodollar Rate Loans or Interest Periods) or, failing that, will be deemed to haveconverted such request into a request for a Term Borrowing of Base Rate Loans in the amount specified therein. Notwithstanding theforegoing, in the case of such pending request, the Lender, in consultation with the Borrower, may establish an alternative interest rate forfunding Term Loans in the applicable currency and amount, and with the same Interest Period as the Term Loan requested to be made,converted or continued, as the case may be in which case, such alternative rate of interest shall apply with respect to such Term Loans.3.04 Increased Costs; Reserves on Eurodollar Rate Loans.(a) Increased Costs Generally. If any Change in Law shall:(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similarrequirement against assets of, deposits with or for the account of, or credit extended by, the Lender (except any reserve requirementcontemplated by Section 3.04(e));(ii) subject the Lender to any taxes on its loans, loan principal, letters of credit, commitments, or other obligations, or itsdeposits, reserves, other liabilities or capital attributable thereto in respect thereof (other than (A) Indemnified Taxes and (B)Excluded Taxes); or(iii) impose on the Lender or the London interbank market any other condition, cost or expense affecting this Agreement orEurodollar Rate Loans made by the Lender;and the result of any of the foregoing shall be to increase the cost to the Lender of making, converting to, continuing or maintainingany Term Loan (or of maintaining its obligation to make any such Term Loan), or to reduce the amount of any sum received orreceivable by the Lender hereunder (whether of principal, interest or any other amount) then, upon request of the Lender, theBorrower will pay to the Lender such additional amount or amounts as will compensate the Lender for such additional costs incurredor reduction suffered.(b) Capital Requirements. If the Lender determines that any Change in Law affecting the Lender or the Lender’s Office or theLender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return onthe Lender’s capital or on the capital of the Lender’s holding company, if any, as a consequence of this Agreement, the Term Commitment ofthe Lender or the Term Loans made by the Lender, to a level below that which the Lender or the Lender’s holding company could haveachieved but for such Change inExhibit 4(g)Law (taking into consideration the Lender’s policies and the policies of the Lender’s holding company with respect to capital adequacy), thenfrom time to time the Borrower will pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender’sholding company for any such reduction suffered.(c) Certificates for Reimbursement. A certificate of the Lender setting forth the amount or amounts necessary to compensate theLender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall beconclusive absent manifest error. The Borrower shall pay the Lender the amount shown as due on any such certificate within ten (10)Business Days after receipt thereof.(d) Reserves on Eurodollar Rate Loans. The Borrower shall pay to the Lender, (i) as long as the Lender shall be required to maintainreserves with respect to liabilities or assets consisting of or including eurocurrency funds or deposits (currently known as “Eurocurrencyliabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reservesallocated to such Term Loan by the Lender (as determined by the Lender in good faith, which determination shall be conclusive), and (ii) aslong as the Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any central banking orfinancial regulatory authority imposed in respect of the maintenance of the Term Commitment or the funding of the Term Loans, suchadditional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to theactual costs allocated to such Term Commitment or Term Loan by the Lender (as determined by the Lender in good faith, whichdetermination shall be conclusive), which in each case shall be due and payable on each date on which interest is payable on such Term Loan,provided the Borrower shall have received at least ten (10) Business Days’ prior notice of such additional interest or costs from the Lender. Ifthe Lender fails to give notice ten (10) Business Days prior to the relevant Interest Payment Date, such additional interest shall be due andpayable ten (10) Business Days from receipt of such notice.(e) Delay in Requests. Failure or delay on the part of the Lender to demand compensation pursuant to the foregoing provisions ofthis Section 3.04 shall not constitute a waiver of the Lender’s right to demand such compensation, provided that the Borrower shall not berequired to compensate the Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions sufferedmore than six (6) months prior to the date that the Lender notifies the Borrower of the Change in Law giving rise to such increased costs orreductions and of the Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costsor reductions is retroactive, then the six (6) month period referred to above shall be extended to include the period of retroactive effectthereof).3.05 Compensation for Losses.Upon demand of the Lender from time to time, the Borrower shall promptly compensate the Lender for and hold the Lender harmlessfrom any loss, cost or expense incurred by it as a result of:(a) any continuation, conversion, payment or prepayment of any Term Loan other than a Base Rate Loan on a day other than thelast day of the Interest Period for such Term Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or(b) any failure by the Borrower (for a reason other than the failure of the Lender to make a Term Loan) to prepay, borrow, continueor convert any Term Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower;including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it tomaintain such Term Loan or from fees payable to terminate the deposits from which such funds were obtained. The Borrower shall also payany customary administrative fees charged by the Lender in connection with the foregoing.For purposes of calculating amounts payable by the Borrower to the Lender under this Section 3.05, the Lender shall be deemed to havefunded each Eurodollar Rate Loan made by it at the Eurodollar Rate for such Term Loan by aExhibit 4(g)matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period,whether or not such Eurodollar Rate Loan was in fact so funded.3.06 Survival.All of the Borrower’s obligations under this Article III shall survive termination of the Term Commitment and repayment of all otherObligations hereunder.ARTICLE IVCONDITIONS PRECEDENT TO TERM BORROWINGS4.01 Conditions of Initial Term Borrowing.The obligation of the Lender to make the initial Term Borrowing hereunder is subject to satisfaction of the following conditionsprecedent:(a) Execution of Term Loan Agreement; Loan Documents. The Lender shall have received (i) counterparts of this Agreement,executed by a Responsible Officer of the Borrower and (ii) counterparts of any other Loan Document, executed by a Responsible Officer ofthe Borrower and a duly authorized officer of each other Person party thereto.(b) Legal Opinions. The Lender shall have received favorable written opinions (addressed to the Lender and dated on or prior to theClosing Date) from Margaret A. Thickens, Vice President, Chief Legal Officer and Corporate Secretary of the Borrower, and Cohen TauberSpievack & Wagner P.C., special counsel to the Borrower, covering such matters relating to the Borrower, the Loan Documents and theTransactions as the Lender may reasonably request. The Borrower hereby requests such counsel to deliver such opinion.(c) Organizational Documents, etc. The Lender shall have received such documents and certificates as the Lender or its counselmay reasonably request relating to (i) the organization, existence and good standing of the Borrower (including (A) a certificate ofincorporation of the Borrower, certified as of a recent date by the Secretary of State of the jurisdiction of its incorporation, and (B) certificatesof good standing (or comparable certificates) for the Borrower, certified as of a recent date prior to the Closing Date, by the Secretaries ofState (or comparable officials)) of the jurisdiction of its incorporation and each other jurisdiction in which it is qualified to do business, (ii)the authorization of the Transactions, (iii) the incumbency of its officer or officers who may sign the Loan Documents, including therein asignature specimen of such officer or officers, and (iv) any other legal matters relating to the Borrower, the Loan Documents or theTransactions, all in form and substance reasonably satisfactory to the Lender and its counsel.(d) Officer’s Certificate. The Lender shall have received a certificate, in form and substance satisfactory to the Lender, dated on orprior to the Closing Date and signed by the chief executive officer, treasurer or another Financial Officer acceptable to the Lender, certifyingthat the conditions set forth in Section 4.02(a) and Section 4.02(b) are satisfied as of the Closing Date.(g) KYC. (i) The Lender shall have received, at least five days prior to the Closing Date, all documentation and other informationregarding the Borrower requested in connection with applicable “know your customer” and anti-money laundering rules and regulations,including the PATRIOT Act, to the extent requested in writing of the Borrower at least 10 days prior to the Closing Date and (ii) to the extentthe Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, at least five days prior to the Closing Date, ifthe Lender has requested, in a written notice to the Borrower at least 10 days prior to the Closing Date, a Beneficial Ownership Certificationin relation to the Borrower shall have received such Beneficial Ownership Certification.Exhibit 4(g)(h) Fees and Expenses. The Lender shall have received all fees and other amounts due and payable on or prior to the Closing Date,including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowerhereunder.(i) Miscellaneous. Such other documents as the Lender or its counsel may have reasonably requested.4.02 Conditions to all Term Borrowings.The obligation of the Lender to honor any Request for Term Borrowing (other than a Loan Notice requesting only a conversion ofTerm Loans to the other Type, or a continuation of Eurodollar Rate Loans) is subject to the following conditions precedent:(a) Representations and Warranties. The representations and warranties of the Borrower contained in Article II, Article V orany other Loan Document, or which are contained in any document furnished at any time under or in connection herewith ortherewith, shall (i) with respect to representations and warranties that contain a materiality qualification, be true and correct on and asof the date of such Term Borrowing and (ii) with respect to representations and warranties that do not contain a materialityqualification, be true and correct in all material respects on and as of the date of such Term Borrowing; provided that to the extent anysuch representation or warranty is stated to have been made as of an earlier date, it is true and correct as of such earlier date.(b) Default. No Default shall exist, or would result from such proposed Term Borrowing or from the application of theproceeds thereof.(c) Request for Term Borrowing. The Lender shall have received a Request for Term Borrowing in accordance with therequirements hereof.Each Request for Term Borrowing (other than a Loan Notice requesting only a conversion of Term Loans to the other Type or a continuationof Eurodollar Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified inSections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Term Borrowing.ARTICLE VREPRESENTATIONS AND WARRANTIESThe Borrower represents and warrants to the Lender that:Exhibit 4(g)5.01 Organization; Powers. Each of the Borrower and each Subsidiary is duly organized or formed, validly existing and in good standingunder the laws of the jurisdiction of its organization or formation, has all requisite corporate power and authority to carry on its business asnow conducted and, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in aMaterial Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.5.02 Authorization; Enforceability. The Transactions are within the corporate powers of the Borrower and have been duly authorized by allnecessary corporate and, if required, equity holder action. Each Loan Document has been duly executed and delivered by the Borrower andconstitutes a legal, valid and binding obligation thereof, enforceable in accordance with its terms, subject to applicable bankruptcy,insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general principles of equity.5.03 Governmental Approvals; No Conflicts.(a)The execution, delivery and performance by the Borrower of the Loan Documents and the borrowing of the TermLoans do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority,except for (i) information filings to be made in the ordinary course of business, which filings are not a condition to the Borrower’sperformance under the Loan Documents and (ii) such as have been obtained or made and are in full force and effect and not subject toany appeals period.(b)The Transactions will not (i) violate the charter, by-laws or other organizational documents of the Borrower, (ii)violate any applicable law or regulation or any order of any Governmental Authority, (iii) violate or result in a default under anymaterial indenture, agreement or other instrument binding upon the Borrower or its assets, or give rise to a right thereunder to requireany payment to be made by the Borrower, and (iv) result in or require the creation or imposition of any Lien on any asset of theBorrower.5.04 Financial Condition; No Material Adverse Change.(c)The Borrower has previously delivered to the Lender copies of (i) its Form 10-K for the fiscal year endedDecember 31, 2018, containing the audited consolidated balance sheet of the Borrower and its Subsidiaries and the related auditedconsolidated statements of operations, comprehensive income, changes in stockholders’ equity and cash flows for the fiscal yearending December 31, 2018, and (ii) the unaudited consolidated balance sheet of the Borrower and its Subsidiaries and the relatedunaudited consolidated statements of income, equity and cash flows for the fiscal quarter ended September 30, 2019 (collectively,including the applicable related notes and schedules, the “Borrower Financial Statements”). All such financial statements have beenprepared in accordance with GAAP and fairly present in all material respects the consolidated financial condition and results of theoperations of the Borrower and its Subsidiaries as of the dates and for the periods indicated therein (subject, in the case of unauditedfinancial statements, to the absence of footnotes and to normal, year-end audit adjustments).(d)Since September 30, 2019, there has been no Material Adverse Change.Exhibit 4(g)5.05 Litigation. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to theknowledge of the Borrower, threatened in writing against or affecting the Borrower or any Subsidiary that (a) if adversely determined (andprovided that there exists a reasonable possibility of such adverse determination), would reasonably be expected, individually or in theaggregate, to result in a Material Adverse Effect, except for any Disclosed Matters, and except that the commencement by the Borrower, anySubsidiary or any Governmental Authority of a rate proceeding, fuel adjustment clause audit or earnings review before such GovernmentalAuthority shall not constitute such a pending or threatened action, suit or proceeding unless and until such Governmental Authority has madea final determination thereunder that would reasonably be expected to have a Material Adverse Effect, or (b) involve any Loan Document orthe Transactions.5.06 Environmental Matters. Except for the Disclosed Matters, the Borrower and its Subsidiaries (a) are in compliance with EnvironmentalLaws, (b) have received all permits, licenses or other approvals required of them under applicable Environmental Law to conduct theirrespective businesses and (c) are in compliance with all terms and conditions of any such permit, license, or approval, except, in each case,such as could not reasonably be expected to result in a Material Adverse Effect.5.07 Investment Company Status. Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an“investment company” as defined in, or is otherwise subject to regulation under, the Investment Company Act of 1940.5.08 ERISA. Each of the Borrower and each of its ERISA Affiliates is in compliance in all material respects with the applicable provisionsof ERISA and the Code and the regulations and published interpretations thereunder except for any such failure that, individually or in theaggregate, could not reasonably be expected to result in a Material Adverse Effect. No ERISA Event has occurred or is reasonably expectedto occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, would reasonably beexpected to result in a Material Adverse Effect.5.09 Disclosure.(e)None of the reports, financial statements, certificates or other information furnished by or on behalf of theBorrower or any Subsidiary to the Lender in connection with the negotiation of, or delivered under any Loan Document when takenas a whole (as modified or supplemented by other information so furnished, including the information contained in the Borrower’smost recent annual report on Form 10-K and in the Borrower’s reports filed with the SEC under the Securities Exchange Act of 1934subsequent to the filing of the Form 10-K) contains any material misstatement of fact or omits to state any material fact necessary tomake the statements therein, in the light of the circumstances under which they were made, not materially misleading, provided that,to the extent any such reports, financial statements, certificates or other information was based upon or constitutes a forecast or aprojection (including statements concerning future financial performance, ongoing business strategies or prospects or possible futureactions, and other forward-looking statements), the Borrower represents only that such information was prepared in good faith basedupon assumptions believed to be reasonable at the time.(f)As of the Closing Date, to the best knowledge of the Borrower, the information included in the BeneficialOwnership Certification provided on or prior to the Closing Date to the Lender in connection with this Agreement is true and correctin all respects.5.10 Subsidiaries. As of the date hereof, the Borrower has only the Subsidiaries set forth on Schedule 5.10. Schedule 5.10 sets forth withrespect to each Subsidiary, the identity of each Person that owns Equity Interests in such Subsidiary and the percentage of the issued andoutstanding Equity Interests owned by each such Person. The shares of each Subsidiary (excluding any Immaterial Subsidiary) are dulyauthorized, validly issued, fully paid and non-assessable and are owned free and clear of any Liens, other than Liens permitted pursuant toSection 7.01.5.11 Use of Proceeds; Federal Reserve Regulations.(g)The proceeds of the Term Loans will be used for general corporate purposes not inconsistent with the terms of thisAgreement.Exhibit 4(g)(h)Neither the Borrower nor any Subsidiary is engaged principally, or as one of their important activities, in thebusiness of extending credit for the purpose of buying or carrying Margin Stock. Immediately before and after giving effect to themaking of the Term Loans, Margin Stock will constitute less than 25% of the Borrower’s assets as determined in accordance withRegulation U.(i)No part of the proceeds of any Term Loan will be used, whether directly or indirectly, and whether immediately,incidentally or ultimately, (i) to purchase, acquire or carry any Margin Stock (other than any purchase of Equity Interests in theBorrower so long as such Equity Interests are retired immediately upon the purchase thereof) or for any purpose that entails aviolation of, or that is inconsistent with, the provisions of the regulations of the Board, including Regulation T, U or X or (ii) to funda personal loan to or for the benefit of a director or executive officer of the Borrower or any Subsidiary.5.12 EEA Financial Institutions. The Borrower is not an EEA Financial Institution.5.13 Anti-Money Laundering and Anti-Terrorism Finance Laws. The Borrower has implemented and maintains in effect policies andprocedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agentswith Anti-Corruption Laws. To the extent applicable, Borrower is in compliance, in all material respects, with Anti-Corruption Laws, anti-money laundering laws and anti-terrorism finance laws including the Bank Secrecy Act and the PATRIOT Act (the “Anti-Terrorism Laws”).5.14 Foreign Corrupt Practices Act. No part of the proceeds of the Term Loans shall be used, directly or indirectly, for any payments to anygovernmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in anofficial capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States ForeignCorrupt Practices Act of 1977.5.15 Sanctions Laws. Neither the Borrower nor, to the knowledge of the Borrower, any Affiliate or broker or other agent of the Borroweracting or benefiting in any capacity in connection with the Term Loans, is any of the following (a “Restricted Person”): (i) a Person that islisted in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing, effective September 24,2001; (ii) a Person that is named as a “specially designated national and blocked person” on the most current list published by the U.S.Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacementofficial publication of such list or similarly named by any similar foreign governmental authority; (iii) an agency of the government of acountry, an organization controlled by a country, or a Person resident in a country that is subject to a sanctions program identified on the listsmaintained by OFAC; or (iv) a Person that derives more than 10% of its assets or operating income from investments in or transactions withany such country, agency, organization or person. Further, none of the proceeds from the Term Loans shall be used to finance any operations,investments or activities in, or make any payments to, any such country, agency, organization or Person subject to OFAC sanctions.5.16 Plan Assets; Prohibited Transactions. None of the Borrower or any of its Subsidiaries is an entity deemed to hold “plan assets” (withinthe meaning of the Plan Asset Regulations), and neither the execution, delivery nor performance of the transactions contemplated under thisAgreement, including the making of any Term Loan hereunder, will give rise to a non-exempt prohibited transaction under Section 406 ofERISA or Section 4975 of the Code.ARTICLE VIAFFIRMATIVE COVENANTSUntil the principal of and interest on all Term Loans and all other amounts payable under the Loan Documents shall have been paidin full, the Borrower covenants and agrees with the Lender that:6.01 Financial Statements and Other Information. The Borrower will furnish to the Lender:(j)As soon as available, but in any event within 120 days after the end of each fiscal year, (i) a copy of the Borrower’sAnnual Report on Form 10-K in respect of such fiscal year required to be filed by theExhibit 4(g)Borrower with the SEC, together with the financial statements attached thereto, and (ii) the Borrower’s audited consolidated balancesheet and related consolidated statements of income, stockholder’s equity and cash flows as of the end of and for such fiscal year,setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by the Accountants (without a“going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to theeffect that such consolidated financial statements present fairly in all material respects the financial conditions and results ofoperations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied during suchfiscal year;(k)As soon as available, but in any event within 60 days after the end of each of the first three fiscal quarters of eachfiscal year, (i) a copy of the Borrower’s Quarterly Report on Form 10-Q in respect of such fiscal quarter required to be filed by theBorrower with the SEC, together with the financial statements attached thereto, and (ii) the Borrower’s unaudited consolidatedbalance sheet and related consolidated statements of income, stockholder’s equity and cash flows as of the end of and for such fiscalquarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the correspondingperiod or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a duly authorizedFinancial Officer as presenting fairly in all material respects the financial conditions and results of operations of the Borrower and itsSubsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year end audit adjustments andthe absence of footnotes;(l)Within 60 days after the end of each of the first three fiscal quarters and within 120 days after the end of the lastfiscal quarter, a Compliance Certificate, signed by a Financial Officer (or such other officer as shall be acceptable to the Lender) as tothe Borrower’s compliance, as of such fiscal quarter ending date, with Section 7.05, and as to the absence of any Default as of suchfiscal quarter ending date and the date of such certificate (or if a Default existed or exists, the nature thereof); and(m)promptly following any request therefor, (i) such other information regarding the operations, business affairs andfinancial condition of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as the Lender mayreasonably request and (ii) information and documentation reasonably requested by the Lender for purposes of compliance withapplicable “know your customer” and anti-money laundering rules and regulations, including the PATRIOT Act and the BeneficialOwnership Regulation.6.02 Notices of Material Events. The Borrower will furnish the following to the Lender:(n)prompt written notice of the occurrence of any Default, specifying the nature thereof and any action taken orproposed to be taken with respect thereto;(o)promptly upon becoming available, copies of all (i) regular, periodic or special reports, schedules and othermaterial which the Borrower or any of its Subsidiaries may be required to file with or deliver to any securities exchange or the SEC,or any other Governmental Authority succeeding to the functions thereof, and (ii) upon the written request of the Lender, reports thatthe Borrower or any of its Subsidiaries sends to or files with the Federal Energy Regulatory Commission, the WPS, the MPUC or anyGovernmental Authority succeeding to the functions thereof, or any similar state or local Governmental Authority;(p)prompt written notice of (i) any material citation, summons, subpoena, order, notice, claim or proceeding receivedby, or brought against, the Borrower or any of its Subsidiaries, with respect to (A) any proceeding before any GovernmentalAuthority (other than proceedings in the ordinary course of business before the WPS or the MPUC), or (B) any real property underany Environmental Law, and (ii) any lapse or other termination of, or refusal to renew or extend, any material franchise or otherauthorization issued to the Borrower or any of its Subsidiaries by any Governmental Authority (other than in the ordinary course ofbusiness), provided that any of the foregoing set forth in this paragraph would, individually or in the aggregate, reasonably beexpected to have a Material Adverse Effect;(q)prompt written notice of any change by any Rating Agency in a Senior Debt Rating; and(r)any change in the information provided in the Beneficial Ownership Certification delivered to the Lender thatwould result in a change to the list of beneficial owners identified in such certification.Each notice delivered under Section 6.02(a) or Section 6.02(c) shall be accompanied by a statement of a Financial Officer or other executiveofficer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to betaken with respect thereto.Exhibit 4(g)Documents required to be delivered pursuant to Section 6.01(a), Section 6.01(b), Section 6.02(b) or Section 6.02(c) (to the extent anysuch documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemedto have been delivered on the date (a) on which the Borrower posts such documents, or provides a link thereto, on the Borrower’s website onthe Internet at the website address listed in Section 10.02; or (b) on which such documents are posted on the Borrower’s behalf on an Internetor intranet website, if any, to which the Lender has access (whether a commercial, third-party website or whether sponsored by the Lender),provided that: (i) the Borrower shall deliver paper copies of such documents to the Lender if the Lender requests that the Borrower deliversuch paper copies until a written request to cease delivering paper copies is given by the Lender and (ii) the Borrower shall notify the Lender(by facsimile or electronic mail) of the posting of any such documents and provide to the Lender by electronic mail electronic versions (i.e.,soft copies) of such documents.6.03 Legal Existence. Except as permitted under Section 7.02, the Borrower shall maintain its legal existence in good standing in thejurisdiction of its organization or formation and in each other jurisdiction in which the failure so to do would reasonably be expected to havea Material Adverse Effect, and cause each of the Subsidiaries to maintain its qualification to do business and good standing in eachjurisdiction in which the failure so to do would reasonably be expected to have a Material Adverse Effect (it being understood that theforegoing shall not prohibit the Borrower from dissolving or terminating the existence of any Subsidiary that is inactive or whosepreservation otherwise is no longer desirable in the conduct of the business of the Borrower and its Subsidiaries considered as a whole).6.04 Taxes. The Borrower shall pay and discharge when due, and cause each of the Subsidiaries so to do, all taxes imposed upon it or uponits property, which if unpaid would, individually or collectively, reasonably be expected to have a Material Adverse Effect or become a Lienon the property of the Borrower or such Subsidiary (other than a Lien described in clause (a) of the definition of Permitted Encumbrances), asthe case may be, unless and to the extent only that such taxes shall be contested in good faith and by appropriate proceedings diligentlyconducted by the Borrower or such Subsidiary, as the case may be.6.05 Insurance. The Borrower shall maintain, and cause each of its Subsidiaries to maintain, with financially sound and reputable insurancecompanies insurance on all its property in at least such amounts and against at least such risks as are usually insured against in the samegeneral area by companies engaged in the same or a similar business, provided that the Borrower and its Subsidiaries may self-insure to thesame extent as other companies engaged in similar businesses and owning similar properties in the same general areas in which the Borroweror such Subsidiary operates and to the extent consistent with prudent business practice. The Borrower shall furnish to the Lender, uponwritten request of the Lender, full information as to the insurance carried.6.06 Condition of Property. The Borrower shall at all times maintain, protect and keep in good repair, working order and condition in allmaterial respects (ordinary wear and tear excepted), and cause each of its Subsidiaries so to do, all material property necessary to theoperation of the Borrower’s or such Subsidiary’s, as the case may be, material businesses, provided that nothing shall prevent the Borroweror its Subsidiaries, as appropriate, from discontinuing the maintenance or operation of any property if such discontinuance is, in the judgmentof the Borrower or such Subsidiary, desirable in the conduct of the business of the Borrower or such Subsidiary. It is understood that thiscovenant relates only to working order and condition of such property in accordance with prudent industry practices and shall not beconstrued as a covenant not to dispose of property.6.07 Observance of Legal Requirements. The Borrower shall observe and comply in all material respects, and cause each of its Subsidiariesso to do, with all laws, regulations and orders of any Governmental Authority which now or at any time hereafter may be applicable to it,including ERISA and all Environmental Laws, a violation of which would individually or collectively reasonably be expected to have aMaterial Adverse Effect, except such thereof as shall be contested in good faith and, if applicable, by appropriate proceedings diligentlyconducted by it.6.08 Inspection of Property; Books and Records; Discussions. The Borrower shall keep proper books of record and account in conformitywith GAAP and all requirements of law. The Borrower shall permit representatives of the Lender to visit its offices, to inspect any of itsproperty (subject to reasonable procedures relating to safety and security) and examine and make copies or abstracts from any of its booksand records at any reasonable time and as often as may reasonably be desired, and to discuss the business, operations, prospects, property andfinancial condition of theExhibit 4(g)Borrower and its Subsidiaries with the officers thereof and the Accountants; provided that none of the Lender, its agents, or itsrepresentatives shall be entitled to examine or make copies or abstracts of, or otherwise obtain information with respect to, the Borrower’srecords relating to pending or threatened litigation if any such disclosure by the Borrower would reasonably be expected (i) to give rise to awaiver of any attorney/client privilege of the Borrower or any of its Subsidiaries relating to such information or (ii) to be otherwise materiallydisadvantageous to the Borrower or any of its Subsidiaries in the defense of such litigation; and provided further that in the case of anydiscussion with the Accountants, the Borrower shall have been given the opportunity to participate in such discussion and, unless a Defaultexists, the Lender shall pay any fees and expenses of the Accountant in connection therewith.ARTICLE VIINEGATIVE COVENANTSUntil the principal of and interest on all Term Loans and all other amounts payable under the Loan Documents shall have been paidin full, the Borrower covenants and agrees with the Lender that:7.01 Liens. The Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of itsproperty, whether now owned or hereafter acquired by it, except:(s)Liens now existing or hereafter arising in favor of the Lender under the Loan Documents;(t)Permitted Encumbrances;(u)any Lien existing on any property prior to the acquisition thereof by the Borrower or any Subsidiary, or existing onany property of any Person that becomes a Subsidiary after the Closing Date prior to the time such Person becomes a Subsidiary orthat is merged with or into or consolidated with the Borrower or any Subsidiary prior to such merger or consolidation, provided that(i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary or suchmerger or consolidation, as the case may be, (ii) such Lien shall not apply to any other property of the Borrower or any Subsidiaryand (iii) such Lien shall secure only those obligations and liabilities that it secures on the date of such acquisition or the date suchPerson becomes a Subsidiary of the Borrower or such merger or consolidation, as the case may be;(v)Liens (including precautionary Liens in connection with Capital Lease Obligations) on fixed or capital assets andother property (including any natural gas, oil or other mineral assets, pollution control facilities, electrical generating plants,equipment and machinery, and related accounts, financial assets, contracts and general intangibles) acquired, constructed, explored,drilled, developed, improved, repaired or serviced (including in connection with the financing of working capital and ongoingmaintenance) by the Borrower or any Subsidiary, provided that (i) such security interests and the obligations and liabilities securedthereby are incurred prior to or within 270 days after the acquisition of the relevant asset or the completion of the relevantconstruction, exploration, drilling, development, improvement, repair or servicing (including the relevant financing of workingcapital and ongoing maintenance), as the case may be, (ii) the obligations and liabilities secured thereby do not exceed the cost ofacquiring, constructing, exploring, drilling, developing, improving, repairing or servicing (including the financing of working capitaland ongoing maintenance in respect of) the relevant assets, and (iii) such security interests shall not apply to any other propertybeyond the relevant property set forth in this Section 7.01(d) (and in the case of construction or improvement, any theretoforeunimproved real property on which the property so constructed or the improvement is located) and Section 7.01(f), as applicable, ofthe Borrower or any Subsidiary;(w)Liens created under or in connection with the Mortgage and the SWLP Mortgage;(x)Liens on any Equity Interest owned or otherwise held by or on behalf of the Borrower or any Subsidiary in anyPerson created as a special purpose, bankruptcy-remote Person for the sole and exclusive purpose of engaging in activities inconnection with the owning and operating of property in connection with any project financing permitted to be secured under Section7.01(d);(y)Liens created to secure Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary;(z)rights reserved to or vested in others to take or receive any part of any coal, ore, gas, oil and other minerals, anytimber and/or any electric capacity or energy, gas, water, steam and any other productExhibit 4(g)developed, produced, manufactured, generated, purchased or otherwise acquired by the Borrower or by others on property of theBorrower or any of its Subsidiaries, provided that no Lien described in this paragraph shall secure Indebtedness;(aa)Liens created for the sole purpose of extending, renewing or replacing in whole or in part Indebtedness secured byany lien, mortgage or security interest referred to in the foregoing Section 7.01(a) through Section 7.01(h), provided that the principalamount of Indebtedness secured thereby shall not exceed the principal amount of Indebtedness so secured at the time of suchextension, renewal or replacement and that such extension, renewal or replacement, as the case may be, shall be limited to all or apart of the property or indebtedness that secured the lien or mortgage so extended, renewed or replaced (and any improvements onsuch property);(ab)Liens on cash or invested funds used to make a defeasance, covenant defeasance or in substance defeasance ofany Indebtedness pursuant to an express contractual provision in the agreement governing such Indebtedness, provided thatimmediately before and immediately after giving effect to the making of such defeasance, no Default shall exist;(ac)Liens on all CoBank Equities now owned or hereafter acquired by the Borrower; and(ad)any Lien, in addition to those described in the foregoing Section 7.01(a) through Section 7.01(k), securingobligations that, together with all other obligations secured pursuant to this Section 7.01(l), do not exceed 10% of ConsolidatedAssets at the time of the incurrence thereof.7.02 Merger; Consolidation. The Borrower shall not, and shall not permit any Subsidiary (excluding any Immaterial Subsidiary) to undergoa division (as defined in Section 18-217 of the Delaware Limited Liability Company Act) or consolidate with or merge into any other Person(other than a merger of a Subsidiary into, or a consolidation of a Subsidiary with, the Borrower or another Subsidiary), unless:(ae)immediately before and after giving effect thereto no Default shall exist;(af)immediately before and after giving effect thereto, all of the representations and warranties contained in the LoanDocuments shall be true and correct except as the context thereof otherwise requires and except for those representations andwarranties which by their terms or by necessary implication are expressly limited to a state of facts existing at a time prior to suchmerger, consolidation or acquisition, as the case may be, or such other matters relating thereto as are identified in a writing to theLender and are satisfactory to the Lender; and(ag)in the case of a transaction involving the Borrower, either (i) the Borrower shall be the surviving entity thereof, orin the event the Borrower shall not be the surviving entity thereof, each of the following conditions shall be satisfied: (A) suchsurviving entity shall have been incorporated or otherwise formed in a State of the United States with substantially all of its assetsand business located and conducted in the United States, (B) such surviving entity shall, immediately after giving effect to suchtransaction, have an Investment Grade Rating and (C) such surviving entity shall have expressly assumed the obligations of theBorrower under the Loan Documents pursuant to a writing in form and substance satisfactory to the Lender; and (ii) the Lender shallhave received a certificate signed by a duly authorized officer of the Borrower identifying the Person to be merged with or into, orconsolidated with, or acquired by, the Borrower, and certifying as to each of the matters set forth in Sections 7.02(a), 7.02(b) and7.02(c)(i).For purposes of Section 7.02(c) above, “Investment Grade Rating” means a Senior Debt Rating from at least two Rating Agenciesequal to (1) for any transaction where the surviving entity has a Senior Debt Rating, a rating for such surviving entity of BBB- or higher fromS&P or Fitch or Baa3 or higher from Moody’s and (2) for any transaction where the surviving entity is an indirect or direct holding companyfor a public utility that does not have a Senior Debt Rating, a rating for such surviving entity’s primary utility Subsidiary of BBB- or higherfrom S&P or Fitch or Baa3 or higher from Moody’s.7.03 Transactions with Affiliates. The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, transfer, lease or otherwisedispose of (including pursuant to a merger) any property or assets to, or purchase, lease or otherwise acquire (including pursuant to a merger)any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except in the ordinary course of businessat prices and on terms and conditions not less materially favorable to the Borrower or such Subsidiary, as the case may be, than could beobtained on an arm’s-length basis from unrelated third parties, provided that this Section shall not apply to (i) any transaction that is incomplianceExhibit 4(g)with applicable laws and regulations of the Federal Energy Regulatory Commission, the WPS or the MPUC pertaining to affiliatetransactions or is authorized by a tariff or rate schedule which has been approved by a Governmental Authority or performed in accordancewith its orders, (ii) any transaction that is otherwise permitted under Section 7.02 and (iii) transactions pursuant to any contract in effect onthe date hereof, as the same may be amended, extended or replaced from time to time so long as such contract as so amended, extended orreplaced is, taken as a whole, not materially less favorable to the Borrower and its Subsidiaries than under those contracts in effect on the datehereof.7.04 Permitted Hedge Agreements. The Borrower shall not enter into any Hedge Agreements other than (a) Permitted Hedge Agreementsand (b) transactions in futures, floors, collars and similar Hedge Agreements involving the stock price of a Person involved in a mergertransaction permitted by Section 7.02.7.05 Financial Covenant. The Borrower will not permit Total Indebtedness to be greater than 65% of Total Capitalization as of the end ofany fiscal quarter.7.06 Anti-Money Laundering and Anti-Terrorism Finance Laws; Foreign Corrupt Practices Act; Sanctions Laws; Restricted Person. TheBorrower shall not, and shall not permit any Subsidiary to, (i) engage in or conspire to engage in any transaction that evades or avoids, or hasthe purpose of evading or avoiding, or attempts to violate, any prohibition set forth in any Anti-Terrorism Law, (ii) cause or permit any of thefunds that are used to repay any obligation under the Loan Documents to be derived from any unlawful activity with the result that themaking of the Term Loans would be in violation of any applicable law, (iii) use any part of the proceeds of the Term Loans, in furtherance ofan offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation ofany Anti-Corruption Laws; (iv) use any of the proceeds from the Term Loans to finance any operations, investments or activities in, or makeany payments to, any Restricted Person or in any manner that would result in the violation of any applicable sanctions.7.07 Use of Proceeds. The Borrower shall not, and shall not permit any Subsidiary to, use the proceeds of the Term Loans, whether directlyor indirectly, and whether immediately, incidentally or ultimately, to purchase assets from or securities from or issued by, or to repay anyobligation to the extent such purchase or repayment constitutes a “covered transaction” (as defined in Section 23A of the Federal Reserve Act(12 U.S.C. § 371c)) owed to, an “affiliate” of the Lender, as such term is defined in Regulation W promulgated by the Board. ARTICLE VIIIEVENTS OF DEFAULT AND REMEDIES8.01 Events of Default.Any of the following shall constitute an Event of Default:(a) the Borrower shall fail to pay any principal of any Term Loan when and as the same shall become due and payable,whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;(b) the Borrower shall fail to pay any interest on any Term Loan or any fee, commission or any other amount (other than anamount referred to in Section 8.01(a)) payable under any Loan Document, when and as the same shall become due and payable, andsuch failure shall continue unremedied for a period of five Business Days;(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or inconnection with any Loan Document or any amendment or modification hereof or waiver thereunder, or in any report, certificate,financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment ormodification hereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;Exhibit 4(g)(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 6.03 (withrespect to the Borrower’s existence), Section 7.02, Section 7.04, Section 7.05 or Section 7.06;(e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 7.01 or Section7.03 and such failure shall continue unremedied for a period of ten days after the Borrower shall have obtained knowledge thereof.(f) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document towhich it is a party (other than those specified in Section 8.01(a), Section 8.01(b), Section 8.01(d) or Section 8.01(e)), and such failureshall continue unremedied for a period of 30 days after the Borrower shall have obtained knowledge thereof;(g) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless ofamount) in respect to any Material Obligations, when and as the same shall become due and payable and after the expiration of anyapplicable grace period;(h) any event or condition occurs that results in any Material Obligations becoming due prior to their scheduled maturity orpayment date, or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of anyMaterial Obligations or any trustee or agent on its or their behalf to cause any Material Obligations to become due prior to theirscheduled maturity or payment date or to require the prepayment, repurchase, redemption or defeasance thereof prior to theirscheduled maturity or payment date (in each case after giving effect to any applicable cure period), provided that this Section 8.01(h)shall not apply to (i) Indebtedness that becomes due as a result of a notice of voluntary prepayment or redemption delivered by theBorrower or a Subsidiary, (ii) secured Indebtedness that becomes due solely as a result of the voluntary sale or transfer of theproperty or assets securing such Indebtedness, (iii) intercompany indebtedness or (iv) the exercise of any contractual right to causethe prepayment of any Material Obligations (other than the exercise of a remedy for an event of default under the applicable contractor agreement);(i) except for Immaterial Transactions and transactions expressly permitted by Section 6.03 with respect to Subsidiaries, theBorrower or any Subsidiary shall (i) suspend or discontinue its business, (ii) make an assignment for the benefit of creditors, (iii)generally not pay its debts as such debts become due, (iv) admit in writing its inability to pay its debts as they become due, (v) file avoluntary petition in bankruptcy, (vi) become insolvent (however such insolvency shall be evidenced), (vii) file any petition oranswer seeking for itself any reorganization, arrangement, composition, readjustment of debt, liquidation or dissolution or similarrelief under any present or future statute, law or regulation of any jurisdiction, (viii) petition or apply to any tribunal for any receiver,custodian or any trustee for any substantial part of its property, (ix) be the subject of any such proceeding filed against it whichremains undismissed for a period of 45 days, (x) file any answer admitting or not contesting the material allegations of any suchpetition filed against it or any order, judgment or decree approving such petition in any such proceeding, (xi) seek, approve, consentto, or acquiesce in any such proceeding, or in the appointment of any trustee, receiver, sequestrator, custodian, liquidator, or fiscalagent for it, or any substantial part of its property, or an order is entered appointing any such trustee, receiver, custodian, liquidator orfiscal agent and such order remains in effect for 45 days, or (xii) take any formal action for the purpose of effecting any of theforegoing or looking to the liquidation or dissolution of the Borrower or any Subsidiary;(j) except to the extent arising solely out of an Immaterial Transaction, an order for relief is entered under the United Statesbankruptcy laws or any other decree or order is entered by a court having jurisdiction (i) adjudging the Borrower or any Subsidiarybankrupt or insolvent, (ii) approving as properly filed a petition seeking reorganization, liquidation, arrangement, adjustment orcomposition of or in respect of Borrower or any Subsidiary under the United States bankruptcy laws or any other applicable Federalor state law, (iii) appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Borroweror any Subsidiary of any substantial part of the property thereof, or (iv) ordering the winding up or liquidation (other than, in the caseof a Subsidiary, voluntary liquidation, not under anyExhibit 4(g)bankruptcy, insolvency or similar law) of the affairs of the Borrower or any Subsidiary, and any such decree or order continuesunstayed and in effect for a period of 45 days;(k) one or more judgments or decrees against the Borrower or any of its Subsidiaries or any combination thereofaggregating in excess of $35,000,000, which judgment or decree (i) shall not be fully covered by insurance after taking into accountany applicable deductibles and (ii) shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of atleast 30 consecutive days;(l) any Loan Document shall cease, for any reason, to be in full force and effect or the Borrower shall so assert in writing orshall disavow any of its Obligations;(m) an ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with all other ERISAEvents that have occurred, could reasonably be expected to result in a Material Adverse Effect;(n) any authorization or approval or other action by any Governmental Authority required for the execution, delivery orperformance of any Loan Document shall be terminated, revoked or rescinded or shall otherwise no longer be in full force and effect;(o) a Change in Control shall occur; or(p) the Borrower shall fail to own, directly or indirectly, substantially all of the assets of Minnesota Power.If a Default shall have occurred under the Loan Documents, then such Default will continue to exist until it either is cured (to theextent specifically permitted) in accordance with the Loan Documents or is otherwise expressly waived by Lender as determined inaccordance with Section 10.01; and once an Event of Default occurs under the Loan Documents, then such Event of Default will continue toexist until it is expressly waived by the Lender, as required hereunder in Section 10.01.8.02 Remedies upon Event of Default.If any Event of Default occurs and is continuing, the Lender may take any or all of the following actions:(a) declare the Term Commitment to be terminated, whereupon such commitment and obligation shall be terminated;(b) declare the unpaid principal amount of all outstanding Term Loans, all interest accrued and unpaid thereon, and all otheramounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment,demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and(c) exercise all rights and remedies available to it under the Loan Documents or applicable law or equity;provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under theBankruptcy Code of the United States, the obligation of the Lender to make Term Loans shall automatically terminate, the unpaid principalamount of all outstanding Term Loans and all interest and other amounts as aforesaid shall automatically become due and payable withoutfurther act of the Lender.8.03 Application of Funds.After the exercise of remedies provided for in Section 8.02 (or after the Term Loans have automatically become immediately due andpayable) or if at any time insufficient funds are received by and available to the Lender to payExhibit 4(g)fully all Obligations then due hereunder, any amounts received on account of the Obligations shall be applied by the Lender in its solediscretion.ARTICLE IXRESERVEDARTICLE XMISCELLANEOUS10.01 Amendments, Etc.No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by theBorrower therefrom, shall be effective unless in writing signed by the Lender and the Borrower and each such waiver or consent shall beeffective only in the specific instance and for the specific purpose for which given.10.02 Notices; Effectiveness; Electronic Communications.(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (andexcept as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall bedelivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax transmission or e-mail transmission asfollows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicabletelephone number, to the address, fax number, e-mail address or telephone number specified for the Borrower or the Lender onSchedule 1.01.Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed tohave been given when received; notices and other communications sent by fax transmission shall be deemed to have been given when sent(except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on thenext Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent providedin subsection (b) below shall be effective as provided in such subsection (b).(b) Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished byelectronic communication (including e-mail, FPML messaging and Internet or intranet websites) pursuant to procedures approved by theLender. The Lender or the Borrower may each, in its discretion, agree to accept notices and other communications to it hereunder byelectronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particularnotices or communications.Unless the Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon thesender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices and other communications posted to an Internet or intranet website shall be deemedreceived by the intended recipient upon the sender’s receipt of an acknowledgement by the intended recipient (such as by the “return receiptrequested” function, as available, return email address or other written acknowledgement) indicating that such notice or communication isavailable and identifying the website address therefor; provided that, for both clauses (i) and (ii), if such notice, email or othercommunication is not sent during the normal business hours of the recipient, such notice, email or communication shall be deemed to havebeen sent at the opening of business on the next Business Day for the recipient.For purposes of Section 6.02, the Borrower’s website is www.allete.com.Exhibit 4(g)(c) Change of Address, Etc. Each of the Borrower and the Lender may change its address, fax number or telephone number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.(d) Reliance by Lender. The Lender shall be entitled to rely and act upon any notices (including, without limitation, telephonic orelectronic notices, Loan Notices and Notice of Loan Prepayment) purportedly given by or on behalf of the Borrower and which the Lender,in good faith, believes to be genuine, even if (i) such notices were not made in a manner specified herein, were incomplete or were notpreceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from anyconfirmation thereof. The Borrower shall indemnify the Lender and the Related Parties of each of them from all losses, costs, expenses andliabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower, provided that suchindemnity shall not be available to the extent that such losses, costs, expenses and liabilities are determined by a court of competentjurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of the Lender or suchRelated Party. All telephonic notices to and other telephonic communications with the Lender may be recorded by either party, and each ofthe parties hereto hereby consents to such recording.10.03 No Waiver; Cumulative Remedies; Enforcement.No failure by the Lender to exercise, and no delay by the Lender in exercising, any right, remedy, power or privilege hereunder orunder any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power orprivilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right,remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, arecumulative and not exclusive of any rights, remedies, powers and privileges provided by law.10.04 Expenses; Indemnity; Damage Waiver.(a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Lender and its Affiliates(including the reasonable fees, charges and disbursements of counsel for the Lender), in connection with the preparation, negotiation,execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of theprovisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonableout-of-pocket expenses incurred by the Lender (including the reasonable fees, charges and disbursements of any counsel for the Lender), inconnection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, includingits rights under this Section, or (B) in connection with Term Loans made hereunder, including all such reasonable out-of-pocket expensesincurred during any workout, restructuring or negotiations in respect of such Term Loans.(b) Indemnification by Borrower. The Borrower shall indemnify the Lender and each Related Party thereof (each such Person beingcalled an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and relatedexpenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against anyIndemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement orinstrument contemplated thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or theconsummation of the Transactions or any other transactions contemplated thereby, (ii) any Term Loan or the use of the proceeds thereof, (iii)any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of theSubsidiaries, or any liability under any Environmental Law related in any way to the Borrower or any of the Subsidiaries or (iv) any actual orprospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not such claim, litigation, investigationor proceeding is brought by the Borrower or any or its equity holders, Affiliates, creditors or any other third Person and whether based oncontract, tort or any other theory and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as toany Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court ofcompetent jurisdiction by final and nonappealable judgment to have resulted from (A)Exhibit 4(g)the gross negligence or willful misconduct of such Indemnitee or (B) a breach in bad faith by such Indemnitee or arising solely from claimsbetween or among one or more Indemnitees.(c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Borrower shall not assert, and theBorrower hereby waives, and acknowledges that no other Person shall have, any claim against any Indemnitee, on any theory of liability, forspecial, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a resultof, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby orthereby, any Term Loan or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damagesarising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by suchIndemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the otherLoan Documents or the transactions contemplated hereby or thereby (except for any claims by the Borrower for damages arising from thegross negligence or willful misconduct of such Indemnitee; provided that no Indemnitee shall be liable for any such damages except to theextent determined by a court of competent jurisdiction in a final nonappealable judgment).(d) Payments. All amounts due under this Section shall be payable not later than ten (10) Business Days after written demandtherefor.(e) Survival. The agreements in this Section and the indemnity provisions of Section 10.02(d) shall survive the termination of theTerm Commitment and the repayment, satisfaction or discharge of all the other Obligations.10.05 Payments Set Aside.To the extent that any payment by or on behalf of the Borrower is made to the Lender, or the Lender exercises its right of setoff, andsuch payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set asideor required (including pursuant to any settlement entered into by the Lender in its discretion) to be repaid to a trustee, receiver or any otherparty, in connection with any proceeding under any Debtor Relief Law or otherwise, then to the extent of such recovery, the obligation or partthereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or suchsetoff had not occurred.10.06 Successors and Assigns.(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the partieshereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of itsrights or obligations hereunder without the prior written consent of the Lender, and the Lender may not assign or otherwise transfer any of itsrights or obligations hereunder except (i) by an assignment in accordance with the provisions of subsection (b) of this Section, (ii) by way ofparticipation in accordance with the provisions of subsection (c) of this Section, or (iii) by way of pledge or assignment of a security interestin accordance with the provisions of subsection (d) of this Section.(b) Assignments by Lender. The Lender may at any time assign to one or more assignees all or a portion of its rights and obligationsunder this Agreement; provided, that, unless such assignment is to an Affiliate of the Lender:(i) the aggregate amount of the principal outstanding balance subject to such assignment shall not be less than $5,000,000,except in the case of an assignment of the entire remaining amount of the Term Loan or unless the Borrower consents to suchassignment; and(ii) the Borrower shall have consented to such assignment (such consent not to be unreasonably withheld or delayed), unlessan Event of Default has occurred and is continuing; provided that the Borrower shall be deemed to have consented to any suchassignment unless it shall object thereto by written notice to the Lender within five (5) Business Days after having received noticethereof.Exhibit 4(g)(c) Participations. The Lender may at any time, without the consent of, or notice to, the Borrower, sell participations to any Personin all or any portion of the Lender’s rights and/or obligations under this Agreement; provided that (i) the Lender’s obligations under thisAgreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the Borrower for the performance of such obligations,and (iii) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender’s rights and obligations underthis Agreement. Any agreement or instrument pursuant to which the Lender sells such a participation shall provide that the Lender shall retainthe sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement.(d) Certain Pledges. The Lender may at any time pledge or assign a security interest in all or any portion of its rights under thisLoan Agreement to secure obligations of the Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank;provided that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgee orassignee for the Lender as a party hereto.10.07 Treatment of Certain Information; Confidentiality.(a) Treatment of Certain Information. The Lender agrees to maintain the confidentiality of the Information (as defined below),except that Information may be disclosed (i) to its Affiliates, its auditors and to its Related Parties that need to know such information (itbeing understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information andinstructed to keep such Information confidential), (ii) to the extent required or requested by any regulatory authority purporting to havejurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of InsuranceCommissioners), (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) in connectionwith the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or anyother Loan Document or the enforcement of rights hereunder or thereunder, (v) subject to an agreement containing provisions substantiallythe same as those of this Section, to (A) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights andobligations under this Agreement or (B) any actual or prospective party (or its Related Parties) to any swap, derivative or other transactionunder which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder, (vi) on aconfidential basis to any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facilities provided hereunder,(vii) with the consent of the Borrower or to the extent such Information (A) becomes publicly available other than as a result of a breach ofthis Section or (B) becomes available to the Lender or any of its Affiliates on a nonconfidential basis from a source other than the Borrower.For purposes of this Section, “Information” means all information received from the Borrower or any Subsidiary relating to the Borrower orany Subsidiary or any of their respective businesses, other than any such information that is available to the Lender on a nonconfidentialbasis prior to disclosure by the Borrower or any Subsidiary, provided that, in the case of information received from the Borrower or anySubsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintainthe confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Personhas exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidentialinformation. In addition, the Lender may disclose the existence of this Agreement and information about this Agreement to market datacollectors, similar service providers to the lending industry and service providers the Lender in connection with the administration of thisAgreement, the other Loan Documents and the Term Commitment.(b) Press Releases. The Borrower and its Affiliates agree that they will not in the future issue any press releases or other publicdisclosure using the name of the Lender or its Affiliates or referring to this Agreement or any of the Loan Documents without the priorwritten consent of the Lender, unless (and only to the extent that) the Borrower or such Affiliate is required to do so under law and then, theBorrower or such Affiliate will, to the extent permitted by applicable law and practicable, consult with such Person before issuing such pressrelease or other public disclosure.(c) Customary Advertising Material. The Borrower consents to the publication by the Lender, at the Lender’s own expense, ofcustomary advertising material relating to the transactions contemplated hereby using the name, product photographs, logo or trademark ofthe Borrower, provided that such use complies with the Borrower’s logo and trademark standards.Exhibit 4(g)10.08 Right of Setoff.If an Event of Default shall have occurred and be continuing, the Lender and each of its Affiliates is hereby authorized at any timeand from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time ordemand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by theLender or any such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations now or hereafter existingunder this Agreement or any other Loan Document to the Lender or its Affiliates, irrespective of whether or not the Lender or Affiliate shallhave made any demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured,secured or unsecured, or are owed to a branch, office or Affiliate of the Lender different from the branch, office or Affiliate holding suchdeposit or obligated on such indebtedness. The rights of the Lender and its Affiliates under this Section are in addition to other rights andremedies (including other rights of setoff) that the Lender or its Affiliates may have. The Lender agrees to notify the Borrower promptly afterany such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.10.09 Interest Rate Limitation.Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the LoanDocuments shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Lendershall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Term Loans or,if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by theLender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is notprincipal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize,prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligationshereunder.10.10 Counterparts; Integration; Effectiveness.This Agreement and each of the other Loan Documents may be executed in counterparts (and by different parties hereto in differentcounterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. ThisAgreement, the other Loan Documents, and any separate letter agreements with respect to fees payable to the Lender, constitute the entirecontract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral orwritten, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall havebeen executed by the Lender and when the Lender shall have received counterparts hereof that, when taken together, bear the signatures ofeach of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement or any other Loan Document, orany certificate delivered thereunder, by fax transmission or e-mail transmission (e.g. “pdf” or “tif”) shall be effective as delivery of amanually executed counterpart of this Agreement or such other Loan Document or certificate. Without limiting the foregoing, to the extent amanually executed counterpart is not specifically required to be delivered under the terms of any Loan Document, upon the request of anyparty, such fax transmission or e-mail transmission shall be promptly followed by such manually executed counterpart.10.11 Survival of Representations and Warranties.All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto orthereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations andwarranties have been or will be relied upon by the Lender, regardless of any investigation made by the Lender or on its behalf andnotwithstanding that the Lender may have had notice or knowledge of any Default at the time of any Term Borrowing, and shall continue infull force until the Facility Termination Date.Exhibit 4(g)10.12 Severability.If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality,validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impairedthereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with validprovisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity ofa provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.10.13 Governing Law; Jurisdiction; Etc.(a) GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT, AS TO ANYOTHER LOAN DOCUMENT, AS EXPRESSLY SET FORTH THEREIN) AND ANY CLAIMS, CONTROVERSY, DISPUTE ORCAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF ORRELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (EXCEPT, AS TO ANY OTHER LOANDOCUMENT, AS EXPRESSLY SET FORTH THEREIN) AND THE TRANSACTIONS CONTEMPLATED HEREBY ANDTHEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEWYORK.(b) SUBMISSION TO JURISDICTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY AGREESTHAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION,WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST THE LENDER ORANY RELATED PARTY IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THETRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OFNEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERNDISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIESHERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS ANDAGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARDAND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BYAPPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINALJUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BEENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BYLAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THATTHE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENTOR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANYJURISDICTION.(c) WAIVER OF VENUE. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THEFULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVETO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THISAGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN SECTION 10.13(b) OF THISSECTION. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENTPERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OFSUCH ACTION OR PROCEEDING IN ANY SUCH COURT.(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS INTHE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THERIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.Exhibit 4(g)10.14 Waiver of Jury Trial.EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLELAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISINGOUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONSCONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACHPARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HASREPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION,SEEK TO ENFORCE THE FOREGOING WAIVER AND (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETOHAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHERTHINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.10.15 Acknowledgment Regarding Any Support QFCs.(a) To the extent that the Loan Documents provide support, through a guarantee or otherwise, for any swap contract or any otheragreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the partiesacknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the FederalDeposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulationspromulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with theprovisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by thelaws of the State of New York and/or of the United States or any other state of the United States): In the event a Covered Entity that is partyto a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of suchSupported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFCCredit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will beeffective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFCCredit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of theUnited States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. SpecialResolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC CreditSupport that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights couldbe exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of theUnited States or a state of the United States.(b) As used in this Section 10.15, the following terms have the following meanings:“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12U.S.C 1841(k)) of such party.“Covered Entity” means any of the following:(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).Exhibit 4(g)“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81,47.2 or 382.1, as applicable.“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12U.S.C. 5390(c)(8)(D).10.16 No Advisory or Fiduciary Responsibility.In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver orother modification hereof or of any other Loan Document), the Borrower acknowledges and agrees, and acknowledges its Affiliates’understanding, that: (a) (i) the services regarding this Agreement provided by the Lender and any Affiliate thereof are arm’s-lengthcommercial transactions between the Borrower and its Affiliates, on the one hand, and the Lender and its Affiliates, on the other hand, (ii) theBorrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borroweris capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by theother Loan Documents; (b) (i) the Lender and its Affiliates each is and has been acting solely as a principal and, except as expressly agreed inwriting by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary, for Borrower or any of itsAffiliates, or any other Person and (ii) neither the Lender nor any of its Affiliates has any obligation to the Borrower or any of its Affiliateswith respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and(c) the Lender and its Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrowerand its Affiliates, and neither the Lender nor any of its Affiliates has any obligation to disclose any of such interests to the Borrower or any ofits Affiliates. To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against the Lenderor any of its Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of anytransactions contemplated hereby.10.17 Electronic Execution.The words “delivery,” “execute,” “execution,” “signed,” “signature,” and words of like import in any Loan Document or any otherdocument executed in connection herewith shall be deemed to include electronic signatures, the electronic matching of assignment terms andcontract formations on electronic platforms approved by the Lender, or the keeping of records in electronic form, each of which shall be ofthe same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-basedrecordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signaturesin Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based onthe Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary, the Lender is under noobligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Lender pursuant toprocedures approved by it; provided further without limiting the foregoing, upon the request of the Lender, any electronic signature shall bepromptly followed by such manually executed counterpart.10.18 USA PATRIOT Act Notice.The Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56(signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, whichinformation includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower inaccordance with the Act. The Borrower agrees to, promptly following a request by the Lender, provide all such other documentation andinformation that the Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-moneylaundering rules and regulations, including the Act.[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]Exhibit 4(g)CHAR1\1686577v5IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.BORROWER:ALLETE, INC.By: Name: Title: LENDER: BANK OF AMERICA, N.A.,as LenderBy: Name: Title: Exhibit 4(g)SCHEDULE 1.01NOTICESIf to the Borrower, to it at:ALLETE, Inc.30 West Superior Street,Duluth, Minnesota 55802,Attention of: Patrick L. Cutshall, TreasurerPhone: 218-723-3978Fax: 218-723-3912Email: pcutshall@allete.comIf to the Lender, to it at:Bank of America, N.A.201 E. Washington StreetPhoenix, Arizona 85004Attention of: Susan MobleyPhone: 602-523-6409Email: susan.e.mobley@bofa.comExhibit 4(g)SCHEDULE 5.05/5.06DISCLOSED MATTERSNone.Exhibit 4(g)SCHEDULE 5.10LIST OF SUBSIDIARIES1 ALLETE Automotive Services, LLCALLETE Enterprises, Inc.ALLETE Clean Energy, Inc.ACE O&M, LLCACE Solar LLCACE Wind LLCACE Mid-West Holdings, LLCMWW Holdings, LLCLake Benton Power Associates LLCLake Benton Holdings LLCLake Benton Power Partners L.L.C.Storm Lake Power Partners I LLCStorm Lake II Power Associates LLCStorm Lake II Holdings LLCStorm Lake Power Partners II LLCNorthern Wind Energy, LLCChanarambie Power Partners, LLCViking Wind Holdings, LLCViking Wind Partners, LLCBuffalo Ridge Wind Farm, LLCMoulton Heights Wind Power Project, LLCMuncie Power Partners, LLCNorth Ridge Wind Farm, LLCVandy South Project, LLCViking Wind Farm, LLCVindy Power Partners, LLCWilson-West Wind Farm, LLCMINNIGAN HOLDCO, LLCACE Gopher Holdings, LLCACE Lincoln Heights Holdings, LLCWindy Dog - I, LLC Wally’s Wind Farm, LLC Roadrunner - I, LLC Salty Dog - I, LLC Salty Dog - II, LLC Breezy Bucks - I, LLC Breezy Bucks - II, LLCDAJAW Transmission, LLC2 Cisco Holdings, LLCChristoffer Wind Energy I LLCChristoffer Wind Energy II LLC Christoffer Wind Energy III LLC Christoffer Wind Energy IV LLC1 Unless otherwise specified, the Equity Interests in each Subsidiary are owned 100% by the Subsidiary identified above it, withfirst-tier Subsidiaries’ Equity Interests owned 100% by ALLETE, Inc. 2 The limited liability companies in the tier above DAJAW, LLC each own 14.3% of DAJAW, LLC.Exhibit 4(g)Cisco Wind Energy, LLC3ACE West Holdings, LLC Condon Wind Power, LLCACE GAWW Class B LLCGreat American West Wind, LLCSouth Peak Wind, LLCGlen Ullin Energy Center, LLCArmenia Holdings, LLCAMW I Holding, LLCArmenia Mountain Wind, LLCArmenia Mountain Wind II, LLCACE South Holdings, LLCThunder Spirit Wind, LLCRed Lake Solar, LLCALLETE Enterprises QOF, LLC4 Diamond Spring QOZB, LLCACE DS Class B LLCDiamond Spring, LLCDiamond Spring Renewables, LLCALLETE Power Systems, Inc.ALLETE Renewable Resources, Inc.ASW Partners, LLCALLETE South Wind, LLCALLETE Transmission Holdings, Inc.BNI Energy, Inc.BNI Coal, Ltd.MP Affiliate Resources, Inc.Rainy River Energy CorporationSouth Shore Energy, LLCUpper Minnesota Properties, Inc.Upper Minnesota Properties - Development, Inc.ALLETE Properties, LLCALLETE Commercial, LLCLehigh Acquisition, LLCFlorida Landmark Communities, LLCLehigh CorporationMardem, LLCPalm Coast Holdings, Inc.Port Orange Holdings, LLCInterlachen Lakes Estates, LLCPalm Coast Land, LLCALLETE Water Services, Inc.Florida Water Services CorporationEnergy Replacement Property, LLCEnergy Land, Incorporated MP Investments, Inc.RendField Land Company, Inc.Superior Water, Light and Power Company1 The limited liability companies in the tier above Cisco Wind Energy, LLC each own 25% of Cisco Wind Energy, LLC.2 Jointly owned with ALLETE Clean Energy, Inc.Exhibit 4(g)Exhibit AFORM OF COMPLIANCE CERTIFICATEFor the fiscal [quarter][year] ended _________________, 20___.I, ______________________, [Title] of ALLETE, Inc., a Minnesota corporation (the “Borrower”) hereby certify that, to the best ofmy knowledge and belief, with respect to that certain Term Loan Agreement dated as of January 10, 2020 (as amended, modified, restated orsupplemented from time to time, the “Term Loan Agreement”; all of the defined terms in the Term Loan Agreement are incorporated hereinby reference) between the Borrower and Bank of America, N.A., as Lender:[Use following paragraph (a) for fiscal year-end financial statements](a) The Borrower has delivered the year-end audited financial statements required by Section 6.01(a) of the TermLoan Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of anindependent certified public accountant required by such section.[Use following paragraph (a) for fiscal quarter-end financial statements](a) The Borrower has delivered the unaudited financial statements required by Section 6.01(b) of the Term LoanAgreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present in allmaterial respects the financial conditions and results of operations of the Borrower and its Subsidiaries on a consolidatedbasis in accordance with GAAP consistently applied, subject to normal year end audit adjustments and the absence offootnotes. (b) As of ______ (the date of the fiscal quarter or year, as applicable, most recently ended) and as of the date of thisCompliance Certificate, or, if none, the Closing Date) no Default or Event of Default has occurred under the Term LoanAgreement;Delivered herewith are detailed calculations demonstrating compliance by the Borrower with the financial covenants contained inSection 7.05 of the Term Loan Agreement as of the end of the fiscal period referred to above.[signature page follows]Exhibit 4(g)This ______ day of ___________, 20__.ALLETE, INC.,a Minnesota corporationBy: Name: Title: Exhibit 4(g)Attachment to Compliance CertificateComputation of Financial Covenants1. Total Indebtedness $______________2. Total Capitalization $______________3. Total Indebtedness to Total Capitalization Ratio (Line A1 ÷ A2) _____________to 1.0Maximum Permitted 0.65 to 1.0Exhibit 4(g)Exhibit BFORM OF LOAN NOTICEDate: ___________, _____To:Bank of America, N.A., as LenderLadies and Gentlemen:Reference is made to that certain Term Loan Agreement, dated as of January 10, 2020 (as amended, restated, extended, supplemented orotherwise modified in writing from time to time, the “Term Loan Agreement;” the terms defined therein being used herein as therein defined),between ALLETE, Inc., a Minnesota corporation (the “Borrower”) and Bank of America, N.A., as Lender.The undersigned hereby requests (select one):A Borrowing of Term LoansA conversion or continuation of Term Loans1. On (a Business Day).2. In the amount of $ .3. Comprised of .[Type of Loan requested]4. For Eurodollar Rate Loans: with an Interest Period of ___ months.[With respect to such Borrowing, the Borrower hereby represents and warrants that (i) such request complies with the requirements ofSection 2.01 of the Term Loan Agreement and (ii) each of the conditions set forth in Section 4.02 of the Term Loan Agreement have beensatisfied on and as of the date of such Borrowing.][signature page follows]ALLETE, INC.,a Minnesota corporationBy: Name: Title: 1 Include for Borrowings.Exhibit 4(g)Exhibit CFORM OF Notice of Loan PrepaymentTO: Bank of America, N.A., as LenderRE:Term Loan Agreement, dated as of January 10, 2020 by and between ALLETE, Inc., a Minnesota corporation (the“Borrower”) and Bank of America, N.A., as Lender (as amended, modified, extended, restated, replaced, or supplementedfrom time to time, the “Term Loan Agreement”; capitalized terms used herein and not otherwise defined shall have themeanings set forth in the Term Loan Agreement)DATE: [Date] The Borrower hereby notifies the Lender that on _____________2 pursuant to the terms of Section 2.03 of the Term LoanAgreement, the Borrower intends to prepay/repay the following Term Loans as more specifically set forth below:Optional prepayment of Term Loans in the following amount(s): Eurodollar Rate Loans: $ 3Applicable Interest Period: Base Rate Loans: $ 4 Delivery of an executed counterpart of a signature page of this notice by fax transmission or other electronic mail transmission (e.g.“pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this notice.[signature page follows]2 Specify date of such prepayment.3 Any prepayment of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 inexcess thereof (or if less, the entire principal amount thereof outstanding).4 Any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof(or if less, the entire principal amount thereof outstanding).Exhibit 4(g)ALLETE, INC.,a Minnesota corporationBy: Name:Title:Exhibit 4(h)Description of SecuritiesRegistered Pursuant to Section 12of the Securities Exchange Act of 1934As of January 1, 2020 (“Description Date”), ALLETE, Inc. (“ALLETE”) had one class of securities registered under Section 12 of the Securities ExchangeAct of 1934: its common stock, without par value. The common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “ALE”. Thefollowing description is as of the Description Date, unless otherwise noted.DESCRIPTION OF ALLETE, Inc. COMMON STOCKGeneral. The following statements describing ALLETE's common stock are not intended to be a complete description. For additional information, please seeALLETE’s Articles of Incorporation and Bylaws. Each of these documents has been previously filed with the Securities and Exchange Commission ("SEC") andare exhibits to ALLETE’s Annual Report on Form 10-K to which this Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Actof 1934 is an exhibit. Reference is also made to the laws of the State of Minnesota.ALLETE has the following capital stock authorized by its Articles of Incorporation: 80,000,000 shares of common stock, without par value, and 3,616,000shares of preferred stock. As of February 1, 2020, there were 51696497 shares of common stock issued and outstanding and no shares of preferred stock issued andoutstanding.Dividend Rights. ALLETE’s common stock is entitled to dividends only after ALLETE has provided for dividends and any sinking fund requirements on anyissued and outstanding preferred stock. ALLETE’s Articles of Incorporation contain provisions which would restrict net income available for the payment of cashdividends on outstanding common stock in the event that shares of ALLETE’s preferred stock were outstanding and certain common stock equity capitalizationratios were not met.Voting Rights (Non‑Cumulative Voting). Holders of ALLETE’s common stock are entitled to receive notice of and to vote at any meeting of shareholders.Each share of ALLETE’s common stock, as well as each share of any of ALLETE’s issued and outstanding preferred stock, is entitled to one vote. Holders ofALLETE’s common stock do not have cumulative voting rights. Each director is elected by the vote of a majority of the votes cast with respect to the director at ameeting of shareholders called for such purpose at which a quorum is present. At any such meeting for which the number of nominees (other than nomineeswithdrawn on or before the sixtieth (60th) day before the first anniversary of the preceding year’s annual shareholder meeting) exceeds the number of directors tobe elected, directors are elected by a plurality of the votes present and entitled to vote on the election of directors. In addition, whenever dividends on any ofALLETE’s preferred stock are in default in the amount of four full quarterly payments or more, and until all the dividends in default are paid, the holders ofALLETE’s preferred stock are entitled, as one class, to elect a majority of the directors. ALLETE’s common stock, as one class, would then elect the minority.The Articles of Incorporation include detailed procedures and other provisions relating to these rights and their termination, including:•quorums;•terms of directorselected;•vacancies;•class voting;•meetings; and•adjournments.The Articles of Incorporation contain provisions that make it difficult to obtain control of ALLETE through transactions not having the approval of the boardof directors of ALLETE. These provisions include:•a provision requiring the affirmative vote of 75 percent of the outstanding shares of all classes of ALLETE’s capital stock, present and entitled to vote, inorder to authorize certain mergers or consolidations, or sales or leases of a significant amount of assets, of ALLETE, and other significant transactionsthat may have an effect on the control of ALLETE. Any of those transactions are required to meet certain “fair price” and procedural requirements.Neither a 75 percent shareholder vote nor a “fair price” is required for any of those transactions that have been approved by a majority of the“Disinterested Directors,” as that term is defined in the Articles of Incorporation;•a provision permitting a majority of the Disinterested Directors to determine whether the above requirements have been satisfied;and•a provision providing that some parts of the Articles of Incorporation cannot be altered unless approved by 75 percent of the outstanding shares of allclasses of ALLETE’s capital stock, present and entitled to vote, unless the alteration is recommended to the shareholders by a majority of theDisinterested Directors. The parts of the Articles of Incorporation that cannot be altered except as stated above include some parts relating to:Exhibit 4(h)◦mergers or consolidations, or sales or leases of a significant amount of assets, of ALLETE, and other significant transactions that may have an effecton the control of ALLETE; and◦the number, election, terms of office and removal of directors of ALLETE and the way in which vacancies on the board of directors arefilled.Liquidation Rights. After ALLETE has satisfied creditors and the preferential liquidation rights of any of its outstanding preferred stock, the holders of itscommon stock are entitled to share ratably in the distribution of all remaining assets.Miscellaneous. Holders of ALLETE’s common stock have no preemptive or conversion rights. ALLETE’s common stock is listed on the New York StockExchange. The transfer agent and registrar for ALLETE’s common stock is EQ Shareowner Services.Exhibit 10(e)8ALLETE Executive Annual Incentive PlanForm of AwardEffective 2020[Eligible Executive Employees]Target Award OpportunityBase Salary$ Times Award Opportunity (percent of base salary)% Equals Target Award$Performance Levels and Award AmountsGoal Performance LevelPayout as Percent ofTarget AwardAward AmountSuperior200%$Target100%$Threshold44%$Below Threshold0%$Goals Goal Weighting Financial Goals Net Income50% Cash from Operating Activities 20% Strategic & Operational & Values Goals 30% 100%Compensation Subject to Compensation Recovery PolicyAnnual Incentive Plan Compensation is subject to recoupment as defined in the Compensation Recovery policy.Exhibit 10(i)12ALLETEEXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLANRESTRICTED STOCK UNIT GRANT[Effective 2020][Eligible Executive Employees]Name In accordance with the terms of ALLETE’s Executive Long-Term Incentive Compensation Plan, as amended (the "Plan"), and asdetermined by and through the Executive Compensation Committee of ALLETE’s Board of Directors, ALLETE hereby grants toyou (the "Participant") Restricted Stock Units (“RSU’s”) as set forth below, payable in the form of ALLETE Common Stock,subject to the terms and conditions set forth in this Grant, including Annex A hereto, and all documents incorporated herein byreference:Number of Restricted Stock Units: Date of Grant: Vesting Period: This Grant is made in accordance with the Plan.Further terms and conditions of the Grant are set forth in Annex A hereto, which is an integral part of this Grant.Any term, provision or condition applicable to the Restricted Stock Units set forth in the Plan and not set forth herein is herebyincorporated by reference. To the extent any provision hereof is inconsistent with a Plan provision, the Plan provision will govern.YOU SHOULD CAREFULLY READ AND REVIEW THE TERMS AND CONDITIONS SET FORTH IN THIS GRANT,INCLUDING ANNEX A HERETO, WHICH CONTAINS IMPORTANT INFORMATION, INCLUDING MANDATORYCLAIMS AND ARBITRATION PROCEDURES.You will be deemed to have accepted this Grant on the Date of Grant, and all its associated terms and conditions, including themandatory claims and arbitration procedures set forth in Annex A, unless you notify the Company of your non-acceptance of theGrant by contacting the Manager - Compensation, Benefits, and Talent Acquisition, in writing within sixty (60) days of the Date ofGrant.IN WITNESS WHEREOF, ALLETE has caused this Grant to be executed by its Chairman and Chief Executive Officer as of thedate and year first above written.ALLETE By: Chairman & CEO Attachment: Annex A1Exhibit 10(i)12ANNEX ATOALLETEEXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLANRESTRICTED STOCK UNIT GRANTThe grant of restricted stock units (each, a “RSU”) under the ALLETE Executive Long-Term Incentive Compensation Plan (the“Plan”), evidenced by the Grant to which this is annexed, is subject to the following additional terms and conditions:1. Form and Timing of Payment. Subject to the provisions hereof, each RSU will be paid in the form of one share of ALLETEcommon stock (each, a “Share”), plus accrued Dividend Equivalents. Shares will be deposited into your ALLETE Invest Direct planaccount. Except as otherwise provided in sections 3 and 4, below, payment will be made during the period ending sixty days afterthe end of the vesting period; provided, however, the Participant will not be permitted, directly or indirectly, to designate the taxableyear of the distribution. Payment will be subject to withholding Shares equal in value to the minimum amount of tax required to bewithheld by law.2. Dividend Equivalents. You will receive Dividend Equivalents in connection with the RSUs granted. Dividend Equivalents willbe calculated and credited to you at the time the underlying RSUs are paid. Dividend Equivalents will be in the form of additionalRSUs, which will be added to the number of RSUs subject to the grant, and will equal the number of Shares (including fractionalShares) that could have been purchased on applicable dividend payment dates, based on the closing ALLETE common stock priceas reported in the consolidated transaction reporting system on that date, with cash dividends that would have been paid on theunderlying RSUs, if such RSUs were Shares. Dividend Equivalents will only become payable if and to the extent the underlyingRSUs vest and become payable.3. Payment Upon Retirement, Death or Disability; Forfeiture Upon Other Termination of Employment, Default on CertainAgreements or Unsatisfactory Job Performance.3.1 Subject to Section 3.4 below, if during the vesting period you (i) Retire, (ii) die while employed by a Related Company,or (iii) become Disabled, a portion of the unvested RSUs subject to the Grant will vest and be paid to you (or yourbeneficiary or estate) during the period ending sixty days after such event; provided, however, you will not be permitted,directly or indirectly, to designate the taxable year of the distribution. Except as otherwise provided in Section 4, paymentpursuant to this Section 3.1 will be prorated, after giving effect to accumulated Dividend Equivalents, based on the numberof whole calendar months within the vesting period that had elapsed as of the date of Retirement, death or Disability inrelation to the number of calendar months in the vesting period. For purposes of this calculation, you will be credited with awhole month if you were employed on the 15th of the month.3.2 Except as otherwise provided in Section 4, if during the vesting period or prior to payment of all RSUs you have aSeparation from Service for any reason other than those specified in Section 3.1 above, all unvested or unpaid RSUs subjectto the Grant (and related Dividend Equivalents) will be forfeited on the date of such Separation from Service.3.3 If during the vesting period or prior to payment of all RSUs you are demoted, you default on any written agreementwith a Related Company related to a restrictive employment covenant (such as confidentiality, non-disclosure, non-competition, non-solicitation, or the like), or if1ALLETE determines, in its sole discretion, that your job performance is unsatisfactory, ALLETE may cancel or amend yourgrant relating to any unpaid RSUs, resulting in the forfeiture of some portion or all of your unpaid RSUs (and relatedDividend Equivalents).3.4 Notwithstanding anything herein to the contrary, if you become entitled to a payment of the RSUs by reason of yourRetirement and if you are a Specified Employee on the date of such Retirement, payment shall not be made until the earlierof: (i) the expiration of the six-month period beginning on the date of your Retirement, or (ii) the date of your death. Thepayment to which a Specified Employee would otherwise be entitled during this six-month period shall be paid, togetherwith Dividend Equivalents that have accrued during this six-month delay, during the seventh month following the date of theParticipant’s Retirement, or, if earlier, the date of the Participant’s death.4. Change in Control. Upon a Change in Control, unless the Committee provides otherwise prior to the Change in Control,outstanding unvested RSUs shall be prorated (as described below) and such prorated RSUs shall immediately vest and be payable toyou during the period ending sixty days after the Change in Control. The RSUs will not be subject to proration and immediatelyvest, however, if and to the extent that the Grant is, in connection with the Change in Control, fully assumed by the successorcorporation or parent thereof; in such case, the RSUs shall be prorated and immediately vest upon your termination of employmentby the successor corporation for reasons other than cause within 18 months following the Change in Control and be payable to theParticipant during the period ending sixty days after the termination of employment. Any payment on account of or in connectionwith a Change in Control will be prorated, after giving effect to the accumulation of Dividend Equivalents, based on the number ofwhole calendar months within the vesting period that had elapsed as of the date of the Change in Control or termination ofemployment, as applicable, in relation to the number of calendar months in the vesting period. For purposes of this calculation, youwill be credited with a whole month if you were employed on the 15th of the month. In no event will you be permitted, directly orindirectly, to designate the taxable year of the distribution on account of or in connection with a Change in Control.5. Compensation Recovery Policy. The Grant is subject to the terms of any compensation recovery policy or policies establishedby ALLETE as may be amended from time to time (“Compensation Recovery Policy”). ALLETE hereby incorporates into the Grantthe terms of the Compensation Recovery Policy.6. Section 409A Compliance. This Grant is intended to comply with Section 409A or an exemption thereunder, and, accordingly,to the maximum extent permitted, the Plan and the Grant shall be interpreted and administered in compliance therewith.Notwithstanding any other provision of the Grant, payments provided pursuant to the Grant may only be made upon an event and ina manner that complies with Section 409A or an applicable exemption. Any payments pursuant to the Grant that may be excludedfrom Section 409A as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. To the extent thatany provision of the Grant would cause a conflict with the requirements of Section 409A or would cause the administration of theGrant to fail to satisfy Section 409A, such provision shall be deemed null and void to the extent permitted by applicable law.Nothing herein shall be construed as a guarantee of any particular tax treatment. ALLETE makes no representation that the Grantcomplies with Section 409A and in no event shall ALLETE be liable for the payment of any taxes and penalties that you may incurunder Section 409A.27. Claims Procedure and Arbitration. The Grant is subject to the following claims procedures:7.1 Mandatory Claims Procedures. If you or any person acting on your behalf (the “Claimant”) has any claim ordispute related in any way to the Grant or to the Plan, the Claimant must follow these claims procedures. All claims must bebrought no later than one year following the date on which the claim first arose and any claim not submitted within suchtime limit will be waived.7.2 Claim Submission. Any claim must be made in writing to the Claims Administrator. The Claims Administrator,or its delegate, shall notify the Claimant of the resolution of the Claim within 90 days after receipt of the claim; provided,however, if the Claims Administrator determines that an extension is necessary, the 90-day period shall be extended to up to180 days upon notice to that effect to the Claimant.7.3 Notice of Denial. If a claim is wholly or partially denied, the denial notice shall contain (i) the reason or reasonsfor denial of the claim, and (ii) references to the pertinent Plan provisions upon which the denial is based. Unless the claimis submitted for arbitration as provided below and in the Plan, the Claims Administrator’s decision or action shall be final,conclusive and binding on all persons having any interest in the Plan.7.4 Arbitration. If, after exhausting the procedures set forth above, a Claimant wishes to pursue legal action, anyaction by the Claimant with respect to a claim, must be resolved by arbitration in the manner described herein.a)Time Limits. A Claimant seeking arbitration of any determination by the Claims Administrator must, withinsix (6) months of the date of the Claims Administrator’s final decision, file a demand for arbitration with theAmerican Arbitration Association submitting the Claim to resolution by arbitration. A Claimant waives anyclaim not filed timely in accordance with this Section.b)Rules Applicable to Arbitration. The arbitration process shall be conducted in accordance with theCommercial Law Rules of the American Arbitration Association.c)Venue. The arbitration shall be conducted in Minneapolis, Minnesota.d)Binding Effect. The decision of the arbitrator with respect to the claim will be final and binding upon theCompany and the Claimant. By participating in the Plan, and accepting the Grant, you, on behalf of yourselfand any person with a Claim relating to your Grant, agree to waive any right to sue in court or to pursue anyother legal right or remedy that might otherwise be available in connection with the resolution of the Claim.e)Enforceability. Judgment upon any award entered by an arbitrator may be entered in any court havingjurisdiction over the parties.f)Waiver of Class, Collective, and Representative Actions. Any claim shall be heard without consolidation ofsuch claims with any other person or entity. To the fullest extent permitted by law, whether in court or inarbitration, by participating in the Plan, you waive any right to commence, be a party to in any way, or be anactual or putative class member of any class, collective, or representative action arising out of or relating toany claim, and you agree that any claim may only be initiated or maintained and decided on an individualbasis. g)Standard of Review. Any decision of an arbitrator on a claim shall be limited to determining whether theClaims Administrator’s decision or action was arbitrary or3capricious or was unlawful. The arbitrator shall adhere to and apply the deferential standard of review set outin Conkright v. Frommert, 130 S. Ct. 1640 (2010), Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105(2008), and Firestone Tire and Rubber Company v. Bruch, 489 U.S. 101 (1989), and shall accord duedeference to the determinations, interpretations, and construction of the Plan document by the Claim’sAdministrator.h)General Procedures.i.Arbitration Rules. The arbitration hearing will be conducted under the AAA Commercial Arbitration Rules(as amended or revised from time to time by AAA) (hereinafter the “AAA Rules”), before one AAAarbitrator who is from the Large, Complex Case Panel and who has experience with matters involvingexecutive compensation and equity compensation plans. The AAA Rules and the terms and procedures setforth here may conflict on certain issues. To the extent that the procedures set forth here conflict with theAAA Rules, the procedures set forth here shall control and be applied by the arbitrator. Notwithstanding theamount of the claim, the Procedures for Large, Complex Commercial Disputes shall not apply.ii.Substantive Law. The arbitrator shall apply the substantive law (and the laws of remedies, ifapplicable), of Minnesota or federal law, or both, depending upon the claim. Except to the extentrequired by applicable law, the Claimant shall keep any arbitration decision or award strictlyconfidential and not disclose to anyone other than his or her spouse, attorney, or tax advisor.iii.Authority. The arbitrator shall have jurisdiction to hear and rule on prehearing disputes and isauthorized to hold prehearing conferences by telephone or in person as the arbitrator deems necessary.The arbitrator will have the authority to hear a motion to dismiss and/or a motion for summaryjudgment by any party and in doing so shall apply the standards governing such motions under theFederal Rules of Civil Procedure.iv.Pre-Hearing Procedures. Each party may take the deposition of not more than one individual and theexpert witness, if any, designated by another party. Each party will have the right to subpoenawitnesses in accordance with the Federal Arbitration Act, Title 9 of the United States Code. Additionaldiscovery may be had only if the arbitrator so orders, upon a showing of substantial need.v.Fees and Costs. Administrative arbitration fees and arbitrator compensation shall be borne equally by theparties, and each party shall be responsible for its own attorney’s fees, if any; provided, however, that theCommittee will authorize payment by the Company of all administrative arbitration fees, arbitratorcompensation and attorney’s fees if the Committee concludes that a Claimant has substantially prevailed onhis or her claims. Unless prohibited by statute, the arbitrator shall assess attorney’s fees against a party upona showing that such party’s claim, defense or position is frivolous, or unreasonable, or factually groundless.If either party pursues a claim by any means other than those set forth in this Article, the responding partyshall be entitled to dismissal of such action, and the recovery of all costs and attorney’s fees and lossesrelated to such action, unless prohibited by statute.(a)Interstate Commerce and the Federal Arbitration Act. The Company is involved in transactions involvinginterstate commerce, and the employee’s employment with the Company involves such commerce. Therefore,the Federal Arbitration Act,4Title 9 of the United States Code, will govern the interpretation, enforcement, and all judicial proceedingsregarding the arbitration procedures in this Section.8. Ratification of Actions. By receiving the Grant or other benefit under the Plan, you and each person claiming under or throughyou shall be conclusively deemed to have indicated your acceptance and ratification of, and consent to, any action taken under thePlan or the Grant by ALLETE, the Board, or the Committee.9. No Impact on Other Benefits. The Grant or payment on account thereof shall not be taken into account in determining anybenefits under any severance, retirement, welfare, insurance or other benefit plan of ALLETE or any affiliate except to the extentotherwise expressly provided in writing in such other plan or an agreement thereunder.10. Notices. Any notice hereunder to ALLETE shall be addressed to ALLETE, 30 West Superior Street, Duluth, Minnesota 55802,Attention: Manager - Compensation, Benefits, and Talent Acquisition, Human Resources, and any notice hereunder to you shall bedirected to your address as indicated by ALLETE’s records, subject to the right of either party to designate at any time hereafter inwriting some other address.11. Governing Law and Severability. To the extent not preempted by the Federal law, the Grant will be governed by and construedin accordance with the laws of the State of Minnesota, without regard to its conflicts of law provisions. In the event any provision ofthe Grant shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Grant,and the Grant shall be construed and enforced as if the illegal or invalid provision had not been included.12. Definitions. Capitalized terms not otherwise defined herein shall have the meanings given them in the Plan. The followingdefinitions apply to the Grant and this Annex A:12.1 “Claims Administrator” means ALLETE’s Chief Executive Officer, unless the claimant is (or is acting on behalf of)an ALLETE executive officer (within the meaning of Exchange Act Rule 3b-7), in which case the Claims Administrator isthe Executive Compensation Committee of the Board of Directors. 12.2 “Change in Control” means the earliest of:(i)the date any one Person, or more than one Person acting as a group (as the term “group” is used in TreasuryRegulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Company that, together withstock previously held by the acquirer, constitutes more than fifty (50%) percent of the total fair market value ortotal voting power of Company stock. If any one Person, or more than one Person acting as a group, isconsidered to own more than fifty (50%) percent of the total fair market value or total voting power ofCompany stock, the acquisition of additional stock by the same Person or Persons acting as a group does notcause a Change in Control. An increase in the percentage of stock owned by any one Person, or Persons actingas a group, as a result of a transaction in which Company acquires its stock in exchange for property, is treatedas an acquisition of stock;(ii)the date any one Person, or more than one Person acting as a group (as the term “group” is used in TreasuryRegulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month periodending on the date of the most5recent acquisition by that Person or Persons) ownership of Company stock possessing at least thirty (30%)percent of the total voting power of Company stock;(iii)the date a majority of the members of the Company’s board of directors is replaced during any twelve (12)month period by directors whose appointment or election is not endorsed by a majority of the members of theboard of directors prior to the date of appointment or election; or(iv)the date any one Person, or more than one Person acting as a group (as the term “group” is used in TreasuryRegulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month periodending on the date of the most recent acquisition by that Person or Persons) assets from the Company that havea total gross fair market value equal to at least forty (40%) percent of the total gross fair market value of all theCompany’s assets immediately prior to the acquisition or acquisitions. For this purpose, “gross fair marketvalue” means the value of the corporation’s assets, or the value of the assets being disposed of, without regardto any liabilities associated with these assets.In determining whether a Change in Control occurs, the attribution rules of Code section 318 apply to determine stockownership. The stock underlying a vested option is treated as owned by the individual who holds the vested option, and thestock underlying an unvested option is not treated as owned by the individual who holds the unvested option. The term“Person” used in this definition means any individual, corporation (including any non-profit corporation), general, limited orlimited liability partnership, limited liability company, joint venture, estate, trust, firm, association, organization or otherentity or any governmental or quasi-governmental authority, organization, agency or body.12.3 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.12.4 “Disability” or “Disabled” means a physical or mental condition in which the Participant is:(v)unable to engage in any substantial gainful activity by reason of any medically determinable physical or mentalimpairment that can be expected to result in death or can be expected to last for a continuous period of not lessthan twelve (12) months;(vi)by reason of any medically determinable physical or mental impairment which can be expected to result indeath or can be expected to last for a continuous period of not less than twelve (12) months, receiving incomereplacement benefits for a period of not less than three (3) months under the Employer’s accident and healthplan;(vii)determined to be totally disabled by the Social Security Administration; or(viii)disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definition ofdisability applied under such disability insurance program complies with the foregoing definition of Disability.12.5 “Related Company” means the ALLETE, Inc. and all persons with whom the ALLETE, Inc. would be considered asingle employer under Code section 414(b) (employees of controlled group of corporations), and all persons with whom suchperson would be considered a single employer under Code section 414(c) (employees of partnerships, proprietorships, etc.,under common control); provided that in applying Code sections 1563(a)(1), (2), and (3) for purposes of determining acontrolled group of corporations under Code section 414(b), the language “at least 50 percent” is used instead of “at least 80percent” each place it appears in Code sections 1563(a)6(1), (2), and (3), and in applying Treasury Regulations section 1.414(c)-2 for purposes of determining trades or businesses(whether or not incorporated) that are under common control for purposes of Code section 414(c), “at least 50 percent” isused instead of “at least 80 percent” each place it appears in Treasury Regulations section 1.414(c)-2.12.6 “Retirement” or “Retires” means Separation from Service, for reasons other than death or Disability, on or afterattaining normal retirement age or early retirement age as defined in the most applicable qualified retirement plan sponsoredby the Related Company that employed the Participant immediately preceding the Separation from Service, without regardto whether the Participant is a participant in such plan, or if the employer Related Company does not sponsor such retirementplan, on or after attaining Normal Retirement Age or Early Retirement Age as defined in the ALLETE and AffiliatedCompanies Retirement Plan A, without regard to whether the Participant is a participant under the ALLETE and AffiliatedCompanies Retirement Plan A. 12.7 “Section 409A” means Section 409A of the Code and Treasury Regulations section 1.409A-1 et seq., as they bothmay be amended from time to time, or other guidance issued by the Treasury Department and Internal Revenue Servicethereunder.12.8 “Separation from Service” means that the Participant terminates employment within the meaning of TreasuryRegulations section 1.409A-1(h) and other applicable guidance with all Related Companies. Whether a termination ofemployment has occurred is determined under the facts and circumstances, and a termination of employment shall occur ifall Related Companies and the Participant reasonably anticipate that no further services shall be performed after a certaindate or that the level of bona fide services the Participant shall perform after such date (as an employee or an independentcontractor) shall permanently decrease to no more than 20 percent of the average level of bona fide services performed(whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full periodof services to the Related Companies if the Participant has been providing services to the Related Companies less than 36months). A Participant shall not be considered to separate from service during a bona fide leave of absence for less than six(6) months or longer if the Participant retains a right to reemployment with any Related Company by contract or statute.With respect to disability leave, a Participant shall not be considered to separate from service for 29 months unless theParticipant otherwise terminates employment or is terminated by all Related Companies.12.9 “Specified Employee” means an Participant who is subject to the six-month delay rule described in Code section409A(2)(B)(i), determined in accordance with guidelines adopted by the Board from time to time as permitted by Section409A of the Code and Treasury Regulations section 1.409A-1 et seq., as they both may be amended from time to time, andother guidance issued by the Treasury Department and Internal Revenue Service thereunder.7Exhibit 10(i)13ALLETEEXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLANPERFORMANCE SHARE GRANT[Effective 2020][Eligible Executive Employees]NameIn accordance with the terms of ALLETE’s Executive Long-Term Incentive Compensation Plan, as amended (the "Plan"), and asdetermined by and through the Executive Compensation Committee of ALLETE’s Board of Directors, ALLETE hereby grants toyou (the "Participant") Performance Shares, as set forth below, subject to the terms and conditions set forth in this Grant, includingAnnex A and Annex B hereto and all documents incorporated herein by reference:Number of Performance Shares Granted: Date of Grant: Performance Period: Performance Goals:See Annex BThis Grant is made in accordance with the Plan.Further terms and conditions of the Grant are set forth in Annex A hereto and Performance Goals are set forth in Annex B hereto,both of which are integral parts of this Grant.Any term, provision or condition applicable to the Performance Shares set forth in the Plan and not set forth herein is herebyincorporated by reference. To the extent any provision hereof is inconsistent with a Plan provision, the Plan provision will govern.YOU SHOULD CAREFULLY READ AND REVIEW THE TERMS AND CONDITIONS SET FORTH IN THIS GRANT,INCLUDING ANNEX A HERETO, WHICH CONTAINS IMPORTANT INFORMATION, INCLUDING MANDATORYCLAIMS AND ARBITRATION PROCEDURES.You will be deemed to have accepted this Grant on the Date of Grant and all its associated terms and conditions, including themandatory claims and arbitration procedures set forth in Annex A, unless you notify the Company of your non-acceptance of theGrant by contacting the Manager - Compensation, Benefits, and Talent Acquisition, in writing within sixty (60) days of the Date ofGrant.IN WITNESS WHEREOF, ALLETE has caused this Grant to be executed by its Chairman and Chief Executive Officer as of thedate and year first above written.ALLETEBy: Chairman & CEOAttachments: Annex A and Annex BExhibit 10(i)13ANNEX ATOALLETEEXECUTIVE LONG-TERM INCENTIVE COMPENSATION PLANPERFORMANCE SHARE GRANT The Performance Share Grant to which this is annexed is subject to the following additional terms and conditions:1. Dividend Equivalents. You will receive Dividend Equivalents with respect to Performance Shares that are earned andpayable. Dividend Equivalents are calculated and credited to you after the Performance Period has ended. The Dividend Equivalentswill be in the form of additional Performance Shares, which will be added to the number of Performance Shares earned, and willequal the number of Shares (including fractional Shares) that could have been purchased on applicable dividend payment dates,based on the closing ALLETE common stock price as reported in the consolidated transaction reporting system on that date, withcash dividends that would have been paid on underlying Performance Shares, if such Performance Shares were Shares. DividendEquivalents will only become payable if and to the extent the underlying Performance Shares are earned and become payable.2. Satisfaction of Goals. Performance Shares remain unearned unless and until Performance Goals are achieved. After thePerformance Period has ended, the Executive Compensation Committee (the “Committee”) will determine the extent to which thePerformance Goals have been met. You will not earn any Performance Shares if the threshold performance level has not been met.Subject to the provisions of Section 4 below and to provisions in the Plan for change in control, Performance Shares will be earnedas follows: If the threshold level has been met, you will have earned 50% of the Performance Shares (as increased by the DividendEquivalents). If the target level has been met, you will have earned 100% of the Performance Shares (as increased by the DividendEquivalents). If the superior level has been met, you will have earned 200% of the Performance Shares (as increased by theDividend Equivalents). Straight line interpolation will be used to determine earned awards based on achievement of goals betweenthe threshold, target and superior levels.3. Payment. Subject to the provisions of Section 4 below and to provisions in the Plan for Change in Control, PerformanceShares (as increased by the Dividend Equivalents) shall be paid in full after the Committee has determined the extent to whichPerformance Goals have been met and within two and one half months after the end of the Performance Period. Payment shall bemade, after withholding Performance Shares in an amount equal in value to the minimum amount of tax required to be withheld bylaw, by depositing ALLETE common stock into your Invest Direct account. Performance Share awards shall not vest until paid.4. Payment Upon Death, Retirement or Disability; Forfeiture of Unvested Performance Shares Upon Demotion,Unsatisfactory Job Performance, Default on Certain Agreements or Other Separation from Service.4.1 If during a Performance Period you (i) Retire, (ii) die while employed by a Related Company, or (iii) becomeDisabled, you (or your beneficiary or estate) will receive a payment of any Performance Shares (as increased by theDividend Equivalents) after the end of the Performance Period in accordance with Section 3 above. The payment shall beprorated based upon the number of whole calendar months within the Performance Period which had elapsed as1of the date of death, Retirement or Disability in relation to the number of calendar months in the full Performance Period. Awhole month is counted in the calculation if you were in the position as of the 15th of the month.4.2 If after the end of a Performance Period, but before any or all Performance Shares have been paid, you Retire,die or become Disabled, you (or your beneficiary or estate) will be entitled to full payout of all earned Performance Shares(as increased by the Dividend Equivalents) in accordance with Section 3 above.4.3 If, prior to payment of all Performance Shares, you are demoted, you default on any written agreement with aRelated Company related to a restrictive employment covenant (such as confidentiality, non-disclosure, non-competition,non-solicitation, or the like) or ALLETE determines, in its sole discretion, that your job performance is unsatisfactory,ALLETE reserves the right to cancel or amend your grant relating to any unpaid Performance Shares, with the result thatsome portion or all of your unpaid Performance Shares (and related Dividend Equivalents) will be forfeited.4.4 If you have a Separation from Service for any reason other than those specified in subsection 4.1 above, allPerformance Shares (and related Dividend Equivalents), to the extent not yet paid, shall be forfeited on the date of suchSeparation from Service, except as otherwise provided by the Committee.5. Compensation Recovery Policy. The Grant is subject to the terms of any compensation recovery policy or policiesestablished by ALLETE as may be amended from time to time (“Compensation Recovery Policy”). ALLETE hereby incorporatesinto the Grant the terms of the Compensation Recovery Policy.6. Section 409A Compliance. This Grant is intended to comply with Section 409A of the Code (“Section 409A”) or anexemption thereunder, and, accordingly, to the maximum extent permitted, the Plan and the Grant shall be interpreted andadministered in compliance therewith. Notwithstanding any other provision of the Grant, payments provided pursuant to the Grantmay only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any paymentspursuant to the Grant that may be excluded from Section 409A as a short-term deferral shall be excluded from Section 409A to themaximum extent possible. To the extent that any provision of the Grant would cause a conflict with the requirements of Section409A or would cause the administration of the Grant to fail to satisfy Section 409A, such provision shall be deemed null and void tothe extent permitted by applicable law. Nothing herein shall be construed as a guarantee of any particular tax treatment. ALLETEmakes no representation that the Grant complies with Section 409A and in no event shall ALLETE be liable for the payment of anytaxes and penalties that you may incur under Section 409A. 7. Claims Procedure and Arbitration. The Grant is subject to the following claims procedures:7.1 Mandatory Claims Procedures. If you or any person acting on your behalf (the “Claimant”) has any claim ordispute related in any way to the Grant or to the Plan, the Claimant must follow these claims procedures. All claims must bebrought no later than one year following the date on which the claim first arose and any claim not submitted within suchtime limit will be waived.27.2 Claim Submission. Any claim must be made in writing to the Claims Administrator. The Claims Administrator,or its delegate, shall notify the Claimant of the resolution of the claim within 90 days after receipt of the claim; provided,however, if the Claims Administrator determines that an extension is necessary, the 90-day period shall be extended to up to180 days upon notice to that effect to the Claimant.7.3 Notice of Denial. If a claim is wholly or partially denied, the denial notice shall contain (i) the reason or reasonsfor denial of the claim, and (ii) references to the pertinent Plan provisions upon which the denial is based. Unless the claimis submitted for arbitration as provided below and in the Plan, the Claims Administrator’s decision or action shall be final,conclusive and binding on all persons having any interest in the Plan.7.4 Arbitration. If, after exhausting the procedures set forth above, a Claimant wishes to pursue legal action, anyaction by the Claimant with respect to a claim, must be resolved by arbitration in the manner described herein.a)Time Limits. A Claimant seeking arbitration of any determination by the Claims Administrator must, withinsix (6) months of the date of the Claims Administrator’s final decision, file a demand for arbitration with theAmerican Arbitration Association submitting the claim to resolution by arbitration. A Claimant waives anyclaim not filed timely in accordance with this Section.b)Rules Applicable to Arbitration. The arbitration process shall be conducted in accordance with theCommercial Law Rules of the American Arbitration Association.c)Venue. The arbitration shall be conducted in Minneapolis, Minnesota.d)Binding Effect. The decision of the arbitrator with respect to the claim will be final and binding upon theCompany and the Claimant. By participating in the Plan, and accepting the Grant, you, on behalf of yourselfand any person with a Claim relating to your Grant, agree to waive any right to sue in court or to pursue anyother legal right or remedy that might otherwise be available in connection with the resolution of the Claim.e)Enforceability. Judgment upon any award entered by an arbitrator may be entered in any court havingjurisdiction over the parties.f)Waiver of Class, Collective, and Representative Actions. Any claim shall be heard without consolidation ofsuch claims with any other person or entity. To the fullest extent permitted by law, whether in court or inarbitration, by participating in the Plan, you waive any right to commence, be a party to in any way, or be anactual or putative class member of any class, collective, or representative action arising out of or relating toany claim, and you agree that any claim may only be initiated or maintained and decided on an individualbasis. g)Standard of Review. Any decision of an arbitrator on a claim shall be limited to determining whether theClaims Administrator’s decision or action was arbitrary or capricious or was unlawful. The arbitrator shalladhere to and apply the deferential standard of review set out in Conkright v. Frommert, 130 S. Ct. 1640(2010), Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105 (2008), and Firestone Tire and RubberCompany v. Bruch, 489 U.S. 101 (1989), and shall accord due deference to the determinations, interpretations,and construction of the Plan document by the Claims Administrator.h)General Procedures.3i.Arbitration Rules. The arbitration hearing will be conducted under the AAA Commercial Arbitration Rules(as amended or revised from time to time by AAA) (hereinafter the “AAA Rules”), before one AAAarbitrator who is from the Large, Complex Case Panel and who has experience with matters involvingexecutive compensation and equity compensation plans. The AAA Rules and the terms and procedures setforth here may conflict on certain issues. To the extent that the procedures set forth here conflict with theAAA Rules, the procedures set forth here shall control and be applied by the arbitrator. Notwithstanding theamount of the claim, the Procedures for Large, Complex Commercial Disputes shall not apply.ii.Substantive Law. The arbitrator shall apply the substantive law (and the laws of remedies, ifapplicable), of Minnesota or federal law, or both, depending upon the claim. Except to the extentrequired by applicable law, the Claimant shall keep any arbitration decision or award strictlyconfidential and not disclose to anyone other than his or her spouse, attorney, or tax advisor.iii.Authority. The arbitrator shall have jurisdiction to hear and rule on prehearing disputes and isauthorized to hold prehearing conferences by telephone or in person as the arbitrator deems necessary.The arbitrator will have the authority to hear a motion to dismiss and/or a motion for summaryjudgment by any party and in doing so shall apply the standards governing such motions under theFederal Rules of Civil Procedure.iv.Pre-Hearing Procedures. Each party may take the deposition of not more than one individual and theexpert witness, if any, designated by another party. Each party will have the right to subpoenawitnesses in accordance with the Federal Arbitration Act, Title 9 of the United States Code. Additionaldiscovery may be had only if the arbitrator so orders, upon a showing of substantial need.v.Fees and Costs. Administrative arbitration fees and arbitrator compensation shall be borne equally by theparties, and each party shall be responsible for its own attorney’s fees, if any; provided, however, that theCommittee will authorize payment by the Company of all administrative arbitration fees, arbitratorcompensation and attorney’s fees if the Committee concludes that a Claimant has substantially prevailed onhis or her claims. Unless prohibited by statute, the arbitrator shall assess attorney’s fees against a party upona showing that such party’s claim, defense or position is frivolous, or unreasonable, or factually groundless.If either party pursues a claim by any means other than those set forth in this Article, the responding partyshall be entitled to dismissal of such action, and the recovery of all costs and attorney’s fees and lossesrelated to such action, unless prohibited by statute.(a)Interstate Commerce and the Federal Arbitration Act. The Company is involved in transactions involvinginterstate commerce, and the employee’s employment with the Company involves such commerce. Therefore,the Federal Arbitration Act, Title 9 of the United States Code, will govern the interpretation, enforcement, andall judicial proceedings regarding the arbitration procedures in this Section.8. Ratification of Actions. By receiving the Grant or other benefit under the Plan, you and each person claiming under orthrough you shall be conclusively deemed to have indicated your acceptance and ratification of, and consent to, any action takenunder the Plan or the Grant by ALLETE, the Board or the Committee.49. No Impact on Other Benefits. The Grant or payment on account thereof shall not be taken into account in determiningany benefits under any severance, retirement, welfare, insurance or other benefit plan of ALLETE or any affiliate except to theextent otherwise expressly provided in writing in such other plan or an agreement thereunder.10. Notices. Any notice hereunder to ALLETE shall be addressed to ALLETE, 30 West Superior Street, Duluth, Minnesota55802, Attention: Manager - Compensation, Benefits, and Talent Acquisition, Human Resources, and any notice hereunder to youshall be directed to your address as indicated by ALLETE’s records, subject to the right of either party to designate at any timehereafter in writing some other address.11. Governing Law and Severability. To the extent not preempted by the Federal law, the Grant will be governed by andconstrued in accordance with the laws of the State of Minnesota, without regard to its conflicts of law provisions. In the event anyprovision of the Grant shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts ofthe Grant, and the Grant shall be construed and enforced as if the illegal or invalid provision had not been included.12. Definitions. Capitalized terms not otherwise defined herein shall have the meanings given them in the Plan. Thefollowing definitions apply to the Grant and this Annex A:12.1 “Claims Administrator” means ALLETE’s Chief Executive Officer, unless the claimant is (or is acting onbehalf of) an ALLETE executive officer (within the meaning of Exchange Act Rule 3b-7), in which case the ClaimsAdministrator is the Executive Compensation Committee of the Board of Directors.12.2 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.12.3 “Disability” or “Disabled” means a physical or mental condition in which the Participant is:(a)unable to engage in any substantial gainful activity by reason of any medically determinable physical ormental impairment that can be expected to result in death or can be expected to last for a continuousperiod of not less than twelve (12) months;(b)by reason of any medically determinable physical or mental impairment which can be expected to result indeath or can be expected to last for a continuous period of not less than twelve (12) months, receivingincome replacement benefits for a period of not less than three (3) months under the Employer’s accidentand health plan;(c)determined to be totally disabled by the Social Security Administration; or(d)disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definitionof disability applied under such disability insurance program complies with the foregoing definition ofDisability.12.4 “Related Company” means ALLETE, Inc. and all persons with whom the ALLETE, Inc. would be considereda single employer under Code section 414(b) (employees of controlled group of corporations), and all persons with whomsuch person would be considered a single employer under Code section 414(c) (employees of partnerships, proprietorships,etc., under common control); provided that in applying Code sections 1563(a)(1), (2), and (3) for purposes of5determining a controlled group of corporations under Code section 414(b), the language “at least 50 percent” is used insteadof “at least 80 percent” each place it appears in Code sections 1563(a)(1), (2), and (3), and in applying Treasury Regulationssection 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under commoncontrol for purposes of Code section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appearsin Treasury Regulations section 1.414(c)-2.12.5 “Retirement” or “Retires” means Separation from Service, for reasons other than death or Disability, on orafter attaining normal retirement age or early retirement age as defined in the most applicable qualified retirement plansponsored by the Related Company that employed the Participant immediately preceding the Separation from Service,without regard to whether the Participant is a participant in such plan, or if the employer Related Company does not sponsorsuch retirement plan, on or after attaining Normal Retirement Age or Early Retirement Age as defined in the ALLETE andAffiliated Companies Retirement Plan A, without regard to whether the Participant is a participant under the ALLETE andAffiliated Companies Retirement Plan A.12.6 “Separation from Service” means that the Participant terminates employment within the meaning of TreasuryRegulations section 1.409A-1(h) and other applicable guidance with all Related Companies. Whether a termination ofemployment has occurred is determined under the facts and circumstances, and a termination of employment shall occur ifall Related Companies and the Participant reasonably anticipate that no further services shall be performed after a certaindate or that the level of bona fide services the Participant shall perform after such date (as an employee or an independentcontractor) shall permanently decrease to no more than 20 percent of the average level of bona fide services performed(whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full periodof services to the Related Companies if the Participant has been providing services to the Related Companies less than 36months). A Participant shall not be considered to separate from service during a bona fide leave of absence for less than six(6) months or longer if the Participant retains a right to reemployment with any Related Company by contract or statute.With respect to disability leave, a Participant shall not be considered to separate from service for 29 months unless theParticipant otherwise terminates employment or is terminated by all Related Companies.a)Waiver of Class, Collective, and Representative Actions. Any claim shall be heard without consolidation ofsuch claims with any other person or entity. To the fullest extent permitted by law, whether in court or inarbitration, by participating in the Plan, you waive any right to commence, be a party to in any way, or be anactual or putative class member of any class, collective, or representative action arising out of or relating toany claim, and you agree that any claim may only be initiated or maintained and decided on an individualbasis. b)Standard of Review. Any decision of an arbitrator on a claim shall be limited to determining whether theClaims Administrator’s decision or action was arbitrary or capricious or was unlawful. The arbitrator shalladhere to and apply the deferential standard of review set out in Conkright v. Frommert, 130 S. Ct. 1640(2010), Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105 (2008), and Firestone Tire and RubberCompany v. Bruch, 489 U.S. 101 (1989), and shall accord due deference to the determinations, interpretations,and construction of the Plan document by the Claims Administrator.6c)General Procedures.i.Arbitration Rules. The arbitration hearing will be conducted under the AAA Commercial ArbitrationRules (as amended or revised from time to time by AAA) (hereinafter the “AAA Rules”), before oneAAA arbitrator who is from the Large, Complex Case Panel and who has experience with mattersinvolving executive compensation and equity compensation plans. The AAA Rules and the terms andprocedures set forth here may conflict on certain issues. To the extent that the procedures set forthhere conflict with the AAA Rules, the procedures set forth here shall control and be applied by thearbitrator. Notwithstanding the amount of the claim, the Procedures for Large, Complex CommercialDisputes shall not apply.ii.Substantive Law. The arbitrator shall apply the substantive law (and the laws of remedies, if applicable),of Minnesota or federal law, or both, depending upon the claim. Except to the extent required byapplicable law, the Claimant shall keep any arbitration decision or award strictly confidential and notdisclose to anyone other than his or her spouse, attorney, or tax advisor.iii.Authority. The arbitrator shall have jurisdiction to hear and rule on prehearing disputes and is authorizedto hold prehearing conferences by telephone or in person as the arbitrator deems necessary. Thearbitrator will have the authority to hear a motion to dismiss and/or a motion for summary judgmentby any party and in doing so shall apply the standards governing such motions under the Federal Rulesof Civil Procedure.iv.Pre-Hearing Procedures. Each party may take the deposition of not more than one individual and theexpert witness, if any, designated by another party. Each party will have the right to subpoenawitnesses in accordance with the Federal Arbitration Act, Title 9 of the United States Code. Additionaldiscovery may be had only if the arbitrator so orders, upon a showing of substantial need.v.Fees and Costs. Administrative arbitration fees and arbitrator compensation shall be borne equally by theparties, and each party shall be responsible for its own attorney’s fees, if any; provided, however, thatthe Committee will authorize payment by the Company of all administrative arbitration fees, arbitratorcompensation and attorney’s fees if the Committee concludes that a Claimant has substantiallyprevailed on his or her claims. Unless prohibited by statute, the arbitrator shall assess attorney’s feesagainst a party upon a showing that such party’s claim, defense or position is frivolous, orunreasonable, or factually groundless. If either party pursues a claim by any means other than thoseset forth in this Article, the responding party shall be entitled to dismissal of such action, and therecovery of all costs and attorney’s fees and losses related to such action, unless prohibited by statute.d)Interstate Commerce and the Federal Arbitration Act. The Company is involved in transactions involvinginterstate commerce, and the employee’s employment with the Company involves such commerce. Therefore,the Federal Arbitration Act, Title 9 of the United States Code, will govern the interpretation, enforcement,and all judicial proceedings regarding the arbitration procedures in this Section.78. Ratification of Actions. By receiving the Grant or other benefit under the Plan, you and each person claiming under orthrough you shall be conclusively deemed to have indicated your acceptance and ratification of, and consent to, any action takenunder the Plan or the Grant by ALLETE, the Board or the Committee.9. No Impact on Other Benefits. The Grant or payment on account thereof shall not be taken into account in determiningany benefits under any severance, retirement, welfare, insurance or other benefit plan of ALLETE or any affiliate except to theextent otherwise expressly provided in writing in such other plan or an agreement thereunder.10. Notices. Any notice hereunder to ALLETE shall be addressed to ALLETE, 30 West Superior Street, Duluth, Minnesota55802, Attention: Manager - Compensation and Benefits, Human Resources, and any notice hereunder to you shall be directed toyour address as indicated by ALLETE’s records, subject to the right of either party to designate at any time hereafter in writing someother address.11. Governing Law and Severability. To the extent not preempted by the Federal law, the Grant will be governed by andconstrued in accordance with the laws of the State of Minnesota, without regard to its conflicts of law provisions. In the event anyprovision of the Grant shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts ofthe Grant, and the Grant shall be construed and enforced as if the illegal or invalid provision had not been included.12. Definitions. Capitalized terms not otherwise defined herein shall have the meanings given them in the Plan. Thefollowing definitions apply to the Grant and this Annex A:12.1 “Claims Administrator” means ALLETE’s Chief Executive Officer, unless the claimant is (or is acting onbehalf of) an ALLETE executive officer (within the meaning of Exchange Act Rule 3b-7), in which case the ClaimsAdministrator is the Executive Compensation Committee of the Board of Directors.12.2 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.12.3 “Disability” or “Disabled” means a physical or mental condition in which the Participant is:(a)unable to engage in any substantial gainful activity by reason of any medically determinable physical ormental impairment that can be expected to result in death or can be expected to last for a continuousperiod of not less than twelve (12) months;(b)by reason of any medically determinable physical or mental impairment which can be expected to result indeath or can be expected to last for a continuous period of not less than twelve (12) months, receivingincome replacement benefits for a period of not less than three (3) months under the Employer’s accidentand health plan;(c)determined to be totally disabled by the Social Security Administration; or8(d)disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definitionof disability applied under such disability insurance program complies with the foregoing definition ofDisability.12.4 “Related Company” means ALLETE, Inc. and all persons with whom the ALLETE, Inc. would be considereda single employer under Code section 414(b) (employees of controlled group of corporations), and all persons with whomsuch person would be considered a single employer under Code section 414(c) (employees of partnerships, proprietorships,etc., under common control); provided that in applying Code sections 1563(a)(1), (2), and (3) for purposes of determining acontrolled group of corporations under Code section 414(b), the language “at least 50 percent” is used instead of “at least 80percent” each place it appears in Code sections 1563(a)(1), (2), and (3), and in applying Treasury Regulations section1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control forpurposes of Code section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each place it appears inTreasury Regulations section 1.414(c)-2.12.5 “Retirement” or “Retires” means Separation from Service, for reasons other than death or Disability, on orafter attaining normal retirement age or early retirement age as defined in the most applicable qualified retirement plansponsored by the Related Company that employed the Participant immediately preceding the Separation from Service,without regard to whether the Participant is a participant in such plan, or if the employer Related Company does not sponsorsuch retirement plan, on or after attaining Normal Retirement Age or Early Retirement Age as defined in the ALLETE andAffiliated Companies Retirement Plan A, without regard to whether the Participant is a participant under the ALLETE andAffiliated Companies Retirement Plan A.12.6 “Separation from Service” means that the Participant terminates employment within the meaning of TreasuryRegulations section 1.409A-1(h) and other applicable guidance with all Related Companies. Whether a termination ofemployment has occurred is determined under the facts and circumstances, and a termination of employment shall occur ifall Related Companies and the Participant reasonably anticipate that no further services shall be performed after a certaindate or that the level of bona fide services the Participant shall perform after such date (as an employee or an independentcontractor) shall permanently decrease to no more than 20 percent of the average level of bona fide services performed(whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full periodof services to the Related Companies if the Participant has been providing services to the Related Companies less than 36months). A Participant shall not be considered to separate from service during a bona fide leave of absence for less than six(6) months or longer if the Participant retains a right to reemployment with any Related Company by contract or statute.With respect to disability leave, a Participant shall not be considered to separate from service for 29 months unless theParticipant otherwise terminates employment or is terminated by all Related Companies.9Exhibit 10(i)13Effective 2020[Eligible Executive Employees]ANNEX BTOALLETEExecutive Long Term Incentive Compensation PlanPerformance Share GrantFinancial Measure:Fifty percent (50%) of the total performance share opportunity is based on Total Shareholder Return (TSR) computed over thethree-year performance period January 1, 2020 to December 31, 2022.Fifty percent (50%) of the total performance share opportunity is based on the Company’s Compound Annual Growth Rate (CAGR)computed over the three-year performance period January 1, 2020 to December 31, 2022.Performance Share Award (TSR metric):Achievement will be weighted on TSR performance in accordance with ALLETE’s TSR ranking as follows: at the 85th percentile orhigher among the peer group (superior performance), 200% of the weighted Performance Share Grant will be earned. If ALLETE’sTSR ranking is at the 50th percentile among the peer group (target performance), 100% of the weighted Performance Share Grantwill be earned. If ALLETE’s TSR ranking is at the 30th percentile (threshold performance), 50% of the weighted Performance ShareGrant will be earned. If TSR ranking is below threshold, no weighted Performance Shares will be earned. Straight-line interpolationwill be used to determine earned awards based on the TSR ranking between threshold, target and superior.Peer Group:The integrated utility companies comprising Edison Electric Institute (EEI) Stock Index as of December 31, 2022 that have been inthe EEI Stock Index for at least three years as of December 31, 2022 will constitute the peer group used to determine actual payoutresults. The table below lists the EEI Stock Index as of December 31, 2019, based on published information available as of that date:Alliant Energy CorporationEl Paso Electric CompanyOGE Energy Corp.Ameren CorporationEntergy CorporationOtter Tail CorporationAmerican Electric Power CompanyEvergy Inc.PG&E CorporationAvangrid, Inc.Eversource EnergyPinnacle West Capital CorporationAvista CorporationExelon CorporationPNM Resources, Inc.Black Hills CorporationFirstEnergy CorporationPortland General Electric CompanyCenterPoint Energy, Inc.Hawaiian Electric Industries, Inc.PPL CorporationCMS Energy CorporationIDACORP, Inc.Public Service Enterprise Group, Inc.Consolidated Edison, Inc.MDU Resources Group, Inc.Sempra EnergyDominion Energy, Inc.MGE Energy, Inc.The Southern CompanyDTE Energy CompanyNextEra Energy, Inc.Unitil CorporationDuke Energy CorporationNiSource, Inc.WEC Energy Group, Inc.Edison InternationalNorthWestern CorporationXcel Energy, Inc.Any Company that is no longer included in the EEI Stock Index as of December 31, 2022 due to corporate restructuring during theperformance period (e.g., mergers, acquisitions, divestitures, spin-offs, etc.) will be excluded from the results calculation entirely. Ifa corporate restructuring during the performanceExhibit 10(i)13period results in a company remaining in the EEI Stock Index following the transaction (and thus not being excluded from theresults calculation entirely), from the point of the transaction forward, the results calculation will track only the entity that remainsin the EEI Stock Index and ignore other entities, regardless of whether such other entities are publicly traded.Performance Share Award (CAGR metric):CAGR will be calculated by using the proforma Earnings per Share (EPS) at the beginning of the three-year performance period andthe proforma EPS at the end the three-year performance period. Achievement will be weighted on CAGR performance inaccordance with the following table:Compound Annual Growth RatePayout Percentage (% of Target Award)Superior [ ]%200%Target [ ]%100%Threshold [ ]%50%If CAGR percentage result is below threshold, no weighted Performance Shares will be earned. Straight-line interpolation will beused to determine earned awards based on the CAGR percentage result between threshold, target and superior.Exhibit 21SUBSIDIARIES OF THE REGISTRANTAs of December 31, 2019Name of Organization (a)State or CountryALLETE, Inc. (d/b/a ALLETE; Minnesota Power; Minnesota Power, Inc.;MinnesotaMinnesota Power & Light Company) ALLETE Automotive Services, LLCMinnesotaALLETE Enterprises, Inc.MinnesotaALLETE Clean Energy, Inc.MinnesotaACE O&M, LLCDelawareACE Solar LLCDelawareRed Lake Solar, LLCDelawareACE Wind LLCDelawareACE Mid-West Holdings, LLCDelawareACE Gopher Holdings, LLCDelawareACE Lincoln Heights Holdings, LLCDelawareCisco Holdings, LLCDelawareMINNIGAN HOLDCO, LLCDelawareMWW Holdings, LLCDelawareLake Benton Power Associates LLCDelawareLake Benton Holdings LLCDelawareLake Benton Power Partners L.L.C.DelawareStorm Lake Power Partners I LLCDelawareStorm Lake II Power Associates LLCDelawareStorm Lake II Holdings LLCDelawareStorm Lake Power Partners II LLCDelawareNorthern Wind Energy, LLCDelawareChanarambie Power Partners, LLCDelawareViking Wind Holdings, LLCDelawareACE South Holdings, LLCDelawareDiamond Spring QOZB, LLCDelawareACE DS Class B LLCDelawareDiamond Spring, LLCDelawareDiamond Spring Renewables, LLCDelawareACE West Holdings, LLCDelawareACE GAWW Class B LLCDelawareGreat American West Wind, LLCDelewareGlen Ullin Energy Center, LLCDelaware South Peak Wind LLCDelawareCondon Wind Power, LLCDelawareArmenia Holdings, LLCDelawareAMW I Holding, LLCDelawareArmenia Mountain Wind, LLCDelawareArmenia Mountain Wind II, LLCDelawareThunder Spirit Wind, LLCDelawareALLETE Enterprises QOF, LLCDelawareALLETE Power Systems, Inc.MinnesotaALLETE Renewable Resources, Inc.North DakotaALLETE Transmission Holdings, Inc.WisconsinASW Partners, LLCDelawareALLETE South Wind, LLCDelawareNobles 2 Power Partners, LLCDelawareBNI Energy, Inc.North DakotaBNI Coal, Ltd.North Dakota(a) Certain insignificant subsidiaries are omitted.Exhibit 21Name of Organization (a)State or CountryMP Affiliate Resources, Inc.MinnesotaRainy River Energy CorporationMinnesotaSouth Shore Energy, LLCWisconsinUpper Minnesota Properties, Inc.MinnesotaUpper Minnesota Properties - Development, Inc.MinnesotaALLETE Properties, LLC (d/b/a ALLETE Properties)MinnesotaALLETE Commercial, LLCFloridaLehigh Acquisition, LLCDelawareFlorida Landmark Communities, LLCFloridaLehigh CorporationFloridaMardem, LLCFloridaPalm Coast Holdings, Inc.FloridaPort Orange Holdings, LLCFloridaInterlachen Lakes Estates, LLCFloridaPalm Coast Land, LLCFloridaALLETE Water Services, Inc.MinnesotaFlorida Water Services CorporationFloridaEnergy Replacement Property, LLCMinnesotaEnergy Land, IncorporatedWisconsinMP Investments, Inc.DelawareRendField Land Company, Inc.MinnesotaSuperior Water, Light and Power CompanyWisconsin(a)Certain insignificant subsidiaries are omitted.Exhibit 23CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-232905, 333-231030) and Form S-8 (Nos. 333-162890,333-183051, 333-190336, 333-207846, 333-228120) of ALLETE, Inc. of our report dated February 13, 2020, relating to the financial statements, financialstatement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPMinneapolis, MinnesotaFebruary 13, 2020Exhibit 31(a)Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Bethany M. Owen, certify that:1.I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2019, of ALLETE,Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:February 13, 2020/s/ Bethany M. Owen Bethany M. Owen President and Chief Executive OfficerExhibit 31(b)Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Robert J. Adams, certify that:1.I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2019, of ALLETE,Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant andhave: a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure thatmaterial information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared; b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date:February 13, 2020/s/ Robert J. Adams Robert J. Adams Senior Vice President and Chief Financial OfficerExhibit 32Section 1350 Certification of Periodic ReportBy the Chief Executive Officer and Chief Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, each of the undersigned officers of ALLETE, Inc. (ALLETE), does herebycertify that:1.The Annual Report on Form 10-K of ALLETE for the fiscal year ended December 31, 2019, (Report) fully complies with the requirements of Section 13(a) ofthe Securities Exchange Act of 1934 (15 U.S.C. 78m); and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofALLETE. Date:February 13, 2020/s/ Bethany M. Owen Bethany M. Owen President and Chief Executive OfficerDate:February 13, 2020/s/ Robert J. Adams Robert J. Adams Senior Vice President and Chief Financial OfficerThis certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability pursuant to thatsection. Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of1934, except to the extent that ALLETE specifically incorporates it by reference.A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature thatappears in typed form within the electronic version of this written statement required by Section 906, has been provided to ALLETE and will be retained byALLETE and furnished to the Securities and Exchange Commission or its staff upon request.Exhibit 95Mine Safety Disclosure Mine or OperatingName/MSHAIdentificationNumberSection 104S&SCitations(#)Section104(b)Orders (#)Section104(d)Citationsand Orders(#)Section110(b)(2)Violations (#)Section107(a)Orders (#)Total DollarValue ofMSHAAssessmentsProposed ($)TotalNumber ofMining-RelatedFatalities(#)ReceivedNotice ofPattern ofViolationUnder Section104(e)(yes/no)ReceivedNotice ofPotential toHave PatternUnder Section104(e)(yes/no)LegalActionsPending asof Last Dayof Period(#)LegalActionsInitiatedDuringPeriod (#)Legal ActionsResolvedDuring Period(#) Center Mine /3200218———————NoNo———For the quarter ended December 31, 2019, BNI Energy, owner of Center Mine, received no citations under Section 104(a) of the Mine Safety Act; five citationswere received for the year ended December 31, 2019, one of which was a significant and substantial citation. For the year ended December 31, 2019, BNI Energypaid $1,311 in penalties for citations closed during the period. For the year ended December 31, 2019, there were no citations, orders, violations or notices receivedunder Sections 104(b), 104(d), 107(a), 104(e) or 110(b)(2) of the Mine Safety Act and there were no fatalities. Exhibit 99For Release:February 13, 2020Investor Contact:Vince Meyer 218-723-3952 vmeyer@allete.comNEWS ALLETE, Inc. reports 2019 earnings of $3.59 per share; initiates 2020 earnings guidance; will constructsignificant new clean energy projects in 2020DULUTH, Minn. - ALLETE, Inc. (NYSE: ALE) today reported 2019 earnings of $3.59 per share on net income of $185.6 million andoperating revenue of $1.2 billion. Reported results from 2018 were $3.38 per share on net income of $174.1 million and operating revenue of$1.5 billion.Net income in 2019 includes a gain on the sale of U.S. Water Services of $0.26 per share, of which $0.04 per share was recognized in thefourth quarter of 2019 for the favorable settlement of a U.S. Water Services patent infringement case, offset by $0.02 per share of U.S. WaterServices operating results prior to sale. Earnings in 2018 included $0.30 per share, in total, from the gain on ALLETE Clean Energy’s sale ofa wind energy facility of $0.20 per share, contributions from U.S. Water Services operating results, and change in fair value of the contingentconsideration liability.“We completed many strategic initiatives in 2019 that position ALLETE for additional success in a clean energy landscape,” said Presidentand Chief Executive Officer Bethany Owen. “2020 will be another year of large scale renewable energy projects that will benefit ourcustomers and the environment while creating value for our shareholders. In 2019 ALLETE made approximately $500 million dollars inrenewable energy investments, and we plan to invest over $450 million again in 2020.”“ALLETE is well positioned to thrive as all facets of an increasingly clean energy future unfold,” stated Executive Chairman Al Hodnik. “Inaddition to our team delivering 2019 on plan financial results, the Board recently raised the dividend for the 10th year in a row. I have everyconfidence that Bethany’s strong values based leadership, her proven ability to position while executing and her laser focus on talentdevelopment will assure ALLETE’s momentum continues as a new decade dawns.”ALLETE’s Regulated Operations segment, which includes Minnesota Power, Superior Water, Light and Power (SWL&P) and theCompany’s investment in the American Transmission Co. (ATC), recorded net income of $154.4 million, compared to $131.0 million in2018. Earnings reflect higher net income at Minnesota Power primarily due to lower operating and maintenance and property tax expense,increased cost recovery rider revenue, higher transmission margins and higher fuel adjustment clause recoveries. These increases werepartially offset by lower kilowatt-hour sales and associated margins from retail and municipal customers. Net income at SWL&P increasedover last year due to higher rates implemented the first of this year, and ALLETE’s earnings in ATC were higher than in 2018 primarily dueto additional equity investments and period over period changes in ATC’s estimate of a refund liability related to MISO return on equitycomplaints.Page 1 of 4ALLETE 30 West Superior Street, Duluth, Minnesota 55802ALLETE Clean Energy recorded 2019 net income of $12.4 million compared to $33.7 million in 2018. Earnings in 2018 included the sale ofa wind energy facility to Montana-Dakota Utilities of $10.2 million and $3.0 million of production tax credits that resulted from theretrospective qualification of additional wind turbine generators in 2016 and 2017. Net income in 2019 included lower revenue resulting fromlower non-cash amortization related to the expiration of power sales agreements and higher depreciation expense. These decreases werepartially offset by $5.3 million of additional production tax credits generated in 2019 compared to production tax credits generated in 2018 asALLETE Clean Energy continues to execute its refurbishment strategy.Corporate and Other businesses, which include BNI Energy and ALLETE Properties, recorded net income of $19.9 million in 2019compared to net income of $6.2 million in 2018. Net income in 2019 included the gain on sale of U.S. Water Services of $13.2 million after-tax and higher earnings on cash and short-term investments. Net income in 2018 included a $2.0 million after-tax benefit for the change infair value of the contingent consideration liability.Details of the Company’s 2020 earnings guidance were filed as part of today’s Form 8-K filing.Live Webcast on February 13, 2020; financial slides posted on company websiteALLETE’s earnings conference call will be at 10:00 a.m. (EST), February 13, 2020, at which time management will discuss 2019 financialresults and 2020 earnings guidance. To participate in the call, analysts are asked to dial 877-303-5852, pass code 8597772, ten minutes priorto the start time and refer to the “ALLETE’s Conference Call Announcing 2019 Financial Results.” All interested parties may listen to thelive audio-only webcast accompanied by financial slides, which will be available on ALLETE’s Investor Relations websitehttp://investor.allete.com/events-presentations. A replay of the call will be available through February 18, 2020 by calling (855) 859-2056,pass code 8597772. The webcast will be accessible for one year at www.allete.com.ALLETE is an energy company headquartered in Duluth, Minn. In addition to its electric utilities, Minnesota Power and Superior Water,Light and Power of Wisconsin, ALLETE owns ALLETE Clean Energy, based in Duluth, BNI Energy in Bismarck, N.D., and has an eightpercent equity interest in the American Transmission Co. More information about ALLETE is available at www.allete.com. ALE-CORPThe statements contained in this release and statements that ALLETE may make orally in connection with this release that are not historical facts, are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements involve risksand uncertainties and investors are directed to the risks discussed in documents filed by ALLETE with the Securities and Exchange Commission.ALLETE's press releases and other communications may include certain non-Generally Accepted Accounting Principles (GAAP) financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance, financial position or cash flows that excludes (or includes)amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the company'sfinancial statements.Non-GAAP financial measures utilized by the Company include presentations of earnings (loss) per share. ALLETE's management believes that these non-GAAPfinancial measures provide useful information to investors by removing the effect of variances in GAAP reported results of operations that are not indicative ofchanges in the fundamental earnings power of the Company's operations. Management believes that the presentation of the non-GAAP financial measures isappropriate and enables investors and analysts to more accurately compare the company's ongoing financial performance over the periods presented.Page 2 of 4ALLETE 30 West Superior Street, Duluth, Minnesota 55802ALLETE, Inc.Consolidated Statement of IncomeFor the Periods Ended December 31, 2019 and 2018 Quarter EndedYear to Date 2019201820192018Millions Except Per Share Amounts Operating Revenue Contracts with Customer – Utility$256.3$270.2$1,042.4$1,059.5Contracts with Customer – Non-utility45.4172.4186.5415.5Other – Non-utility2.95.711.623.6Total Operating Revenue304.6448.31,240.51,498.6Operating Expenses Fuel, Purchased Power and Gas – Utility94.8106.9390.7407.5Transmission Services – Utility14.016.869.869.9Cost of Sales – Non-utility18.8109.480.6218.0Operating and Maintenance63.386.9264.3340.5Depreciation and Amortization50.452.2202.0205.6Taxes Other than Income Taxes13.514.153.357.9Other—(2.0)—(2.0)Total Operating Expenses254.8384.31,060.71,297.4Operating Income49.864.0179.8201.2Other Income (Expense) Interest Expense(16.0)(16.3)(64.9)(67.9)Equity Earnings6.44.521.717.5Gain on Sale of U.S. Water Services3.0—23.6—Other4.12.118.77.8Total Other Expense(2.5)(9.7)(0.9)(42.6)Income Before Non-Controlling Interest and Income Taxes47.354.3178.9158.6Income Tax Benefit(2.3)(6.8)(6.6)(15.5)Net Income$49.6$61.1$185.5$174.1Less: Non-Controlling Interest in Subsidiaries(0.1)—(0.1)—Net Income Attributable to ALLETE$49.7$61.1$185.6$174.1Average Shares of Common Stock Basic51.751.551.651.3Diluted51.851.751.751.5Basic Earnings Per Share of Common Stock$0.96$1.19$3.59$3.39Diluted Earnings Per Share of Common Stock$0.96$1.18$3.59$3.38Dividends Per Share of Common Stock$0.5875$0.56$2.35$2.24Consolidated Balance SheetMillions Dec. 31,Dec. 31, Dec. 31,Dec. 31, 20192018 20192018Assets Liabilities and Equity Cash and Cash Equivalents$69.3$69.1 Current Liabilities$507.4$405.1Other Current Assets200.2265.2 Long-Term Debt1,400.91,428.5Property, Plant and Equipment – Net4,377.03,904.4 Deferred Income Taxes212.8223.6Regulatory Assets420.5389.5 Regulatory Liabilities560.3512.1Equity Investments197.6161.1 Defined Benefit Pension & Other Postretirement BenefitPlans172.8177.3Goodwill and Intangibles – Net1.0223.3 Other Non-Current Liabilities293.0262.6Other Non-Current Assets217.2152.4 Equity2,335.62,155.8Total Assets$5,482.8$5,165.0 Total Liabilities and Equity$5,482.8$5,165.0Page 3 of 4ALLETE 30 West Superior Street, Duluth, Minnesota 55802 Quarter EndedYear to DateALLETE, Inc.December 31,December 31,Income (Loss)2019201820192018Millions Regulated Operations$40.2$31.3$154.4$131.0 ALLETE Clean Energy5.917.812.433.7U.S. Water Services—2.7(1.1)3.2 Corporate and Other3.69.319.96.2Net Income Attributable to ALLETE$49.7$61.1$185.6$174.1Diluted Earnings Per Share$0.96$1.18$3.59$3.38Statistical Data Corporate Common Stock High$87.83$82.82$88.60$82.82Low$78.25$72.42$72.50$66.64Close$81.17$76.22$81.17$76.22Book Value$43.19$41.85$43.19$41.85Kilowatt-hours Sold Millions Regulated Utility Retail and Municipal Residential3013041,1301,140Commercial3473511,3901,426Industrial1,8881,8437,2777,261Municipal153195672798Total Retail and Municipal2,6892,69310,46910,625Other Power Suppliers8919773,1853,953Total Regulated Utility3,5803,67013,65414,578Regulated Utility Revenue Millions Regulated Utility Revenue Retail and Municipal Electric Revenue Residential$31.9$33.6$125.9$126.1Commercial33.435.5139.5141.9Industrial117.9120.3473.9465.2Municipal9.213.148.654.9Total Retail and Municipal192.4202.5787.9788.1Other Power Suppliers41.843.0153.7170.3Other (Includes Water and Gas Revenue)22.124.7100.8101.1Total Regulated Utility Revenue$256.3$270.2$1,042.4$1,059.5This exhibit has been furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemedincorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.Page 4 of 4ALLETE 30 West Superior Street, Duluth, Minnesota 55802

Continue reading text version or see original annual report in PDF format above