ALLETE Annual Report 2023

FY2023 Annual Report · ALLETE

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2023 Annual Report

March 2024

Dear ALLETE shareholders,

As the renewable energy transition accelerates, ALLETE is
strategically positioned with both experience and momentum as
we invest in and build the grid of the future. For the third year in
a row, ALLETE in 2023 ranked first among U.S.-based investor-
owned utilities for investment in wind and solar generation
capacity as a percentage of market cap. Our team has deep
experience in developing and operating renewable sites, and we
have a track record of leading the way to a clean-energy future,
putting sustainability into action for customers, communities, and
shareholders.

We are building on that momentum in 2024. Minnesota Power issued Requests for Proposals
(RFPs) for up to 300 megawatts of solar energy and up to 400 megawatts of wind energy as
outlined in its 2022 Integrated Resource Plan approved by state regulators. Through these RFPs,
Minnesota Power is doing more than seeking renewable energy—the company also is striving
to maximize the economic and community benefits of clean energy development by including
preferences for diverse bidders and domestically sourced materials, as well as requirements
to use local prevailing wages and local labor for construction and permanent staffing and to
develop apprenticeship programs to help train the energy workforce of tomorrow.

These solar and wind RFPs call for new renewable energy sites to be online by the end of 2027.

While adding renewable generation is vitally important, renewable megawatts will not help if we
cannot move the energy to customers. That’s why ALLETE and Minnesota Power are investing
in transmission projects that will enhance the reliability and resilience of the regional grid across
the Upper Midwest and beyond.

In October, the U.S. Department of Energy awarded a $50 million grant to Minnesota Power to
modernize its high-voltage direct-current (HVDC) transmission system so it is ready to expand
to meet future energy needs, while increasing the reliability and resilience of the regional grid.
The company was selected in a competitive process from among hundreds of applicants
nationwide. Minnesota Power also received $15 million in state funding for the project in May,
with both government grants helping reduce costs for customers.

Earlier in 2023, Minnesota Power and Great River Energy filed an application for a Certificate
of Need and Route Permit from the Minnesota Public Utilities Commission (MPUC) to build a
high-voltage transmission line to bolster electric reliability in northern and central Minnesota.
The Northland Reliability Project is an approximately 180-mile transmission line from northern
Minnesota to central Minnesota. It will help maintain a reliable and resilient regional power grid
as more renewable energy is brought online, as electrification continues to expand, and as
extreme weather events become more frequent.

ALLETE also signed a development agreement in December with North Plains Connector LLC,
a subsidiary of Grid United LLC, for the North Plains Connector project, a new, approximately
400-mile HVDC transmission line from central North Dakota to Colstrip, Montana.

The North Plains Connector will be the nation’s first HVDC transmission connection between
three regional U.S. electric energy markets—the Midcontinent Independent System Operator,
the Western Interconnection, and the Southwest Power Pool. The project will be designed
to transfer 3,000 megawatts across all three energy markets, easing congestion on the
transmission system, increasing resiliency and reliability, and enabling fast delivery of energy
resources across a vast area with diverse weather patterns.

Ensuring the financial health of our companies is part of a sustainable clean-energy transition.
In late 2023, the MPUC approved an interim rate increase of 8.6% for Minnesota Power. The
interim rate supports the company’s ability to continue this important work, and we expect a
decision on the company’s full request of a 12% increase late this year. Superior Water, Light and
Power also expects to file a rate request with Wisconsin regulators in coming months.

ALLETE’s companies outside the regulated utility space also continue to make significant strides.
New Energy Equity ended its first full calendar year as part of the ALLETE family of businesses by
exceeding original financial expectations for 2023, and we are excited about its future.

ALLETE Clean Energy recently had a favorable arbitration outcome related to one of its wind
facilities. Its team also continued their work to increase efficiencies and unit availability, while
they implemented operations and maintenance reductions and took many other initiatives to
endure historically low wind conditions over the past year.

ALLETE’s achievements are the result of the innovation, talent, resilience, and hard work of
a remarkable team. We have incredibly capable, skilled, and experienced people throughout
ALLETE working toward the same goals, and we are excited about the future.

While ALLETE is making significant investments in clean energy and transmission that, in
turn, build sustainable long-term earnings growth, we are building more than turbines, solar
arrays, and power lines. ALLETE is committed to advancing the clean-energy future in deeply
sustainable ways for the communities in which we live, work, and operate by providing
opportunities for others as we move forward. With integrity as our guide, we’re striving to
advance this vital energy transition in the right way for the climate and for our customers and
communities. More details about this important work are included in our recently updated
corporate sustainability report that can be found at allete.com.

We’re proud that ALLETE increased its dividends again in early 2024, after 2023 earnings were in
line with our expectations. We have an exciting future as together we build reliable, renewable
energy sources and enhanced energy infrastructure while making substantial investments in our
communities.

As always, thank you for your interest and investment in ALLETE.

Bethany M. Owen
ALLETE Chair, President and CEO

United States
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-K

(Mark One)
☒

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the year ended December 31, 2023

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______________ to ______________

Commission File Number 1-3548

ALLETE, Inc.

(Exact name of registrant as specified in its charter)

Minnesota
(State or other jurisdiction of incorporation or organization)

41-0418150
(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 class
Common Stock, without par value

Trading Symbol
ALE

Name of each exchange on which registered
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Securities registered pursuant to Section 12(g) of the Act: None

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 12 months (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 during the 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 growth company. 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
Non-Accelerated Filer

☒
☐

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 financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 30, 2023, was $3,320,941,939.

As of February 1, 2024, there were 57,578,222 shares of ALLETE Common Stock, without par value, outstanding.

Portions of the Proxy Statement for the 2024 Annual Meeting of Shareholders are incorporated by reference in Part III.

Documents Incorporated By Reference

Index
Definitions

Forward-Looking Statements

Part I

Item 1. Business
Regulated Operations

Electric Sales / Customers
Seasonality
Power Supply
Transmission and Distribution
Investment in ATC
Properties
Regulatory Matters
Regional Organizations
Minnesota Legislation
Competition
Franchises

ALLETE Clean Energy
Corporate and Other
New Energy
Investment in Nobles 2
South Shore Energy
BNI Energy
ALLETE Properties
Non-Rate Base Generation and Miscellaneous

Environmental Matters
Human Capital Management
Availability of Information
Information about our Executive Officers
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures

Part II

8
8
10
10
13
13
16
16
16
17
18
19
19
20
20
21
21
21
20
21
21
22
22
22
23
24
25
35
36
37
37
37
37

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities

37
Item 6. [Reserved]
39
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39
39
41
45
47
54
58
58
58
59
59
60

Overview
2023 Compared to 2022
Critical Accounting Policies
Outlook
Liquidity and Capital Resources
Capital Requirements
Environmental and Other Matters
Market Risk
Recently Adopted Accounting Standards

Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data

ALLETE, Inc. 2023 Form 10-K
2

Index (Continued)

Part III

Part IV

Signatures

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 60
60
Item 9A. Controls and Procedures
60
Item 9B. Other Information
60
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
61
61
61

Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and

Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements - Audited

Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Cash Flows
Consolidated Statement of Equity
Notes to Consolidated Financial Statements

Note 1. Operations and Significant Accounting Policies
Note 2. Property, Plant and Equipment
Note 3. Jointly-Owned Facilities and Assets
Note 4. Regulatory Matters
Note 5. Acquisitions
Note 6. Equity Investments
Note 7. Fair Value
Note 8. Short-Term and Long-Term Debt
Note 9. Commitments, Guarantees and Contingencies
Note 10. Common Stock and Earnings Per Share
Note 11. Income Tax Expense
Note 12. Pension and Other Postretirement Benefit Plans
Note 13. Employee Stock and Incentive Plans
Note 14. Business Segments
Note 15. Quarterly Financial Data (Unaudited)

Schedule II

ALLETE, Inc. 2023 Form 10-K
3

62
62
62
63
63
67

72
72
73
74
75
76
77
77
89
90
91
96
97
98
101
103
111
112
115
124
126
129
129

Definitions

The 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 Acronym
AFUDC

ALLETE

Term
Allowance for Funds Used During Construction - the cost of both debt and equity funds
used to finance utility plant additions during construction periods
ALLETE, Inc.

ALLETE Clean Energy

ALLETE Clean Energy, Inc. and its subsidiaries

ALLETE Properties

ALLETE South Wind

ALLETE Properties, LLC and its subsidiaries

ALLETE South Wind, LLC

ALLETE Transmission Holdings ALLETE Transmission Holdings, Inc.

ArcelorMittal

ARO

ASU

ATC

Basin

Bison

BNI Energy

Boswell

C&I

Camp Ripley

Cenovus Energy

CIP

Cliffs

Company

COVID-19

CSAPR

CTO

DOC

ECO

EPA

ELG

ESOP

FASB

FERC

FGD

FIP

Form 8-K

Form 10-K

Form 10-Q

GAAP

GHG
GNTL
Hibbing Taconite
HLBV
Husky Energy

ArcelorMittal USA LLC
Asset Retirement Obligation

Accounting Standards Update

American Transmission Company LLC

Basin Electric Power Cooperative

Bison Wind Energy Center

BNI Energy, Inc. and its subsidiary

Boswell Energy Center

Commercial and Industrial

Camp Ripley Solar Array

Cenovus Energy Inc.

Conservation Improvement Program

Cleveland-Cliffs Inc.

ALLETE, Inc. and its subsidiaries

2019 novel coronavirus

Cross-State Air Pollution Rule

Chief Technology Officer

Direct Current

U.S. Department of Commerce

Energy Conservation and Optimization

United States Environmental Protection Agency

Effluent Limitation Guidelines

Employee Stock Ownership Plan

Financial Accounting Standards Board

Federal Energy Regulatory Commission

Flue Gas Desulphurization

Federal Implementation Plan

ALLETE Current Report on Form 8-K

ALLETE Annual Report on Form 10-K

ALLETE Quarterly Report on Form 10-Q

Generally Accepted Accounting Principles in the United States of America

Greenhouse Gases
Great Northern Transmission Line
Hibbing Taconite Co.
Hypothetical Liquidation at Book Value
Husky Energy Inc.

ALLETE, Inc. 2023 Form 10-K
4

Abbreviation or Acronym
HVDC
IBEW
Invest Direct
IRP
Item ___
kV
kW / kWh
Lampert Capital Markets
Laskin
LLC
MACT
MATS
Manitoba Hydro
MBtu
Minnesota Power
Minnkota Power
MISO
Moody’s
MPCA
MPUC
MRO
MW / MWh
NAAQS
NDPSC
NERC
New Energy
Nippon Steel
NIST

Nobles 2

NOL

NO2
NOX
Northshore Mining

Note ___

NPDES

NTEC

NYSE

Oliver Wind I

Oliver Wind II

Definitions (Continued)

Term
High-Voltage Direct-Current
International Brotherhood of Electrical Workers
ALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan
Integrated Resource Plan
Item ___ of this Form 10-K
Kilovolt(s)
Kilowatt(s) / Kilowatt-hour(s)
Lampert Capital Markets, Inc.
Laskin Energy Center
Limited Liability Company
Maximum Achievable Control Technology
Mercury and Air Toxics Standards
Manitoba Hydro-Electric Board
Million British thermal units
An operating division of ALLETE, Inc.
Minnkota Power Cooperative, Inc.
Midcontinent Independent System Operator, Inc.
Moody’s Investors Service, Inc.
Minnesota Pollution Control Agency
Minnesota Public Utilities Commission
Midwest Reliability Organization
Megawatt(s) / Megawatt-hour(s)
National Ambient Air Quality Standards
North Dakota Public Service Commission
North American Electric Reliability Corporation
New Energy Equity LLC
Nippon Steel Corporation
National Institute of Standards and Technology

Nobles 2 Power Partners, LLC

Net Operating Loss

Nitrogen Dioxide

Nitrogen Oxides

Northshore Mining Company, a wholly-owned subsidiary of Cliffs

Note ___ to the consolidated financial statements in this Form 10-K

National Pollutant Discharge Elimination System

Nemadji Trail Energy Center

New York Stock Exchange

Oliver Wind I Energy Center

Oliver Wind II Energy Center

Palm Coast Park District

Palm Coast Park Community Development District in Florida

PPA / PSA

PPACA

Power Purchase Agreement / Power Sales Agreement

Patient Protection and Affordable Care Act of 2010

ALLETE, Inc. 2023 Form 10-K
5

Abbreviation or Acronym
PSCW
PV
RFP
RSOP
SEC
S&P
SIP
Silver Bay Power
SIP
SO2
SOC
Sofidel
South Shore Energy
Square Butte
Standard & Poor’s
ST Paper
SWL&P
Taconite Harbor
Taconite Ridge
Town Center District
United Taconite
UPM Blandin
U.S.
USS Corporation
VEBA
VIE
WTG

Definitions (Continued)

Term
Public Service Commission of Wisconsin
Photovoltaic
Request for Proposals
Retirement Savings and Stock Ownership Plan
Securities and Exchange Commission
S&P Global Ratings
State Implementation Plan
Silver Bay Power Company, a wholly-owned subsidiary of Cliffs
State Implementation Plan
Sulfur Dioxide
System and Organizational Controls
The Sofidel Group
South Shore Energy, LLC
Square Butte Electric Cooperative, a North Dakota cooperative corporation
S&P Global Ratings
ST Paper LLC
Superior Water, Light and Power Company
Taconite Harbor Energy Center
Taconite Ridge Energy Center
Town Center at Palm Coast Community Development District in Florida
United Taconite LLC, a wholly-owned subsidiary of Cliffs
UPM, Blandin paper mill owned by UPM-Kymmene Corporation
United States of America
United States Steel Corporation
Voluntary Employee Benefit Association
Variable Interest Entities
Wind Turbine Generator

ALLETE, Inc. 2023 Form 10-K
6

Forward-Looking Statements

Statements in this report that are not statements of historical facts are considered “forward-looking” and, accordingly, involve
risks and uncertainties that could cause actual results to differ materially from those discussed. Although such forward-looking
statements have been made in good faith and are based on reasonable assumptions, 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 or phrases 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 identify important factors that could cause our actual results to differ materially from those indicated in
forward-looking statements made by or on behalf of ALLETE in this 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 are accompanied by, the
following important factors, in addition to any assumptions and other factors referred to specifically in connection with such
forward-looking statements that could cause our actual results to differ materially from those indicated in the forward-looking
statements:

•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

•
•
•
•
•
•

•
•
•

our ability to successfully implement our strategic objectives;
global and domestic economic conditions affecting us or our customers;
changes in and compliance with laws and regulations or changes in tax rates or policies;
changes in rates of inflation or availability of key materials and suppliers;
the outcome of legal and administrative proceedings (whether civil or criminal) and settlements;
weather conditions, natural disasters and pandemic diseases;
our ability to access capital markets, bank financing and other financing sources;
changes in interest rates and the performance of the financial markets;
project delays or changes in project costs;
changes in operating expenses and capital expenditures and our ability to raise revenues from our customers;
the impacts of commodity prices on ALLETE and our customers;
our ability to attract and retain qualified, skilled and experienced personnel;
effects of emerging technology;
war, acts of terrorism and cybersecurity attacks;
our ability to manage expansion and integrate acquisitions;
population growth rates and demographic patterns;
wholesale power market conditions;
federal and state regulatory and legislative actions that impact regulated utility economics, including our allowed rates of
return, capital structure, ability to secure financing, industry and rate structure, acquisition and disposal of assets and
facilities, operation and construction of plant facilities and utility infrastructure, recovery of purchased power, capital
investments and other expenses, including present or prospective environmental matters;
effects of competition, including competition for retail and wholesale customers;
effects of restructuring initiatives in the electric industry;
the impacts on our businesses of climate change and future regulation to restrict the emissions of GHG;
effects of increased deployment of distributed low-carbon electricity generation resources;
the impacts of laws and regulations related to renewable and distributed generation;
pricing, availability and transportation of fuel and other commodities and the ability to recover the costs of such
commodities;
our current and potential industrial and municipal customers’ ability to execute announced expansion plans;
real estate market conditions where our legacy Florida real estate investment is located may deteriorate; and
the success of efforts to realize value from, invest in, and develop new opportunities.

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 1A under 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 undertake no 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 occurrence of
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 from those contained in any forward-looking statement.
Readers are urged to carefully review and consider the various disclosures made by ALLETE in this Form 10-K and in other
reports filed with the SEC that attempt to identify the risks and uncertainties that may affect ALLETE’s business.

ALLETE, Inc. 2023 Form 10-K
7

Item 1. Business

Overview.

Part I

ALLETE is a leader in the nation’s clean-energy transformation. Our businesses and dedicated employees deliver sustainable
energy solutions that mitigate climate change, build thriving communities, help customers reach their sustainability goals and
drive value for shareholders. In 2020, ALLETE’s largest business, Minnesota Power, reached a milestone of providing
50 percent renewable energy to its retail and municipal customers in Minnesota, and in 2023 delivered 50 percent renewable
energy to those customers. The Company envisions delivering 100 percent carbon-free energy to customers by 2050—a vision
grounded in a steadfast commitment to climate, customers and community through its EnergyForward strategy. ALLETE
Clean Energy, our second-largest business, is positioned at the heart of society’s clean-energy transformation and owns,
operates and has developed for others more than 1,600 megawatts of wind energy generation across eight states—helping some
of the largest companies in the country reduce their carbon footprint. Our newest business, New Energy, is a leading developer
of community, commercial and industrial, and small utility-scale renewable energy projects that has completed more than
500 MW in its history.

Minnesota Power’s latest IRP, approved by the MPUC in an order dated January 9, 2023, outlines its clean-energy transition
plans through 2035. These plans include expanding its renewable energy supply to 70 percent by 2030, achieving coal-free
operations at its facilities by 2035, and investing in a resilient and flexible transmission and distribution grid. Minnesota Power
has also set a target to achieve an 80 percent reduction in carbon emissions by 2035 compared to 2005 levels. As part of these
plans, Minnesota Power anticipates adding up to 700 MW of new wind and solar energy resources, and ceasing coal operations
at Boswell Units 3 and 4 by 2030 and 2035, respectively. Minnesota Power’s plans recognize that advances in technology will
play a significant role in completing its transition to carbon-free energy supply, reliably and affordably.

In recent years, Minnesota Power has transformed its company-owned energy supply from more than a 95 percent reliance on
coal to become a leader in the nation’s clean-energy transformation. Since 2013, the company has closed or converted seven of
its nine coal-fired units and added nearly 900 megawatts of renewable energy sources. Additionally, Minnesota Power has been
a leader in energy conservation, surpassing the state’s conservation goals each year for the past decade.

On February 7, 2023, the Minnesota Governor signed into law legislation that updates the state’s renewable energy standard
and requires Minnesota electric utilities to source retail sales with 100 percent carbon-free energy by 2040. The Company is
evaluating the law to identify challenges and opportunities it could present. Minnesota Power is also working with various
stakeholders and participating in the regulatory process to implement this legislation. (See Regulated Operations – Minnesota
Legislation.)

ALLETE is committed to earning a financial return that rewards our shareholders, allows for reinvestment in our businesses,
and sustains growth. ALLETE is predominately a regulated utility through Minnesota Power, SWL&P, and an investment in
ATC. ALLETE’s strategy is to remain predominately a regulated utility while investing in ALLETE Clean Energy, New
Energy and its Corporate and Other businesses to complement its regulated businesses, balance exposure to the utility’s
industrial customers, and provide potential long-term earnings growth.

Regulated Operations includes our regulated utilities, Minnesota Power and SWL&P, as well as our investment in ATC, a
Wisconsin-based regulated utility that owns and maintains electric transmission assets in portions of Wisconsin, Michigan,
Minnesota and Illinois. Minnesota Power provides regulated utility electric service in northeastern Minnesota to approximately
150,000 retail customers. Minnesota Power also has 14 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 in northwestern Wisconsin to approximately 15,000 electric customers, 13,000 natural gas customers and
10,000 water customers. Our regulated utility operations include 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 and operates, in seven states, more than 1,200 MW of nameplate capacity wind energy generation with a
majority contracted under PSAs of various durations. In addition, ALLETE Clean Energy engages in the development of wind
energy facilities to operate under long-term PSAs or for sale to others upon completion.

ALLETE, Inc. 2023 Form 10-K
8

Overview (Continued)

Corporate and Other is comprised of New Energy, a renewable development company; our investment in Nobles 2, an entity
that owns and operates a 250 MW wind energy facility in southwestern Minnesota; South Shore Energy, our non-rate regulated,
Wisconsin subsidiary developing NTEC, an approximately 600 MW proposed combined-cycle natural gas-fired generating
facility; BNI Energy, our coal mining operations in North Dakota; ALLETE Properties, our legacy Florida real estate
investment; other business development and corporate expenditures; unallocated interest expense; a small amount of non-rate
base generation; land holdings in Minnesota; 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 of December 31, 2023, 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 31

2023

2022

2021

Consolidated Operating Revenue – Millions (a)
Percentage of Consolidated Operating Revenue

Regulated Operations
ALLETE Clean Energy (a)
Corporate and Other (b)

$1,879.8

$1,570.7

$1,419.2

66 %
22 %
12 %
100 %

80 %
8 %
12 %
100 %

87 %
6 %
7 %
100 %

(a) Consolidated operating revenue for 2023 includes the sales of ALLETE Clean Energy’s Northern Wind and Red Barn projects.
(b) Consolidated operating revenue for 2023 and 2022 includes revenue from New Energy, which was acquired in the second quarter of

2022. (See Note. 5 Acquisitions.)

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. 2023 Form 10-K
9

REGULATED OPERATIONS

Electric Sales / Customers

Regulated Utility Kilowatt-hours Sold
Year Ended December 31
Millions
Retail and Municipal

Residential
Commercial
Industrial
Municipal

Total Retail and Municipal

Other Power Suppliers
Total Regulated Utility Kilowatt-hours Sold

2023

2022

2021

1,089
1,347
7,044
466
9,946
2,819
12,765

8
11
55
4
78
22
100

1,148
1,359
6,745
540
9,792
3,149
12,941

9
11
52
4
76
24
100

1,135
1,359
7,196
590
10,280
5,102
15,382

7
9
47
4
67
33
100

Industrial Customers. In 2023, industrial customers represented 55 percent of total regulated utility kWh sales. Our industrial
customers are primarily in the taconite mining, paper, pulp and secondary wood products, and pipeline industries. Cliffs idled
all production at its Northshore mine in 2022 and resumed partial pellet plant production in April 2023. (See Outlook –
Regulated Operations – Industrial Customers – Taconite.)

Industrial Customer Kilowatt-hours Sold
Year Ended December 31
Millions
Taconite
Paper, Pulp and Secondary Wood Products
Pipelines and Other Industrial

Total Industrial Customer Kilowatt-hours Sold

2023

2022

2021

4,935
669
1,440
7,044

70
10
20
100

4,713
735
1,297
6,745

70
11
19
100

5,281
702
1,213
7,196

73
10
17
100

Six taconite facilities served by Minnesota Power made up approximately 70 percent of 2022 iron ore pellet production in the
U.S. according to data from the Minnesota Department of Revenue 2023 Mining Tax Guide. These taconite facilities are owned
by Cliffs and USS Corporation. (See Large Power Customer Contracts.) Sales to taconite customers represented 4,935 million
kWh, or 70 percent of total industrial customer kWh sales in 2023. Taconite, an iron bearing rock of relatively low iron content,
is abundantly available in northern Minnesota and an important domestic source of raw material for the steel industry. Taconite
processing plants use large quantities of electric power to grind the iron-bearing rock, and agglomerate and pelletize the 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 Minnesota are primarily shipped to North American steel making facilities that are part of the
integrated steel industry, which continue to lead the world in environmental performance among steelmaking countries.
According to the U.S. Department of Energy, steel production in the U.S. is the most energy efficient of any major steel
producing country. Steel produced from these North American facilities is used primarily in the manufacture of automobiles,
appliances, tubular applications for all industries, and in the construction industry. Steel is also a critical component of the clean
energy transformation underway today. The demand for more renewable energy and the need for additional infrastructure to
transport green energy from the point of generation to the end user both require steel. Historically, approximately 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, an association of North American steel producers, reported that U.S. raw steel production operated at
approximately 75 percent of capacity in 2023 (78 percent in 2022 and 82 percent in 2021). The World Steel Association, an
association of steel producers, national and regional steel industry associations, and steel research institutes representing
approximately 85 percent of world steel production, projected U.S. steel consumption in 2024 will increase by approximately
2 percent compared to 2023.

ALLETE, Inc. 2023 Form 10-K
10

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 Production

Year

2023*

2022

2021

2020

2019

2018

2017

2016

2015

2014

Tons (Millions)

Source: Minnesota Department of Revenue 2023 Mining Tax Guide for years 2014 - 2022.

* 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 demand changes or maintenance outages. We estimate that a one million ton change in Minnesota
Power’s taconite customers’ production would impact our annual earnings per share by approximately $0.05, net of expected
power marketing sales at current prices. Changes in wholesale electric prices or customer contractual demand nominations
could impact this estimate. Minnesota Power proactively sells power in the wholesale power markets that is temporarily not
required by industrial customers to optimize the value of its generating facilities. Long-term reductions in taconite production or
a permanent shut down of a taconite customer may 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, which represented 669 million kWh, or 10 percent of total industrial customer kWh sales in 2023.
Minnesota Power also has an agreement to provide steam for one paper and pulp customer for use in the customer’s operations.
The major paper and pulp mills we serve reported operating at similar levels in 2023 compared to 2022. ST Paper completed
start-up of operations and is now a Large Power Customer as of the first quarter of 2023. On January 3, 2024, ST Paper
announced it had entered into an asset purchase agreement to sell the Duluth Mill to Sofidel (See Outlook – Regulated
Operations – Industrial Customers – Paper, Pulp and Secondary Wood Products – ST Paper.)

Large Power Customer Contracts. Minnesota Power had eight Large Power Customer contracts as of December 31, 2023,
each serving requirements of 10 MW or more of customer load. Certain facilities with common ownership are served under
combined contracts. The customers as of December 31, 2023 consisted of six taconite facilities owned by Cliffs and USS
Corporation as well as four paper and pulp mills. Minnesota Power also serves Northshore Mining through a PSA with its
affiliate Silver Bay Power, in addition to the load served through its Large Power Contract with United Taconite and
Northshore Mining. (See Silver Bay Power PSA.)

ALLETE, Inc. 2023 Form 10-K
11

REGULATED OPERATIONS (Continued)
Large Power Customer Contracts (Continued)

Large Power Customer contracts require Minnesota Power to have a certain amount of generating capacity available. In turn,
each Large Power Customer is required to pay a minimum monthly demand charge that covers the fixed costs associated with
having this capacity available to serve the customer, including a return on common equity. Most contracts allow customers to
establish the level of megawatts subject to a demand charge on a three- to four-month basis and require that a portion 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, each Large Power Customer is billed an energy charge for each kWh used that recovers the variable costs
incurred in generating electricity. Five of the Large Power Customer contracts have interruptible service which provides a
discounted demand rate in exchange for the ability to interrupt the customers during system emergencies. Minnesota Power also
provides incremental production service for customer demand levels above the contractual take-or-pay levels. There is no
demand charge for this service and energy is priced at an increment above Minnesota Power’s cost. Incremental production
service is interruptible.

All contracts with Large Power Customers continue past the contract termination date unless the required advance notice of
cancellation has been given. The required advance notice of cancellation varies from two to four years. Such contracts reduce
the impact on earnings that otherwise would result from significant reductions in kWh sales to such customers. Large Power
Customers are required to take all of their purchased electric service requirements from Minnesota Power for the duration of
their contracts. The rates and corresponding revenue associated with capacity and energy provided under these contracts are
subject to change through 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 energy usage estimates. These customers receive estimated bills or make weekly prepayments
based on Minnesota Power’s estimate of the customer’s 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 week-
to-week basis and any differences that occur are trued-up the following month.

Contract Status for Minnesota Power Large Power Customers
As of December 31, 2023

Customer
Cliffs – Minorca Mine (a)

Industry
Taconite

Location
Virginia, MN

Ownership
Cliffs

Hibbing Taconite (a)(d)

Taconite

Hibbing, MN

85.3% Cliffs
14.7% USS Corporation
Cliffs

Eveleth, MN and
Babbitt, MN
Mtn. Iron, MN and
Keewatin, MN
International Falls,
MN
Grand Rapids, MN UPM-Kymmene Corporation

USS Corporation

Packaging Corporation of America December 31, 2027

Earliest
Termination Date
December 31, 2027

December 31, 2027

December 31, 2029

Cloquet, MN

Sappi Limited

December 31, 2027

Duluth, MN

ST Paper LLC

February 28, 2029

United Taconite and
Northshore Mining (a)
USS Corporation
(USS – Minnesota Ore) (a)(b)(d)
Boise, Inc. (a)

UPM Blandin

Sappi Cloquet LLC (a)

ST Paper Duluth (c)

Taconite

Paper

Paper and
Pulp
Paper

(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 by either party. Thus, the earliest date of cancellation is December 31, 2027.

(b) USS Corporation owns both the Minntac Plant in Mountain Iron, MN, and the Keewatin Taconite Plant in Keewatin, MN.
(c)

In January 2024, ST Paper announced it had entered into an asset purchase agreement to sell its paper mill in Duluth, Minnesota to
Sofidel. (See Outlook – Regulated Operations – Industrial Customers – Paper, Pulp and Secondary Wood Products.)
In December 2023, USS Corporation announced it entered into a definitive agreement in which Nippon Steel will acquire all of USS
Corporation’s stock. (See Outlook – Regulated Operations – Industrial Customers – Taconite.)

(d)

ALLETE, Inc. 2023 Form 10-K
12

REGULATED OPERATIONS (Continued)

Silver Bay Power PSA. Minnesota Power has a PSA with Silver Bay Power through 2031 to supply its full energy requirements.
Silver Bay Power supplies approximately 90 MW of load to Northshore Mining, an affiliate of Silver Bay Power.

Residential and Commercial Customers. In 2023, residential and commercial customers represented 19 percent of total
regulated utility kWh sales.

Municipal Customers. In 2023, municipal customers represented 4 percent of total regulated utility kWh sales.

Minnesota Power’s wholesale electric contracts with 14 non-affiliated municipal customers in Minnesota have termination
dates ranging from 2029 through 2037, with a majority of contracts expiring in 2029. One of these wholesale contracts includes
a termination clause requiring a 3-year notice to terminate. (See Note 4. Regulatory Matters.)

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 market on 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.

Minnkota Power PSA. Minnesota Power has a PSA with Minnkota Power where Minnesota Power is selling a portion of its
entitlement from Square Butte to Minnkota Power, resulting in Minnkota Power’s net entitlement increasing and Minnesota
Power’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 approximately 37 percent to Minnkota Power in 2023 (32 percent in 2022 and 28 percent
in 2021). Minnkota Power’s net entitlement increases to approximately 41 percent in 2024, 46 percent in 2025 and 50 percent in
2026. (See Power Supply – Long-Term Purchased Power.)

Hibbing Public Utilities. In April 2022, Minnesota Power entered into a long-term Power Purchase and Market Energy Service
Agreement with Hibbing Public Utilities for the period of June 1, 2022, through May 31, 2027. The agreement replaced the
previous wholesale electric contract between Hibbing Public Utilities and Minnesota Power.

Seasonality

The operations of our industrial customers, which make up a large portion of our electric sales, are not typically subject to
significant seasonal variations. (See Electric Sales / Customers.) As a result, Minnesota Power is generally not subject to
significant seasonal fluctuations in electric sales; however, Minnesota Power and 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 winter and summer
months with fewer electric sales in the spring and fall months. Peak sales of natural gas generally occur in the winter months.
Additionally, our regulated utilities have historically generated fewer sales and less revenue when weather conditions are milder
in the winter and summer.

Power Supply

In order to meet its customers’ electric requirements, Minnesota Power utilizes a mix of its own generation and purchased
power. Since 2020, approximately 50 percent of Minnesota Power’s power supply for its retail and municipal customers in
Minnesota has been provided by renewable energy sources. This was enabled by the completion of the 250 MW Nobles 2 wind
energy facility in December 2020 and the GNTL in June 2020, which is used to deliver 250 MW of hydroelectric energy from
Manitoba Hydro. Minnesota Power’s remaining operating coal-fired facilities are Boswell Units 3 and 4, which Minnesota
Power plans to cease coal operations at by 2030 and 2035, respectively. (See Regulatory Matters.) Renewable energy
percentages may vary year to year based on weather, system demand and transmission constraints.

The following table reflects Minnesota Power’s generating capabilities as of December 31, 2023, and total electrical supply for
2023. Minnesota Power had an annual net peak load of 1,551 MW on August 3, 2023.

ALLETE, Inc. 2023 Form 10-K
13

Unit
No.

Year

Net

Installed Capability

Year Ended
December 31, 2023
Generation and Purchases

MWh

3
4

1973
1980

REGULATED OPERATIONS (Continued)
Power Supply (Continued)

Regulated Utility Power Supply

Coal-Fired

Boswell Energy Center (a)

in Cohasset, MN

Total Coal-Fired

Biomass Co-Fired / Natural Gas

Hibbard Renewable Energy Center in Duluth, MN
Laskin Energy Center in Hoyt Lakes, MN
Total Biomass Co-Fired / Natural Gas

3 & 4
1 & 2

1949, 1951
1953

Hydro (c)

Group consisting of ten stations in MN

Multiple Multiple

Wind (d)

Taconite Ridge Energy Center in Mtn. Iron, MN
Bison Wind Energy Center in Oliver and Morton
Counties, ND
Total Wind

Multiple

2008

Multiple 2010-2014

Solar (e)

Group consisting of two solar arrays in MN

Multiple Multiple

Total Generation

Long-Term Purchased Power

Lignite Coal - Square Butte near Center, ND (f)
Wind - Oliver Wind I and II in Oliver County, ND
Wind - Nobles 2 in Nobles County, MN (g)
Hydro - Manitoba Hydro in Manitoba, Canada
Solar - Purchases from five solar arrays in MN

Total Long-Term Purchased Power

Other Purchased Power (h)

Total Purchased Power
Total Regulated Utility Power Supply

(b)

352
468
820
820

60
98
158

120

497
522

10
1,630

4,458,923
4,458,923

68,189
110,290
178,479

434,133

47,361

1,269,120
1,316,481

15,844
6,403,860

1,377,198
357,541
953,506
1,460,000
28,227
4,176,472
2,625,816
6,802,288
13,206,148

33.8
33.8

0.5
0.8
1.3

3.3

0.4

9.6
10.0

0.1
48.5

10.4
2.7
7.2
11.1
0.2
31.6
19.9
51.5
100.0

(a) Minnesota Power anticipates ceasing coal operations at Boswell Units 3 and 4 by 2030 and 2035, respectively. (See Regulatory Matters.)
(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) Hydro consists of 10 stations with 34 generating units.
(d) Taconite Ridge consists of 10 WTGs and Bison consists of 165 WTGs.
(e) Solar includes the 10 MW Camp Ripley Solar Array near Little Falls, MN, and a 40 kW community solar garden in Duluth, MN.
(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 Electric Sales / Customers – Minnkota Power PSA.)

(g) See Item 1. Business – Corporate and Other – Investment in Nobles 2.
(h)

Includes short-term market purchases in the MISO market and from Other Power Suppliers.

ALLETE, Inc. 2023 Form 10-K
14

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 in 2023 for electric generation at Minnesota Power’s coal-fired generating stations was
2.7 million tons (2.7 million tons in 2022; 2.7 million tons in 2021). As of December 31, 2023, Minnesota Power had coal
inventories of 0.7 million tons (0.8 million tons as of December 31, 2022). Minnesota Power has coal supply agreements
providing for the purchase of a significant portion of its coal requirements through December 2025. In 2024, Minnesota Power
expects to obtain coal under these coal supply agreements and in the spot market. Minnesota Power continues to explore other
future coal supply options and believes that adequate supplies 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 2024. The costs of fuel and related transportation costs for Minnesota Power’s generation are
recoverable from Minnesota Power’s utility customers through the fuel adjustment clause.

Coal Delivered to Minnesota Power
Year Ended December 31
Average Price per Ton
Average Price per MBtu

2023
$41.23
$2.30

2022
$39.98
$2.25

2021
$39.51
$2.18

Long-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 MW coal-fired generating unit. (See Note 9. Commitments, Guarantees and Contingencies.)
BNI Energy mines and sells lignite coal to Square Butte. This lignite supply is sufficient to provide fuel for the anticipated
useful life of the generating unit. Square Butte’s cost of lignite consumed in 2023 was approximately $2.36 per MBtu
($2.05 per MBtu in 2022; $1.94 per MBtu in 2021). (See Electric Sales / Customers – Minnkota Power PSA.)

Manitoba Hydro. Minnesota Power has two long-term PPAs with Manitoba Hydro. The first PPA provides for Minnesota
Power to purchase 250 MW of capacity and energy from Manitoba Hydro through May 2035. The second PPA provides for
Minnesota Power to purchase up to 133 MW of energy from Manitoba Hydro through June 2040. A third PPA, which expired
in April 2022 was an energy-only agreement, which primarily consisted of surplus hydro energy on Manitoba Hydro’s system
that was delivered to Minnesota Power on a non-firm basis.

Wind Energy. Minnesota Power has a long-term PPA with Nobles 2 that provides for Minnesota Power to purchase the energy
and associated capacity from a 250 MW wind energy facility in southwestern Minnesota through 2040. The agreement provides
for 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 is delivered. (See Corporate and Other – Investment in Nobles 2.) 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.

Solar Energy. Minnesota Power purchases solar energy from approximately 20 MW of solar energy facilities located in
Minnesota that are owned by an ALLETE subsidiary, and a 1 MW community solar garden in northeastern Minnesota, which is
owned and operated by a third party.

ALLETE, Inc. 2023 Form 10-K
15

REGULATED OPERATIONS (Continued)

Transmission and Distribution

We have electric transmission and distribution lines of 500 kV (232 miles), 345 kV (241 miles), 250 kV (466 miles),
230 kV (715 miles), 161 kV (43 miles), 115 kV (1,380 miles) and less than 115 kV (6,415 miles). We own and operate 162
substations with a total capacity of 9,980 megavolt-amperes. Some of our transmission and distribution lines interconnect with
other utilities, and we own some of our transmission lines jointly with other utilities. (See Note 3. Jointly-Owned Facilities and
Assets and Outlook – Regulated Operations – Transmission.)

Great Northern Transmission Line. As a condition of the 250 MW long-term PPA entered into with Manitoba Hydro,
construction of additional transmission capacity was required. As a result, Minnesota Power constructed the GNTL, an
approximately 220-mile 500-kV transmission line between Manitoba and Minnesota’s Iron Range that was proposed by
Minnesota Power and Manitoba Hydro in order to strengthen the electric grid, enhance regional reliability and promote a
greater exchange of sustainable energy. In June 2020, Minnesota Power placed the GNTL into service with project costs of
approximately $310 million incurred by Minnesota Power. Total project costs, including those costs contributed by a subsidiary
of Manitoba Hydro, totaled approximately $660 million. The 250 MW PPA with Manitoba Hydro commenced when the GNTL
was placed into service.

Investment in ATC

Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based
utility that owns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. We
account for our investment in ATC under the equity method of accounting. As of December 31, 2023, our equity investment in
ATC was $179.7 million ($165.4 million as of December 31, 2022). (See Note 6. Equity Investments.)

ATC’s authorized return on equity is 10.02 percent, or 10.52 percent including an incentive adder for participation in a regional
transmission organization, based on a 2020 FERC order which is subject to various outstanding legal challenges related to the
return on equity calculation and refund period ordered by the FERC. On August 9, 2022, the U.S. Court of Appeals for the
District of Columbia Circuit vacated and remanded the 2020 FERC order back to the FERC. As a result of this decision, ATC
recorded a reserve in the third quarter of 2022 for anticipated refunds to its customers for approximately $31 million of which
our share was approximately $2.4 million pre-tax. We cannot predict the return on equity the FERC will ultimately authorize in
the remanded proceeding.

In addition, the FERC issued a Notice of Proposed Rulemaking in April 2021 to limit the 50 basis point incentive adder for
participation in a regional transmission organization to only the first three years of membership in such an organization. If this
proposal is adopted, our equity in earnings from ATC would be reduced by approximately $1 million pre-tax annually.

ATC’s most recent 10-year transmission assessment, which covers the years 2023 through 2032, identifies a need for between
$6.6 billion and $8.1 billion in transmission system investments. These investments by ATC, if undertaken, are expected to be
funded through a combination of internally generated cash, debt and investor contributions. As opportunities arise, we plan to
make additional investments in ATC through general capital calls based upon our pro rata ownership interest in ATC.

Properties

Our Regulated Operations businesses own office and service buildings, an energy control center, repair shops, electric plants,
transmission and distribution facilities and storerooms in various localities in Minnesota, Wisconsin and North Dakota. All of
the electric plants are subject to mortgages, which collateralize the outstanding first mortgage bonds of Minnesota Power and
SWL&P. Most of the generating plants and substations are located on real property owned by Minnesota Power or SWL&P,
subject to the lien of a mortgage, whereas most of the transmission and distribution lines are located on real property owned by
others with appropriate easement rights or necessary permits from governmental authorities. WPPI Energy owns 20 percent of
Boswell Unit 4. WPPI Energy has the right to use our transmission line facilities to transport its share of Boswell generation.
(See Note 3. Jointly-Owned Facilities and Assets.)

ALLETE, Inc. 2023 Form 10-K
16

REGULATED OPERATIONS (Continued)

Regulatory Matters

We are subject to the jurisdiction of various regulatory authorities and other organizations. Regulatory matters and proceedings
are detailed in Note 4. Regulatory Matters, with a summary included in the following paragraphs.

Electric Rates. All rates and contract terms in our Regulated Operations are subject to approval by applicable regulatory
authorities. Minnesota Power and SWL&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 approved by 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 and purchased energy,
recovery of current and deferred conservation improvement program expenditures and recovery of certain transmission,
renewable and environmental 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 retail base
rates through 2021 were based on a 2018 MPUC retail rate order that allowed for a 9.25 percent return on common equity and a
53.81 percent equity ratio. Interim rates were implemented in Minnesota Power’s 2022 general rate case beginning in
January 2022, and the resolution of Minnesota Power’s 2022 general rate case changed the allowed return on equity to
9.65 percent and the equity ratio to 52.50 percent beginning October 1, 2023. (See 2022 Minnesota General Rate Case.) As
authorized by the MPUC, Minnesota Power also recognizes revenue under cost recovery riders for transmission and renewable
investments.

2024 Minnesota General Rate Case. On November 1, 2023, Minnesota Power filed a retail rate increase request with the
MPUC seeking an average increase of approximately 12.00 percent for retail customers, net of rider revenue incorporated into
base rates. The rate filing seeks a return on equity of 10.30 percent and a 53.00 percent equity ratio. On an annualized basis, the
requested final rate increase would generate approximately $89 million in additional revenue. On December 7, 2023, the MPUC
accepted the filing as complete and approved an annual interim rate increase of approximately $64 million, net of rider revenue,
incorporated into base rates starting January 1, 2024, subject to refund. We cannot predict the level of final rates that may be
authorized by the MPUC.

2022 Minnesota General Rate Case. On November 1, 2021, Minnesota Power filed a retail rate increase request with the
MPUC seeking an average increase of approximately 18 percent for retail customers. The rate filing sought a return on equity
of 10.25 percent and a 53.81 percent equity ratio. On an annualized basis, the requested final rate increase would have
generated approximately $108 million in additional revenue.

In an order dated February 28, 2023, the MPUC made determinations regarding Minnesota Power’s general rate case including
allowing a return on common equity of 9.65 percent and a 52.50 percent equity ratio. We expect additional revenue from base
rates of approximately $60 million and an additional $10 million in revenue recognized under cost recovery riders on an
annualized basis. On March 20, 2023, Minnesota Power filed a petition for reconsideration with the MPUC requesting
reconsideration and clarification of certain decisions in the MPUC’s order. Minnesota Power’s petition included requesting
reconsideration of the ratemaking treatment of Taconite Harbor and Minnesota Power’s prepaid pension asset as well as
clarification on interim rate treatment for sales to certain customers that did not operate during 2022. The MPUC denied the
requests for reconsideration in an order dated May 15, 2023, and provided clarification in support of the interim rate refund
treatment for sales to certain customers that did not operate during 2022.

On June 14, 2023, Minnesota Power appealed to the Minnesota Court of Appeals (Court) specific aspects of the MPUC’s rate
case orders. Minnesota Power is appealing the ratemaking treatment of Taconite Harbor and Minnesota Power’s prepaid
pension asset. We are unable to predict the outcome of this proceeding.

In an order dated September 29, 2023, the MPUC approved Minnesota Power’s final rates, which were implemented beginning
on October 1, 2023. The MPUC order also approved Minnesota Power’s interim rate refund plan. Interim rates were collected
through the third quarter of 2023 with reserves recorded as necessary. Minnesota Power recorded a reserve for an interim rate
refund of approximately $39 million pre-tax as of September 30, 2023 (approximately $18 million as of December 31, 2022).
The reserve was refunded to customers during the fourth quarter of 2023.

ALLETE, Inc. 2023 Form 10-K
17

REGULATED OPERATIONS (Continued)
Regulatory Matters (Continued)

Minnesota Power Land Sales. In August 2020, Minnesota Power filed a petition with the MPUC for approval to sell land that
surrounds several reservoirs on its hydroelectric system and is no longer required to maintain its operations. The land had an
estimated value of approximately $100 million, and Minnesota Power proposed to credit ratepayers the net proceeds from the
sales in a future rate case or through its renewable resources rider to mitigate future rate increases. In an order dated
November 18, 2021, the MPUC authorized the land sales and directed the net proceeds to be refunded to ratepayers subject to
certain conditions and required compliance filings. As of December 31, 2023, we have a regulatory liability recorded of
$30.2 million related to these sales.

2021 Integrated Resource Plan. On February 1, 2021, Minnesota Power filed its latest IRP, which was approved by the MPUC
in an order dated January 9, 2023. The approved IRP, which reflects a joint agreement reached with various stakeholders,
outlines Minnesota Power’s clean-energy transition plans through 2035. These plans include expanding its renewable energy
supply, achieving coal-free operations at its facilities by 2035, and investing in a resilient and flexible transmission and
distribution grid. As part of these plans, Minnesota Power anticipates adding up to 700 MW of new wind and solar energy
resources, and ceasing coal operations at Boswell Units 3 and 4 by 2030 and 2035, respectively. Minnesota Power’s plans
recognize that advances in technology will play a significant role in completing its transition to carbon-free energy supply,
reliably and affordably. Minnesota Power is expected to file its next IRP by March 1, 2025.

Minnesota Power has a vision to deliver 100 percent carbon-free energy to customers by 2050, continuing its commitment to
climate, customers and communities through its EnergyForward strategy. This vision builds on Minnesota Power’s
achievement, in 2020, of now providing 50 percent renewable energy to its customers.

Public Service Commission of Wisconsin. The PSCW has regulatory authority over SWL&P’s retail sales of electricity,
natural gas and water, issuances of securities and other matters. The resolution of SWL&P’s 2022 general rate case changed the
allowed return on equity to 10.00 percent and maintained an equity ratio of 55.00 percent beginning January 1, 2023. (See
2022 Wisconsin General Rate Case.) SWL&P’s retail rates through 2022 were based on a December 2018 order by the PSCW
that allowed for a return on equity of 10.40 percent and a 55.00 percent equity ratio.

2022 Wisconsin General Rate Case. In 2022, SWL&P filed a rate increase request with the PSCW seeking an average increase
of 3.60 percent for retail customers. The filing sought an overall return on equity of 10.40 percent and a 55.00 percent equity
ratio. On an annualized basis, the requested final rate increase would have generated an estimated $4.3 million in additional
revenue. In an order dated December 20, 2022, the PSCW approved an annual increase of $3.3 million reflecting a return on
equity of 10.00 percent and 55.00 percent equity ratio. Final rates went into effect January 1, 2023.

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 for transmission 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
recordkeeping practices, certain activities of our regulated utilities and the operations of ATC. FERC jurisdiction also includes
enforcement of NERC mandatory electric reliability standards. Violations of FERC rules are subject to enforcement action by
the FERC including financial penalties up to $1 million per day per violation.

Regional Organizations

Midcontinent Independent System Operator, Inc. Minnesota Power, SWL&P and ATC are members of MISO, a regional
transmission organization. While Minnesota Power and SWL&P retain ownership of their respective transmission assets, their
transmission networks are under the regional operational control of MISO. 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.

North American Electric Reliability Corporation. The NERC has been certified by the FERC as the national electric
reliability organization. The NERC ensures the reliability of the North American bulk power system. The NERC oversees six
regional entities that establish requirements, approved by the FERC, for reliable operation and maintenance of power generation
facilities and transmission systems. Minnesota Power is subject to these reliability requirements and can incur significant
penalties for noncompliance.

ALLETE, Inc. 2023 Form 10-K
18

REGULATED OPERATIONS (Continued)
Regional Organizations (Continued)

Midwest Reliability Organization (MRO). Minnesota Power and ATC are members of the MRO, one of the six regional
entities overseen by the NERC. The MRO's primary responsibilities are to: ensure compliance with mandatory reliability
standards by entities which own, operate or use the interconnected, international bulk 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.

Minnesota Legislation

Renewable and Carbon-Free Energy Requirements. On February 7, 2023, the Minnesota Governor signed into law legislation
that updates the state’s renewable energy standard and requires Minnesota electric utilities to source retail sales with
100 percent carbon-free energy by 2040. The law increases the renewable energy standard from 25 percent renewable by 2025
to 55 percent renewable by 2035, and requires investor-owned Minnesota utilities to provide 80 percent carbon-free energy by
2030, 90 percent carbon-free energy by 2035 and 100 percent carbon-free energy by 2040. The law utilizes renewable energy
credits as the means to demonstrate compliance with both the carbon-free and renewable energy standards, includes an off ramp
provision that enables the MPUC to protect reliability and customer costs through modification or delay of either the renewable
energy standard, the carbon-free standard, or both, and streamlines development and construction of wind energy projects and
transmission in Minnesota. The Company is evaluating the law to identify challenges and opportunities it could present.
Minnesota Power is also working with various stakeholders and participating in the regulatory process to implement this
legislation.

Since 2020, approximately 50 percent of Minnesota Power’s power supply for its retail and municipal customers in Minnesota
has been provided by renewable energy sources. Minnesota Power’s plans include expanding its renewable energy supply to
70 percent renewable energy by 2030. Minnesota Power has also set a target to achieve an 80 percent reduction in carbon
emissions by 2035 compared to 2005 levels. (See Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Outlook – EnergyForward.)

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 by solar energy. At least 10 percent of the 1.5 percent mandate must be met by solar energy
generated by or procured from solar photovoltaic devices with a nameplate capacity of 40 kW or less and community solar
garden subscriptions. Minnesota Power has met both parts of the solar mandate to date.

Competition

Retail electric energy sales in Minnesota and Wisconsin are made to customers in assigned service territories. As a result, most
retail electric customers in Minnesota 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 to choose a supplier upon MPUC approval. Minnesota Power
served eight Large Power Customers under contracts of at least 10 MW in 2023, none of which have engaged in a competitive
rate process. (See Electric Sales / Customers.) No other large commercial or small industrial customers in Minnesota Power’s
service territory have sought a provider outside Minnesota Power’s service territory. Retail electric and natural gas customers in
Wisconsin do not have the ability to choose their energy supplier. In both states, however, electricity may compete with other
forms of energy. Customers may also choose to generate their own electricity, or substitute other forms of energy for their
manufacturing processes.

In 2023, 4 percent of total regulated utility kWh sales were to municipal customers in Minnesota. These customers have the
right to seek an energy supply from any wholesale electric service provider upon contract expiration. Minnesota Power’s
wholesale electric contract with the Nashwauk Public Utilities Commission is effective through 2037. Minnesota Power’s
wholesale electric contracts with 13 other non-affiliated municipal customers are effective through 2029. (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, our electric sales to Other Power Suppliers and our purchases to supply our retail and wholesale
load are made in a competitive market.

ALLETE, Inc. 2023 Form 10-K
19

REGULATED OPERATIONS (Continued)

Franchises

Minnesota Power holds franchises to construct and maintain an electric distribution and transmission system in 95 cities. The
remaining cities, villages and towns served 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 villages and towns.

ALLETE CLEAN ENERGY

ALLETE Clean Energy believes the market for renewable energy in North America is robust, driven by several factors
including environmental regulation, tax incentives such as the extension of production tax credit and investment tax credits,
societal expectations and continual technology advances. State renewable portfolio standards, state or federal regulations to
limit GHG emissions and the extension of production tax credit and investment tax credits are 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, the continuous pursuit of operational efficiencies at existing facilities and cost controls.
ALLETE Clean Energy generally acquires facilities in liquid power markets and its strategy includes the exploration of PSA
extensions upon expiration of existing contracts, production tax credit requalification of existing facilities or the sale of
facilities.

ALLETE Clean Energy manages risk by having a diverse portfolio of assets, which includes PSA expiration, technology and
geographic diversity. The current operating portfolio 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. ALLETE Clean Energy’s current operating portfolio is as follows:

Region
East

Midwest

South

West

Wind Energy Facility
Armenia Mountain

Capacity MW
101

PSA 1
PSA 2

Lake Benton
Storm Lake I
Storm Lake II
Merchant
PSA

Other
Caddo

Merchant
PSA 1
PSA 2
Diamond Spring
PSA 1
PSA 2
PSA 3

Condon
Glen Ullin
South Peak

104
108
77

17
303

303

50
106
80

50%
50%
100%
100%

90%
10%
100%

27%
66%
7%

58%
25%
16%
100%
100%
100%

PSA Expiration

2031
2024
2028
2027

n/a
2032
2028

n/a
2034
2034

2035
2032
2035
2028
2039
2035

The majority of ALLETE Clean Energy’s wind operations are located on real property owned by others with easement rights or
necessary consents of governmental authorities. One of ALLETE Clean Energy’s wind energy facilities is encumbered by liens
against its assets securing financing. ALLETE Clean Energy’s Glen Ullin, South Peak, Diamond Spring and Caddo wind
energy facilities are subject to tax equity financing structures. (See Note 1. Operations and Significant Accounting Policies.)

ALLETE, Inc. 2023 Form 10-K
20

CORPORATE AND OTHER

New Energy

In April 2022, a wholly-owned subsidiary of ALLETE acquired 100 percent of the membership interests of New Energy for a
purchase price of $165.5 million. New Energy, which is headquartered in Annapolis, Maryland, is a renewable energy
development company with a primary focus on solar and storage facilities while also offering comprehensive operations,
maintenance and asset management services. New Energy is a leading developer of community, commercial and industrial, and
small utility-scale renewable energy projects that has completed more than 500 MW in its history, totaling more than
$1.2 billion of capital. New Energy currently has a robust project pipeline with greater than 2,000 MW of renewable projects in
development across over 20 different states. New Energy is involved in greenfield development as well as acquiring and
completing mid-stage and late-stage renewable energy projects. New Energy will continue its current strategy of developing
and operating renewable energy projects.

Investment in Nobles 2

Our subsidiary, ALLETE South Wind, owns a 49 percent equity interest in Nobles 2, the entity that owns and operates a
250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA with Minnesota Power. As of
December 31, 2023, our equity investment in Nobles 2 was $151.5 million ($157.3 million at December 31, 2022). (See Note 6.
Equity Investments.)

South Shore Energy

South Shore Energy, ALLETE’s non-rate regulated, Wisconsin subsidiary, is developing NTEC, an approximately 600 MW
proposed combined-cycle natural gas-fired generating facility to be built in Superior, Wisconsin, which will be jointly owned
by Dairyland Power Cooperative, Basin and South Shore Energy. Minnesota Power is expected to purchase approximately
20 percent of the facility's output starting in 2028 pursuant to a capacity dedication agreement. 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 South Shore Energy will be responsible for approximately 20 percent. South Shore Energy’s portion of
NTEC project costs incurred through December 31, 2023, is approximately $9 million.

BNI Energy

BNI 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 coal reserves. Two electric generating cooperatives, Minnkota Power and Square Butte, consume
virtually all of BNI Energy’s production of lignite under cost-plus fixed fee coal supply agreements extending through
December 31, 2037. (See Item 1. Business – Regulated Operations – Power Supply – Long-Term Purchased Power and Note 9.
Commitments, Guarantees and Contingencies.) The mining process disturbs and reclaims between 200 and 250 acres per year.
Laws require that the reclaimed land be at least as productive as it was prior to mining. As of December 31, 2023, BNI
Energy’s total reclamation liability is estimated at $82.1 million, which is included in Other Non-Current Liabilities on the
Consolidated Balance Sheet at its present value. These costs are included in the cost-plus fixed fee contract, for which an asset
reclamation cost receivable was included in Other Non-Current Assets on the Consolidated Balance Sheet. The asset
reclamation obligation is guaranteed by surety bonds and a letter of credit. (See Note 9. Commitments, Guarantees and
Contingencies.)

ALLETE Properties

ALLETE Properties represents our legacy Florida real estate investment. ALLETE Properties’ major project in Florida is Town
Center at Palm Coast, which consists of approximately 200 acres of land as well as various residential units and non-residential
square footage. In addition to the Town Center at Palm Coast project, ALLETE Properties has approximately 500 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, 2023,
outstanding finance receivables were $2.9 million, net of reserves, with maturities through 2027. These finance receivables
accrue interest at market-based rates and are collateralized by the financed properties.

ALLETE, Inc. 2023 Form 10-K
21

CORPORATE AND OTHER (Continued)
ALLETE Properties (Continued)

Regulation. A substantial portion of our development properties in Florida are subject to federal, state and local regulations,
and restrictions that may impose significant 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 may affect the natural habitats of various protected wildlife species
or in sensitive environmental areas such as wetlands.

Non-Rate Base Generation and Miscellaneous

Corporate and Other also includes other business development and corporate expenditures, unallocated interest expense, a small
amount of non-rate base generation, land holdings in Minnesota, and earnings on cash and investments.

As of December 31, 2023, non-rate base generation consists of 29 MW of natural gas and hydro generation at Rapids Energy
Center in Grand Rapids, Minnesota, which is primarily dedicated to the needs of one customer, UPM Blandin, and
approximately 20 MW of solar energy facilities located in Sylvan, Hoyt Lakes, and Duluth, Minnesota, which sell energy
generated to Minnesota Power.

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 Air Act, 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, over time, to
reduce its reliance on coal, has installed cost-effective emission control technology, and advocates for sound science and policy
during rulemaking implementation.

We consider our businesses to be in substantial compliance with currently applicable environmental regulations and believe all
necessary permits have been obtained. We anticipate that with many state and federal environmental regulations and
requirements finalized, or to be finalized in the near future, potential expenditures for future environmental matters may be
material and require significant capital investments. Minnesota Power has evaluated various environmental compliance
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 and the amount of the liability can be reasonably estimated based on current law and existing
technologies. Accruals are adjusted as assessment and remediation efforts progress, or as additional technical or legal
information becomes available. Accruals for environmental liabilities are included in the Consolidated Balance Sheet at
undiscounted amounts and exclude claims for recoveries from insurance or other third parties. Costs related to environmental
contamination treatment and cleanup are expensed unless recoverable in rates from customers. (See Note 9. Commitments,
Guarantees and Contingencies.)

HUMAN CAPITAL MANAGEMENT

The Company’s key human capital management objectives are to attract, recognize and retain high quality talent, align with
strategic business objectives and support the Company’s values. To support these objectives, the Company’s programs are
designed to develop talent; reward and support employees through competitive compensation programs and benefit plans;
enhance the Company’s culture through efforts aimed at making the workplace more engaging, safe and inclusive; and acquire
talent and leverage internal opportunities to create a high-performing, diverse workforce. Our management, the ALLETE Board
of Directors Executive Compensation and Human Capital Committee, and our Board of Directors as a whole play key roles in
reviewing and overseeing our human capital practices.

As of December 31, 2023, ALLETE had 1,560 employees, of which 1,513 were full-time. We also respect employees’ freedom
of association and their right to collectively organize. As of December 31, 2023, Minnesota Power and SWL&P have an
aggregate of 479 employees covered under collective bargaining agreements, of which most are members of the International
Brotherhood of Electrical Workers (IBEW) Local 31. The current labor agreements with IBEW Local 31 expire on
April 30, 2026, for Minnesota Power and January 31, 2027, for SWL&P. BNI Energy has 129 employees that are members of
IBEW Local 1593. The current labor agreement with IBEW Local 1593 expires on March 31, 2026.

ALLETE, Inc. 2023 Form 10-K
22

HUMAN CAPITAL MANAGEMENT (Continued)

ALLETE’s Human Rights Policy confirms our commitment to the advancement and protection of human rights, consistent with
U.S. human rights laws and the general principles in the International Labour Organization Convention.

Integrity. Integrity is a foundational, shared value at ALLETE, is important to ALLETE’s business and operations, and enables
our success. The Company has a written Code of Business Conduct that applies to all of our employees, directors of ALLETE,
contractors, vendors, and others who do business with or on behalf of ALLETE.

Health and Safety. The success of our business is fundamentally connected to the well-being of our people. Our journey to
zero injury starts with a culture that is open and transparent. We encourage all employees to report injuries, near misses, and
good catches, so that we can learn and share with others throughout the Company in an effort to improve safety performance.
Leaders have regular safety conversations with employees, where hazard identification and controls are discussed to ensure
work is being performed safely. To monitor progress, the Company uses leading and lagging indicators to analyze injury trends,
safety participation and other data, such as data from our Company-wide safety perception survey to make better decision on
safety practices.

Talent Attraction, Retention and Development. For more than a century, ALLETE has been successful because of our ability
to attract and retain high-quality people who demonstrate our shared values. We engage in workforce planning, and succession
planning, while building a robust talent pipeline and monitoring turnover.

We recognize and support the growth and development of our employees and offer opportunities to participate in internal and
external learning programs. Our internal talent development programs provide employees with the resources they need to
develop proficiency in their role, help achieve their career goals and build leadership skills. We are focusing initiatives on
programs to expand the diversity of new hires and updating on-the-job trainings—including apprenticeships and scholarships
aimed at bridging opportunity gaps—as we recognize the importance of a strong talent pipeline. In addition to role specific
training, targeted training also includes respect in the workplace, cyber awareness, safety, integrity and leadership development.

Compensation and Benefits. Our competitive compensation package gives employees flexibility, choices and opportunities.
Competitive compensation is important for the Company to attract and retain a qualified workforce to successfully manage our
business and achieve our business objectives. We also strive to ensure pay equity among diverse employees performing equal
or substantially similar work. Periodically, we review the median pay of our male and female employees as well as employees
from diverse backgrounds.

Diversity, Equity and Inclusion. Increasing diversity enriches our workforce culture at ALLETE. Our employees are
operating in an increasingly diverse society. In order to be accountable to our employees and stakeholders, we strive to have a
workforce that reflects the diversity of the communities we serve, promotes inclusivity and is equitable.

At ALLETE, we want to ensure that we have a workplace culture where we treat each other with fairness, dignity and respect.
The Company has a respect in the workplace initiative, which includes education as well as ongoing discussions focused on
building respectful relationships and managing bias. We continue our efforts in crafting a framework to strengthen ALLETE’s
diversity, equity and inclusion efforts in the areas of: workforce, supply chain, communications, customers, and ALLETE as a
community citizen. ALLETE continues to take tangible steps toward advancing diversity, equity and inclusion by continuing to
raise awareness, furthering
increasing supplier diversity, focus on
underrepresented groups through grants/scholarships and other Company and employee giving.

intentional external relationships/partnerships,

Yellow Ribbon Program. ALLETE and its subsidiaries are dedicated to supporting veterans, military members and their
families. An employee effort grew out of that spirit of commitment to veterans and led the state of Minnesota to designate
ALLETE/Minnesota Power and ALLETE Clean Energy as Yellow Ribbon Companies. The mission of ALLETE’s Yellow
Ribbon Program is to contribute to the Company’s unique culture by proactively recruiting and retaining the best and
supporting an environment in which military-connected employees can thrive.

AVAILABILITY OF INFORMATION

ALLETE 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 to those 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. 2023 Form 10-K
23

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

As of February 20, 2024, these are the executive officers of ALLETE:

Executive Officers

Bethany M. Owen, Age 58

Chair, President and Chief Executive Officer
President and Chief Executive Officer
President
Senior Vice President and Chief Legal and Administrative Officer

Patrick L. Cutshall, Age 58

Vice President and Corporate Treasurer

Nicole R. Johnson, Age 49

Vice President and President of ALLETE Clean Energy
Vice President and Chief Administrative Officer

Steven W. Morris, Age 62

Senior Vice President and Chief Financial Officer
Vice President and Chief Accounting Officer
Vice President, Controller and Chief Accounting Officer

Joshua J. Skelton, Age 44
Vice President and Chief Operating Officer of Minnesota Power

Initial Effective Date

May 11, 2021
February 3, 2020
January 31, 2019
November 26, 2016

December 18, 2017

August 22, 2022
June 28, 2019

February 9, 2022
October 28, 2021
December 24, 2016

August 22, 2022

Margaret A. Thickens, Age 57

Vice President, Chief Legal Officer and Corporate Secretary

February 13, 2019

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 listed above, the following executives held other positions with the Company during the past five years.

Ms. Johnson was Vice President – Human Resources.
Mr. Skelton was Chief Operating Officer of Minnesota Power, Vice President Generation Operations and ALLETE
Safety.

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 meeting of shareholders. Both meetings are scheduled for May 14, 2024.

ALLETE, Inc. 2023 Form 10-K
24

Item 1A. Risk Factors

The risks and uncertainties discussed below could materially affect our business operations, financial position, results of
operations and cash flows, and should be carefully considered by stakeholders. The risks and uncertainties in this section are
not the only ones we face; additional risks and uncertainties that we are not presently 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 with the SEC.

Regulated Operations Risks

Our results of operations could be negatively impacted if our taconite, paper and pipeline customers experience an
economic downturn, incur work stoppages, 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 Large Power Customers (see Item 1. Business – Regulated Operations – Electric Sales / Customers) and
Silver Bay Power accounted for 24 percent of our 2023 consolidated operating revenue (29 percent in 2022 and 32 percent in
2021) and 36 percent of Regulated Operations operating revenue (36 percent in 2022 and 37 percent in 2021). Minnesota
Power’s taconite customers, which are currently owned by only two entities at the end of 2023, accounted for approximately
21 percent of consolidated operating revenue and 32 percent of Regulated Operations operating revenue in 2023. This
concentrated ownership presents customer concentration risk for the Company, and could lead to further capacity consolidation
for both steel blast furnaces and related Minnesota iron ore production. These customers are also involved in cyclical industries
that by their nature are adversely impacted by economic downturns and are subject to strong competition in the marketplace.
The North American paper and pulp industry also faces declining demand due to the impact of electronic substitution for print
and changing customer needs. As a result, certain paper and pulp customers have reduced their existing operations or idled
facilities in recent years and have pursued or are pursuing product changes in response to declining demand. Additionally, the
taconite industry could be impacted by changing technology in the steel industry such as the adoption of electric arc furnaces
for steelmaking, which could result in declining demand for taconite and the electricity used during its production.

Minnesota Power also serves two pipeline customers that accounted for 2 percent of our 2023 consolidated operating revenue
(2 percent in 2022 and in 2021) and 3 percent of Regulated Operations revenue in 2023 (2 percent in 2022 and 2021). These
customers are involved in an industry that is seeing increased environmental pressure for construction of new or expanded
pipeline infrastructure for the transportation of fossil fuels. Changes in regulatory rulings or permit proceedings could result in
changes to operations of the pipeline network in our service territory.

Accordingly, if our industrial customers experience an economic downturn, incur a work stoppage (including strikes, lock-outs
or other events), fail to compete effectively, experience decreased demand, fail to economically obtain raw materials or operate
their facilities, fail to renew or obtain necessary permits, or experience a decline in demand or prices for their product, there
could be adverse effects on their operations and, consequently, this could have a negative impact on our results of operations as
we are unable to remarket at similar prices the energy that would otherwise have been sold to such customers.

We may not be able to successfully implement our strategic objectives of growing load at our utilities if current or
potential industrial or municipal customers are unable to successfully implement expansion plans, including the
inability to obtain necessary governmental permits and approvals.

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 in northeastern Minnesota that are in the process of developing natural resource-based projects that
represent long-term growth potential and load diversity for our Regulated Operations businesses. These projects may include
construction of new facilities and restarts of old facilities, both of which require permitting and approvals 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 could be adversely impacted.

ALLETE, Inc. 2023 Form 10-K
25

Item 1A. Risk Factors (Continued)
Regulated Operations Risks (Continued)

Our businesses, investments and customers are subject to an extensive legal and regulatory framework under federal
and state laws as well as regulations imposed by other organizations that may have a negative impact on our business
and results of operations.

Our businesses, investments and customers 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 allowed rates 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 capital investments, approval of integrated resource plans and present or prospective
wholesale and retail competition, renewable portfolio standards that require utilities to obtain specified percentages of electric
supply from eligible renewable generation sources, among other things. Energy policy initiatives at the state or federal level
could increase or accelerate renewable and carbon-free energy standards or incentives for distributed generation, municipal
utility ownership, or local initiatives could introduce generation or distribution requirements that could change the current
integrated utility model. (See Item 1. Business – Regulated Operations – Minnesota Legislation.) Our transmission systems and
electric generation facilities are subject to the NERC mandatory reliability standards, including cybersecurity standards.
Compliance with these standards may lead to increased operating costs and capital expenditures which are subject to regulatory
approval for recovery. If it was determined that we were not in compliance with these mandatory reliability standards or 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 have numerous permits, licenses, approvals and certificates from the agencies and other
organizations that regulate our business. We believe we have obtained the necessary 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 in regulations, timing of approvals, the adoption of new regulations or the expansion of jurisdiction by these agencies
and other organizations could have an adverse impact on our business and results of operations. In addition, our ability to
manage changing regulations could be impacted by our rights and obligations under joint ownership agreements.

Our ability to obtain rate adjustments to maintain reasonable rates of return depends upon regulatory action under applicable
statutes and regulations, and we cannot 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 and SWL&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 or
recovered on a timely basis, if fuel adjustment clause recoveries or cost recovery for other items are not granted at the requested
level, or costs are otherwise unable to be recovered through rates, we may experience an adverse impact on our financial
position, results of operations and cash flows. We are unable to predict the impact on our business and results of operations
from future legislation or regulatory 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 effects of 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, water quality and usage, waste management, reclamation, hazardous wastes, avian mortality
and natural resources. These laws and regulations, or new laws and regulations that may be passed, can result in increased
capital expenditures and increased operating and other costs as a result of compliance, remediation, containment and monitoring
obligations, particularly with regard 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 of additional pollution control equipment, require participation in environmental emission
allowance trading, and lead to other environmental considerations and costs, which could have an adverse impact on our
business, operations and results of operations.

ALLETE, Inc. 2023 Form 10-K
26

Item 1A. Risk Factors (Continued)
Regulated Operations Risks (Continued)

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 and private parties, as well as potential significant civil fines
criminal penalties and other sanctions.

Existing environmental regulations may be revised and new environmental regulations may be adopted or become applicable to
us. Revised or additional regulations 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.

There is significant uncertainty regarding if and when new laws, regulations or administrative policies will be adopted to reduce
or limit GHG and the impact any such laws or regulations would have on us. In 2023, our operating coal-fired generating
facilities consisted of the 352 MW Boswell Unit 3 and the 468 MW Boswell Unit 4. (See Item 7. Management Discussion and
Analysis of Financial Condition and Results of Operation – Outlook – EnergyForward.) Any future limits on GHG emissions at
the federal or state level, or action taken by regulators, before these facilities are retired or become coal-free may require us to
incur significant capital expenditures and increases in operating costs, or could result in early closure of coal-fired generating
facilities, stranded assets, an impairment of assets, denial of full recovery of decommissioning costs in excess of amounts
previously collected, or otherwise adversely affect our results of operations, particularly if resulting expenditures and costs are
not fully recoverable from customers.

Our regulated operations may be adversely impacted by the physical and financial risks associated with climate change. See
Entity-wide Risks for additional discussion of risks related to GHG and climate change.

We cannot predict the amount or timing of all future expenditures related to environmental matters because of uncertainty as to
applicable regulations or requirements. There is also uncertainty in quantifying liabilities under environmental laws that impose
joint and several liability on all potentially responsible parties. Violations of certain environmental statutes, rules and
regulations could expose ALLETE to third party disputes and potentially significant monetary penalties, as well as other
sanctions for noncompliance.

The operation and maintenance of our regulated electric generation, transmission and distribution facilities are subject
to operational risks that could adversely affect our 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 fuel source, inadequate fuel supply, availability of fuel transportation, and the impact of
unusual or adverse weather conditions or other natural events, as well as the risk of performance below expected levels of
output or efficiency. A significant portion of our facilities contain older generating equipment, which, even if maintained in
accordance with good engineering practices, may require significant capital expenditures to continue operating at peak
efficiency. Generation, transmission and distribution facilities and equipment are also likely to require periodic upgrades and
improvements due to changing environmental standards and technological advances. Our ability to manage and operate certain
facilities could also be impacted by our rights and obligations under the joint ownership agreements. We could be subject to
costs associated with any unexpected failure to produce or deliver power, including failure caused by breakdown, forced outage
or limited availability of fuel or fuel transportation, as well as the repair of damage to facilities due to breakdown, storms,
natural disasters, wars, sabotage, terrorist acts and other catastrophic events. This could also lead to requiring additional
purchased power to meet requirements of serving our retail load, which for Minnesota Power is subject to recovery under the
fuel adjustment clause. Should these costs be denied or are otherwise unable to be recovered, our financial position, results of
operations and cash flows could be adversely impacted.

Our ability to successfully and timely complete capital repairs or improvements to existing regulated facilities or in the
development of new electric generation and transmission facilities or other capital projects is contingent upon many
variables.

We expect to incur significant capital expenditures in making capital repairs or improvements to our existing electric generation
and transmission facilities and in the development and construction of new electric generation and transmission facilities.
Should any such efforts be unsuccessful, not completed in a timely manner, if we are unable to obtain the necessary permits,
land rights and regulatory approvals, or if there are increases in the costs for or limited availability of key materials, supplies,
labor and services, we could be subject to additional costs or impairments, and projects may be delayed or canceled which
could have an adverse impact on our financial position, results of operation and cash flows.

ALLETE, Inc. 2023 Form 10-K
27

Item 1A. Risk Factors (Continued)
Regulated Operations Risks (Continued)

Our regulated electric operations may not have access to adequate and reliable transmission and distribution facilities
necessary to deliver electricity to our customers.

We depend on our own transmission and distribution facilities, as well as facilities owned by other utilities, to deliver the
electricity sold to our customers, and to other energy suppliers. If transmission capacity is inadequate or transmission and
distribution facilities we rely on are damaged, our ability to sell and deliver electricity may be limited. We may have to forgo
sales or may have to buy more expensive wholesale electricity that is available in a capacity-constrained area. The ability to
restore adequate capacity or repair damaged infrastructure may be impacted by the availability of key materials, supplies, labor
and services, which if unavailable may prolong the impact of capacity constraints or damaged facilities. In addition, any
infrastructure failure or damage that interrupts or impairs delivery of electricity to our customers could negatively impact the
satisfaction of our customers, which could have an adverse impact on our business and results of operations.

The price of electricity may be volatile and fuel may be volatile and availability may be limited.

Volatility in market prices for electricity and volatility and limited availability of fuel could adversely impact our financial
position and results of operations and may result from:

•
•
•
•
•
•
•
•
•
•
•
•

severe or unexpected weather conditions and natural disasters;
seasonality;
changes in electricity usage;
transmission or transportation constraints, inoperability or inefficiencies;
availability of competitively priced alternative energy sources;
changes in supply and demand for energy;
changes in power production capacity;
outages at our generating facilities or those of our competitors;
availability of fuel and transportation of fuel;
changes in production and storage levels of natural gas, lignite, coal, crude oil and refined products;
wars, sabotage, terrorist acts, cybersecurity attacks or other catastrophic events; and
federal, state, local and foreign energy, environmental, or other regulation and legislation.

Volatility in market prices for our fuel and purchase power costs impacts our sales to retail, municipal and Other Power
Suppliers. 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; however, our results of operations and cash flows may be adversely impacted if
increased fuel adjustment clause rates are not approved or recovered on a timely basis, if cost recovery is not granted at the
requested level, or costs are otherwise unable to be recovered through the fuel adjustment clause.

Wholesale prices for electricity have also declined in recent years primarily due to the extension of renewable tax credits and
additional renewable generation commencing operations. If there are reductions in demand from current customers, we lose
retail customers, or we lose municipal customers that do not renew existing contracts, 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 at market-based
prices into the MISO market on a daily basis or through bilateral agreements of various durations. Due to wholesale prices for
electricity being below our rates for retail and municipal customers, we do 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 of customers. (See
Item 1. Business – Regulated Operations – Electric Sales / Customers.)

ALLETE, Inc. 2023 Form 10-K
28

Item 1A. Risk Factors (Continued)
Regulated Operations Risks (Continued)

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 be lower demand for energy due to a loss of customers as a result of economic conditions,
customers constructing or installing their own generation facilities, higher costs and rates charged to customers, eligible
municipal and other power suppliers choosing an alternative energy provider, or loss of service territory or franchises. Further,
energy conservation and technological advances that increased energy efficiency may temporarily or permanently reduce the
demand for energy products. In addition, we are impacted by state and federal regulations requiring mandatory conservation
measures, which reduce the demand for energy products. Continuing technology improvements and regulatory developments
may make customer and third party-owned generation technologies such as rooftop solar systems, WTGs, microturbines and
battery storage systems more cost effective and feasible for certain 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 from these customers. Therefore, a decrease in demand for energy could adversely impact our
financial position, results of operations and cash flows.

ALLETE Clean Energy / Corporate and Other Risks

The inability to successfully manage and grow our businesses could adversely affect our results of operations.

The Company's strategy includes adding customers, new geographies, and growth through acquisitions or project development
with long-term PSAs in place for the output or to be sold upon completion. This strategy depends, in part, on the Company’s
ability to successfully identify and evaluate acquisition or development opportunities and consummate acquisitions on
acceptable terms and obtain all required permits and approvals. The Company may compete with other companies for these
acquisition and development opportunities, which may increase the Company’s cost of making acquisitions and the Company
may be unsuccessful in pursuing these acquisition opportunities. Other companies may be able to pay more for acquisitions and
may be able to identify, evaluate, bid for and purchase a greater number of assets than the Company’s financial or human
resources permit. New laws and regulations promoting renewable energy generation may result in increased competition. Our
ALLETE Clean Energy business is experiencing return pressures from increased competition, and lower forward price curves,
as a growing amount of investment capital is being directed into wind energy generation opportunities. In addition, current and
potential new project developments at our businesses can be negatively affected by a lower ALLETE stock price, which may
result in such projects not being accretive, or otherwise unable to satisfy our financial objectives criteria to proceed.
Additionally, tax law changes may adversely impact the economic characteristics of potential acquisitions or investments. If the
Company is unable to execute its strategy of growth through acquisitions, project development for others, or the addition of
new customers and geographies, it may impede our long-term objectives and business strategy.

Acquisitions and operations of recently acquired entities are subject to uncertainties. If we are unable to successfully integrate
and manage New Energy, or future acquisitions and strategic investments, this could have an adverse 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
or governmental approvals, integration and operational issues and the ability to retain management and other key personnel.

Our results of operations could be adversely affected by changes in governmental incentives or policies that support
renewable energy or changes in taxes, tariffs, duties or other assessments on renewable energy or the equipment
necessary to generate and deliver it.

Any reductions or modifications to, or the elimination of, governmental incentives or policies that support renewable energy, or
the imposition of additional or increased sourcing of components subject to taxes, tariffs, duties or other assessments on
renewable energy or the equipment necessary to generate and deliver it, could result in, among other items, the lack of a
satisfactory market for the development or financing of new renewable energy projects and reduced project returns on current
or future projects.

ALLETE, Inc. 2023 Form 10-K
29

Item 1A. Risk Factors (Continued)
ALLETE Clean Energy / Corporate and Other Risks (Continued)

The U.S. government currently imposes anti-dumping and countervailing duties on certain imported photovoltaic (PV) cells and
modules from China and Taiwan. Such duties can change over time pursuant to annual reviews conducted by the U.S.
Department of Commerce (DOC). On August 18, 2023, the U.S. DOC issued a final affirmative determination that imports of
certain PV cells and modules assembled and completed in Cambodia, Malaysia, Thailand, and Vietnam are circumventing anti-
dumping and countervailing duties. Duties will not be collected on imports before June 2024 as a result of a temporary duty
suspension ordered by the U.S. President. Our operating results could be adversely impacted if this U.S. DOC circumvention
determination results in duties assessed on future purchases made by our businesses after the current moratorium ends, or if
additional anti-dumping and countervailing duties are imposed by the U.S. government on products purchased by our
businesses.

The generation of electricity from wind and solar energy facilities depends heavily on suitable meteorological conditions.

Although our electric generation facilities are located in diverse geographic regions to reduce the potential impact that may be
caused by unfavorable weather in a particular region, suitable meteorological conditions are variable and difficult to predict. If
wind or solar conditions are unfavorable or meteorological conditions are unsuitable, electricity generation and revenue from
wind and solar energy facilities may be substantially below our expectations. The electricity produced, production tax credits
received, and revenues generated by a wind or solar energy facility are highly dependent on suitable wind conditions and
associated weather conditions, which are variable and beyond our control. We base our decisions about which wind and solar
projects to build or acquire as well as our electricity generation estimates, in part, on the findings of long-term wind and other
meteorological studies conducted on the project site and its region; however, the unpredictable nature of wind and solar
conditions, weather and meteorological conditions can result in material deviations from these studies and our expectations.
Furthermore, components of our systems could be damaged by severe weather, such as hailstorms, lightning or tornadoes. In
addition, replacement and spare parts for key components may be difficult or costly to acquire or may be unavailable.
Unfavorable wind and solar conditions, weather or changes to meteorological patterns could impair the effectiveness of our
electric generation facility assets, reduce their output beneath their rated capacity or require shutdown of key equipment,
impeding operation of our wind energy facilities or lead to an impairment of assets.

The construction, operation and maintenance of our electric generation facilities or investment in facilities are subject to
operational risks that could adversely 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; increases in the costs for or limited availability of key materials, supplies, labor and
services; start-up operations risks; breakdown or failure of facilities; curtailment of facilities by counterparties or due to
inadequate transmission capacity; the dependence on the availability of wind resources; or the impact of unusual, adverse
weather conditions or other natural events, as well as the risk of performance below expected levels of output or efficiency.
Some of our facilities contain older generating equipment, which even if maintained in accordance with good engineering
practices, may require significant capital expenditures to continue operating at peak efficiency. We could be subject to costs
associated with any unexpected failure to produce and deliver power, including failure caused by breakdown or forced outage,
as well as the repair of damage to facilities due to storms, natural disasters, wars, sabotage, terrorist acts and other catastrophic
events.

The price of electricity may be volatile, which may impact results of operations at ALLETE Clean Energy wind energy
facilities under contracts with commercial and industrial (C&I) customers.

Unusual, adverse weather conditions or other natural events and different settlement prices between hub and node can cause
volatility in market prices for electricity and adversely affect our financial position, results of operations and cash flows.
ALLETE Clean Energy’s power sales agreements with C&I customers at its Diamond Spring and Caddo wind energy facilities
are contracts for differences where power is delivered to the market, a fixed price is paid by the customers to ALLETE Clean
Energy, and differences between the market price and the fixed price are paid to or received from the customers. Certain
contracts also settle with the market at the hub price whereas ALLETE Clean Energy settles with the customer at the node price
which can vary significantly based on multiple factors. These settlement provisions can result in an adverse impact on our
financial position, results of operations and cash flows when market prices are volatile, or lead to potential impairment of
property, plant and equipment if these conditions persist for an extended period of time.

ALLETE, Inc. 2023 Form 10-K
30

Item 1A. Risk Factors (Continued)
ALLETE Clean Energy / Corporate and Other Risks (Continued)

As contracts with counterparties expire, we may not be able to replace them with agreements on similar terms or divest
the related assets at a profit.

ALLETE Clean Energy is party to PSAs that expire in various years between 2024 and 2039. These PSA expirations are prior
to the end of the estimated useful lives of the respective wind energy facilities. If, for any reason, ALLETE Clean Energy is
unable to enter into new agreements with existing or new counterparties on similar terms once the current agreements expire,
sell energy in the wholesale market resulting in similar revenue, or enter into a contract to sell the facility at a profit, our
financial position, results of operations and cash flows could be adversely affected, which includes potential impairment of
property, plant and equipment.

Counterparties to turbine and other generation supply, service and maintenance, or power sale agreements may not
fulfill their obligations.

Our businesses are party to turbine and other generation supply agreements, service and maintenance agreements, and PSAs
under various durations with a limited number of creditworthy counterparties. If, for any reason, any of the counterparties under
these agreements do not fulfill their related contractual obligations, and we are unable to mitigate non-performance by a key
supplier or maintenance provider or remarket PSA energy resulting in similar revenue, our financial position, results of
operations and cash flows could be adversely affected.

ALLETE has a significant amount of goodwill. A determination that goodwill has been impaired could result in a
significant non-cash charge to earnings.

We had approximately $155 million of goodwill recorded on our Consolidated Balance Sheet as of December 31, 2023, related
to New Energy. If we change our business strategy, fail to deliver on our projected results or if market or other conditions
adversely affect the operations of New Energy, we may be required to record an impairment charge. Declines in projected
operating cash flows at New Energy could also result in an impairment charge. An impairment charge would result in a non-
cash charge to earnings that could have an adverse effect on our results of operations.

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 were unable or unwilling to fulfill their related contractual obligations, or change the way
in which they operate their generating facilities. In addition, BNI Energy and its customers may be adversely impacted by
existing or new environmental laws and regulations which could have an adverse effect on our financial position, results of
operations and cash flows. In addition, insurance companies have decreased the 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 deteriorate.

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 sales over time, however, adverse market conditions could impact the timing of land sales, which
could result in little to no sales, while still incurring operating 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 could
have an adverse effect on our results of operations.

Entity-wide Risks

We could be materially adversely affected by health epidemics, pandemics and other outbreaks.

Health epidemics, pandemics and other outbreaks, as well as the related federal and state government responses, can have
widespread impacts on the economy and on our employees, customers, contractors and suppliers, such as those experienced
from the COVID-19 pandemic. There may be uncertainty regarding the length of time an epidemic, pandemic or other outbreak
will last, how they will evolve, or the extent and duration of any measures attempted to try and contain them.

ALLETE, Inc. 2023 Form 10-K
31

Item 1A. Risk Factors (Continued)
Entity-wide Risks (Continued)

A disruption of economic activity or an extended disruption of economic activity may lead to adverse impacts on our taconite,
paper, pulp and secondary wood products, and pipeline customers’ operations including reduced production or the temporary
idling or indefinite shutdown of facilities, which would result in lower sales and revenue from these customers. A disruption in
capital markets could lead to increased borrowing costs or adversely impact our ability to access capital markets or other
financing sources, which would adversely affect our ability to maintain our businesses or to implement our business plans. An
epidemic, pandemic or other outbreak may also result in a disruption to our supply chains which could adversely impact our
operations and capital projects resulting in project and operational delays, project cancellations, lower returns on projects and
cost increases.

Despite any efforts made to mitigate the impacts on the Company of an epidemic, pandemic or other outbreak, their ultimate
impact also depends on factors beyond our control, including their duration and severity as well as governmental and third-
party actions taken to contain their spread and mitigate their public health effects. As a result, we cannot predict the ultimate
impact of an epidemic, pandemic or other outbreak, such as the ongoing COVID-19 pandemic and whether it will have a
material impact on our liquidity, financial position, results of operations and cash flows.

We 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 when needed, our ability to execute our business plans, make capital expenditures or pursue
other strategic actions that we may otherwise rely on for future growth 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 not satisfied by our cash flows from operations. Rising interest rates, inflation and market
disruptions or a downgrade of our credit ratings may increase the cost of borrowing or adversely affect our ability to access and
finance in the capital markets or to access other financing sources such as tax equity financing. Such disruptions or causes of a
downgrade could include but are not limited to: weakening of 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 to offset the related lost margins; weaker operating
performance; adverse regulatory outcomes; disproportionate increase in the contribution to net income from ALLETE Clean
Energy and our Corporate and Other businesses as compared to that from our Regulated Operations; deteriorating economic or
capital market conditions; 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 our business plans would be adversely affected. This would include our ability to make the
significant capital expenditures planned in order to achieve Minnesota Power’s clean-energy transition plans. (See Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital Requirements.)

A deterioration in general economic conditions, an inflationary environment or supply chain disruptions may have
adverse impacts on our financial position, results of operations and cash flows.

If economic conditions deteriorate, we experience an inflationary environment or supply chains are disrupted on a national,
regional or global level, it may have a negative impact on our customers and the Company’s financial position, results of
operations and cash flows. This impact may include volatility and unpredictability in the demand for the products and services
offered by our businesses, the loss of existing customers, tempered growth strategies, customer production cutbacks, customer
bankruptcies and increases in costs for or limited availability of key materials, supplies, labor and services for our operations
and capital projects. An uncertain economy could also adversely affect expenses including pension costs, interest costs, and
uncollectible accounts, or lead to reductions in the value of certain real estate and other investments.

Our utility infrastructure and generating facilities, ongoing and future capital and development projects, and other operations
require components, supplies, materials, labor and services sourced from suppliers or providers who, in turn, may source
components from their suppliers. A shortage of key components, supplies, materials, labor or services in which an alternative
supplier or provider is not identified could significantly impact project plans or our operations. Such impacts could include
project delays, including potential for project cancellation, lower project returns, increased costs or the inability to provide
service to customers, which could adversely impact our results of operations, financial condition or cash flows.

ALLETE, Inc. 2023 Form 10-K
32

Item 1A. Risk Factors (Continued)
Entity-wide Risks (Continued)

Our businesses, investments and customers are subject to extensive state and federal legislation and regulation,
compliance with which could have an adverse effect on our businesses.

Our businesses, investments and customers are subject to, and affected by, extensive state and federal legislation and regulation.
If it was determined that our businesses failed to comply with applicable laws and regulations, we could become subject to fines
or penalties or be required to implement additional compliance measures or actions, the cost of which could be material. If we
are unable to obtain all required permits and approvals for our development projects, it could negatively impact our ability to
execute on our EnergyForward strategy. 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 specialized skills, 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 to maintain a qualified workforce, including, but not limited to, executive officers, key
employees and employees with specialized skills, may negatively affect our ability to service our existing or new customers, or
successfully manage our business or achieve our business objectives. Personnel costs may increase due to competitive
pressures, inflation or terms of collective bargaining agreements with union employees.

Market performance and other changes could decrease the value of pension and other postretirement benefit plan
assets, which may result in significant additional 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 postretirement benefit plans. We have significant obligations to these plans and the trusts hold significant
assets. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected rates
of return. A decline in the market value of the pension and other postretirement benefit plan assets would increase the funding
requirements under our benefit plans if asset returns do not recover. Additionally, our pension and other postretirement benefit
plan liabilities are sensitive to changes in interest rates. As interest rates decrease, the liabilities increase, potentially increasing
benefit expense and funding requirements. Our pension and other postretirement benefit plan costs are generally recoverable in
our electric rates as allowed by our regulators or through our cost-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 the future.

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, such as our code of business conduct, by employees, directors of ALLETE, contractors, vendors and
others who do business with or on behalf of ALLETE, regulatory violations, operations that produce or enable the production of
GHG emissions or other events which may result in negative customer perception, increased regulatory oversight, and negative
consequences to our credit ratings and ability to access capital, each of which could have an adverse effect on our financial
position, results of operations and cash flows.

We are subject to physical and financial risks associated with climate change and other catastrophic events, such as
natural disasters and acts of war.

Catastrophic events at or near Company facilities and equipment on which the Company depends upon or that otherwise impact
the Company such as fires, wildfires, including the impact to Company facilities and operations or potential liability if caused
by Company equipment, earthquakes, explosions, and floods, severe weather, such as ice storms, hailstorms, or tornadoes or
similar occurrences, as well as acts of war, could adversely affect the Company’s facilities, operations, financial position,
results of operations and cash flows. Although the Company has contingency plans and employs crisis management to respond
and recover operations in the event of a severe disruption resulting from a catastrophic event, these measures may not be
successful. Furthermore, despite these measures, if a catastrophic event were to occur, our financial position, results of
operations and cash flows could be adversely affected.

ALLETE, Inc. 2023 Form 10-K
33

Item 1A. Risk Factors (Continued)
Entity-wide Risks (Continued)

The scientific community generally accepts that emissions of GHG are linked to global climate change. Physical risks of
climate change, such as more frequent, longer duration or more extreme weather events, changes in temperature and
precipitation patterns, increased risk of wildfires, 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 or limit the availability of key materials, supplies, labor and services used in our operations or to
respond to damaged facilities. An extreme weather event can also directly affect our capital assets, causing disruption in service
to customers due to facility outages, downed wires and poles or damage to other operating equipment.

Climate-related risks that could adversely affect our financial position and results of operations include effects of
environmental- or economic-based laws, regulations, incentives or initiatives designed to reduce the quantity or impact of GHG
emissions, the ability of our regulated businesses to obtain rate adjustments to recover costs and investments to implement
clean-energy transition plans, or disruptions to the economy or energy markets caused by climate change. This includes the risk
of laws or regulations that create mandates that do not allow for a transition that protects the safety, reliability or affordability of
energy for our customers, are implemented before cost-effective technology is developed and regulatory policy is established,
or require the electric sector to decarbonize faster than other sectors and ahead of our current vision to deliver 100 percent
carbon-free energy to customers by 2050. Additionally, restrictions on land use, wildlife impacts, and other environmental
regulations could affect the siting, construction and operation of new or existing generation and transmission facilities needed to
transition to lower-carbon generation sources.

These all have the potential to adversely affect our business and operations.

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 of critical 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 and distribution facilities, information technology systems and other infrastructure facilities and
systems could be direct targets of, or otherwise be materially adversely affected by such activities. Hacking, computer viruses,
terrorism, theft and sabotage could impact our systems and facilities, or those of third parties on which we rely, which may
disrupt our operations.

Our businesses require the continued operation of sophisticated custom-developed, purchased, and leased information
technology systems and network infrastructure as well as the collection and retention of personally identifiable information of
our customers, shareholders and employees. Although we maintain security 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 of war 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 perform critical business functions including effectively maintaining certain
internal controls over financial reporting, our reputation may be negatively impacted, we may become subject to litigation or
increased regulation, and sensitive, confidential and other data could be compromised. If our business were impacted by
terrorist activities or cybersecurity attacks, such impacts could have an adverse effect on our financial position, results of
operations and cash flows.

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 by insurance, could have a material effect on our financial position, results of operations and
cash flows.

ALLETE, Inc. 2023 Form 10-K
34

Item 1A. Risk Factors (Continued)
Entity-wide Risks (Continued)

Government challenges to our tax positions, as well as tax law changes and the inherent difficulty in quantifying
potential tax effects of our operations and 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 our obligations to taxing authorities. The obligations, which include income taxes and taxes
other than income taxes, involve complex matters that ultimately could be litigated. 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 on our
Consolidated Balance Sheet. A disallowance of some or all 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 enough taxable 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 tax authorities deny any deductions or tax credits, negatively change existing tax laws or policies, or fail to
extend or renew policies beneficial to the Company, such as those for renewable energy production tax credits, our financial
position, results of operations and cash flows may be adversely impacted.

Our business, financial position, results of operations, and cash flows could be materially affected by adverse results of
litigation.

We are involved in litigation arising in the normal course of business. Unfavorable resolution of legal or administrative
proceedings in which we are involved or other future legal or administrative proceedings may have an adverse effect on our
business, financial position, results of operations and cash flows.

Item 1B. Unresolved Staff Comments

None.

ALLETE, Inc. 2023 Form 10-K
35

Item 1C. Cybersecurity

ALLETE employs a multilayer approach to addressing cybersecurity risk based on the National Institute of Standards and
Technology (NIST) framework. It has established a dedicated cybersecurity team that utilizes internal and external assessments,
automated monitoring tools, and input from public and private partners to identify potential cyber threats. External third party
security firms are engaged to assist with cybersecurity risk assessments, penetration testing and system security analysis.
ALLETE’s cybersecurity team works in conjunction with the risk management, legal, finance, accounting, operations, and
information technology areas to assess the risk these identified cybersecurity threats present to the organization. To ensure
consistency, these cybersecurity risk assessments are incorporated into ALLETE’s Enterprise Risk Management process,
ALLETE’s information technology leadership reviews the company’s enterprise risk management-level cybersecurity risks on a
quarterly basis, and key cybersecurity risks are incorporated into ALLETE’s enterprise risk management framework.
Cybersecurity risks are managed and controlled through multiple overlapping layers of cybersecurity defenses that include:

•
•

•

expert input from both public and private partnerships;
the implementation of a comprehensive cybersecurity policy that encompasses but is not limited to social media,
acceptable use (devices, wireless, remote access, internet use), information governance, monitoring, authentication,
encryption, vulnerability management, third-party management, and recovery;
required annual cybersecurity training for all employees with additional supplemental cybersecurity training required
based on role;
random employee phish testing and follow-up;
procedural and automated cyber controls in conjunction with robust detection, mitigation, and recovery capabilities;
the formation of a multidisciplinary cybersecurity incident response team;
the integration of multiple threat intelligence sources into our cybersecurity tools and processes;
the retention of external cybersecurity threat response resources;
the formation of a multidisciplinary cybersecurity incident response team; and

•
•
•
•
•
•
• multiple cyber event simulation and tabletop exercises per year to hone the cybersecurity incident response team

preparedness.

The ALLETE board of directors provides enterprise-level oversight of risks associated with cybersecurity threats through the
Audit Committee, which assists the Board in fulfilling its oversight responsibilities regarding the Company’s policies and
processes with respect to risk assessment and risk management, including any significant non-financial risk exposures;
reviewing and discussing the Company’s information security policies and internal controls regarding information security; and
reviewing the Company’s annual disclosures concerning the role of the Board in the risk oversight of the Company. The Audit
Committee performs an annual review of the Company’s cybersecurity program and receives quarterly updates on key
cybersecurity risks, the cybersecurity risk management plan, and cyber incident event trends.

ALLETE’s Chief Technology Officer (CTO) has primary responsibility for the development and oversight of ALLETE’s
cybersecurity team and the development and maintenance of the company’s related cybersecurity policies and procedures. The
CTO has over 25 years’ experience working in the information and operational technology field and is a registered professional
engineer in the State of Minnesota. The company’s cybersecurity team continuously assesses the evolving cyber threat
landscape based on their expertise and that of our third-party partners. They then work with all parts of ALLETE to protect
against, detect, identify, respond to, and recover from the risks that cybersecurity threats present. The cybersecurity team views
and responds to cybersecurity risks in a holistic manner, applying a comprehensive multilayered strategy to prevent, detect, and
mitigate them. They have identified ALLETE’s critical cyber assets and taken appropriate steps to protect them. External
expertise is regularly engaged to assess ALLETE’s cybersecurity program and help the cybersecurity team to strengthen the
organization’s monitoring, alerting, prevention, mitigation, and recovery capabilities. Tabletop simulations, third party cyber
vulnerability assessments, maturity assessments, and partnerships are used to assess and refine all elements of our cybersecurity
program.

In addition to managing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with
the use of third-party service providers. Risk assessments are performed against third-party service providers with a specific
focus on any sensitive data that is to be shared with them. The internal business owners of ALLETE’s applications are required
to document user access reviews regularly. We request a System and Organizational Controls (SOC) 2 report from the vendors
of our enterprise cloud applications. If they do not provide us with a SOC 2, we seek additional compensating risk assurance in
our contract language with them. Risks associated with the use of third-party service providers are managed as part of our
overall cybersecurity risk management framework.

ALLETE, Inc. 2023 Form 10-K
36

Item 1C. Cybersecurity (Continued)

To continually manage and control the material risks that cybersecurity threats present to the organization, ALLETE invests
significantly in the cybersecurity elements outlined above. In addition, the Company has made significant investments to fulfill
the operational and financial regulatory requirements laid out by the North American Electric Reliability Corporation Critical
Infrastructure Protection Standards and Sarbanes-Oxley Act of 2002.

ALLETE faces a number of cybersecurity risks in connection with its business. Although such risks have not materially
affected us, including our business strategy, results of operations, and financial conditions, to date, we have, from time to time,
experienced threats to and breaches of our data systems, including malware, phishing and computer virus attacks. See Item 1A.
Risk Factors for additional information regarding our organization’s cybersecurity risks, which should be read together with
this Item 1C. Cybersecurity.

Item 2. Properties

A discussion of our properties is included in Item 1. Business and is incorporated by reference herein.

Item 3. Legal Proceedings

Discussions of material regulatory and environmental proceedings are included in Note 4. Regulatory Matters and Note 9.
Commitments, Guarantees and Contingencies, 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 other governmental audits, inspections, investigations and other proceedings that involve state and federal
taxes, safety, and compliance with regulations, rate base and cost 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 operations or cash flows.

Item 4. Mine Safety Disclosures

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires issuers to include in periodic
reports filed with the SEC certain information relating to citations or orders for violations of standards under the Federal Mine
Safety and Health Act of 1977 (Mine Safety Act). Information concerning 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 this Form 10-K.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Our common stock is listed on the NYSE under the symbol ALE. We have paid dividends, without interruption, on our
common stock since 1948. A quarterly dividend of $0.705 per share on our common stock is payable on March 1, 2024, to the
shareholders of record on February 15, 2024. The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of the Company, applicable government regulations and other factors deemed relevant by
the ALLETE Board of Directors. As of February 1, 2024, there were approximately 19,000 common stock shareholders of
record.

We do not have a publicly announced stock repurchase program and we did not repurchase any equity securities during the
quarter ended December 31, 2023.

ALLETE, Inc. 2023 Form 10-K
37

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities (Continued)

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 the Philadelphia Utility Index. The S&P 500 Index is a capitalization-weighted index of 500
stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500
stocks representing all major industries. Because this composite index has a broad industry base, its performance may not
closely track that of a composite index comprised solely of electric utilities. The Philadelphia Utility Index is a capitalization-
weighted index of 20 utility companies involved in the generation of electricity.

The calculations assume a $100 investment on December 31, 2018, and reinvestment of dividends.

ALLETE
S&P 500 Index
Philadelphia Utility Index

2018
$100
$100
$100

2019
$110
$131
$127

2020
$87
$156
$130

2021
$97
$200
$154

2022
$98
$164
$155

2023
$98
$207
$141

ALLETE, Inc. 2023 Form 10-K
38

Total Shareholder Return for the Five Years Ending December 31, 2023ALLETES&P 500 IndexPhiladelphia Utility Index201820192020202120222023$0$50$100$150$200$250$300Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Consolidated Financial Statements and notes to those
statements and the other financial information 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 our disclosures in this
Form 10-K under the headings: “Forward-Looking Statements” located on page 7 and “Risk Factors” located in Item 1A. The
risks and uncertainties 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 that we currently consider immaterial, may also affect our business
operations. Our business, financial condition or results of operations could suffer if the risks are realized.

Overview

Basis of Presentation. We present two reportable segments: Regulated Operations and ALLETE Clean Energy. Our segments
were determined in accordance with the guidance on segment reporting. We measure performance of our operations through
budgeting and monitoring of contributions to consolidated net income by each business segment.

ALLETE Clean Energy focuses on developing, acquiring, and operating clean and renewable energy projects. ALLETE Clean
Energy currently owns and operates, in seven states, more than 1,200 MW of nameplate capacity wind energy generation with a
majority contracted under PSAs of various durations. In addition, 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.

ALLETE, Inc. 2023 Form 10-K
39

2023 Financial Overview

The following net income discussion summarizes a comparison of the year ended December 31, 2023, to the year ended
December 31, 2022.

Net income attributable to ALLETE in 2023 was $247.1 million, or $4.30 per diluted share, compared to $189.3 million, or
$3.38 per diluted share, in 2022. Net income in 2023 included a $40.5 million, or $0.71 per share, after-tax gain recognized for
a favorable arbitration ruling involving a subsidiary of ALLETE Clean Energy. (See Note 9. Commitments, Guarantees and
Contingencies.) This increase was partially offset by the impact of unusually low wind resources at ALLETE Clean Energy and
warmer winter weather impacting our Regulated Operations in 2023. Earnings per share dilution in 2023 was $0.11 due to
additional shares of common stock outstanding in 2023 compared to 2022.

Regulated Operations net income attributable to ALLETE was $147.2 million in 2023, compared to $149.9 million in 2022.
Net income at Minnesota Power was lower than 2022 primarily due to higher operating and maintenance, depreciation and
interest expenses, and lower kWh sales to residential and commercial customers in 2023 compared to 2022 due to warmer
winter weather. These decreases were partially offset by higher kWh sales to industrial customers in 2023 and lower property
tax expense resulting from the favorable impact of an updated estimate for property taxes payable in 2023. Net income at
SWL&P was higher than 2022 primarily due to the implementation of new rates from its most recent rate case in 2023. (See
Note 4. Regulatory Matters.) Our after-tax equity earnings in ATC were higher than 2022 reflecting period over period changes
in ATC’s estimate of a refund liability related to the appeals court decision on MISO return on equity complaints in 2022. (See
Note 6. Equity Investments.)

ALLETE Clean Energy net income attributable to ALLETE was $71.7 million in 2023 compared to $16.3 million in 2022.
Net income in 2023 reflected a $44.3 million after-tax gain recognized for a favorable arbitration ruling involving a subsidiary
of ALLETE Clean Energy. Net income in 2023 also included the gain on sale of the Red Barn project in 2023 of $4.3 million
after-tax and higher interest income related to interest awarded as part of the arbitration ruling. These increases were partially
offset by lower wind resources and availability at its wind energy facilities in 2023 as well as a network outage located near its
Caddo wind energy facility resulting in lower earnings. Net income in 2022 included reserves for an anticipated loss on the sale
of ALLETE Clean Energy’s project to repower and sell its Northern Wind project as well as earnings from the legacy Northern
Wind facilities, which were decommissioned in April 2022 as part of the project.

Corporate and Other net income attributable to ALLETE was $28.2 million in 2023 compared to $23.1 million in 2022. Net
income in 2023 reflects higher earnings from New Energy in 2023 compared to 2022 as a result of more renewable
development projects closing during 2023, income in 2023 from net losses attributable to non-controlling interest for tax equity
financed solar energy facilities and the impact of purchase price accounting in 2022. Net income from New Energy in 2023 was
$17.6 million. Net income from New Energy in 2022 was $7.8 million, which included a $8.3 million after-tax expense as a
result of purchase price accounting related to projects under development at the time of acquisition. Net income in 2023 also
reflects earnings from Minnesota solar projects placed into service in the fourth quarter of 2022 and second quarter of 2023, and
a $3.8 million after-tax expense for the consolidated income tax impact resulting from the gain on the favorable arbitration
ruling. Net income in 2022 included transaction costs of $2.7 million after-tax related to the acquisition of New Energy in
April 2022.

ALLETE, Inc. 2023 Form 10-K
40

2023 Compared to 2022

(See Note 14. Business Segments for financial results by segment.)

Regulated Operations

Year Ended December 31
Millions
Operating Revenue – Utility
Fuel, Purchased Power and Gas – Utility
Transmission Services – Utility
Operating and Maintenance
Depreciation and Amortization
Taxes Other than Income Taxes

Operating Income

Interest Expense
Equity Earnings
Other Income

Income Before Income Taxes

Income Tax Expense (Benefit)

Net Income Attributable to ALLETE

2023

2022

$1,238.3 $1,259.3
545.5
76.7
239.3
171.9
57.4
168.5
(58.1)
19.3
9.8
139.5
(10.4)
$149.9

484.3
88.2
247.1
179.2
44.5
195.0
(63.9)
23.1
15.4
169.6
22.4
$147.2

Operating Revenue – Utility decreased $21.0 million from 2022 primarily due to lower kWh sales, fuel adjustment clause
recoveries and gas sales, partially offset by higher cost recovery rider revenue, FERC formula-based rates and transmission
revenue.

Lower kWh sales reduced revenue $32.5 million from 2022 reflecting lower sales to residential, commercial and municipal
customers as well as lower sales to other power suppliers, partially offset by higher sales to industrial customers. Sales to
residential, commercial and municipal customers decreased from 2022 primarily due to warmer weather in the winter
months in 2023 compared to 2022. Heating degree days for Duluth, Minnesota, were down 13 percent in 2023 compared to
2022. Sales to municipal customers also decreased as a result of a new contract entered into with Hibbing Public Utilities in
2022 with sales under the new contract now classified under other power suppliers. Sales to industrial customers increased
primarily due to higher sales to taconite customers as well as sales to ST Paper, which became a Large Power Customer in
2023, higher sales to Cenovus Energy, which restarted its refinery in Superior, Wisconsin, in 2023, and higher sales to
pipeline and other customers. (See Outlook – Regulated Operations – Industrial Customers – ST Paper and Cenovus
Energy.) Sales to other power suppliers, which are sold at market-based prices into the MISO market on a daily basis or
through PSAs of various durations, decreased in 2023 compared to 2022 primarily due to fewer market sales and lower
market prices in 2023 compared to 2022.

Kilowatt-hours Sold
Millions
Regulated Utility

Retail and Municipal

Residential
Commercial
Industrial
Municipal

Total Retail and Municipal

Other Power Suppliers

Total Regulated Utility Kilowatt-hours Sold

2023

2022

Quantity
Variance

%
Variance

1,089
1,347
7,044
466
9,946
2,819
12,765

1,148
1,359
6,745
540
9,792
3,149
12,941

(59)
(12)
299
(74)
154
(330)
(176)

(5.1)
(0.9)
4.4
(13.7)
1.6
(10.5)
(1.4)

Revenue from electric sales to taconite and mining customers accounted for 32 percent of regulated operating revenue in
2023 (32 percent in 2022). Revenue from electric sales to paper, pulp and secondary wood product customers accounted
for 5 percent of regulated operating revenue in 2023 (5 percent in 2022). Revenue from electric sales to pipelines and other
industrial customers accounted for 11 percent of regulated operating revenue in 2023 (10 percent in 2022).

ALLETE, Inc. 2023 Form 10-K
41

2023 Compared to 2022 (Continued)
Regulated Operations (Continued)

Fuel adjustment clause revenue decreased $20.6 million primarily due to lower fuel and purchased power costs attributable
to retail and municipal customers. (See Fuel, Purchased Power and Gas – Utility.)

Revenue from gas sales at SWL&P decreased $4.6 million reflecting fewer gas sales resulting from warmer winter weather
and lower gas prices in 2023 compared to 2022. (See Fuel, Purchased Power and Gas – Utility.)

Cost recovery rider revenue increased $18.2 million primarily due to fewer production tax credits generated by Minnesota
Power. If production tax credits are generated at a level below those assumed in Minnesota Power’s retail rates, an increase
in cost recovery rider revenue is recognized to offset the impact of lower production tax credits on income tax expense.

Revenue from wholesale customers under FERC formula-based rates increased $9.6 million primarily due to higher rates
reflecting higher expenses billable under wholesale customer contracts.

Transmission revenue increased $9.2 million primarily due to higher MISO-related revenue.

Operating Expenses decreased $47.5 million from 2022.

Fuel, Purchased Power and Gas – Utility expense decreased $61.2 million, or 11 percent, from 2022 primarily due to
lower kWh sales, purchased power prices and fuel costs as well as lower gas sales and prices.

Transmission Services – Utility expense increased $11.5 million, or 15 percent, from 2022 primarily due to higher MISO-
related expense.

Operating and Maintenance expense increased $7.8 million, or 3 percent, from 2022 primarily due to higher salaries and
wages, vegetation management costs, and materials purchased for use in generation facilities and field operations. These
increases were partially offset by lower contract and professional services as well as lower benefit costs.

Depreciation and Amortization expense increased $7.3 million, or 4 percent, from 2022 primarily due to a higher plant in
service balance in 2023.

Taxes Other than Income Taxes decreased $12.9 million, or 22 percent, from 2022 primarily due to lower property tax
expense resulting from the favorable impact of an updated estimate for 2022 property tax expense recorded in 2023.

Interest Expense increased $5.8 million, or 10 percent, from 2022 primarily due to higher interest rates and interest on
Minnesota Power’s reserve for interim rate refunds in 2023.

Equity Earnings increased $3.8 million from, or 20 percent, 2022 primarily due to period over period changes in ATC’s
estimate of a refund liability related to the appeals court decision on MISO return on equity complaints in 2022.
(See Note 6. Equity Investments.)

Other Income increased $5.6 million from 2022 reflecting year over year differences in various individually immaterial
items.

Income Tax Expense increased $32.8 million from 2022. The effective tax rate in 2023 was an income tax expense
compared to a benefit in 2022 primarily due to lower production tax credits and higher pre-tax income.

ALLETE, Inc. 2023 Form 10-K
42

2023 Compared to 2022 (Continued)
ALLETE Clean Energy

Year Ended December 31
Millions
Operating Revenue

Contracts with Customers – Non-utility
Other – Non-utility (a)
Cost of Sales – Non-utility
Operating and Maintenance
Depreciation and Amortization
Taxes Other than Income Taxes

Operating Loss

Interest Expense
Other Income (b)

Income (Loss) Before Income Taxes

Income Tax Expense (Benefit)
Net Income (Loss)

Net Loss Attributable to Non-Controlling Interest (b)

2023

2022

$413.4
5.1
342.2
52.1
57.5
10.0
(43.3)
(0.8)
68.0
23.9
2.7
21.2
(50.5)
$71.7

$110.7
7.6
56.7
47.3
58.6
10.7
(55.0)
(2.3)
10.8
(46.5)
(15.4)
(31.1)
(47.4)
$16.3

Net Income Attributable to ALLETE
(a) Represents non-cash amortization of differences between contract prices and estimated market prices on assumed PSAs.
(b) See Note 1. Operations and Significant Accounting Policies.

Operating Revenue increased $300.2 million from 2022 primarily due to the sales of ALLETE Clean Energy’s Northern
Wind and Red Barn projects in 2023. This increase was partially offset by lower wind resources and availability at wind
energy facilities in all regions in 2023 compared to 2022. Wind availability was down across the nation much of the year
and, consequently, ALLETE Clean Energy revenue was negatively impacted in 2023. Operating revenue in 2023 was also
negatively impacted by a forced outage in the fourth quarter of 2023 to a substation and the transmission lines feeding that
substation located near ALLETE Clean Energy’s Caddo wind energy facility. This forced outage increased congestion
experienced by the Caddo wind energy facility resulting in lower kWh sales and pricing. In 2022, operating revenue also
included revenue from the legacy Northern Wind facilities, which were decommissioned in April 2022 as part of ALLETE
Clean Energy’s Northern Wind project.

Production and Operating Revenue
Millions
Wind Energy Regions

Year Ended December 31,

2023

2022

kWh

Revenue

kWh

Revenue

East
Midwest (a)
South
West
Total Wind Energy Facilities

$24.3
27.0
15.4
18.1
84.8
Sale of Wind Energy Facility
33.5
$118.3
Total Production and Operating Revenue
(a) The Chanarambie and Viking wind energy facilities were decommissioned in the second quarter of 2022 as part of ALLETE Clean

266.6
775.9
2,047.1
829.5
3,919.1
—
3,919.1

$21.2
18.4
16.8
13.6
70.0
348.5
$418.5

224.0
560.9
1,720.8
714.1
3,219.8
—

3,219.8

Energy’s Northern Wind project.

ALLETE, Inc. 2023 Form 10-K
43

2023 Compared to 2022 (Continued)
ALLETE Clean Energy (Continued)

Cost of Sales - Non-utility increased $285.5 million from 2022 reflecting the sales of ALLETE Clean Energy’s Northern
Wind and Red Barn projects in 2023. Cost of Sales – Non-utility in 2022 reflected reserves in 2022 related to ALLETE
Clean Energy’s project to repower and sell its Northern Wind project resulting from inflationary increases and significant
cost pressures. In addition, 2022 included a $10.2 million reserve in the second quarter related to the sale of the Northern
Wind project, which was fully offset by a gain on removal of the PSA liability for the Northern Wind project upon
decommissioning of the wind energy facilities. (See Other Income.)

Operating and Maintenance expense increased $4.8 million, or 10 percent, from 2022 primarily due to higher contract and
professional services in 2023. Arbitration-related costs incurred in 2023 for arbitration proceedings involving a subsidiary
of ALLETE Clean Energy were fully offset by the recovery of $3.6 million for arbitration-related costs that were awarded
as part of a favorable arbitration ruling. (See Note 9. Commitments, Guarantees and Contingencies.)

Other Income increased $57.2 million from 2022 primarily due to a $58.4 million gain recognized for a favorable
arbitration ruling involving a subsidiary of ALLETE Clean Energy and higher interest income related to $5.1 million of
interest awarded as part of the favorable arbitration ruling. (See Note 9. Commitments, Guarantees and Contingencies.)
Other Income in 2022 reflected a gain on removal of the PSA liability for the Northern Wind project upon
decommissioning of the wind energy facilities in 2022. (See Cost of Sales – Non-utility.)

Income Tax Expense increased $18.1 million from 2022 primarily due to higher pre-tax income in 2023 compared to
2022.

Net Loss Attributable to Non-Controlling Interest increased $3.1 million from 2022 reflecting a higher production tax
credit rate, as determined by the Internal Revenue Service, in 2023 compared to 2022. This increase was partially offset by
lower wind resources at our tax equity financed wind energy facilities.

Corporate and Other

Operating Revenue increased $29.9 million, or 15 percent, from 2022 reflecting higher revenue from New Energy, which
was acquired in April 2022, and higher revenue at BNI Energy, which operates under cost-plus fixed fee contracts, as a
result of higher expenses in 2023 compared to 2022.

Net Income Attributable to ALLETE was $28.2 million in 2023 compared to $23.1 million in 2022. Net income in 2023
reflects higher earnings from New Energy in 2023 compared to 2022 as a result of more renewable development projects
closing during 2023, income in 2023 from net losses attributable to non-controlling interest for tax equity financed solar
energy facilities and the impact of purchase price accounting in 2022. Net income from New Energy in 2023 was
$17.6 million. Net income from New Energy in 2022 was $7.8 million, which included a $8.3 million after-tax expense as
a result of purchase price accounting related to projects under development at the time of acquisition. Net income in 2023
also reflects earnings from Minnesota solar projects placed into service in the fourth quarter of 2022 and second quarter of
2023, and a $3.8 million after-tax expense for the consolidated income tax impact resulting from the gain on the favorable
arbitration ruling. Net income in 2022 included transaction costs of $2.7 million after-tax related to the acquisition of New
Energy in April 2022.

Income Taxes – Consolidated

For the year ended December 31, 2023, the effective tax rate was an expense of 13.5 percent (benefit of 31.2 percent for the
year ended December 31, 2022). The effective tax rate for 2023 an expense compared to a benefit in 2022 primarily due to
higher pre-tax income and lower production tax credits. (See Note 11. Income Tax Expense.)

ALLETE, Inc. 2023 Form 10-K
44

2022 Compared to 2021

The comparison of the results of operations for the years ended December 31, 2022 and 2021 is included in Management's
Discussion in the Annual Report on Form 10-K for the year ended December 31, 2022.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make various
estimates and assumptions that affect amounts reported in the Consolidated Financial Statements. These estimates and
assumptions may be revised, which may have a material effect on the Consolidated Financial Statements. Actual results may
differ from these estimates and assumptions. These policies are discussed with the Audit Committee of our Board 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 subject to accounting standards for the effects of certain types of
regulation. These standards require us to reflect the effect of regulatory decisions in our financial statements. Regulatory assets
represent incurred costs that have been deferred as they are probable for recovery in customer rates. Regulatory liabilities
represent obligations to make refunds to customers and amounts collected in rates for which the related costs have not yet been
incurred. The Company assesses quarterly whether regulatory assets and liabilities meet the criteria for probability of future
recovery or deferral. This assessment considers factors such as, but not limited to, changes in the regulatory environment and
recent rate orders to other regulated entities under the same jurisdiction. If future recovery or refund of costs becomes no longer
probable, the assets and liabilities would be recognized 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 accordance with 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 the annual cost of our pension
and other postretirement benefits. In establishing the expected long-term rate of return on plan assets, we determine the long-
term historical performance of each asset class and adjust these for current economic conditions while utilizing the target
allocation of our plan assets to forecast the expected long-term rate of return. Our pension asset allocation as of
December 31, 2023, was approximately 57 percent equity securities, 40 percent fixed income and 3 percent real estate. Our
postretirement health and life asset allocation as of December 31, 2023, was approximately 67 percent equity securities, and
33 percent fixed income. Equity securities consist of a mix of market capitalization sizes with domestic and international
securities. In 2023, we used weighted average expected long-term rates of return of 6.83 percent in our actuarial determination
of our pension expense and 6.33 percent in our actuarial determination of our other postretirement expense. The actuarial
determination uses an asset smoothing methodology for actual returns to reduce the volatility of varying investment
performance over time. We review our expected long-term rate of return assumption annually and will adjust it to respond to
changing market conditions. A one-quarter percent decrease in the expected long-term rate of return would increase the annual
expense for pension and other postretirement benefits by approximately $2.1 million, pre-tax.

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 of our pension and other postretirement plans. In 2023, we used weighted average discount
rates of 5.70 percent and 5.89 percent in our actuarial determination of our pension and other postretirement expense,
respectively. We review our discount rates annually and will adjust them to respond to changing market conditions. A one-
quarter percent decrease in the discount rate would increase the annual expense for pension and other postretirement benefits by
approximately $0.4 million, pre-tax.

The mortality assumptions used to calculate our pension and other postretirement benefit obligations as of December 31, 2023,
considered a modified PRI-2012 mortality table and MP-2021 mortality projection scale. (See Note 12. Pension and Other
Postretirement Benefit Plans.)

Valuation of Business Combinations and Resulting Goodwill. When we acquire a business, the assets acquired and liabilities
assumed are recorded at their respective fair values as of the acquisition date. Determining the fair value of intangible assets
acquired as part of a business combination requires us to make significant estimates. These estimates may include the amount
and timing of projected future cash flows, the discount rate used to discount those cash flows to present value, the assessment of
the asset’s life cycle, and the consideration of legal, technical, regulatory, economic and competitive risks.

ALLETE, Inc. 2023 Form 10-K
45

Critical Accounting Policies (Continued)

Goodwill. Goodwill is the excess of the purchase price (consideration transferred) over the estimated fair value of the net assets
of the acquired businesses. In accordance with GAAP, goodwill is not amortized. The Company assesses whether there has
been an impairment of goodwill annually in the fourth quarter and whenever an event occurs or circumstances change that
would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at the reporting unit level. An
impairment loss is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the
reporting unit. The test for impairment requires us to make several estimates about fair value, most of which are based on
projected future cash flows. Our estimates associated with the goodwill impairment test are considered critical due to the
amount of goodwill recorded on our Consolidated Balance Sheet and the judgment required in determining fair value. The fair
value of the New Energy reporting unit was determined using a discounted cash flow model, using significant assumptions
which included a discount rate of 14 percent, cash flow forecasts through 2028, industry average gross margins, and a terminal
growth rate of 3.5 percent. Any forecast contains a degree of uncertainty, and changes in the forecasted cash flows and other
assumptions could significantly increase or decrease the calculated fair value of New Energy. The results of our annual
impairment test are discussed in Note 1. Operations and Significant Accounting Policies and Note 7. Fair Value in this Form
10-K. Goodwill was $154.9 million as of December 31, 2023.

Impairment of Long-Lived Assets. We review our long-lived assets for indicators of impairment 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 by comparing 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 lowest level 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 our expectations related
to: management’s best estimate of future sales prices; holding period and timing of sales; method of disposition; and future
expenditures necessary to maintain the operations. (See Note 1. Operations and Significant Accounting Policies.)

Taxation. We are required to make judgments regarding the potential tax effects of various financial transactions and our
ongoing operations to estimate our obligations to taxing authorities. These tax obligations include income taxes and taxes other
than income taxes. Judgments related to income taxes require the recognition 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 not meet 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 a valuation 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 the application of tax statutes and regulations, and projections
of future federal taxable income, state taxable income, and state apportionment to determine our ability to utilize NOL and
credit carryforwards prior to their expiration. Significant changes in assumptions regarding future federal and state taxable
income or a change in tax rates could require new or increased valuation allowances which could result in a material impact on
our results of operations.

ALLETE, Inc. 2023 Form 10-K
46

Outlook

ALLETE is an energy company committed to earning a financial return that rewards our shareholders, allows for reinvestment
in our businesses, and sustains growth. The Company has a long-term objective of achieving consolidated earnings per share
growth within a range of 5 percent to 7 percent.

ALLETE is predominately a regulated utility through Minnesota Power, SWL&P, and an investment in ATC. ALLETE’s
strategy is to remain predominately a regulated utility while investing in ALLETE Clean Energy, New Energy and its Corporate
and Other businesses to complement its regulated businesses, balance exposure to the utility’s industrial customers, and provide
potential long-term earnings growth. ALLETE expects net income from Regulated Operations to be approximately 75 percent
of total consolidated net income in 2024. ALLETE expects its businesses to generally provide regulated, contracted or recurring
revenues, and to support sustained growth in net income and cash flow.

In August 2022, the Inflation Reduction Act was signed into law. We believe our businesses will benefit from certain
provisions of the legislation including from the extension and transferability of production tax credits and investment tax
credits, among others. We are planning to sell certain tax credits generated in 2023 and beyond. We do not currently anticipate
any impact from the new alternative minimum tax. We will continue to assess the impact of the law as additional
implementation guidance becomes available.

Minnesota Carbon-Free Legislation. On February 7, 2023, the Minnesota Governor signed into law legislation that updates the
state’s renewable energy standard and requires Minnesota electric utilities to source retail sales with 100 percent carbon-free
energy by 2040. The law increases the renewable energy standard from 25 percent renewable by 2025 to 55 percent renewable
by 2035, and requires investor-owned Minnesota utilities to provide 80 percent carbon-free energy by 2030, 90 percent carbon-
free energy by 2035 and 100 percent carbon-free energy by 2040. The law utilizes renewable energy credits as the means to
demonstrate compliance with both the carbon-free and renewable standards, includes an off-ramp provision that enables the
MPUC to protect reliability and customer costs through modification or delay of either the renewable energy standard, the
carbon-free standard, or both, and streamlines development and construction of wind energy projects and transmission in
Minnesota. The Company is evaluating the law to identify challenges and opportunities it could present.

Regulated Operations. Minnesota Power’s long-term strategy is to be the leading electric energy provider in northeastern
Minnesota by providing safe, reliable and cost-competitive electric energy, while complying with environmental permit
conditions and renewable energy requirements. Keeping the cost of energy production competitive enables Minnesota Power to
effectively compete in the wholesale power markets and minimizes retail rate increases to help maintain customer viability. As
part of maintaining cost competitiveness, Minnesota Power intends to reduce its exposure to possible future carbon and GHG
legislation by reshaping its generation portfolio, over time, to reduce its reliance on coal. Minnesota Power has a vision of
delivering 100 percent carbon-free energy by 2050. (See EnergyForward.) We will monitor and review proposed
environmental regulations and may challenge those that add considerable cost with limited environmental benefit. Minnesota
Power will continue to pursue customer growth opportunities and 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.

2024 Minnesota General Rate Case. On November 1, 2023, Minnesota Power filed a retail rate increase request with the
MPUC seeking an average increase of approximately 12.00 percent for retail customers, net of rider revenue incorporated into
base rates. The rate filing seeks a return on equity of 10.30 percent and a 53.00 percent equity ratio. On an annualized basis, the
requested final rate increase would generate approximately $89 million in additional revenue. In orders dated
December 19, 2023, the MPUC accepted the filing as complete and approved an annual interim rate increase of approximately
$64 million, net of rider revenue, beginning January 1, 2024, subject to refund. We cannot predict the level of final rates that
may be authorized by the MPUC.

Wisconsin Retail Rates. SWL&P expects to file its next general rate case with the PSCW in the first quarter of 2024.

ALLETE, Inc. 2023 Form 10-K
47

Outlook (Continued)

Industrial Customers. Electric power is one of several key inputs in the taconite mining, paper, pulp and secondary wood
products, pipeline and other industries. Approximately 55 percent of our regulated utility kWh sales in 2023 (52 percent in 2022
and 47 percent in 2021) were made to our industrial customers. We expect industrial sales of approximately 7.0 million MWh
in 2024 (7.0 million MWh in 2023 and 6.7 million in 2022). (See Item 1. Business – Regulated Operations – Electric Sales /
Customers.)

Taconite. Minnesota Power’s taconite customers are capable of producing up to approximately 41 million tons of taconite
pellets annually. Taconite pellets produced in Minnesota are primarily shipped to North American steel making facilities that
are part of the integrated steel industry, which continue to lead the world in environmental performance among steelmaking
countries. According to the U.S. Department of Energy, steel production in the U.S. is the most energy efficient of any major
steel producing country. Steel produced from these North American facilities is used primarily in the manufacture of
automobiles, appliances, tubular applications for all industries, and in the construction industry. Steel is also a critical
component of the clean energy transformation underway today. Meeting the demand for more renewable energy and the need
for additional infrastructure to transport green energy from the point of generation to the end user both require steel.
Historically, approximately 10 percent of Minnesota taconite production has been exported outside of North America.

Minnesota Power’s taconite customers may experience annual variations in production levels due to such factors as economic
conditions, short-term demand changes or maintenance outages. The Minnesota Department of Revenue Mineral Tax Office
expects taconite production from our taconite customers to be approximately 35 million tons in 2024. We estimate that a one
million ton change in Minnesota Power’s taconite customers’ production would impact our annual earnings per share by
approximately $0.05, net of expected power marketing sales at current prices. Changes in wholesale electric prices or customer
contractual demand nominations could impact this estimate. Minnesota Power proactively sells power in the wholesale power
markets that is temporarily not required by industrial customers to optimize the value of its generating facilities. Long-term
reductions in taconite production or a permanent shut down of a taconite customer may lead Minnesota Power to file a general
rate case to recover lost revenue.

USS Corporation. USS Corporation has announced plans to invest approximately $150 million to construct a system dedicated
to producing direct reduced-grade (DR-grade) pellets at its Keetac plant. USS Corporation broke ground on the project in the
third quarter of 2022, and is expected to begin producing DR-grade pellets in 2024. This will enable the existing pelletizing
plant to not only create DR-grade pellets for use as a feedstock for a direct reduced iron (DRI) or hot briquetted iron (HBI)
process that ultimately supplies electric arc furnace steelmaking but also maintains the optionality to continue producing blast
furnace-grade pellets. USS Corporation’s Minntac and Keetac plants are Large Power industrial customers of Minnesota Power.
USS Corporation has the capability to produce approximately 15 million and 5 million tons annually at its Minntac and Keetac
plants, respectively.

In the third quarter of 2023, USS Corporation disclosed it had commenced a formal review process to evaluate strategic
alternatives for the company after receiving multiple unsolicited proposals that ranged from the acquisition of certain
production assets to consideration for the whole company. On December 18, 2023, USS Corporation announced it entered into
a definitive agreement in which Nippon Steel will acquire all of the shares of USS Corporation. USS Corporation expects the
transaction to close in the second or third quarter of 2024, subject to regulatory approvals, at which time USS Corporation
stated it will continue to operate under the U.S. Steel brand name and will maintain its headquarters in Pittsburgh,
Pennsylvania.

Cleveland-Cliffs, Inc. (Cliffs). In 2020, Cliffs announced that it had completed the previously announced acquisition of
substantially all of the operations of ArcelorMittal USA LLC and its subsidiaries. Cliffs had stated that upon closure of the
acquisition, Cliffs would be the largest flat-rolled steel producer and the largest iron ore pellet producer in North America. The
acquisition included ArcelorMittal’s Minorca mine in Virginia, Minnesota, and its ownership share of Hibbing Taconite in
Hibbing, Minnesota, which are both large industrial customers of Minnesota Power. Cliffs is Minnesota Power’s largest
customer. The acquisition has increased customer concentration risk for the Company and could lead to further capacity
consolidation for both steel blast furnaces and related Minnesota iron ore production.

ALLETE, Inc. 2023 Form 10-K
48

Outlook (Continued)
Industrial Customers (Continued)

Cliffs completed construction of a hot briquetted iron production plant in Toledo, Ohio, in 2020, which has utilized direct
reduced-grade pellets from Northshore Mining. In October 2021, Cliffs indicated it plans to move direct reduced-grade pellet
production to its Minorca mine and that Northshore Mining would become a “swing facility” due to the higher royalty rates at
that mine. (See Northshore Mining.)

Northshore Mining. Cliffs idled all production at its Northshore mine in 2022. Northshore Mining resumed partial pellet plant
production in April 2023. Cliffs indicated it will continue to utilize Northshore Mining as a swing facility. Northshore Mining
has the capability to produce approximately 6 million tons annually. Minnesota Power has a PSA through 2031 with Silver Bay
Power, which provides the majority of the electric service requirements for Northshore Mining.

Hibbing Taconite. Hibbing Taconite is a joint venture between subsidiaries of Cliffs (85.3 percent ownership) and USS
Corporation (14.7 percent ownership). The joint venture is managed by Cliffs and is also a Large Power Customer of Minnesota
Power. On May 25, 2023, the Minnesota Executive Council approved state mineral leases near Nashwauk, Minnesota, with
Cliffs, the majority owner of Hibbing Taconite. Cliffs has stated that these leases will provide Hibbing Taconite with more than
two decades of additional mineral reserves. Prior to the leases being awarded, Hibbing Taconite had proven mineral reserves to
support its operations through 2026. Hibbing Taconite has the capability of producing 8 million tons of taconite annually.

Minnesota Sulfate Wild Rice Water Quality Standard. On April 29, 2021, the EPA identified rivers and lakes in Minnesota in
which wild rice grows that have sulfate levels that exceed Minnesota’s sulfate limit for wild rice waters. On September 1, 2021,
three additional wild rice waters with sulfate levels that exceed Minnesota’s sulfate limit were identified. The EPA directed the
MPCA to add these rivers and lakes to its list of impaired waters which can be used to set limits in discharge permits for
industrial activities such as mining. Minnesota Power’s taconite customers could be adversely impacted if they are required to
significantly reduce sulfate discharges.

Paper, Pulp and Secondary Wood Products. The North American paper and pulp industry continues to face declining demand
due to the impact of electronic substitution for print and changing customer needs. As a result, certain paper and pulp customers
have reduced their existing operations in recent years and have pursued or are pursuing product changes in response to the
declining demand. The resulting reduction in production capacity outside of Minnesota for certain paper grades has solidified
our paper customers’ operations, at least for the near term, and as such we expect operating levels in 2024 at the major paper
and pulp mills we serve to be at similar levels as in 2023.

ST Paper. In May 2021, ST Paper announced it had completed the purchase of the Duluth Mill from Verso Corporation. In
January 2022, Minnesota Power entered into an electric service agreement with ST Paper that would begin Large Power
Customer service with a minimum term of six years upon start-up of operations. ST Paper completed start-up of operations and
became a Large Power Customer as of the first quarter of 2023. On January 3, 2024, ST Paper announced it had entered into an
asset purchase agreement to sell the Duluth Mill to Sofidel, a privately held Italian multinational company that is currently the
seventh largest manufacturer of tissue paper in the world.

Pipeline and Other Industries.

Cenovus Energy. In 2018, a fire at Cenovus Energy’s refinery in Superior, Wisconsin, which was owned by Husky Energy at
that time, disrupted operations at the facility. Under normal operating conditions, SWL&P provides approximately 14 MW of
average monthly demand to the refinery in addition to water service. In April 2023, Cenovus Energy announced that it had
commenced restart of the facility.

ALLETE, Inc. 2023 Form 10-K
49

Outlook (Continued)

EnergyForward. Minnesota Power is executing EnergyForward, its strategy assuring reliability, protecting affordability and
further improving environmental performance. The plan includes completed and planned investments in wind, solar, natural gas
and hydroelectric power, construction of additional transmission capacity, the installation of emissions control technology and
the idling and retirement of certain coal-fired generating facilities. Minnesota Power has a vision to deliver 100 percent carbon-
free energy to customers, continuing its commitment to climate, customers and communities through its EnergyForward
strategy. This vision builds on Minnesota Power’s recent achievement of now providing 50 percent renewable energy to its
customers. In 2023, the Minnesota Governor signed into law legislation that updates the state’s renewable energy standard and
requires Minnesota electric utilities to source retail sales with 100 percent carbon-free energy by 2040. Minnesota Power is
working with various stakeholders and participating in the regulatory process to implement this legislation. (See Item 1.
Business – Regulated Operations – Minnesota Legislation.)

2021 Integrated Resource Plan (IRP). On February 1, 2021, Minnesota Power filed its latest IRP, which was approved by the
MPUC in an order dated January 9, 2023. The approved IRP, which reflects a joint agreement reached with various
stakeholders, outlines Minnesota Power’s clean-energy transition plans through 2035. These plans include expanding its
renewable energy supply, achieving coal-free operations at its facilities by 2035, and investing in a resilient and flexible
transmission and distribution grid. As part of these plans, Minnesota Power anticipates adding up to 700 MW of new wind and
solar energy resources, and ceasing coal operations at Boswell Units 3 and 4 by 2030 and 2035, respectively. Minnesota
Power’s plans recognize that advances in technology will play a significant role in completing its transition to carbon-free
energy supply, reliably and affordably. Minnesota Power is expected to file its next IRP by March 1, 2025.

In recent years, Minnesota Power has transformed its energy supply from more than a 95 percent reliance on coal to become a
leader in the nation’s clean-energy transformation. Since 2013, the company has closed or converted seven of its nine coal-fired
units and added nearly 900 megawatts of renewable energy sources. Additionally, Minnesota Power has been a leader in energy
conservation, surpassing the state’s conservation goals each year for the past decade.

Nemadji Trail Energy Center (NTEC). In 2017, Minnesota Power submitted a resource package to the MPUC which included
requesting approval of a natural gas capacity dedication and other affiliated interest agreements for NTEC, an approximately
600 MW proposed combined-cycle natural gas-fired generating facility to be built in Superior, Wisconsin, which will be jointly
owned by Dairyland Power Cooperative, Basin and South Shore Energy, ALLETE’s non-rate regulated, Wisconsin subsidiary.
Minnesota Power is expected to purchase approximately 20 percent of the facility's output starting in 2028 pursuant to the
capacity dedication agreement.

Renewable Energy. Minnesota Power continues to execute its renewable energy strategy and reached its goal of supplying
50 percent of its energy by renewable energy sources. Minnesota Power also has a vision of delivering 100 percent carbon-free
energy by 2050. (See EnergyForward.)

Minnesota Power has approved cost recovery riders for certain renewable investments and expenditures as well as investments
and expenditures related to compliance with the Minnesota Solar Energy Standard. The cost recovery riders allow Minnesota
Power to charge retail customers on a current basis for the costs of certain renewable and solar investments and expenditures
plus a return on the capital invested. (See Note 4. Regulatory Matters.)

Wind Energy. Minnesota Power’s wind energy facilities consist of Bison (497 MW) located in North Dakota, and Taconite
Ridge (25 MW) located in northeastern Minnesota. 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.

Minnesota Power uses the 465-mile, 250-kV DC transmission line that runs from Center, North Dakota, to Duluth, Minnesota,
to transport wind energy from North Dakota while gradually phasing out coal-based electricity delivered to its system over this
transmission line from Square Butte’s lignite coal-fired generating unit. Minnesota Power is currently pursuing a modernization
and capacity upgrade of its DC transmission system to continue providing reliable operations and additional system capabilities.
(See Transmission.)

Wind Energy Request For Proposals. On December 15, 2023, Minnesota Power issued a notice with the MPUC of its intent to
issue a request for proposals for up to 400 MW of wind energy resources. Minnesota Power issued the request for proposals on
February 15, 2024.

ALLETE, Inc. 2023 Form 10-K
50

Outlook (Continued)
EnergyForward (Continued)

Nobles 2 PPA. Minnesota Power has a long-term PPA with Nobles 2 that provides for Minnesota Power to purchase the energy
and associated capacity from a 250 MW wind energy facility in southwestern Minnesota through 2040. The agreement provides
for 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 is delivered. (See Corporate and Other – Investment in Nobles 2.)

Manitoba Hydro. Minnesota Power has two long-term PPAs with Manitoba Hydro. The first PPA provides for Minnesota
Power to purchase 250 MW of capacity and energy from Manitoba Hydro through May 2035. The second PPA provides for
Minnesota Power to purchase up to 133 MW of energy from Manitoba Hydro through June 2040. (See Note 9. Commitments,
Guarantees and Contingencies.)

Solar Energy. Minnesota Power’s solar energy facilities consist of a 10 MW solar energy facility at the Camp Ripley Minnesota
Army National Guard base and training facility near Little Falls, Minnesota, and a 40 kW solar array located in Duluth,
Minnesota. Minnesota Power also purchases solar energy from approximately 20 MW of solar energy facilities located in
Minnesota that are owned by an ALLETE subsidiary, and a 1 MW community solar garden in northeastern Minnesota, which is
owned and operated by a third party. SWL&P owns and operates a 470 kW solar array as part of a community solar garden in
Superior, Wisconsin, that went into service in 2023.

Solar Energy Request For Proposals. On October 2, 2023, Minnesota Power issued a notice with the MPUC of its intent to
issue a request for proposals for up to 300 MW of solar energy resources. Minnesota Power issued the request for proposals on
November 15, 2023, which were accepted through January 17, 2024.

Transmission. We continue to make investments in transmission opportunities that strengthen or enhance the transmission grid
or take advantage of our geographical location between sources of renewable energy and end users. These include investments
to enhance our own transmission facilities and investments in other transmission assets (individually or in combination with
others) and our investment in ATC. See also Item 1. Business – Regulated Operations – Transmission and Distribution.

North Plains Connector Development Agreement. In December 2023, ALLETE and Grid United LLC, an independent
transmission company, signed development agreements for the North Plains Connector project. The project is a new,
approximately 400-mile high-voltage direct-current (HVDC) transmission line from central North Dakota, to Colstrip, Montana
that will be the first transmission connection between three regional U.S. electric energy markets: MISO, the Western
Interconnection and the Southwest Power Pool. This new link, open to all sources of electric generation, would create
3,000 MW of transfer capacity between the middle of the country and the West Coast, easing congestion on the transmission
system, increasing resiliency and reliability in all three energy markets, and enabling fast sharing of renewable energy across a
vast area with diverse weather patterns. The project capital cost is expected to be approximately $3.2 billion. ALLETE expects
to pursue up to 35 percent ownership and would oversee the line’s operation. The companies began project permitting in 2023
as they work toward a planned in-service date as early as 2029, pending regulatory and other necessary approvals.

Duluth Loop Reliability Project. In October 2021, Minnesota Power submitted an application for a certificate of need for the
Duluth Loop Reliability Project. This transmission project was proposed to enhance reliability in and around Duluth,
Minnesota. The project includes the construction of a new 115-kV transmission line; construction of an approximately one-mile
extension of an existing 230-kV transmission line; and upgrades to several substations. A certificate of need was granted and a
route permit was issued by the MPUC on April 3, 2023. The Duluth Loop Reliability Project is expected to be completed and in
service by 2025, subject to MPUC approval, with an estimated cost of $50 million to $70 million.

HVDC Transmission System Project. On June 1, 2023, Minnesota Power submitted an application for a certificate of need and
route permit with the MPUC to replace aging critical infrastructure and modernize the terminal stations of its HVDC
transmission line. Minnesota Power uses the 465-mile, 250-kV HVDC transmission line that runs from Center, North Dakota,
to Duluth, Minnesota, to transport wind energy from North Dakota while gradually phasing out coal-based electricity delivered
to its system over this transmission line from Square Butte’s lignite coal-fired generating unit. The HVDC transmission system
project is expected to improve reliability of the transmission system, improve system resiliency, expand the operating capacity
of the HVDC terminals, and replace critical infrastructure. Pending regulatory approvals in Minnesota and North Dakota,
construction could begin as early as 2024, with an in-service date expected between 2028 and 2030. The project is estimated to
cost between $800 million and $900 million. On October 18, 2023, the U.S. Department of Energy awarded a $50 million grant
to Minnesota Power for this project, which will be used to prepare the HVDC transmission system for future expansion and
help reduce project costs to customers, subject to final application and review process. In addition, this project received
$15 million in state funding as part of an energy and climate budget bill passed by the Minnesota Legislature in 2023.

ALLETE, Inc. 2023 Form 10-K
51

Outlook (Continued)
Transmission (Continued)

Northland Reliability Project. Minnesota Power and Great River Energy announced in July 2022 their intent to build a 180-
mile, 345-kV transmission line, connecting northern Minnesota to central Minnesota to support continued reliability in the
Upper Midwest. Great River Energy, a wholesale electric power cooperative, and Minnesota Power filed a Notice of Intent to
Construct, Own and Maintain the transmission line with the MPUC in August 2022. This joint project is part of a portfolio of
transmission projects approved in July 2022 by MISO as part of the first phase of its Long Range Transmission Plan. Planning
for the approximately $970 million to $1,350 million transmission line is in its early stages with the route anticipated to
generally follow existing rights of way in an established power line corridor. The MPUC will determine the final route as well
as cost recovery for Minnesota Power’s approximately 50 percent estimated share of the project. On August 4, 2023, Minnesota
Power and Great River Energy submitted an application for a certificate of need and route permit with the MPUC. Subject to
regulatory approvals, the transmission line is expected to be in service in 2030.

Big Stone South Transmission Project. Northern States Power, Great River Energy, Minnesota Power, Otter Tail Power
Company, and Missouri River Energy Resources (Project Developers) announced in July 2022 their intent to build a 150-mile,
345-kV transmission line to improve reliability in North Dakota and South Dakota, and western and central Minnesota. This
joint project is part of a portfolio of transmission projects approved in July 2022 by MISO as part of the first phase of its Long
Range Transmission Plan. A Notice of Intent to Construct, Own and Maintain the transmission line was filed with the MPUC in
October 2022. On September 29, 2023, the Project Developers submitted an application for a certificate of need and route
permit with the MPUC. The project is in its early stages and is expected to cost between $600 million and $700 million. The
MPUC will determine the final route for the Minnesota portion as well as cost recovery for Minnesota Power’s approximately
$20 million estimated share of the project. Subject to regulatory approvals, the transmission line is expected to be in service in
2027.

Investment in ATC. ATC’s most recent 10-year transmission assessment, which covers the years 2023 through 2032, identifies a
need for between $6.6 billion and $8.1 billion in transmission system investments. These investments by ATC, if undertaken,
are expected to be funded through a combination of internally generated cash, debt and investor contributions. As opportunities
arise, we plan to make additional investments in ATC through general capital calls based upon our pro rata ownership interest
in ATC.

ALLETE Clean Energy

ALLETE Clean Energy will pursue growth through acquisitions or project development. ALLETE Clean Energy is targeting
acquisitions of existing operating portfolios which have a mix of long-term PSAs in place and/or available for repowering and
recontracting. Further, ALLETE Clean Energy will evaluate actions that will lead to the addition of complimentary clean
energy products and services. At this time, ALLETE Clean Energy is focused on actions that will optimize its clean energy
project portfolio of operating and development projects, which may include recontracting, repowering, entering into
partnerships and divestitures along with continued acquisitions or development of new projects including wind, solar, energy
storage or storage ready facilities across North America.

Portions of our ALLETE Clean Energy business are experiencing return pressures that are impacting our earnings per share
growth from increased competition, congestion and lower forward price curves, as a growing amount of investment capital is
being directed into wind generation opportunities. In addition, current and potential new project developments can be
negatively affected by a lower ALLETE stock price, which may result in such projects not being accretive, or otherwise unable
to satisfy our financial objectives criteria to proceed. In response to these market pressures, we are actively evaluating
additional growth opportunities to deliver more comprehensive clean energy solutions for customers at ALLETE Clean Energy,
which may include wind, solar, storage solutions, and related energy infrastructure investments and services. We believe that
the renewable energy industry is entering a new phase of growth and that we are well-positioned to serve customers and drive
future growth at ALLETE. ALLETE Clean Energy will continue to optimize its existing wind energy facility portfolio, advance
and expand its project pipeline, and explore other renewable energy opportunities to further enhance its service offerings,
growth and profitability.

In May 2021, ALLETE Clean Energy announced that it acquired the rights to the approximately 92 MW Red Barn wind
development project and the approximately 68 MW Whitetail renewable development project in southwestern Wisconsin.
ALLETE Clean Energy signed an asset sale agreement for the Red Barn wind project with Wisconsin Public Service
Corporation and Madison Gas and Electric Company in 2021. The sale of Red Barn wind project closed in the second quarter of
2023 at which time ALLETE Clean Energy received cash proceeds of approximately $160 million and recorded a gain on sale
of $4.3 million after-tax.

ALLETE, Inc. 2023 Form 10-K
52

Outlook (Continued)
ALLETE Clean Energy

Since September 20, 2023, a substation and the transmission lines feeding that substation located near ALLETE Clean Energy’s
Caddo wind energy facility, and operated by another party, have experienced a forced outage. This forced outage has increased
congestion experienced by the Caddo wind energy facility and is expected to have a negative impact on ALLETE Clean
Energy’s results in the first quarter of 2024. We will continue to monitor this development for timing of repairs and impact
going forward.

Region
East

Midwest

South

West

Wind Energy Facility
Armenia Mountain

Capacity MW
101

PSA 1
PSA 2
Lake Benton
Storm Lake I
Storm Lake II
Merchant
PSA 1

Other
Caddo

Merchant
PSA 1
PSA 2
Diamond Spring
PSA 1
PSA 2
PSA 3

Condon
Glen Ullin
South Peak

104
108
77

17
303

303

50
106
80

50%
50%
100%
100%

90%
10%
100%

27%
66%
7%

58%
25%
16%
100%
100%
100%

PSA Expiration

2031
2024
2028
2027

n/a
2032
2028

n/a
2034
2034

2035
2032
2035
2028
2039
2035

Non-cash amortization to revenue recognized by ALLETE Clean Energy relates to the amortization of differences between
contract prices and estimated market prices on assumed PSAs. As part of wind energy facility acquisitions, ALLETE Clean
Energy assumed various PSAs that were above or below estimated market prices at the time of acquisition; the resulting
differences between contract prices and estimated market prices are amortized to revenue over the remaining PSA term. Non-
cash amortization is expected to be approximately $5 million in 2024, $6 million in 2025 through 2027, and decreasing
thereafter through 2032.

Corporate and Other.

New Energy. New Energy is a renewable energy development company with a primary focus on solar and storage facilities
while also offering comprehensive operations, maintenance and asset management services. New Energy is a leading developer
of community, commercial and industrial, and small utility-scale renewable energy projects that has completed more than
500 MW in its history, totaling more than $1.2 billion of capital. New Energy currently has a robust project pipeline with
greater than 2,000 MW of renewable projects in development across over 20 different states. New Energy adds value through
cost effective development and economies of scale on project implementation, bringing national capabilities to regional co-
development partners. New Energy is involved in greenfield development as well as acquiring and completing mid-stage and
late-stage renewable energy projects.

Investment in Nobles 2. Our subsidiary, ALLETE South Wind, owns a 49 percent equity interest in Nobles 2, the entity that
owns and operates a 250 MW wind energy facility in southwestern Minnesota pursuant to a 20-year PPA with Minnesota
Power. We account for our investment in Nobles 2 under the equity method of accounting. (See Note 6. Equity Investments.)

ALLETE, Inc. 2023 Form 10-K
53

Outlook (Continued)
Corporate and Other (Continued)

South Shore Energy. South Shore Energy, ALLETE’s non-rate regulated, Wisconsin subsidiary, is developing NTEC, an
approximately 600 MW proposed combined-cycle natural gas-fired generating facility to be built in Superior, Wisconsin, which
will be jointly owned by Dairyland Power Cooperative, Basin and South Shore Energy. Minnesota Power is expected to
purchase approximately 20 percent of the facility's output starting in 2028 pursuant to a capacity dedication agreement.
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 South Shore Energy will be responsible for approximately 20 percent.
South Shore Energy’s portion of NTEC project costs incurred through December 31, 2023, is approximately $9 million.

BNI Energy. In 2023, BNI Energy sold 4.0 million tons of coal (3.7 million tons in 2022) and anticipates 2024 sales will be
similar to 2023. BNI Energy operates under cost-plus fixed fee agreements extending through December 31, 2037.

ALLETE Properties. Our strategy incorporates the possibility of a bulk sale of the entire ALLETE Properties portfolio.
Proceeds from a bulk sale would be strategically deployed to support growth initiatives at our Regulated Operations and
ALLETE Clean Energy. ALLETE Properties also continues to pursue sales of individual parcels over time and will continue to
maintain key entitlements and infrastructure.

Income Taxes

ALLETE’s aggregate federal and multi-state statutory tax rate is approximately 28 percent for 2023. ALLETE also has tax
credits and other tax adjustments that reduce the combined statutory rate to the effective tax rate. These tax credits and
adjustments historically have included items such as production tax credits, excess deferred taxes, non-controlling interests in
subsidiaries, as well as other items. The annual effective rate can also be impacted by such items as changes in income before
income 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 an expense of approximately
5 percent for 2024 primarily due to federal production tax credits as a result of wind energy generation and non-controlling
interests in subsidiaries. We also expect that our effective tax rate will be lower than the combined statutory rate over the next
10 years due to production tax credits attributable to our wind energy generation.

Liquidity and Capital Resources

Liquidity Position. ALLETE is well-positioned to meet its liquidity needs. As of December 31, 2023, we had cash and cash
equivalents of $71.9 million, $369.7 million in available consolidated lines of credit, 2.1 million original issue shares of
common stock available for issuance through a distribution agreement with Lampert Capital Markets and a debt-to-capital ratio
of 35 percent.

2021

51 $2,404.3
533.2
12

1,986.4
37
—
—
100 $4,923.9

49
11

40
—
100

Capital Structure. ALLETE’s capital structure for each of the last three years is as follows:
As of December 31
Millions
ALLETE Equity
Non-Controlling Interest in Subsidiaries

54 $2,691.9
656.4
11

$2,809.6
597.0

2022

2023

Short-Term and Long-Term Debt (a)
Redeemable Non-Controlling Interest

(a) Excludes unamortized debt issuance costs.

1,799.4
0.5
$5,206.5

1,929.1
35
—
—
100 $5,277.4

ALLETE, Inc. 2023 Form 10-K
54

Liquidity and Capital Resources(Continued)

Cash Flows. Selected information from ALLETE’s Consolidated Statement of Cash Flows is as follows:
Year Ended December 31
Millions
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
Cash Flows from (used in)
Operating Activities
Investing Activities
Financing Activities

$40.2

2023

Change in Cash, Cash Equivalents and Restricted Cash
Cash, Cash Equivalents and Restricted Cash at End of Period

2022

2021

$47.7

$65.2

221.3
(384.0)
155.2
(7.5)
$40.2

263.5
(485.2)
204.2
(17.5)
$47.7

585.3
(283.6)
(262.5)
39.2
$79.4

Operating Activities. Cash provided by operating activities was higher in 2023 compared to 2022. Cash provided by operating
activities in 2023 reflected cash proceeds from the sales of ALLETE Clean Energy’s Northern Wind and Red Barn projects
which were sold to third parties in 2023, cash received from the favorable arbitration award by a subsidiary of ALLETE Clean
Energy, and lower payments for inventories compared to 2022 primarily related to the Northern Wind and Red Barn projects.
Cash provided by operating activities in 2023 also increased due to the timing of recovery under Minnesota Power’s fuel
adjustment clause.

Cash provided by operating activities was lower in 2022 compared to 2021. Cash provided by operating activities in 2022
reflected higher payments for inventories, net of customer deposits received, compared to 2021 primarily related to ALLETE
Clean Energy’s Northern Wind and Red Barn projects. This decrease was partially offset by the timing of recovery under the
fuel adjustment clause.

Investing Activities. Cash used in investing activities was lower in 2023 compared to 2022. Cash used for investing activities in
2023 reflected higher additions to property, plant and equipment compared to 2022. Cash used for investing activities in 2022
reflected cash payments for the acquisition of New Energy.

Cash used in investing activities was lower in 2022 compared to 2021. Cash used for investing activities in 2022 reflected lower
additions to property, plant and equipment and lower payments for equity method investments compared to 2021. These
decreases were partially offset by cash payments for the acquisition of New Energy.

Financing Activities. Cash used in financing activities in 2023 reflected lower proceeds from the issuance of common stock
and the issuance of long-term debt, and lower proceeds from the issuance of non-controlling interest in subsidiaries compared
to 2022.

Cash provided by financing activities was lower in 2022 compared to 2021 primarily due to higher repayments of short-term
and long-term debt and higher dividends on common stock in 2022. These decreases were partially offset by higher proceeds
from the issuance of common stock, higher proceeds from issuance of short-term and long-term debt, and higher proceeds from
non-controlling interest in 2022.

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, 2023, we
had consolidated bank lines of credit aggregating $423.1 million ($475.7 million as of December 31, 2022), most of which
expire in January 2027. We had $19.4 million outstanding in standby letters of credit and $34.1 million outstanding draws
under our lines of credit as of December 31, 2023 ($32.8 million in standby letters of credit and $31.3 million outstanding
draws as of December 31, 2022). We also have other credit facility agreements in place that provide the ability to issue up to
$252.0 million in standby letters of credit. As of December 31, 2023, we had $130.5 million outstanding in standby letters of
credit under these agreements.

In addition, as of December 31, 2023, we had 2.6 million original issue shares of our common stock available for issuance
through Invest Direct and 2.1 million original issue shares of common stock available for issuance through a distribution
agreement with Lampert Capital Markets. (See Securities.) The amount and timing of future sales of our securities will depend
upon market conditions and our specific needs.

ALLETE, Inc. 2023 Form 10-K
55

Liquidity and Capital Resources (Continued)

Securities. We entered into a distribution agreement with Lampert Capital Markets, in 2008, as amended most recently in 2020,
with respect to the issuance and sale of up to an aggregate of 13.6 million shares of our common stock, without par value, of
which 2.1 million shares remain available for issuance as of December 31, 2023. For the year ended December 31, 2023, no
shares of common stock were issued under this agreement (none in 2022; 0.8 million shares for net proceeds of $51.0 million in
2021).

During the year ended December 31, 2023, we issued 0.3 million shares of common stock through Invest Direct, the Employee
Stock Purchase Plan and the Retirement Savings and Stock Ownership Plan, resulting in net proceeds of $14.9 million
(0.3 million shares for net proceeds of $16.2 million in 2022; 0.3 million shares for net proceeds of $18.9 million in 2021). See
Note 10. Common Stock and Earnings Per Share for additional detail regarding ALLETE’s equity 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 the year ended December 31, 2023, we made $17.3 million in cash
contributions to the defined benefit pension plans. On January 12, 2024, we contributed $25.0 million in cash to the defined
benefit pension plans, and expect to make $2.0 million in additional cash contributions to the defined benefit pension plans in
2024. We do not expect to make any contributions to the defined benefit postretirement health and life plans in 2024. (See Note
10. Common Stock and Earnings Per Share and Note 12. Pension and Other Postretirement Benefit Plans.)

Off-Balance Sheet Arrangements. Off-balance sheet arrangements are discussed in Note 9. Commitments, Guarantees and
Contingencies.

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. Material contractual obligations and other
commitments are as follows:

Long-Term Debt. ALLETE has material long-term debt obligations, including long-term debt due within one year. These
obligations include the principal amount of bonds, notes and loans which are recorded on the Consolidated Balance Sheet, plus
interest. (See Note 8. Short-Term and Long-Term Debt.)

Pension and Other Postretirement Benefit Plans. Pension and other postretirement benefit plan obligations include the current
estimate of future benefit payments. Pension contributions are dependent on several factors including realized asset
performance, future discount rate and other actuarial assumptions, Internal Revenue Service and other regulatory requirements,
and contributions required to avoid benefit restrictions for the pension plans. Funding for the other postretirement benefit plans
is impacted by realized asset performance, future discount rate and other actuarial assumptions, and utility regulatory
requirements. Our obligations are estimates and will change based on actual market performance, changes in interest rates and
any changes in governmental regulations. (See Note 12. Pension and Other Postretirement Benefit Plans.)

Operating and Finance Lease Obligations. ALLETE has certain operating and finance lease obligations for the minimum
payments required under various lease agreements which are recorded on the Consolidated Balance Sheet. (See Note 1.
Operations and Significant Accounting Policies.)

Easement Obligations. ALLETE has easement obligations for the minimum payments required under our land easement
agreements at our wind energy facilities. (See Note 9. Commitments, Guarantees and Contingencies.)

PPA Obligations. PPA obligations represent our Square Butte, Manitoba Hydro and other PPAs. (See Note 9. Commitments,
Guarantees and Contingencies.)

Other Purchase Obligations. ALLETE has other purchase obligations covering our minimum purchase commitments under
coal supply and rail contracts, and long-term service agreements for wind energy facilities. (See Note 9. Commitments,
Guarantees and Contingencies.)

ALLETE, Inc. 2023 Form 10-K
56

Liquidity and Capital Resources (Continued)

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 measures can 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:

Credit Ratings

Issuer Credit Rating

Commercial Paper

First Mortgage Bonds

(a) Not rated by S&P.

S&P

BBB

A-2

(a)

Moody’s

Baa1

P-2

The disclosure of these credit ratings is not a recommendation to buy, sell or hold our securities. Ratings are subject to revision
or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other
rating.

Common Stock Dividends. ALLETE is committed to providing a competitive dividend to its shareholders while at the same
time funding its growth. ALLETE’s long-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 60 percent and 70 percent. In 2023, we paid out 63 percent
(77 percent in 2022; 78 percent in 2021) of our per share earnings in dividends. On January 26, 2024, our Board of Directors
declared a dividend of $0.705 per share, which is payable on March 1, 2024, to shareholders of record at the close of business
on February 15, 2024.

ALLETE, Inc. 2023 Form 10-K
57

Capital Requirements

ALLETE’s projected capital expenditures for the years 2024 through 2028 are presented in the following table. Actual capital
expenditures may vary from the projections due to changes in forecasted plant maintenance, regulatory decisions or approvals,
future environmental requirements, base load growth, capital market conditions or executions of new business strategies.
Projected capital expenditures exclude amounts for projects that will be sold to third parties upon completion.

Capital Expenditures
Millions
Regulated Operations

High kV Transmission Expansion (a)
Solar RFP (b)
Wind RFP (b)
Storage (b)
Base & Other

Regulated Operations
ALLETE Clean Energy (c)
Corporate and Other

South Shore Energy (d)
Other

Total Capital Expenditures (e)

2024

2025

2026

2027

2028

Total

$45
35
5
—
225
310
15

$80
130
105
10
215
540
5

$215
300
215
10
235
975
5

$480
100
300
10
270
1,160
5

$705
75
—
100
190
1,070
5

$1,525
640
625
130
1,135
4,055
35

40
10
$375

55
15
$615

40
10
$1,030

40
20
$1,225

10
15
$1,100

185
70
$4,345

(a) This includes capital expenditures for the HVDC modernization, Northland Reliability, Duluth Loop and Big Stone South transmission

projects. (See Outlook – Transmission.)

(b) These capital expenditures are part of Minnesota Power’s clean-energy transition plans, which include its vision to deliver 100 percent
carbon-free energy to customers by 2050, as detailed in Minnesota Power’s latest IRP, which was approved by the MPUC in
January 2023. These capital expenditures are dependent on successful requests for proposal by Minnesota Power. (See Outlook –
EnergyForward.)

(c) Capital expenditures do not include costs related to developing projects that will be sold upon completion as these costs are accounted

for as inventory and reflected in Inventories – Net on the Consolidated Balance Sheet.

(d) Our portion of estimated capital expenditures for construction of NTEC, an approximately 600 MW proposed combined-cycle natural
gas-fired generating facility to be built in Superior, Wisconsin, which will be jointly owned by Dairyland Power Cooperative, Basin and
South Shore Energy.

(e) These amounts do not include capital expenditures for projects considered to be in their preliminary stages.

We are well positioned to meet our financing needs due to adequate operating cash flows, available additional working capital
and access to capital markets. We will finance capital expenditures from a combination of internally generated funds, debt and
equity issuance proceeds. We intend to maintain a capital structure with capital ratios near current levels. (See Capital
Structure.)

Environmental and Other Matters

Market Risk

Securities Investments.

Available-for-Sale Securities. As of December 31, 2023, our available-for-sale securities portfolio consisted primarily of
securities held in other postretirement plans to fund employee benefits.

ALLETE, Inc. 2023 Form 10-K
58

Market Risk (Continued)

INTEREST RATE RISK

We 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 the issuance and maturity dates of our fixed rate debt, limiting the amount of variable rate debt, and
continually monitoring the effects of market changes in interest rates. 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, 2023:

Interest Rate Sensitive
Financial Instruments
Long-Term Debt

2024

2025

2026

2027

2028

Thereafter

Total

Fair
Value

Expected Maturity Date

Fixed Rate – Millions
Average Interest Rate – %

$94.1 $216.9

$80.2 $162.5

3.4

3.5

4.5

$55.8
3.6

$1,144.8 $1,754.3 $1,625.5

4.2

4.1

Variable Rate – Millions
Average Interest Rate – %

$17.3
8.9

$27.8
3.9

—
—

$45.1
5.8

$45.1

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 of December 31, 2023, an increase of 100 basis points in interest rates would impact the
amount of pre-tax interest expense by $0.5 million. This amount was determined by considering the impact of a hypothetical
100 basis point increase to the average variable interest rate on the variable rate debt outstanding as of December 31, 2023.

COMMODITY PRICE RISK

Our regulated utility operations incur costs for power and fuel (primarily coal and related transportation) in Minnesota, and
power and natural gas purchased for resale in our regulated service territory in Wisconsin. Minnesota Power’s exposure to price
risk for these commodities is significantly mitigated by the current ratemaking process and regulatory framework, which allows
recovery of fuel costs in excess of those included in base rates or distribution of savings in fuel costs to ratepayers. SWL&P’s
exposure to price risk for natural gas is significantly mitigated by the current ratemaking process and regulatory framework,
which allows the commodity cost to be passed through to customers. We seek to prudently manage our customers’ exposure to
price risk by entering into contracts of various durations and terms for the purchase of power and coal and related transportation
costs (Minnesota Power) and natural gas (SWL&P).

POWER MARKETING

Minnesota Power’s power marketing activities consist of: (1) purchasing energy in the wholesale market to serve its regulated
service territory when energy requirements exceed generation output; and (2) selling excess available energy and purchased
power. From time to time, Minnesota Power may have excess energy that is temporarily not required by retail and municipal
customers in our regulated service territory. Minnesota Power actively sells any excess energy to the wholesale 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 an established credit approval process and monitoring counterparty limits.

Recently Adopted Accounting Pronouncements.

New accounting pronouncements are discussed in Note 1. Operations and Significant Accounting Policies.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk for
information related to quantitative and qualitative disclosure about market risk.

ALLETE, Inc. 2023 Form 10-K
59

Item 8. Financial Statements and Supplementary Data

See our Consolidated Financial Statements as of December 31, 2023 and 2022, and for the years ended December 31, 2023,
2022 and 2021, and supplementary data, which are indexed in Item 15(a).

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of December 31, 2023, evaluations were performed, under the supervision and with the participation of management,
including our principal executive officer and 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) and 15d-15(e) of the Securities Exchange Act of
1934 (Exchange Act). Based upon those evaluations, our principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are effective to provide assurance that information required to be
disclosed in ALLETE’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our
management, including our principal executive officer and principal financial officer, to allow timely decisions regarding
required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rule 13a-15(f) or 15d-15(f). Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, 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
management concluded that our internal control over financial reporting was effective as of December 31, 2023.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included
herein.

Changes in Internal Controls

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Trading Plans. For the three months ended December 31, 2023, no director or officer of the Company adopted, modified or
terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item
408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

ALLETE, Inc. 2023 Form 10-K
60

Item 10. Directors, Executive Officers and Corporate Governance

Part III

Unless otherwise stated, the information required by this Item is incorporated by reference herein from our Proxy Statement for
the 2024 Annual Meeting of Shareholders (2024 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 “Audit Committee 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 2024 Proxy Statement will be filed with the SEC within 120 days after the end of our 2023 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 and Chief 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 request to ALLETE, Inc., Attention: Secretary, 30 West
Superior St., Duluth, Minnesota 55802. Any amendment to the Code of Ethics or any waiver of the Code of Ethics 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 and Human Capital 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.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference herein from the “Compensation Discussion and Analysis,”
the “Compensation Committee Report,” the “Director Compensation” and the “Pay Versus Performance” sections in our 2024
Proxy Statement.

Information concerning the Company’s policy regarding incentive-based compensation received by current and former officers
in the event of a required accounting restatement is included in Exhibit 97 to this Form 10-K.

ALLETE, Inc. 2023 Form 10-K
61

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated by reference herein from the “Ownership of ALLETE Common Stock –
Securities Owned by Certain Beneficial Owners” and the “Ownership of ALLETE Common Stock – Securities Owned by
Directors and Management” sections in our 2024 Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth the shares of ALLETE common stock available for issuance under the Company's equity
compensation plans as of December 31, 2023:

Plan Category

Equity Compensation Plans Approved by
Security Holders
Equity Compensation Plans Not Approved
by Security Holders
Total

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants, and Rights (a)

Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and Rights (b)

Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans (c)

189,646

—

189,646

—

917,149

—

917,149

(a) Includes the following as of December 31, 2023: (i) 29,751 securities representing the performance shares (including accrued dividends)
granted under the executive long-term incentive compensation plan that vested but were not paid as of December 31, 2023; (ii) 81,747
securities representing the target number of performance share awards (including accrued dividends) granted under the executive long-
term incentive compensation plan that were unvested; and (iii) 78,148 director deferred stock units (including accrued dividends) under
the non-employee director compensation deferral plan. With respect to unvested performance share 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 shareholder return
objectives established for such awards. For additional information about the performance shares, including payout calculations, see our
2024 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-average exercise 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) 593,992 shares available for issuance under the executive long-term incentive compensation plan
in the form of options, rights, restricted stock units, performance share awards, and other grants as approved by the Executive
Compensation Committee of the Company’s Board of Directors; (ii) 274,834 shares available for issuance under the Non-Employee
Director Stock Plan as payment for a portion of the annual retainer payable to non-employee Directors; and (iii) 48,323 shares
available for issuance under the ALLETE and Affiliated Companies Employee Stock Purchase Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference herein from the “Corporate Governance” section in our
2024 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, upon request. Any amendment to this policy will be disclosed on our website at www.allete.com
promptly following the date of such amendment.

Item 14. Principal Accountant Fees and Services

Our independent registered public accounting firm is PricewaterhouseCoopers LLP, Minneapolis, MN, PCAOB ID: 238.

The information required by this Item is incorporated by reference herein from the “Audit Committee Report” section in our
2024 Proxy Statement.

ALLETE, Inc. 2023 Form 10-K
62

Item 15. Exhibits and Financial Statement Schedules

Part IV

(a)

(1)

Certain Documents Filed as Part of this Form 10-K.

Financial Statements

ALLETE

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheet as of December 31, 2023 and 2022

For the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Consolidated Statement of Cash Flows

Consolidated Statement of Equity

Notes to Consolidated Financial Statements

(2)

Financial Statement Schedules

Schedule II – ALLETE Valuation and Qualifying Accounts and Reserves

Page

74
75

129

All other schedules have been omitted either because the information is not required to be reported by ALLETE or
because the information is included in the Consolidated Financial Statements or the notes.
Exhibits including those incorporated by reference.

(3)

Exhibit
Number
*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)

*4(a)1

Bylaws, as amended effective April 13, 2020 (filed as Exhibit 3 to the April 14, 2020, Form 8-K, File No. 1-3548).

— Mortgage and Deed of Trust, dated as of September 1, 1945, between Minnesota Power & Light Company (now
ALLETE) and The Bank of New York Mellon (formerly Irving Trust Company) and Janet Lee (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:

Number

First
Second
Third
Fourth
Fifth
Sixth
Seventh
Eighth
Ninth
Tenth
Eleventh
Twelfth
Thirteenth
Fourteenth
Fifteenth
Sixteenth

Dated as of

Reference File

Exhibit

March 1, 1949
July 1, 1951
March 1, 1957
January 1, 1968
April 1, 1971
August 1, 1975
September 1, 1976
September 1, 1977
April 1, 1978
August 1, 1978
December 1, 1982
April 1, 1987
March 1, 1992
June 1, 1992
July 1, 1992
July 1, 1992

2-7826
2-9036
2-13075
2-27794
2-39537
2-54116
2-57014
2-59690
2-60866
2-62852
2-56649
33-30224
33-47438
33-55240
33-55240
33-55240

ALLETE, Inc. 2023 Form 10-K
63

7(b)
7(c)
2(c)
2(c)
2(c)
2(c)
2(c)
2(c)
2(c)
2(d)2
4(a)3
4(a)3
4(b)
4(b)
4(c)
4(d)

Exhibit
Number

Seventeenth
Eighteenth
Nineteenth
Twentieth
Twenty-first
Twenty-second
Twenty-third
Twenty-fourth
Twenty-fifth
Twenty-sixth
Twenty-seventh
Twenty-eighth
Twenty-ninth
Thirtieth
Thirty-first
Thirty-second
Thirty-third
Thirty-fourth
Thirty-fifth
Thirty-sixth
Thirty-seventh
Thirty-eighth
Thirty-ninth
Fortieth

Forty-first

Forty-second

Forty-third

Forty-fourth

February 1, 1993
July 1, 1993
February 1, 1997
November 1, 1997
October 1, 2000
July 1, 2003
August 1, 2004
March 1, 2005
December 1, 2005
October 1, 2006
February 1, 2008
May 1, 2008
November 1, 2008
January 1, 2009
February 1, 2010
August 1, 2010
July 1, 2012
April 1, 2013
March 1, 2014
June 1, 2014
September 1, 2014
September 1, 2015
April 1, 2018
March 1, 2019

33-50143
33-50143
1-3548 (1996 Form 10-K)
1-3548 (1997 Form 10-K)
333-54330
1-3548 (June 30, 2003, Form 10-Q)
1-3548 (Sept. 30, 2004, Form 10-Q)
1-3548 (March 31, 2005, Form 10-Q)
1-3548 (March 31, 2006, Form 10-Q)
1-3548 (2006 Form 10-K)
1-3548 (2007 Form 10-K)
1-3548 (June 30, 2008, Form 10-Q)
1-3548 (2008 Form 10-K)
1-3548 (2008 Form 10-K)
1-3548 (March 31, 2010, Form 10-Q)
1-3548 (Sept. 30, 2010, Form 10-Q)
1-3548 (July 2, 2012, Form 8-K)
1-3548 (April 2, 2013, Form 8-K)
1-3548 (March 31, 2014, Form 10-Q)
1-3548 (June 30, 2014, Form 10-Q)
1-3548 (Sept. 30, 2014, Form 10-Q)
1-3548 (Sept. 30, 2015, Form 10-Q)
1-3548 (March 31, 2018, Form 10-Q)
1-3548 (March 31, 2019, Form 10-Q)

August 1, 2020

1-3548 (Sept. 30, 2020, Form 10-Q)

September 1, 2021

1-3548 (Sept. 30, 2021, Form 10-Q)

August 1, 2022

1-3548 (Sept. 30, 2022, Form 10-Q)

April 1, 2023

1-3548 (June 30, 2023, Form 10-Q)

4(b)
4(c)
4(a)3
4(a)3
4(c)3
4
4(a)
4
4
4(a)3
4(a)3
4
4(a)3
4(a)4
4
4
4
4
4
4
4
4(a)
4
4(a)

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 Company and 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:

Number

Dated as of

Reference File

First

Second

Third

Fourth

Fifth

Sixth

Seventh

Eighth

Ninth

Tenth

Eleventh

Twelfth

Thirteenth

Fourteenth

Fifteenth

March 1, 1951

March 1, 1962

July 1, 1976

March 1, 1985

2-59690

2-27794

2-57478

2-78641

December 1, 1992

1-3548 (1992 Form 10-K)

March 24, 1994

1-3548 (1996 Form 10-K)

November 1, 1994

1-3548 (1996 Form 10-K)

January 1, 1997

1-3548 (1996 Form 10-K)

October 1, 2007

1-3548 (2007 Form 10-K)

October 1, 2007

1-3548 (2007 Form 10-K)

December 1, 2008

1-3548 (2008 Form 10-K)

December 2, 2013
May 29, 2018

1-3548 (2013 Form 10-K)
1-3548 (June 30, 2018, Form 10-Q)

June 14, 2021

1-3548 (June 30, 2021, Form 10-Q)

Exhibit

2(d)(1)

2(d)1

2(e)1

4(b)

4(b)1

4(b)2

4(b)3

4(c)3

4(c)4

4(c)3

4(c)3
4

4(a)

4(b)

*4(c)

— Note Purchase and Guarantee Agreement dated as of November 5, 2015, among Armenia Mountain Wind LLC, AMW I
Holding, LLC and the purchasers named therein (filed as Exhibit 4 to the November 12, 2015, Form 8-K, File No.
1-3548).

ALLETE, Inc. 2023 Form 10-K
64

Exhibit
Number
*4(d)

— Note Purchase Agreement, dated December 8, 2016, between ALLETE and Hartford Investment Management Company,
Northwestern Mutual Investment Management Company, The Northwestern Mutual Life Insurance Company and
Nationwide Life insurance Company (filed as Exhibit 4 to the December 12, 2016, Form 8-K, File No. 1-3548).

*4(e)

— Note Purchase Agreement, dated September 10, 2020, between ALLETE and the purchasers named therein (filed as

Exhibit 4 to the September 30, 2020, Form 10-Q, File No. 1-3548).

*4(f)

— Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4(h)

to the 2019 Form 10-K, File No. 1-3548).

*10(a)

— Power Purchase and Sale Agreement, dated as of May 29, 1998, between Minnesota Power, Inc. (now ALLETE) and

Square Butte Electric Cooperative (filed as Exhibit 10 to the June 30, 1998, Form 10-Q, File No. 1-3548).

*10(b)1

*10(b)2

*10(b)3

*10(b)4

— Amended and Restated Credit Agreement dated as of January 10, 2019 among ALLETE, as Borrower, the lenders party
thereto, JPMorgan Chase Bank, 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 the 2018 Form 10-K, File No. 1-3548).

— First Amendment to Credit Agreement dated May 15, 2019, among ALLETE, as Borrower, the lenders party thereto, 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).

— Second Amendment to Credit Agreement dated November 23, 2021, among ALLETE, as Borrower, the lenders party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent. (filed as Exhibit 10(b)3 to the 2021 Form 10-K, File
No. 1-3548).

— Third Amendment to Credit Agreement dated as of October 17, 2023, among ALLETE, as Borrower, the lenders party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent. (filed as Exhibit 10 to the Sept. 30, 2023, 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 the June 30, 2006, Form 10-Q, File No. 1-3548).

*10(c)2

*10(c)3

— 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).

— First Amendment to Amended and Restated Letter of Credit Agreement, dated as of June 1, 2013, between ALLETE and
Wells Fargo Bank, National Association, 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) to the 2009 Form 10-K, File No. 1-3548).

*+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, File No. 1-3548).

*+10(e)2

— ALLETE Executive Annual Incentive Plan Form of Award Effective 2020 (filed as Exhibit 10(e)8 to the 2019 Form 10-

K, File No. 1-3548).

*+10(e)3

— ALLETE Executive Annual Incentive Plan Form of Award Effective 2021 (filed as Exhibit 10(e)8 to the 2020 Form 10-

K, File No. 1-3548).

*+10(e)4

— ALLETE Executive Annual Incentive Plan Form of Award Effective 2022 (filed as Exhibit 10(e)9 to the 2021 Form 10-

K, File No. 1-3548).

*+10(e)5

— ALLETE Executive Annual Incentive Plan Form of Award Effective 2023 (filed as Exhibit 10(e)8 to the 2022 Form 10-

K, File No. 1-3548).

*+10(e)6

— ALLETE Executive Annual Incentive Plan Form of Award ALLETE Clean Energy Effective 2023 (filed as Exhibit

10(e)9 to the 2022 Form 10-K, File No. 1-3548).

+10(e)7

— ALLETE Executive Annual Incentive Plan, as amended and restated, effective December 21, 2023.

+10(e)8

— ALLETE Executive Annual Incentive Plan Form of Award Effective 2024.

+10(e)9

— ALLETE Executive Annual Incentive Plan Form of Award ALLETE Clean Energy Effective 2024.

*+10(f)1

— ALLETE and Affiliated Companies Supplemental Executive Retirement Plan (SERP I), as amended and restated,

effective January 1, 2009 (filed as Exhibit 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 Exhibit 10(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, 2021 (filed as Exhibit 10(f)5 to the 2021 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 October 27, 2023.

*+10(g)

— ALLETE Deferred Compensation Trust Agreement, as amended and restated, effective December 15, 2012 (filed as

Exhibit 10(j) to the 2012 Form 10-K, File No. 1-3548).

*+10(h)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(h)2

— 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).

ALLETE, Inc. 2023 Form 10-K
65

Exhibit
Number
*+10(h)3

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2018 (filed

as Exhibit 10(i)7 to the 2017 Form 10-K, File No. 1-3548).

*+10(h)4

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2018 (filed as

Exhibit 10(i)8 to the 2017 Form 10-K, File No. 1-3548).

*+10(h)5

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2019 (filed

as Exhibit 10(i)10 to the 2018 Form 10-K, File No. 1-3548).

*+10(h)6

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2019 (filed as

Exhibit 10(i)11 to the 2018 Form 10-K, File No. 1-3548).

*+10(h)7

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2020 (filed

as Exhibit 10(i)12 to the 2019 Form 10-K, File No. 1-3548).

*+10(h)8

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2020 (filed as

Exhibit 10(i)13 to the 2019 Form 10-K, File No. 1-3548).

*+10(h)9

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2021 (filed

as Exhibit 10(i)14 to the 2020 Form 10-K, File No. 1-3548).

*+10(h)10

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2021 (filed as

Exhibit 10(i)15 to the 2020 Form 10-K, File No. 1-3548).

*+10(h)11

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2022 (filed

as Exhibit 10(i)17 to the 2021 Form 10-K, File No. 1-3548).

*+10(h)12

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2022 (filed as

Exhibit 10(i)18 to the 2021 Form 10-K, File No. 1-3548).

*+10(h)13

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2023 (filed

as Exhibit 10(h)16 to the 2022 Form 10-K, File No. 1-3548).

*+10(h)14

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2023 (filed as

Exhibit 10(h)17 to the 2022 Form 10-K, File No. 1-3548).

+10(h)15

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Restricted Stock Unit Grant Effective 2024.

+10(h)16

— Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2024.

*+10(i)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(i)2

— ALLETE Non-Employee Director Stock Plan (As Amended and Restated Effective May 10, 2022) (filed as Exhibit 99,

File No. 333-265211).

*+10(j)3

— ALLETE Non-Employee Director Compensation Summary effective January 1, 2020 (filed as Exhibit 10(k)3 to the 2020

Form 10-K, File No. 1-3548).

*+10(j)4

— ALLETE Non-Employee Director Compensation Summary effective January 1, 2022 (filed as Exhibit 10(k)4 to the 2021

Form 10-K, File No. 1-3548).

*+10(j)5

— Amended and Restated ALLETE Non-Employee Director Stock Plan, effective May 10, 2022 (filed as Exhibit 99 to

Form S-8, File No. 333-265211).

+10(j)6

— ALLETE Non-Employee Director Compensation Summary effective January 1, 2023 (filed as Exhibit 10(j)6 to the 2022

Form 10-K, File No. 1-3548).

*+10(k)1

— Minnesota Power (now ALLETE) Director Compensation Deferral Plan Amended and Restated, effective January 1,

1990 (filed as Exhibit 10(ac) to the 2002 Form 10-K, File No. 1-3548).

*+10(k)2

— Amendment to the Minnesota Power (now ALLETE) Director Compensation Deferral Plan, effective October 1, 2003

(filed as Exhibit 10(aa)2 to the 2003 Form 10-K, File No. 1-3548).

*+10(k)3

— Amendment to the ALLETE Director Compensation Deferral Plan, effective January 1, 2005 (filed as Exhibit 10(c) to

the March 31, 2005, Form 10-Q, File No. 1-3548).

*+10(k)4

— Amendment to the ALLETE Director Compensation Deferral Plan, effective October 1, 2006 (filed as Exhibit 10(d) to

the September 30, 2006, Form 10-Q, File No. 1-3548).

*+10(k)5

— Amendment to the ALLETE Director Compensation Deferral Plan, effective July 24, 2012 (filed as Exhibit 10(n)5 to the

2012 Form 10-K, File No. 1-3548).

*+10(l)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, File No. 1-3548).

*+10(l)2

— ALLETE Non-Employee Director Compensation Deferral Plan II, as amended and restated, effective July 24, 2012 (filed

as Exhibit 10(o)2 to the 2012 Form 10-K, File No. 1-3548).

*+10(m)

— ALLETE Non-Employee Director Compensation Trust Agreement, as amended and restated, effective December 15,

2012 (filed as Exhibit 10(p)2 to the 2012 Form 10-K, File No. 1-3548).

*+10(n)1

— ALLETE and Affiliated Companies Change in Control Severance Plan, as amended and restated, effective April 23, 2018

(filed as Exhibit 10(c) to the March 31, 2018, Form 10-Q, File No. 1-3548).

ALLETE, Inc. 2023 Form 10-K
66

Exhibit
Number
+10(n)2

— ALLETE and Affiliated Companies Change in Control Severance Plan, as amended and restated, effective October 27,

2023.

— Subsidiaries of the Registrant.

— 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.

— 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.

— Mine Safety.

— Policy Relating to Recovery of Erroneously Awarded Compensation.

— ALLETE News Release dated February 20, 2024, announcing earnings for the year ended December 31, 2023.
(This 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 deemed incorporated by reference in any filing under the Securities Act of
1933, except as shall be expressly set forth by specific reference in such filing.)

101.INS

— XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags

are embedded within the Inline XBRL document.

101.SCH

— XBRL Schema

101.CAL

— XBRL Calculation

101.DEF

— XBRL Definition

101.LAB

— XBRL Label

101.PRE

— XBRL Presentation

104

— Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, other long-term debt instruments are not filed as exhibits because the total
amount of debt authorized under 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 Summary

None.

ALLETE, Inc. 2023 Form 10-K
67

Pursuant 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 by the undersigned, thereunto duly authorized.

Signatures

Dated: February 20, 2024

ALLETE, Inc.

/s/ Bethany M. Owen

Bethany M. Owen

Chair, President and Chief Executive Officer

Pursuant 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 in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Bethany M. Owen
Bethany M. Owen

Chair, President and Chief Executive Officer
(Principal Executive Officer) and Director

February 20, 2024

/s/ Steven W. Morris
Steven W. Morris

Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)

February 20, 2024

ALLETE, Inc. 2023 Form 10-K
68

Signature

/s/ George G. Goldfarb
George G. Goldfarb

/s/ James J. Hoolihan
James J. Hoolihan

/s/ Madeleine W. Ludlow
Madeleine W. Ludlow

/s/ Charles R. Matthews
Charles R. Matthews

/s/ Susan K. Nestegard
Susan K. Nestegard

/s/ Douglas C. Neve
Douglas C. Neve

/s/ Barbara A. Nick
Barbara A. Nick

/s/ Robert P. Powers
Robert P. Powers

/s/ Charlene A. Thomas
Charlene A. Thomas

Signatures (Continued)

Title

Director

Date

February 20, 2024

ALLETE, Inc. 2023 Form 10-K
69

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of ALLETE, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of ALLETE, Inc. and its subsidiaries (the “Company”) as of
December 31, 2023 and 2022, and the related 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, 2023, including the related notes and financial
statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the 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 December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial 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 and regulations 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 reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control 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 financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ALLETE, Inc. 2023 Form 10-K
70

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required 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 the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Accounting for the Effects of Regulatory Matters

As described in Note 4 to the consolidated financial statements, the Company’s regulated utility operations are subject to
accounting standards for the effects of certain types of regulation. As of December 31, 2023, there was $435 million of
regulatory assets and $578 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 obligations to make refunds to
customers and amounts collected in rates for which the related costs have not yet been incurred. Management assesses quarterly
whether regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. As disclosed by
management, these standards require the Company to reflect the effect of regulatory decisions in its financial statements. This
assessment considers factors such as, but not limited to, changes in the regulatory environment and recent rate orders to other
regulated entities under the same jurisdiction. If future recovery or refund of costs becomes no longer probable, the assets 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 critical audit matter is the 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 financial statements. These procedures included testing the effectiveness of controls relating to
management’s implementation of new regulatory orders, changes to existing regulatory orders, and assessing the recoverability
of costs. These procedures also included, among others, evaluating (i) the reasonableness of management’s assessment of
impacts arising from correspondence with regulators and changes in laws and regulations, (ii) management’s judgments related
to the recoverability of regulatory assets and the establishment of regulatory liabilities, and (iii) the sufficiency of the
disclosures in the consolidated financial statements. Testing the regulatory assets and liabilities involved considering the
provisions and formulas outlined in rate orders, other regulatory correspondence, and application of relevant regulatory
precedents.

/s/ PricewaterhouseCoopers LLP

Minneapolis, Minnesota
February 20, 2024

We have served as the Company’s auditor since 1963.

ALLETE, Inc. 2023 Form 10-K
71

CONSOLIDATED FINANCIAL STATEMENTS

As of December 31
Millions
Assets
Current Assets

ALLETE Consolidated Balance Sheet

2023

2022

Cash and Cash Equivalents
Accounts Receivable (Less Allowance of $1.6 and $1.6 )
Inventories – Net
Prepayments and Other
Total Current Assets

Property, Plant and Equipment – Net
Regulatory Assets
Equity Investments
Goodwill and Intangible Assets – Net
Other Non-Current Assets
Total Assets
Liabilities, Redeemable Non-Controlling Interest and Equity
Liabilities
Current Liabilities

Accounts Payable
Accrued Taxes
Accrued Interest
Long-Term Debt Due Within One Year
Other

Total Current Liabilities

Long-Term Debt
Deferred Income Taxes
Regulatory Liabilities
Defined Benefit Pension and Other Postretirement Benefit Plans
Other Non-Current Liabilities
Total Liabilities

Commitments, Guarantees and Contingencies (Note 9)
Redeemable Non-Controlling Interest
Equity
ALLETE Equity

Common Stock Without Par Value, 80.0 Shares Authorized, 57.6 and 57.2 Shares Issued
and Outstanding
Accumulated Other Comprehensive Loss
Retained Earnings

Total ALLETE Equity

Non-Controlling Interest in Subsidiaries

Total Equity

Total Liabilities, Redeemable Non-Controlling Interest and Equity

The accompanying notes are an integral part of these statements.

ALLETE, Inc. 2023 Form 10-K
72

$71.9
137.2
175.4
83.6
468.1
5,013.4
425.4
331.2
155.4
262.9
$6,656.4

$102.2
51.0
21.1
111.4
91.9
377.6
1,679.9
192.7
574.0
160.8
264.3
3,249.3

$36.4
137.9
455.9
87.8
718.0
5,004.0
441.0
322.7
155.6
204.3
$6,845.6

$103.0
69.1
20.5
272.6
251.0
716.2
1,648.2
158.1
526.1
179.7
269.0
3,497.3

0.5

—

1,803.7
(20.5)
1,026.4
2,809.6
597.0
3,406.6
$6,656.4

1,781.5
(24.4)
934.8
2,691.9
656.4
3,348.3
$6,845.6

ALLETE Consolidated Statement of Income

Year Ended December 31
Millions Except Per Share Amounts
Operating Revenue

Contracts with Customers – Utility
Contracts with Customers – Non-utility
Other – Non-utility

Total Operating Revenue

Operating Expenses

Fuel, Purchased Power and Gas – Utility
Transmission Services – Utility
Cost of Sales – Non-utility
Operating and Maintenance
Depreciation and Amortization
Taxes Other than Income Taxes
Total Operating Expenses

Operating Income
Other Income (Expense)

Interest Expense
Equity Earnings
Other

Total Other Income (Expense)

Income Before Non-Controlling Interest and Income Taxes
Income Tax Expense (Benefit)
Net Income

Net Loss Attributable to Non-Controlling Interest

Net Income Attributable to ALLETE
Average Shares of Common Stock

Basic
Diluted

Basic Earnings Per Share of Common Stock
Diluted Earnings Per Share of Common Stock

2023

2022

2021

$1,238.3
636.4
5.1
1,879.8

$1,259.3
303.8
7.6
1,570.7

$1,227.9
179.9
11.4
1,419.2

482.9
88.2
473.5
345.3
251.8
57.2
1,698.9
180.9

(80.8)
21.7
85.0
25.9
206.8
27.9
178.9
(68.2)
$247.1

57.3
57.4
$4.31
$4.30

545.5
76.7
182.8
318.9
242.2
70.4
1,436.5
134.2

(75.2)
18.7
22.4
(34.1)
100.1
(31.2)
131.3
(58.0)
$189.3

55.9
56.0
$3.38
$3.38

562.4
75.3
68.8
259.2
231.7
70.5
1,267.9
151.3

(69.1)
20.0
8.7
(40.4)
110.9
(26.9)
137.8
(31.4)
$169.2

52.4
52.5
$3.23
$3.23

The accompanying notes are an integral part of these statements.

ALLETE, Inc. 2023 Form 10-K
73

ALLETE Consolidated Statement of Comprehensive Income
2023

2022

2021

Year Ended December 31
Millions
Net Income
Other Comprehensive Income (Loss)
Unrealized Gain (Loss) on Securities

Net of Income Tax Expense (Benefit) of $0.1, $(0.2) and $(0.1)

Defined Benefit Pension and Other Postretirement Benefit Plans
Net of Income Tax Expense (Benefit) of $2.4, $(0.1) and $3.0

Total Other Comprehensive Income (Loss)

Total Comprehensive Income

Net Loss Attributable to Non-Controlling Interest

Total Comprehensive Income Attributable to ALLETE

$178.9

$131.3

$137.8

0.3

(0.4)

(0.1)

3.6
3.9
182.8
(68.2)
$251.0

(0.2)
(0.6)
130.7
(58.0)
$188.7

7.4
7.3
145.1
(31.4)
$176.5

The accompanying notes are an integral part of these statements.

ALLETE, Inc. 2023 Form 10-K
74

ALLETE Consolidated Statement of Cash Flows

Year Ended December 31

Millions

Operating Activities

Net Income
Adjustments to Reconcile Net Income to Cash provided by Operating Activities:
AFUDC – Equity
Income from Equity Investments – Net of Dividends
(Gain) / Loss on Investments and Property, Plant and Equipment
Depreciation Expense
Amortization of PSAs
Amortization of Other Intangible Assets and Other Assets
Deferred Income Tax Expense (Benefit)
Share-Based and ESOP Compensation Expense
Defined Benefit Pension and Other Postretirement Plan Expense (Benefit)
Bad Debt Expense
Fuel Adjustment Clause
Provision (Payments) for Interim Rate Refund
Changes in Operating Assets and Liabilities

Accounts Receivable
Inventories
Prepayments and Other
Accounts Payable
Other Current Liabilities

Cash Contributions to Defined Benefit Pension Plans
Changes in Regulatory and Other Non-Current Assets
Changes in Regulatory and Other Non-Current Liabilities

Cash provided by Operating Activities

Investing Activities

Proceeds from Sale of Available-for-sale Securities
Payments for Purchase of Available-for-sale Securities
Acquisitions of Subsidiaries – Net of Cash and Restricted Cash Acquired
Payments for Equity Investments
Additions to Property, Plant and Equipment
Other Investing Activities

Cash used in Investing Activities

Financing Activities

Proceeds from Issuance of Common Stock
Equity Issuance Costs
Proceeds from Issuance of Short-Term and Long-Term Debt
Repayments of Short-Term and Long-Term Debt
Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs
Distributions to Non-Controlling Interest
Dividends on Common Stock
Other Financing Activities

Cash provided (used in) by Financing Activities
Change in Cash, Cash Equivalents and Restricted Cash

2023

2022

2021

$178.9 $131.3 $137.8

(3.6)
1.0
—
251.7
(5.2)
7.1
17.6
7.3
(6.1)
1.3
44.0
(18.4)

1.8
277.1
(7.9)
(4.0)
(157.6)
(17.3)
15.6
2.0
585.3

1.0
(1.2)
—
(8.2)
(271.2)
(4.0)
(283.6)

14.9
—
437.0
(566.7)
17.8
(8.5)
(155.5)
(1.5)
(262.5)
39.2

(2.7)
2.4
1.2
242.0
(7.6)
8.3
(38.5)
4.9
(3.0)
1.9
15.1
18.4

(14.0)
(256.1)
(21.5)
(1.3)
116.2
—
24.1
0.2
221.3

2.2
(2.4)
(155.0)
(5.9)
(220.5)
(2.4)
(384.0)

248.0
(8.1)
785.4
(877.0)
155.7
(1.7)
(145.9)
(1.2)
155.2
(7.5)

(2.6)
2.2
(0.8)
231.6
(11.4)
9.9
(26.9)
5.9
4.3
1.2
(56.4)
—

(13.0)
(23.5)
(0.5)
15.0
28.0
(10.3)
(12.0)
(15.0)
263.5

6.4
(3.6)
—
(17.6)
(479.5)
9.1
(485.2)

69.9
—
733.0
(552.9)
90.9
(3.1)
(131.9)
(1.7)
204.2
(17.5)

Cash, Cash Equivalents and Restricted Cash at Beginning of Period

Cash, Cash Equivalents and Restricted Cash at End of Period

40.2

47.7

65.2

$79.4

$40.2

$47.7

The accompanying notes are an integral part of these statements.

ALLETE, Inc. 2023 Form 10-K
75

ALLETE Consolidated Statement of Equity

2023

2022

2021

Millions Except Per Share Amounts

Equity
Common Stock
Balance, Beginning of Period

Common Stock Issued

Balance, End of Period

Accumulated Other Comprehensive Loss
Balance, Beginning of Period

Other Comprehensive Income – Net of Income Taxes

Unrealized Gain (Loss) on Debt Securities

Defined Benefit Pension and Other Postretirement Plans

Balance, End of Period

Retained Earnings
Balance, Beginning of Period

Net Income Attributable to ALLETE

Common Stock Dividends

Adjustment of Redeemable Non-Controlling Interest

Balance, End of Period

Non-Controlling Interest in Subsidiaries
Balance, Beginning of Period

Proceeds from Non-Controlling Interest in Subsidiaries – Net of Issuance Costs
Net Loss Attributable to Non-Controlling Interest

Reclassification of Redeemable Non-Controlling Interest to Current Liabilities

Distributions to Non-Controlling Interest

Balance, End of Period

$1,781.5 $1,536.7 $1,460.9

22.2

244.8

75.8

1,803.7

1,781.5

1,536.7

(24.4)

(23.8)

(31.1)

0.3

3.6

(0.4)

(0.2)

(0.1)

7.4

(20.5)

(24.4)

(23.8)

934.8

247.1

891.4

189.3

856.0

169.2

(155.5)

(145.9)

(131.9)

—

(1.9)

1,026.4

934.8

891.4

656.4

9.9
(60.8)

—

(8.5)

533.2

182.9
(58.0)

—

(1.7)

505.6

90.9
(31.4)

(28.8)

(3.1)

597.0

656.4

533.2

Total Equity

$3,406.6 $3,348.3 $2,937.5

Redeemable Non-Controlling Interest

Balance, Beginning of Period

Proceeds from Non-Controlling Interest in Subsidiaries
Net Loss Attributable to Non-Controlling Interest

Total Redeemable Non-Controlling Interest

—

$7.9

(7.4)

$0.5

—

Dividends Per Share of Common Stock

$2.71

$2.60

$2.52

The accompanying notes are an integral part of these statements.

ALLETE, Inc. 2023 Form 10-K
76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Financial Statement Preparation. References in this report to “we,” “us,” and “our” are to ALLETE and its subsidiaries,
collectively. We prepare our financial statements in conformity with GAAP. These principles require management to make
informed judgments, best estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses. Actual results could differ from those estimates. The presentation of certain prior period amounts on the Consolidated
Financial Statements have been adjusted for comparative purposes.

Subsequent Events. The Company performed an evaluation of subsequent events for potential recognition and disclosure
through the time of the financial statements issuance.

Principles of Consolidation. Our Consolidated Financial Statements include the accounts of ALLETE, all of our majority
owned subsidiary companies and variable 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 variable interest 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 to finance its activities without additional subordinated
financial support, equity owners are unable to direct the activities that most significantly impact the legal entity’s economic
performance (or they possess disproportionate voting rights in relation to the economic interest in the legal entity), or the equity
owners lack the obligation 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 VIE when 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 accounting guidance for “Variable Interest Entities.” In
determining whether ALLETE is the primary beneficiary of a VIE, management considers whether ALLETE has the power 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 the VIE. The accounting guidance for VIEs applies to certain ALLETE Clean Energy wind energy facilities,
certain New Energy Equity facilities, and our investment in Nobles 2. (See Tax Equity Financing.)

Business Segments. We present two reportable segments: Regulated Operations and ALLETE Clean Energy. Our segments
were determined in accordance with the guidance on segment reporting. We measure performance of our operations through
budgeting and monitoring of contributions to consolidated net income by each business segment.

ALLETE Clean Energy focuses on developing, acquiring, and operating clean and renewable energy projects. ALLETE Clean
Energy currently owns and operates, in seven states, more than 1,200 MW of nameplate capacity wind energy generation with a
majority contracted under PSAs of various durations. In addition, 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.

Corporate and Other is comprised of New Energy, our investment in Nobles 2, South Shore Energy, BNI Energy, ALLETE
Properties, other business development and corporate expenditures, unallocated interest expense, a small amount of non-rate
base generation, land holdings in Minnesota, and earnings on cash and investments.

New Energy is a renewable energy development company with a primary focus on solar and storage facilities while also
offering comprehensive operations, maintenance and asset management services.

Our investment in Nobles 2 represents a 49 percent equity interest in Nobles 2, the entity that owns and operates a 250 MW
wind energy facility in southwestern Minnesota pursuant to a 20-year PPA with Minnesota Power.

ALLETE, Inc. 2023 Form 10-K
77

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

BNI Energy mines and sells lignite coal to two North Dakota mine-mouth generating units, one of which is Square Butte. In
2023, 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.)

ALLETE Properties represents our legacy Florida real estate investment. Our strategy incorporates the possibility of a bulk sale
of the entire ALLETE Properties portfolio. Proceeds from a bulk sale would be strategically deployed to support growth at our
Regulated Operations and ALLETE Clean Energy. ALLETE Properties 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. As of December 31, 2023, and 2022, restricted cash amounts included in Prepayments and Other
on the Consolidated Balance Sheet include deposits required under a tax equity financing agreement and collateral deposits
required under an ALLETE Clean Energy loan agreement. The restricted cash amounts included in Other Non-Current Assets
represent collateral deposits required under an ALLETE Clean Energy loan agreement and PSAs. The following table provides
a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet that aggregate to
the amounts presented in the Consolidated Statement of Cash Flows.

Cash, Cash Equivalents and Restricted Cash

As of December 31
Millions

Cash and Cash Equivalents

Restricted Cash included in Prepayments and Other

Restricted Cash included in Other Non-Current Assets

Cash, Cash Equivalents and Restricted Cash on the
Consolidated Statement of Cash Flows

Supplemental Statement of Cash Flow Information.

Consolidated Statement of Cash Flows
Year Ended December 31
Millions

2023

$71.9

5.1

2.4

$79.4

2022

$36.4

1.5

2.3

$40.2

2021

$45.1

0.3

2.3

$47.7

Cash Paid During the Period for Interest – Net of Amounts Capitalized

Cash Paid for Income Taxes

Noncash Investing and Financing Activities

Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant
and Equipment
Reclassification of Property, Plant and Equipment to Inventory (a)

Reclassification of Redeemable Non-Controlling Interest to Current Liabilities (b)

Capitalized Asset Retirement Costs

AFUDC–Equity

2023

2022

2021

$80.5
$19.5

$72.8
$6.0

$66.8
—

$2.2

—

$5.8

$3.6

$(9.6)

$99.7

—

$11.8

$2.7

$(14.0)

—

$30.6

$16.9

$2.6

(a) The decommissioning of the existing Northern Wind assets resulted in a reclassification from Property, Plant and Equipment – Net to
Inventories – Net in the second quarter of 2022 as they were repowered and subsequently sold to a subsidiary of Xcel Energy Inc. In the
third quarter of 2022, safe harbor equipment was transferred to the project entity resulting in an additional reclassification from
Property, Plant and Equipment – Net to Inventories – Net.

(b) Amount reclassified to Current Liabilities resulting from the exercise of an option to buy out a non-controlling interest.

ALLETE, Inc. 2023 Form 10-K
78

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounts Receivable. Accounts receivable are reported on the Consolidated Balance Sheet net of an allowance for doubtful
accounts. The allowance is based on our evaluation of the receivable portfolio under current conditions, overall portfolio
quality, review of specific situations and such other factors that, in our judgment, deserve recognition in estimating losses.

Accounts Receivable
As of December 31
Millions
Trade Accounts Receivable

Billed
Unbilled
Less: Allowance for Doubtful Accounts

Total Trade Accounts Receivable
Income Taxes Receivable
Total Accounts Receivable

2023

2022

$106.8
23.8
1.6
129.0
8.2
$137.2

$107.1
29.2
1.6
134.7
3.2
$137.9

Concentration of Credit Risk. We are subject to concentration of credit risk primarily as a result of accounts receivable.
Minnesota Power sells electricity to eight Large Power Customers. Receivables from these customers totaled $11.2 million as
of December 31, 2023 ($11.3 million as of December 31, 2022). Minnesota Power does not obtain collateral to support utility
receivables, but monitors the credit standing of major customers. In addition, Minnesota Power, as permitted by the MPUC,
requires its taconite-producing Large Power Customers to pay weekly for electric usage based on monthly energy usage
estimates, which allows us to closely manage collection of amounts due. Minnesota Power’s taconite customers, which are
currently owned by two entities at the end of 2023, accounted for 32 percent of Regulated Operations operating revenue and
21 percent of consolidated operating revenue in 2023 (32 percent of Regulated Operations operating revenue and 26 percent of
consolidated operating revenue in 2022 and 32 percent of Regulated Operations operating revenue and 28 percent of
consolidated operating revenue in 2021).

Long-Term Finance Receivables. Long-term finance receivables relating to our real estate operations are collateralized by
property sold, accrue interest at market-based rates and are net of an allowance for doubtful accounts. We assess delinquent
finance receivables by comparing the balance of such receivables to the estimated 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. We estimate 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 debt securities are included in accumulated other comprehensive income (loss), net of tax.
Unrealized gains and losses on available-for-sale equity securities are recognized 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 average cost 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 31
Millions
Fuel (a)
Materials and Supplies
Renewable Energy Facilities Under Development (b)
Total Inventories – Net

2023

2022

$27.2
115.7
32.5
$175.4

$33.4
75.1
347.4
$455.9

(a) Fuel consists primarily of coal inventory at Minnesota Power.
(b) Renewable Energy Facilities Under Development consists primarily of project costs related to renewable energy development projects at
New Energy. As of December 31, 2022, it consisted primarily of project costs related to ALLETE Clean Energy’s Northern Wind and
Red Barn wind projects sold in the first quarter of 2023 and the second quarter of 2023, respectively. (See Other Current Liabilities.)

ALLETE, Inc. 2023 Form 10-K
79

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment. Property, plant and equipment are recorded at original cost and are reported on the
Consolidated Balance Sheet net of accumulated depreciation. Expenditures for additions, significant replacements,
improvements and major plant overhauls are capitalized; maintenance and repair costs are expensed as incurred. Gains or losses
on property, plant and equipment for Corporate and Other operations are recognized when they are retired or otherwise
disposed. When property, plant and equipment in our Regulated Operations and ALLETE Clean Energy segments are retired or
otherwise disposed, no gain or loss is recognized in accordance with the accounting standards for component depreciation
except for certain circumstances where the retirement is unforeseen or unexpected. Our Regulated Operations capitalize
AFUDC, which includes both an interest and equity component. AFUDC represents the cost of both debt and equity funds used
to finance utility plant additions during construction periods. AFUDC amounts capitalized are included in rate base and are
recovered 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 book value of retired plant assets. The MPUC order for Minnesota Power’s 2015 IRP directed
Minnesota Power to retire Boswell Units 1 and 2, which occurred in the fourth quarter of 2018. As part of the 2016 general
retail rate case, the MPUC allowed recovery of the remaining book value of Boswell Units 1 and 2 through 2022. Minnesota
Power’s latest IRP, which was approved by the MPUC in an order dated January 9, 2023, includes ceasing coal operations at
Boswell Units 3 and 4 by 2030 and 2035, respectively. Boswell Unit 3 and Unit 4 have a net book value of approximately
$220 million and $420 million, respectively, as of December 31, 2023. (See Note 4. Regulatory Matters.) Minnesota Power also
retired Taconite Harbor in the first quarter of 2023 consistent with its latest IRP. As part of the 2022 general retail rate case, the
MPUC allowed recovery of the remaining book value of Taconite Harbor through 2026. We do not expect to record any
impairment charge as a result of these operating changes at Taconite Harbor and Boswell. In addition, we expect to be able to
continue depreciating these assets for at least their established remaining useful lives; however, we are unable to predict the
impact of regulatory outcomes resulting in changes to their established remaining useful lives.

Impairment of Long-Lived Assets. We review our long-lived assets for indicators of impairment in accordance with the
accounting standards for property, plant and equipment on a quarterly basis. This includes our property, plant and equipment
(see Property, Plant and Equipment) and land inventory. Land inventory is accounted 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 for property, 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 by comparing 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 lowest level 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 our expectations
related to: management’s best estimate of future use; sales prices; holding period and timing of sales; method of disposition;
and future expenditures necessary to maintain the operations.

We continue to monitor changes in the broader energy markets along with wind resource expectations that could indicate
impairment at ALLETE Clean Energy wind energy facilities upon contract expirations. A decline in energy prices or lower
wind resource expectations could result in a future impairment.

In 2023, 2022 and 2021 there were triggering events identified for our property, plant, and equipment at certain ALLETE Clean
Energy wind energy facilities. A recoverability test was performed indicating that the undiscounted cash flows adequately
supported the property, plant and equipment book values. As a result, no impairment was recorded in 2023, 2022 or 2021.

Derivatives. ALLETE is exposed to certain risks relating to its business operations that can be managed through the use of
derivative instruments. ALLETE may enter into derivative instruments to manage those risks including interest rate risk related
to certain variable-rate borrowings, and commodity price and transmission congestion cost risk related to sales to electric
customers. We have determined that either these agreements are immaterial to the financial statements, are not derivatives, or, if
they are derivatives, the agreements qualify for the normal purchases and normal sales exception to derivative accounting
guidance; therefore, derivative accounting is not required.

ALLETE, Inc. 2023 Form 10-K
80

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.)

Goodwill. Goodwill is the excess of the purchase price (consideration transferred) over the estimated fair value of net assets of
acquired businesses. In accordance with GAAP, goodwill is not amortized. Goodwill is assessed annually in the fourth quarter
for impairment and whenever an event occurs or circumstances change that would indicate the carrying amount may be
impaired. Impairment testing for goodwill is done at the reporting unit level.

As of the date of our annual goodwill impairment testing in 2023, the Company elected to bypass the qualitative assessment of
goodwill for impairment, proceeding directly to the two-step impairment test for the New Energy reporting unit. In performing
Step 1 of the impairment test, we compared the fair value of the reporting unit to its carrying value including goodwill. If the
carrying value including goodwill were to exceed the fair value of a reporting unit, Step 2 of the impairment test would be
performed. Step 2 of the impairment test requires the carrying value of goodwill to be reduced to its fair value, if lower, as of
the test date.

For Step 1 of the impairment test, we estimated the reporting unit's fair value using standard valuation techniques, including
techniques which use estimates of projected future results and cash flows to be generated by the reporting unit. Such techniques
generally include a terminal value that utilizes a growth rate on debt-free cash flows. These cash flow valuations involve a
number of estimates that require broad assumptions and significant judgment by management regarding future performance.
Our annual impairment test in 2023 indicated that the estimated fair value of New Energy exceeded its carrying value, and
therefore no impairment existed. The fair value of the reporting unit was determined using a discounted cash flow model, using
significant assumptions which included a discount rate of 14 percent, cash flow forecasts through 2028, gross margins, and a
terminal growth rate of 3.5 percent.

Other Non-Current Assets

As of December 31

Millions

Contract Assets (a)

ALLETE Properties

Restricted Cash

Other Postretirement Benefit Plans

Other
Total Other Non-Current Assets

2023

2022

$18.5

10.8

2.4

106.3

124.9

$262.9

$21.0

19.1

2.3

58.8

103.1

$204.3

(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 of the respective agreements as a reduction to revenue.

Other Current Liabilities

As of December 31

Millions

Customer Deposits (a)

PSAs

Provision for Interim Rate Refund

Manufactured Gas Plant (b)

Other

Total Other Current Liabilities

2023

2022

$7.4

6.0

—

0.8

77.7

$91.9

$150.7

6.1

18.4

14.7

61.1

$251.0

(a) Primarily related to deposits received by ALLETE Clean Energy for the Northern Wind project sold in the first quarter of 2023 and the

Red Barn wind project sold in the second quarter of 2023. (See Inventories – Net.)

(b) The manufactured gas plant represents the current liability for remediation of a former manufactured gas plant site located in Superior,

Wisconsin, and formerly operated by SWL&P. (See Note 9. Commitments, Guarantees and Contingencies.)

ALLETE, Inc. 2023 Form 10-K
81

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Other Non-Current Liabilities
As of December 31
Millions
Asset Retirement Obligation (a)
PSAs
Other
Total Other Non-Current Liabilities

2023

2022

$202.9
20.9
40.5
$264.3

$200.4
26.9
41.7
$269.0

(a) The asset retirement obligation is primarily related to our Regulated Operations and is funded through customer rates over the life of the
related assets. Additionally, BNI Energy funds its obligation through its cost-plus coal supply agreements for which BNI Energy has
recorded a receivable of $37.2 million in Other Non-Current Assets on the Consolidated Balance Sheet as of December 31, 2023
($32.4 million as of December 31, 2022).

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 and finance leases are
included in Other Non-Current Assets, Other Current Liabilities and Other Non-Current Liabilities, respectively, in our
Consolidated Balance Sheet.

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 arising from the lease. Operating and finance lease right-of-use assets and lease liabilities are
recognized at the commencement date based on the estimated present value of lease payments 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 estimated incremental
borrowing rate using information available at the lease commencement date. The operating and finance lease right-of-use assets
includes lease payments to be made during 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 at lease commencement that we will exercise that option, we include those rental payments in our calculation of the
right-of-use asset and lease liability. Lease and rent expense are recognized on a straight-line basis over the lease term for
operating leases. Finance leases recognize interest expense using the interest expense method over the lease term and
amortization expense on a straight-line basis over the shorter of the useful life of the asset or the lease term, unless a buy out
option is reasonably certain to be exercised, for which we then amortize on a straight-line basis over the useful life of the asset.
Leases with a term of 12 months or less are not recognized on the Consolidated Balance Sheet.

The majority of our operating leases are for heavy equipment, vehicles and land with fixed monthly payments which we group
into two categories: Vehicles and Equipment; and Land and Other. Our largest operating lease is for the drag line at BNI
Energy which includes a termination payment at the end of the lease term if we 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 liability recorded.
None of our other leases contain residual value guarantees. We have one finance lease for heavy equipment which includes a
purchase option we are reasonably certain to exercise when the lease terminates.

ALLETE, Inc. 2023 Form 10-K
82

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leases (Continued)

Additional information on the components of lease cost and presentation of cash flows were as follows:

As December 31

Millions

Operating Lease Cost

Finance Lease Cost

Other Information:

Operating Cash Flows From Operating Leases

Financing Cash Flows From Finance Leases

Additional information related to leases were as follows:

As of December 31

Millions

Balance Sheet Information Related to Leases:

Operating Lease Other Non-Current Assets

Finance Lease Other Non-Current Assets

Total Lease Right-of-use Assets

Operating Lease Other Current Liabilities

Finance Lease Other Current Liabilities

Operating Lease Other Non-Current Liabilities

Finance Lease Other Non-Current Liabilities

Total Lease Liabilities

Income Statement Information Related to Leases:

Operating Lease Rent Expense

Finance Lease Amortization Expense

Total Operating and Finance Lease Expenses

Weighted Average Remaining Lease Term (Years):

Operating Leases - Vehicles and Equipment
Operating Leases - Land and Other

Finance Leases - Vehicles and Equipment

Weighted Average Discount Rate:

Operating Leases - Vehicles and Equipment

Operating Leases - Land and Other

Finance Leases - Vehicles and Equipment

ALLETE, Inc. 2023 Form 10-K
83

2023

2022

$5.0

$0.1

$5.0

$0.2

$6.3

—

$6.3

—

2023

2022

$10.7

2.1

$12.8

$3.0

0.4

7.7

1.6

$12.7

—

$12.7

$3.2

—

9.3

—

$12.7

$12.5

$5.0

0.1

$5.1

3
12

4.0 %

5.0 %

5.4 %

$6.3

—

$6.3

4
16

3.9 %

— %

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leases (Continued)

Maturities of operating and finance lease liabilities as of December 31, 2023, were as follows:

Millions

2024

2025

2026

2027

2028

Thereafter

Total Lease Payments Due

Less: Imputed Interest

Total Lease Obligations

Less: Current Lease Obligations

Total Long-term Lease Obligations

Operating

$3.2

3.2

4.1

0.2

1.2

15.1

4.4

10.7

3.0

$7.7

Finance

$0.4

0.4

0.5

0.6

—

2.3

0.3

2.0

0.4

$1.6

Environmental Liabilities. We review environmental matters on a quarterly basis. Accruals for environmental matters are
recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based
on current law and existing technologies. Accruals are adjusted as assessment and remediation efforts progress, or as additional
technical or legal information becomes available. Accruals for environmental liabilities are included in the Consolidated
Balance Sheet at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. Costs related to
environmental contamination 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 of water 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 paper and pulp.

Contracts with Customers – Non-utility includes sales of goods and services to customers from ALLETE Clean Energy and our
Corporate and 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 and estimated market prices for PSAs that were assumed during the acquisition of various
wind energy facilities.

Revenue Recognition. Revenue 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 in exchange for those products or services. Revenue is recognized
net of allowance for returns and any taxes collected from customers, which are subsequently remitted to the appropriate
governmental authorities. We account for shipping and handling activities that occur after the customer obtains control of goods
as a cost rather than an additional performance obligation thereby recognizing revenue at time of shipment and accruing
shipping and handling costs when control transfers 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 our performance completed to date; therefore, we may
recognize revenue in the amount to which we have a right to invoice.

ALLETE, Inc. 2023 Form 10-K
84

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue (Continued)

Nature of Revenue Streams

Utility

Residential and Commercial includes sales for electric, gas or water service to customers, who have implied contracts with the
utility, under rates governed by the MPUC, PSCW or FERC. Customers are billed on a monthly cycle basis and revenue is
recognized for electric, gas or water service delivered during the billing period. Revenue is accrued for service provided but not
yet billed at period end. Performance obligations with these customers are satisfied at time of delivery to customer meters and
simultaneously consumed.

Municipal includes sales to 14 non-affiliated municipal customers in Minnesota under long-term wholesale electric contracts.
One of these wholesale electric contracts include a termination clause requiring a three-year notice to terminate. These contracts
have termination dates ranging through 2037, with a majority of contracts expiring in 2029. Performance obligations with these
customers are satisfied at the time energy is delivered to an agreed upon municipal substation 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 55 percent of total regulated utility kWh
sales for the year ended December 31, 2023. Within industrial revenue, Minnesota Power had eight Large Power Customer
contracts, each serving requirements of 10 MW or more of customer load as of December 31, 2023. These contracts
automatically renew past the contract term unless a four-year written notice is given. Large Power Customer contracts have
earliest termination dates ranging from 2027 through 2029. We satisfy our performance obligations for these customers at the
time energy is delivered to an agreed upon customer substation. Revenue is accrued for energy provided but not yet billed at
period end. Based on current contracts with industrial customers, we expect to recognize minimum revenue for the fixed
contract components of approximately $62 million per annum through 2027, $15 million in 2028, and $12 million in total
thereafter, which reflects the termination notice period in these contracts. When determining minimum revenue, we assume that
customer contracts will continue under the contract renewal provision; 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
revenue amounts.

Other Power Suppliers includes the sale of energy under a long-term PSA with one customer as well as MISO market and
liquidation sales. The expiration date of this PSA is 2028. Performance obligations with these customers are satisfied at the time
energy is delivered to an agreed upon delivery point defined in the contract (generally the MISO pricing node). The current
contract with one customer contains variable pricing components that prevent us from estimating future minimum revenue.

Other Revenue includes all remaining individually immaterial revenue streams for Minnesota Power and SWL&P, and is
comprised of steam sales to paper and pulp 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 accounted for in accordance with the accounting standards for alternative revenue programs which
allow for the recognition of revenue under an alternative revenue program if 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 revenue recognized is
objectively determinable and probable of recovery, and the revenue will be collected within 24 months following the end of the
annual period in which 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. 2023 Form 10-K
85

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue (Continued)

Non-utility

ALLETE Clean Energy

Long-term PSA revenue includes all sales recognized under long-term contracts for production, curtailment, capacity and
associated renewable energy credits from ALLETE Clean Energy wind energy facilities. Expiration dates of these PSAs range
from 2024 through 2039. Performance obligations for these contracts are satisfied 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 sale of 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. Performance obligations for these types of agreements are satisfied at the time the completed project is
transferred to the customer at the commercial operation date. Revenue from 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 estimated market prices on assumed PSAs. As part of wind energy facility acquisitions, ALLETE Clean
Energy assumed various PSAs that were above or below estimated market prices at the time of acquisition; the resulting
differences between contract prices and estimated market prices are amortized to revenue over the remaining PSA term.

Corporate and Other

Long-term Contract encompasses the sale and delivery of coal to customer generation facilities. Revenue is recognized on a
monthly basis at the cost of production plus 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.

Sale of Renewable Development Projects includes revenue recognized from development only and development plus
construction type projects that are sold to a customer. For development only projects, revenue is recognized at point in time
when all required development responsibilities have been completed and ownership has transferred to the customer. For
development plus construction, the transaction price is allocated to two performance obligations based upon the standalone
selling price of each obligation. Revenue is recognized on the development performance obligation upon satisfying all required
development activities and ownership transferring to the customer. Revenue for the construction performance obligation is
recognized over time based on construction costs incurred, beginning at notice to proceed through the commercial operation
date.

Other primarily includes revenue from BNI Energy unrelated to coal, revenue from New Energy for asset management services
and non-development activities, the sale of real estate from ALLETE Properties, and non-rate base steam generation that is sold
for use during production of paper and pulp. Performance obligations are satisfied when control transfers to the customer.

Payment Terms. Payment terms and conditions vary across our businesses. Aside from taconite-producing Large Power
Customers, payment terms generally require payment to be made within 15 to 30 days from the end of the period that the
service has been rendered. In the case of its taconite-producing Large Power Customers, as permitted by the MPUC, Minnesota
Power requires weekly payments for electric usage based on monthly energy usage estimates. These customers receive
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 are trued-up the following month. Due to the timing difference of
revenue recognition from the timing of invoicing and payment, the taconite-producing Large Power Customers receive credit
for the time value of money; however, we have determined that our contracts do not include a significant financing component
as the period between when we transfer the service to the customer and when they pay for such service is minimal.

ALLETE, Inc. 2023 Form 10-K
86

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue (Continued)

Assets Recognized From the Costs to Obtain a Contract with a Customer. We 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. We expense
incremental costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year
or less. As of December 31, 2023, we have $18.5 million of assets recognized for costs incurred to obtain contracts with our
customers ($21.0 million as of December 31, 2022). 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 provide goods 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 to
revenue. We recognized $2.4 million of non-cash amortization for the year ended December 31, 2023 ($2.4 million for the year
end December 31, 2022).

Unamortized Discount and Premium on Debt. Discount and premium on debt are deferred and amortized over the terms of
the related debt instruments using a method which approximates the effective interest method.

Tax Equity Financings. Certain subsidiaries of ALLETE have entered into tax equity financings that include forming limited
liability companies (LLC) with third-party investors for certain wind and solar projects. Tax equity financings have specific
terms that dictate distributions of cash and the allocation of tax attributes among the LLC members, who are divided into two
categories: the sponsor and third-party investors. ALLETE subsidiaries are the sponsors in these tax equity financings. The
distributions of cash and allocation of tax attributes in these financings generally differ from the underlying ownership
percentage interests in the related LLC, with a disproportionate share of tax attributes (including accelerated depreciation and
production tax credits) allocated to third-party investors in order to achieve targeted after-tax rates of return, or target yield,
from project operations, and a disproportionate share of cash distributions made to the sponsor.

The target yield and other terms vary by tax equity financing. Once the target yield has been achieved or defined time period is
met, a “flip point” is recognized. In addition, tax equity financings typically provide that cash distributions can be temporarily
increased to the third-party investors in order to meet cumulative distribution thresholds. After the flip point, tax attributes and
cash distributions are both typically disproportionately allocated to the sponsor.

Tax equity financings include affirmative and negative covenants that are similar to what a project lender would require in a
project financing, such as financial reporting, insurance, maintenance and prudent operator standards. Most covenants are no
longer applicable once the flip point occurs and any other obligations of the third-party investor have been eliminated.

The third-party investors’ portions of equity ownership in tax equity LLCs are recorded as non-controlling interest in
subsidiaries on the Consolidated Balance Sheet and earnings allocated to third-party investors are recorded as net loss
attributable to non-controlling interest on the Consolidated Statement of Income.

Non-Controlling Interest in Subsidiaries and Redeemable Non-Controlling Interest. Non-controlling interest in
subsidiaries and redeemable non-controlling interest represent the portion of equity ownership, net income (loss), and
comprehensive income (loss) in subsidiaries that is not attributable to equity holders of ALLETE. Non-controlling Interest in
Subsidiaries as of and for the years ended December 31, 2023 and 2022, are related to the tax equity financings for ALLETE
Clean Energy’s 106 MW Glen Ullin, 80 MW South Peak, 303 MW Diamond Spring and 303 MW Caddo wind energy facilities
as well as ALLETE’s equity investment in the 250 MW Nobles 2 wind energy facility. Redeemable Non-Controlling Interest as
of and for the year ended December 31, 2023, is related to a tax equity financing entered into in the fourth quarter of 2023 for
certain New Energy solar energy facilities totaling 14 MW. This tax equity financing is classified as redeemable non-
controlling interest as the redemption price and date are fixed and determinable.

For those wind and solar projects with tax equity financings 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 book value (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-party investors would hypothetically receive at each balance sheet reporting date under the
liquidation provisions of the LLC agreements, assuming the net assets of the wind and solar projects were liquidated at amounts
determined in accordance with GAAP and distributed to the third-party investor and sponsor. The resulting non-controlling
interest in subsidiaries balance in these projects is reported as a component of equity on the Consolidated Balance Sheet as
either Non-Controlling Interest in Subsidiaries or Redeemable Non-Controlling Interest.

ALLETE, Inc. 2023 Form 10-K
87

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

The results of operations for these projects attributable to non-controlling interest under the HLBV method is determined as the
difference in non-controlling interest in subsidiaries and redeemable non-controlling interest on the Consolidated Balance Sheet
at the start and end of each reporting period, after taking into account any capital transactions between the projects and the
third-party investors.

Factors used in the HLBV calculation include GAAP income, taxable income (loss), tax attributes such as accelerated
depreciation, investment tax credits and production tax credits, capital contributions, cash distributions, and the target yield
specified in the corresponding LLC agreement. Changes in these factors could have a significant impact on the amounts that
third-party investors and sponsors would receive upon a hypothetical liquidation. The use 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 of the
HLBV method can drive variability in net income or loss attributable to non-controlling interest in subsidiaries from period to
period.

Immaterial Out-of-Period Adjustment. In the third quarter of 2023, we recognized a $5.7 million increase in Net Loss
Attributable to Non-Controlling Interest on the Consolidated Statement of Income for the correction of an error related to the
calculation of non-controlling interest in subsidiaries under the hypothetical liquidation at book value method, of which
$3.6 million related to 2022. We have evaluated the effect of this out-of-period adjustment for the current reporting period, as
well as on the previous interim and annual periods in which they should have been recognized and concluded that this
adjustment is not material to any of the periods affected.

Other Income (Expense) - Other

Year Ended December 31

Millions

Pension and Other Postretirement Benefit Plan Non-Service Credit (a)

Interest and Investment Income (b)

AFUDC - Equity

Gain on Land Sales

PSA Liability (c)

Gain on Arbitration Award (d)

Other

Total Other Income (Expense) - Other

2023

2022

$8.9

10.3

3.6

0.2

—

58.4

3.6

$85.0

$9.8

—

2.7

—

10.2

—

(0.3)

$22.4

2021

$6.1

2.3

2.6

0.1

—

(2.4)

$8.7

(a) These are components of net periodic pension and other postretirement benefit cost other than service cost. (See Note 12. Pension and

(b)

Other Postretirement Benefit Plans.)
Interest and Investment Income for the year ended December 31, 2023, reflects $5.1 million of interest income related to interest
awarded as part of an arbitration ruling involving a subsidiary of ALLETE Clean Energy. (See Note 9. Commitments, Guarantees and
Contingencies.)

(c) The gain on removal of the PSA liability for the Northern Wind project upon decommissioning of the legacy wind energy facility assets,
which was more than offset by a reserve for an anticipated loss on the sale of the Northern Wind project that was recorded in Cost of
Sales - Non-Utility on the Consolidated Statement of Income.

(d) This reflects a gain recognized for the favorable outcome of an arbitration ruling involving a subsidiary of ALLETE Clean Energy. (See

Note 9. Commitments, Guarantees and Contingencies.)

Income Taxes. ALLETE and its subsidiaries file a consolidated federal income tax return as well as combined and separate
state income tax returns. We account for income taxes using the liability method in accordance with GAAP for income taxes.
Under the liability method, deferred income tax assets and liabilities are established 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 which the taxes become
payable.

ALLETE, Inc. 2023 Form 10-K
88

NOTE 1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 or liabilities. Tax credits are recorded when earned unless there is a requirement to defer the
benefit and amortize it over the book depreciable lives of the related property. The requirement to defer and amortize tax credits
only applies to federal credits related to public utility property. 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 position that 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.)

Excise Taxes. We collect excise taxes from our customers levied by governmental entities. These taxes are stated separately on
the billing to the customer and recorded as a liability to be remitted to the governmental entity. We account for the collection
and payment of these taxes on a net basis.

New Accounting Standards.

Improvements to Reportable Segment Disclosures. In November 2023, the FASB issued Accounting Standards Update
2023-07, Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 requires that an entity provide
enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker,
among other disclosures. ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and for interim
periods within annual periods beginning after December 15, 2024, with early adoption permitted.

Improvements to Income Tax Disclosures. In December 2023, the FASB issued Accounting Standards Update 2023-09,
Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 was issued to enhance the transparency and decision
usefulness of income tax disclosures by disclosing specific categories in the rate reconciliation as well as providing additional
information for reconciling items above a threshold. It also requires disclosure about certain income taxes paid. ASU 2023-09 is
effective for annual periods beginning after December 15, 2024, with early adoption permitted.

There are no other new accounting standards that we anticipate having a material effect on the presentation of ALLETE’s
consolidated financial statements.

NOTE 2. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment
As of December 31
Millions
Regulated Operations

Property, Plant and Equipment in Service
Construction Work in Progress
Accumulated Depreciation
Regulated Operations – Net

ALLETE Clean Energy

Property, Plant and Equipment in Service
Construction Work in Progress
Accumulated Depreciation
ALLETE Clean Energy – Net

Corporate and Other (a)

Property, Plant and Equipment in Service
Construction Work in Progress
Accumulated Depreciation
Corporate and Other – Net

Property, Plant and Equipment – Net

(a) Primarily includes BNI Energy and a small amount of non-rate base generation.

ALLETE, Inc. 2023 Form 10-K
89

2023

2022

$5,167.2
146.7
(1,969.4)
3,344.5

1,612.8
48.9
(229.1)
1,432.6

355.8
27.5
(147.0)
236.3
$5,013.4

$5,198.6
74.0
(1,972.3)
3,300.3

1,619.4
51.1
(176.8)
1,493.7

295.2
50.9
(136.1)
210.0
$5,004.0

NOTE 2. PROPERTY, PLANT AND EQUIPMENT (Continued)

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
Generation
Transmission
Distribution

4 to 50
50 to 75
18 to 70

ALLETE Clean Energy
Corporate and Other

5 to 35
3 to 50

Asset Retirement Obligations. We recognize, at fair value, obligations associated with the retirement of certain tangible, long
lived assets that result from the acquisition, 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. The associated
retirement costs are capitalized as part of the related long-lived asset and depreciated over the useful life of the asset. Removal
costs associated with certain 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 in depreciation rates. These plant removal cost recoveries are classified either as AROs or as a
regulatory liability for non-AROs. To the extent annual accruals for plant removal costs differ from accruals under approved
depreciation rates, a regulatory asset has been established in accordance with GAAP for AROs. (See Note 4. Regulatory
Matters.)

Asset Retirement Obligations
Millions
Obligation as of December 31, 2021
Accretion
Liabilities Recognized
Liabilities Settled
Revisions in Estimated Cash Flows
Obligation as of December 31, 2022
Accretion
Liabilities Settled
Revisions in Estimated Cash Flows
Obligation as of December 31, 2023

$184.5
9.5
7.8
(4.4)
3.0
200.4
10.3
(10.2)
2.4
$202.9

NOTE 3. JOINTLY-OWNED FACILITIES AND ASSETS

Boswell Unit 4. Minnesota Power owns 80 percent of the 585 MW Boswell Unit 4. While Minnesota Power operates the plant,
certain decisions about the operations 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 equal representation and voting rights. Each owner must provide its own
financing and is obligated to its ownership share of operating costs. Minnesota Power’s share of operating expenses for Boswell
Unit 4 is included in Operating Expenses on the Consolidated Statement of Income.

ALLETE, Inc. 2023 Form 10-K
90

NOTE 3. JOINTLY-OWNED FACILITIES AND ASSETS (Continued)

Minnesota Power’s investments in jointly-owned facilities and assets and the related ownership percentages are as follows:

Regulated Utility Plant
Millions
As of December 31, 2023

Boswell Unit 4
Transmission Assets
Total

As of December 31, 2022

Boswell Unit 4
Transmission Assets
Total

Plant in
Service

Accumulated
Depreciation

Construction

Work in Progress % Ownership

$725.9
101.0
$826.9

$712.0
101.0
$813.0

$369.8
23.6
$393.4

$340.1
21.1
$361.2

$2.8
—
$2.8

$3.3
—
$3.3

9.3 - 14.7

Nemadji Trail Energy Center. South Shore Energy, ALLETE’s non-rate regulated, Wisconsin subsidiary, is developing
NTEC, an approximately 600 MW proposed combined-cycle natural gas-fired generating facility to be built in Superior,
Wisconsin, which will be jointly owned by Dairyland Power Cooperative, Basin and South Shore Energy. Minnesota Power is
expected to purchase approximately 20 percent of the facility's output starting in 2028 pursuant to a capacity dedication
agreement. 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 South Shore Energy will be responsible for approximately
20 percent. South Shore Energy’s portion of NTEC project costs incurred through December 31, 2023, is approximately
$9 million.

NOTE 4. REGULATORY MATTERS

Electric 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. (See Transmission Cost Recovery Rider, Renewable Cost Recovery
Rider, Solar Cost Recovery Rider and Environmental Improvement Rider.) Revenue from cost recovery riders was
$57.0 million in 2023 ($38.8 million in 2022; $38.9 million in 2021).

Minnesota Retail Rates. Minnesota Power’s retail base rates through 2021 were based on a 2018 MPUC retail rate order that
allowed for a 9.25 percent return on common equity and a 53.81 percent equity ratio. Interim rates were implemented in
Minnesota Power’s 2022 general rate case beginning in January 2022, and the resolution of Minnesota Power’s 2022 general
rate case changed the allowed return on equity to 9.65 percent and the equity ratio to 52.50 percent beginning October 1, 2023.
(See 2022 Minnesota General Rate Case.)

2024 Minnesota General Rate Case. On November 1, 2023, Minnesota Power filed a retail rate increase request with the
MPUC seeking an average increase of approximately 12.00 percent for retail customers, net of rider revenue incorporated into
base rates. The rate filing seeks a return on equity of 10.30 percent and a 53.00 percent equity ratio. On an annualized basis, the
requested final rate increase would generate approximately $89 million in additional revenue. In orders dated
December 19, 2023, the MPUC accepted the filing as complete and approved an annual interim rate increase of approximately
$64 million, net of rider revenue, beginning January 1, 2024, subject to refund. We cannot predict the level of final rates that
may be authorized by the MPUC.

ALLETE, Inc. 2023 Form 10-K
91

NOTE 4. REGULATORY MATTERS (Continued)
Electric Rates (Continued)

In an order dated September 29, 2023, the MPUC approved Minnesota Power’s final rates, which were implemented beginning
on October 1, 2023. The MPUC order also approved Minnesota Power’s interim rate refund plan. Interim rates were collected
through the third quarter with reserves recorded as necessary. Minnesota Power recorded a reserve for an interim rate refund of
approximately $39 million pre-tax as of September 30, 2023 (approximately $18 million as of December 31, 2022), which was
refunded to customers during the fourth quarter of 2023.

FERC-Approved Wholesale Rates. Minnesota Power has wholesale contracts with 14 non-affiliated municipal customers in
Minnesota and SWL&P. Two of the 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
December 31, 2037. The wholesale electric service contract with SWL&P is effective through February 28, 2027. 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-based formula methodology, using estimated costs and a rate of return that is equal to Minnesota Power’s
authorized rate of return for Minnesota retail customers. The formula-based rate methodology also provides for a yearly true-up
calculation for actual costs incurred.

Minnesota Power’s wholesale electric contracts with 13 other municipal customers were extended in January 2022 and are
effective through 2029. These contracts are based on fixed prices for capacity and energy. The base energy charge for each year
is adjusted annually for updated fuel and purchased power costs.

Transmission Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place to charge retail customers on
a current basis for certain transmission investments and expenditures, including a return on the capital invested. Current
customer billing rates are based on an MPUC order dated December 19, 2023, which provisionally approved Minnesota
Power’s latest transmission factor filing submitted on October 24, 2023. Updated billing rates were included on customer bills
starting in the first quarter of 2024.

Renewable Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place to charge retail customers on a
current basis for the costs of certain renewable investments and expenditures, including a return on the capital invested.
Customer billing rates for the renewable cost recovery rider had been based on a MPUC order dated January 24, 2023. On
March 29, 2023, Minnesota Power submitted its latest renewable cost recovery rider factor filing, which the MPUC approved in
an order dated October 3, 2023. Updated billing rates were included on customer bills starting in the fourth quarter of 2023.

Solar Cost Recovery Rider. Minnesota Power has an approved cost recovery rider in place to charge retail customers on a
current basis for solar costs related to investments and expenditures for meeting the state of Minnesota’s solar energy standard.
Customer billing rates for the solar cost recovery rider had been based on an August 2022 MPUC order. On August 23, 2023,
Minnesota Power submitted its latest solar cost recovery rider factor filing, which the MPUC approved in an order dated
December 26, 2023. Updated billing rates were included on customer bills starting in the first quarter of 2024.

Fuel Adjustment Clause. Fuel and purchased power costs related to Minnesota Power’s retail customers are recovered from
customers through the fuel adjustment clause. The method of accounting for all Minnesota electric utilities is a monthly
budgeted, forward-looking fuel adjustment clause with annual prudence review and true-up to actual allowed costs.

ALLETE, Inc. 2023 Form 10-K
92

NOTE 4. REGULATORY MATTERS (Continued)
Electric Rates (Continued)

Minnesota Power incurred higher fuel and purchased power costs in 2021 than those factored in its fuel adjustment forecast
filed in May 2020 for 2021, which resulted in the recognition of an approximately $56 million regulatory asset as of
December 31, 2021. The MPUC approved recovery of the regulatory asset in a July 2022 order; recovery of the regulatory asset
was completed in 2023.

Minnesota Power incurred higher fuel and purchased power costs in 2022 than those factored in its fuel adjustment forecast
filed in May 2021 for 2022, which resulted in the recognition of an approximately $13 million regulatory asset as of
December 31, 2022. The MPUC approved recovery of the regulatory asset in an order dated July 31, 2023; recovery of the
regulatory asset began in the third quarter of 2023 and will continue through mid-2024.

Minnesota Power incurred lower fuel and purchased power costs in 2023 than those factored in its fuel adjustment forecast filed
in May 2022 for 2023, which resulted in the recognition of a $15.5 million regulatory liability as of December 31, 2023. On
August 30, 2023, Minnesota Power submitted a filing with the MPUC requesting to refund a portion of over-collected fuel
adjustment clause recoveries for 2023 from October 2023 through December 2023. No parties objected to the request and lower
rates were implemented in October 2023, subject to final approval by the MPUC which is expected in 2024.

In May 2023, Minnesota Power filed its fuel adjustment forecast for 2024 which was subsequently approved by the MPUC in
an order dated November 9, 2023. The fuel and purchase power rates for Minnesota Power retail customers are based on this
filing beginning January 1, 2024.

Wisconsin Retail Rates. SWL&P’s retail rates through 2022 were based on a December 2018 order by the PSCW that allowed
for a return on equity of 10.40 percent and a 55.00 percent equity ratio. The resolution of SWL&P’s 2022 general rate case
changed the allowed return on equity to 10.00 percent and maintained an equity ratio of 55.00 percent. (See 2022 Wisconsin
General Rate Case.)

Integrated Resource Plan. On February 1, 2021, Minnesota Power filed its latest IRP, which was approved by the MPUC in
an order dated January 9, 2023. The approved IRP, which reflects a joint agreement reached with various stakeholders, outlines
Minnesota Power’s clean-energy transition plans through 2035. These plans include expanding its renewable energy supply,
achieving coal-free operations at its facilities by 2035, and investing in a resilient and flexible transmission and distribution
grid. As part of these plans, Minnesota Power anticipates adding up to 700 MW of new wind and solar energy resources, and
ceasing coal operations at Boswell Units 3 and 4 by 2030 and 2035, respectively. Minnesota Power’s plans recognize that
advances in technology will play a significant role in completing its transition to carbon-free energy supply, reliably and
affordably. Minnesota Power is expected to file its next IRP by March 1, 2025.

Solar Energy Request For Proposals. On October 2, 2023, Minnesota Power filed a notice with the MPUC of its intent to issue
a request for proposals for up to 300 MW of solar energy resources. Minnesota Power issued the request for proposals on
November 15, 2023, which were accepted through January 17, 2024.

Wind Energy Request For Proposals. On December 15, 2023, Minnesota Power filed a notice with the MPUC of its intent to
issue a request for proposals for up to 400 MW of wind energy resources. Minnesota Power issued the request for proposals on
February 15, 2024.

Energy Conservation and Optimization (ECO) Plan. Minnesota requires electric utilities to spend a minimum of 1.5 percent
of gross operating revenues, excluding revenue received from exempt customers, from service provided in the state on ECOs
each year. On April 3, 2023, Minnesota Power submitted its 2022 ECO, formerly known as the conservation improvement
program, annual filing detailing Minnesota Power’s ECO plan results and proposed financial incentive, which was approved by
the MPUC on July 21, 2023. As a result, Minnesota Power recognized revenue of $2.2 million in 2023 for the approved
financial incentive ($1.9 million in 2022 and $2.4 million in 2021). The financial incentives are recognized in the period in
which the MPUC approves the filing.

ALLETE, Inc. 2023 Form 10-K
93

NOTE 4. REGULATORY MATTERS (Continued)

On June 30, 2023, Minnesota Power submitted its triennial filing for 2024 through 2026 to the MPUC and Minnesota
Department of Commerce, which outlines Minnesota Power’s ECO spending and energy-saving goals for those years.
Minnesota Power’s investment goals are $12.5 million for 2024, $12.7 million for 2025 and $12.8 million for 2026.

MISO Return on Equity Complaint. MISO transmission owners, including ALLETE and ATC, have an authorized return on
equity of 10.02 percent, or 10.52 percent including an incentive adder for participation in a regional transmission organization
based on a 2020 FERC order which is subject to various outstanding legal challenges related to the return on equity calculation
and refund period ordered by the FERC. In August 2022, the U.S. Court of Appeals for the District of Columbia Circuit vacated
and remanded the 2020 FERC order back to the FERC. We cannot predict the return on equity the FERC will ultimately
authorize in the remanded proceeding. (See Note 6. Equity Investments.)

In June 2020, Minnesota Power filed a proposal with the MPUC to accelerate its plans for purchasing solar energy from
approximately 20 MW of solar energy projects in Minnesota which was approved in a June 2021 order. These solar energy
projects were constructed and owned through an ALLETE subsidiary with an investment of approximately $40 million.
Construction of these solar energy projects commenced in 2022 with a portion of these projects placed into service in the fourth
quarter of 2022; the remaining project was placed into service in 2023.

Regulatory Assets and Liabilities. Our regulated utility operations are subject to accounting standards for the effects of certain
types of regulation. Regulatory assets represent incurred costs that have been deferred as they are probable for recovery in
customer rates. Regulatory liabilities represent obligations to make refunds to customers and amounts collected in rates for
which the related costs have not yet been incurred. The Company assesses quarterly whether regulatory assets 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 plant and equipment, no other regulatory assets are currently earning a return. The recovery, refund or credit to rates
for these regulatory assets and liabilities will occur over the periods either specified by the applicable regulatory authority or
over the corresponding period related to the asset or liability.

ALLETE, Inc. 2023 Form 10-K
94

NOTE 4. REGULATORY MATTERS (Continued)
Regulatory Assets and Liabilities
As of December 31
Millions
Current Regulatory Assets (a)
Fuel Adjustment Clause (b)
Other

Total Current Regulatory Assets

Non-Current Regulatory Assets

Defined Benefit Pension and Other Postretirement Benefit Plans (c)
Income Taxes (d)
Asset Retirement Obligations (e)
Cost Recovery Riders (f)
Taconite Harbor (g)
Manufactured Gas Plant (h)
Fuel Adjustment Clause (b)
PPACA Income Tax Deferral
Other

Total Non-Current Regulatory Assets

Current Regulatory Liabilities (i)

Provision for Interim Rate Refund
Transmission Formula Rates Refund
Other

Total Current Regulatory Liabilities

Non-Current Regulatory Liabilities

Income Taxes (d)
Wholesale and Retail Contra AFUDC (j)
Plant Removal Obligations (k)
Defined Benefit Pension and Other Postretirement Benefit Plans (c)
Non-Jurisdictional Land Sales (l)
Fuel Adjustment Clause (b)
Investment Tax Credits (m)
Boswell Units 1 and 2 Net Plant and Equipment (n)
Other

Total Non-Current Regulatory Liabilities

2023

2022

$8.7
0.6
$9.3

$218.6
88.1
37.7
33.8
20.9
13.2
5.0
3.9
4.2
$425.4

—
$1.5
2.4
$3.9

$310.0
78.0
67.0
48.6
30.2
15.5
13.6
6.7
4.4
$574.0

$25.6
—
$25.6

$225.9
97.6
35.6
41.2
—
15.1
14.5
4.1
7.0
$441.0

$18.4
4.9
0.1
$23.4

$332.5
80.7
60.0
17.6
7.5
—
16.9
6.7
4.2
$526.1

(a) Current regulatory assets are presented within Prepayments and Other on the Consolidated Balance Sheet.
(b) Fuel adjustment clause regulatory assets and liabilities represent the amount expected to be recovered from or refunded to customers for the

under- or over-collection of fuel adjustment clause recoveries. (See Fuel Adjustment Clause.)

(c) Defined benefit pension and other postretirement items included in our Regulated Operations, which are otherwise required to be recognized in
accumulated other comprehensive income, are recognized as regulatory assets or regulatory liabilities on the Consolidated Balance Sheet. The
asset or liability will decrease as the deferred items are amortized and recognized as components of net periodic benefit cost. (See Note 12.
Pension and Other Postretirement Benefit Plans.)

(d) These costs represent the difference between deferred income taxes recognized for financial reporting purposes and amounts previously billed to

our customers. The balances will primarily decrease over the remaining life of the related temporary differences.

(e) Asset retirement obligations will accrete and be amortized over the lives of the related property with asset retirement obligations.
(f)

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 revenue recognized, respectively, primarily due to capital expenditures related to Bison and the GNTL as well as
differences between production tax credits recognized and those assumed in Minnesota Power’s base rates. The cost recovery rider regulatory
assets as of December 31, 2023, will be recovered within the next two years.
In the first quarter of 2023, Minnesota Power retired Taconite Harbor Units 1 and 2. The remaining net book value was reclassified from
property, plant and equipment to a regulatory asset on the Consolidated Balance Sheet when the units were retired. Minnesota Power expects to
receive recovery of the remaining net book value from customers.

(g)

(h) This regulatory asset represents costs of remediation for a former manufactured gas plant site located in Superior, Wisconsin, and formerly

operated by SWL&P. We expect recovery of these remediation costs to be allowed by the PSCW in rates over time.

(i) Current regulatory liabilities are presented within Other Current Liabilities on the Consolidated Balance Sheet.
(j) Wholesale and retail contra AFUDC represents amortization to offset AFUDC Equity and Debt recorded during the construction period of our
cost recovery rider projects prior 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)

This regulatory liability represents the net proceeds from the sale of certain land by Minnesota Power that is expected to be refunded to
ratepayers through a future rate case or through its renewable resources rider.

(m) North Dakota and Federal investment tax credits expected to be realized from Minnesota Power’s Bison facility and SWL&P’s community solar

(n)

facility that will be credited to retail customers primarily through future renewable cost recovery rider as the tax credits are utilized.
In 2018, Minnesota Power retired Boswell Units 1 and 2 and reclassified the remaining net book value from property, plant and equipment to a
regulatory asset on 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 the outstanding balance.

ALLETE, Inc. 2023 Form 10-K
95

NOTE 5. ACQUISITIONS

2022 Activity

New Energy. On April 15, 2022, a wholly-owned subsidiary of ALLETE acquired 100 percent of the membership interests of
New Energy for a purchase price of $165.5 million. Total consideration of approximately $158.8 million was paid in cash on
the acquisition date, which is net of cash acquired and debt assumed. New Energy, which is headquartered in Annapolis,
Maryland, is a renewable energy development company with a primary focus on solar and storage facilities while also offering
comprehensive operations, maintenance and asset management services. The acquisition of New Energy is consistent with
ALLETE’s stated strategy of additional investment in renewable energy and related infrastructure across North America to
support the Company’s sustainability-in-action strategy while providing potential long-term earnings growth.

The acquisition was accounted for as a business combination and the purchase price was allocated based on the estimated fair
values of the assets acquired and the liabilities assumed at the date of acquisition. The allocation of the purchase price, which
was finalized in the fourth quarter of 2022, is shown in the following table. Fair value measurements were valued primarily
using the discounted cash flow method and replacement cost basis. The goodwill recorded is primarily attributable to the highly
skilled workforce of New Energy and synergies expected to arise as a result of the acquisition.

The Company has not presented separate results of operations since closing or combined pro forma financial information of the
Company and New Energy since the beginning of 2021, as the results of operations for New Energy are not material to the
Company's consolidated financials.

Millions

Assets Acquired

Cash and Cash Equivalents

Accounts Receivable

Inventory (a)

Other Current Assets

Property, Plant and Equipment - Net

Goodwill (b)

Other Non-Current Assets

Total Assets Acquired

Liabilities Assumed

Current Liabilities

Long-Term Debt Due Within One Year

Long-Term Debt

Other Non-Current Liabilities

Total Liabilities Assumed

Net Identifiable Assets Acquired

$3.9

1.4

25.3

12.8

16.4

154.9

2.1

$216.8

$23.6

28.3

5.9

0.2

$58.0

$158.8

Includes $11.6 million of purchase price accounting for certain projects under development at the time of acquisition.

(a)
(b) For tax purpose, the purchase price allocation resulted in $154.9 million of deductible goodwill.

Acquisition-related costs were $2.7 million after-tax, expensed as incurred during 2022 and recorded in Operating and
Maintenance on the Consolidated Statement of Income.

ALLETE, Inc. 2023 Form 10-K
96

NOTE 6. EQUITY INVESTMENTS

Investment in ATC. Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC,
a Wisconsin-based utility that owns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota
and Illinois. We account for our investment in ATC under the equity method of accounting. In 2023, we invested $8.2 million
in ATC. In total, we expect to invest approximately $5.8 million in 2024.

ALLETE’s Investment in ATC
Year Ended December 31
Millions
Equity Investment Beginning Balance
Cash Investments
Equity in ATC Earnings
Distributed ATC Earnings
Amortization of the Remeasurement of Deferred Income Taxes
Equity Investment Ending Balance

ATC Summarized Financial Data

Balance Sheet Data
As of December 31
Millions
Current Assets
Non-Current Assets

Total Assets

Current Liabilities
Long-Term Debt
Other Non-Current Liabilities
Members’ Equity
Total Liabilities and Members’ Equity

Income Statement Data
Year Ended December 31
Millions
Revenue
Operating Expense
Other Expense
Net Income

ALLETE’s Equity in Net Income

2023

2022

$165.4
8.2
23.1
(18.3)
1.3
$179.7

$154.5
5.9
19.3
(15.5)
1.2
$165.4

2023

2022

$115.2
6,337.0

$89.6
5,997.8

$6,452.2

$6,087.4

$495.9
2,736.0
585.2
2,635.1
$6,452.2

$511.9
2,613.0
485.8
2,476.7
$6,087.4

2023

2022

2021

$818.9
407.6
131.7
$279.6

$23.1

$751.2
381.5
122.9
$246.8

$19.3

$754.8
376.2
113.9
$264.7

$21.3

ATC’s authorized return on equity is 10.02 percent, or 10.52 percent including an incentive adder for participation in a regional
transmission organization, based on a 2020 FERC order which is subject to various outstanding legal challenges related to the
return on equity calculation and refund period ordered by the FERC. In August 2022, the U.S. Court of Appeals for the District
of Columbia Circuit vacated and remanded the 2020 FERC order back to FERC. As a result of this decision, ATC recorded a
reserve in the third quarter of 2022 for anticipated refunds to its customers for approximately $31 million of which our share
was approximately $2.4 million pre-tax. We cannot predict the return on equity FERC will ultimately authorize in the remanded
proceeding.

ALLETE, Inc. 2023 Form 10-K
97

NOTE 6. EQUITY INVESTMENTS (Continued)

ALLETE’s Investment in Nobles 2

Millions

Equity Investment Balance as of December 31, 2022
Equity in Nobles 2 Earnings (a)

Distributed Nobles 2 Earnings

Equity Investment Balance as of December 31, 2023

$157.3

(1.4)

(4.4)

$151.5

(a) The Company also recorded net loss attributable to non-controlling interest of $10.2 million related to its investment in Nobles 2.

NOTE 7. FAIR VALUE

Fair 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 measurement date (exit price). We utilize market data or assumptions that market participants would
use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation
technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily apply the
market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we
utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These
inputs, which are used to measure fair value, are prioritized through the fair 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 for the asset or liability occur in sufficient frequency and volume to provide pricing information
on an ongoing basis. This category includes primarily equity securities.

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 assets and liabilities included in Level 2 are typically either comparable to actively traded securities
or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models
using highly observable inputs, such as commodity options priced using observable forward prices and volatilities. 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 inputs requiring significant management judgment or estimation, such as the complex and
subjective models and forecasts used to determine the fair value.

ALLETE, Inc. 2023 Form 10-K
98

NOTE 7. FAIR VALUE (Continued)

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 of December 31, 2023, and December 31, 2022. Each asset and liability is classified based on the
lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to
the fair value measurement requires judgment, which may affect the valuation of these assets and liabilities and their placement
within the fair value hierarchy levels. The estimated fair value of Cash and Cash Equivalents listed on the Consolidated Balance
Sheet approximates the carrying amount and therefore is excluded from the recurring fair value measures in the following
tables.

Recurring Fair Value Measures
Millions
Assets:
Investments (a)

Available-for-sale – Equity Securities
Available-for-sale – Corporate and Governmental Debt Securities (b)
Cash Equivalents

Total Fair Value of Assets

Liabilities:
Deferred Compensation (c)
Total Fair Value of Liabilities

Fair Value as of December 31, 2023

Level 1

Level 2

Level 3

Total

$8.7
—
5.8
$14.5

—
$6.0
—
$6.0

—
—

$16.5
$16.5

—
—
—
—

—
—

$8.7
6.0
5.8
$20.5

$16.5
$16.5

Included in Other Non-Current Assets on the Consolidated Balance Sheet.

(a)
(b) As of December 31, 2023, the aggregate amount of available-for-sale corporate and governmental debt securities maturing in one year
or less was $1.3 million, in one year to less than three years was $3.2 million, in three years to less than five years was $1.0 million and
in five or more years was $0.5 million.
Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.

(c)

Recurring Fair Value Measures
Millions
Assets:
Investments (a)

Available-for-sale – Equity Securities
Available-for-sale – Corporate and Governmental Debt Securities
Cash Equivalents

Total Fair Value of Assets

Liabilities: (b)
Deferred Compensation
Total Fair Value of Liabilities

Fair Value as of December 31, 2022

Level 1

Level 2

Level 3

Total

$7.7
—
4.2
$11.9

—
$5.7
—
$5.7

—
—

$15.0
$15.0

—
—
—
—

—
—

$7.7
5.7
4.2
$17.6

$15.0
$15.0

(a)
(b)

Included in Other Non-Current Assets on the Consolidated Balance Sheet.
Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.

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, 2023 and 2022, 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 instruments approximates 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).

ALLETE, Inc. 2023 Form 10-K
99

NOTE 7. FAIR VALUE (Continued)

Financial Instruments
Millions
Short-Term and Long-Term Debt (a)

December 31, 2023
December 31, 2022

(a) Excludes unamortized debt issuance costs.

Carrying Amount

Fair Value

$1,799.4
$1,929.1

$1,670.6
$1,782.7

Assets 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 is recognized.

Equity Method Investments. The aggregate carrying amount of our equity investments was $331.2 million as of
December 31, 2023 ($322.7 million as of December 31, 2022). The Company assesses our equity investments in ATC and
Nobles 2 for impairment whenever events or changes in circumstances indicate that the carrying amount of our investments
may not be recoverable. For the years ended December 31, 2023 and 2022, there were no indicators of impairment. (See Note 6.
Equity Investments.)

Goodwill. The Company assesses the impairment of goodwill annually in the fourth quarter and whenever an event occurs or
circumstances change that would indicate that the carrying amount may be impaired. The Company’s goodwill is a result of the
New Energy acquisition in 2022. (See Note 1. Operations and Significant Accounting Policies and Note 5. Acquisitions.) The
aggregate carrying amount of goodwill was $154.9 million as of December 31, 2023.

Property, Plant and Equipment. The Company assesses the impairment of property, plant, and equipment whenever events or
changes in circumstances indicate that the carrying amount of property, plant, and equipment assets may not be recoverable.
(See Note 1. Operations and Significant Accounting Policies.) For the years ended December 31, 2023, and 2022, there was no
impairment of property, plant, and equipment.

ALLETE, Inc. 2023 Form 10-K
100

NOTE 8. SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of December 31, 2023, total short-term debt outstanding was $111.4 million ($272.6 million as of
December 31, 2022), and consisted of long-term debt due within one year and included $0.1 million of unamortized debt
issuance costs.

On October 17, 2023, ALLETE amended its $400 million credit facility (Credit Agreement), which was scheduled to expire in
January 2026, to $355 million and extended the expiration date to January 10, 2027. The amended Credit Agreement is
unsecured and has a variable interest rate. ALLETE may request a single, one-year extension to the expiration date. Advances
may be used by ALLETE for general corporate purposes, to provide liquidity in support of ALLETE's commercial paper
program and to issue up to $100 million in letters of credit.

As of December 31, 2023, we had consolidated bank lines of credit aggregating to $423.1 million ($475.7 million as of
December 31, 2022), most of which expire in January 2027. We had $19.4 million outstanding in standby letters of credit and
$34.1 million outstanding draws under our lines of credit as of December 31, 2023 ($32.8 million in standby letters of credit
and $31.3 million outstanding draws as of December 31, 2022).

Long-Term Debt. As of December 31, 2023, total long-term debt outstanding was $1,679.9 million ($1,648.2 million as of
December 31, 2022) and included $8.0 million of unamortized debt issuance costs. The aggregate amount of long-term debt
maturing in 2024 is $111.4 million; $244.7 million in 2025; $80.2 million in 2026; $162.5 million in 2027; $55.8 million in
2028; and $1,144.8 million thereafter. Substantially all of our regulated electric plant is subject to the lien of the mortgages
collateralizing outstanding first mortgage bonds. The mortgages contain non-financial covenants customary in utility
mortgages, including restrictions on 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 expires in 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 April 27, 2023, ALLETE issued $125 million of its First Mortgage Bonds (Bonds) to certain institutional buyers in the
private placement market. The Bonds, which bear interest at 4.98 percent, will mature in April 2033 and pay interest semi-
annually in May and November of each year, commencing on November 1, 2023. 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 and
conditions which are customary for these types of transactions. Proceeds from the sale of the Bonds were used to refinance
existing indebtedness and for general 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, to institutional accredited investors.

ALLETE, Inc. 2023 Form 10-K
101

NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)
Long-Term Debt (Continued)

Long-Term Debt
As of December 31
Millions
First Mortgage Bonds

6.02% Series Due 2023
3.69% Series Due 2024
4.90% Series Due 2025
5.10% Series Due 2025
3.20% Series Due 2026
5.99% Series Due 2027
3.30% Series Due 2028
4.08% Series Due 2029
3.74% Series Due 2029
2.50% Series Due 2030
3.86% Series Due 2030
2.79% Series Due 2031
4.54% Series Due 2032
4.98% Series Due 2033
5.69% Series Due 2036
6.00% Series Due 2040
5.82% Series Due 2040
4.08% Series Due 2042
4.21% Series Due 2043
4.95% Series Due 2044
5.05% Series Due 2044
4.39% Series Due 2044
4.07% Series Due 2048
4.47% Series Due 2049
3.30% Series Due 2050

Armenia Mountain Senior Secured Notes 3.26% Due 2024
Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006, Due 2025
Revolving Credit Facility Variable Rate Due 2027
Senior Unsecured Notes 2.65% Due 2025
Senior Unsecured Notes 3.11% Due 2027
SWL&P First Mortgage Bonds 4.15% Series Due 2028
SWL&P First Mortgage Bonds 4.14% Series Due 2048
Unsecured Term Loan Variable Rate Due 2023
Other Long-Term Debt, 2023 Weighted Average Rate 5.24% Due 2024 – 2051
Unamortized Debt Issuance Costs
Total Long-Term Debt
Less: Due Within One Year
Net Long-Term Debt

ALLETE, Inc. 2023 Form 10-K
102

2023

2022

—
$60.0
30.0
30.0
75.0
60.0
40.0
70.0
50.0
46.0
60.0
100.0
75.0
125.0
50.0
35.0
45.0
85.0
60.0
40.0
40.0
50.0
60.0
30.0
94.0
9.5
27.8
—
150.0
80.0
15.0
12.0
—
95.1
(8.1)
1,791.3
111.4
$1,679.9

$75.0
60.0
30.0
30.0
75.0
60.0
40.0
70.0
50.0
46.0
60.0
100.0
75.0
—
50.0
35.0
45.0
85.0
60.0
40.0
40.0
50.0
60.0
30.0
94.0
19.3
27.8
13.0
150.0
80.0
15.0
12.0
170.0
82.0
(8.3)
1,920.8
272.6
$1,648.2

NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)
Long-Term Debt (Continued)

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 financial covenant requires ALLETE to maintain a ratio of
indebtedness to total capitalization (as the amounts are calculated in accordance with the respective long-term debt
arrangements) of less than or equal to 0.65 to 1.00, measured quarterly. As of December 31, 2023, our ratio was approximately
0.36 to 1.00. Failure to meet this 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 of funding. 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 financing arrangements to
meet payment terms or to observe other covenants that would result in an acceleration of payments due. ALLETE has no
significant restrictions on its ability to pay dividends from retained earnings or net income. As of December 31, 2023, 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, 2023:

2024

2025

2026

2027

2028 Thereafter

Millions
Capital Purchase Obligations
Easements (a)
PPAs (b)
Other Purchase Obligations (c)

$1.6
$8.1

$73.9
$8.0

—
$8.4
$140.7 $133.8 $136.6 $125.7 $132.4
—

$38.1
$8.2

$9.9
$8.1

$42.9

—

$10.5
$217.7
$937.5
—

(a) Easement obligations represent the minimum payments for our land easement agreements at our wind energy facilities.
(b) Does not include the Oliver Wind I, Oliver Wind II or Nobles 2 PPAs, as Minnesota Power only pays for energy as it is delivered. (See

Power Purchase Agreements.)

(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 have determined that either we have no variable interest in the PPAs, or where we do have variable
interests, we are not the primary beneficiary; therefore, consolidation is 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 to absorb losses or
receive benefits from the entity’s performance. Our financial exposure relating to these PPAs is limited to our 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, or, if they are derivatives, the agreements qualify for the normal purchases and normal sales
exception to derivative accounting guidance; therefore, derivative accounting is not 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 share of 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 under the Agreement is 50 percent for the remainder of the
Agreement, subject to the provisions of the Minnkota Power PSA described in the following table. Minnesota Power’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’s costs consist primarily of debt service, operating and maintenance, depreciation and fuel expenses. As of
December 31, 2023, Square Butte had total debt outstanding of $171.8 million. Annual debt service for Square Butte is
expected to be approximately $33.5 million in 2024, $29.5 million in 2025, $29.6 million in 2026, and $11.9 million in 2027 of
which Minnesota Power’s obligation is 50 percent. Fuel expenses are recoverable through Minnesota Power’s fuel adjustment
clause and include the cost of coal purchased from BNI Energy under a long-term contract.

ALLETE, Inc. 2023 Form 10-K
103

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)
Power Purchase and Sales Agreements (Continued)

Minnesota Power’s cost of power purchased from Square Butte during 2023 was $86.2 million ($82.7 million in 2022;
$82.4 million in 2021). This reflects Minnesota 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 rata share of interest expense of $5.5 million in 2023
($5.1 million in 2022; $5.8 million in 2021). Minnesota Power’s payments to Square Butte are approved as a purchased power
expense for ratemaking purposes by both the MPUC and the FERC.

Minnesota Power has also entered into the following long-term PPAs for the purchase of capacity and energy as of
December 31, 2023:

Counterparty

Quantity

Product

Commencement

Expiration

Pricing

PPAs

Calpine Corporation

25 MW

Capacity

June 2019

May 2026

Fixed

Manitoba Hydro

PPA 1

PPA 2

Nobles 2

Oliver Wind I

Oliver Wind II

250 MW Capacity / Energy

133 MW

Energy

June 2020

May 2035

(a)

June 2040

Forward Market Prices

250 MW Capacity / Energy December 2020 December 2040

(b)

Energy

December 2006 December 2040

December 2007 December 2040

Fixed

(a) The capacity price was adjusted annually until 2020 by the change in a governmental inflationary index. The energy price is based on a
formula that includes an annual fixed component adjusted for the change in a governmental inflationary index and a natural gas index,
as well as market prices.

(b) 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.

Minnesota Power has also entered into the following long-term PSAs for the sale of capacity and energy as of
December 31, 2023:

Counterparty

Quantity

Product

Commencement

Expiration

Pricing

PSAs

Basin

PSA 1

PSA 2

Great River Energy

(a)

100 MW

Capacity

June 2022

June 2025

June 2022

May 2025

May 2028

May 2025

Minnkota Power
Oconto Electric Cooperative

(b)

Capacity / Energy
25 MW Capacity / Energy

June 2014
January 2019

December 2026
May 2026

Silver Bay Power

(c)

Energy

January 2017

December 2031

Fixed

(b)

Fixed

(d)

(a) The agreement provided for 75 MW of capacity from June 1, 2022, through May 31, 2023, and increased to 125 MW of capacity from

June 1, 2023, through May 31, 2025.

(b) Minnesota Power is selling a portion of its entitlement from Square Butte to Minnkota Power, resulting in Minnkota Power’s net
entitlement increasing and Minnesota Power’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 to Minnkota Power approximately 37 percent in 2023 (32 percent in
2022 and 28 percent in 2021). (See Square Butte PPA.)

(c) Silver Bay Power supplies approximately 90 MW of load to Northshore Mining, an affiliate of Silver Bay Power.
(d) The energy pricing escalates at a fixed rate annually and is adjusted for changes in a natural gas index.

ALLETE, Inc. 2023 Form 10-K
104

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)

Coal, Rail and Shipping Contracts. Minnesota Power has coal supply agreements providing for the purchase of a significant
portion of its coal requirements through December 2025. Minnesota Power also has coal transportation agreements in place for
the delivery of a significant portion of its coal requirements through December 2024. The costs of fuel and related
transportation costs for Minnesota Power’s generation are recoverable from Minnesota Power’s utility customers through the
fuel adjustment clause.

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 Air Act, the Clean Water Act and various waste management requirements continue to be
promulgated by both the EPA and state authorities. Minnesota Power’s facilities are subject to new requirements under many of
these regulations. Minnesota Power is reshaping its generation portfolio, over time, to reduce its reliance on coal, has installed
cost-effective emission control technology, and advocates for sound science and policy during rulemaking implementation.

We consider our businesses to be in substantial compliance with currently applicable environmental regulations and believe all
necessary permits have been obtained. We anticipate that with many new and proposed state and federal environmental
regulations and requirements, potential expenditures for future environmental matters may be material and require significant
capital investments. Minnesota Power has evaluated various environmental compliance scenarios using possible outcomes of
environmental regulations to project power supply trends and impacts on customers.

Air. The electric utility industry is regulated at the federal and state level to address air emissions. Minnesota Power’s thermal
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 emission requirements.

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 emissions that contribute to ozone or fine particulate pollution in other states. The CSAPR
does not require installation of controls but does require facilities have sufficient allowances 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
review of the NOX and SO2 allowances issued and pending issuance, as well as consideration of current rules, we currently
expect generation levels and emission rates will result in continued compliance with the CSAPR. Minnesota Power will
continue to monitor ongoing CSAPR rulemakings and compliance implementation, including the EPA’s Good Neighbor Rule
which modifies certain aspects of the CSAPR’s program scope and extent (see EPA Good Neighbor Plan for 2015 Ozone
NAAQS).

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 is not in compliance with the NAAQS, the state is required to adopt plans describing how it
will reduce emissions to attain the NAAQS. Minnesota Power actively monitors NAAQS developments, and the EPA is
currently reviewing the primary or secondary NAAQS for NOx, SO2, and ozone. On February 7, 2024, the EPA announced a
final rule lowering the annual primary standard for particulate matter less than 2.5 microns (PM2.5) from 12 micrograms per
cubic meter (ug/m3) to 9 ug/m3, while retaining other existing primary and secondary standards such as those for course
particulate matter. The Company is reviewing the new standard to determine potential impacts. Anticipated timelines and
compliance costs related to this new standard and other expected NAAQS revisions cannot yet be fully estimated; however,
costs could be material. Minnesota Power would seek recovery of additional costs through a rate proceeding.

ALLETE, Inc. 2023 Form 10-K
105

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)
Environmental Matters (Continued)

EPA Good Neighbor Plan for 2015 Ozone NAAQS. On June 5, 2023, after disapproving state implementation plans, the EPA
published a final Federal Implementation Plan (FIP) rule in the Federal Register, the Good Neighbor Plan, to address regional
ozone transport for the 2015 Ozone NAAQS by reducing NOx emissions during the period of May 1 through September 30
(ozone season). In its justification for the final rule, the EPA asserted that 23 states, including Minnesota, were modeled as
significant contributors to downwind states’ challenges in attaining or maintaining ozone NAAQS compliance. The Good
Neighbor Plan is designed to resolve this interstate transport issue by implementing a variety of NOx reduction strategies,
including federal implementation plan requirements, NOx emission limitations, and ozone season allowance program
requirements. The final rule imposed restrictions on fossil-fuel fired power plants in 22 states and on certain industrial sources
in 20 states, with implementation occurring through changes to the existing CSAPR program for power plants.

Since the EPA partially disapproved the Good Neighbor State Implementation Plans (SIPs) for the states of Minnesota and
Wisconsin, among others, Minnesota is subject to the final Good Neighbor Plan. However, Minnesota Power and a coalition of
other Minnesota utilities and industry (the parties) co-filed challenges to the EPA’s final Minnesota SIP disapproval, submitting
a petition for reconsideration and stay to the EPA, and a petition for judicial review to the U.S. Court of Appeals for the Eighth
Circuit (Eighth Circuit Court). The parties are challenging and requesting reconsideration of certain technical components of the
EPA’s review and subsequent partial disapproval of Minnesota’s SIP. On July 5, 2023, the Eighth Circuit Court granted the stay
preventing the Good Neighbor Plan from taking effect in Minnesota.

On September 29, 2023, the EPA issued an updated final interim rule addressing the stays in Minnesota and five other states,
formally delaying the effective date of the final FIP for states with active stays in place. The state of Minnesota was therefore
not subject to compliance obligations for the 2023 ozone season. Future compliance obligations will depend on resolution of the
stay. Additionally, challenges have been filed against the final FIP rule by the Minnesota coalition parties and other entities,
although the Minnesota coalition FIP challenge is currently in abeyance pending resolution of the SIP disapproval case. In
February 2024, the U.S. Supreme Court will hear arguments from several states and industry groups requesting a national stay
of the FIP rule. Anticipated compliance costs related to final Good Neighbor Plan compliance cannot yet be estimated due to
uncertainties about SIP approval resolution, implementation timing, FIP rule outcome, and allowance costs and facility
emissions during the ozone season. However, the costs could be material, including costs of additional NOx controls, emission
allowance program participation, or operational changes, if any are required. Minnesota Power would seek recovery of
additional costs through a rate proceeding.

EPA National Emission Standards for Hazardous Air Pollutants for Major Sources: Industrial, Commercial and Institutional
Boilers and Process Heaters (Industrial Boiler MACT) Rule. A final rule issued by the EPA for Industrial Boiler MACT
became effective in 2013 with compliance required at major existing sources in 2016, which applied to Minnesota Power’s
Hibbard Renewable Energy Center and Rapids Energy Center. Compliance consisted largely of adjustments to fuels and
operating practices and compliance costs were not material. After this initial rulemaking, litigation from 2016 through 2018
resulted in court orders directing that the EPA reconsider certain aspects of the regulation. A final rule incorporating these
revisions became effective in December 2022, with a compliance deadline of October 6, 2025. Compliance costs are not
expected to be material.

EPA Mercury and Air Toxics Standards (MATS) Rule. On April 24, 2023, the EPA published a proposed revision to the existing
MATS Rule as part of its mandatory 2020 MATS review. In this proposed rule, the EPA is proposing to alter certain
compliance and operational requirements, and to lower several emission limits. Compliance would be required in the 2026 to
2027 timeframe. The EPA expects to issue the final rule in April 2024. The MATS regulation applies at Minnesota Power’s
Boswell Energy Center, which is currently well-controlled for these emissions and is in full compliance with existing
requirements. Compliance costs cannot yet be estimated; however, recovery of any additional costs would be sought through a
rate proceeding.

ALLETE, Inc. 2023 Form 10-K
106

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)
Environmental Matters (Continued)

Climate Change. The scientific community generally accepts that emissions of GHGs 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 or other changes in temperatures; increased risk of wildfires; and
changes in the intensity and frequency of extreme weather events. These all have the potential to affect the Company’s business
and operations. We are addressing climate change 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 of others;
Providing energy conservation initiatives for our customers and engaging in other demand side management efforts;
Improving efficiency of our generating facilities;
Supporting research of technologies to reduce carbon emissions from generating facilities and carbon sequestration
efforts;
Evaluating and developing less carbon intensive future generating assets such as efficient and flexible natural gas fired
generating facilities;

• 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, including planting and managing long-lived conifer species.

EPA Regulation of GHG Emissions. On May 23, 2023, the EPA published in the Federal Register proposed regulatory actions
under Section 111 of the Clean Air Act (CAA) addressing greenhouse gas (GHG) emissions from fossil fuel-fired electric
generating units (EGUs). The EPA is proposing to revise new source performance standards (NSPS) for new, modified and
reconstructed EGUs (Section 111(b) of the CAA) as well as emission guidelines for certain existing (Section 111(d) of the
CAA) EGUs. The EPA is also proposing in this action to officially repeal the predecessor regulation “Affordable Clean Energy
Rule”, first issued in 2019 and later vacated in 2021. The EPA’s Fall 2023 unified agenda identifies the EPA’s goal of issuing
final regulations in April 2024. The Company will continue to monitor this GHG rulemaking and analyze potential impacts to
existing and proposed thermal generating facilities. The rule would apply to several Company assets including existing EGUs at
Boswell and Laskin as well as the proposed combined cycle natural gas-fired generating facility, NTEC. Minnesota Power
continues implementing its EnergyForward strategic plan that provides for significant emissions reductions and diversifying its
electricity generation mix to include more renewable and natural gas energy. We are unable to predict compliance costs due to
the draft status of the rules and the need for a state implementation plan for Section 111(d) existing units; however, the costs
could be material. Minnesota Power would seek recovery of additional costs through a rate proceeding.

Water. The Clean Water Act requires NPDES permits be obtained from the EPA or delegated state agency for any wastewater
discharged to navigable waters. Minnesota Power has obtained all necessary NPDES permits, including NPDES storm water
permits, for applicable facilities to conduct operations.

Steam Electric Power Generating Effluent Limitations Guidelines. In 2015, the EPA issued revised federal Effluent Limitation
Guidelines (ELG) for steam electric power generating stations under the Clean Water Act. The ELG set effluent limits and
prescribed best available control technology for several wastewater streams, including flue gas desulphurization (FGD) water,
bottom ash transport water (BATW) and coal combustion landfill leachate. On October 13, 2020, the EPA published a final
ELG Rule allowing re-use of bottom ash transport water in FGD scrubber systems and limited discharge for maintaining system
water balance. The rule set technology standards and numerical pollutant limits for discharges of BATW and FGD wastewater.
Compliance deadlines depend on subcategory, with compliance generally required as soon as possible, beginning after
October 13, 2021, but no later than December 31, 2025, or December 31, 2028, in some specific cases.

On March 29, 2023, the EPA published a proposed new ELG rule in the Federal Register to update the 2020 ELGs. In the
proposed rule, the EPA is revising ELGs for existing sources, including establishing zero discharge limitations for BATW and
FGD wastewater; new limits for combustion residual leachate; and allowing states to set discharge limits for legacy wastewater
in surface impoundments. The rule proposes to maintain exemptions for units permanently ceasing coal combustion by 2028
and adds a new subcategory for units that have already complied with either the 2015 or 2020 ELG rules and which will retire
by 2032. The EPA plans to publish a final ELG rule in April 2024.

ALLETE, Inc. 2023 Form 10-K
107

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)
Environmental Matters (Continued)

ELG revisions are not expected to have a significant impact on Minnesota Power operations. Boswell, where these ELGs are
applicable, completed conversion to dry bottom ash handling and installed a FGD dewatering system in September 2022. The
dry conversion projects eliminated bottom ash transport water and minimized wastewater from the FGD system. Re-use and
onsite consumption are planned for the remaining BATW and FGD waste stream and for dewatering legacy wastewater from
Boswell’s existing impoundments. The EPA’s reconsideration of legacy wastewater and leachate discharge requirements has
the potential to impact dewatering associated with the closed impoundment at Laskin and the closed Taconite Harbor dry ash
landfill.

At this time, we estimate no additional material compliance costs for ELG, BATW and FGD requirements. Compliance costs
we might incur related to other ELG waste streams (e.g., leachate) or other potential future water discharge regulations at
Minnesota Power facilities cannot be estimated; however, the costs could be material, including costs associated with
wastewater treatment and re-use. Minnesota Power would seek recovery of additional costs through a rate proceeding.

Permitted Water Discharges – Sulfate. In 2017, the MPCA released a draft water quality standard in an attempt to update
Minnesota’s existing 10 mg/L sulfate limit for waters used for the production of wild rice with the proposed rulemaking heard
before an administrative law judge (ALJ). In 2018, the ALJ rejected significant portions of the proposed rulemaking and the
MPCA subsequently withdrew the rulemaking. The existing 10 mg/L limit remains in place, but the MPCA is currently
prohibited under state law from listing wild rice waters as impaired or requiring sulfate reduction technology.

The federal Clean Water Act requires the MPCA to update the state's impaired water list every two years. Beginning in 2021
through the latest draft proposed on November 14, 2023, this list now includes Minnesota lakes and streams identified as wild
rice waters that are listed for sulfate impairment. The list could subsequently be used to set sulfate limits in discharge permits
for power generation facilities and municipal and industrial customers, including paper and pulp facilities, and mining
operations. At this time, we are unable to determine the specific impacts these developments may have on Minnesota Power
operations or its customers, if any. Minnesota Power would seek recovery of additional costs through a rate proceeding.

Solid and Hazardous Waste. The Resource Conservation and Recovery Act (RCRA) regulates the management and disposal of
solid and hazardous wastes. Minnesota Power is required to notify the EPA of hazardous waste activity and routinely submit
reports to the EPA.

Coal Ash Management Facilities. Minnesota Power produces the majority of its coal ash at Boswell, with small amounts of ash
generated at Hibbard Renewable Energy Center. Ash storage and disposal methods include storing ash in clay-lined 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 state permitted landfills.

Coal Combustion Residuals from Electric Utilities (CCR). In 2015, the EPA published a final rule (2015 Rule) regulating CCR
as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery Act (RCRA) in the Federal Register. The
rule included requirements for new landfill and impoundment construction as well as closure activities related to certain
existing impoundments. Costs of compliance for Boswell and Laskin are expected to be incurred primarily over the next
12 years and be between approximately $65 million and $120 million. Compliance costs for CCR at Taconite Harbor are not
expected to be material. Minnesota Power would seek recovery of additional costs through a rate proceeding.

Minnesota Power continues to work on minimizing compliance costs through evaluation of beneficial re-use and recycling of
CCR. In 2018, a U.S. District Court for the District of Columbia decision vacated specific provisions of the CCR rule, which
resulted in a change to the status of several existing clay-lined impoundments at Boswell being considered unlined. In
September 2020, the EPA finalized the CCR Part A Rule, which required all unlined impoundments to cease disposal and
initiate closure. Upon completion of dry ash conversion activities, Boswell ceased disposal in both impoundments in
September 2022. Both impoundments are now inactive and have initiated closure.

ALLETE, Inc. 2023 Form 10-K
108

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)
Environmental Matters (Continued)

On May 17, 2023, the EPA released a proposed rule for CCR legacy surface impoundments. The proposal expands the scope of
units regulated under the CCR rule to include legacy ponds (inactive surface impoundments at inactive facilities) and creates a
new category of units called CCR management units, which includes inactive and closed impoundments and landfills as well as
other non-containerized accumulations of CCR. The proposed rule was published in the Federal Register on May 18, 2023. The
EPA is proposing to require that generating facilities evaluate and identify all past deposits of CCR materials on their sites and
close or re-close existing CCR units to meet current closure standards, as well as install groundwater monitoring systems,
conduct groundwater monitoring, and implement groundwater corrective actions as necessary. A final rule is expected in
April 2024. This rule has the potential to impact Boswell and Laskin. Compliance costs for Minnesota Power facilities cannot
be estimated at this time; however, the costs could be material. Minnesota Power would seek recovery of additional costs
through a rate proceeding.

Additionally, the EPA released a proposed CCR Part B rulemaking in February 2020 addressing options for beneficial reuse of
CCR materials. The final Part B rule expected in late 2024. The final CCR federal permit rule is expected in the first half of
2026. The final federal permit rule will finalize procedures for implementing a CCR federal permit program.

Other Environmental Matters

Manufactured 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 and location of contamination at the site and surrounding
properties. As of December 31, 2023, we have recorded a liability of $1 million for remediation costs at this site. SWL&P has
recorded remediation costs for the site as an associated regulatory asset as we expect recovery of these remediation costs to be
allowed by the PSCW.

Other Matters

We have multiple credit facility agreements in place that provide the ability to issue standby letters of credit to satisfy our
contractual security requirements across our businesses. As of December 31, 2023, we had $149.8 million of outstanding letters
of credit issued, including those issued under our revolving credit facility. We do not believe it is likely that any of these
outstanding letters of credit will be drawn upon.

Regulated Operations. As of December 31, 2023, we had $24.2 million outstanding in standby letters of credit at our Regulated
Operations which are pledged as security to MISO, the NDPSC and a state agency.

ALLETE Clean Energy. ALLETE Clean Energy is party to PSAs that expire in various years between 2024 and 2039. As of
December 31, 2023, ALLETE Clean Energy has $91.6 million outstanding in standby letters of credit, the majority of which are
pledged as security under these PSAs.

Corporate and Other.

BNI Energy. As of December 31, 2023, BNI Energy had surety bonds outstanding of $82.4 million related to the reclamation
liability for closing costs associated with its mine and mine facilities. Although its coal supply agreements obligate the
customers to provide for the closing costs, additional assurance is required by federal and state regulations. BNI Energy’s total
reclamation liability is currently estimated at $82.1 million. BNI Energy does not believe it is likely that any of these
outstanding surety bonds will be drawn upon.

Investment in Nobles 2. Nobles 2 wind energy facility requires standby letters of credit as security for certain contractual
obligations. As of December 31, 2023, ALLETE South Wind has $10.1 million outstanding in standby letters of credit, related
to our portion of the security requirements relative to our ownership in Nobles 2.

ALLETE, Inc. 2023 Form 10-K
109

NOTE 9. COMMITMENTS, GUARANTEES AND CONTINGENCIES (Continued)
Other Matters (Continued)

South Shore Energy. As of December 31, 2023, South Shore Energy had $23.9 million outstanding in standby letters of credit
pledged as security in connection with the development of NTEC.

ALLETE Properties. As of December 31, 2023, ALLETE Properties had surety bonds outstanding to governmental entities
totaling $2.0 million primarily related to development and maintenance obligations for various projects. The estimated cost of
the remaining development work is $1.0 million. ALLETE Properties does not believe it is likely that any of these outstanding
surety bonds 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 revenue bonds. The capital improvement revenue bonds are payable over 31 years (by
May 1, 2036) and are secured by special assessments on the benefited land. 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 its ownership of
benefited property.

As of December 31, 2023, we owned 33 percent of the assessable land in the Town Center District (42 percent as of
December 31, 2022). As of December 31, 2023, ownership levels, our annual assessments related to capital improvement and
special assessment bonds for the ALLETE Properties project within the district is approximately $0.7 million. As we sell
property at this project, the obligation to pay special assessments will pass to the new landowners. In accordance with
accounting guidance, these bonds are not reflected as debt on our Consolidated Balance Sheet.

Legal Proceedings.

In the first quarter of 2023, an ALLETE Clean Energy subsidiary initiated arbitration proceedings seeking damages against a
counterparty for non-performance under a contract. Arbitration hearings were held in June and July 2023, and a final arbitration
ruling was issued in favor of ALLETE Clean Energy’s subsidiary in September 2023. The final arbitration ruling awarded
$68.3 million to ALLETE Clean Energy’s subsidiary, which included prejudgment interest of $5.1 million, recovery of
$3.6 million of arbitration-related costs, and resulted in the recognition of a $58.4 million pre-tax gain in the third quarter of
2023. The arbitration ruling also resulted in the receipt of approximately $60 million of cash, net of distribution to non-
controlling interest, in the third quarter of 2023.

ALLETE, Inc. 2023 Form 10-K
110

NOTE 10. COMMON STOCK AND EARNINGS PER SHARE

Summary of Common Stock

Balance as of December 31, 2020

Employee Stock Purchase Plan
Invest Direct
Share-Based Compensation
Equity Issuance Program
Balance as of December 31, 2021

Employee Stock Purchase Plan
Invest Direct
Share-Based Compensation
Equity Issuance
Balance as of December 31, 2022

Employee Stock Purchase Plan
Invest Direct
Share-Based Compensation

Balance as of December 31, 2023

Shares
Thousands

52,085
17
263
73
782
53,220
11
244
82
3,680
57,237
16
232
76
57,561

Equity
Millions
$1,460.9
0.8
17.5
6.5
51.0
1,536.7
0.9
14.9
5.3
223.7
1,781.5
0.8
13.3
8.1
$1,803.7

Equity Issuance Program. We entered into a distribution agreement with Lampert Capital Markets, in 2008, as amended most
recently in 2020, with respect to the issuance and sale of up to an aggregate of 13.6 million shares of our common stock,
without par value, of which 2.1 million shares remain available for issuance as of December 31, 2023. For the year ended
December 31, 2023, no shares of common stock were issued under this agreement (none in 2022; 0.8 million for net proceeds
of $51.0 million in 2021). On April 5, 2022, ALLETE issued and sold approximately 3.7 million shares of ALLETE common
stock. Net proceeds of approximately $224 million were received from the sale of shares. Proceeds were used primarily to fund
the acquisition of New Energy and capital investments at ALLETE Clean Energy.

Earnings Per Share. We compute basic earnings per share using the weighted average number of shares of common stock
outstanding during each period. The difference between basic and diluted earnings per share, if any, arises from non-vested
restricted stock units and performance share awards granted under our Executive Long-Term Incentive Compensation Plan.

Reconciliation of Basic and Diluted
Earnings Per Share
Year Ended December 31
Millions Except Per Share Amounts
2023
Net Income Attributable to ALLETE
Average Common Shares
Earnings Per Share
2022
Net Income Attributable to ALLETE
Average Common Shares
Earnings Per Share
2021
Net Income Attributable to ALLETE
Average Common Shares
Earnings Per Share

Basic

Dilutive
Securities

Diluted

$247.1

57.3
$4.31

$189.3

55.9
$3.38

$169.2

52.4
$3.23

0.1

$247.1
57.4
$4.30

$189.3
56.0
$3.38

$169.2
52.5
$3.23

ALLETE, Inc. 2023 Form 10-K
111

NOTE 11. INCOME TAX EXPENSE

Income Tax Expense
Year Ended December 31
Millions
Current Income Tax Expense (a)

Federal
State

Total Current Income Tax Expense
Deferred Income Tax Expense (Benefit)

Federal (b)
State (c)
Investment Tax Credit Amortization

Total Deferred Income Tax Expense (Benefit)

Total Income Tax Expense (Benefit)

2023

2022

2021

$9.4
0.9
$10.3

$(6.0)
24.0
(0.4)
$17.6
$27.9

$1.2
6.1
$7.3

$(32.8)
(5.2)
(0.5)
$(38.5)
$(31.2)

—
—
—

$(37.2)
10.8
(0.5)
$(26.9)
$(26.9)

(a) For the years ended December 31, 2023 and 2022, the federal current tax expense was partially offset by production tax credits and

NOLs. For the year ended December 31, 2021, the federal and state current tax expense was minimal due to NOLs.

(b) For the year ended December 31, 2023, the federal deferred income tax benefit was due to tax credits, partially offset by deferred
partnership income. For the years ended December 31, 2022 and 2021, the federal deferred income tax benefit is primarily due to
production tax credits.

(c) For the year ended December 31, 2022, the state impact includes the benefit of deferred repricing as a result of the New Energy

acquisition.

Reconciliation of Taxes from Federal Statutory
Rate to Total Income Tax Expense
Year Ended December 31
Millions
Income Before Non-Controlling Interest and Income Taxes
Statutory Federal Income Tax Rate
Income Taxes Computed at Statutory Federal Rate
Increase (Decrease) in Tax Due to:

State Income Taxes – Net of Federal Income Tax Benefit
Deferred Revaluation – Net of Federal Income Tax Benefit

Production Tax Credits (a)

Investment Tax Credits (a)
Regulatory Differences – Excess Deferred Tax Benefit
Non-Controlling Interest
AFUDC - Equity
Other

Total Income Tax Expense (Benefit)

2023

2022

2021

$206.8

$100.1

$110.9

21 %

$43.4

$21.0

$23.3

19.7
—

(31.6)

(5.8)
(9.9)
13.3
(1.3)
0.1
$27.9

8.6
(7.9)

(50.7)

(4.1)
(9.1)
11.2
(1.1)
0.9
$(31.2)

8.6
—

(53.5)

—
(9.5)
6.3
(1.0)
(1.1)
$(26.9)

(a) For the year ended December 31, 2023, the credits are presented net of any estimated discount on the sale of certain credits.

The effective tax rate was an expense of 13.5 percent for 2023 (benefit of 31.2 percent for 2022; benefit of 24.3 percent for
2021). The 2023, 2022 and 2021 effective tax rates were primarily impacted by production tax credits and non-controlling
interests in subsidiaries.

ALLETE, Inc. 2023 Form 10-K
112

NOTE 11. INCOME TAX EXPENSE (Continued)

Deferred Income Tax Assets and Liabilities
As of December 31
Millions
Deferred Income Tax Assets

Employee Benefits and Compensation
Property-Related
NOL Carryforwards
Capital Loss Carryforwards
Tax Credit Carryforwards
Power Sales Agreements
Regulatory Liabilities
Other

Gross Deferred Income Tax Assets
Deferred Income Tax Asset Valuation Allowance
Total Deferred Income Tax Assets
Deferred Income Tax Liabilities

Deferred Gain
Property-Related
Regulatory Asset for Benefit Obligations
Unamortized Investment Tax Credits
Partnership Basis Differences
Fuel Adjustment Clause
Regulatory Assets

Total Deferred Income Tax Liabilities
Net Deferred Income Taxes (a)

(a) Recorded as a net Deferred Income Tax liability on the Consolidated Balance Sheet.

NOL and Tax Credit Carryforwards
As of December 31
Millions
Federal Tax Credit Carryforwards
Federal Capital Loss Carryforwards (a)
State NOL Carryforwards (a)

State Tax Credit Carryforwards (b)

State Capital Loss Carryforwards (a)

2023

2022

$29.3
58.1
13.0
2.1
557.4
9.0
89.0
8.7
766.6
(58.0)
$708.6

$7.9
632.0
48.1
29.6
156.5
1.9
25.3
$901.3
$192.7

$46.4
61.9
16.7
13.1
548.7
13.7
95.5
28.1
824.1
(60.2)
$763.9

$7.9
661.7
57.7
30.0
126.0
10.7
28.0
$922.0
$158.1

2023

2022

$480.4
—
$280.9

$21.5

—

$464.5
$35.1
$323.0

$24.5

$83.2

(a) Pre-tax amounts; state NOL carryforwards net of a $10.5 million valuation allowance and state capital loss carryforwards net of a

$58.7 million valuation allowance.

(b) Net of a $55.4 million valuation allowance as of December 31, 2023 ($59.6 million as of December 31, 2022).

The federal tax credit carryforward periods expire between 2034 and 2043. We expect to fully utilize the tax credit
carryforwards; therefore, no federal valuation allowance has been recognized as of December 31, 2023. The apportioned state
NOL, capital loss and tax credit carryforward periods expire between 2024 and 2045. We have established a valuation
allowance against certain state NOL, capital loss and tax credits that we do not expect to utilize before their expiration.

ALLETE, Inc. 2023 Form 10-K
113

NOTE 11. INCOME TAX EXPENSE (Continued)

Gross Unrecognized Income Tax Benefits
Millions

Balance at January 1
Reductions for Tax Positions Related to Prior Years
Balance as of December 31

2023

2022

2021

$1.3
(0.2)
$1.1

$1.3
—
$1.3

$1.4
(0.1)
$1.3

Unrecognized 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 pursuant to the “more-likely-than-not” criteria. The unrecognized tax benefit balance includes
permanent tax positions which, if recognized, would affect the annual effective income tax rate. In addition, the unrecognized
tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which 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 accelerate the payment of cash to the taxing authority to an earlier period. The gross unrecognized tax benefits as of
December 31, 2023, included $0.6 million of net unrecognized tax benefits which, if recognized, would affect the annual
effective income tax rate.

As of December 31, 2023, we had accrued interest of $0.1 million (none as of December 31, 2022, and 2021) related to
unrecognized tax benefits included on the Consolidated Balance Sheet due to our NOL carryforwards. We classify interest
related to unrecognized tax benefits as interest expense and tax-related penalties in operating expenses on the Consolidated
Statement of Income. Interest expense related to unrecognized tax benefits on the Consolidated Statement of Income was
immaterial in 2023, 2022 and 2021. There were no penalties recognized in 2023, 2022 or 2021. The unrecognized tax benefit
amounts have been presented as an increase to the net deferred tax liability 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 is currently under examination by the state of Minnesota for the tax years 2020
through 2022. ALLETE has no open federal audits, and is no longer subject to federal examination for years before 2020 or
state examination for years before 2019. Additionally, the statute of limitations related to the federal tax credit carryforwards
will remain open until those credits are utilized in subsequent returns.

ALLETE, Inc. 2023 Form 10-K
114

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

We have noncontributory union, non-union and combined retiree defined benefit pension plans covering eligible employees.
The combined retiree defined benefit pension plan was created in 2016, to include all union and non-union retirees from the
existing plans as of January 2016. The plans provide defined benefits based on years of service and final average pay. We made
$17.3 million in cash contributions to the plan trusts in 2023 (none in 2022; $10.3 million in 2021). We also have a defined
contribution RSOP covering substantially all employees. The 2023 plan year employer contributions totaled $13.7 million
($12.0 million for the 2022 plan year; $11.5 million for the 2021 plan year). (See Note 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 new participants. The Minnesota Power union defined benefit pension plan is also closed to new
participants, and the SWL&P union defined benefit pension plan was closed to new participants effective February 1, 2022.

We have postretirement health care and life insurance plans covering eligible employees. In 2010, the postretirement health care
plan was closed to employees hired after January 2011, and the eligibility requirements were amended. The postretirement life
plan was amended in 2014 to close the plan to non-union employees retiring after 2015, and in 2018, the plan was amended to
limit the benefit level for union employees retiring after 2018. In 2023, the postretirement health care plan was amended to
change the company contribution to an annual stipend for certain retirees. The postretirement health and life plans are
contributory with participant contributions adjusted annually. Postretirement health and life benefits are funded through a
combination of Voluntary Employee Benefit Association trusts (VEBAs), established under section 501(c)(9) of the Internal
Revenue Code, and irrevocable grantor trusts. In 2023, no contributions were made to the VEBAs (none in 2022; none in 2021)
and no contributions were made to the grantor trusts (none in 2022; none in 2021).

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 pension plans. Contributions
are based on estimates and assumptions which are subject to change. On January 12, 2024, we contributed $25.0 million in cash
to the defined benefit pension plans, and expect to make $2.0 million in additional cash contributions to the defined benefit
pension plans in 2024. We do not expect to make any contributions to the defined benefit postretirement health and life plans in
2024.

Accounting for defined benefit pension and other postretirement benefit plans requires that employers recognize on a
prospective basis the funded status of their defined benefit pension and other postretirement plans on their balance sheet and
recognize as a component of other comprehensive income, net of tax, the gains or losses 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 other comprehensive income have been recognized as a long-term
regulatory asset (regulatory liability) on the Consolidated Balance Sheet, in accordance with the accounting standards for the
effect of certain types of regulation applicable to our Regulated Operations. The defined benefit pension and postretirement
health and life benefit expense (credits) associated with our other operations are recognized in accumulated other
comprehensive income.

ALLETE, Inc. 2023 Form 10-K
115

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)

Pension Obligation and Funded Status
As of December 31
Millions
Accumulated Benefit Obligation
Change in Benefit Obligation

Obligation, Beginning of Year
Service Cost
Interest Cost
Plan Amendments
Actuarial (Gain) Loss (a)
Benefits Paid
Participant Contributions
Obligation, End of Year

Change in Plan Assets

Fair Value, Beginning of Year
Actual Return on Plan Assets
Employer Contribution (b)
Benefits Paid
Fair Value, End of Year
Funded Status, End of Year

Net Pension Amounts Recognized in Consolidated Balance Sheet Consist of:

Current Liabilities
Non-Current Liabilities

2023

2022

$729.5

$724.5

$739.7
6.5
40.5
—
13.9
(60.9)
6.6
$746.3

$568.6
55.1
26.2
(60.9)
$589.0

$(157.3)

$911.7
9.3
27.2
0.8
(160.6)
(58.9)
10.2
$739.7

$745.7
(130.5)
12.3
(58.9)
$568.6
$(171.1)

$(2.1)
$(155.2)

$(2.1)
$(169.0)

(a) Actuarial gain in 2022 was primarily the result of increases in discount rates.
(b) Includes Participant Contributions noted above, any contributions made by the Company to pension plan trusts and any direct benefit

payments made under certain plans.

The pension costs that are reported as a component within the Consolidated Balance Sheet, reflected in long-term regulatory
assets or liabilities and accumulated other comprehensive income, consist of a net loss of $256.9 million as of
December 31, 2023 (net loss of $260.2 million and prior service credit of $0.1 million as of December 31, 2022.

ALLETE, Inc. 2023 Form 10-K
116

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)

Reconciliation of Net Pension Amounts Recognized in Consolidated Balance Sheet
As of December 31
Millions
Net Loss
Prior Service Credit
Accumulated Contributions in Excess of Net Periodic Benefit Cost (Prepaid Pension Asset)
Total Net Pension Amounts Recognized in Consolidated Balance Sheet

2023

2022

$(256.9)
—
99.6
$(157.3)

$(260.2)
0.1
89.0
$(171.1)

Components of Net Periodic Pension Cost
Year Ended December 31
Millions
Service Cost
Non-Service Cost Components (a)

Interest Cost
Expected Return on Plan Assets
Amortization of Loss
Amortization of Prior Service Credit

Net Pension Cost

2023

2022

2021

$6.5

$9.3

$11.0

40.5
(43.8)
5.8
(0.1)
$8.9

27.2
(41.5)
11.4
(0.1)
$6.3

24.6
(43.4)
18.8
(0.2)
$10.8

(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 in
Other Comprehensive Income and Regulatory Assets or Liabilities
Year Ended December 31
Millions
Net Loss
Amortization of Prior Service Credit
Prior Service Credit Arising During the Period
Amortization of Loss
Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities

2023

2022

$2.5
0.1
—
(5.7)

$(3.1)

$11.4
0.1
0.8
(11.4)
$0.9

Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets
As of December 31
Millions
Projected Benefit Obligation
Accumulated Benefit Obligation
Fair Value of Plan Assets

2023

2022

$746.3
$729.5
$589.0

$739.7
$724.5
$568.6

ALLETE, Inc. 2023 Form 10-K
117

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)

Postretirement Health and Life Obligation and Funded Status
As of December 31
Millions
Change in Benefit Obligation

Obligation, Beginning of Year
Service Cost
Interest Cost
Actuarial Gain (a)
Benefits Paid
Participant Contributions
Plan Amendments (b)
Obligation, End of Year
Change in Plan Assets

Fair Value, Beginning of Year
Actual Return on Plan Assets
Employer Contribution (Withdrawal)
Participant Contributions
Benefits Paid
Fair Value, End of Year
Funded Status, End of Year

Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet
Consist of:

Non-Current Assets
Current Liabilities
Non-Current Liabilities

2023

2022

$110.4
2.0
5.6
(9.3)
(8.1)
2.4
(29.1)
$73.9

$162.6
20.3
(3.4)
2.4
(8.1)
$173.8
$99.9

$148.2
3.0
4.4
(38.7)
(9.2)
2.7
—
$110.4

$201.8
(33.0)
0.3
2.7
(9.2)
$162.6
$52.2

$106.3
$(0.2)
$(6.2)

$58.8
$(0.2)
$(6.4)

(a) Actuarial gain in 2022 was primarily the result of increases in discount rates.
(b)

In 2023, the postretirement health care plan was amended to change the company contribution to an annual stipend for certain retirees.

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 of determining funded status. In addition to the postretirement health and life assets reported in
the previous table, we had $12.8 million in irrevocable grantor trusts included in Other Non-Current Assets on the Consolidated
Balance Sheet as of December 31, 2023 ($11.8 million as of December 31, 2022).

The postretirement health and life costs that are reported as a component within the Consolidated Balance Sheet, reflected in
regulatory long-term assets or liabilities and accumulated other comprehensive income, consist of the following:

Unrecognized Postretirement Health and Life Costs
As of December 31
Millions
Net Gain
Prior Service Credit
Total Unrecognized Postretirement Health and Life Cost

2023

2022

$(24.8)
(33.8)
$(58.6)

$(9.2)
(13.2)
$(22.4)

ALLETE, Inc. 2023 Form 10-K
118

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)

Reconciliation of Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet
As of December 31
Millions
Net Gain (a)
Prior Service Credit
Accumulated Net Periodic Benefit Cost in Excess of Contributions (a)
Total Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet

$24.8
33.8
41.3
$99.9

2023

2022

$9.2
13.2
29.8
$52.2

(a) Excludes gains, losses and contributions associated with irrevocable grantor trusts.

Components of Net Periodic Postretirement Health and Life Cost
Year Ended December 31
Millions
Service Cost
Non-Service Cost Components (a)

Interest Cost
Expected Return on Plan Assets
Amortization of (Gain) Loss
Amortization of Prior Service Credit
Net Postretirement Health and Life Credit

2023

2022

2021

$2.0

$3.0

$3.6

5.6
(11.4)
(2.7)
(8.5)

4.4
(9.6)
0.4
(7.5)

$(15.0)

$(9.3)

4.4
(9.9)
3.0
(7.6)
$(6.5)

(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 of Income.

Other Changes in Postretirement Benefit Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities
Year Ended December 31
Millions
Net (Gain) Loss
Prior Service Credit Arising During the Period
Amortization of Prior Service Credit
Amortization of Gain (Loss)
Total Recognized in Other Comprehensive Income and Regulatory Assets or Liabilities

Estimated Future Benefit Payments

Millions
2024
2025
2026
2027
2028
Years 2029 – 2033

2023

2022

$(18.3)

(29.1)
8.4
2.7

$(36.3)

$3.9
—
7.5
(0.4)
$11.0

Pension

Postretirement
Health and Life

$58.4
$58.1
$57.5
$57.2
$56.9
$272.6

$6.3
$6.2
$6.1
$6.1
$6.0
$30.0

ALLETE, Inc. 2023 Form 10-K
119

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)

Weighted Average Assumptions Used to Determine Benefit Obligation
As of December 31
Discount Rate

Pension
Postretirement Health and Life

Rate of Compensation Increase
Health Care Trend Rates

Trend Rate
Ultimate Trend Rate
Year Ultimate Trend Rate Effective

2023

2022

5.39%
5.42%
3.52%

7.00%
5.00%
2038

5.70%
5.68%
3.58%

6.50%
5.00%
2038

Weighted Average Assumptions Used to Determine Net Periodic Benefit Costs
Year Ended December 31
Discount Rate

Pension
Postretirement Health and Life

Expected Long-Term Return on Plan Assets

Pension
Postretirement Health and Life

Rate of Compensation Increase

2023

2022

2021

5.70%
5.89%

6.83%
6.33%
3.58%

3.28%
3.09%

6.00%
5.41%
3.58%

2.87%
2.70%

6.50%
5.85%
3.62%

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 current economic conditions, and utilizing the target allocation of our plan assets, forecast the
expected long-term rate of return.

The Company utilizes actuarial assumptions about mortality to calculate the pension and postretirement health and life benefit
obligations. The mortality assumptions used to calculate our pension and other postretirement benefit obligations as of
December 31, 2023, considered a modified PRI-2012 mortality table and MP-2021 mortality projection scale.

ALLETE, Inc. 2023 Form 10-K
120

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)

Actual Plan Asset Allocations

Equity Securities
Fixed Income Securities
Real Estate

(a)

Includes VEBAs and irrevocable grantor trusts.

Pension

Postretirement
Health and Life (a)

2023
57 %
40 %
3 %
100 %

2022
46 %
50 %
4 %
100 %

2023
67 %
33 %
—
100 %

2022
66 %
34 %
—
100 %

There were no shares of ALLETE common stock included in pension plan equity securities as of December 31, 2023 (no shares
as of December 31, 2022).

The defined benefit pension plans have adopted a dynamic asset allocation strategy (glide path) that increases the invested
allocation to fixed income assets as the funding 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 the volatility of reported pension plan expenses. The
postretirement health and life plans’ assets are diversified to achieve strong returns within managed risk. Equity securities are
diversified among domestic companies with large, mid and small market capitalization, as well as investments in international
companies. The majority of debt securities are made up of investment grade bonds.

Following are the current targeted allocations as of December 31, 2023:

Plan Asset Target Allocations

Equity Securities
Fixed Income Securities
Real Estate

(a)

Includes VEBAs and irrevocable grantor trusts.

Fair Value

Pension

Postretirement
Health and
Life (a)

55 %
41 %
4 %
100 %

65 %
35 %
—
100 %

ALLETE, Inc. 2023 Form 10-K
121

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)
Fair Value (Continued)

Pension Fair Value

Recurring Fair Value Measures
Millions
Assets:
Equity Securities:

U.S. Large-cap (a)
U.S. Mid-cap Growth (a)
U.S. Small-cap (a)
International

Fixed Income Securities (a)
Cash and Cash Equivalents
Real Estate
Total Fair Value of Assets

Fair Value as of December 31, 2023

Level 1

Level 2

Level 3

Total

—
—
—
$134.6
—
20.4
—
$155.0

$83.7
69.9
46.5
—
215.0
—
—
$415.1

—
—
—
—
—
—
$18.9
$18.9

$83.7
69.9
46.5
134.6
215.0
20.4
18.9
$589.0

(a) The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity and fixed income

securities indexes.

Recurring Fair Value Measures

Activity in Level 3
Millions
Balance as of December 31, 2022
Actual Return on Plan Assets
Purchases, Sales, and Settlements – Net
Balance as of December 31, 2023

Recurring Fair Value Measures
Millions
Assets:
Equity Securities:

U.S. Large-cap (a)
U.S. Mid-cap Growth (a)
U.S. Small-cap (a)
International

Fixed Income Securities (a)
Cash and Cash Equivalents
Real Estate
Total Fair Value of Assets

Real Estate

$22.4
(3.1)
(0.4)

$18.9

Fair Value as of December 31, 2022

Level 1

Level 2

Level 3

Total

—
—
—
$127.0
—
7.3
—
$134.3

$61.2
40.0
35.4
—
275.3
—
—
$411.9

—
—
—
—
—
—
$22.4
$22.4

$61.2
40.0
35.4
127.0
275.3
7.3
22.4
$568.6

(a) The underlying investments consist of actively-managed funds managed to achieve the returns of certain U.S. equity and fixed income

securities indexes.

ALLETE, Inc. 2023 Form 10-K
122

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)
Fair Value (Continued)

Recurring Fair Value Measures

Activity in Level 3
Millions
Balance as of December 31, 2021
Actual Return on Plan Assets
Purchases, Sales, and Settlements – Net
Balance as of December 31, 2022

Postretirement Health and Life Fair Value

Recurring Fair Value Measures
Millions
Assets:
Equity Securities: (a)
U.S. Large-cap
U.S. Mid-cap Growth
U.S. Small-cap
International

Fixed Income Securities:

Mutual Funds

Cash and Cash Equivalents
Total Fair Value of Assets

(a) The underlying investments consist of mutual funds (Level 1).

Recurring Fair Value Measures
Millions
Assets:
Equity Securities: (a)
U.S. Large-cap
U.S. Mid-cap Growth
U.S. Small-cap
International

Fixed Income Securities:

Mutual Funds

Cash and Cash Equivalents
Total Fair Value of Assets

(a) The underlying investments consist of mutual funds (Level 1).

Real Estate

$21.6
1.0
(0.2)
$22.4

Fair Value as of December 31, 2023

Level 1

Level 2

Level 3

Total

$30.0
28.7
14.9
41.9

55.1
3.2
$173.8

—
—
—
—

—
—
—

—
—
—
—

—
—
—

$30.0
28.7
14.9
41.9

55.1
3.2
$173.8

Fair Value as of December 31, 2022

Level 1

Level 2

Level 3

Total

$26.7
25.5
12.7
41.5

55.5
0.7
$162.6

—
—
—
—

—
—
—

—
—
—
—

—
—
—

$26.7
25.5
12.7
41.5

55.5
0.7
$162.6

ALLETE, Inc. 2023 Form 10-K
123

NOTE 12. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)
Fair Value (Continued)

Recurring Fair Value Measures

Activity in Level 3
Millions
Balance as of December 31, 2021
Actual Return on Plan Assets
Purchases, Sales, and Settlements – Net
Balance as of December 31, 2022

Private Equity
Funds

$2.0
(1.5)
(0.5)
—

Accounting and disclosure requirements for the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(Act) provide guidance for employers that sponsor postretirement health care plans that provide prescription drug benefits. We
provide a fully insured postretirement health benefit, including a prescription 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 insurance company.

NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANS

Employee Stock Ownership Plan. We sponsor an ESOP within the RSOP. Eligible employees may contribute to the RSOP
plan as of their date of hire. The dividends received by the ESOP are distributed to participants. Dividends on allocated ESOP
shares are recorded as a reduction of retained earnings. ESOP employer allocations are funded with contributions paid in either
cash or the issuance of ALLETE common stock at the Company’s discretion. We record compensation expense equal to the
cash or current market price of stock contributed. ESOP compensation expense was $13.7 million in 2023 ($12.0 million in
2022; $11.5 million in 2021).

According to the accounting standards for stock compensation, unallocated shares of ALLETE common stock held and
purchased by the ESOP were treated as unearned ESOP shares and not considered outstanding for earnings per share
computations. All ESOP shares have been allocated to participants as of December 31, 2023, 2022 and 2021.

Stock-Based Compensation.

Stock Incentive Plan. Under our Executive Long-Term Incentive Compensation Plan (Executive Plan), share-based awards may
be issued to key employees through a broad range of methods, including non-qualified and incentive stock options,
performance shares, performance units, restricted stock, restricted stock units, stock appreciation rights and other awards. There
are 0.7 million shares of ALLETE common stock reserved for issuance under the Executive Plan, of which 0.6 million of these
shares remain available for issuance as of December 31, 2023.

ALLETE, Inc. 2023 Form 10-K
124

NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANS (Continued)
Stock-Based Compensation (Continued)

The following types of share-based awards were outstanding in 2023, 2022 or 2021:

Performance Shares. Under the performance share awards, the number of shares earned is contingent upon attaining
specific market and performance goals over a three-year performance period. Market goals are measured by total
shareholder return relative to a group of peer companies while performance goals are 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 award
will 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 other than 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 the greater of actual performance up to the date of
the change in control or target performance. The fair value of these awards incorporates the probability of meeting the total
shareholder return goals. Compensation cost is recognized over the three-year performance period based on our estimate of
the number of shares 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. For participants 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 portion of 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 be earned. 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 award recipients.

Employee Stock Purchase Plan (ESPP). Under our ESPP, eligible employees may purchase ALLETE common stock at a
5 percent discount from the market price; 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 Expense
Year Ended December 31
Millions
Performance Shares
Restricted Stock Units
Total Share-Based Compensation Expense
Income Tax Benefit

2023

2022

2021

$3.1
0.8
$3.9
$1.1

$0.7
0.9
$1.6
$0.5

$2.0
1.0
$3.0
$0.9

There were no capitalized share-based compensation costs during the years ended December 31, 2023, 2022 or 2021.

As of December 31, 2023, the total unrecognized compensation cost for the performance share awards and restricted stock units
not yet recognized in our Consolidated Statement of Income was $2.6 million and $0.8 million, respectively. These amounts are
expected to be recognized over a weighted-average period of 1.7 years and 1.7 years, respectively.

ALLETE, Inc. 2023 Form 10-K
125

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.

2023

2022

2021

Weighted-
Average
Grant Date
Fair Value

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Number of
Shares

60,489

54,039

$69.62

$63.50

—

80,661

37,731

—

$75.80

$67.22

—

85,284

33,304

—

(50,524)

$77.49

(33,375)

(3,030)

111,498

$67.60

$66.71

(7,379)

60,489

$71.00

$69.62

(4,552)

80,661

$80.73

$73.25

—

$86.09

$74.05

$75.80

Non-vested as of January 1

Granted (a)

Awarded

Unearned Grant Award

Forfeited

Non-vested as of December 31

(a) Shares granted include accrued dividends.

There were approximately 61,900 performance shares granted in January 2024 for the three-year performance period ending in
2026. The ultimate issuance is contingent upon the attainment of certain goals of ALLETE during the performance periods. The
grant date fair value of the performance shares granted was $4.0 million. There were approximately 46,700 performance shares
awarded in February 2024. The grant date fair value of the shares awarded was $3.3 million.

Restricted Stock Units. The following table presents information regarding our available restricted stock units.

2023

2022

2021

Weighted-
Average
Grant Date
Fair Value

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Number of
Shares

Available as of January 1

Granted (a)
Awarded
Forfeited

Available as of December 31

(a) Shares granted include accrued dividends.

33,564
21,200
(9,631)
(1,389)
43,744

$68.80
$61.16
$81.91
$63.46
$62.38

28,141
15,477
(7,396)
(2,658)
33,564

$73.16
$63.70
$75.55
$66.44
$68.80

37,482
16,251
(23,631)
(1,961)
28,141

$77.64
$64.97
$74.53
$74.52
$73.16

There were approximately 24,300 restricted stock units granted in January 2024 for the vesting period ending in 2026. The
grant date fair value of the restricted stock units granted was $1.4 million. There were approximately 11,200 restricted stock
units awarded in February 2024. The grant date fair value of the shares awarded was $0.7 million.

NOTE 14. BUSINESS SEGMENTS

We present two reportable segments: Regulated Operations and ALLETE Clean Energy. We measure performance of our
operations through 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. We also present Corporate and Other which includes three operating segments, New Energy, a
renewable energy development company, 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, South Shore Energy, our non-rate regulated,
Wisconsin subsidiary developing NTEC, other business development and corporate expenditures, unallocated interest expense,
a small amount of non-rate base generation, land holdings in Minnesota, and earnings on cash and investments.

ALLETE, Inc. 2023 Form 10-K
126

NOTE 14. BUSINESS SEGMENTS (Continued)

Year Ended December 31
Millions
Operating Revenue
Residential
Commercial
Municipal
Industrial
Other Power Suppliers
Other

Total Regulated Operations

ALLETE Clean Energy
Long-term PSA
Sale of Wind Energy Facilities
Other

Total ALLETE Clean Energy

Corporate and Other

Long-term Contract
Sale of Renewable Development Projects
Other

Total Corporate and Other

Total Operating Revenue

Net Income Attributable to ALLETE (a)

Regulated Operations
ALLETE Clean Energy (b)
Corporate and Other (c)(d)

Total Net Income Attributable to ALLETE

2023

2022

2021

$165.7
184.6
33.4
593.6
146.1
114.9
1,238.3

$175.9
187.2
40.2
589.0
165.8
101.2
1,259.3

65.0
348.4
5.1
418.5

77.2
33.5
7.6
118.3

101.2
92.5
29.3
223.0
$1,879.8

89.2
73.9
30.0
193.1
$1,570.7

$147.2
71.7
28.2
$247.1

$149.9
16.3
23.1
$189.3

$160.8
168.6
52.0
565.5
168.7
112.3
1,227.9

75.5
—
11.4
86.9

84.4
—
20.0
104.4
$1,419.2

$129.1
26.3
13.8
$169.2

(a) Includes interest expense and interest income resulting from intercompany loan agreements and allocated to certain subsidiaries. The

amounts are eliminated in consolidation.

(b) Net income in 2023 includes a $44.3 million after-tax gain recognized for a favorable arbitration ruling. (See Note 9. Commitments,

Guarantees and Contingencies.)

(c) Net Income in 2022 includes a $8.3 million after-tax expense as a result of purchase price accounting related to projects under

development at the time of acquisition and $2.7 million after-tax of transaction costs related to the acquisition of New Energy.

(d) In 2021, South Shore Energy sold a portion of its undivided ownership interest in NTEC to Basin. The closing of the transaction resulted
in the recognition of an approximately $8.5 million after-tax gain which is reflected in Corporate and Other. (See Note 1. Operations
and Significant Accounting Policies.)

ALLETE, Inc. 2023 Form 10-K
127

NOTE 14. BUSINESS SEGMENTS (Continued)

Year Ended December 31
Millions
Depreciation and Amortization

Regulated Operations
ALLETE Clean Energy
Corporate and Other

Total Depreciation and Amortization

Interest Expense (a)

Regulated Operations
ALLETE Clean Energy
Corporate and Other
Eliminations

Total Interest Expense

Equity Earnings

Regulated Operations
Corporate and Other

Total Equity Earnings
Income Tax Expense (Benefit)

Regulated Operations
ALLETE Clean Energy
Corporate and Other

2023

2022

2021

$179.2
57.5
15.1
$251.8

$63.9
0.8
22.5
(6.4)
$80.8

$23.1
(1.4)
$21.7

$22.4
2.7
2.8
$27.9

$171.9
58.6
11.7
$242.2

$58.1
2.3
19.6
(4.8)
$75.2

$19.3
(0.6)
$18.7

$(10.4)
(15.4)

(5.4)

$170.7
49.2
11.8
$231.7

$57.3
1.5
13.2
(2.9)
$69.1

$21.3
(1.3)
$20.0

$(16.6)
(16.6)
6.3
$(26.9)

(a)

Total Income Tax Expense (Benefit)
Includes interest expense resulting from intercompany loan agreements and allocated to certain subsidiaries. The amounts are
eliminated in consolidation.

$(31.2)

As of December 31
Millions
Assets

Regulated Operations
ALLETE Clean Energy
Corporate and Other

Total Assets
Capital Expenditures

Regulated Operations
ALLETE Clean Energy
Corporate and Other

Total Capital Expenditures

2023

2022

$4,335.0
1,594.1
727.3
$6,656.4

$4,291.4
1,873.3
680.9
$6,845.6

$236.3
(5.3)
25.0
$256.0

$158.3
2.2
47.6
$208.1

ALLETE, Inc. 2023 Form 10-K
128

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 Ended
Millions Except Earnings Per Share
2023
Operating Revenue
Operating Income
Net Income Attributable to ALLETE
Earnings Per Share of Common Stock

Basic
Diluted

2022
Operating Revenue
Operating Income
Net Income Attributable to ALLETE
Earnings Per Share of Common Stock

Basic
Diluted

2021
Operating Revenue
Operating Income
Net Income Attributable to ALLETE
Earnings Per Share of Common Stock

Basic
Diluted

Schedule II

ALLETE

Mar. 31

Jun. 30

Sept. 30

Dec. 31

$564.9
$48.3
$58.2

$533.4
$53.5
$51.5

$378.8
$36.0
$85.9

$1.02
$1.02

$0.90
$0.90

$1.50
$1.49

$383.5
$53.4
$66.3

$373.1
$13.7
$37.6

$388.3
$33.4
$33.7

$1.24
$1.24

$0.67
$0.67

$0.59
$0.59

$339.2
$42.0
$51.8

$335.6
$28.2
$27.9

$345.4
$31.1
$27.6

$0.99
$0.99

$0.53
$0.53

$402.7
$43.1
$51.5

$0.89
$0.89

$425.8
$33.7
$51.7

$0.90
$0.90

$399.0
$50.0
$61.9

$1.18
$1.18

Valuation and Qualifying Accounts and Reserves

Balance at
Beginning of
Period

Additions

Charged to
Income

Other
Charges

Deductions
from
Reserves (a)

Balance at
End of
Period

Millions
Reserve Deducted from Related Assets
Reserve For Uncollectible Accounts
2021 Trade Accounts Receivable
2022 Trade Accounts Receivable
2023 Trade Accounts Receivable
Deferred Asset Valuation Allowance

2021 Deferred Tax Assets
2022 Deferred Tax Assets
2023 Deferred Tax Assets

(a)

Includes uncollectible accounts written-off.

$2.5
$1.8
$1.6

$69.9
$69.0
$60.2

$1.2
$1.9
$1.3

$(0.9)
$(8.8)
$(2.2)

—
—
—

$1.9
$2.1
$1.3

—
—
—

$1.8
$1.6
$1.6

$69.0
$60.2
$58.0

ALLETE, Inc. 2023 Form 10-K
129

ALLETE, Inc. Board of Directors

Bethany M. Owen
Chair, President and CEO, ALLETE, Inc.

Susan K. Nestegard
Advisor, True Wealth Ventures
Venture Capital

George G. Goldfarb
Director and Chair Emeritus, Maurices Incorporated
Retail Women’s Apparel

James J. Hoolihan
Owner and CEO, Can-Jer Industrial Lubricant, Ltd.
Industrial Supplier

Madeleine W. Ludlow
Founder and Managing Director, West Capital Advisors, LLC
Investment Banking

Charles R. Matthews
Retired President, Peoples Energy, LLC and President and CEO, The Peoples Gas Light and Coke Company and
North Shore Gas Company, each a subsidiary of WEC Energy Group Inc.
Power and Utilities

Douglas C. Neve
Retired Executive Vice President and CFO, Ceridian Corp.
Human Capital Management Software

Barbara A. Nick
Retired CEO, Dairyland Power Cooperative
Power and Utilities

Robert P. Powers
Retired Vice Chair and Senior Advisor to the Chair and CEO, American Electric Power Company
Power and Utilities

Charlene A. Thomas
Retired Executive Vice President and Chief Diversity, Equity and Inclusion Officer, United Parcel Service, Inc.
Shipping and Logistics

30 W Superior Street, Duluth, MN 55802
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