ALLETE, Inc. Reports 2017 Earnings of $3.38 Per Share; Initiates 2018 Earnings Guidance; Expects Significant Growth from Non-Regulated Businesses

February 15, 2018

DULUTH, Minn.–(BUSINESS WIRE)–ALLETE, Inc. (NYSE: ALE) today reported 2017 earnings of $3.38 per share
on net income of $172.2 million and operating revenue of $1.42 billion.
Results from 2016 were $3.14 per share on net income of $155.3 million
and operating revenue of $1.34 billion.

“I am pleased with our financial performance and accomplishments in 2017
as we continued to execute on our multi-faceted strategy for growth
while returning more than $100 million to shareholders in the form of
dividends; our businesses are well positioned as we move into 2018 and
beyond,” said ALLETE Chairman, President and CEO Al Hodnik, “We believe
our unique mix of businesses will continue to deliver a strong value
proposition to shareholders as supported by our recent announcement to
increase our long-term average annual earnings growth target to 5
percent to 7 percent from 5 percent previously, and increase our
dividend by approximately 5 percent over 2017.”

Results in 2017 were positively impacted by $13.0 million after-tax, or
$0.25 per share, for the remeasurement of ALLETE’s deferred income tax
assets and liabilities resulting from the Tax Cuts and Jobs Act (TCJA)
that was enacted on December 22, 2017. While immediate and future net
tax benefits for the regulated businesses are expected to return to our
utility customers over time, the immediate net tax benefits attributable
to ALLETE Clean Energy and U.S. Water Services positively affected 2017
results and are expected to benefit future after-tax earnings. Results
for 2017 also reflect a benefit of $7.9 million after-tax, or $0.16 per
share, for the Minnesota Public Utilities Commission’s (MPUC)
modification of its November 2016 order on the allocation of North
Dakota investment tax credits in a MPUC order dated December 7, 2017.
These benefits were partially offset by a non-cash $11.4 million
after-tax charge, or $0.22 per share, for the MPUC’s decision in
Minnesota Power’s rate case in January 2018, disallowing recovery of
Minnesota Power’s regulatory asset for deferred fuel adjustment clause
costs due to the anticipated adoption of a forward-looking fuel
adjustment clause methodology.

Net income for 2016 was impacted by an after-tax gain of $13.6 million,
or $0.28 per share, related to the change in fair value of the
contingent consideration liability, offset by the adverse impact of $8.8
million after-tax, or $0.18 per share, for the November 2016 MPUC order
on the allocation of North Dakota investment tax credits, a $3.3 million
after-tax, or $0.07 per share, goodwill impairment charge related to
ALLETE Clean Energy, and $0.9 million after-tax expense, or $0.02 per
share, related to the repayment of long-term debt at ALLETE Clean Energy.

ALLETE’s Regulated Operations segment, which includes Minnesota Power,
Superior Water, Light and Power, and the Company’s investment in the
American Transmission Co. (ATC), recorded net income of $128.4 million,
a decrease of $7.1 million compared to 2016. Net income at Minnesota
Power decreased $9.8 million after-tax reflecting the previously
mentioned non-cash $11.4 million after-tax charge for the MPUC’s
decision disallowing recovery of Minnesota Power’s regulatory asset for
deferred fuel adjustment clause costs. In addition, net income decreased
due to lower sales to other power suppliers as a result of higher
industrial sales coupled with lower market prices, higher interest and
taxes other than income taxes, and lower kWh sales to residential,
commercial and municipal customers due to milder temperatures in 2017.
These decreases were partially offset by lower depreciation expense of
$14.6 million after-tax resulting from the MPUC’s decision to modify the
depreciable lives at Boswell Energy Center, and higher industrial kWh
sales. Interim retail rate refund reserves fully offset the interim
retail rates recognized during 2017 due to the regulatory outcome of the
MPUC’s decision in Minnesota Power’s 2016 general rate case in January
2018. Our equity earnings in ATC increased $2.6 million after-tax in
2017, primarily due to additional investments in ATC and
period-over-period changes in ATC’s estimate of a refund liability
related to the MISO return on equity complaints.

ALLETE’s Energy Infrastructure and Related Services businesses, which
include ALLETE Clean Energy and U.S. Water Services, recorded net income
of $41.5 million and $10.7 million, respectively.

Earnings at ALLETE Clean Energy in 2017 included a favorable impact of
$23.6 million after-tax for the remeasurement of deferred income tax
assets and liabilities resulting from the TCJA, increased production tax
credits due to the requalification of certain wind turbine generators
for production tax credits at its Storm Lake I, Storm Lake II and Lake
Benton wind energy facilities, lower operating and maintenance expenses,
and lower interest expense. Results for 2016 at ALLETE Clean Energy
included a $3.3 million after-tax goodwill impairment charge and a $0.9
million after-tax expense related to the repayment of long-term debt.

Earnings at U.S. Water Services in 2017 increased $9.2 million
reflecting a favorable impact of $9.2 million after-tax for the
remeasurement of deferred income tax assets and liabilities resulting
from the TCJA, and higher operating revenue, partially offset by
increased operating expenses as a result of investments for future
growth in waste treatment and water safety applications. 2017 earnings
also reflected a net loss of $0.8 million primarily for transaction fees
and amortization expense of a recent acquisition. Cash flow from
operations remained strong for the year at approximately $12 million.

Our Corporate and Other businesses, which include BNI Energy and ALLETE
Properties, recorded a net loss of $8.4 million for the year, compared
to net income of $4.9 million in 2016. The net loss in 2017 included
additional income tax expense of $19.8 million after-tax for the
remeasurement of deferred income tax assets and liabilities resulting
from the TCJA. The net loss in 2017 also included the previously
mentioned favorable impact of $7.9 million after-tax for the MPUC’s
modification of its November 2016 order on the allocation of North
Dakota investment tax credits, lower accretion expense relating to the
contingent consideration liability, and lower interest expense. Net
income in 2016 included the after-tax gain of $13.6 million related to
the change in fair value of the U.S. Water Services contingent
consideration liability, partially offset by the adverse impact of $8.8
million after-tax for the regulatory outcome of the November 2016 MPUC
order.

Earnings were diluted by $0.11 per share in 2017, due to additional
shares of common stock outstanding as of December 31, 2017.

The Company expects 2018 earnings per share to be within a range of
$3.20 to $3.50 with earnings from our Energy Infrastructure and Related
Services businesses expected to increase further in 2019 and become a
more meaningful contributor to ALLETE’s earnings in the coming years.
Details of the Company’s 2018 earnings guidance were also filed as part
of today’s Form 8-K filing.

ALLETE will host a conference call and webcast at 10 a.m. Eastern Time
this morning to discuss details of its financial performance and
earnings guidance. Interested parties may listen live by calling (877)
303-5852, or by accessing the webcast at www.allete.com.
A replay of the call will be available through February 19, 2018 by
calling (855) 859-2056, pass code 9977768. The webcast will be
accessible for one year at www.allete.com.

ALLETE is an energy company headquartered in Duluth, Minn. In addition
to its electric utilities, Minnesota Power and Superior Water, Light and
Power of Wisconsin, ALLETE owns ALLETE Clean Energy, based in Duluth,
BNI Energy in Bismarck, N.D., U.S. Water Services headquartered in St.
Michael, Minn., and has an eight percent equity interest in the American
Transmission Co. More information about ALLETE is available at www.allete.com.
ALE-CORP

The statements contained in this release and statements that ALLETE
may make orally in connection with this release that are not historical
facts, are forward-looking statements. Actual results may differ
materially from those projected in the forward-looking statements. These
forward-looking statements involve risks and uncertainties and investors
are directed to the risks discussed in documents filed by ALLETE with
the Securities and Exchange Commission.

ALLETE's press releases and other communications may include certain
non-Generally Accepted Accounting Principles (GAAP) financial measures.
A “non-GAAP financial measure” is defined as a numerical measure of a
company's financial performance, financial position or cash flows that
excludes (or includes) amounts that are included in (or excluded from)
the most directly comparable measure calculated and presented in
accordance with GAAP in the company's financial statements.

Non-GAAP financial measures utilized by the Company may include
presentations of earnings (loss) per share and earnings before interest,
taxes, depreciation and amortization. ALLETE's management believes that
these non-GAAP financial measures provide useful information to
investors by removing the effect of variances in GAAP reported results
of operations that are not indicative of changes in the fundamental
earnings power of the Company's operations. Management believes that the
presentation of the non-GAAP financial measures is appropriate and
enables investors and analysts to more accurately compare the company's
ongoing financial performance over the periods presented.

ALLETE, Inc.
Consolidated Statement of Income
For the Periods Ended December 31, 2017 and 2016
Quarter Ended	Year to Date
2017	2016	2017	2016
Millions Except Per Share Amounts
Operating Revenue
Utility	$239.7	$260.2	$1,063.8	$1,000.7
Non-utility	98.2	81.3	355.5	339.0
Total Operating Revenue	337.9	341.5	1,419.3	1,339.7
Operating Expenses
Fuel, Purchased Power and Gas – Utility	113.7	89.3	396.9	339.9
Transmission Services – Utility	18.1	15.7	71.2	65.2
Cost of Sales – Non-utility	41.7	29.2	147.8	137.7
Operating and Maintenance	91.7	93.2	339.9	334.1
Depreciation and Amortization	26.0	50.1	177.5	195.8
Taxes Other than Income Taxes	14.2	13.2	56.9	53.8
Other	(0.7	)	(10.3	)	(0.7	)	(10.3	)
Total Operating Expenses	304.7	280.4	1,189.5	1,116.2
Operating Income	33.2	61.1	229.8	223.5
Other Income (Expense)
Interest Expense	(17.3	)	(17.3	)	(67.8	)	(70.3	)
Equity Earnings in ATC	5.2	3.5	22.5	18.5
Other	0.4	1.1	2.4	3.9
Total Other Expense	(11.7	)	(12.7	)	(42.9	)	(47.9	)
Income Before Non-Controlling Interest and Income Taxes	21.5	48.4	186.9	175.6
Income Tax Expense (Benefit)	(19.9	)	4.1	14.7	19.8
Net Income	41.4	44.3	172.2	155.8
Less: Non-Controlling Interest in Subsidiaries	—	—	—	0.5
Net Income Attributable to ALLETE	$41.4	$44.3	$172.2	$155.3
Average Shares of Common Stock
Basic	51.1	49.5	50.8	49.3
Diluted	51.3	49.7	51.0	49.5
Basic Earnings Per Share of Common Stock	$0.81	$0.89	$3.39	$3.15
Diluted Earnings Per Share of Common Stock	$0.81	$0.89	$3.38	$3.14
Dividends Per Share of Common Stock	$0.535	$0.52	$2.14	$2.08

Consolidated Balance Sheet
Millions
Dec. 31,	Dec. 31,	Dec. 31,	Dec. 31,
2017	2016	2017	2016
Assets	Liabilities and Equity
Cash and Cash Equivalents	$98.9	$27.5	Current Liabilities	$351.2	$399.5
Other Current Assets	268.6	267.0	Long-Term Debt	1,439.2	1,370.4
Property, Plant and Equipment – Net	3,822.4	3,741.2	Deferred Income Taxes	230.5	554.6
Regulatory Assets	384.7	330.1	Regulatory Liabilities	532.0	125.8
Investment in ATC	118.7	135.6	Defined Benefit Pension & Other Postretirement Benefit Plans	191.8	210.9
Other Investments	53.1	55.6	Other Non-Current Liabilities	267.1	322.7
Goodwill and Intangibles – Net	225.9	213.4	Equity	2,068.2	1,893.0
Other Non-Current Assets	107.7	106.5
Total Assets	$5,080.0	$4,876.9	Total Liabilities and Equity	$5,080.0	$4,876.9

Quarter Ended	Year to Date
ALLETE, Inc.	December 31,	December 31,
Income (Loss)	2017	2016	2017	2016
Millions
Regulated Operations	$18.3	$25.5	$128.4	$135.5
Energy Infrastructure and Related Services
ALLETE Clean Energy	30.4	3.7	41.5	13.4
U.S. Water Services	9.1	(0.5	)	10.7	1.5
Corporate and Other	(16.4	)	15.6	(8.4	)	4.9
Net Income Attributable to ALLETE	$41.4	$44.3	$172.2	$155.3
Diluted Earnings Per Share	$0.81	$0.89	$3.38	$3.14
Statistical Data
Corporate
Common Stock
High	$81.24	$66.92	$81.24	$66.92
Low	$72.96	$56.48	$61.64	$48.26
Close	$74.36	$64.19	$74.36	$64.19
Book Value	$40.46	$38.17	$40.46	$38.17
Kilowatt-hours Sold
Millions
Regulated Utility
Retail and Municipal
Residential	305	286	1,096	1,102
Commercial	359	352	1,420	1,442
Municipal	208	205	799	816
Industrial	1,890	1,716	7,327	6,456
Total Retail and Municipal	2,762	2,559	10,642	9,816
Other Power Suppliers	1,017	860	4,039	4,316
Total Regulated Utility	3,779	3,419	14,681	14,132
Regulated Utility Revenue
Millions
Regulated Operations
Retail and Municipal
Residential	$33.5	$30.6	$119.9	$115.8
Commercial	35.6	33.6	139.5	133.7
Municipal	12.8	17.2	57.9	67.6
Industrial	123.7	110.0	486.5	412.5
Reserve for Interim Rate Refunds	(31.6	)	—	(31.6	)	—
Total Retail and Municipal	174.0	191.4	772.2	729.6
Other Power Suppliers	37.8	41.9	161.8	175.1
Other	27.9	26.9	129.8	96.0
Total Regulated Utility Revenue	$239.7	$260.2	$1,063.8	$1,000.7