ALE Allete Inc

Full year earnings guidance is reaffirmed

ALLETE, Inc. (NYSE:ALE) today reported second quarter 2014 earnings of 40 cents per share on net income of $16.8 million compared to 35 cents per share on net income of $14.0 million during the same period last year. Included in this quarter’s results was a $2.5 million after-tax, or 6 cents per share, non-recurring charge associated with a settlement agreement with the Environmental Protection Agency (EPA).

Revenue for the second quarter of 2014 rose by 10.7 percent to $260.7 million versus $235.6 million a year ago. This quarter’s earnings per share included 2 cents per share of dilution due to an increase in common shares year over year.

Net income at ALLETE’s Regulated Operations segment, which includes Minnesota Power, Superior Water, Light and Power and the company’s investment in the American Transmission Co., rose to $17.5 million compared to $16.3 million in the same period of 2013, despite the inclusion of the aforementioned non-recurring charge in this quarter’s results. The net income increase was primarily due to higher cost recovery revenue as a result of ongoing work on the Boswell 4 environmental retrofit and Bison 4 wind energy projects. Electric sales were similar to the second quarter of 2013, and reflected continued strong demand from Minnesota Power’s industrial customers.

The Investments and Other segment, which includes BNI Coal, ALLETE Clean Energy, ALLETE Properties, and miscellaneous corporate income and expense, reported a net loss of $0.7 million for the quarter, an improvement of $1.6 million from the same period in 2013. ALLETE Clean Energy posted a profit from its newly acquired wind energy facilities in Minnesota, Iowa and Oregon. Results at BNI Coal and ALLETE Properties were similar to the second quarter of last year.

“Demand nominations we’ve just received indicate our taconite customers will continue to operate at full demand levels through the remainder of 2014,” said ALLETE Chairman, President and CEO Al Hodnik. “We’re pleased to be on track with the earnings projections we made earlier this year.” Hodnik said the 2014 full year earnings guidance range remains unchanged at $2.75 to $2.95, excluding 3 cents per share of costs recorded in the first quarter associated with an ALLETE Clean Energy acquisition, and this quarter’s non-recurring 6 cents per share charge associated with the EPA settlement.

The company will host a conference call and webcast at 10 a.m. Eastern time today to discuss details of its quarterly performance. 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 August 3, 2014 by dialing (855) 859-2056, pass code 72262344. 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 BNI Coal in Center, N.D., ALLETE Clean Energy, based in Duluth, and has an eight percent equity interest in the American Transmission Co. More information about ALLETE is available at www.allete.com.

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 include presentations of earnings (loss) per share. 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

Millions Except Per Share Amounts - Unaudited

      Quarter Ended     Six Months Ended June 30, June 30,       2014     2013     2014     2013         Operating Revenue     $ 260.7       $ 235.6       $ 557.2       $ 499.4     Operating Expenses Fuel and Purchased Power 83.6 78.7 179.8 165.2 Operating and Maintenance 115.1 103.8 234.9 208.5 Depreciation       33.8         28.7         66.0         56.9   Total Operating Expenses 232.5 211.2 480.7 430.6   Operating Income       28.2         24.4         76.5         68.8     Other Income (Expense) Interest Expense (13.5 ) (12.8 ) (26.3 ) (25.1 ) Equity Earnings in ATC 5.2 5.0 10.3 10.2 Other       1.9         1.5         3.9         4.2   Total Other Expense       (6.4 )       (6.3 )       (12.1 )       (10.7 )   Income Before Non-Controlling Interest and Income Taxes 21.8 18.1 64.4 58.1 Income Tax Expense       4.9         4.1         13.7         11.6   Net Income       16.9         14.0         50.7         46.5   Less: Non-Controlling Interest in Subsidiaries       0.1         —         0.4         —   Net Income Attributable to ALLETE     $ 16.8       $ 14.0       $ 50.3       $ 46.5     Average Shares of Common Stock Basic 42.1 39.4 41.7 39.2 Diluted       42.3         39.6         41.9         39.3     Basic Earnings Per Share of Common Stock $ 0.40 $ 0.36 $ 1.21 $ 1.19 Diluted Earnings Per Share of Common Stock $ 0.40 $ 0.35 $ 1.20 $ 1.18   Dividends Per Share of Common Stock     $ 0.49       $ 0.475       $ 0.98       $ 0.95       Consolidated Balance Sheet

Millions - Unaudited

      Jun. 30,     Dec. 31,           Jun. 30,     Dec. 31,       2014     2013             2014     2013 Assets Liabilities and Shareholders’ Equity Cash and Cash Equivalents $ 83.6 $ 97.3 Current Liabilities $ 213.4 $ 230.2 Other Current Assets 209.9 209.7 Long-Term Debt 1,316.8 1,083.0 Property, Plant and Equipment - Net 3,020.4 2,576.5 Deferred Income Taxes 496.3 479.1 Regulatory Assets 270.8 263.8 Regulatory Liabilities 100.1 81.0 Investment in ATC 118.8 114.6 Defined Benefit Pension & Other

Postretirement Benefit Plans

117.0 133.4 Other Investments 116.7 146.3 Other Non-Current Liabilities 234.5 127.2 Other Non-Current Assets       75.4       68.6       Shareholders’ Equity       1,417.5       1,342.9 Total Assets     $ 3,895.6     $ 3,476.8       Total Liabilities and Shareholders’ Equity     $ 3,895.6     $ 3,476.8           Quarter Ended Six Months Ended ALLETE, Inc. June 30, June 30, Income (Loss)     2014     2013     2014     2013 Millions         Regulated Operations $ 17.5 $ 16.3 $ 51.4 $ 48.4 Investments and Other       (0.7 )       (2.3 )       (1.1 )       (1.9 ) Net Income Attributable to ALLETE     $ 16.8       $ 14.0       $ 50.3       $ 46.5   Diluted Earnings Per Share     $ 0.40       $ 0.35       $ 1.20       $ 1.18     Statistical Data                         Corporate Common Stock High $ 52.54 $ 52.25 $ 52.73 $ 52.25 Low $ 47.51 $ 46.85 $ 47.51 $ 41.39 Close $ 51.35 $ 49.85 $ 51.35 $ 49.85 Book Value $ 33.22 $ 31.12 $ 33.22 $ 31.12   Kilowatt-hours Sold                         Millions Regulated Utility Retail and Municipals Residential 249 251 647 605 Commercial 333 335 728 712 Municipals 198 225 440 499 Industrial       1,788         1,769         3,604         3,614   Total Retail and Municipal 2,568 2,580 5,419 5,430 Other Power Suppliers       631         610         1,331         1,201   Total Regulated Utility 3,199 3,190 6,750 6,631 Non-regulated Energy Operations       30         33         64         64   Total Kilowatt-hours Sold       3,229         3,223         6,814         6,695     Regulated Utility Revenue                         Millions Regulated Utility Revenue Retail and Municipals Residential $ 25.7 $ 24.7 $ 65.8 $ 59.8 Commercial 30.9 29.3 66.0 62.5 Municipals 14.5 15.8 31.0 32.4 Industrial       108.7         101.6         220.1         210.1   Total Retail and Municipals 179.8 171.4 382.9 364.8 Other Power Suppliers 24.1 22.4 53.7 44.7 Other       25.7         22.0         57.2         47.7   Total Regulated Utility Revenue     $ 229.6       $ 215.8       $ 493.8       $ 457.2    

ALLETE, Inc.Investor Contact:Tim Thorp, 218-723-3953tthorp@allete.com