ALLETE Reports Third Quarter 2007 Earnings of 58 Cents Per Share

By: ALLETE Inc. via Business Wire News Releases

October 26, 2007 at 08:30 AM EDT

ALLETE Inc. (NYSE:ALE) today reported third quarter 2007 earnings of 58 cents per share, on net income of $16.5 million and operating revenue of $200.8 million.

In the third quarter a year ago, earnings were 78 cents per share on net income of $21.8 million and operating revenue of $199.1 million.

Earnings from ALLETE’s energy business segments were, in total, about the same in the third quarter of 2007 as they were in 2006.

ALLETE’s investment in the American Transmission Company recorded net income of $1.9 million in the third quarter of 2007, compared to $0.6 million in the third quarter a year ago. ALLETE began investing in ATC in May of 2006, and that investment gradually grew throughout the year.

Regulated Utility net income of $13.0 million for the quarter was down from $13.7 million in 2006. Kilowatt-hour sales of electricity were about two percent lower than last year, and operations and maintenance expenses were higher due to a planned outage and storm recovery expenditures. These items were partially offset by a lower effective tax rate this year.

ALLETE’s real estate income in the third quarter was $0.6 million compared with $5.1 million in the third quarter of 2006. ALLETE Chairman, President and CEO Don Shippar noted that the company’s latest earnings guidance, issued in July, assumed real estate activity during the second half of 2007 would fall from levels recorded a year earlier due to difficult market conditions.

“ALLETE remains on track to meet our 2007 earnings expectation of $3.00 to $3.05 per share,” Shippar said. Through the first three quarters of this year, ALLETE has earned $2.31 per share versus $1.95 for the same period in 2006.

ALLETE’s corporate headquarters are located in Duluth, Minnesota. ALLETE provides energy services in the upper Midwest and has significant real estate holdings in Florida. More information about the company is available on ALLETE’s Web site 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, Inc. Consolidated Statement of Income For the Periods Ended September 30, 2007 and 2006 Millions Except Per Share Amounts

	Quarter Ended						Year to Date
	2007			2006			2007			2006
Operating Revenue	$	200.8		$	199.1		$	629.4		$	569.9
Operating Expenses
Fuel and Purchased Power		91.8			79.5			262.4			211.9
Operating and Maintenance		72.1			68.7			231.3			220.0
Depreciation		12.2			12.2			35.8			36.6
Total Operating Expenses		176.1			160.4			529.5			468.5
Operating Income from Continuing Operations		24.7			38.7			99.9			101.4
Other Income (Expense)
Interest Expense		(6.3	)		(7.3	)		(18.7	)		(20.1	)
Equity Earnings in ATC		3.2			1.0			9.3			1.0
Other		3.2			2.7			11.9			7.8
Total Other Income (Expense)		0.1			(3.6	)		2.5			(11.3	)

Income from Continuing Operations Before Minority Interest and Income Taxes		24.8			35.1			102.4			90.1
Income Tax Expense		8.1			12.1			35.4			32.6
Minority Interest		0.2			1.1			1.6			3.2
Income from Continuing Operations		16.5			21.9			65.4			54.3
Income from Discontinued Operations - Net of Tax		0.0			(0.1	)		0.0			(0.5	)
Net Income	$	16.5		$	21.8		$	65.4		$	53.8

Average Shares of Common Stock
Basic		28.5			27.8			28.2			27.7
Diluted		28.5			27.9			28.3			27.8
Basic Earnings Per Share of Common Stock
Continuing Operations	$	0.58		$	0.78		$	2.31		$	1.96
Discontinued Operations		0.00			0.00			0.00			(0.02	)
	$	0.58		$	0.78		$	2.31		$	1.94
Diluted Earnings Per Share of Common Stock
Continuing Operations	$	0.58		$	0.78		$	2.31		$	1.95
Discontinued Operations		0.00			0.00			0.00			(0.02	)
	$	0.58		$	0.78		$	2.31		$	1.93
Dividends Per Share of Common Stock	$	0.4100		$	0.3625		$	1.2300		$	1.0875

Consolidated Balance Sheet Millions

	Sep. 30,		Dec. 31,			Sep. 30,		Dec. 31,
	2007		2006			2007		2006
Assets					Liabilities and Shareholders' Equity
Cash and Short-Term Investments	$	131.8	$	149.3	Current Liabilities	$	129.6	$	143.5
Other Current Assets		135.8		138.4	Long-Term Debt		409.0		359.8
Property, Plant and Equipment		1,033.8		921.6	Other Liabilities		383.4		364.3
Investments		206.4		189.1	Shareholders' Equity		724.5		665.8
Other		138.7		135.0
Total Assets	$	1,646.5	$	1,533.4	Total Liabilities and Shareholders' Equity	$	1,646.5	$	1,533.4

	Quarter Ended				Year to Date
	September 30,				September 30,
ALLETE, Inc.	2007		2006		2007		2006
Income (Loss)
Millions
Regulated Utility	$	13.0	$	13.7	$	37.9	$	33.5
Nonregulated Energy Operations		0.6		1.1		3.4		2.9
ATC		1.9		0.6		5.6		0.6
Real Estate		0.6		5.1		15.2		15.7
Other		0.4		1.4		3.3		1.6
Income from Continuing Operations		16.5		21.9		65.4		54.3
Loss from Discontinued Operations		0.0		0.1		0.0		0.5
Net Income	$	16.5	$	21.8	$	65.4	$	53.8
Diluted Earnings Per Share
Continuing Operations	$	0.58	$	0.78	$	2.31	$	1.95
Discontinued Operations		0.0		0.0		0.0		(0.02	)
	$	0.58	$	0.78	$	2.31	$	1.93

Statistical Data
Corporate
Common Stock
High	$	50.05	$	49.30	$	51.30	$	49.30
Low	$	38.60	$	43.26	$	38.60	$	42.99
Close	$	44.76	$	43.45	$	44.76	$	43.45
Book Value	$	23.50	$	21.26	$	23.50	$	21.26

Kilowatthours Sold
Millions
Regulated Utility
Retail and Municipals
Residential		258.8		263.0		832.1		800.1
Commercial		360.5		361.7		1,033.6		1,005.9
Municipals		255.7		248.6		751.3		684.0
Industrial		1,775.8		1,836.9		5,215.2		5,429.1
Other		21.5		20.8		62.8		59.4
Total Retail and Municipal		2,672.3		2,731.0		7,895.0		7,978.5
Other Power Suppliers		571.9		584.3		1,608.8		1,604.9
Total Regulated Utility		3,244.2		3,315.3		9,503.8		9,583.4
Nonregulated Energy Operations		60.7		60.4		184.2		181.3
Total Kilowatthours Sold		3,304.9		3,375.7		9,688.0		9,764.7

Real Estate
Town Center Development Project
Commercial Square Footage Sold		50,000		114,300		474,476		364,995
Residential Units		–		356		130		542

Palm Coast Park Development Project
Commercial Square Footage Sold		–		–		40,000		–
Residential Units		–		200		406		200

Other Land
Acres Sold		83		242		450		708

Contacts:

ALLETE Inc.
Eric Olson, 218-723-3947
[email protected]
or
Investor Contact:
Tim Thorp, 218-723-3953
[email protected]