ALLETE Reports 2002 Earnings, 2003 Expectations

ALLETE Reports 2002 Earnings, 2003 Expectations (DULUTH, Minn.)—ALLETE, Inc. (NYSE: ALE) today reported 2002 earnings of $1.68 per share, compared with earnings of $1.81 in 2001. Excluding one-time events, earnings were $1.80 per share in 2002 and $1.87 in 2001. Net income was $137.2 million in 2002 on revenue of $1.507 billion, compared with $138.7 million net income on revenue of $1.526 billion in 2001.

“We navigated through a challenging year while accomplishing several important goals,” said Dave Gartzke, ALLETE’s chairman, president and CEO. “We simplified our company by exiting non-strategic businesses. This strengthened our balance sheet and allowed us to focus on our two core businesses. We continued our efforts to communicate this new focus to investors.”

One-time events in 2002 include final exit charges related to the automotive transport and Electric Odyssey retail businesses, as well as a charge related to the indefinite delay of an electric generation project in Superior, Wis. In 2001, ALLETE recognized a portion of the exit charge from the automotive transport business.

Automotive Services grew net income by 24% in 2002 despite relatively flat auction vehicle sales. At ADESA, growth was due to mandated goodwill accounting changes, lower interest expense and increased auction efficiency. Automotive Finance Corporation financed 42,000 more vehicles – an increase of 5%.

At Energy Services, total kilowatt-hour sales were up 11% for the year in part due to sales from nonregulated generation that began in 2002. Low wholesale prices, however, resulted in net income declining by 8%, excluding the Superior generation project.

Investments and Corporate Charges declined by $19.5 million from 2001, mainly due to the liquidation of the company’s securities portfolio during the year and the largest real estate sale in the company’s history which improved earnings in 2001.

Net income from Discontinued Operations increased by $9.8 million in 2002, largely from the suspension of depreciation expense at the company’s Water Services businesses. The pending sale of Florida Water Services for $492.5 million is expected to close in mid-February.

“The proceeds from the sale will give us the ability to reduce debt, which will further strengthen our balance sheet and keep us financially well-positioned,” Gartzke said. “Our two core businesses remain strong and are poised for earnings growth in their respective markets as economic conditions improve.”

Gartzke expects earnings at Automotive Services to grow by about 15% in 2003. Earnings at Energy Services are expected to decrease from 2002 levels. “If wholesale power prices improve, so too will our profitability at Energy Services,” he added.

ALLETE’s corporate headquarters are located in Duluth, Minnesota. ALLETE’s holdings include ADESA, the second largest wholesale vehicle auction network in North America; AFC, the leading provider of independent auto dealer financing; Minnesota Power, a low-cost electric utility that serves some of the largest industrial customers in the United States; and significant real estate holdings in Florida. For more information about ALLETE, visit the company’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.