ALLETE Reports Solid Third Quarter

ALLETE Reports Solid Third Quarter Duluth, Minn. ― ALLETE, Inc. (NYSE: ALE) today reported earnings of 55 cents per share for the third quarter of 2002, compared with 47 cents over the comparable period a year ago, an increase of 17 percent. Net income was $45.1 million, up 19 percent from the third quarter of 2001. Operating revenue was $390 million in the quarter compared with $383.1 million a year ago. Year-to-date, earnings are $1.46 per share, compared with $1.50 for the first nine months of 2001. Excluding exit charges related to the vehicle transport business and Electric Odyssey, year-to-date earnings per share are $1.51 this year.

“We reported earnings comparable to last year despite difficult market conditions for both the energy and automotive businesses,” said Dave Gartzke, ALLETE Chairman, President and CEO. “We are confident that the company is well-positioned to contend with current market conditions and will show stronger earnings performance once the economic environment improves.”

While total kilowatt-hour sales increased 24 percent, earnings at Energy Services for the quarter were down three percent compared to a year ago due to weak wholesale power prices. Revenue and earnings from our core retail electric business remain strong.

Investments and Corporate Charges in the third quarter were flat compared with the comparable period in 2001.

Earnings at Automotive Services increased by $3.5 million for the quarter compared with the third quarter of 2001. At ADESA, growth was due to mandated goodwill accounting changes, lower interest expense and increased auction efficiency. Total receivables at Automotive Finance Corporation have increased by eight percent over 2001 to $535 million, and its strong credit quality helped AFC post another strong quarter. Year-to-date, net income for Automotive Services is 33 percent over the same period last year.

“In the first few weeks of October we were surprised to see conversion rates fall to 50 percent at our U.S. auctions,” Gartzke said. “New car manufacturers have extended zero-percent financing into the 2003 model year, causing a further reduction in wholesale used car prices. This has slowed the sale of vehicles at our auctions.”

The conversion rate represents the number of vehicles sold compared with the number of vehicles offered at auction.

“We expect the sellers of used cars will ultimately accept the lower prices at auction and begin selling again,” Gartzke said. “But timing is uncertain. Based on current market conditions we believe Automotive Services will not achieve its stated earnings growth goal of 30 percent this year. We now expect ALLETE’s earnings per share to be at the low end of the range with respect to our estimate for 2002 of $1.80 to $1.90.”

ALLETE's corporate headquarters are located in Duluth, Minnesota. ALLETE’s holdings include ADESA, the second largest wholesale automobile auction network in North America; AFC, the leading provider of independent auto dealer inventory 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.