SUBJECT TO COMPLETION, DATED OCTOBER 4, 2000
PROSPECTUS SUPPLEMENT FILING UNDER RULE 424(B)(5)
(TO PROSPECTUS DATED AUGUST 7, 2000) REGISTRATION NO. 333-41882
$ ,000,000
ALLETE
(LEGALLY INCORPORATED AS MINNESOTA POWER, INC.)
FLOATING RATE SENIOR NOTES DUE OCTOBER , 2003
ALLETE will pay interest, in cash, on the Senior Notes on January , April , July
, and October , of each year, beginning January , 2001. Except in certain
circumstances described in this prospectus supplement, the per annum interest
rate on the Senior Notes for each interest period will be reset quarterly based
on LIBOR plus . %.
The Senior Notes shall not be redeemable prior to October , 2001. On or after
October , 2001, ALLETE may redeem the Senior Notes, at its option, in whole or
in part from time to time, on any interest payment date prior to their maturity,
upon at least 30 but not more than 60 days notice, at a redemption price equal
to 100% of the principal amount of the Senior Notes being redeemed plus accrued
and unpaid interest thereon, if any.
The Senior Notes are unsecured and rank equally with ALLETE's other unsecured
and unsubordinated indebtedness. ALLETE does not plan to list the Senior Notes
on any securities exchange.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PER SENIOR NOTE TOTAL
--------------- -----
Price to Public.................
Underwriting Discount...........
Proceeds to ALLETE
(before expenses)...............
The Price to Public and the Proceeds to ALLETE set forth above do not include
accrued interest. Interest on the Senior Notes will accrue from their issue date
and must be paid by the purchasers if the Senior Notes are delivered after that
date. ALLETE currently expects to deliver the Senior Notes to the underwriters
in book-entry form only, through the facilities of The Depository Trust Company,
on or about October , 2000.
ABN AMRO INCORPORATED
BANC ONE CAPITAL MARKETS, INC. J.P. MORGAN & CO.
SUNTRUST EQUITABLE SECURITIES U.S. BANCORP PIPER JAFFRAY
WELLS FARGO BROKERAGE SERVICES, LLC
Prospectus Supplement dated October , 2000.
The information in this prospectus supplement is not complete and may be
changed. Neither this prospectus supplement nor the accompanying prospectus is
an offer to sell these securities and neither is soliciting any offer to buy
these securities in any state where the offer or sale is not permitted.
ALLETE
The information in this section replaces in its entirety the information in
the "Minnesota Power, Inc." section beginning on page 4 of the accompanying
prospectus.
ALLETE has been incorporated under the laws of the State of Minnesota since
1906. Before September 1, 2000 ALLETE did business under the name Minnesota
Power, Inc. ALLETE is a multi-services company with four business segments:
(1) Automotive Services, which includes a network of vehicle auctions, a
finance company, an auto transport company, a vehicle remarketing
company and a company that provides field information services;
(2) Energy Services, which includes electric and gas services, coal mining
and telecommunications;
(3) Water Services, which includes water and wastewater services; and
(4) Investments, which includes real estate operations, intermediate-term
investments and a securities portfolio.
(UNAUDITED)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- -------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
BASIC AND DILUTED EARNINGS PER SHARE OF
COMMON STOCK
Before Capital Re and ACE Transactions.. $ 1.24 $ 1.35 $ 1.49 $ 0.67 $ 0.91
Capital Re and ACE Transactions (a)..... - - (0.52) (0.35) 0.44
------- ------- ------- ------- -------
Total................................. $ 1.24 $ 1.35 $ 0.97 $ 0.32 $ 1.35
======= ======= ======= ======= =======
NET INCOME
Automotive Services..................... $ 14.0 $ 25.5 $ 39.9 $ 21.6 $ 26.6
Energy Services......................... 43.1 47.4 45.0 19.6 20.0
Water Services.......................... 8.2 7.5 12.2 5.7 6.5
Investments............................. 32.1 29.6 26.8 9.3 21.7
Corporate Charges....................... (19.8) (21.5) (19.7) (9.3) (10.6)
------- ------- ------- ------- -------
Net Income before Capital Re and ACE
Transactions........................ 77.6 88.5 104.2 46.9 64.2
Capital Re and ACE Transactions (a)..... - - (36.2) (24.1) 30.4
------- ------- ------- ------- -------
$77.6 $ 88.5 $ 68.0 $ 22.8 $ 94.6
======= ======= ======= ======= =======
- ------------------------
(a) In May 2000 the company sold its investment in ACE Limited ("ACE") common
stock, which resulted in an after-tax gain of $30.4 million, or $0.44 per
share. The ACE shares were received in December 1999 upon completion of
ACE's merger with Capital Re Corporation ("Capital Re"). During 1999 the
company recorded an aggregate $36.2 million, or $0.52 per share, after-tax
non-cash charge in connection with the valuation and exchange of its
investment in Capital Re stock for the ACE shares, including a $24.1
million, or $0.35 per share, charge in the second quarter.
AUTOMOTIVE SERVICES
Automotive Services includes several subsidiaries which are integral parts
of the vehicle redistribution business.
ADESA Corporation is the second largest vehicle auction network in North
America. Headquartered in Indianapolis, Indiana, ADESA owns, or leases, and
operates 48 vehicle auction facilities in the United States and Canada through
which used cars and other vehicles are sold to franchised automobile dealers and
licensed used car dealers. Sellers at ADESA's auctions include domestic and
foreign auto manufacturers, car dealers, automobile fleet/lease companies, banks
and finance companies. ADESA also owns Canada's largest national salvage auction
chain with 11 sites in six provinces. These salvage auctions provide remarketing
services to insurance companies for their "total loss" vehicles.
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Automotive Finance Corporation provides inventory financing for wholesale
and retail automobile dealers who purchase vehicles from ADESA auctions,
independent auctions, other auction chains and other outside sources.
Other subsidiaries within the Automotive Services business segment include:
o Great Rigs Incorporated, which is one of the nation's largest
independent used automobile transport carriers with over 150
automotive carriers, the majority of which are leased;
o PAR, Inc., doing business as PAR North America, which provides
customized remarketing services to various fleet operations; and
o AutoVIN, Inc., 90 percent owned, which provides professional field
information service to the automotive industry and the industry's
secured lenders. Services provided include vehicle condition
reporting, inventory verification auditing, program compliance
auditing and facility inspection.
ENERGY SERVICES
The Energy Services segment, which includes Minnesota Power, primarily
generates, transmits, distributes and markets electricity. In addition, Energy
Services includes coal mining and telecommunications in and near Minnesota
Power's electric utility service area. As of June 30, 2000, Minnesota Power
supplied retail electric service to 130,000 customers in 153 cities, towns and
communities, and outlying rural areas of northeastern Minnesota. Superior Water,
Light and Power Company, a wholly owned subsidiary, provided electric, natural
gas, and water services to 14,000 electric customers, 11,000 natural gas
customers and 10,000 water customers in northwestern Wisconsin as of June 30,
2000. Split Rock Energy LLC, formed as an alliance between Minnesota Power and
Great River Energy, combines power supply capabilities and customer loads to
share market and supply risks and to optimize power trading opportunities. Split
Rock contracts for exclusive services from MPEX, Minnesota Power's power
marketing division.
BNI Coal, Ltd., another wholly owned subsidiary, owns and operates a
lignite mine in North Dakota. Two electric generating cooperatives, Minnkota
Power Cooperative, Inc. and Square Butte Electric Cooperative, presently consume
virtually all of BNI Coal's production of lignite coal under cost-plus coal
supply agreements extending to 2027. Under an agreement with Square Butte,
Minnesota Power purchases approximately 71 percent of the output from the Square
Butte unit which is capable of generating up to 455 megawatts. Minnkota Power
has an option to extend its coal supply agreement to 2042.
Other subsidiaries within the Energy Services business segment include:
o Electric Outlet, Inc., doing business as Electric Odyssey, which is a
retail, catalog and e-commerce merchandiser that sells unique products
for the home, office and travel;
o Minnesota Power Telecom, Inc., which provides high capacity fiber
optic based communication services to businesses and communities
across Minnesota and in Wisconsin; and
o Rainy River Energy Corporation, which holds ownership and power
purchase positions in merchant generation.
Minnesota Power has large power contracts to sell power to 11 industrial
customers (five taconite producers, four paper and pulp mills, and two pipeline
companies) each requiring 10 megawatts or more of generating capacity. These
contracts require the payment of minimum monthly demand charges that cover the
fixed costs associated with having capacity available to serve each of these
customers, including a return on common equity. Each contract continues past the
contract termination date unless the required four-year advance notice of
cancellation has been given.
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WATER SERVICES
Water Services includes Florida Water Services Corporation, Heater
Utilities, Inc., Instrumentation Services, Inc., Vibration Correction Services,
Inc., and Americas' Water Service Corporation, each a wholly owned subsidiary.
Florida Water, the largest investor owned water supplier in Florida, owns and
operates water and wastewater treatment facilities within that state. As of June
30, 2000, Florida Water served 148,000 water customers and 72,000 wastewater
customers, and maintained 157 water and wastewater facilities throughout
Florida. As of June 30, 2000, Heater Utilities, which provides water and
wastewater treatment services in North Carolina, served 43,000 water customers
and 5,000 wastewater treatment customers. Instrumentation Services and Vibration
Correction Services provide predictive maintenance and instrumentation
consulting services to water and wastewater utilities in the southeastern United
States as well as Texas and Minnesota. Americas' Water Service offers contract
management, operations and maintenance services for water and wastewater
treatment facilities to governments and industries.
INVESTMENTS
Investments consist of real estate operations, intermediate-term
investments and an actively traded securities portfolio. Through subsidiaries,
ALLETE owns Florida real estate operations at Cape Coral and Lehigh Acres
adjacent to Ft. Meyers, at Palm Coast in northeast Florida and at Sugar Mill
Woods in Citrus County. Since 1985, ALLETE has invested $27.9 million in funds
that seek long-term capital appreciation by making investments in emerging
technologies to be used by the electric utility industry. As of June 30, 2000,
ALLETE had approximately $113.7 million invested in a trading and
available-for-sale securities portfolio.
USE OF PROCEEDS
The information in this section adds to the information in the "Use of
Proceeds" section beginning on page 6 of the accompanying prospectus. Please
read these two sections together.
ALLETE will add the net proceeds from the sale of the Senior Notes (as
defined below) to its general funds. ALLETE expects to use its general funds to
repay a portion of ALLETE's short-term borrowings. On October 3, 2000, ALLETE
had an aggregate of approximately $197 million of short-term borrowings
outstanding, which had maturities of up to 42 days and which had a weighted
average annual interest rate of 6.77%. ALLETE will invest general funds not
immediately used for these purpose or other purposes in short-term instruments.
On October 6, 2000 ADESA anticipates the completion of the purchase of nine
auto auctions from Manheim Auctions, Inc. for a purchase price of $251 million,
which will be financed primarily through the issuance of commercial paper.
Commercial paper that will be issued to finance this purchase is not included in
the aggregate short-term borrowings mentioned in the preceding paragraph.
CERTAIN TERMS OF THE SENIOR NOTES
The information in this section adds to the information in the "Description
of Debt Securities" section beginning on page 11 of the accompanying prospectus.
Please read these two sections together.
GENERAL. ALLETE is currently offering $ ,000,000 aggregate principal
amount of its Floating Rate Senior Notes due October , 2003 (the "Senior
Notes").
ALLETE will issue the Senior Notes under the Indenture, dated as of October
1, 2000, between ALLETE and LaSalle Bank National Association, as Indenture
Trustee. An Officer's Certificate will supplement the Indenture and establish
the specific terms of the Senior Notes. Under the Indenture, ALLETE may issue an
unlimited amount of additional debt securities.
The Indenture Trustee is currently the Security Registrar and the Paying
Agent for the Senior Notes. All transactions with respect to the Senior Notes,
including registration, transfer and exchange of the Senior Notes, will be
handled by the Security Registrar at an office designated by ALLETE. ALLETE has
initially designated the corporate trust office of the Indenture Trustee as that
office. In addition, holders of the Senior Notes should address any notices to
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ALLETE regarding the Senior Notes to that office. ALLETE will notify holders of
the Senior Notes of any change in the location of that office.
INTEREST. Interest on the Senior Notes will:
o Be payable in U.S. dollars at rates determined quarterly as described
below;
o Be computed for each interest period on the basis of a year consisting
of 360 days and paid for the actual number of days for which interest
is payable in that interest period;
o Be payable quarterly in arrears on January , April , July , and
October , of each year, commencing January , 2001, and at maturity;
o Originally accrue from, and include, the date of initial issuance
(expected to be on or about October , 2000); and
o Be paid to the persons in whose names the Senior Notes are registered
at the close of business (1) on the business day prior to each
interest payment date if the Senior Notes remain in book-entry only
form or (2) on the 15th calendar day before each interest payment date
if the Senior Notes do not remain in book-entry only form. See
"Book-Entry Only Issuance--The Depository Trust Company" below.
The Senior Notes will bear interest for each interest period at a per annum
interest rate determined by ABN AMRO Bank, N.V., Chicago Branch, or its
successor appointed by ALLETE as permitted by the Indenture, acting as
Calculation Agent. The interest rate for each interest period will be equal to
LIBOR on the interest determination date for that interest period plus . %;
provided, however, that in certain circumstances described below, the interest
rate will be determined in an alternative manner without reference to LIBOR.
Promptly upon determination, the Calculation Agent will notify the Indenture
Trustee of the interest rate for the new interest period. The interest rate
determined by the Calculation Agent, absent wilful default, bad faith or
manifest error, will be binding and conclusive upon the beneficial owners and
holders of the Senior Notes, ALLETE and the Indenture Trustee.
The period commencing on an interest payment date and ending on the day
preceding the next succeeding interest payment date is called an "interest
period," provided that the initial interest period will commence on the date of
initial issuance. The "interest determination date" for an interest period is
the second London business day immediately preceding the first day of that
interest period.
For purposes of this calculation, "London business day" means a day on
which dealings in deposits in U.S. dollars are transacted, or with respect to
any future date, are expected to be transacted, in the London interbank market.
"LIBOR" for any interest determination date will be the offered rate for
deposits in U.S. dollars having an index maturity of three months for a period
commencing on the second London business day immediately following the interest
determination date (the "Three Month Deposits") in amounts of not less than
$1,000,000, as that rate appears on Telerate Page 3750, or a successor reporter
of such rates selected by the Calculation Agent and acceptable to ALLETE, at
approximately 11:00 a.m., London time, on the interest determination date (the
"Reported Rate").
"Telerate Page 3750" means the display designated on page "3750" on Dow
Jones Markets Limited (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).
If the following circumstances exist on any interest determination date,
the Calculation Agent will determine the interest rate for the Senior Notes as
follows:
o In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on an interest determination
date, the Calculation Agent will request the principal London offices
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of each of four major banks in the London interbank market selected by
the Calculation Agent (after consultation with ALLETE) to provide a
quotation of the rate at which Three Month Deposits in amounts of not
less than $1,000,000 are offered by it to prime banks in the London
interbank market, as of approximately 11:00 a.m., London time, on that
interest determination date, that is representative of single
transactions at that time (the "Representative Amounts"). If at least
two rate quotations are provided, the interest rate will be the
arithmetic mean of the rate quotations obtained by the Calculation
Agent, plus . %.
o In the event no Reported Rate appears on Telerate Page 3750 and the
Calculation Agent obtains fewer than two rate quotations, the interest
rate will be the arithmetic mean of the rates quoted at approximately
11:00 a.m., New York City time, on that interest determination date,
by three major banks in New York City, selected by the Calculation
Agent (after consultation with ALLETE), for loans in Representative
Amounts in U.S. dollars to leading European banks, having an index
maturity of three months for a period commencing on the second London
business day immediately following that interest determination date,
plus . %; provided, however, that if fewer than three banks selected
by the Calculation Agent are quoting those rates, the interest rate
for the applicable interest period will be the same as the interest
rate in effect for the immediately preceding interest period.
Upon the request of the holder of any Senior Note, the Calculation Agent
will provide to that holder the interest rate in effect on the date of the
request and, if determined, the interest rate for the next interest period.
OPTIONAL REDEMPTION. The Senior Notes shall not be redeemable prior to
October , 2001. On or after October , 2001, ALLETE may redeem the Senior
Notes, at its option, in whole or in part from time to time, on any interest
payment date prior to their maturity (each a "Redemption Date"). ALLETE will
give notice of its intent to redeem any of the Senior Notes upon at least 30
days but not more than 60 days prior to a Redemption Date. If ALLETE redeems all
or any part of the Senior Notes, it will pay a redemption price equal to 100% of
the principal amount of the Senior Notes being redeemed plus accrued and unpaid
interest thereon, if any, to the Redemption Date.
The Indenture provides that if ALLETE at any time elects to redeem only a
part of the Senior Notes, the Security Registrar will select the particular
Senior Notes to be redeemed using any method that it deems fair and appropriate.
However, if the Senior Notes are solely registered in the name of Cede & Co. and
traded through The Depository Trust Company ("DTC"), then DTC will select the
Senior Notes to be redeemed in accordance with its practices as described below
in "Book-Entry Only--The Depository Trust Company."
If at the time notice of redemption is given, the redemption moneys are not
on deposit with the Indenture Trustee, then the redemption shall be subject to
their receipt on or before the Redemption Date and such notice shall be of no
effect unless such moneys are received.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY. The Senior Notes
will trade through DTC. The Senior Notes will be represented by a global
certificate and registered in the name of Cede & Co., DTC's nominee.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Securities Exchange Act of 1934. DTC holds securities
for its participants. DTC facilitates settlement of securities transactions
among its participants through electronic computerized book-entry changes in the
participants' accounts. This eliminates the need for physical movement of
securities certificates. The participants include securities brokers and
dealers, banks, trust companies and clearing corporations. DTC is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange LLC, and the National Association of Securities Dealers,
Inc. Others who maintain a custodial relationship with a participant can use the
DTC system. The rules that apply to DTC and those using its systems are on file
with the SEC.
Purchases of the Senior Notes within the DTC system must be made through
participants, which will receive a credit for the Senior Notes on DTC's records.
The beneficial ownership interest of each purchaser will be recorded on the
participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchases, but beneficial owners should receive written
confirmations of the transactions, as well as periodic statements of their
S-6
holdings, from the participants through which they purchased Senior Notes.
Beneficial owners will not receive certificates for their Senior Notes, except
if use of the book-entry system for the Senior Notes is discontinued.
To facilitate subsequent transfers, all Senior Notes deposited by direct
participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of the Senior Notes with DTC and their registration in the name of
Cede & Co. effects no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the Senior Notes. DTC's records reflect only the
identity of the participants to whose accounts such Senior Notes are credited.
These participants may or may not be the beneficial owners. Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to participants, and
by participants to indirect participants and beneficial owners, will be governed
by arrangements among them.
Redemption notices will be sent to Cede & Co. If less than all of the
Senior Notes are being redeemed, DTC's practice is to determine by lot the
amount of Senior Notes of each participant to be redeemed.
Neither DTC nor Cede & Co. will itself consent or vote with respect to
Senior Notes. Under its usual procedures, DTC would mail an omnibus proxy to
ALLETE as soon as possible after the record date. The omnibus proxy assigns the
consenting or voting rights of Cede & Co. to those participants to whose
accounts the Senior Notes are credited on the record date. ALLETE believes that
these arrangements will enable the beneficial owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a
registered holder of Senior Notes.
Interest and redemption payments on the Senior Notes will be made to DTC.
DTC's practice is to credit participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on that payment date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices. Payments will be the responsibility of
participants and not of DTC, LaSalle Bank National Association or ALLETE.
Payment of redemption proceeds, distributions and interest to DTC is the
responsibility of ALLETE. Disbursement of payments to participants is the
responsibility of DTC, and disbursement of payments to the beneficial owners is
the responsibility of participants.
Except as provided in this prospectus supplement, a beneficial owner will
not be entitled to receive physical delivery of Senior Notes. Accordingly, each
beneficial owner must rely on the procedures of DTC to exercise any rights under
the Senior Notes.
DTC may discontinue providing its services as securities depository with
respect to the Senior Notes at any time by giving reasonable notice to ALLETE.
In the event no successor securities depository is obtained, certificates for
the Senior Notes will be printed and delivered. If ALLETE decides to discontinue
use of the DTC system of book-entry transfers, certificates for the Senior Notes
will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that ALLETE believes to be reliable, but ALLETE
does not take responsibility for the accuracy of this information.
UNDERWRITING
ALLETE is selling the Senior Notes to the underwriters named in the table
below pursuant to an underwriting agreement dated the date of this prospectus
supplement. ALLETE has agreed to sell to each of the underwriters, and each of
the underwriters has severally agreed to purchase, the principal amount of
Senior Notes set forth opposite that underwriter's name in the table below:
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UNDERWRITER PRINCIPAL AMOUNT OF SENIOR NOTES
----------- --------------------------------
ABN AMRO Incorporated..................
Banc One Capital Markets, Inc..........
J.P. Morgan Securities Inc.............
SunTrust Equitable Securities
Corporation..........................
U.S. Bancorp Piper Jaffray Inc.........
Wells Fargo Brokerage Services, LLC....
Total................................ $ ,000,000
Under the terms and conditions of the underwriting agreement, the
underwriters must buy all of the Senior Notes if they buy any of them. The
underwriting agreement provides that the obligations of the underwriters
pursuant thereto are subject to certain conditions. In the event of a default by
an underwriter, the underwriting agreement provides that, in certain
circumstances, the purchase commitments of the non-defaulting underwriters may
be increased or the underwriting agreement may be terminated. The underwriters
will sell the Senior Notes to the public when and if the underwriters buy the
Senior Notes from ALLETE.
The Senior Notes sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the cover of this
prospectus supplement. Any Senior Notes sold by the underwriters to securities
dealers may be sold at a discount from the initial public offering price of up
to 0. % of the principal amount of Senior Notes. Any such securities dealers may
resell any Senior Notes purchased from the underwriters to certain other brokers
or dealers at a discount from the initial public offering price of up to 0. % of
the principal amount of Senior Notes. If all of the Senior Notes are not sold at
the initial offering price, the underwriters may change the offering price and
other selling terms.
ALLETE has been advised by the underwriters that the underwriters intend to
make a market in the Senior Notes but are not obligated to do so and may stop
their market-making at any time. Liquidity of the trading market for the Senior
Notes cannot be assured.
In order to facilitate the offering of the Senior Notes, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Senior Notes. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the Senior Notes for
their own accounts. In addition, to cover over-allotments or to stabilize the
price of the Senior Notes, the underwriters may bid for, and purchase, the
Senior Notes in the open market. Finally, the underwriters may reclaim selling
concessions allowed to a particular underwriter or dealer for distributing the
Senior Notes in the offering if the underwriter or dealer repurchases previously
distributed Senior Notes in transactions to cover short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Senior Notes above independent market
levels. The underwriters are not required to engage in these activities and may
end any of these activities at any time. These transactions may be effected in
the over-the-counter market or otherwise.
ALLETE estimates that its expenses in connection with the sale of the
Senior Notes, other than underwriting discounts, will be $ . This estimate
includes expenses relating to printing, rating agency fees, trustees' fees and
legal fees, among other expenses.
ALLETE has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, ALLETE and its affiliates in the ordinary course
of business and have engaged, and may in the future engage, in commercial
banking and investment banking transactions with ALLETE and its affiliates.
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PROSPECTUS
$400,000,000
MINNESOTA POWER, INC.
FIRST MORTGAGE BONDS
AND
DEBT SECURITIES
--------------------
Minnesota Power, Inc. intends to offer from time to time not to exceed
$400,000,000 aggregate principal amount of its first mortgage bonds and debt
securities. The first mortgage bonds will be secured by a mortgage that
constitutes a first mortgage lien on substantially all of the property of
Minnesota Power, Inc. The debt securities will be unsecured and will consist of
debentures, notes or other unsecured evidence of indebtedness. Minnesota Power,
Inc. will refer to the first mortgage bonds and the debt securities in this
prospectus collectively as the "Securities."
The Securities will be offered on terms to be decided at the time of sale.
Minnesota Power, Inc. will provide specific terms of the Securities, including
their offering prices, interest rates and maturities, in supplements to this
prospectus. The supplements may also add, update or change information contained
in this prospectus. You should read this prospectus and any supplement carefully
before you invest.
Minnesota Power, Inc. may offer these Securities directly or through
underwriters, agents or dealers. The supplements to this prospectus will
describe the terms of any particular plan of distribution, including any
underwriting arrangements. The "Plan of Distribution" section on page 17 of this
prospectus also provides more information on this topic.
Minnesota Power, Inc.'s principal executive offices are located at 30 West
Superior Street, Duluth, Minnesota 55802-2093, telephone number (218) 722-2641.
--------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 7, 2000
WHERE YOU CAN FIND MORE INFORMATION
Minnesota Power, Inc. ("Minnesota Power") files annual, quarterly and other
reports and other information with the Securities and Exchange Commission
("SEC"). You can read and copy any information filed by Minnesota Power with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can obtain additional information about the Public Reference
Room by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains an Internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, including Minnesota
Power. Minnesota Power also maintains an Internet site (http://www.mnpower.com).
Information contained on Minnesota Power's Internet site does not constitute
part of this prospectus.
INCORPORATION BY REFERENCE
The SEC allows Minnesota Power to "incorporate by reference" the
information that Minnesota Power files with the SEC, which means that Minnesota
Power may, in this prospectus, disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. Minnesota Power is incorporating by
reference the documents listed below and any future filings Minnesota Power
makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, until Minnesota Power sells all of the Securities
described in this prospectus. Information that Minnesota Power files in the
future with the SEC will automatically update and supersede this information.
(1) Minnesota Power's Annual Report on Form 10-K for the year ended
December 31, 1999.
(2) Minnesota Power's Quarterly Report on Form 10-Q for the quarters ended
March 31, 2000 and June 30, 2000.
(3) Minnesota Power's Current Reports on Form 8-K filed with the SEC on
June 20, 2000, June 28, 2000 and July 19, 2000.
You may request a copy of these documents, at no cost to you, by writing or
calling Shareholder Services, Minnesota Power, Inc., 30 West Superior Street,
Duluth, Minnesota 55802-2093, telephone number (218) 723-3974 or (800) 535-3056.
You should rely only on the information contained in, or incorporated by
reference in, this prospectus and the prospectus supplement. Minnesota Power has
not, and any underwriters, agents or dealers have not, authorized anyone else to
provide you with different information. Minnesota Power is not, and any
underwriters, agents or dealers are not, making an offer of these Securities in
any state where the offer is not permitted. You should not assume that the
information contained in this prospectus and the prospectus supplement is
accurate as of any date other than the date on the front of those documents.
SAFE HARBOR STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, Minnesota Power is hereby filing cautionary
statements identifying important factors that could cause Minnesota Power's
actual results to differ materially from those projected in forward-looking
statements (as that term is defined in the Private Securities Litigation Reform
Act of 1995) made by or on behalf of Minnesota Power which are made in this
prospectus or any supplement to this prospectus, in presentations, in response
to questions or otherwise. Any statements that express, or involve discussions
as to, expectations, beliefs, plans, objectives, assumptions or future events or
2
performance (often, but not always, through the use of words or phrases such as
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"projects," "will likely," "result," "will continue" or similar expressions) are
not statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions and uncertainties
and are qualified in their entirety by reference to, and are accompanied by, the
following important factors, which are difficult to predict, contain
uncertainties, are beyond the control of Minnesota Power and may cause actual
results to differ materially from those contained in those forward-looking
statements:
o prevailing governmental policies and regulatory actions, including
those of Congress, state legislatures, the Federal Energy Regulatory
Commission, the Minnesota Public Utilities Commission, the Florida
Public Service Commission, the North Carolina Utilities Commission and
the Public Service Commission of Wisconsin, with respect to allowed
rates of return, industry and rate structure, acquisition and disposal
of assets and facilities, operation and construction of plant
facilities, recovery of purchased power, and present or prospective
wholesale and retail competition (including but not limited to retail
wheeling and transmission costs);
o economic and geographic factors including political and economic
risks;
o changes in and compliance with environmental and safety laws and
policies;
o weather conditions;
o population growth rates and demographic patterns;
o competition for retail and wholesale customers;
o pricing and transportation of commodities;
o market demand, including structural market changes;
o changes in tax rates or policies or in rates of inflation;
o changes in project costs;
o unanticipated changes in operating expenses and capital expenditures;
o capital market conditions;
o competition for new energy development opportunities; and
o legal and administrative proceedings (whether civil or criminal) and
settlements that influence the business and profitability of Minnesota
Power.
Any forward-looking statement speaks only as of the date on which that
statement is made, and Minnesota Power undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which that statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of those factors, nor can it assess the impact of each
of those factors on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.
3
MINNESOTA POWER, INC.
Minnesota Power, a multi-services company incorporated under the laws of
the State of Minnesota in 1906, has operations in four business segments:
(1) Electric Services, which include electric and gas services, coal
mining and telecommunications;
(2) Automotive Services, which include a network of vehicle auctions, a
finance company, an auto transport company, a vehicle remarketing
company and a company that provides field information services;
(3) Water Services, which include water and wastewater services; and
(4) Investments, which include a securities portfolio, intermediate-term
investments and real estate operations.
(UNAUDITED)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- -------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
BASIC AND DILUTED EARNINGS PER SHARE OF
COMMON STOCK
Before Capital Re and ACE Transactions.. $ 1.24 $ 1.35 $ 1.49 $ 0.67 $ 0.91
Capital Re and ACE Transactions (a)..... - - (0.52) (0.35) 0.44
------- ------- ------- ------- -------
Total................................. $ 1.24 $ 1.35 $ 0.97 $ 0.32 $ 1.35
======= ======= ======= ======= =======
NET INCOME
Electric Services....................... $ 43.1 $ 47.4 $ 45.0 $ 19.6 $ 20.0
Automotive Services..................... 14.0 25.5 39.9 21.6 26.6
Water Services.......................... 8.2 7.5 12.2 5.7 6.5
Investments............................. 32.1 29.6 26.8 9.3 21.7
Corporate Charges....................... (19.8) (21.5) (19.7) (9.3) (10.6)
------- ------- ------- ------- -------
Net Income before Capital Re and ACE
Transactions........................ 77.6 88.5 104.2 46.9 64.2
Capital Re and ACE Transactions (a)..... - - (36.2) (24.1) 30.4
------- ------- ------- ------- -------
$ 77.6 $ 88.5 $ 68.0 $ 22.8 $ 94.6
======= ======= ======= ======= =======
(a) In May 2000 Minnesota Power sold its investment in ACE Limited ("ACE")
common stock, which resulted in an after-tax gain of $30.4 million, or
$0.44 per share. The ACE shares were received in December 1999 upon
completion of ACE's merger with Capital Re Corporation ("Capital Re").
During 1999 Minnesota Power recorded an aggregate $36.2 million, or $0.52
per share after-tax non-cash charge in connection with the valuation and
exchange of its investment in Capital Re stock for the ACE shares,
including a $24.1 million, or $0.35 per share charge in the second quarter.
ELECTRIC SERVICES
Electric Services generate, transmit, distribute and market electricity. In
addition, Electric Services include coal mining, telecommunications,
engineering, operating and maintenance services, and economic development
projects in and near Minnesota Power's service area. As of June 30, 2000,
Minnesota Power was supplying retail electric service to 130,000 customers in
153 cities, towns and communities, and outlying rural areas of northeastern
Minnesota. Minnesota Power's wholly owned subsidiary, Superior Water, Light and
Power Company, was providing electric, natural gas, and water services to 14,000
electric customers, 11,000 natural gas customers and 10,000 water customers in
northwestern Wisconsin as of June 30, 2000.
BNI Coal, Ltd., another wholly owned subsidiary of Minnesota Power, owns
and operates a lignite mine in North Dakota. Two electric generating
cooperatives, Minnkota Power Cooperative, Inc. and Square Butte Electric
Cooperative, presently consume virtually all of BNI Coal's production of lignite
coal under cost-plus coal supply agreements extending to 2027. Under an
agreement with Square Butte, Minnesota Power purchases approximately 71 percent
4
of the output from the Square Butte unit which is capable of generating up to
455 MW. Minnkota Power has an option to extend its coal supply agreement to
2042.
Other wholly owned subsidiaries of Minnesota Power within the Electric
Services business segment include:
o Electric Outlet, Inc., doing business as Electric Odyssey, which is a
retail, catalog and e-commerce merchandiser that sells unique products
for the home, office and travel;
o Minnesota Power Telecom, Inc., which provides high capacity fiber
optic based communication services to businesses and communities
across Minnesota and in Wisconsin;
o Rainy River Energy Corporation, which holds ownership and power
purchase positions in merchant generation, as well as provides
engineering, operating and maintenance services to new and existing
generating facilities; and
o Upper Minnesota Properties, Inc., which has invested in affordable
housing projects located in Minnesota Power's service territory.
Minnesota Power has large power contracts to sell power to eleven
industrial customers (five taconite producers, four paper and pulp mills, and
two pipeline companies) each requiring 10 megawatts or more of generating
capacity. These contracts require the payment of minimum monthly demand charges
that cover the fixed costs associated with having capacity available to serve
each of these customers, including a return on common equity. Each contract
continues past the contract termination date unless the required four-year
advance notice of cancellation has been given.
AUTOMOTIVE SERVICES
Automotive Services includes several subsidiaries which are integral parts
of the vehicle redistribution business. ADESA Corporation, a wholly owned
subsidiary of Minnesota Power, is the second largest vehicle auction network in
North America. Headquartered in Indianapolis, Indiana, ADESA owns, or leases,
and operates 45 vehicle auction facilities in the United States and Canada
through which used cars and other vehicles are sold to franchised automobile
dealers and licensed used car dealers. Sellers at ADESA's auctions include
domestic and foreign auto manufacturers, car dealers, automobile fleet/lease
companies, banks and finance companies.
Other subsidiaries of Minnesota Power within the Automotive Services
business segment include:
o Automotive Finance Corporation, which provides inventory financing for
wholesale and retail automobile dealers who purchase vehicles from
ADESA auctions, independent auctions, other auction chains and other
outside sources;
o Great Rigs Incorporated, which is one of the nation's largest used
automobile transport carriers with over 150 automotive carriers, the
majority of which are leased;
o PAR, Inc., which provides customized remarketing services to various
fleet operations; and
o AutoVIN, Inc., 90 percent owned, which provides professional field
information service to the automotive industry, including vehicle
condition reporting, inventory verification auditing, program
compliance auditing and facility inspection.
WATER SERVICES
Water Services include Florida Water Services Corporation, Heater
Utilities, Inc., Instrumentation Services, Inc., Vibration Correction Services,
Inc., and Americas' Water Service Corporation, each a wholly owned subsidiary of
Minnesota Power. Florida Water, the largest investor owned water supplier in
Florida, owns and operates water and wastewater treatment facilities within that
state. As of June 30, 2000, Florida Water served 148,000 water customers and
72,000 wastewater customers, and maintained 151 water and wastewater facilities
5
throughout Florida. As of June 30, 2000, Heater Utilities, which provides water
and wastewater treatment services in North Carolina, served 43,000 water
customers and 5,000 wastewater treatment customers. Instrumentation Services and
Vibration Correction Services provide predictive maintenance and instrumentation
consulting services to water and wastewater utilities throughout the
southeastern part of the United States as well as Texas and Minnesota. Americas'
Water Service offers contract management, operations and maintenance services
for water and wastewater treatment facilities to governments and industries.
INVESTMENTS
Investments consist of an actively traded securities portfolio,
intermediate-term investments and real estate operations. As of June 30, 2000,
Minnesota Power had approximately $113.7 million invested in a trading and
available-for-sale securities portfolio. Since 1985 Minnesota Power has invested
$27.9 million in venture capital funds that seek long-term capital appreciation
by making investments in companies developing advanced technologies to be used
by the electric utility industry. In addition, through subsidiaries, Minnesota
Power owns Cape Coral Holdings, Inc. and 80 percent of Lehigh Acquisition
Corporation, real estate companies that own various real estate properties and
operations in Florida.
USE OF PROCEEDS
Unless otherwise stated in the prospectus supplement, Minnesota Power will
add the net proceeds from sales of the Securities to its general funds.
Minnesota Power uses its general funds for general corporate purposes,
including, without limitation, acquisitions made by or on behalf of Minnesota
Power or its subsidiaries, to repay short-term borrowings and to redeem or
repurchase outstanding long-term debt obligations. Minnesota Power will
temporarily invest any proceeds that it does not need to use immediately in
short-term instruments.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
Minnesota Power has calculated ratios of earnings to fixed charges as
follows:
YEAR ENDED DECEMBER 31,
--------------------------------
SIX MONTHS ENDED
1995 1996 1997 1998 1999 JUNE 30, 2000
---- ---- ---- ---- ---- -------------
1.90 2.12 2.46 2.65 2.76 4.89
Minnesota Power has calculated supplemental ratios of earnings to fixed
charges as follows:
YEAR ENDED DECEMBER 31,
--------------------------------
SIX MONTHS ENDED
1995 1996 1997 1998 1999 JUNE 30, 2000
---- ---- ---- ---- ---- -------------
1.73 1.93 2.26 2.39 2.45 4.28
The supplemental ratio of earnings to fixed charges includes Minnesota
Power's obligation under a contract with Square Butte which extends through
2027, pursuant to which Minnesota Power is entitled to approximately 71 percent
of the output of a 455-megawatt coal-fired generating unit. Minnesota Power is
obligated to pay its pro rata share of Square Butte's costs based on output
entitlement from the unit. Minnesota Power's payment obligation is suspended if
Square Butte fails to deliver any power, whether produced or purchased, for a
period of one year. Square Butte's fixed costs consist primarily of debt
service. Variable operating costs include the price of coal purchased from BNI
Coal under a long-term contract.
6
DESCRIPTION OF FIRST MORTGAGE BONDS
General. The first mortgage bonds are to be issued under Minnesota Power's
Mortgage and Deed of Trust, dated as of September 1, 1945, with Irving Trust
Company (now The Bank of New York) and Richard H. West (Douglas J. MacInnes,
successor), as mortgage trustees ("Mortgage Trustee" or "Mortgage Trustees"), as
supplemented by twenty supplemental indentures (herein collectively referred to
as the "Mortgage"), all of which are exhibits to the registration statement. The
statements herein with respect to the first mortgage bonds offered by this
prospectus and the Mortgage are merely an outline and do not purport to be
complete. They make use of terms defined in the Mortgage and are qualified in
their entirety by express reference to the cited articles and sections of the
Mortgage. All first mortgage bonds issued or to be issued under the Mortgage,
including the first mortgage bonds offered by this prospectus, are referred to
herein as "First Mortgage Bonds."
Reference is made to a prospectus supplement relating to each series of
First Mortgage Bonds offered by this prospectus for the following specific terms
of that series, among others:
o the designation of the series of First Mortgage Bonds and aggregate
principal amount of the First Mortgage Bonds;
o the percentage or percentages of their principal amount at which the
series will be issued;
o the date or dates on which the series will mature;
o the rate or rates at which the series will bear interest;
o the times at which such interest will be payable; and
o redemption terms or other specific terms.
Form and Exchanges. The First Mortgage Bonds offered by this prospectus
will be issued in definitive fully registered form without coupons in
denominations of $1,000 and multiples thereof and will be transferable and
exchangeable without charge (except for stamp taxes, if any, or other
governmental charges) at The Bank of New York, in The City of New York.
Interest, Maturity and Payment. Reference is made to the prospectus
supplement for the interest rate or rates of the First Mortgage Bonds offered by
this prospectus and the dates on which such interest is payable. Principal and
interest are payable at The Bank of New York, in The City of New York.
Redemption and Purchase of First Mortgage Bonds. The First Mortgage Bonds
may be redeemable mandatorily or at the option of Minnesota Power upon 30 days
notice at predetermined prices. If the First Mortgage Bonds are redeemable,
Minnesota Power may use certain deposited cash and/or proceeds of released
property to effect the redemption. Reference is made to the prospectus
supplement for the redemption terms of the First Mortgage Bonds offered by this
prospectus.
If at the time notice of redemption is given the redemption moneys are not
on deposit with The Bank of New York, as Mortgage Trustee, the redemption may be
made subject to their receipt before the date fixed for redemption.
Cash deposited under any provisions of the Mortgage (with certain
exceptions) may generally be applied to the purchase of First Mortgage Bonds of
any series.
(See Mortgage, Article X.)
Sinking or Improvement Fund. Reference is made to the prospectus supplement
concerning whether or not the First Mortgage Bonds offered by this prospectus
are entitled to the benefit of a sinking or improvement fund or other provision
for amortization prior to maturity. None of the currently outstanding First
Mortgage Bonds has sinking fund or improvement fund provisions.
7
Replacement Fund. The First Mortgage Bonds offered by this prospectus are
not entitled to the benefit of any replacement fund.
Special Provisions for Retirement of First Mortgage Bonds. If, during any
12 month period, mortgaged property is disposed of by order of or to any
governmental authority resulting in the receipt of $5 million or more as
proceeds, Minnesota Power (subject to certain conditions) must apply such
proceeds, less certain deductions, to the retirement of First Mortgage Bonds.
(See Mortgage, Section 64.) Reference is made to the prospectus supplement for
information concerning whether the First Mortgage Bonds offered by this
prospectus are redeemable for this purpose and, if so, at what redemption
prices.
Security. The First Mortgage Bonds offered by this prospectus and any other
First Mortgage Bonds now or hereafter issued under the Mortgage will be secured
by the Mortgage, which constitutes, in the opinion of General Counsel for
Minnesota Power, a first lien on all of the electric generating plants and other
materially important physical properties of Minnesota Power and substantially
all other properties described in the Mortgage as owned by Minnesota Power,
subject to
o leases of minor portions of Minnesota Power's property to others for
uses which, in the opinion of such counsel, do not interfere with
Minnesota Power's business,
o leases of certain property of Minnesota Power not used in its electric
utility business, and
o excepted encumbrances, minor defects and irregularities,
but such counsel has not examined title to or passed upon title to reservoir
lands, easements or rights of way, any property not costing in excess of
$25,000, or lands or rights held for flowage, flooding or seepage purposes, or
riparian rights. There are excepted from the lien:
o cash and securities;
o merchandise, equipment, materials or supplies held for sale or other
disposition;
o aircraft, automobiles and other vehicles, and materials and supplies
for repairing and replacing the same;
o timber, minerals, mineral rights and royalties; and
o receivables, contracts, leases and operating agreements.
The Mortgage contains provisions that impose the lien of the Mortgage on
property acquired by Minnesota Power after the date of the Mortgage, other than
the excepted property, subject to pre-existing liens. However, if Minnesota
Power consolidates or merges with or conveys or transfers all or substantially
all of the mortgaged property to another corporation, the lien created by the
Mortgage will generally not cover the property of the successor company, other
than the property it acquires from Minnesota Power and improvements,
replacements and additions to that property. (See Mortgage, Section 87.)
The Mortgage provides that the Mortgage Trustees shall have a lien upon the
mortgaged property, prior to the First Mortgage Bonds, for the payment of their
reasonable compensation, expenses and disbursements and for indemnity against
certain liabilities. (See Mortgage, Section 96.)
No stocks or properties of subsidiaries are subject to the Mortgage.
Issuance of Additional First Mortgage Bonds. The maximum principal amount
of First Mortgage Bonds which may be issued under the Mortgage is not limited.
First Mortgage Bonds of any series may be issued from time to time on the basis
of:
(1) 60 percent of property additions after adjustments to offset
retirements;
8
(2) retirement of First Mortgage Bonds or qualified lien bonds; and
(3) deposit of cash.
With certain exceptions in the case of (2) above, the issuance of First
Mortgage Bonds requires adjusted net earnings before income taxes for 12 out of
the preceding 15 months of at least twice the annual interest requirements on
all First Mortgage Bonds at the time outstanding, including the additional
issue, and on all indebtedness of prior rank. Such adjusted net earnings are
computed after provision for retirement and depreciation of property equal to
$750,000 plus, for each of the 12 calendar months selected for the net earnings
test, 1/12th of 2 percent of the net additions to depreciable mortgaged property
made after June 30, 1945 and prior to the beginning of the calendar year within
which that calendar month is included. It is expected that the First Mortgage
Bonds offered by this prospectus will be issued upon the basis of the retirement
of First Mortgage Bonds or property additions.
Property additions generally include electric, gas, steam or hot water
property acquired after June 30, 1945, but may not include securities, aircraft,
automobiles or other vehicles, or property used principally for the production
or gathering of natural gas. There was available, as of June 30, 2000, unfunded
net property additions of approximately $77 million.
Minnesota Power has the right to amend the Mortgage without any consent or
other action by holders of any series of First Mortgage Bonds, including the
holders of First Mortgage Bonds offered by this prospectus, so as to include
nuclear fuel as well as similar or analogous devices or substances as property
additions.
The Mortgage contains certain restrictions upon the issuance of First
Mortgage Bonds against property subject to liens and upon the increase of the
amount of such liens. (See Mortgage, Sections 4-8, 20-30, and 46; Fifth
Supplemental, Section 2.)
Release and Substitution of Property. Property may be released upon the
basis of:
(1) deposit of cash or, to a limited extent, purchase money mortgages;
(2) property additions, after adjustments in certain cases to offset
retirement and after making adjustments for qualified lien bonds
outstanding against property additions; and/or
(3) waiver of the right to issue First Mortgage Bonds without applying any
earnings test.
Cash may be withdrawn upon the bases stated in (2) and (3) above.
When property released is not funded property, property additions used to
effect the release may again, in certain cases, become available as credits
under the Mortgage, and the waiver of the right to issue First Mortgage Bonds to
effect the release may, in certain cases, cease to be effective as such a
waiver. Similar provisions are in effect as to cash proceeds of such property.
The Mortgage contains special provisions with respect to qualified lien bonds
pledged, and disposition of moneys received on pledged prior lien bonds. (See
Mortgage, Sections 5, 31, 32, 37, 46-50, 59-63, 100 and 118.)
Dividend Covenant. Minnesota Power covenants that it will not declare or
pay dividends, other than dividends payable in common stock, on or make any
other distributions on or acquire, unless without cost to it, any of its common
stock unless
o the provisions for depreciation and retirement of property during the
period beginning September 1, 1945 to the date of the proposed
payment, distribution or acquisition, plus
o earned surplus of Minnesota Power, including current net income
available to be transferred to earned surplus, remaining:
(1) after such payment, distribution or acquisition; and
9
(2) after deducting any remainder of the amount of earned surplus of
Minnesota Power as of August 31, 1945, after deducting from such
amount the charges to earned surplus subsequent to August 31,
1945, other than charges occasioned by dividends (other than
dividends payable in common stock) on its common stock or
occasioned by other distributions on or acquisitions of its
common stock and other than charges to earned surplus with
corresponding credits to reserve for depreciation and retirement
of property;
shall be at least equal to
o $1,000,000 plus, for each calendar year 1947 through 1996, $750,000
plus 2 percent of net additions to depreciable mortgaged property made
after June 30, 1945 through that calendar year. (See Mortgage, Section
39.) None of Minnesota Power's retained earnings as of June 30, 2000
were restricted as a result of such provisions.
Modification of the Mortgage. The rights of bondholders may be modified
with the consent of the holders of 70 percent of the First Mortgage Bonds and,
if less than all series of First Mortgage Bonds are affected, the consent also
of the holders of 70 percent of the First Mortgage Bonds of each series
affected. Minnesota Power has reserved the right without any consent or other
action by the holders of any series of First Mortgage Bonds, including the
holders of First Mortgage Bonds offered by this prospectus, to amend the
Mortgage so as to substitute 66-2/3 percent for 70 percent in the foregoing
provisions. In general, no modification of the terms of payment of principal and
interest, no modification of the obligations of Minnesota Power under Section 64
and no modification affecting the lien or reducing the percentage required for
modification, is effective against any bondholder without his consent. (See
Mortgage, Article XIX; Fifth Supplemental, Section 3.)
Defaults and Notice Thereof. Defaults are defined as being:
o default in payment of principal;
o default for 60 days in payment of interest or of installments of funds
for retirement of First Mortgage Bonds;
o certain defaults with respect to qualified lien bonds and certain
events in bankruptcy, insolvency or reorganization; and
o default of 90 days after notice in other covenants. (See Mortgage,
Section 65.)
The Mortgage Trustees may withhold notice of default, except in payment of
principal, interest or funds for retirement of First Mortgage Bonds, if they
think it is in the interest of the bondholders. (See Mortgage, Section 66.)
Under the Trust Indenture Act of 1939, Minnesota Power is required to provide to
the Mortgage Trustees an annual statement by an appropriate officer as to
Minnesota Power's compliance with all conditions and covenants under the
Mortgage.
The Bank of New York, as Mortgage Trustee, or the holders of 25 percent of
the First Mortgage Bonds may declare the principal and interest due on default,
but a majority may annul such declaration if the default has been cured. (See
Mortgage, Section 67.) No holder of First Mortgage Bonds may enforce the lien of
the Mortgage without giving the Mortgage Trustees written notice of a default
and unless holders of 25 percent of the First Mortgage Bonds have requested the
Trustees to act and offered them reasonable opportunity to act and indemnity
satisfactory to the Mortgage Trustees and they shall have failed to act. (See
Mortgage, Section 80.) The holders of a majority of the First Mortgage Bonds may
direct the time, method and place of conducting any proceedings for any remedy
available to the Mortgage Trustees, or exercising any trust or power conferred
upon the Mortgage Trustees, but the Mortgage Trustees are not required to follow
such direction if not sufficiently indemnified for expenditures. (See Mortgage,
Section 71.)
10
DESCRIPTION OF DEBT SECURITIES
General. The following description sets forth certain general terms and
provisions of Minnesota Power's unsecured debt securities that Minnesota Power
may offer by this prospectus ("Debt Security" or "Debt Securities"). Minnesota
Power will describe the particular terms of the Debt Securities, and provisions
that vary from those described below, in one or more prospectus supplements.
The Debt Securities will be Minnesota Power's direct unsecured general
obligations. The Debt Securities will be senior debt securities. Minnesota Power
may issue the Debt Securities from time to time in one or more series. Minnesota
Power will issue the Debt Securities under one or more separate Indentures
("Indenture") between Minnesota Power and a trustee ("Indenture Trustee") to be
specified in the prospectus supplement.
The following descriptions of the Debt Securities and the Indenture are
summaries and are qualified by reference to the Indenture. The form of the
Indenture is being filed as an exhibit to the registration statement, and you
should read the Indenture for provisions that may be important to you.
References to certain sections of the Indenture are included in parentheses.
Whenever particular provisions or defined terms in the Indenture are referred to
under this "Description of Debt Securities," such provisions or defined terms
are incorporated by reference herein. The Indenture will be qualified under the
Trust Indenture Act of 1939. You should refer to the Trust Indenture Act of 1939
for provisions that apply to the Debt Securities.
The Debt Securities will rank equally with all of Minnesota Power's other
senior, unsecured and unsubordinated debt.
The prospectus supplement relating to any series of Debt Securities being
offered will include specific terms relating to that offering. These terms will
include any of the following terms that apply to that series:
o the title of the Debt Securities;
o the total principal amount of the Debt Securities;
o the date or dates on which the principal of the Debt Securities will
be payable and how it will be paid;
o the rate or rates at which the Debt Securities will bear interest, or
how such rate or rates will be determined;
o the date or dates from which interest on the Debt Securities will
accrue, the interest payment dates on which interest will be paid, and
the record dates for interest payments;
o the percentage, if less than 100 percent, of the principal amount of
the Debt Securities that will be payable if the maturity of the Debt
Securities is accelerated;
o any date or dates on which, and the price or prices at which, the Debt
Securities may be redeemed at the option of Minnesota Power and any
restrictions on such redemptions;
o any sinking fund or other provisions or options held by holders of
Debt Securities that would obligate Minnesota Power to repurchase or
otherwise redeem the Debt Securities;
o any changes or additions to the Events of Default under the Indenture
or changes or additions to the covenants of Minnesota Power under the
Indenture;
o if the Debt Securities will be issued in denominations other than
$1,000;
o if payments on the Debt Securities may be made in a currency or
currencies other than United States dollars;
o any convertible feature or options regarding the Debt Securities;
11
o any rights or duties of another person to assume the obligations of
Minnesota Power with respect to the Debt Securities;
o any collateral, security, assurance or guarantee for the Debt
Securities;
o any rights to change or eliminate any provision of the Indenture or to
add any new provision to the Indenture without the consent of the
holders of the securities of such series; and
o any other terms of the Debt Securities not inconsistent with the terms
of the Indenture.
(See Indenture, Section 301.)
The Indenture does not limit the principal amount of Debt Securities that
may be issued. The Indenture allows Debt Securities to be issued up to the
principal amount that may be authorized by Minnesota Power.
Debt Securities may be sold at a discount below their principal amount.
United States federal income tax considerations applicable to Debt Securities
sold at an original issue discount may be described in the prospectus
supplement. In addition, certain United States federal income tax or other
considerations applicable to any Debt Securities which are denominated or
payable in a currency or currency unit other than United States dollars may be
described in the prospectus supplement.
Except as may otherwise be described in the prospectus supplement, the
covenants contained in the Indenture will not afford holders of Debt Securities
protection in the event of a highly-leveraged or similar transaction involving
Minnesota Power or in the event of a change in control.
Payment and Paying Agents. Except as may be provided in the prospectus
supplement, interest, if any, on each Debt Security payable on each interest
payment date will be paid to the person in whose name such Debt Security is
registered as of the close of business on the regular record date for the
interest payment date. However, interest payable at maturity will be paid to the
person to whom the principal is paid. If there has been a default in the payment
of interest on any Debt Security, the defaulted interest may be paid to the
holder of such Debt Security as of the close of business on a date to be fixed
by the Indenture Trustee, which will be between 10 and 15 days prior to the date
proposed by Minnesota Power for payment of such defaulted interest or in any
other manner permitted by any securities exchange on which such Debt Security
may be listed, if the Indenture Trustee finds it practicable. (See Indenture,
Section 307.)
Unless otherwise specified in the prospectus supplement, principal of, and
premium, if any, and interest, if any, on the Debt Securities at maturity will
be payable upon presentation of the Debt Securities at the corporate trust
office of the Indenture Trustee, in The City of New York, as Paying Agent for
Minnesota Power. Minnesota Power may change the place of payment on the Debt
Securities, may appoint one or more additional Paying Agents, including
Minnesota Power, and may remove any Paying Agent, all at the discretion of
Minnesota Power. (See Indenture, Section 602.)
Registration and Transfer. Unless otherwise specified in the prospectus
supplement, the transfer of Debt Securities may be registered, and Debt
Securities may be exchanged for other Debt Securities of the same series of
authorized denominations and with the same terms and principal amount, at the
corporate trust office of the Indenture Trustee in The City of New York.
Minnesota Power may change the place for registration of transfer and exchange
of the Debt Securities and may designate additional places for such registration
and exchange. Unless otherwise provided in the prospectus supplement, no service
charge will be made for any transfer or exchange of the Debt Securities.
However, Minnesota Power may require payment to cover any tax or other
governmental charge that may be imposed. Minnesota Power will not be required to
execute or to provide for the registration of transfer of, or the exchange of,
(a) any Debt Security during a period of 15 days prior to giving any notice of
redemption or (b) any Debt Security selected for redemption except the
unredeemed portion of any Debt Security being redeemed in part. (See Indenture,
Section 305.)
Satisfaction and Discharge. Minnesota Power will be discharged from its
obligations on the Debt Securities of a particular series, or any portion of the
principal amount of the Debt Securities of such series, if it irrevocably
12
deposits with the Indenture Trustee sufficient cash or government securities to
pay the principal, or portion of principal, interest, any premium and any other
sums when due on the Debt Securities of such series at their maturity, stated
maturity date, or redemption. (See Indenture, Section 701.)
The Indenture will be deemed satisfied and discharged when no Debt
Securities remain outstanding and when Minnesota Power has paid all other sums
payable by Minnesota Power under the Indenture. (See Indenture, Section 702.)
All moneys Minnesota Power pays to the Indenture Trustee or any Paying
Agent on Debt Securities which remain unclaimed at the end of two years after
payments have become due will be paid to or upon the order of Minnesota Power.
Thereafter, the holder of such Debt Security may look only to Minnesota Power
for payment thereof. (See Indenture, Section 603.)
Limitation on Liens. Unless otherwise specified in a prospectus supplement
with respect to a particular series of Debt Securities, Minnesota Power will not
create or allow any liens, other than permitted liens, to be created on any of
its property, other than excepted property, without making effective provision
whereby:
o the outstanding Debt Securities shall be equally and ratably secured;
or
o secured obligations shall be delivered to the Indenture Trustee in an
amount equal to the outstanding Debt Securities.
The term permitted liens includes, among others:
o non-delinquent or contested tax or construction liens;
o judgment liens in an aggregate amount less than $10 million or subject
to appeal;
o easements, leases, title defects that do not impair Minnesota Power's
intended use of property;
o governmental rights, mineral, timber or production rights, joint
ownership rights;
o liens fully secured by deposited money or investment securities,
purchase money liens and liens on property at the time of acquisition;
o liens securing tax-exempt financing, non-recourse liens related to the
acquisition or construction of additional property;
o the lien of the Mortgage or any successor indenture secured by First
Mortgage Bonds; and
o any other liens in an aggregate amount not exceeding 2.5 percent of
Minnesota Power's consolidated assets.
The term excepted property includes, among others:
o cash, shares of stock, interests in partnerships, bonds, notes,
evidence of indebtedness and other securities, including investments
in its subsidiaries;
o contracts, leases, accounts receivable, patents, trademarks,
intangibles, vehicles, rolling stock, aircraft, inventory;
o fuel and other consumables, minerals, timber, natural gas production
and gathering assets, hydroelectric assets; and
13
o leaseholds.
(See Indenture, Section 608.)
Consolidation, Merger, and Sale of Assets. Under the terms of the
Indenture, Minnesota Power may not consolidate with or merge into any other
entity or convey, transfer or lease its properties and assets substantially as
an entirety to any entity, unless:
o the surviving or successor entity is organized and validly existing
under the laws of any domestic jurisdiction and it expressly assumes
Minnesota Power's obligations on all Debt Securities and under the
Indenture;
o immediately after giving effect to the transaction, no Event of
Default and no event which, after notice or lapse of time or both,
would become an Event of Default shall have occurred and be
continuing; and
o Minnesota Power shall have delivered to the Indenture Trustee an
officer's certificate and an opinion of counsel as to compliance with
the foregoing.
The terms of the Indenture do not restrict Minnesota Power in a merger in
which Minnesota Power is the surviving entity. (See Indenture, Section 1101.)
Events of Default. "Event of Default" when used in the Indenture with
respect to any series of Debt Securities, means any of the following:
o failure to pay interest, if any, on any Debt Security of the
applicable series for 30 days after it is due;
o failure to pay the principal of or premium, if any, on any Debt
Security of the applicable series when due, whether at maturity or
upon earlier redemption;
o failure to perform any other covenant in the Indenture, other than a
covenant that does not relate to that series of Debt Securities, that
continues for 90 days after Minnesota Power receives written notice
from the Indenture Trustee, or Minnesota Power and the Indenture
Trustee receive a written notice from 33 percent of the holders of the
Debt Securities of such series; however, the Indenture Trustee or the
Indenture Trustee and the holders of such principal amount of Debt
Securities of this series can agree to an extension of the 90 day
period and such an agreement to extend will be automatically deemed to
occur if Minnesota Power is diligently pursuing action to correct the
default;
o certain events in bankruptcy, insolvency or reorganization of
Minnesota Power; or
o any other event of default included in any supplemental indenture or
officer's certificate for a specific series of Debt Securities.
(See Indenture, Section 801.)
The Indenture Trustee may withhold notice to the holders of Debt Securities
of any default, except default in the payment of principal, premium or interest,
if it considers such withholding of notice to be in the interests of the
holders. An Event of Default for a particular series of Debt Securities does not
necessarily constitute an Event of Default for any other series of Debt
Securities issued under the Indenture.
Remedies
Acceleration of Maturity. If an Event of Default with respect to fewer
than all the series of Debt Securities occurs and continues, either the
Indenture Trustee or the holders of at least 33 percent in principal amount of
the Debt Securities of any such series may declare the entire principal amount
of all the Debt Securities of such series, together with accrued interest, to be
due and payable immediately. However, if the Event of Default is applicable to
all outstanding Debt Securities under the Indenture, only the Indenture Trustee
or holders of at least 33 percent in principal amount of all outstanding Debt
14
Securities of all series, voting as one class, and not the holders of any one
series, may make such a declaration of acceleration.
At any time after a declaration of acceleration with respect to the Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained, the Event of Default giving rise to
such declaration of acceleration will be considered waived, and such declaration
and its consequences will be considered rescinded and annulled, if:
o Minnesota Power has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(1) all overdue interest, if any, on all Debt Securities of the
series;
(2) the principal of and premium, if any, on any Debt Securities of
the series which have otherwise become due and interest, if any,
that is currently due;
(3) interest, if any, on overdue interest; and
(4) all amounts due to the Indenture Trustee under the Indenture; or
o any other Event of Default with respect to the Debt Securities of that
series has been cured or waived as provided in the Indenture.
There is no automatic acceleration, even in the event of bankruptcy,
insolvency or reorganization of Minnesota Power. (See Indenture, Section 802.)
Right to Direct Proceedings. Other than its duties in case of an Event
of Default, the Indenture Trustee is not obligated to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
holders, unless the holders offer the Indenture Trustee a reasonable indemnity.
(See Indenture, Section 903.) If they provide a reasonable indemnity, the
holders of a majority in principal amount of any series of Debt Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Indenture Trustee, or exercising any power
conferred upon the Indenture Trustee. However, if the Event of Default relates
to more than one series, only the holders of a majority in aggregate principal
amount of all affected series will have the right to give this direction. (See
Indenture, Section 812). The Indenture Trustee is not obligated to comply with
directions that conflict with law or other provisions of the Indenture.
Limitation on Right to Institute Proceedings. No holder of Debt Securities
of any series will have any right to institute any proceeding under
the Indenture, or to exercise any remedy under the Indenture, unless:
o the holder has previously given to the Indenture Trustee written
notice of a continuing Event of Default;
o the holders of a majority in aggregate principal amount of the
outstanding Debt Securities of all series in respect of which an Event
of Default shall have occurred and be continuing have made a written
request to the Indenture Trustee, and have offered reasonable
indemnity to the Indenture Trustee to institute proceedings; and
o the Indenture Trustee has failed to institute any proceeding for 60
days after notice and has not received any direction inconsistent with
the written request of holders during such period.
(See Indenture, Section 807.)
No Impairment of Right to Receive Payment. However, the limitations
described in the preceding paragraph do not apply to a suit by a holder of a
Debt Security for payment of the principal of or premium, if any, or interest,
if any, on a Debt Security on or after the applicable due date. (See Indenture,
Section 808.)
15
Annual Notice to Indenture Trustee. Minnesota Power will provide to the
Indenture Trustee an annual statement by an appropriate officer as to Minnesota
Power's compliance with all conditions and covenants under the Indenture. (See
Indenture, Section 606.)
Modification and Waiver. Minnesota Power and the Indenture Trustee may
enter into one or more supplemental indentures without the consent of any holder
of Debt Securities for any of the following purposes:
o to evidence the assumption by any permitted successor of the covenants
of Minnesota Power in the Indenture and in the Debt Securities;
o to add additional covenants of Minnesota Power or to surrender any
right or power of Minnesota Power under the Indenture;
o to add additional Events of Default;
o to change, eliminate, or add any provision to the Indenture; provided,
however, if the change, elimination, or addition will adversely affect
the interests of the holders of Debt Securities of any series, other
than any series the terms of which permit such change, elimination or
addition, in any material respect, such change, elimination, or
addition will become effective only as to such series:
(1) when the consent of the holders of Debt Securities of such series
has been obtained in accordance with the Indenture; or
(2) when no Debt Securities of such series remain outstanding under
the Indenture;
o to provide collateral security for all or part of the Debt Securities;
o to establish the form or terms of Debt Securities of any other series
as permitted by the Indenture;
o to provide for the authentication and delivery of bearer securities
and coupons attached thereto;
o to evidence and provide for the acceptance of appointment of a
successor Indenture Trustee;
o to provide for the procedures required for use of a noncertificated
system of registration for the Debt Securities of all or any series;
o to change any place where principal, premium, if any, and interest
shall be payable, Debt Securities may be surrendered for registration
of transfer or exchange and notices to Minnesota Power may be served;
or
o to cure any ambiguity or inconsistency or to make any other provisions
with respect to matters and questions arising under the Indenture;
provided that such action shall not adversely affect the interests of
the holders of Debt Securities of any series in any material respect.
(See Indenture, Section 1201.)
The holders of at least a majority in aggregate principal amount of the
Debt Securities of all series then outstanding may waive compliance by Minnesota
Power with certain restrictive provisions of the Indenture. (See Indenture,
Section 607.) The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series may waive any past default under the
Indenture with respect to that series, except a default in the payment of
principal, premium, if any, or interest and certain covenants and provisions of
the Indenture that cannot be modified or be amended without the consent of the
holder of each outstanding Debt Security of the series affected. (See Indenture,
Section 813.)
If the Trust Indenture Act of 1939 is amended after the date of the
Indenture in such a way as to require changes to the Indenture, the Indenture
will be deemed to be amended so as to conform to such amendment of the Trust
16
Indenture Act of 1939. Minnesota Power and the Indenture Trustee may, without
the consent of any holders, enter into one or more supplemental indentures to
evidence such an amendment. (See Indenture, Section 1201.)
The consent of the holders of a majority in aggregate principal amount of
the Debt Securities of all series then outstanding is required for all other
modifications to the Indenture. However, if less than all of the series of Debt
Securities outstanding are directly affected by a proposed supplemental
indenture, then the consent only of the holders of a majority in aggregate
principal amount of all series that are directly affected will be required. No
such amendment or modification may:
o change the stated maturity of the principal of, or any installment of
principal of or interest on, any Debt Security, or reduce the
principal amount of any Debt Security or its rate of interest or
change the method of calculating such interest rate or reduce any
premium payable upon redemption, or change the currency in which
payments are made, or impair the right to institute suit for the
enforcement of any payment on or after the stated maturity of any Debt
Security, without the consent of the holder;
o reduce the percentage in principal amount of the outstanding Debt
Securities of any series whose consent is required for any
supplemental indenture or any waiver of compliance with a provision of
the Indenture or any default thereunder and its consequences, or
reduce the requirements for quorum or voting, without the consent of
all the holders of the series; or
o modify certain of the provisions of the Indenture relating to
supplemental indentures, waivers of certain covenants and waivers of
past defaults with respect to the Debt Securities of any series,
without the consent of the holder of each outstanding Debt Security
affected thereby.
A supplemental indenture which changes the Indenture solely for the benefit
of one or more particular series of Debt Securities, or modifies the rights of
the holders of Debt Securities of one or more series, will not affect the rights
under the Indenture of the holders of the Debt Securities of any other series.
(See Indenture, Section 1202.)
The Indenture provides that Debt Securities owned by Minnesota Power or
anyone else required to make payment on the Debt Securities shall be disregarded
and considered not to be outstanding in determining whether the required holders
have given a request or consent. (See Indenture, Section 101.)
Minnesota Power may fix in advance a record date to determine the required
number of holders entitled to give any request, demand, authorization,
direction, notice, consent, waiver or other such act of the holders, but
Minnesota Power shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other act of the holders may be given before or after such record date, but
only the holders of record at the close of business on that record date will be
considered holders for the purposes of determining whether holders of the
required percentage of the outstanding Debt Securities have authorized or agreed
or consented to such request, demand, authorization, direction, notice, consent,
waiver or other act of the holders. For that purpose, the outstanding Debt
Securities shall be computed as of the record date. Any request, demand,
authorization, direction, notice, consent, election, waiver or other act of a
holder shall bind every future holder of the same Debt Securities and the holder
of every Debt Security issued upon the registration of transfer of or in
exchange of such Debt Securities. A transferee will be bound by acts of the
Indenture Trustee or Minnesota Power taken in reliance thereon, whether or not
notation of such action is made upon such Debt Security. (See Indenture, Section
104.)
17
Resignation of the Indenture Trustee. The Indenture Trustee may resign at
any time by giving written notice to Minnesota Power or may be removed at any
time by act of the holders of a majority in principal amount of all series of
Debt Securities then outstanding delivered to the Indenture Trustee and
Minnesota Power. No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee will be effective until the
acceptance of appointment by a successor Indenture Trustee. So long as no Event
of Default or event which, after notice or lapse of time, or both, would become
an Event of Default has occurred and is continuing and except with respect to
the Indenture Trustee appointed by act of the holders, if Minnesota Power has
delivered to the Indenture Trustee a resolution of its Board of Directors
appointing a successor Indenture trustee and such successor has accepted such
appointment in accordance with the terms of the respective Indenture, the
Indenture Trustee will be deemed to have resigned and the successor will be
deemed to have been appointed as Indenture trustee in accordance with such
Indenture. (See Indenture, Section 910.)
Notices. Notices to holders of Debt Securities will be given by mail to the
addresses of such holders as they may appear in the security register therefor.
(See Indenture, Section 106.)
Title. Minnesota Power, the Indenture Trustee, and any agent of Minnesota
Power or the Indenture Trustee, may treat the person in whose name Debt
Securities are registered as the absolute owner thereof, whether or not such
Debt Securities may be overdue, for the purpose of making payments and for all
other purposes irrespective of notice to the contrary. (See Indenture, Section
308.)
Governing Law. Each Indenture and the Debt Securities will be governed by,
and construed in accordance with, the laws of the State of New York. (See
Indenture, Section 112.)
Regarding the Indenture Trustee. The Indenture Trustee will be specified in
the prospectus supplement. In addition to acting as Indenture Trustee, the
Indenture Trustee may act as trustee under various indentures and trusts of
Minnesota Power and its affiliates.
PLAN OF DISTRIBUTION
Minnesota Power may sell the Securities:
o through underwriters or dealers;
o through agents; or
o directly to one or more purchasers.
Through Underwriters or Dealers. If Minnesota Power uses underwriters in
the sale, the underwriters will acquire the Securities for their own account.
The underwriters may resell the Securities in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The underwriters may sell the
Securities directly or through underwriting syndicates represented by managing
underwriters. Unless otherwise stated in the prospectus supplement relating to
any series of Securities, the obligations of the underwriters to purchase the
Securities will be subject to certain conditions, and the underwriters will be
obligated to purchase all of the Securities if they purchase any of them. If
Minnesota Power uses a dealer in the sale, Minnesota Power will sell the
Securities to the dealer as principal. The dealer may then resell those
Securities at varying prices determined at the time of resale.
Any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time.
Through Agents. Minnesota Power may designate one or more agents to sell
the Securities. Unless stated in a prospectus supplement, the agents will agree
to use their best efforts to solicit purchases for the period of their
appointment.
Directly. Minnesota Power may sell the Securities directly to one or more
purchasers. In this case, no underwriters or agents would be involved.
General Information. A prospectus supplement will state the name of any
underwriter, dealer or agent and the amount of any compensation, underwriting
discounts or concessions paid, allowed or reallowed to them. A prospectus
supplement will also state the proceeds to Minnesota Power from the sale of the
Securities, any initial public offering price and other terms of the offering of
the Securities.
Minnesota Power may authorize agents, underwriters or dealers to solicit
offers by certain institutions to purchase the Securities from Minnesota Power
at the public offering price and on terms described in the related prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future.
18
Minnesota Power may have agreements to indemnify agents, underwriters and
dealers against certain civil liabilities, including liabilities under the
Securities Act of 1933.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to Minnesota Power's Annual Report on Form 10-K for the year ended
December 31, 1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
Legal conclusions and opinions specifically attributed to General Counsel
herein under "Description of First Mortgage Bonds" and in the documents
incorporated in this prospectus by reference have been reviewed by Philip R.
Halverson, Esq., Duluth, Minnesota, Vice President, General Counsel and
Secretary of Minnesota Power, and are set forth or incorporated by reference
herein in reliance upon his opinion given upon his authority as an expert.
As of July 1, 2000, Mr. Halverson owned 21,978 shares of common stock of
Minnesota Power. Mr. Halverson is acquiring additional shares of Minnesota Power
common stock at regular intervals as a participant in the Employee Stock
Ownership Plan and Supplemental Retirement Plan. Under the Executive Long-Term
Incentive Compensation Plan, Mr. Halverson has:
o been granted options to purchase 38,467 shares of Minnesota Power
common stock, of which 24,652 options are fully vested, the remainder
of which shall vest over the next two years, and all of which will
expire ten years from the date of grant;
o earned approximately 874 performance shares that have not yet been
paid out under the terms of this Plan; and
o an award opportunity for up to 7,538 additional performance shares
contingent upon the attainment of certain performance goals of
Minnesota Power for the period January 1, 2000 through December 31,
2001.
LEGAL OPINIONS
The legality of the Securities will be passed upon for Minnesota Power by
Mr. Halverson and by Thelen Reid & Priest LLP, New York, New York, counsel for
Minnesota Power, and for any underwriter, dealer or agent by Morrison Cohen
Singer & Weinstein, LLP, New York, New York. Thelen Reid & Priest LLP and
Morrison Cohen Singer & Weinstein, LLP may rely as to all matters of Minnesota
law upon the opinion of Mr. Halverson.
-------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. MINNESOTA POWER HAS
NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. MINNESOTA
POWER IS NOT MAKING AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THOSE DOCUMENTS.
19
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YOU SHOULD RELY ON THE INFORMATION
INCORPORATED BY REFERENCE OR PROVIDED IN ALLETE
THIS PROSPECTUS SUPPLEMENT OR IN THE (LEGALLY INCORPORATED AS
ACCOMPANYING PROSPECTUS. ALLETE HAS NOT MINNESOTA POWER, INC.)
AUTHORIZED ANYONE ELSE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. ALLETE IS
NOT MAKING AN OFFER OF THE SENIOR NOTES $ ,000,000
IN ANY JURISDICTION WHERE THE OFFER IS FLOATING RATE SENIOR NOTES DUE
NOT PERMITTED. YOU SHOULD NOT ASSUME OCTOBER , 2003
THAT THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT OR IN THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE ON THE FRONT OF
THOSE DOCUMENTS.
- -----------------------------------------
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
AllETE................................S-2
USE OF PROCEEDS.......................S-4
CERTAIN TERMS OF THE SENIOR
NOTES...............................S-4
UNDERWRITING..........................S-7 PROSPECTUS SUPPLEMENT
PROSPECTUS ABN AMRO INCORPORATED
WHERE YOU CAN FIND MORE BANC ONE CAPITAL MARKETS, INC.
INFORMATION...........................1
INCORPORATION BY REFERENCE..............1 J.P. MORGAN & CO.
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION SUNTRUST EQUITABLE SECURITIES
REFORM ACT OF 1995....................1
MINNESOTA POWER, INC....................4 U.S. BANCORP PIPER JAFFRAY
USE OF PROCEEDS.........................6
CONSOLIDATED RATIO OF EARNINGS WELLS FARGO BROKERAGE SERVICES, LLC
TO FIXED CHARGES......................6
DESCRIPTION OF FIRST
MORTGAGE BONDS........................7 OCTOBER , 2000
DESCRIPTION OF DEBT SECURITIES.........11
PLAN OF DISTRIBUTION...................18
EXPERTS................................19
LEGAL OPINIONS.........................19
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