|
| |
|
 |
|
Giving
stock as a gift can pay educational dividends, too
It's never too early to begin planning a holiday gift of ALLETE
stock for that special someone. For Harriet Hams, gift opportunities
come year-around.
The 79-year-old Superior woman gives shares of ALLETE to relatives
for graduations, birthdays, and weddings, as well as for Christmas
gifts.
Mrs. Hams began giving shares of ALLETE stock to her children and
grandchildren about 20 years ago – not long after her daughter,
Donna Brown, went to work for ALLETE’s electric utility, Minnesota
Power.
“Donna told me ‘why don’t you start giving stock
to the kids rather than dishing out money?’” Hams recalled.
Before that suggestion, Hams said she’d give gifts of cash
or savings bonds to her children and grandchildren. Now she realizes
that giving a gift of stock provides something more than a gift
of cash or bonds does.
“The difference, I think, is that it’s more educational,”
Hams said. “This way, you’re investing in a business
and learning about it. You’re supporting a company that
operates your utilities.” Many of Hams’ seven children,
14 grandchildren and six great-grandchildren live in the service
territory of Minnesota Power or Superior Water, Light and Power,
another ALLETE subsidiary. There are basically two ways
to gift shares of stock in ALLETE. If you already own shares of
ALLETE stock, you can transfer one or more shares into the name
of the gift recipient. You’ll need to send a letter of instruction
or a stock power form that’s available on the “investors”
pages of the allete.com web site. All signatures from the account
gifting the shares need to be “Medallion Guaranteed.”
If your stock is in certificates, they will need to be sent in with
the Medallion Guaranteed instructions. If your ALLETE shares were
purchased through a broker, consult the brokerage company to find
out how to transfer shares. 
You may want to open an Invest Direct account in the recipient’s
name if you don’t already own shares of ALLETE. Invest Direct
is a convenient, no-load way for investors to buy shares; an initial
investment of $250 is needed to open the account.
Transferring shares is not difficult, but different circumstances
require different procedures. ALLETE has a variety of colorful gift
cards available for you to send the recipient of your gift. In order
to get a Christmas present of stock delivered on time, investors
should start making plans by early November. To receive the forms
needed or for more information about how to give the gift of ALLETE
stock, call Shareholder Services at 218-723-3974 or 800-535-3056. |
|
 Dear
Shareholder |
|
ALLETE
to sell seven Florida Water Services systems for $296 million
ALLETE, Inc. subsidiary Florida Water Services has
agreed to sell seven of its Florida water and wastewater systems
to governmental entities in Florida for $296 million payable
at closing, which is expected by the end of 2003 pending satisfaction
of certain contingencies and regulatory approvals in Florida.
Cash proceeds after transaction costs, retirement of Florida
Water debt, and payment of income taxes are estimated at $158
million, and will be used to retire debt at ALLETE. The sale
is expected to result in an after-tax gain to ALLETE of approximately
$55 million.
The water and wastewater systems to be sold through this purchase
agreement include those serving the counties of Osceola, Hernando,
Citrus, Lee, and Charlotte, and the communities of Marco Island
and Palm Coast.
The purchase agreement was signed July 24 by representatives
of Florida Water Services and the acquiring communities and
represents about two-thirds of Florida Water’s assets.
Florida Water Services continues to seek buyers for its remaining
water and wastewater systems. If interested governmental buyers
cannot be found, the remaining systems will be sold to a private
purchaser.
|
|
|
 I’m very pleased with the way this
year is shaping up, both financially and strategically. Midway
through 2003, ALLETE’s net income and diluted earnings
per share from continuing operations are up 12 percent and
11 percent, respectively, compared with 2002. We’re
on track to reach the 2003 financial targets we set for ourselves
when the year began.
By signing an agreement to sell seven of our Florida Water
Services systems for $296 million, we moved another step closer
to accomplishing a key strategic goal of exiting this business.
We believe that we’ve served our water customers well.
Since the mid-1980s, we’ve made capital improvements
to meet the service requirements of our water systems. As
a result, we’ve left them in better shape than when
we acquired them. Now we’ve reached a point when we
can realize a fair return on a well-made investment. Once
the sale is completed, we will have done well by our investors.
In closing, I’d like to express my heartfelt thanks
to my friend and longtime colleague Donnie Crandell, who recently
retired. Donnie held a number of key positions at ALLETE during
a time of significant growth. He helped guide ALLETE through
successful investments in communications, water, real estate
and automotive services. All of us at ALLETE would like to
wish Donnie the best in his future endeavors.
Sincerely,
David G. Gartzke
CEO |
|
|
ENERGY
Services |
|
New BNI Coal dragline under construction
in North Dakota
Once it’s operational, the new dragline under construction
at ALLETE’s BNI Coal subsidiary will weigh 4,300 tons,
scoop up 82 cubic yards of earth at a time, and be capable
of “walking” about 35 steps a day to position
itself over a coal deposit.
A dragline is a giant excavating machine that drags a large
capacity shovel across soil covering a coal deposit so that
other equipment can mine the coal.
The mammoth Bucyrus 8200 dragline will be built to last a
quarter-century. Buying a machine with such large capabilities
and a $38 million price tag is not a decision to be taken
lightly, says Mike Hummel, president and general manager of
BNI. Hummel expects the new dragline to be uncovering coal
for even longer than 25 years.
“Planning for this goes all the way back to the beginning
of the mine,” Hummel said from the mine site near Center,
N.D.“When we designed our initial capacity, we consciously
designed to include replacement of an existing smaller dragline
midway through the 50-year contract.”
ALLETE (then Minnesota Power) purchased Baukol-Noonan Inc.
in 1988 and changed the name to BNI Coal Ltd. Operations at
the open-pit lignite mine began in 1970. Today, BNI mines
about 4.5 million tons per year of lignite to fuel the nearby
Milton R. Young steam electric generating stations. Lignite
is a soft coal abundant in North Dakota.
Hummel said the purchasing process for the new dragline began
in 1998. First, he said, “we scoured the used dragline
market.”
Moving an existing dragline was a mammoth task, and BNI planners
wanted to be sure the equipment lasted the full 25 years of
expected operation. In August of 2002 the decision was made
to sign a purchase agreement with Bucyrus International, located
in Milwaukee, Wis. It’s one of only two firms that manufacture
the huge draglines.
top
Minserco employees supervise construction of a new dragline
at the BNI mine in Center, N.D.
The machine is so big it will take until at least August of
2004 to erect it at the Center Mine. More than 30 employees
of a Bucyrus subsidiary called Minserco are now working on
building it. When complete, it will have a boom 355 feet long
and a shovel capacity of 125 tons. Fourteen electric motors
rated at 1,045 horsepower each will run the hoist, drag, swing
and propel functions. A power cable 41/2 inches thick will
deliver electricity from the Young Generating Station to operate
the dragline.
“The mining operation gradually moves away from the
(power) plant,” explains Mark Moberg, manager of purchasing
and maintenance for BNI. The Bucyrus 8200 utilizes a mechanism
that allows it to “walk,” thereby positioning
itself over the coal deposit. Moberg said the dragline typically
walks about 35 steps in a 24-hour period. Each step is approximately
six feet; BNI operates the mine around the clock.
Two electric generation cooperatives, Minnkota Power and Square
Butte, consume virtually all of the lignite mined by BNI.
Through a long-term agreement, Minnesota Power purchases from
Square Butte about 71 percent of the electricity generated
by a 435-megawatt generating unit operated by Minnkota Power
at the Young Station.
This synergy is crucial to maintaining Minnesota Power’s
position as one of the lowest-cost providers of electricity
in the Midwest. Besides the added efficiency the mammoth new
dragline will bring, its capacity will also allow BNI to perhaps
serve additional lignite customers in the future, Hummel said. |
|
|
AUTOMOTIVE
Services |
|
AFC president
talks about his customers and growth in dealer financing
Brad Todd, president of Automotive Finance Corporation,
answers some fundamental questions about this key ALLETE
subsidiary.
AFC President and
CED Brad Todd
Q: Who are AFC’s customers?
A: Basically any used vehicle dealer throughout North America.
We do business in every state and every province in Canada.
Our dealers’ credit lines range from $5,000 to $45 million.
We have more than 17,000 dealers with credit lines who purchase
vehicles at more at more than 500 auto auctions and hundreds
of non-auction locations. About 30 percent of the vehicles
purchased by our dealers are bought at Adesa sales.
Q: What is floorplanning?
A: Floorplanning is providing financing, per vehicle, for
a short period — usually 30 to 90 days. We charge an
administrative fee and an interest rate for each term. Floorplanning
allows the dealer to purchase a car or truck at auction, house
it on his lot and sell it to the ultimate consumer. We don’t
actually own the vehicle and we don’t finance the vehicles
for retail customers.
Q: How much business do you do?
A: In 1997 we averaged about $170 million dollars per month,
or a little more than $2 billion per year, in floorplan receivables. This
year we are averaging more than $475 million dollars per month,
which annualizes to more than $5 billion in floorplan receivables.
This equates to about one million financial transactions per
year at AFC.
top
Q: How has zero-percent
financing on new vehicles affected AFC?
A. Zero percent has had both a positive and negative effect. It
causes consumers who wouldn’t otherwise purchase a vehicle
to come into the marketplace. It also allows the consumer
who planned to purchase a used vehicle the chance to buy a
new one. What affects us more than zero percent financing
is the economy itself — along with the slowdown of used
vehicle sales. It’s similar to the housing industry.
When the economy is strong, people who wouldn’t necessarily
buy a house do so, and the same is true with a vehicle. When
the economy is sluggish, people who would have bought a nicer
home might have to drop a tier or two. But a vehicle is not
a necessity. You don’t have to have a new vehicle.
So consumers keep their vehicles longer and our dealers don’t
need to floorplan as much inventory.
Q: How has AFC managed to produce steady earnings,
year-in and year-out?
A: The secret is the great employee base — hiring the
right individual for the job. Then we train them on our processes
and additional management skills. Another plus is we stick
to our niche. We don’t try to build vehicles. We know
we’re good at financing vehicles. When the economy started
having a few glitches, we focused on the collection side or
the back-end functions and this helped the loan portfolio
performance. Lastly, our computer system is state-of-the-art
and has allowed us to expand and better manage the portfolio
over the last three years.
|
|
|
