ALLETE, Inc. (NYSE: ALE) reported 2012 earnings of $2.58 per share compared with $2.65 per share in 2011. Excluding two non-recurring items, ALLETE's pro-forma earnings in 2011 were $2.39 per share.

The company recorded net income of $97.1 million in 2012 compared with $93.8 million a year ago, an increase of 3.5 percent. Operating revenue was $961.2 million this year versus $928.2 million in 2011. ALLETE shares briefly exceeded their 52-week high of $47.06 after the earnings report was released.

Demand for electricity is expected to remain strong this year, Duluth-based ALLETE said in its 10-k filing. Mines and paper mills served by the corporation's Minnesota Power division will consume an amount of electricity at least as large as during 2012, the company said, and earn the return allowed by utility regulators.

Income from ALLETE’s regulated operations decreased by $4.3 million in 2012 compared with 2011, but last year's results included the benefit of two non-recurring items: the reversal of a $6.2 million deferred tax liability and a $2.9 million income tax benefit. Excluding these items, the segment increased by $4.8 million.

Minnesota Power electric sales to industrial customers increased by nearly two percent to more than 7.5 million kilowatt-hours. These increases were partially offset by increased operating and maintenance, depreciation and interest expenses, as well as higher costs under the Square Butte power purchase agreement.

During 2013, steel demand for pipe used in the fracking industry and for automobiles should be strong, along with the demand for Minnesota taconite, ALLETE President, Chairman and CEO Al Hodnik said during the year-end conference call.

The company’s investments and other segment recorded net income of $1 million in 2012 compared to a net loss of $6.6 million in 2011, due primarily to lower state income tax and interest expense.

Earnings for 2012 were diluted by 16 cents per share due to issuances of common shares needed to fund major capital investments, the company said.

“I'm pleased with our 2012 financial and operational performance as we executed our multi-faceted growth strategies,” Hodnik said in a news release. “Our year-end results were in the upper end of our $2.50 to $2.60 guidance range.”

Hodnik predicted earnings growth in 2013.

“We expect another strong year of energy sales as our regional economy grows and we will continue to make needed capital investments to ensure reliability and meet state renewable and environmental mandates.”

In January, ALLETE announced its board of directors increased the quarterly dividend on the companys common stock to 47.5 cents per share.

Looking forward, the corporation's Minnesota Power subsidiary could see demand eventually grow by 600 megawatts if proposed Iron Range mining projects reach fruition, according to the 10-k. It said:

• If the PolyMet copper/nickel/precious minerals project advances, Minnesota Power could begin to supply between 45-70 megawatts of power in

approximately 2014 through a 10-year power supply contract that would begin upon start-up.

• Mesabi Nugget continues to pursue permits for taconite mining activities on lands formerly mined by Erie Mining Co. and LTV Steel Mining Co. near Hoyt Lakes. Upon receipt of permits to mine, Mesabi Nugget could mine and self-supply its own iron ore concentrate about a year later, which would result in increased electrical loads above our current 20 MW long-term power supply contract with Mesabi Nugget which lasts at least through 2017. In the meantime, Mesabi Nugget will receive iron ore concentrate from a new Mining Resources, LLC facility located near Chisholm.

• If an idled Keewatin Taconite pellet line is restarted, it would bring 3.6 million tons of additional pellet making capability to northeastern Minnesota and could result in over 60 MW of additional load for Minnesota Power.

• The new Essar taconite plant in Nashwauk will add approximately 110 megawatts of additional load for Minnesota Power. Essar has indicated plans for start-up in mid-2013, with pellet production beginning during the second half of the year, resulting in a minimal impact on our results of operations until late 2013. ALLETE believes Essar will move towards full production capacity levels during 2014.

Minnesota Power is constructing a 230 kV transmission system upgrade to serve the Essar load. It will cost approximately $35 million and is scheduled to be in service in April.

• Essar expansions for additional pellet production, production of direct reduced iron and production of steel slabs are also being considered for future years. Essar has announced a 10-year iron ore pellet supply agreement with ArcelorMittal. Essar will supply 3.5 million tons of pellets annually to ArcelorMittal, which is expected to begin in late 2013.

• Magnetation will construct new facilities near Calumet and Coleraine in 2013. The Calumet facility could come on line in late 2014 and the Coleraine facility shortly thereafter to supply iron ore concentrate to Magnetation’s new pellet plant that is under construction in Reynolds, Ind. Construction of these new iron ore concentrate facilities could result in approximately 20 megawatts of additional load for Minnesota Power.

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