Alan Hodnik – Chairman, President and CEO Mark Schober – CFO

Paul Ridzon – KeyBanc Brian Russo – Ladenburg Thalmann Bernie Horn – Polaris

Good morning, everyone. Mark Schober, ALLETE’s Chief Financial Officer, is with me, and we’ll be providing quarterly financial detail in a few moments.

For the third quarter, ALLETE reported earnings per share of $0.78. The quarterly results were consistent with our expectations as has been the case each quarter throughout this year.

Given our year-to-date results and the fact that our industrial customers have demand nomination at full capacity through the end of the year, we have narrowed our year-end earnings per share guidance to $2.50 to $2.60 per share. Before I turn the call over to Mark, I would like to give you a status update on some of our projects, as well as those of potential new customers in our region.

Let me begin with the new customers. Essar Steel Minnesota has nearly $700 million invested in their project to-date and has hired over 85 employees so far.

About 150 contractors are currently working on the site. Large concentrator grinding mills have begun arriving and will be assembled and then set on to concrete mill pedestals yet this year.

The coarse crusher has been set in place in building walls completed with only the rough installation left before winter. Essar’s first rotary blasthole drill has also been constructed and is expected to begin drilling soon in preparation for an initial blast.

In addition, construction of the boiling and filtering building for the power plant is also well underway. So as you can see, Essar has made significant progress as they proceed toward a 2013 startup of their facility.

At full production levels, we anticipate Essar will require about 120 megawatts of electricity. During our last call, I reported that another new customer, Magnetation, had started up a new 5 to 7 megawatt facility in our region.

Magnetation has experienced much success, and recently begun an expansion of this plant, which will feature new equipment installations at the site in two stages in 2013. Once the expansion is completed, the load for this facility will grow to 12 to 15 megawatt.

In addition, they’re a new 5 megawatt to 7 megawatt Magnetation facility. This one, in partnership with Steel Dynamics of Indiana, has recently come online and is ramping up towards full production, which is expected before year-end.

Turning toward our capital investments; please note that our Bison 2 and Bison 3 wind generating facilities in North Dakota are nearing completion. All turbines are up in the air and are now in the startup and final commissioning phase.

These facilities will be operational by year-end and meet the production tax credit deadlines. The Minnesota Power total generation supply will be approximately 20% renewable as we head off into 2013.

We are proud of the nearly $550 million Bison investment, and it reflects our shared purpose, growing ALLETE while answering the call to transform the nation’s energy landscape. Earlier this year, we announced an environmental upgrade project at Minnesota Power’s Boswell Unit 4.

This $350 million to $400 million project is scheduled to be completed in 2015. On August 31, Minnesota Power filed its mercury emission reduction plan for Boswell 4 with the Minnesota Public Utilities Commission and the Minnesota Pollution Control Agencies.

Project engineering is in progress and we expect groundbreaking and overall construction work to begin at Boswell in 2013. I will make some additional comments.

But before I do, I will now turn the call over to Mark. Mark?

Thank you, Al, and good morning, everyone. Before I begin, I would like to remind you that we filed our 10-Q this morning, and I encourage you to refer to it for more details.

For the third quarter, ALLETE reported earnings of $0.78 per share, a net income of $29.4 million, and revenue of $248.8 million. In the same period a year ago, ALLETE earned $0.57 per share, a net income of $20.5 million, and revenue of $226.9 million.

Earnings from our regulated operations segment, which includes Minnesota Power, Superior Water, Light & Power, and our investment in the American Transmission Company, improved approximately 23% from $23.8 million in 2011 to $29.3 million in 2012. Minnesota Power recorded higher sales, cost recovery rider revenue and renewable tax credit as well as increased operating and maintenance expenses and depreciation in interest expense associated with our ongoing capital investments.

Total regulated operations revenue was $19 million or 19% more than in 2011 due to a number of factors. First, a 1.3% increase in total kilowatt hour sales resulted in an additional $4.7 million of revenue compared to last year.

The increase in kilowatt hour sales was primarily due to higher sales to retail and municipal customers, partially offset by lower sales to other power suppliers. Electric sales to retail and municipal customers are up 3.8% compared to last year.

Sales to our industrial customers remained strong, increasing 3.5% over the same quarter last year. Secondly, cost recovery rider revenue was up $7.1 million due to higher capital expenditures, primarily related to our Bison projects.

Also, transmission revenue grew by $3.6 million, largely because of Midwest Independent System Operator, or MISO, revenue resulting from our investment in CapEx 2020. And finally, fuel adjustment cost recoveries increased $4 million from 2011 due to higher fuel and purchased power costs attributable to our retail and municipal customers.

On the expense side, fuel and purchased power rose $1.7 million or 6% from 2011, primarily due to increased purchased power expenses, coal prices and costs under our Square Butte purchased power agreement. Regulated operations’ operating and maintenance expense increased $6 million or 9% from 2011, mostly due to increased salary, benefit and MISO transmission expenses.

Benefit expenses increased largely because of higher pension expense resulting from lower discount rates. Depreciation expense increased $2.1 million and interest expense was up $1 million for the quarter, both directly attributable to the capital investment programs at our regulated operations.

Earnings from our investment in ATC for the quarter were in line with 2011 results for the same quarter. Income tax expense increased slightly this quarter because of higher pre-tax income, which was partially offset by higher renewable tax credits.

The investments in other segment reported a net income of $100,000 compared to a net loss of $3.3 million in the same quarter of 2011. State income tax expense was lower in 2012 primarily due to North Dakota income tax credits attributable to our North Dakota capital investments and recognizable as a result of ALLETE generating future taxable income in excess of that generated by our regulated operations.

The lower tax expense was partially offset by higher business development expenses. Our consolidated effective tax rate for the third quarter of 2012 was 25.9% compared to 38.2% for the same quarter in 2011.

We anticipate that the effective tax rate for the full year will be approximately 25%. Finally, additional common stock issuances related to funding our capital expenditures had a dilutive impact of $0.04 per share for the quarter.

In summary, we’re pleased with our results in the third quarter and year-to-date. Our cash flow was strong once again this quarter.

Year-to-date through September 30, we generated $195.5 million in cash from operating activity and carried a 47% debt-to-capital ratio, which includes $67 million of debt due next year. Al?

Thanks, Mark. Heading into the final two months of 2012, I’m pleased with our performance to date, which has been consistent with our expectations when we first issued earning guidance last December.

Over the next few months, you can expect to hear more from us as we continue to execute our multi-year, multifaceted growth strategy. Around December 1, we will issue an 8-K to disclose large power demand nominations for January to April 2013.

Sometime during mid-December, we will initiate our 2013 earnings guidance and further detail associated assumptions. We will also inform you on the Bison 2 and Bison 3 wind facilities begin operations.

And of course, if there should be any other material developments relative to organic growth, renewable energy transmission or environmental investments or other energy-centric investment growth opportunities in front of us, we would be sure to let you know. Thank you for your interest and your investment in ALLETE.

At this time, the operator will please open up the lines for your questions.

Good morning. Can you hear me?

Yeah.

Good morning, Paul.

I have three quick questions. One is, any update from U.S.

Steel on their expansion? The second is, how you foresee the ramp up of Essar in 2013, whether that’s going to come on mid-year or later in the year or just kind of how to model that?

And then lastly, other investments this year, a decent – relative to last year, decent results, whether any of these benefits are going to be ongoing or how to think about those?

Well, I’ll take the – maybe the steel related questions, and Mark can take the last question, I guess. I – we did not learn anything new necessarily from U.S.

Steel regarding their Keewatin taconite expansion decision. It’s in the Board room level, if you will.

They have received permits in Minnesota, as you know, and those permits are still good to early next year sometimes. So we don’t have any additional information on U.S.

Steel Keetac. With respect to Essar Steel, Essar Steel’s construction continues to go well.

But like any construction initiative of this size, things ebb and flow. We’re thinking that construction will carry on through much of the first half of the year and then startup will be sometime in the later spring or early summer.

Now, there will be some blasting and drilling and other things going on with respect to the pit itself in preparing crude oil and taconite, if you will, for processing. But we’re expecting sort of a ramp up coming from the summer months heading up into the later part of the year.

Mark?

All right. And just a follow-up on Essar, Paul.

As we issue guidance for 2013 here in mid-December, we’ll look at giving you some incremental information as far as how to look at Essar in 2013. As far as in the other investments segment, the driver there, as you’re aware, is the investment tax credits that we have in the state of North Dakota.

The majority of those have been recognized or will be recognized in 2012, but there will be some ongoing benefits going into 2013 and future years, based on the outlook for earnings in the state of North Dakota.

Thank you very much.

Thank you, Paul.

Hi, good morning.

Good morning, Brian.

Good morning, Brian.

Could you just comment on your general rate case strategy when you might file next?

Brian, we don’t have any immediate plans to file the rate case. We certainly look at it on a regular basis.

As we’ve chatted in the past, the majority of our capital that we’re investing in the last couple of years and as we go forward is eligible for our current cost recovery for riders. It’s either renewable or the large environmental projects that we’re looking at.

O&M costs, we continue to look at those, especially where discounts rates are and our pension and medical and employee expenses. But at this point in time, we don’t see the need to file the rate case in the immediate future, but we certainly look at it on a regular basis and are ready to file if we need to.

Okay. And on the Boswell environmental upgrade, when will spending ramp up there?

And just kind of add some color on how those costs recovered in the recovery rider? Are they recovered as they are spent or is there some sort of lag?

Yeah. As we outlined in our Q and I think Al mentioned too, we’re in the process of design and engineering that project currently, and that will continue on through 2013.

The ramp up in spend then will really pick up in 2014/2015 that’s when you see the majority of the dollars. As far as – so we recognize the AFUDC on those dollars as we spend them.

The process that we go through then as we need approval from the Minnesota Pollution Control Agency, that will happen hopefully by mid-year in 2013. And then we’ll get approval from our regulators to recover it through rates.

That probably won’t happen until sometime at the end of next year, early 2014, and that’s when you’ll see the actual cash flow will start then in 2014. From an income statement standpoint, I will be recognizing those revenues through AFUDC.

Okay, great. And I may have missed this earlier, but is there any update on the Clean Energy subsidiary, anything in the pipeline that you guys can discuss?

Nothing that we can discuss right now. We continue to focus on energy-centric investments both with ALLETE Clean Energy and with our business development team.

We like energy. As you know, we’re focused on energy exclusively or energy infrastructure at least related to energy.

And so nothing new to report right now, Brian, but we continue to actively pursue opportunity.

Okay. One last question on, how do you manage your guidance and the sensitivities to uncertain changes in the industrial nominations, meaning, I think, 40 million tons is kind of the benchmark at full production.

I mean, if by chance that was to decrease by, say, 5%, is there a margin sensitivity there or are you able to offset that with off-system sales and cost cutting?

Yeah. So if we look at our guidance for 2013 that we’ll issue here in December, Brian, I will give you some metrics, but we anticipate production from our taconite customers will be.

And you’re right, full production is right around that 41 million tons level plus or minus, so we certainly look at our expectations for the year and we’re building some potential for some short-term swings in production in our guidance. If there is a shutdown or a slowdown in the 5% range, certainly there would be some margin pressure.

We could take some costs out. We can take that excess power to market, but we’re all well aware how our wholesale prices are very soft and we would not be able to replicate all of those margins, but we anticipate that would be relatively short term and would not have a material impact on the company long-term.

Okay. Thank you very much.

Thanks, Brian.

Yes, good morning. I’m just wondering if you could comment on – I know that in the first part of the year, you had lower sales due to a mild winter.

And it seems like the third quarter was a bit more normal. I’m just curious if – as you look forward for the next six months or so, and this is related to kind of gas versus coal question.

Is there any price sensitivity among your customers that would – that there would be some price elasticity such that you’re seeing any increase or changes in behavior as far as electricity consumption is concerned with respect to the prices that they’re paying?

No, we’re not anticipating a lot of change on the residential or commercial side of the business in terms of their usage or consumption relative to that. And likewise, with the taconites, they have continued to signal strong operations at least through the end of this year.

So we don’t see any sort of material change in behaviors by residential and commercial customers.

Okay. And then as far as the spreads are concerned over coal prices and so forth, are you – in terms of what you’ve bought and inventories and so forth, would you expect the spreads that you’re earning over the next six months or so to be any different from what they were in the first nine months?

No, not from a fuel standpoint. Bernie, again, it’s important to remember that here in Minnesota we have fuel adjustments.

I know you passed up through.

Yeah. So it doesn’t have a significant impact.

We are seeing some softness in coal prices but certainly those benefits then roll through to our customers. And on the margin standpoint and on the weather too, it’s important to remember that Minnesota Power is not real weather sensitive.

As we discussed, the vast majority or 50%-plus of our revenues come from our industrial customers that run and are not really impacted by weather. So what happened in the first and into the second quarter here was unusual.

We usually don’t have – not really impacted by different patterns in weather.

Okay, great. Thanks.

That’s all I had.

Thanks, Bern.

Well, thank you, again, everyone, for joining us this morning. We look forward to meeting with a number of you at our upcoming EEI Financial Conference Interface with you all and I want to thank you again for your investment in ALLETE.

Have a good day.