ALLETE INC - 10-K filing on 2020-02-13

Short-Term and Long-Term Debt

12 Months Ended

Dec. 31, 2019

Short-Term and Long-Term Debt [Text Block]

SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of December 31, 2019, total short-term debt outstanding was $212.9 million ($57.5 million as of December 31, 2018), consisted of long-term debt due within one year and included $0.4 million of unamortized debt issuance costs.

As of December 31, 2019, we had consolidated bank lines of credit aggregating $407.0 million ($407.0 million as of December 31, 2018), most of which expire in January 2024. We had $62.0 million outstanding in standby letters of credit and no outstanding draws under our lines of credit as of December 31, 2019 ($18.4 million in standby letters of credit and no outstanding draws as of December 31, 2018).

On January 10, 2019, ALLETE entered into an amended and restated $400 million credit agreement (Credit Agreement). The Credit Agreement amended and restated ALLETE’s $400 million credit facility, which was scheduled to expire in October 2020. The Credit Agreement is unsecured, has a variable interest rate and will expire in January 2024. At ALLETE’s request and subject to certain conditions, the Credit Agreement may be increased by up to$150 million and ALLETE may make two requests to extend the maturity date, each for a one‑year extension. Advances may be used by ALLETE for general corporate purposes, to provide liquidity in support of ALLETE's commercial paper program and to issue up to $100 million in letters of credit.

Long-Term Debt. As of December 31, 2019, total long-term debt outstanding was $1,400.9 million ($1,428.5 million as of December 31, 2018) and included $8.4 million of unamortized debt issuance costs. The aggregate amount of long-term debt maturing in 2020 is $213.3 million; $98.6 million in 2021; $88.8 million in 2022; $88.8 million in 2023; $73.5 million in 2024; and $1,059.6 million thereafter. Substantially all of our regulated electric plant is subject to the lien of the mortgages collateralizing outstanding first mortgage bonds. The mortgages contain non-financial covenants customary in utility mortgages, including restrictions on our ability to incur liens, dispose of assets, and merge with other entities.

Minnesota Power is obligated to make financing payments for the Camp Ripley solar array totaling $1.4 million annually during the financing term, which expires in 2027. Minnesota Power has the option at the end of the financing term to renew for a two‑year term, or to purchase the solar array for approximately $4 million. Minnesota Power anticipates exercising the purchase option when the term expires.

On March 1, 2019, ALLETE issued and sold the following First Mortgage Bonds (the Bonds):



Maturity Date	Principal Amount	Interest Rate
March 1, 2029	$70 Million	4.08%
March 1, 2049	$30 Million	4.47%

ALLETE has the option to prepay all or a portion of the Bonds at its discretion, subject to a make-whole provision. The Bonds are subject to additional terms and conditions which are customary for these types of transactions. ALLETE used the proceeds from the sale of the Bonds to fund utility capital investment and for general corporate purposes. The Bonds were sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to institutional accredited investors.

NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)

Long-Term Debt (Continued)

On August 14, 2019, ALLETE entered into an amended and restated $110.0 million term loan agreement (Term Loan). The Term Loan is unsecured and due on August 25, 2020, and may be prepaid at any time, subject to a make-whole provision. Interest on the Term Loan is payable monthly at a rate per annum equal to LIBOR plus 1.025 percent. Proceeds from the Term Loan were used for construction-related expenditures.



Long-Term Debt
As of December 31	2019			2018
Millions
First Mortgage Bonds
8.17% Series Due 2019	—				$42.0
5.28% Series Due 2020		$35.0		35.0
2.80% Series Due 2020	40.0			40.0
4.85% Series Due 2021	15.0			15.0
3.02% Series Due 2021	60.0			60.0
3.40% Series Due 2022	75.0			75.0
6.02% Series Due 2023	75.0			75.0
3.69% Series Due 2024	60.0			60.0
4.90% Series Due 2025	30.0			30.0
5.10% Series Due 2025	30.0			30.0
3.20% Series Due 2026	75.0			75.0
5.99% Series Due 2027	60.0			60.0
3.30% Series Due 2028	40.0			40.0
4.08% Series Due 2029	70.0			—
3.74% Series Due 2029	50.0			50.0
3.86% Series Due 2030	60.0			60.0
5.69% Series Due 2036	50.0			50.0
6.00% Series Due 2040	35.0			35.0
5.82% Series Due 2040	45.0			45.0
4.08% Series Due 2042	85.0			85.0
4.21% Series Due 2043	60.0			60.0
4.95% Series Due 2044	40.0			40.0
5.05% Series Due 2044	40.0			40.0
4.39% Series Due 2044	50.0			50.0
4.07% Series Due 2048	60.0			60.0
4.47% Series Due 2049	30.0			—
Variable Demand Revenue Refunding Bonds Series 1997 A Due 2020	13.5			13.5
Unsecured Term Loan Variable Rate Due 2020	110.0			10.0
Armenia Mountain Senior Secured Notes 3.26% Due 2024	47.8			57.2
Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006, Due 2025	27.8			27.8
Senior Unsecured Notes 3.11% Due 2027	80.0			80.0
SWL&P First Mortgage Bonds 4.15% Series Due 2028	15.0			15.0
SWL&P First Mortgage Bonds 4.14% Series Due 2048	12.0			12.0
Other Long-Term Debt, 3.11% – 5.75% Due 2020 – 2037	46.5			67.7
Unamortized Debt Issuance Costs	(8.8		)	(9.2		)
Total Long-Term Debt	1,613.8			1,486.0
Less: Due Within One Year	212.9			57.5
Net Long-Term Debt		$1,400.9			$1,428.5

NOTE 8. SHORT-TERM AND LONG-TERM DEBT (Continued)

Long-Term Debt (Continued)

On January 10, 2020, ALLETE entered into a $200 million term loan agreement (Term Loan) and borrowed $60 million upon execution. The unsecured Term Loan provides for the ability to borrow up to an additional $140 million, is due on February 10, 2021, and may be repaid at any time. Interest is payable monthly at a rate per annum equal to LIBOR plus 0.55 percent. Proceeds from the Term Loan will be used for construction-related expenditures.

Financial Covenants. Our long-term debt arrangements contain customary covenants. In addition, our lines of credit and letters of credit supporting certain long-term debt arrangements contain financial covenants. Our compliance with financial covenants is not dependent on debt ratings. The most restrictive financial covenant requires ALLETE to maintain a ratio of indebtedness to total capitalization (as the amounts are calculated in accordance with the respective long-term debt arrangements) of less than or equal to 0.65 to 1.00, measured quarterly. As of December 31, 2019, our ratio was approximately 0.42 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from the lender, in which event ALLETE may need to pursue alternative sources of funding. Some of ALLETE’s debt arrangements contain “cross-default” provisions that would result in an event of default if there is a failure under other financing arrangements to meet payment terms or to observe other covenants that would result in an acceleration of payments due. ALLETE has no significant restrictions on its ability to pay dividends from retained earnings or net income. As of December 31, 2019, ALLETE was in compliance with its financial covenants.