United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-K (Mark One) T Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2017 £ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ Commission File Number 1-3548 ALLETE, Inc. (Exact name of registrant as specified in its charter) Minnesota 41-0418150 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 30 West Superior Street, Duluth, Minnesota 55802-2093 (Address of principal executive offices, including zip code) (218) 279-5000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, without par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company ¨ Emerging Growth Company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The aggregate market value of voting stock held by nonaffiliates on June 30, 2017 , was $3,637,956,646 . As of February 1, 2018 , there were 51,143,656 shares of ALLETE Common Stock, without par value, outstanding. Documents Incorporated By Reference Portions of the Proxy Statement for the 2018 Annual Meeting of Shareholders are incorporated by reference in Part III. Index Definitions 4 Forward-Looking Statements 6 Part I 8 Item 1. Business 8 Regulated Operations 9 Electric Sales / Customers 9 Seasonality 12 Power Supply 12 Transmission and Distribution 14 Investment in ATC 15 Properties 15 Regulatory Matters 16 Regional Organizations 17 Minnesota Legislation 18 Competition 18 Franchises 19 Energy Infrastructure and Related Services 19 ALLETE Clean Energy 19 U.S. Water Services 20 Corporate and Other 21 BNI Energy 21 ALLETE Properties 21 Non-Rate Base Generation and Miscellaneous 22 Environmental Matters 22 Employees 23 Availability of Information 23 Executive Officers of the Registrant 24 Item 1A. Risk Factors 25 Item 1B. Unresolved Staff Comments 32 Item 2. Properties 32 Item 3. Legal Proceedings 33 Item 4. Mine Safety Disclosures 33 33 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. Selected Financial Data 35 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Overview 36 2017 Compared to 2016 38 2016 Compared to 2015 42 Critical Accounting Policies 46 Outlook 48 Liquidity and Capital Resources 56 Capital Requirements 59 Environmental and Other Matters 60 Market Risk 60 Recently Adopted Accounting Standards 61 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 61 Item 8. Financial Statements and Supplementary Data 62 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 62 ALLETE, Inc. 2017 Form 10-K 2 Index Item 9A. Controls and Procedures 62 Item 9B. Other Information 62 Part III 63 Item 10. Directors, Executive Officers and Corporate Governance 63 Item 11. Executive Compensation 63 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 64 Item 13. Certain Relationships and Related Transactions, and Director Independence 64 Item 14. Principal Accounting Fees and Services 64 Part IV 65 Item 15. Exhibits and Financial Statement Schedules 65 Item 16. Form 10-K Summary 70 Signatures 71 73 Report of Independent Registered Public Accounting Firm Consolidated Financial Statements - Audited 75 75 Consolidated Balance Sheet 76 Consolidated Statement of Income 77 Consolidated Statement of Comprehensive Income 78 Consolidated Statement of Cash Flows 79 Consolidated Statement of Equity 80 Notes to Consolidated Financial Statements 80 Note 1. Operations and Significant Accounting Policies 91 Note 2. Property, Plant and Equipment 92 Note 3. Jointly-Owned Facilities and Projects 92 Note 4. Regulatory Matters 99 Note 5. Investment in ATC 100 Note 6. Acquisitions 105 Note 7. Goodwill and Intangible Assets 106 Note 8. Investments 106 Note 9. Fair Value 110 Note 10. Short-Term and Long-Term Debt 112 Note 11. Commitments, Guarantees and Contingencies 120 Note 12. Common Stock and Earnings Per Share 122 Note 13. Income Tax Expense 124 Note 14. Reclassifications Out of Accumulated Other Comprehensive Income (Loss) 125 Note 15. Pension and Other Postretirement Benefit Plans 135 Note 16. Employee Stock and Incentive Plans 138 Note 17. Business Segments 141 Note 18. Quarterly Financial Data (Unaudited) 142 Schedule II ALLETE, Inc. 2017 Form 10-K 3 Definitions The following abbreviations or acronyms are used in the text. References in this report to “we,” “us” and “our” are to ALLETE, Inc. and its subsidiaries, collectively. Abbreviation or Acronym Term AFUDC Allowance for Funds Used During Construction - the cost of both debt and equity funds used to finance utility plant additions during construction periods ALLETE ALLETE, Inc. ALLETE Clean Energy ALLETE Clean Energy, Inc. and its subsidiaries ALLETE Properties ALLETE Properties, LLC and its subsidiaries ALLETE Transmission Holdings ALLETE Transmission Holdings, Inc. ArcelorMittal ArcelorMittal USA, Inc. ASC Accounting Standards Codification ATC American Transmission Company LLC Basin Basin Electric Power Cooperative Bison Bison Wind Energy Center BNI Energy BNI Energy, Inc. and its subsidiary Boswell Boswell Energy Center Camp Ripley Camp Ripley Solar Array CIP Conservation Improvement Program Cliffs Cleveland-Cliffs Inc. CO 2 Carbon Dioxide Company ALLETE, Inc. and its subsidiaries DC Direct Current EIS Environmental Impact Statement EITE Energy-Intensive Trade-Exposed EPA United States Environmental Protection Agency ERP Iron Ore ERP Iron Ore, LLC ESOP Employee Stock Ownership Plan FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission Form 8-K ALLETE Current Report on Form 8-K Form 10-K ALLETE Annual Report on Form 10-K Form 10-Q ALLETE Quarterly Report on Form 10-Q GAAP Generally Accepted Accounting Principles in the United States of America GHG Greenhouse Gases GNTL Great Northern Transmission Line Invest Direct ALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan IRP Integrated Resource Plan Item ___ Item ___ of this Form 10-K kV Kilovolt(s) kW / kWh Kilowatt(s) / Kilowatt-hour(s) Laskin Laskin Energy Center LIBOR London Interbank Offered Rate Magnetation Magnetation, LLC Manitoba Hydro Manitoba Hydro-Electric Board MBtu Million British thermal units ALLETE, Inc. 2017 Form 10-K 4 Definitions (continued) Abbreviation or Acronym Term Mesabi Metallics Mesabi Metallics Company, LLC Minnesota Power An operating division of ALLETE, Inc. Minnkota Power Minnkota Power Cooperative, Inc. MISO Midcontinent Independent System Operator, Inc. Montana-Dakota Utilities Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc. Moody’s Moody’s Investors Service, Inc. MPCA Minnesota Pollution Control Agency MPUC Minnesota Public Utilities Commission MW / MWh Megawatt(s) / Megawatt-hour(s) NDPSC North Dakota Public Service Commission NERC North American Electric Reliability Corporation NOL Net Operating Loss NO 2 Nitrogen Dioxide NO X Nitrogen Oxides Northern States Power Northern States Power Company, a subsidiary of Xcel Energy Inc. Northshore Mining Northshore Mining Company, a wholly-owned subsidiary of Cliffs Note ___ Note ___ to the consolidated financial statements in this Form 10-K NYSE New York Stock Exchange Oliver Wind I Oliver Wind I Energy Center Oliver Wind II Oliver Wind II Energy Center Palm Coast Park District Palm Coast Park Community Development District in Florida PolyMet PolyMet Mining Corp. PPA / PSA Power Purchase Agreement / Power Sales Agreement PPACA Patient Protection and Affordable Care Act of 2010 PSCW Public Service Commission of Wisconsin RSOP Retirement Savings and Stock Ownership Plan SEC Securities and Exchange Commission Shell Energy Shell Energy North America (US), L.P.