Short-Term and Long-Term Debt

3 Months Ended

Mar. 31, 2012

Short-Term and Long-Term Debt [Abstract]

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

SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of March 31, 2012, total short-term debt outstanding was $7.1 million ($6.5 million as of December 31, 2011) and consisted of long-term debt due within one year and notes payable.

Long-Term Debt. No long-term debt was issued in the first three months of 2012. As of March 31, 2012, total long-term debt outstanding was $856.5 million ($857.9 million as of December 31, 2011).

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 March 31, 2012, our ratio was approximately 0.43 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from a 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. As of March 31, 2012, ALLETE was in compliance with its financial covenants.