Short-Term and Long-Term Debt

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Short-Term and Long-Term Debt

SHORT-TERM AND LONG-TERM DEBT

The following tables present the Company’s short-term and long-term debt as of September 30, 2023, and December 31, 2022:

September 30, 2023	Principal	Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt	$111.1	$(0.1)	$111.0
Long-Term Debt	1,694.4	(8.3)	1,686.1
Total Debt	$1,805.5	$(8.4)	$1,797.1

December 31, 2022	Principal	Unamortized Debt Issuance Costs	Total
Millions
Short-Term Debt	$272.7	$(0.1)	$272.6
Long-Term Debt	1,656.4	(8.2)	1,648.2
Total Debt	$1,929.1	$(8.3)	$1,920.8

We had $19.8 million outstanding in standby letters of credit and $33.3 million outstanding draws under our lines of credit as of September 30, 2023 ($32.8 million in standby letters of credit and $31.3 million outstanding draws as of December 31, 2022). We also have standby letters of credit outstanding under other letter of credit facilities. (See Note 6. Commitments, Guarantees and Contingencies.)

On October 17, 2023, ALLETE amended its $400 million credit facility (Credit Agreement), which was scheduled to expire in January 2026, to $355 million and extended the expiration date to January 10, 2027. The amended Credit Agreement is unsecured and has a variable interest rate. ALLETE may request a single, one-year extension to the maturity date. 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 $80 million in letters of credit.

On April 27, 2023, ALLETE issued $125 million of its First Mortgage Bonds (Bonds) to certain institutional buyers in the private placement market. The Bonds, which bear interest at 4.98 percent, will mature in April 2033 and pay interest semi-annually in May and November of each year, commencing on November 1, 2023. 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. Proceeds from the sale of the Bonds were used to refinance existing indebtedness 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 5. SHORT-TERM AND LONG-TERM DEBT (Continued)

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 September 30, 2023, our ratio was approximately 0.36 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 September 30, 2023, ALLETE was in compliance with its financial covenants.