Edgar Filing: ALLETE INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12

ALLETE, Inc.
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(Name of Registrant as Specified in its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[Photo of Medardo Salgado and Manuel [Photo of ALLETE's Ethics Handbook
Vargas buffing a Beetle at ADESA Golden on the printing press]
Gate's reconditioning facility]

NOTICE AND PROXY STATEMENT

[Photo of Minnesota Power lineman [Photo of vehicle in a parking garage]
working on a power pole in Duluth, MN]

[ALLETE LOGO]
ANNUAL MEETING
OF SHAREHOLDERS
---------------
Tuesday May 13, 2003
Duluth, Minnesota

[Photo of a transmission tower in
Duluth, MN]

[ALLETE LOGO]

March 25, 2003

Dear Shareholder:

We cordially invite you to our 2003 Annual Meeting of Shareholders to
be held Tuesday, May 13, 2003 at 10:30 a.m. in the auditorium of the Duluth
Entertainment Convention Center (DECC). The DECC is located on the waterfront at
350 Harbor Drive in Duluth. Free parking is available in the adjoining lot. On
behalf of the Board of Directors, I encourage you to attend.

At this year's meeting you will be asked to elect ten Directors, ratify
the appointment of PricewaterhouseCoopers LLP as independent auditors, and
approve the reservation of an additional 500,000 shares of common stock for
issuance under our employee stock purchase plan.

Standing for election to the Board for the first time this year is Mr.
Tom Cunningham, recently retired from a long and successful career at Ford Motor
Company where he was responsible for Ford's used vehicle sales strategy in the
United States. His experience will be a valuable asset to the Board in its
oversight of our Automotive Services business. Two directors will not be
standing for re-election this year. Ms. Glenda Hood resigned from the Board
earlier this year to avoid conflicts of interest that would result after her
appointment to the office of Secretary of State for Florida. Ms. Kathleen
Brekken declined to stand for re-election as part of a resolve to find a better
balance to the demands of her professional obligations. We thank them for their
many contributions during their tenure on the Board.

After our Annual Meeting, we invite you to visit with our directors,
officers and employees over lunch in the Lake Superior Ballroom located within
the DECC. If you plan to join us for lunch, please return the enclosed
reservation card.

It is important that your shares be represented and voted whether or
not you plan to attend our Annual Meeting. You can vote your shares by Internet,
a toll-free telephone call, or by returning the enclosed Proxy Card. Please see
your Proxy Card for specific instructions on how to vote.

Thank you for your investment in ALLETE.

Sincerely,

David G. Gartzke

David G. Gartzke
Chairman, President and
Chief Executive Officer

ALLETE, INC.

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - MAY 13, 2003
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The Annual Meeting of Shareholders of ALLETE, Inc. will be held in the
auditorium at the Duluth Entertainment Convention Center, 350 Harbor Drive,
Duluth, Minnesota, on Tuesday, May 13, 2003 at 10:30 a.m. for the following
purposes:

1. To elect a Board of ten directors to serve for the ensuing year;

2. To ratify the appointment of PricewaterhouseCoopers LLP as ALLETE's
independent auditors for 2003;

3. To approve the reservation of an additional 500,000 shares of ALLETE
Common Stock for issuance under the ALLETE and Affiliated Companies
Employee Stock Purchase Plan; and

4. To transact such other business as may properly come before the
meeting or any adjournments thereof.

Shareholders of record on the books of ALLETE at the close of business
on March 14, 2003 are entitled to notice of and to vote at the Annual Meeting.

All shareholders are cordially invited and encouraged to attend the
meeting in person. The holders of a majority of the shares entitled to vote at
the meeting must be present in person or by Proxy to constitute a quorum.

Your early response will facilitate an efficient tally of your votes.
If voting by mail, please sign, date and return the enclosed Proxy Card in the
envelope provided. Alternatively, follow the enclosed instructions to vote by
phone or the Internet.

By order of the Board of Directors,

Philip R. Halverson

Philip R. Halverson
Vice President, General Counsel and Secretary

Dated at Duluth, Minnesota
March 25, 2003

IF YOU HAVE NOT RECEIVED THE ALLETE 2002 ANNUAL REPORT, WHICH INCLUDES
FINANCIAL STATEMENTS, KINDLY NOTIFY ALLETE SHAREHOLDER SERVICES, 30 WEST
SUPERIOR STREET, DULUTH, MN 55802-2093, TELEPHONE NUMBER 1-800-535-3056 OR
1-218-723-3974, AND A COPY WILL BE SENT TO YOU.

ALLETE, INC.
30 WEST SUPERIOR STREET
DULUTH, MINNESOTA 55802

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PROXY STATEMENT
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SOLICITATION

The Proxy accompanying this Proxy Statement is solicited on behalf of
the Board of Directors of ALLETE, Inc. (ALLETE or Company) for use at the Annual
Meeting of Shareholders to be held on May 13, 2003 and any adjournments thereof.
The purpose of the meeting is to elect a Board of ten directors to serve for the
ensuing year, to ratify the appointment of PricewaterhouseCoopers LLP
(PricewaterhouseCoopers) as ALLETE's independent auditors for 2003, to approve
the reservation of an additional 500,000 shares of ALLETE Common Stock (Common
Stock) for issuance under the ALLETE and Affiliated Companies Employee Stock
Purchase Plan, and to transact such other business as may properly come before
the meeting. All properly submitted proxies received at or before the meeting
and entitled to vote will be voted at the meeting.

This Proxy Statement and the enclosed Proxy Card were first mailed on
or about March 25, 2003. Each Proxy delivered pursuant to this solicitation is
revocable any time before it is voted by written notice delivered to the
Secretary of ALLETE.

ALLETE expects to solicit proxies primarily by mail. Proxies also may
be solicited at a nominal cost in person and by telephone by employees or
retirees of ALLETE. The expenses of such solicitation are the ordinary ones in
connection with preparing, assembling and mailing the material, and also include
charges and expenses of brokerage houses and other custodians, nominees or other
fiduciaries for communicating with shareholders. Additional solicitation of
proxies will be made by mail, telephone and in person by Georgeson Shareholder
Communications, Inc., a firm specializing in the solicitation of proxies, at a
cost to ALLETE of approximately $15,000 plus expenses. The total amount of such
costs will be borne by ALLETE.

OUTSTANDING SHARES AND VOTING PROCEDURES

The outstanding shares of capital stock of ALLETE as of March 14, 2003
were 86,087,753 shares of Common Stock (without par value).

Each share of the Common Stock of record on the books of ALLETE at the
close of business on March 14, 2003 is entitled to notice of the Annual Meeting
and to one vote.

The affirmative vote of a majority of the shares of stock entitled to
vote at the Annual Meeting is required for election of each director, and the
affirmative vote of a majority of the shares of stock present and entitled to
vote is required for approval of the other items described in this Proxy
Statement to be acted upon by shareholders. An automated system administered by
Wells Fargo Bank Minnesota, N.A. tabulates the votes. Abstentions are included
in determining the number of shares present and voting, and are treated as votes
against the particular proposal. Broker non-votes are not counted for or against
any proposal.

Any shareholder giving a Proxy has the right to revoke it at any time
prior to its exercise by giving notice in writing to the Secretary.

Unless contrary instructions are indicated on the Proxy, all shares
represented by valid proxies will be voted "FOR" the election of all nominees
for director named herein, "FOR" ratifying the appointment of
PricewaterhouseCoopers as ALLETE's independent auditors for 2003, and "FOR"
approval of the reservation of an additional 500,000 shares of Common Stock for
issuance under the ALLETE and Affiliated Companies Employee Stock Purchase Plan.
If any other business is transacted at the meeting, all shares represented by
valid proxies will be voted in accordance with the best judgment of the
appointed proxies.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The only person known to ALLETE who as of March 14, 2003 owned
beneficially more than 5 percent of any class of ALLETE's voting securities is
American Express Trust Company, 50765 AXP Financial Center, Minneapolis,
Minnesota, 55474. As of March 14, 2003 American Express Trust Company held
8,343,864 shares, or 9.7 percent, of ALLETE's Common Stock in its capacity as
Trustee of the Minnesota Power and Affiliated Companies Retirement Savings and
Stock Ownership Plan (RSOP). Generally, these shares will be voted in accordance
with instructions received by American Express Trust Company from participants
in the RSOP.

The following table presents the shares of Common Stock beneficially
owned by directors, nominees for director and executive officers named in the
Summary Compensation Table which appears subsequently in this Proxy Statement,
and all directors and executive officers of ALLETE as a group, as of March 14,
2003. Unless otherwise indicated, the persons shown have sole voting and
investment power over the shares listed.

Options Options
Number of Shares Exercisable Number of Shares Exercisable
Name of Beneficially within 60 days Name of Beneficially within 60 days
Beneficial Owner Owned after March 14, 2003 Beneficial Owner Owned after March 14, 2003
---------------------------------------------------------------------------------------------------------------------------

Kathleen A. Brekken 13,058 7,680 Nick Smith 17,250 10,537
Wynn V. Bussmann 3,919 750 Bruce W. Stender 20,137 9,600
Thomas L. Cunningham 500 0 Donald C. Wegmiller 24,383 9,600
Dennis E. Evans 27,733 9,600 Donnie R. Crandell 38,344 89,216
David G. Gartzke 46,619 113,673 Robert D. Edwards 49,806 101,211
Peter J. Johnson 32,746 9,600 James P. Hallett 32,689 88,844
George L. Mayer 28,626 9,116 Donald J. Shippar 16,142 28,391
Jack I. Rajala 19,593 9,600

All directors and
executive officers
as a group (20): 476,959 619,565

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Includes (i) shares as to which voting and investment power is shared with the person's spouse: Mr. Johnson - 28,300,
and all directors and officers as a group - 40,088; (ii) shares owned by the person's spouse: Mr. Gartzke - 10, Mr.
Mayer - 800, Mr. Smith - 50, Mr. Crandell - 8,226 and all directors and officers as a group - 24,589; and (iii) shares
held as trustee: Mr. Mayer - 650. Each director and executive officer owns only a fraction of 1 percent of any class
of ALLETE stock, and all directors and executive officers as a group also own less than 1 percent of any class of
ALLETE stock.
Includes 15,154 options owned by Mr. Crandell's spouse that are exercisable within 60 days after March 14, 2003.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires ALLETE's directors and executive officers, and persons who own more
than 10 percent of a registered class of ALLETE's equity securities, to file
reports of initial ownership of Common Stock and other equity securities and
subsequent changes in that ownership with the Securities and Exchange
Commission, and the New York Stock Exchange. Based on a review of such reports,
ALLETE believes that all such filing requirements were met during 2002, except
that an initial report (Form 3) for Mr. Donald Shippar was filed approximately
three months late and a report (Form 5) for Mr. Nick Smith covering one stock
option grant was filed seven days late. Both late filings were the result of
administrative error on the part of the Company.

PROPOSALS OF SHAREHOLDERS FOR THE 2004 ANNUAL MEETING

All proposals from shareholders to be considered for inclusion in the
Proxy Statement relating to the Annual Meeting scheduled for May 11, 2004 must
be received by the Secretary of ALLETE at 30 West Superior Street, Duluth,
Minnesota, 55802, not later than November 19, 2003. In addition, the persons to
be named as proxies in the Proxy Cards relating to that Annual Meeting may have
the discretion to vote their proxies in accordance with their judgment on any
matter as to which ALLETE did not have notice prior to February 8, 2004, without
discussion of such matter in the Proxy Statement relating to that Annual
Meeting.

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ITEM NO. 1 - ELECTION OF DIRECTORS
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It is intended that the shares represented by the Proxy will be voted,
unless authority is withheld, "FOR" the election of the ten nominees for
director named below and on the opposite page. Directors are elected to serve
until the next annual election of directors and until a successor is elected and
qualified, or until a director's earlier resignation or removal. In the event
that any nominee should become unavailable, which is not anticipated, the Board
of Directors may provide by resolution for a lesser number of directors, or
designate substitute nominees, who would receive the votes represented by the
enclosed Proxy.

CURRENT DIRECTORS/NOMINEES FOR DIRECTOR
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[PHOTO] WYNN V. BUSSMANN, 61, Birmingham, MI. Member of the Audit
Committee. Senior Vice President - Global Forecasting of
J.D. Power and Associates, an international marketing
information firm. From 1994 to 2001 he was Corporate
Economist for Daimler Chrysler Corporation, where he
provided forecasts and analysis of vehicle sales and other
trends in the vehicle industry for product strategy and
planning. Chair of Society of Automotive Analysts and past
chair of the Conference of Business Analysts. DIRECTOR SINCE
2002.
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[PHOTO] THOMAS L. CUNNINGHAM, 57, St. Augustine, FL. Retired in 2002
from his position of Director, Remarketing Strategy for Ford
Motor Company, where he was responsible for the total design
and implementation of Ford's wholesale used vehicle sales
strategy in the United States for all the Ford and
Ford-affiliate brands. From 1989 to 2001 he was Manager,
Vehicle Remarketing for Ford, where he developed
industry-leading vehicle remarketing processes. FIRST-TIME
NOMINEE.
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[PHOTO] DENNIS E. EVANS, 64, Scottsdale, AZ. Member of the Corporate
Governance and Nominating Committee, and the Executive
Compensation Committee. President and CEO of the Hanrow
Financial Group, Ltd., a merchant banking firm. DIRECTOR
SINCE 1986.
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[PHOTO] DAVID G. GARTZKE, 59, Duluth, MN. Chairman, President and
CEO of ALLETE. From 1994 to 2001 he was Senior Vice
President and CFO of ALLETE. Board member of Edison Electric
Institute and the Minnesota Business Partnership. DIRECTOR
SINCE 2001.
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[PHOTO] PETER J. JOHNSON, 66, Tower, MN. Member of the Audit
Committee. Chairman and CEO of Hoover Construction Company,
a highway and heavy construction contractor. DIRECTOR SINCE
1994.

CURRENT DIRECTORS/NOMINEES FOR DIRECTOR
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[PHOTO] GEORGE L. MAYER, 58, Essex, CT. Member of the Audit
Committee. Founder and President of Manhattan Realty Group
which manages various apartment properties. Director of
Schwaab, Inc., one of the nation's largest manufacturers of
handheld rubber stamps and associated products. DIRECTOR
SINCE 1996.
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[PHOTO] JACK I. RAJALA, 63, Grand Rapids, MN. Member of the
Corporate Governance and Nominating Committee. Chairman and
CEO of Rajala Companies, and Director and President of
Rajala Mill Company which manufacture and trade lumber.
Director of Grand Rapids State Bank. Board of Regents of
Concordia College in Minnesota. DIRECTOR SINCE 1985.
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[PHOTO] NICK SMITH, 66, Duluth, MN. Lead Director of the ALLETE
Board. Chair of the Corporate Governance and Nominating
Committee, and member of the Executive Compensation
Committee. Chairman and CEO of Northeast Ventures
Corporation, a venture firm investing in northeastern
Minnesota. Chairman of Community Development Venture Capital
Alliance, a national association. Director of North Shore
Bank of Commerce. DIRECTOR SINCE 1995.
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[PHOTO] BRUCE W. STENDER, 61, Duluth, MN. Chair of the Audit
Committee, and member of the Corporate Governance and
Nominating Committee. President and CEO of Labovitz
Enterprises, Inc. which owns and manages hotel properties.
Trustee of the C.K. Blandin Foundation and member of the
Chancellor's Advisory Committee for the University of
Minnesota Duluth. DIRECTOR SINCE 1995.
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[PHOTO] DONALD C. WEGMILLER, 64, Minneapolis, MN. Chairman of the
Executive Compensation Committee. Chairman of Clark/Bardes
Consulting - Healthcare Group, a national executive and
physician compensation and benefits consulting firm.
Director of LecTec Corporation, Medical Graphics
Corporation, Possis Medical, Inc., SelectCare, Inc. and JLJ
Medical Devices International, LLC. DIRECTOR SINCE 1992.

CORPORATE GOVERNANCE

Corporate governance encompasses the internal policies and practices by
which ALLETE is operated and controlled on behalf of its shareholders. Sound
corporate governance starts with a strong, independent Board of Directors that
is accountable to the Company and its owners. The role of the Board is to
effectively govern the affairs of the Company for the benefit of its
shareholders and, to the extent appropriate under Minnesota law, other
constituencies which include the Company's employees, customers, suppliers and
the communities in which it does business. Since its ultimate goal is to better
focus and direct the resources of the Company, we see good corporate governance
as a source of competitive advantage.

In the last year the Board reviewed its corporate governance practices.
The Board's practices already conformed with most of the requirements of new
laws, rules and proposed rules pertaining to corporate governance. However, the
Board and its committees took this opportunity to formalize existing practices
and policies and strengthen them as appropriate. For example, the Board adopted
Corporate Governance Guidelines which articulate Board and committee roles and
responsibilities, guidelines for their composition, membership selection and
operations, director compensation guidelines and other matters. Committee
charters were reviewed and amended. Self-evaluation processes were formalized
and improved. The Board and its committees meet regularly without members of
management present, have direct access to and meet individually with members of
management, and retain their own advisors as they deem appropriate.

BOARD AND COMMITTEE MEETINGS IN 2002

During 2002 the Board of Directors held nine meetings. The Corporate
Governance and Nominating Committee, which held eight meetings during 2002,
provides recommendations to the Board with respect to Board organization,
membership, function, Committee structure and membership, succession planning
for the executive management, and the application of corporate governance
principles. This Committee also performs the functions of a director nominating
committee, leads the Board's annual evaluation of the Chief Executive Officer
and is authorized to exercise the authority of the Board in the intervals
between meetings. Shareholders may recommend nominees for director to the
Corporate Governance and Nominating Committee by addressing the Secretary of
ALLETE, 30 West Superior Street, Duluth, Minnesota, 55802. The Audit Committee,
which held eight meetings in 2002, recommends the selection of independent
auditors, reviews and evaluates ALLETE's accounting practices, reviews periodic
financial reports to be provided to the public, and reviews and recommends
approval of the annual audit report. The Executive Compensation Committee, which
held seven meetings in 2002, establishes compensation and benefit arrangements
for ALLETE officers and other key executives that are intended to be equitable,
competitive in the marketplace and consistent with corporate objectives. All
directors attended 75 percent or more of the aggregate number of meetings of the
Board of Directors and applicable committee meetings in 2002.

DIRECTOR COMPENSATION

Employee directors receive no additional compensation for their
services as directors. In 2002 ALLETE paid each non-employee director an annual
retainer fee of $11,000 and 1,300 shares of Common Stock under the terms of the
ALLETE Director Stock Plan. In addition, each non-employee director was paid
$6,000 as a committee retainer fee for each committee assignment. Each
non-employee director who is the chairman of a committee received an additional
$3,000 retainer. Directors may elect to defer all or a part of the cash portion
of their retainer. The shares of Common Stock paid to directors with respect to
2002 had an average market price of $25.82 per share.

Under the ALLETE Director Long-Term Stock Incentive Plan, non-employee
directors receive automatic grants of 1,500 stock options every year and
performance shares valued at $10,000 every other year. Fifty percent of the
stock options vest and become exercisable after the first year, and the
remaining 50 percent vest after the second year. All stock options expire on the
tenth anniversary of the date of grant. The exercise price for each grant is the
closing sale price of Common Stock on the date of grant. The performance periods
for performance shares end on December 31 of the year following the date of
grant. Dividend equivalents in the form of additional performance shares accrue
during the performance period and are paid only to the extent the underlying
grant is earned. The performance goal of each performance period is based on
Total Shareholder Return for ALLETE in comparison to Total Shareholder Return
for 16 diversified electric utilities. Any awards earned are paid out in Common
Stock. No performance period ended in 2002 and therefore, no awards were earned.

The Board authorized Mr. Smith, as lead director, to receive the
following additional compensation in 2002: $12,667 retainer fee; 867 shares of
Common Stock under the Director Stock Plan; 1,875 stock options; and performance
shares valued at $6,251 under the Director Long-Term Stock Incentive Plan. The
Board authorized additional payments of $5,000 to Audit Committee members Mr.
Bussmann, Ms. Hood, Mr. Johnson and Mr. Mayer, and $7,500 to Audit Committee
Chair Mr. Stender in recognition of additional responsibilities related to the
implementation of new mandates under the federal securities laws.

COMPENSATION OF EXECUTIVE OFFICERS

The following information describes compensation paid in the years 2000
through 2002 for ALLETE's named executive officers.

SUMMARY COMPENSATION TABLE
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Annual Compensation Long-Term Compensation
----------------------- -------------------------------------
Awards Payouts
------------------------- --------
Name Restricted Securities All
and Stock Underlying LTIP Other
Principal Salary Bonus Awards Options Payouts Comp.
Position Year ($) ($) ($) (#) ($) ($)
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DAVID G. GARTZKE 2002 515,385 0 0 89,667 99,388 74,195
Chairman, President and CEO 2001 319,866 489,590 493,800 16,883 139,394 42,139
2000 239,927 225,523 0 24,928 11,764 35,403

JAMES P. HALLETT 2002 420,692 153,344 0 42,500 117,912 47,516
Executive Vice President; 2001 361,885 890,565 0 19,350 195,531 34,664
President and CEO of 2000 288,446 319,899 0 29,520 213,396 38,697
ALLETE Automotive Services

ROBERT D. EDWARDS 2002 332,154 30,724 0 57,869 84,376 61,585
Executive Vice President; 2001 311,558 208,432 0 19,350 144,887 50,995
CEO of Minnesota Power 2000 291,193 204,902 0 30,941 30,580 46,307

DONNIE R. CRANDELL 2002 278,077 0 0 28,125 104,630 46,575
Executive Vice President; 2001 263,135 236,318 0 26,240 157,723 39,159
President of ALLETE
Water Services 2000 248,192 247,311 0 26,240 20,898 30,698

DONALD J. SHIPPAR 2002 231,041 25,132 0 8,371 52,961 29,506
President and COO 2001 194,654 104,654 0 6,136 88,524 21,336
of Minnesota Power 2000 186,373 87,897 0 9,840 17,319 18,588
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Amounts shown include compensation earned by the named executive officers, as well as amounts earned but deferred
at the election of those officers. The "Bonus" column is comprised of amounts earned pursuant to Results Sharing
and the Executive Annual Incentive Plan. For bonuses paid in Common Stock, the market value of the stock at
the time of payment is included.
Included in this amount is $250,000 paid as a bonus in connection with his election to the office of President.
Included in the amount shown for Mr. Hallett is an annual retention bonus of $102,550 paid in a combination of
Common Stock and cash.
The amount shown represents the value of 20,000 deferred share units of Common Stock granted on December 18,
2001. On December 31, 2002, 10,000 shares valued at $226,800 remained deferred under the terms of the grant. Mr.
Gartzke receives dividend equivalents on these deferred share units.
Includes a supplemental payment based upon significantly exceeding multi-year financial performance
targets established in 1996.
The amounts shown for 2002 include the following ALLETE annual contributions for
the named executive officers:

Contribution to the Contribution to the Above-Market Interest
Retirement Savings and Supplemental on Compensation
Stock Ownership Plan* Executive Deferred Under the
Name and the Flexible Benefit Plan Retirement Plan Executive Incentive Plan**
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David G. Gartzke $19,800 $47,243 $7,152
James P. Hallett 2,000 45,516 0
Robert D. Edwards 19,800 31,143 10,642
Donnie R. Crandell 19,800 26,775 0
Donald J. Shippar 17,958 9,938 1,610
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* In 2002 ALLETE consolidated its supplemental retirement and employee stock ownership plans into a
single Retirement Savings and Stock Ownership Plan, which combines the features of a 401(k) plan and
an employee stock ownership plan.
** ALLETE made investments in corporate-owned life insurance which will recover the cost of this above-
market benefit, if actuarial factors and other assumptions are realized. The policy premiums are fully
paid and ALLETE has discontinued this investment program.

OPTION GRANTS IN LAST FISCAL YEAR
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Individual Grants Grant Date Value
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Number of % of Total
Securities Options Granted Exercise or Grant Date
Underlying to Employees in Base Price Expiration Present Value
Name Options Granted Fiscal Year ($/Sh) Date ($)
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DAVID G. GARTZKE
New Options 77,595 9.8% 25.68 Jan. 2, 2012 521,431
Replacement Options 9,655 1.2% 27.95 Jan. 3, 2010 64,881
Replacement Options 2,417 0.3% 27.95 Jan. 2, 2006 16,242

JAMES P. HALLETT
New Options 42,500 5.4% 25.68 Jan. 2, 2012 285,596

ROBERT D. EDWARDS
New Options 33,646 4.2% 25.68 Jan. 2, 2012 226,098
Replacement Options 13,667 1.7% 30.85 Jan. 3, 2010 91,841
Replacement Options 5,388 0.7% 30.85 Jan. 2, 2007 36,207
Replacement Options 5,168 0.7% 30.85 Jan. 2, 2006 34,728

DONNIE R. CRANDELL
New Options 28,125 3.5% 25.68 Jan. 2, 2012 188,997

DONALD J. SHIPPAR
New Options 8,371 1.1% 25.68 Jan. 2, 2012 56,252
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New options vest 50 percent on January 2, 2003 and 50 percent on January 2, 2004. Options granted to each of the
executives listed in this table are subject to a change-in-control acceleration provision.
Replacement options (also known as ownership retention options or reload options) were granted when the executive
used his shares of Common Stock to fund the exercise price of stock options. One replacement option was granted to
replace each share that was delivered by the executive as payment for the purchase price of shares being acquired
through the exercise of a stock option. Replacement options become exercisable twelve months after their grant date
and terminate on the expiration date of the option that they replaced. The exercise price of replacement options
is equal to the closing price of Common Stock on the grant date of the replacement options. Effective January 21,
2003 the replacement option feature was removed from all outstanding stock option grants and eliminated on a going
forward basis.
The grant date dollar value of options is based on ALLETE's binomial ratio (as of January 2, 2002) of .262. The
binomial method is a complicated mathematical formula premised on immediate exercisability and transferability of
the options, which are not features of ALLETE's options granted to executive officers and other employees. The
values shown are theoretical and do not necessarily reflect the actual values the recipients may eventually
realize. Any actual value to the officer or other employee will depend on the extent to which the market value of
Common Stock at a future date exceeds the exercise price. In addition to the option exercise price, the following
assumptions for modeling were used to calculate the values shown for the options granted in 2002: (i) each option
remains outstanding for a period of seven years; (ii) expected dividend yield is 4.17 percent (based on the most
recent quarterly dividend); (iii) expected stock price volatility is .283 (based on 504 trading days previous to
January 2, 2002); and (iv) the risk-free rate of return is 5.16 percent (based on Treasury yields). The grant date
dollar value of the replacement options is based on an ALLETE binomial ratio determined using assumptions that are
materially similar to those applicable to the new options.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
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Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
Shares Acquired Value Realized ---------------------------- -----------------------------
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------

David G. Gartzke 21,327 258,671 54,363 98,088 135,704 0

James P. Hallett 0 0 57,919 52,175 122,106 0

Robert D. Edwards 49,232 771,490 50,490 67,544 61,221 0

Donnie R. Crandell 0 0 51,721 36,404 108,905 0

Donald J. Shippar 0 0 21,138 11,439 59,123 0
------------------------------------------------------------------------------------------------------------------------

LONG-TERM INCENTIVE PLANS - AWARDS IN THE LAST FISCAL YEAR

--------------------------------------------------------------------------------------------------
Number of Performance Estimated Future Payouts Under
Shares, Units or Other Non-Stock Price-Based Plans
or Other Period Until -------------------------------
Rights Maturation or Threshold Target Maximum
Name (#) Payout (#) (#) (#)
--------------------------------------------------------------------------------------------------

David G. Gartzke 17,069 1/02 - 12/03 8,535 17,069 34,138

James P. Hallett 9,533 1/02 - 12/03 4,767 9,533 19,066

Robert D. Edwards 7,547 1/02 - 12/03 3,774 7,547 15,094

Donnie R. Crandell 6,308 1/02 - 12/03 3,154 6,308 12,616

Donald J. Shippar 4,381 1/02 - 12/03 2,191 4,381 8,762
--------------------------------------------------------------------------------------------------

The table directly above reflects the number of shares of Common Stock
that can be earned pursuant to the Executive Long-Term Incentive Compensation
Plan for the 2002-2003 performance period if the Total Shareholder Return of the
Company meets goals established by the Executive Compensation Committee. These
goals are based on the Company's ranking against a peer group of 16 diversified
electric utilities. A threshold performance share award will be earned if the
Company's Total Shareholder Return ranks at least 11th, a target award will be
earned if the Company ranks 7th, and a maximum award will be earned if the
Company ranks 3rd. For this comparison the Total Shareholder Return ranking will
be computed over the two-year period from January 1, 2002 through December 31,
2003. Dividend equivalents accrue during the performance period and are paid in
shares only to the extent performance goals are achieved. If earned, 50 percent
of the performance shares will be paid in Common Stock after the end of the
performance period; the remaining 50 percent will be paid in Common Stock on the
second anniversary of the end of the performance period. Payment is accelerated
upon a change in control of the Company at 200 percent of the target number of
performance shares granted as increased by dividend equivalents for the
performance period.

RETIREMENT PLANS

The following table sets forth examples of the estimated annual
retirement benefits that would be payable to participants in ALLETE's Retirement
Plan and Supplemental Executive Retirement Plan after various periods of
service, assuming no changes to the plans and retirement at the normal
retirement age of 65.

PENSION PLAN
Years of Service
-------------------------------------------------------------------------------------------------------
Remuneration 15 20 25 30 35
-------------------------------------------------------------------------------------------------------

$100,000 $12,000 $16,000 $30,600 $35,600 $40,600
125,000 15,000 20,000 38,250 44,500 50,750
150,000 18,000 24,000 45,900 53,400 60,900
175,000 21,000 28,000 53,550 62,300 71,050
200,000 24,000 32,000 61,200 71,200 81,200
225,000 27,000 36,000 68,850 80,100 91,350
250,000 30,000 40,000 76,500 89,000 101,500
300,000 36,000 48,000 91,800 106,800 121,800
400,000 48,000 64,000 122,400 142,400 162,400
450,000 54,000 72,000 137,700 160,200 182,700
500,000 60,000 80,000 153,000 178,000 203,000
600,000 72,000 96,000 183,600 213,600 243,600
700,000 84,000 112,000 214,200 249,200 284,200
800,000 96,000 128,000 244,800 284,800 324,800
900,000 108,000 144,000 275,400 320,400 365,400
1,000,000 120,000 160,000 306,000 356,000 406,000
-------------------------------------------------------------------------------------------------------

Represents the highest annualized average compensation (salary and bonus) received for 48
consecutive months during the employee's last 15 years of service with ALLETE. For determination
of the pension benefit, the 48-month period for highest average salary may be different from the
48-month period of highest aggregate bonus compensation.

Retirement benefit amounts shown are in the form of a straight-life
annuity to the employee and are based on amounts listed in the Summary
Compensation Table under the headings "Salary" and "Bonus." Retirement benefit
amounts shown are not subject to any deduction for Social Security or other
offset amounts. The Retirement Plan provides that the benefit amount at
retirement is subject to adjustment in future years to reflect cost of living
increases to a maximum adjustment of 3 percent per year. As of December 31,
2002 the executive officers named in the Summary Compensation Table had the
following years of credited service under the plans:

David G. Gartzke 28 years Donnie R. Crandell 22 years
James P. Hallett 8 years Donald J. Shippar 26 years
Robert D. Edwards 27 years

If any of Mr. Gartzke, Mr. Hallett, Mr. Edwards or Mr. Crandell remains
employed as a senior executive with ALLETE until age 62, a defined benefit
retirement plan supplements amounts paid under other ALLETE retirement plans, so
that the executive's total retirement pay is no less than 51 percent of the
executive's final pay if retirement is at age 62 and no less than 60 percent of
the executive's final pay if retirement is at age 65. This benefit is reduced by
2.3 percent of pay for each year under 22 years of service with ALLETE if the
executive retires at age 62 and by 3 percent of pay for each of the three years
between ages 62 and 65.

With certain exceptions, the Internal Revenue Code of 1986, as amended,
(Code) restricts the aggregate amount of annual pension which may be paid to an
employee under ALLETE's Retirement Plan to $160,000 for 2002. This amount is
subject to adjustment in future years to reflect cost of living increases.
ALLETE's Supplemental Executive Retirement Plan provides for supplemental
payments by ALLETE to eligible executives (including the executive officers
named in the Summary Compensation Table) in amounts sufficient to maintain total
retirement benefits upon retirement at a level which would have been provided by
the Retirement Plan if benefits were not restricted by the Code.

REPORT OF BOARD'S EXECUTIVE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

Described below are the compensation policies of the Executive
Compensation Committee of the Board of Directors (Committee) effective for 2002
with respect to the executive officers of ALLETE. Composed entirely of
independent outside directors, the Committee is responsible for recommending to
the Board policies which govern the executive compensation program of ALLETE and
for administering those policies. The Committee has retained the services of
Mercer Human Resource Consulting LLC (Mercer), a benefits and compensation
consulting firm, to assist the Committee in connection with the performance of
such responsibilities. Mercer has served in this capacity since 1995.

The role of the executive compensation program is to help ALLETE
achieve its corporate goals by motivating performance, rewarding positive
results and enhancing Total Shareholder Return. Recognizing that the potential
impact an individual employee has on the attainment of corporate goals tends to
increase at higher levels of responsibility within ALLETE, the executive
compensation program provides greater variability in compensating individuals
based on results achieved as their responsibilities within ALLETE increase. In
other words, individuals with the greatest potential impact on achieving the
stated goals have the greatest amount to gain when goals are achieved and the
greatest amount at risk when goals are not achieved.

The program recognizes that, in order to attract and retain exceptional
executive talent needed to lead and grow ALLETE's businesses, compensation must
be competitive in the national market. To determine market levels of
compensation for executive officers in 2002, the Committee relied upon
comparative information from general industrial companies in tandem with
available specific industry data (i.e., electric utility, automotive, finance,
water utility, etc.) which was provided and reviewed by Mercer. All data were
analyzed to determine median compensation levels for comparable positions in
comparably sized companies, as measured by revenue.

Internal Revenue Code Section 162(m) generally disallows a tax
deduction to public companies for compensation over $1 million paid for any
fiscal year to each of the corporation's CEO and four other most highly
compensated executive officers as of the end of any fiscal year. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The stock options and performance shares granted
to the executive officers under the Executive Long-Term Incentive Compensation
Plan are intended to qualify as performance-based compensation within the
meaning of Code Section 162(m) and should therefore be fully deductible for
federal income tax purposes. The Committee generally intends to structure
executive compensation plans so that the Company may deduct all executive
compensation, but reserves the ability to do otherwise if it is determined in
the best interests of the Company and its shareholders.

As described below, executive officers of ALLETE receive a compensation
package which consists of three basic elements: base salary, performance-based
compensation and supplemental executive benefits. The CEO's compensation is
discussed separately.

BASE SALARY

Base salaries are set at a level so that, if the target level of
performance is achieved under the performance-based plans as described below,
executive officers' total compensation, including amounts paid under each of the
performance-based compensation plans, will be near the midpoint of market
compensation as described above.

PERFORMANCE-BASED COMPENSATION

The performance-based compensation plans of ALLETE are intended by the
Committee to reward executives for achieving financial and non-financial goals
which the Committee determines will be required to achieve ALLETE's strategic
and budgeted goals.

Performance goals under performance-based plans are established in
advance by the Committee and the Board of Directors. Target performance levels
under the performance-based plans are achieved if the business unit meets its
budget and if ALLETE achieves a Total Shareholder Return ranking of 7th compared
to a peer group of 16 diversified utilities. Total Shareholder Return is defined
as stock price appreciation plus dividends reinvested on the ex-dividend date
throughout the relevant performance period, divided by the fair market value of
a share at the beginning of the performance period. With target performance, it
is the Committee's intent that executive compensation (including the value of
stock options granted) will be near the midpoint of the relevant market. If no
performance awards are earned and no value is attributed to the stock options
granted, compensation of ALLETE's executive officers would be significantly
below the midpoint market compensation level, while performance at increments
above the target level will result in total compensation above the midpoint of
the market.

ALLETE's performance-based compensation plans include:

- RESULTS SHARING. The Results Sharing award opportunities for 2002 were
based on earnings per share and business unit operating income. Target
financial performance will result in an award of 5 percent of base
salary, assuming safety and environmental protection goals established
by the Committee are also accomplished. No results sharing awards were
paid to the executive officers of the Company for 2002.

- EXECUTIVE ANNUAL INCENTIVE PLAN. The Executive Annual Incentive Plan
is intended to focus executive attention on meeting and exceeding
annual financial and non-financial business unit goals established by
the Committee. For 2002 financial goals were business unit
contributions to net income, operating free cash flow and earnings per
share. These financial performance measures were chosen by the
Committee because of their positive correlation over time with the
Total Shareholder Return achieved by ALLETE for its shareholders.
Target level performance is earned if budgeted financial results are
achieved. The results shown on the Summary Compensation Table reflect
financial operating performance by business units in 2002 that were
below budget.

- LONG-TERM INCENTIVE PLAN (LTIP). Under the Executive Long-Term
Incentive Compensation Plan, the executive officers of ALLETE, other
than the CEO, have been awarded stock options (which are granted
annually) and performance shares (which are granted in even-numbered
years) having in the aggregate target award values ranging from 40
percent to 100 percent of their annual base salaries. The value has
been allocated 70 percent to stock options and 30 percent to
performance shares. The stock options have value only if the Common
Stock price appreciates above the price on the date of grant. The
performance shares granted for the two-year performance period ending
December 31, 2003 will have value if the Total Shareholder Return of
ALLETE over the two-year period ranks at least 11th in a peer group of
16 diversified electric utilities adopted by the Committee as
appropriate comparators. Dividend equivalents accrue on performance
shares during the performance period and are paid in Common Stock only
to the extent performance goals are achieved. The maximum payout is 200
percent of the target award. If earned, the performance shares will be
paid in Common Stock with 50 percent of the award paid after the end of
the performance period and the remaining 50 percent on the first
anniversary thereof. The LTIP payout for 2002 shown in the Summary
Compensation Table includes a payment of the second 50 percent of the
award earned for the performance period ending December 31, 2001, the
first 50 percent of which was paid and reported in 2001.

The Committee has determined that these awards are consistent with its
philosophy of aligning executive officers' interests with those of shareholders
and to the performance of ALLETE.

SUPPLEMENTAL EXECUTIVE BENEFITS

ALLETE has established a Supplemental Executive Retirement Plan (SERP)
to compensate certain employees, including the executive officers, equitably by
replacing benefits not provided by ALLETE's Flexible Benefit Plan and the
Retirement Savings and Stock Ownership Plan due to government-imposed limits and
to provide retirement benefits which are competitive with those offered by other
businesses with which ALLETE competes for executive talent. The SERP also
provides employees whose salaries exceed the salary limitations for
tax-qualified plans imposed by the Code with additional benefits such that they
receive in aggregate the benefits they would have been entitled to receive had
such limitations not been imposed. Effective as of January 21, 2002 the SERP
also provides certain executive employees with a 40 percent supplemental tax
benefit in the event that a change in control of the Company results in the
termination of the covered executive's employment and an immediate distribution
in full of the covered executives' SERP account and/or Executive Investment Plan
deferral account. The supplemental tax benefit applies only if the covered
executive employee is not eligible for early retirement at the time of the
change-in-control event.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Committee has endeavored to provide Mr. Gartzke with a compensation
package that is at the 50th percentile of compensation paid by comparably-sized
general industrial companies with revenue comparable to the Company. The
Committee has designed Mr. Gartzke's compensation package to provide substantial
incentive to achieve and exceed the Board's financial performance goals for the
Company and Total Shareholder Return goals for the Company's shareholders.

In June 2002 the Board of Directors increased Mr. Gartzke's annual base
salary 15.8 percent to move his base salary toward the median of salaries of
chief executive officers of comparably-sized companies. Mr. Gartzke did not earn
any awards under the Company's Results Sharing Plan nor the Executive Annual
Incentive Plan in 2002 because financial goals under the plans were not met.

Mr. Gartzke's compensation also contains elements which motivate him to
focus on the longer-term performance of the Company. Under the Executive
Long-Term Incentive Compensation Plan, Mr. Gartzke was awarded annual target
opportunities with a value equal to 150 percent of his base salary. This value
has been allocated 70 percent to stock options (which are granted annually) and
30 percent to performance shares (which are granted in even-numbered years). The
stock options and performance shares have the same characteristics as those
issued to other executive officers as described above. The LTIP payout for 2002
shown in the Summary Compensation Table includes a payment of the second 50
percent of the award earned for the performance period ending December 31, 2001,
the first 50 percent of which was paid and reported in 2001.

March 25, 2003

Executive Compensation Committee

Donald C. Wegmiller, Chairman
Kathleen A. Brekken
Dennis E. Evans
Nick Smith

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth the Company securities available for
issuance under the Company's equity compensation plans as of December 31, 2002.

EQUITY COMPENSATION PLAN INFORMATION
--------------------------------------------------------------------------------------------------------------

Number of Securities Number of Securities
to be Issued Upon Weighted-Average Remaining Available
Exercise of Exercise Price of for Future Issuance
Outstanding Options, Outstanding Options, Under Equity
Plan Category Warrants and Rights Warrants and Rights Compensation Plans
--------------------------------------------------------------------------------------------------------------

Equity Compensation 2,292,258 $22.48 5,624,409
Plans Approved by
Security Holders

Equity Compensation 0 N/A 0
Plans Not Approved
by Security Holders
--------------------------------------------------------------------------------------------------------------
Total 2,292,258 $22.48 5,624,409
--------------------------------------------------------------------------------------------------------------

Excludes the number of securities to be issued upon exercise of outstanding options, warrants and rights.
The amount shown includes: (i) 5,053,228 shares available for issuance under the Executive Long-Term
Incentive Compensation Plan (LTIP) in the form of options, rights, restricted stock, performance units
and shares, or other grants as approved by the Executive Compensation Committee; (ii) 162,672 shares are
available for issuance under the Director Long-Term Stock Incentive Plan in the form of options and
performance shares; (iii) 370,366 shares available for issuance under the Director Stock Plan as
payment for a portion of the annual retainer payable to non-employee directors; and (iv) 38,143 shares
available for issuance under the ALLETE and Affiliated Companies Employee Stock Purchase Plan.
Shares available for issuance under the LTIP may be increased by shares purchased on the open market,
tendered to exercise options or withheld to satisfy tax withholding requirements in connection with
LTIP awards.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors consists of four members
who are independent, non-employee directors, as required by applicable listing
standards of the New York Stock Exchange. The Committee assists the Board's
oversight of the integrity of ALLETE's financial reports compliance with legal
and regulatory requirements, the qualifications and independence of the
independent auditors, the audit process and internal controls. The Committee
reviews and recommends to the Board of Directors that the audited financial
statements be included in ALLETE's Annual Report on Form 10-K.

The Audit Committee has reviewed the relevant requirements of the
Sarbanes-Oxley Act of 2002, the proposed rules of the Securities and Exchange
Commission, and the proposed new listing standards of the New York Stock
Exchange regarding audit committee procedures and responsibilities. Although the
Audit Committee's existing procedures and responsibilities generally complied
with the requirements of these rules and standards, the Board of Directors has
adopted amendments to the Committee's charter to voluntarily implement certain
of the rules and to make explicit its adherence to others. A copy of the
Committee's amended charter is attached as an Appendix to this Proxy Statement.

During 2002 the Committee met and held separate discussions with
members of ALLETE's management, and the Company's independent auditor,
PricewaterhouseCoopers, regarding certain audit activities and the plans for and
results of selected internal audits. The Committee reviewed the quarterly
financial statements. It reviewed the adequacy of the systems of internal
controls, and the Company's compliance with laws and regulations. It also
reviewed the Company's process for communicating its code of business conduct
and ethics. The Committee approved the appointment of PricewaterhouseCoopers as
the Company's independent auditor for the year 2003, subject to shareholder
ratification. The Company's independent auditor provided to the Committee the
written disclosure required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent auditor that firm's independence.

The Audit Committee has: (i) reviewed and discussed ALLETE's audited
financial statements for the year ending December 31, 2002 with ALLETE's
management and with ALLETE's independent auditors; (ii) met with management to
discuss all financial statements prior to their issuance and to discuss
significant accounting issues; and (iii) discussed with ALLETE's independent
auditors the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards) which include, among other items, matters
related to the conduct of the audit of ALLETE's financial statements. The
Committee has also discussed with the Chief Executive Officer and Chief
Financial Officer the certification process required by the Sarbanes-Oxley Act
of 2002. Management represented to the Committee that the Company's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles. The Committee discussed with the independent auditor
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees) as currently in effect. Based on the
above-mentioned review and discussions, the Committee recommended to the Board
of Directors that the audited financial statements be included in ALLETE's
Annual Report on Form 10-K for the fiscal year ended December 31, 2002, for
filing with the Securities and Exchange Commission.

Management has advised the Audit Committee that PricewaterhouseCoopers'
fees for the year ended December 31, 2002 were as follows:

AUDIT FEES: The aggregate fees billed for professional
services rendered for the audit of the Company's annual
financial statements for the year ended December 31, 2002 and
the reviews of the financial statements included in ALLETE's
quarterly reports on Form 10-Q for 2002 were $1.1 million.

TAX CONSULTING FEES: The aggregate fees billed for
professional services rendered for tax consulting to the
Company were $1.0 million.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
No fees were billed for professional services rendered
for financial information systems design and implementation.

ALL OTHER FEES: The aggregate fees billed for all other
professional services rendered were $0.2 million.

We have considered and determined that the provision of the non-audit services
noted above is compatible with maintaining PricewaterhouseCoopers' independence.

March 25, 2003

Audit Committee

Bruce W. Stender, Chair
Wynn V. Bussman
Peter J. Johnson
George L. Mayer

ALLETE COMMON STOCK PERFORMANCE

The following graph compares ALLETE's cumulative Total Shareholder
Return on its Common Stock with the cumulative return of the S&P 500 Index, the
Philadelphia Stock Exchange Utility Index (Philadelphia Utility Index) and the
S&P Utilities Index - Electric. The S&P 500 Index is a capitalization-weighted
index of 500 stocks designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. Because this composite index has a broad industry base,
its performance may not closely track that of a composite index comprised solely
of electric utilities. In 2002 ALLETE selected the Philadelphia Utility Index as
a comparative to replace the S&P Utilities Index - Electric which was
discontinued in 2001. The Philadelphia Utility Index is a capitalization-
weighted index of 20 utility companies involved in the production of electrical
energy, while the S&P Utilities Index - Electric was a capitalization-weighted
index of 27 stocks designed to measure the performance of the electric power
utility company sector of the S&P 500 Index. The calculations assume a $100
investment on December 31, 1997 and reinvestment of dividends on the ex-dividend
date.

[GRAPHIC OMITTED - PERFORMANCE GRAPH]

TOTAL SHAREHOLDER RETURN FOR THE FIVE YEARS ENDING DECEMBER 31, 2002

1997 1998 1999 2000 2001 2002
----------------------------------------------------

ALLETE $100 $106 $86 $134 $142 $133
Philadelphia Utility Index $100 $118 $97 $146 $127 $104
S&P 500 Index $100 $129 $156 $141 $125 $97
S&P Utilities Index - Electric $100 $115 $93 $143 $131 N/A

--------------------------------------------------------------------------------
ITEM NO. 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------

The Audit Committee of the Board of Directors of ALLETE recommends
shareholder ratification of the appointment of PricewaterhouseCoopers as
independent auditors for ALLETE for the year 2003. PricewaterhouseCoopers has
acted in this capacity since October 1963.

A representative of PricewaterhouseCoopers will be present at the
Annual Meeting of Shareholders, will have an opportunity to make a statement if
he or she so desires and will be available to respond to appropriate questions.

In connection with the 2002 audit, PricewaterhouseCoopers reviewed
ALLETE's annual report, examined the related financial statements, and reviewed
interim financial statements and certain filings of ALLETE with the Federal
Energy Regulatory Commission and the Securities and Exchange Commission.

The Board of Directors recommends a vote "FOR" ratifying the
appointment of PricewaterhouseCoopers as ALLETE's independent auditors for 2003.

--------------------------------------------------------------------------------
ITEM NO. 3 - APPROVAL OF THE RESERVATION OF ADDITIONAL SHARES UNDER THE
ALLETE AND AFFILIATED COMPANIES EMPLOYEE STOCK PURCHASE PLAN
--------------------------------------------------------------------------------

Shareholders are asked to approve an amendment to the ALLETE and
Affiliated Companies Employee Stock Purchase Plan (ESPP), to increase the number
of shares of ALLETE Common Stock authorized for issuance thereunder by 500,000
shares. On January 21, 2003 the Company's Board of Directors unanimously
approved an amendment of the ESPP, thereby providing for this increase in the
number of shares authorized for issuance under the ESPP (subject to shareholder
approval).

Approval of an amended and restated ESPP by the shareholders is not
required by the terms of the ESPP. Management requests such approval, however,
in order to ensure the availability to employees participating in the ESPP of
certain tax benefits discussed below.

The ESPP was established in 1976 and approved at its inception by the
shareholders at the Annual Meeting of Shareholders held on May 11, 1976. The
ESPP was amended and restated effective July 1, 1993, and approved again by the
shareholders at the Annual Meeting of Shareholders held on May 10, 1994. The
Company amended and restated the ESPP effective November 20, 1996, and again
effective December 21, 2000, to reflect minor changes in administration.

The ESPP is a broad-based plan that provides eligible employees of the
Company and certain of its subsidiaries with an opportunity to purchase shares
of Common Stock at a 5 percent discount through payroll deductions, optional
cash payments and dividend reinvestment. By encouraging the purchase of Common
Stock, the ESPP supports a basic principle of the Company's compensation policy
which is to align the financial interests of the employees with the financial
interests of the Company and its shareholders. The ESPP also provides the
Company with a source of capital for which there is no cost of issuance other
than the 5 percent discount from market price discussed below and minor
administrative costs. Management is eligible to purchase shares of Common Stock
through the ESPP at the 5 percent discount on the same basis as other employees.
Future benefits to management under the plan will depend on the individual
election of each manager whether to purchase under the plan and in at what
amounts. Management is subject to the annual contribution limits of the ESPP as
described below.

Currently, the total number of shares of Common Stock that are
authorized for issuance under the ESPP is 300,043. As of March 3, 2003, 17,196
shares remain available for issuance under the ESPP and, as of this same date,
1,796 employees were participating in the ESPP.

SUMMARY OF THE ESPP

The purposes of the ESPP are to encourage employees to become
shareholders in the Company, to stimulate employee interest in the affairs of
the Company, and to afford employees an opportunity to share in the profits and
growth of the Company.

Purchases of Common Stock under the ESPP are made directly from the
Company at a 5 percent discount from the market price at the time the purchases
are made. The purchase price is equal to 95 percent of the closing price of the
Common Stock on the New York Stock Exchange on the applicable investment date
(or the next day on which the New York Stock Exchange is open if it is closed on
the investment date). On each monthly investment date, each participating
employee is deemed to have been granted by the Company and to have
simultaneously exercised an option to purchase shares of Common Stock in an
amount equal to the participant's investment contribution divided by the
purchase price.

The ESPP is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Internal Revenue Code. Under a plan
that so qualifies, neither the grant of an option nor the acquisition of shares
upon exercise of such option will result in taxable income to the employee or a
tax deduction for the Company. Participants generally will be subject to income
tax liability upon a disposition of Common Stock acquired under the ESPP. Such
income tax liability would be based on the difference between the participant's
basis in the Common Stock and the price at which the disposition of the Common
Stock took place. The Company will be entitled to a corporate income tax
deduction in any amount equal to ordinary income realized by participants as a
result of "disqualifying dispositions" of Common Stock. In general, a
disqualifying disposition of Common Stock occurs if a participant disposes of
Common Stock acquired under the ESPP within two years of the date of purchase of
such Common Stock.

There are no fees or expenses to participants in connection with the
purchases of Common Stock under the ESPP. There also are no fees or expenses to
participants upon withdrawal from the ESPP, or upon termination of the ESPP by
the Company, except that a participant who instructs the Company to sell shares
of Common Stock held in his or her ESPP account is charged the commissions,
taxes and other applicable expenses relating to those sales. All other costs of
administration of the ESPP will be paid by the Company.

The ESPP is administered for the Company by a committee known as the
Employee Benefit Plans Committee (Benefits Committee). The Benefits Committee
consists of not less than three members appointed by the Board of Directors with
at least one member of the Benefits Committee being an officer of the Company
responsible for recording and maintaining the Benefits Committee records. The
Board of Directors has the power to remove members of the Benefits Committee
from office.

Employee participation in the ESPP is entirely voluntary. Employees of
the Company and employees of its subsidiaries whose participation in the ESPP is
approved, upon request, by the Company's Board of Directors or by the Benefits
Committee are eligible to participate in the ESPP except: (i) employees who have
been employed less than six months at the time shares would be purchased; (ii)
employees who normally work less than 1,000 hours in a calendar year; (iii)
employees who normally work less than five months in any calendar year; (iv)
employees who immediately after a purchase of shares under the ESPP would own
stock possessing 5 percent or more of the total combined voting power or value
of all classes of stock in the Company; or (v) members of the Board of Directors
who are not officers of the Company. An eligible employee may join the ESPP at
any time.

Eligible employees who participate in the ESPP are able to purchase
Common Stock through reinvested dividends, payroll deduction, optional cash
payments or a combination of all. An eligible employee may select payroll
deductions in after-tax dollars in any amount not less than $5 per payroll
period, nor more than a total of $23,750 per year. Optional cash payments cannot
be less than $10 per payment, nor more than a total of $23,750 per year. The
same amount of money need not be invested each month through optional cash
payments and there is no obligation to make an optional cash payment in any
month. Until the Company is notified of a participant's death or withdrawal from
the ESPP, the ESPP is terminated by the Company, or the participant ceases to be
a regular employee of the Company, all cash dividends paid on shares of Common
Stock in the participant's ESPP account are used to purchase additional
authorized, but unissued shares of Common Stock. In any event, the sum of
payroll deductions, optional cash payments and dividends available for
reinvestment for any participant may not exceed $23,750 per year. Any amount in
excess of $23,750 will be refunded to the participant without interest.

Each participant in the ESPP is allowed to have only one account.
Shares of Common Stock purchased for the account of each participant will be
registered in the name of the Company as "Agent" for the participant.

Each participant will receive a periodic statement of his or her
account and a statement following any transaction affecting his or her ESPP
account. Each participant also will receive copies of the same communications
sent to all holders of Common Stock, including the Company's current quarterly
Investor

Newsletter, the Annual Report to Shareholders, the Notice of Annual
Meeting and Proxy Statement, and Internal Revenue Service information for
reporting dividends paid.

The number of shares to be purchased pursuant to the ESPP depends upon
the amount of the participant's payroll deductions and optional cash payments,
dividends available for reinvestment, the price of the shares of Common Stock,
and the number of shares available for issuance and sale under the ESPP.

Subject to the maximum number of shares of Common Stock available for
issuance and sale under the ESPP, each participant's account will be credited
with that number of shares (including any fraction of a share computed to three
decimal places) equal to the total amount to be invested divided by the per
share purchase price of the Common Stock on the appropriate investment date.

Certificates for shares of Common Stock purchased under the ESPP will
not normally be issued to participants. The number of shares credited to an
account under the ESPP will be shown on each statement of account mailed to the
participant.

Without withdrawing from the ESPP, a participant may request the
issuance of, and the Company will issue, certificates for any number of whole
shares in the participant's ESPP account. Any remaining whole shares and any
fractional share will continue to be credited to the participant's account.
Certificates for fractional shares will not be issued under any circumstances.
Certificates for whole shares, when issued, will be registered in the name of
the account.

Shares of Common Stock credited to the account of a participant under
the ESPP may not be pledged. The right to purchase shares pursuant to the ESPP
is not transferable in any manner.

A participant may withdraw from the ESPP at any time. A participant's
death or withdrawal from the ESPP will stop all investment on an investment
date, if written notification of death or withdrawal is received not later than
five business days prior to such investment date. Any payroll deductions,
optional cash payments, or dividends available for reinvestment for which
investment has been stopped by timely notification of death or withdrawal from
the ESPP will be paid by the Company to the participant or the participant's
estate without interest.

The Company or its designated agent must be notified in writing of a
participant's death or withdrawal from the ESPP. Upon notification of a
participant's death or withdrawal from the ESPP, termination of the ESPP, or a
participant ceasing to be a regular employee of the Company, certificates for
whole shares included in the participant's ESPP account (less any shares of
Common Stock sold by the Company on behalf of the participant) will be issued
and a cash payment will be made for any fraction of a share included in the
participant's account. The cash payment for any fractional share will be based
on the net price received by the Company when such fractional share is sold.
Sales of fractional shares are combined with sales of other such fractional
shares.

For each meeting of shareholders, each participant in the ESPP will
receive a Proxy for voting shares and fractional shares included in his or her
ESPP account. If a properly signed Proxy is returned lacking full instructions
with regard to any item thereon, then all of the participant's shares included
in the participant's ESPP account will be voted with respect to such item in the
same manner as for non-participating shareholders who return proxies and do not
provide instructions, that is, in accordance with the recommendation of the
Board of Directors. If the Proxy is not returned or if it is returned unsigned,
none of the participant's shares will be voted unless the participant votes in
person.

The Board of Directors reserves the right to suspend, modify, amend or
terminate the ESPP at any time, except that the Board of Directors cannot
decrease the purchase price of the shares offered pursuant to the ESPP or make
more restrictive the eligibility requirements for employees wishing to
participate in the ESPP. All participants will receive notice of any suspension,
modification, amendment or termination of the ESPP.

The Company is authorized to take such actions to carry out the ESPP as
may be consistent with the ESPP's terms and conditions. The Company reserves the
right to interpret and regulate the ESPP as it deems desirable or necessary in
connection with the ESPP's operation.

The Board of Directors recommends that the shareholders vote "FOR"
approval of the amendment to the ESPP.

--------------------------------------------------------------------------------
OTHER BUSINESS
--------------------------------------------------------------------------------

The Board of Directors does not know of any other business to be
presented at the meeting. However, if any other matters properly come before the
meeting, it is the intention of the persons named in the accompanying Proxy Card
to vote pursuant to the proxies in accordance with their judgment in such
matters.

All shareholders are asked to promptly return their Proxy in order that
the necessary vote may be present at the meeting. We respectfully request that
you vote your Proxy at your earliest convenience either by signing and returning
the accompanying Proxy Card by mail, or following the enclosed instructions to
vote by phone or the Internet.

By order of the Board of Directors,

Dated March 25, 2003

Philip R. Halverson

Philip R. Halverson
Vice President, General Counsel and Secretary

APPENDIX

ALLETE, INC.
BOARD OF DIRECTORS

AUDIT COMMITTEE CHARTER

PURPOSES AND ROLE OF COMMITTEE

The purposes of the Audit Committee (Committee) of the Board of Directors
(Board) of ALLETE, Inc. (Company) are to: (A) assist the Board's oversight of
(1) the integrity of the Company's financial statements, (2) the Company's
compliance with legal and regulatory requirements, (3) the independent auditor's
qualifications and independence, and (4) the performance of the Company's
internal audit function and independent auditors; and (B) prepare the report
that Securities and Exchange Commission (Commission) rules require to be
included in the Company's annual proxy statement.

The role of the Committee is oversight. Management and the internal audit
department are responsible for maintaining and evaluating appropriate accounting
and financial reporting principles and policies and internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. The independent auditors are responsible for
auditing the financial statements and assessing the Company's internal controls.
Consequently, in carrying out its oversight responsibilities, the Committee is
not providing any certification as to the independent auditors' work or the work
or report of any expert. Each member of the Committee shall be entitled to
reasonably rely on the integrity of people and organizations from whom the
Committee receives information and the accuracy of such information.

COMMITTEE MEMBERSHIP

The Committee shall consist of three or more members of the Board, each of whom
(A) satisfies the requirements for independence pursuant to law and the listing
standards of the New York Stock Exchange (NYSE), and (B) is financially literate
as required by the listing standards of the NYSE. At least one Committee member
shall have accounting or related financial management expertise as required by
the listing standards of the NYSE. Committee members may not serve on audit
committees of more than two other publicly traded companies. Committee members
shall serve at the pleasure of the Board and for such term or
terms as the Board may determine.

COMMITTEE STRUCTURE AND OPERATIONS

The Board shall designate one member of the Committee as its Chair. The
Committee shall meet at least quarterly at a time and place determined by the
Board or the Committee Chair, with further meetings to occur when deemed
necessary or desirable by a majority of the Committee or its Chair. The
Committee will meet periodically in executive session without management
present.

A majority of the Committee members currently holding office constitutes a
quorum for the transaction of business. The Committee shall take action by the
affirmative vote of a majority of the Committee members present at a duly held
meeting. The Committee may meet in person or telephonically, and may act by
unanimous written consent when deemed necessary or desirable by the Committee or
its Chair. The Committee may recommend to the Board procedures to be observed in
executing its responsibilities. The Committee may invite such members of
management to its meetings as it may deem desirable or appropriate.

COMMITTEE DUTIES AND RESPONSIBILITIES

The duties and responsibilities of the Committee are to:

1. Appoint, retain and terminate, and approve fees and terms of retention of
the public accounting firm serving as the Company's independent auditors
(subject to ratification by Company shareholders if deemed appropriate).
The Committee shall be responsible for the oversight of the independent
accounting firm engaged by the Company for the purpose of preparing or
issuing an audit report or related work or performing other audit, review
or attest services, including resolution of disagreements between

management and the independent accounting firm regarding financial
reporting. The Committee shall pre-approve any audit and non-audit services
by the independent auditors as required by applicable law and the rules of
the NYSE. The Committee shall directly implement these responsibilities.

2. Instruct the independent auditors that they are to report directly to the
Committee, and provide that they are ultimately responsible to the
Committee and the Board.

3. Review with the independent auditors the scope of the prospective audit,
the estimated fees therefor and such other matters pertaining to such audit
as the Committee may deem appropriate. Receive copies of the annual
comments from the outside auditors on accounting procedures and systems of
control. Recommend to the Board the acceptance of such audits that are
accompanied by certification.

4. Review and discuss with management and the independent auditor, before
filing with the Commission, the annual audited financial statements and
quarterly financial statements, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

5. Review and discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating agencies.

6. Advise management, the internal audit department and the independent
auditors that they are expected to provide to the Committee a timely
analysis of and opportunity to discuss significant financial reporting
issues and practices, critical accounting policies, major issues regarding
accounting principles and financial statement presentations (including any
significant changes in the Company's selection or application of accounting
principles), and major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control
deficiencies.

7. Direct management and the independent auditors to disclose to the Committee
any significant risks and exposures; discuss policies with respect to risk
assessment and risk management.

8. Review with the independent auditors any audit problems or difficulties and
management's response.

9. Review the action taken by management on the internal auditors' and
independent auditors' recommendations.

10. Review with the senior internal audit executive the annual internal audit
plan and scope of internal audits, including the procedure for assuring
implementation of accepted recommendations made by the independent
auditors. Advise the senior internal audit executive that he or she is
expected to provide the Committee with summaries of any significant
identified control issues and management's response thereto, and inform the
Committee of any significant changes to the internal audit department
charter, staffing or budget.

11. Make or cause to be made, from time to time, such other examinations or
reviews as the Committee may deem advisable with respect to the adequacy of
the systems of internal controls and accounting practices of the Company
and its subsidiaries and with respect to current accounting trends and
developments, and take such action with respect thereto as may be deemed
appropriate.

12. Review the appointment, reassignment, and replacement of the senior
internal audit executive.

13. Set clear hiring policies for employees or former employees of the
independent auditors.

14. On a periodic basis, and without others present, meet separately with the
independent auditors, the senior internal audit executive, the controller,
the general counsel, and other members of management as appropriate.

15. Review with management, the independent auditors and the senior internal
audit executive the adequacy of and any significant changes in the internal
controls, the accounting policies procedures or practices of the Company
and its subsidiaries, and compliance with Corporate policies, directives
and applicable laws.

16. Ensure that the independent auditor submits on a periodic basis to the
Committee a formal written statement delineating all relationships between
the auditor and the Company that may have a bearing on

the auditor's independence, engage in an active dialogue with the
independent auditor with respect to any disclosed relationships or services
that may impact the objectivity and independence of the independent
auditor, and recommend to the Board any action deemed appropriate in
response to the independent auditor's report to satisfy the Board and the
Committee of the independent auditor's independence.

17. Obtain and review, at least annually, a report by the independent auditor
describing: the independent auditor's internal quality-control procedures;
any material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the firm, and any
steps taken to deal with any such issues; and (to assess the auditor's
independence) all relationships between the independent auditor and the
Company.

18. Establish procedures for the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters; and the confidential, anonymous
submission by employees of the Company and its affiliates of concerns
regarding questionable accounting, internal control or auditing matters.

19. Review the status of compliance with laws, regulations, and internal
procedures, contingent liabilities and risks that may be material to the
Company, the scope and status of systems designed to assure Company
compliance with laws, regulations and internal procedures, through
receiving reports from management, legal counsel and other third parties as
determined by the Committee on such matters, as well as major legislative
and regulatory developments which could materially impact the Company's
contingent liabilities and risks.

20. Prepare a report for inclusion in the annual proxy statement that specifies
the Directors who sit on the Committee, describes the Committee's
responsibilities as outlined in this Charter, and discusses how these
responsibilities were discharged during the year.

21. Conduct or authorize investigations into any matters within the Committee's
scope of responsibility, consistent with procedures to be adopted by the
Committee.

22. Review and assess the adequacy of the Committee charter annually.

COMMITTEE REPORTS

1. Report to the Board on a regular basis on the activities of the Committee
and make such recommendations with respect to the above matters as the
Committee may deem necessary or appropriate. This report shall include a
review of any issues that arise with respect to the quality or integrity of
the Company's financial statements, the Company's compliance with legal or
regulatory requirements, the performance and independence of the Company's
independent auditors, or the performance of the internal audit function.

2. Transmit to the Board notices of Committee meetings, agendas, and meeting
minutes.

3. At the time of or in advance of the Annual Directors Meeting held in May of
each year, present an annual performance evaluation of the Committee, which
shall assess the performance of the Committee in relation to its duties and
responsibilities under this charter, recommend any amendments to this
charter, and set forth the goals and objectives of the Committee for the
ensuing twelve months.

4. Report on matters required by the rules of the Commission to be disclosed
in the Company's annual proxy statement.

DELEGATION OF AUTHORITY

The Committee may, in its discretion, delegate certain of its duties and
responsibilities to a subcommittee of the Committee.

The Committee may delegate to one or more of its members the authority to grant
pre-approvals of auditing and non-audit services to be performed by the
Company's independent auditor subject to such guidelines as the Committee may
determine. Any such decisions to pre-approve shall be presented to the full
Committee at its next following regular meeting.

RESOURCES AND AUTHORITY OF THE COMMITTEE

The Committee shall have the resources and appropriate funding, as determined by
the Committee, to discharge its duties and responsibilities. The Committee shall
have the authority to retain and discharge, and approve fees and other terms and
conditions for retention of independent experts in accounting and auditing,
legal counsel and other experts or advisors. The Committee may direct any
officer or employee of the Company or request any employee of the Company's
independent auditors or outside legal counsel to attend a Committee meeting or
meet with any Committee members.

"Printed with soy based inks on recycled paper containing at
least 10 percent fibers from paper recycled by consumers."

[RECYCLE LOGO] [LOGO PRINTED WITH SOY INK]

[ALLETE LOGO]

ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 13, 2003
10:30 A.M.
DULUTH ENTERTAINMENT
CONVENTION CENTER
350 HARBOR DRIVE
DULUTH, MN

[ALLETE LOGO] ALLETE, INC.
30 WEST SUPERIOR STREET
DULUTH, MINNESOTA 55802-2093 PROXY
--------------------------------------------------------------------------------

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 13, 2003.

David G. Gartzke and Philip R. Halverson or either of them, with power of
substitution, are hereby appointed Proxies of the undersigned to vote all shares
of ALLETE, Inc. stock owned by the undersigned at the Annual Meeting of
Shareholders to be held in the auditorium at the Duluth Entertainment Convention
Center, 350 Harbor Drive, Duluth, Minnesota, at 10:30 a.m. on Tuesday, May 13,
2003, or any adjournments thereof, with respect to the election of Directors,
ratification of the appointment of independent auditors, the reservation of
additional shares of ALLETE Common Stock to be issued under the Employee Stock
Purchase Plan and any other matters as may properly come before the meeting.

THIS PROXY CONFERS AUTHORITY TO VOTE EACH PROPOSAL LISTED ON THE OTHER SIDE
UNLESS OTHERWISE INDICATED. If any other business is transacted at said meeting,
this Proxy shall be voted in accordance with the best judgment of the Proxies.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
This Proxy is solicited on behalf of the Board of Directors of ALLETE, Inc., and
may be revoked prior to its exercise. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD USING THE ENCLOSED ENVELOPE. ALTERNATIVELY, AUTHORIZE THE ABOVE-NAMED
PROXIES TO VOTE THE SHARES REPRESENTED ON THIS PROXY CARD BY PHONE OR THE
INTERNET AS DESCRIBED ON THE OTHER SIDE. Shares cannot be voted unless these
instructions are followed, or other specific arrangements are made to have the
shares represented at the meeting. By responding promptly, you may help save the
costs of additional Proxy solicitations.

SEE REVERSE FOR VOTING INSTRUCTIONS.

THERE ARE THREE WAYS TO VOTE YOUR PROXY ----------
COMPANY #
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO CONTROL #
VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND ----------
RETURNED YOUR PROXY CARD.

VOTE BY PHONE - TOLL FREE - 1-800-240-6326 - QUICK --- EASY --- IMMEDIATE

- Use any touch-tone telephone to vote your Proxy 24 hours a day, 7 days a week,
until 11:00 a.m. (CT) on May 12, 2003.
- You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the Proxy Card) and the last 4-
digits of the U.S. Social Security Number or Tax Identification Number for
this account. If you do not have a U.S. SSN or TIN please enter 4 zeros.
- Follow the simple instructions the voice provides you.

VOTE BY INTERNET - http://www.eproxy.com/ale/ - QUICK --- EASY --- IMMEDIATE

- Use the Internet to vote your Proxy 24 hours a day, 7 days a week, until 12:00
p.m. (CT) on May 12, 2003.
- You will be prompted to enter your 3-digit Company Number, your 7-digit
Control Number (these numbers are located on the Proxy Card) and the last
4-digits of the U.S. Social Security Number or Tax Identification Number for
this account to obtain your records and create an electronic ballot. If you
do not have a U.S. SSN or TIN please leave blank.

VOTE BY MAIL

Mark, sign and date your Proxy card and return it in the postage-paid envelope
we've provided or return it to ALLETE, Inc., c/o Shareowner Services
(servicemark), P.O. Box 64873, St. Paul, MN 55164-0873.

IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD

- PLEASE DETACH HERE -

--------------------------------------------------------------------------------

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.

1. Election of Directors: 01 Bussmann 02 Cunningham 03 Evans 04 Gartzke
05 Johnson 06 Mayer 07 Rajala 08 Smith
09 Stender 10 Wegmiller

/ / Vote FOR all nominees / / Vote WITHHELD from all nominees
(except as marked)

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ----------------------
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE NOMINEE(S)
IN THE BOX PROVIDED TO THE RIGHT.) ----------------------

2. Ratification of the appointment of PricewaterhouseCoopers LLP as independent
auditors.

/ / For / / Against / / Abstain

3. Reservation of an additional 500,000 shares of ALLETE Common Stock for
issuance under the Employee Stock Purchase Plan.

/ / For / / Against / / Abstain

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR ITEMS 1, 2 AND 3.
---

Address Change? Mark Box / / Date
-----------------------
Indicate changes below:
-----------------------------------

-----------------------------------
Signature(s) in Box

Please sign exactly as your name(s)
appears on Proxy. If held in joint
tenancy, all persons must sign.
Trustees, administrators, etc.,
should include title and authority.
Corporations should provide full
name of corporation and title of
authorized officer signing the
Proxy.
--------------------------------------------------------------------------------

YOU'RE INVITED

[ALLETE LOGO] ANNUAL MEETING OF SHAREHOLDERS
2003 May 13th
10:30 AM
At the Duluth Entertainment Convention Center
IN DULUTH, MINNESOTA

Dear Shareholder:

It's my pleasure to invite you to ALLETE's Annual Meeting of Shareholders on
Tuesday, May 13 beginning at 10:30 a.m. at the Duluth Entertainment Convention
Center. Our agenda will include business highlights from 2002 and a discussion
of strategic issues facing ALLETE. Lunch will be served in the DECC's Lake
Superior Ballroom after the meeting.

Please make plans to join us May 13. It will be a great opportunity to learn the
latest information about ALLETE and enjoy the camaraderie of your fellow
shareholders. We look forward to seeing you.

Sincerely,

/s/ David G. Gartzke

David G. Gartzke
Chairman, President
and Chief Executive Officer

REGISTRATION
Registration begins at 9 a.m. inside the entrance to the DECC. Parking is free,
so be sure to tell the gate attendant you're a shareholder.

When you register, you'll receive a ticket to lunch and a ticket for a chance to
win shares of ALLETE stock.

ANNUAL MEETING
The DECC Auditorium doors will open at 9:30 a.m. and the meeting will begin
promptly at 10:30 a.m.

LUNCH
A box lunch will be served following the meeting in the Lake Superior Ballroom
within the DECC.

RESERVATION INSTRUCTIONS
Please complete the card below, detach and mail. If you have questions, call
Shareholder Services toll-free at 1-800-535-3056, or 218-723-3974.

If your plans change after you've sent the reservation card and you can't
attend, please let us know by calling Shareholder Services.

--------------------------------------------------------------------------------
RESERVATION CARD-Complete and mail this postage-paid card as soon as possible.
Please do not enclose with your proxy.
--------------------------------------------------------------------------------

Yes, I will attend the Annual Meeting and the lunch.
-----
Each shareholder may bring one guest. Please PRINT clearly your name and your
guest's name.

Shareholder's Name
--------------------------------------------------------------------------------

Guest's Name
-------------------------------------------------------------------

Shareholder's Name
----------------------------------------------------------------- [ALLETE LOGO]

Guest's Name
-------------------------------------------------------------------

[GRAPHIC OMITTED - Fim Markings]
-----------------
NO POSTAGE
NECESSARY
IF MAILED
IN THE
UNITED STATES
-----------------
[GRAPHIC OMITTED - Solid bars
below indicia]

----------------------------------------
BUSINESS REPLY MAIL
FIRST CLASS Permit No. 74 Duluth, MN
----------------------------------------
POSTAGE WILL BE PAID BY ADDRESSEE

ALLETE
ATTN: BERNADETTE NELSON
30 WEST SUPERIOR STREET
DULUTH, MINNESOTA 55802-9986

[GRAPHIC OMITTED - Bar Code]

April __, 2003

Dear Shareholder:

We have not yet received your vote on issues to come before the Annual
Meeting of ALLETE Shareholders on May 13, 2003. Proxy materials were sent to you
on or about March 25, 2003. Please take time to vote the enclosed copy of your
Proxy using one of the three options available to you:

1. MAIL - Complete the enclosed duplicate Proxy Card and return it in
the self-addressed stamped envelope;

2. TELEPHONE - Call the 800 number listed on the Proxy Card and
follow the instructions; or

3. INTERNET - Log onto the web site listed on the Proxy Card and
follow the instructions.

We again extend to you a cordial invitation to attend ALLETE's Annual
Meeting of Shareholders to be held in the auditorium of the Duluth Entertainment
Convention Center, 350 Harbor Drive, Duluth, Minnesota on Tuesday, May 13, 2003
at 10:30 a.m.

Your prompt response will be appreciated.

Sincerely,

Philip R. Halverson

Enclosures