SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. Total short-term debt outstanding as of December 31, 2012, was $84.5 million ($6.5 million at December 31, 2011) and consisted of long-term debt due within one year and notes payable. As of December 31, 2012, short-term debt increased from December 31, 2011, primarily due to $60.0 million of long-term debt maturing in April 2013.

As of December 31, 2012, we had bank lines of credit aggregating $406.4 million ($256.4 million at December 31, 2011), of which $150.0 million expires in January 2014, and $250.0 million expires in June 2015. These bank lines of credit are available to provide short-term bank loans and liquidity support for ALLETE’s commercial paper program and to issue up to $50.0 million in letters of credit. We had no outstanding draws on our lines of credit as of December 31, 2012 ($1.1 million at December 31, 2011).

On February 1, 2012, ALLETE entered into a $150.0 million credit agreement (Agreement) with JPMorgan Chase Bank, N.A., as administrative agent, and several other lenders that are parties thereto. The Agreement is unsecured and has a maturity date of January 31, 2014, which may be extended for one year, subject to bank approvals. Advances under the Agreement may be used for general corporate purposes, to provide liquidity support for ALLETE’s commercial paper program and to issue up to $10.0 million in letters of credit.

Long-Term Debt. Total long-term debt outstanding as of December 31, 2012, was $933.6 million ($857.9 million at December 31, 2011). The aggregate amount of long-term debt maturing during 2013 is $84.5 million ($94.8 million in 2014; $17.4 million in 2015; $21.7 million in 2016; $51.2 million in 2017; and $748.5 million thereafter). Substantially all of our electric plant is subject to the lien of the mortgage collateralizing outstanding first mortgage bonds. The mortgages contain non-financial covenants customary in utility mortgages, including restrictions on our ability to incur liens, dispose of assets, and merge with other entities.

On July 2, 2012, we issued $160.0 million of the Company’s First Mortgage Bonds (Bonds) in the private placement market in two series as follows:



Issue Date	Maturity Date	Principal Amount	Interest Rate
July 2, 2012	July 15, 2026	$75 Million	3.20%
July 2, 2012	July 15, 2042	$85 Million	4.08%

We have the option to prepay all or a portion of the 3.20 percent Bonds at our discretion at any time prior to January 15, 2026, subject to a make-whole provision, and at any time on or after January 15, 2026, at par, including, in each case, accrued and unpaid interest. We also have the option to prepay all or a portion of the 4.08 percent Bonds at our discretion at any time prior to January 15, 2042, subject to a make-whole provision, and at any time on or after January 15, 2042, at par, including, in each case, accrued and unpaid interest. The Bonds are subject to the additional terms and conditions of our utility mortgage. In July 2012, we used a portion of the proceeds from the sale of the Bonds to redeem $6.0 million of our 6.50 percent Industrial Development Revenue Bonds and to repay $14.0 million in outstanding borrowings on our $150.0 million line of credit. The remaining proceeds were used to fund utility capital expenditures and for general corporate purposes. The Bonds were sold in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to certain institutional accredited investors.

NOTE 10. SHORT-TERM AND LONG-TERM DEBT (Continued)



Long-Term Debt
As of December 31	2012		2011
Millions
First Mortgage Bonds
4.86% Series Due 2013		$60.0		$60.0
6.94% Series Due 2014	18.0		18.0
7.70% Series Due 2016	20.0		20.0
8.17% Series Due 2019	42.0		42.0
5.28% Series Due 2020	35.0		35.0
4.85% Series Due 2021	15.0		15.0
4.95% Pollution Control Series F Due 2022	111.0		111.0
6.02% Series Due 2023	75.0		75.0
4.90% Series Due 2025	30.0		30.0
5.10% Series Due 2025	30.0		30.0
3.20% Series Due 2026	75.0		—
5.99% Series Due 2027	60.0		60.0
5.69% Series Due 2036	50.0		50.0
6.00% Series Due 2040	35.0		35.0
5.82% Series Due 2040	45.0		45.0
4.08% Series Due 2042	85.0		—
SWL&P First Mortgage Bonds 7.25% Series Due 2013	10.0		10.0
Senior Unsecured Notes 5.99% Due 2017	50.0		50.0
Variable Demand Revenue Refunding Bonds Series 1997 A, B, and C Due 2013 – 2020	27.5		28.2
Industrial Development Revenue Bonds 6.5% Due 2025	—		6.0
Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006 Due 2025	27.8		27.8
Unsecured Term Loan Variable Rate Due 2014	75.0		75.0
Other Long-Term Debt, 1.0% – 8.0% Due 2013 – 2037	41.8		40.3
Total Long-Term Debt	1,018.1		863.3
Less: Due Within One Year	84.5		5.4
Net Long-Term Debt		$933.6		$857.9

Financial Covenants. Our long-term debt arrangements contain customary covenants. In addition, our lines of credit and letters of credit supporting certain long-term debt arrangements contain financial covenants. Our compliance with financial covenants is not dependent on debt ratings. The most restrictive covenant requires ALLETE to maintain a ratio of its Indebtedness to Total Capitalization (as the amounts are calculated in accordance with the respective long-term debt arrangements) of less than or equal to 0.65 to 1.00 measured quarterly. As of December 31, 2012, our ratio was approximately 0.46 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from the lender, in which event ALLETE may need to pursue alternative sources of funding. Some of ALLETE’s debt arrangements contain “cross-default” provisions that would result in an event of default if there is a failure under other financing arrangements to meet payment terms or to observe other covenants that would result in an acceleration of payments due. As of December 31, 2012, ALLETE was in compliance with its financial covenants.