INVESTMENT IN ATC

Our wholly-owned subsidiary, ALLETE Transmission Holdings, owns approximately 8 percent of ATC, a Wisconsin-based utility that owns and maintains electric transmission assets in portions of Wisconsin, Michigan, Minnesota and Illinois. We account for our investment in ATC under the equity method of accounting. As of December 31, 2017, our equity investment in ATC was $118.7 million ($135.6 million as of December 31, 2016). On January 31, 2018, we invested an additional $1.6 million in ATC. In total, we expect to invest approximately $6 million throughout 2018.



ALLETE’s Investment in ATC
Year Ended December 31	2017			2016
Millions
Equity Investment Beginning Balance		$135.6			$124.5
Cash Investments	7.8			5.4
Equity in ATC Earnings	22.5			18.5
Distributed ATC Earnings	(19.3		)	(12.8		)
Remeasurement of Deferred Income Taxes (a)	(27.9		)	—
Equity Investment Ending Balance		$118.7			$135.6


(a)	Impact of the remeasurement of deferred income tax assets and liabilities resulting from the TCJA. (See Note 1. Operations and Significant Accounting Policies.)



ATC Summarized Financial Data
Balance Sheet Data
As of December 31	2017		2016
Millions
Current Assets		$87.7		$75.8
Non-Current Assets	4,598.9		4,312.9
Total Assets		$4,686.6		$4,388.7
Current Liabilities		$767.2		$495.1
Long-Term Debt	1,790.6		1,865.3
Other Non-Current Liabilities	240.3		271.5
Members’ Equity	1,888.5		1,756.8
Total Liabilities and Members’ Equity		$4,686.6		$4,388.7



Income Statement Data
Year Ended December 31	2017		2016		2015
Millions
Revenue		$721.6		$650.8		$615.8
Operating Expense	344.9		322.5		319.3
Other Expense	104.1		95.5		96.1
Net Income		$272.6		$232.8		$200.4
ALLETE’s Equity in Net Income		$22.5		$18.5		$16.3

In September 2016, the FERC issued an order reducing ATC’s authorized return on equity to 10.32 percent, or 10.82 percent including an incentive adder for participation in a regional transmission organization. Prior to this order, ATC had been allowed a return on equity of 12.2 percent which had been impacted by reductions for estimated refunds related to complaints filed with the FERC by several customers located within the MISO service area.

In June 2016, a federal administrative law judge ruled on an additional complaint proposing a further reduction in the base return on equity to 9.70 percent, or 10.20 percent including an incentive adder for participation in a regional transmission organization, subject to approval or adjustment by the FERC. A final decision from the FERC on the administrative law judge’s recommendation is pending. (See Note 4. Regulatory Matters.)