SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt. As of December 31, 2017, total short-term debt outstanding was $64.1 million ($187.7 million as of December 31, 2016), consisted of long-term debt due within one year and included $0.5 million of unamortized debt issuance costs.

As of December 31, 2017, we had consolidated bank lines of credit aggregating $407.0 million ($409.0 million as of December 31, 2016), the majority of which expire in October 2020. We had $11.9 million outstanding in standby letters of credit and no outstanding draws under our lines of credit as of December 31, 2017 ($11.1 million in standby letters of credit and no outstanding draws as of December 31, 2016).

Long-Term Debt. As of December 31, 2017, total long-term debt outstanding was $1,439.2 million ($1,370.4 million as of December 31, 2016) and included $9.5 million of unamortized debt issuance costs. The aggregate amount of long-term debt maturing in 2018 is $64.6 million; $57.6 million in 2019; $143.0 million in 2020; $97.8 million in 2021; $88.0 million in 2022; and $1,062.3 million thereafter. Substantially all of our regulated electric plant is subject to the lien of the mortgages 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.

Minnesota Power is obligated to make financing payments for the Camp Ripley solar array totaling $1.4 million annually during the financing term, which expires in 2027. Minnesota Power has the option at the end of the financing term to renew for a two‑year term, or to purchase the solar array for approximately $4 million. Minnesota Power anticipates exercising the purchase option when the term expires.

On June 1, 2017, ALLETE issued $80.0 million of its senior unsecured notes (the Notes) to certain institutional buyers in the private placement market. The Notes were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended, to institutional accredited investors. The Notes bear interest at 3.11 percent and mature on June 1, 2027. Interest on the Notes is payable semi-annually in June and December of each year, commencing on December 1, 2017. ALLETE has the option to prepay all or a portion of the Notes at its discretion, subject to a make-whole provision. The Notes are subject to additional terms and conditions which are customary for these types of transactions. Proceeds from the sale of the Notes were used to redeem debt, fund corporate growth opportunities and for general corporate purposes.

On August 25, 2017, ALLETE entered into a $40.0 million term loan agreement (Term Loan). The Term Loan is an unsecured, single draw loan that is due on August 25, 2020, and may be prepaid at any time subject to a make-whole provision. Interest on the Term Loan is payable quarterly at a rate per annum equal to LIBOR plus 1.025 percent. Proceeds from the Term Loan were used for general corporate purposes.

On November 2, 2017, ALLETE entered into a bond purchase agreement providing for the issuance and sale of $60.0 million of its First Mortgage Bonds (the Bonds) that bear interest at 4.07 percent. The Bonds will be issued on or about April 1, 2018, and will mature in April 2048. Interest on the Bonds will be payable semi-annually in April and October of each year, commencing on October 16, 2018. ALLETE has the option to prepay all or a portion of the Bonds at its discretion, subject to a make-whole provision. The Bonds are subject to additional terms and conditions which are customary for these types of transactions. The company intends to use the proceeds from the sale of the Bonds 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 institutional accredited investors.

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

Long-Term Debt (Continued)



Long-Term Debt
As of December 31	2017			2016
Millions
First Mortgage Bonds
1.83% Series Due 2018		$50.0			$50.0
8.17% Series Due 2019	42.0			42.0
5.28% Series Due 2020	35.0			35.0
2.80% Series Due 2020	40.0			40.0
4.85% Series Due 2021	15.0			15.0
3.02% Series Due 2021	60.0			60.0
3.40% Series Due 2022	75.0			75.0
6.02% Series Due 2023	75.0			75.0
3.69% Series Due 2024	60.0			60.0
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			75.0
5.99% Series Due 2027	60.0			60.0
3.30% Series Due 2028	40.0			40.0
3.74% Series Due 2029	50.0			50.0
3.86% Series Due 2030	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			85.0
4.21% Series Due 2043	60.0			60.0
4.95% Series Due 2044	40.0			40.0
5.05% Series Due 2044	40.0			40.0
4.39% Series Due 2044	50.0			50.0
Unsecured Term Loan Variable Rate Due 2017	—			125.0
Senior Unsecured Notes 5.99% Due 2017	—			50.0
Variable Demand Revenue Refunding Bonds Series 1997 A Due 2020	13.5			13.5
Unsecured Term Loan Variable Rate Due 2020	40.0			—
Armenia Mountain Senior Secured Notes 3.26% Due 2024	65.9			74.6
Industrial Development Variable Rate Demand Refunding Revenue Bonds Series 2006, Due 2025	27.8			27.8
Senior Unsecured Notes 3.11% Due 2027	80.0			—
SWL&P First Mortgage Bonds 4.15% Series Due 2028	15.0			15.0
Other Long-Term Debt, 3.11% – 5.37% Due 2018 – 2037	69.1			61.2
Unamortized Debt Issuance Costs	(10.0		)	(11.0		)
Total Long-Term Debt	1,503.3			1,558.1
Less: Due Within One Year	64.1			187.7
Net Long-Term Debt		$1,439.2			$1,370.4

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

Financial Covenants. Our long-term debt arrangements contain customary covenants. In addition, our lines of credit and letters of credit supporting certain long-term debt arrangements contain financial covenants. Our compliance with financial covenants is not dependent on debt ratings. The most restrictive financial covenant requires ALLETE to maintain a ratio of indebtedness to total capitalization (as the amounts are calculated in accordance with the respective long-term debt arrangements) of less than or equal to 0.65 to 1.00, measured quarterly. As of December 31, 2017, our ratio was approximately 0.42 to 1.00. Failure to meet this covenant would give rise to an event of default if not cured after notice from the lender, in which event ALLETE may need to pursue alternative sources of funding. Some of ALLETE’s debt arrangements contain “cross-default” provisions that would result in an event of default if there is a failure under other financing arrangements to meet payment terms or to observe other covenants that would result in an acceleration of payments due. ALLETE has no significant restrictions on its ability to pay dividends from retained earnings or net income. As of December 31, 2017, ALLETE was in compliance with its financial covenants.