2011 Utility Monthly 09-12-11.pdf

Please refer to page 9 of this report for detailed disclosure and certification information.
INDUSTRY UPDATE
Institutional Equity Research

September 12, 2011 Utility Monthly

Prices: (9/9/11)

Industry:
Utilities

James L. Bellessa, Jr., CFA
406.791.7230
[e-mail]

Michael Bates
Research Associate
406.791.7216
[e-mail]

Utility Capex Plans Remain Intact Following Withdrawal of Ozone Rule

• Our BUY-rated utilities are Alliant Energy Corp., IDACORP, Inc., NorthWestern
Corp., Portland General Electric, and Westar Energy.
• The National Weather Service reported that this summer (June through August)
was the hottest recorded in the United States in the last 75 years, which gives us
confidence in our previously-stated expectation that strong air conditioning loads
will drive margins and earnings higher in the third quarter for most electric utilities,
particularly those in the Midwest.
• ALLETE’s utility subsidiary received regulatory approval to construct the
proposed Bison 2 wind project, which is expected to carry nameplate capacity of
104 MW. The wind farm is expected to be brought online in 2012 at a total cost of
$157 million. The utility continues to await regulatory approval of its request to
construct the similarly-sized Bison 3 project.
• A Black Hills Corp. subsidiary filed for a certificate of public convenience and
necessity to construct and operate a new 120 MW gas-fired generating facility to
serve customers in Cheyenne, Wyoming.
• Xcel Energy announced a delay of at least one year in its plan to uprate its
Monticello nuclear power plant.
• Integrys Energy Group updated its electric utility rate request in Wisconsin to
account for expected costs to comply with new environmental regulations. The
utility also withdrew its request revenue increase for gas utility service.
• Avista Corp. reached an all-party settlement agreement in its Idaho-based
electric and gas utility rate cases, which were filed in July 2011.

On September 2nd the Obama administration announced its decision to back off from
environmental rules designed to combat ozone pollution, stating that ground-level
ozone levels would be reviewed in 2013 rather than tightened immediately. Based on
discussions with our contacts within the industry, it is our expectation that the deferral
(and potential abandonment) of this rule will have only a small impact on electric utility
capital spending in our coverage universe. This is due to the fact that most
environmental projects currently on the drawing board are centered on compliance
with other regulations, including the EPA’s Cross-State Air Pollution Rule (CSAPR)
(which was unveiled this summer to replace the Clean Air Interstate Rule (CAIR) in
regulating emissions of SO2 and NOx) and Maximum Achievable Control Technology
(MACT) rule (which regulates mercury and emissions of hazardous air pollutants),
which have been evolving for several years.

Abandonment of the MACT and CSAPR rules appears unlikely at this point, but it is
our view that the possibility of the rules being softened or delayed should not be ruled
out in the event of a further weakening in the economy or additional political
opposition. While we would not expect capital spending for most utilities under our
coverage to be materially altered if benchmark dates for these rules were pushed out a
couple of years, a complete overturn of the rules would likely cause material shrinkage
in capex plans. Although this would lessen the expected need for external financing to
fund capital projects, it could throw cold water on investors’ expectations for earnings
growth within the group.

D.A. Davidson & Co.
2
On August 19, 2011, Integrys Energy Group’s electric utility subsidiary Wisconsin Public
Service Corporation (WPS) filed an amendment to its general rate case before the Public
Service Commission of Wisconsin (PSCW). The updated request is for an annual electric
revenue increase of $65.5 million (+6.8%), versus the original request for a $33.7 million
(+3.5%) increase, which had been a limited fuel reopener.

The amendment to the filing was primarily a result of the expected compliance costs for the
Cross State Air Pollution Rule (CSAPR), which was issued on July 11, 2011 by the EPA.
Although the full cost of compliance with the rule remains uncertain, Integrys is similar to most
electric utilities under our coverage in its expectation that it will be necessary to install emission
controls, limit operation of its generating units, or purchase emissions allowances from the
market to maintain compliance with CSAPR. It also notes that its ability to meet these
requirements will be hampered by the short span of time before portions of CSAPR’s emission
limitations become effective in January 2012.

In conjunction with the amended filing, WPS withdrew its request for a natural gas revenue
increase of $1.1 million (+0.31%).

*****

On August 31st Avista Corp. announced that an all-party settlement agreement had been
reached in its electric and natural gas rate cases before the Idaho Public Utilities Commission
(IPUC). Under the settlement (which is subject to IPUC approval), the utility would be granted
an annual revenue increase of $2.8 million (+1.1%) for electric rates and a $1.1 million (+1.6%)
increase for natural gas rates, which compare to the utility’s request of electric and gas
revenue increases of $9.0 million (+3.5%) and a $1.9 million (+2.8%), respectively. If the
settlement is approved by the IPUC, new rates would become effective October 1, 2011 and
would place a moratorium on any additional general rate increases prior to April 2013 (note
that the moratorium does not apply to annual rate adjustments such as the Power Cost
Adjustment (PCA) and Purchased Gas Adjustment (PGA)).

*****

On August 31st Avista Corp. filed its annual Purchase Gas Cost Adjustment (PGA) request
with the Public Utility Commission of Oregon (OPUC). The PGA filing points to an expected
rate decrease of $1.2 million (-1.2%) annually, and would take effect on November 1st. The
purpose of the PGA filing is ensure the real cost of natural gas corresponds with the amount
built into the utility’s rate structure. Importantly, since the utility does not collect a margin on
the cost of natural gas delivered to customers, the PGA filing should not have an impact on
AVA’s net income.

In early September Xcel Energy announced that its plan to boost the power output of its
Monticello nuclear power plant in Minnesota would be delayed by at least one year due to
technical problems and a need to collect and provide additional information about the
capabilities of the plant’s emergency cooling pumps. The utility’s current intention is to
complete the project during the plant’s refueling in fall 2012. No delays to Xcel’s plans to
uprate its Prairie Island reactors (currently expected to take place in 2014-2015) were
announced.

*****

In late August ALLETE’s primary utility subsidiary (Minnesota Power) received approval from
the Minnesota Public Utilities Commission (MPUC) to construct its proposed Bison 2 wind
project. Costs associated with the 105-MW project (expected to total $157 million) are eligible
for recovery through a renewable resources rider. The project is expected to be brought online
in 2012 and is needed as part of the utility’s plan to comply with Minnesota's Renewable
Energy Standard of attaining 25% of its power from renewable energy resources by 2025.
Assuming the utility’s current rate structure is maintained (10.38% allowed ROE and a 54.3%
equity structure), we estimate the asset would provide ALE an additional $8.9 million ($0.20-
$0.22 per share) of potential net income each year following its completion.

In June the utility also filed plans for a similar sized project, Bison 3, which would also come
online in 2012 to take advantage of federal production tax credits before they expire
(scheduled for year-end 2012).

Rate Case Developments
Capital Projects
D.A. Davidson & Co.
3
*****

In early August Black Hills Corp. announced that its Cheyenne Light, Fuel & Power subsidiary
had filed for a certificate of public convenience and necessity with the Wyoming Public Service
Commission (WPSC) to construct and operate a new 120 MW gas-fired generating facility.
Assuming the WPSC grants approval for the project, construction of the $158 million plant is
expected to begin in 2013 with the asset coming online in 2014. Assuming the utility’s current
rate structure is maintained (10.9% allowed ROE and a 54% equity structure), we estimate the
asset could provide BKH an additional $9.3 million of potential net income each year following
its completion.

On August 19th MGE Energy, Inc. increased its quarterly dividend by 2% from $0.375 per
share to $0.3826 per share. With this increase, MGEE has paid dividends to common
shareholders for over 100 years, and has raised its dividend for 36 consecutive years.

*****

On August 17th ITC Holdings Corp. increased its quarterly dividend by 5.2%, or from $0.335
per share to $0.3525 per share. With this increase, ITC has raised its dividend for six
consecutive years.

On August 23rd ITC Holdings Corp. announced the appointment of three new independent
members to its board of directors, increasing the board’s size from seven to ten members.
The new members include J.C. Watts, Jr. (former U.S. Congressman from Oklahoma), M.
Michael Rounds (former South Dakota Governor), and Christopher H. Franklin (an executive
officer for Aqua America, Inc. (WTR - $21.04)). Taking note of the new board members’ strong
ties to markets in which ITC has expressed interest in pursuing further transmission investment
(South Dakota and Oklahoma), it is our view that the appointments were strategically prudent
and will benefit the firm as it continues to execute on its ambitious growth initiatives.

Dividend Increases
Other Developments
D.A. Davidson & Co.
4

According to the National Weather Service (NWS) and as detailed in Table 1, the summer
(June through August) of 2011 was the hottest recorded in the United States in the last 75
years, with Oregon and Washington being the only two of the lower 48 states not experiencing
average to above-average temperatures, making AVA and POR the exceptions to the trend.
As displayed in Figure 1, the NWS continues to forecast unseasonably hot/warm temperatures
for the next three months in the majority of the continental United States. Assuming this
forecast proves accurate, we would expect the heat wave to drive stronger electric demand as
air conditioners are used later into the year than would normally be expected, which should
contribute to strong 3Q’11 results for Midwestern utilities under our coverage (other things
being equal), including XEL, LNT, WR, ALE, TEG, BKH, and MGEE.

Table 1: Cooling Degree Day Data (CDD) – 3Q’11 QTD
3Q'11
Parent Company & Utility Location QTD
ALLETE, Inc. (ALE)
Minnesota Power Duluth, MN 85 42% -41% 272 92% -3%
Alliant Energy, Inc. (LNT)
Interstate Power & Light Cedar Rapids, IA 206 -14% -25% 606 14% 7%
Wisconsin Power & Light Madison, WI 202 31% -28% 571 55% -3%
Avista Corp. (AVA)
Avista Utilities Spokane, WA 196 27% 15% 301 -3% -14%
Black Hills Corp. (BKH)
Black Hills Power Rapid City, SD 263 26% 7% 581 34% 32%
Black Hills Energy - Colorado Colorado Springs, CO 291 151% 50% 610 109% 36%
Hawaiian Electric Industries, Inc. (HE)
Hawaiian Electric Co. Honolulu, HI 515 -1% 4% 1003 -1% 5%
IDACORP, Inc. (IDA)
Idaho Power Company Boise, ID 422 53% 38% 759 33% 17%
Integrys Energy Group, Inc. (TEG)
Peoples Gas Light and Coke Co. Chicago, IL 271 16% -27% 716 40% -7%
Wisconsin Public Service Corp. Green Bay, WI 140 11% -44% 460 52% -7%
MDU Resources Group, Inc. (MDU)
Cascade Natural Gas Co. Tri Cities, WA 350 8% 18% 572 -12% -9%
Intermountain Natural Gas Boise, ID 422 53% 38% 759 33% 17%
Montana-Dakota Utilities Co. Bismarck, ND 144 -11% -32% 360 6% -11%
MGE Energy, Inc. (MGEE)
Madison Gas & Electric Co. Madison, WI 202 31% -28% 571 55% -3%
Portland General Electric Co. (POR)
Portland General Electric Portland, OR 161 11% 19% 233 -16% -9%
Northwest Natural Gas Co. (NWN)
NW Natural Portland, OR 161 11% 19% 233 -16% -9%
NorthWestern Corp. (NWE)
NorthWestern Energy Great Falls, MT 174 63% 85% 296 40% 68%
NorthWestern Energy Sioux Falls, SD 196 -9% -34% 584 19% 3%
Otter Tail Corp. (OTTR)
Otter Tail Power Co. Fargo, ND 183 13% -16% 485 37% 9%
Questar Corp. (STR)
Questar Corp. Salt Lake City, UT 449 29% 24% 877 19% 8%
Westar Energy, Inc. (WR)
Westar Energy, Inc. Topeka, KS 506 42% -5% 1172 51% 11%
Xcel Energy, Inc. (XEL)
NSP-Minnesota Minneapolis, MN 276 45% -28% 709 58% -4%
PSCo Denver, CO 382 76% 35% 729 53% 24%
SPS Clovis, NM 536 63% 46% 1076 50% 54%
% From
2010
% From
Average
% From
2010
% From
Average
August
Total
Source: National Weather Service’s Climate Prediction Center
Figure 1: Sept-Oct-Nov 2011 Temperature Forecast
33% to 40% Chance of Above Normal Temperature 33% to 40% Chance of Below Normal Temperature
40% to 50% Chance of Above Normal Temperature 40% or Greater for Below Normal Temperature
50% or Greater for Above Normal Temperature Means Equal Chances for Above, Normal, or Below Normal Temperature Source: National Weather Service Climate Prediction Center
Hot Temperatures Likely to Drive
Strong Utility Demand
D.A. Davidson & Co.
5

The upper portion of Chart 1 depicts an overall ~50% advance in the price of FactSet’s market-
weighted index of 100 domestic investor-owned utilities since reaching a trough in early 2009.
The middle portion of the chart depicts the group’s 14.4x P/E ratio on year-forward earnings
estimates, or just below the 5-year average (14.7x). The bottom panel shows utilities trading
at a 19% premium P/E valuation relative to the S&P 500. Although this is above the 5-year
average relative valuation of parity with the broad index, it represents a return to the premium
accorded to the group prior to the 2009-2010 period and reflects a renewed interest in yield-
bearing securities due to recent market uncertainties.

As shown in the top panel of Chart 2, the sector’s current average dividend yield of 4.1%
remains above the 5-year average of 3.7%. The bottom panel depicts the yield of the utility
group relative to the yield of the S&P 500 is currently at ~1.9x. After a prolonged relative
downtrend, utilities’ relative yields trended upward through 2009 and have continued to trend
sideways at around 2.0x since early 2010.

As depicted in Chart 3, utility dividend yields have strengthened significantly relative to 10-year
Treasuries since early July as the current challenges in the global economy have led investors
to take a more defensive stance. Interestingly, the group’s current yield relative to treasuries
matches the peak level of 2.0x seen in December 2008, at the height of the financial crisis.

150
200
250
300
350
400
Utilities
08-Sep-2006 to 09-Sep-2011 (Weekly) High: 388.51 Low: 203.66 Latest: 305.30
Price (USD)
5
10
15
20 Average: 14.7 High: 18.8 Low: 9.5 Latest: 14.4
Price to Earnings - FY1
'07 '08 '09 '10 '110.6
0.8
1
1.2
1.4
©FactSet Research SystemsData Source: FactSet Aggregates, FactSet Aggregates,
Average: 1.00 High: 1.21 Low: 0.69 Latest: 1.19
Price to Earnings - FY1 - Relative to S&P 500
Source: FactSet
Current Sector Valuation
Chart 1: Utility Price Index,
Forward P/E Ratios, and P/E
Relative to the S&P 500
D.A. Davidson & Co.
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2
2.5
3
3.5
4
4.5
5
5.5
6
Utilities
08-Sep-2006 to 09-Sep-2011 (Weekly) Average: 3.7 High: 5.5 Low: 2.4 Latest: 4.1
Dividend Yield
'07 '08 '09 '10 '111.2
1.4
1.6
1.8
2
2.2
2.4
©FactSet Research SystemsData Source: FactSet Aggregates,
Average: 1.78 High: 2.30 Low: 1.25 Latest: 1.90
Dividend Yield - Relative to S&P 500
Source: FactSet

'07 '08 '09 '10 '1140%
60%
80%
100%
120%
140%
160%
180%
200%
220%Elec utilities yield relative to 10-yr treasury Launch full data release
FDSAGG United States / Utilities -SEC - Dividend Yield / US Treasury Constant Maturity - 10 Year - Yield * 100 [Max: 208.15, Min: 50.50, Last: 202.50]
Source: FactSet
Chart 2: Utility Dividend Yields and
ield Relative to Yield on S&P 500

Chart 3: Utility Dividend Yield
Relative to 10-Year Treasury Bonds
D.A. Davidson & Co.
7

Table 2: D.A. Davidson Utility Coverage Relative Performance
Price Price Ex-Dividend Monthl ear-to-Date
12/31/2010 8/31/2011 in August Total Return Total Return
ALLETE Inc. ALE $35.26 $39.06 $0.45 -1.9% 14.6%
Alliant Energy Corp. LNT 36.77 40.57 2.9% 13.8%
Avista Corp. AVA 22.52 25.38 0.28 1.8% 16.4%
Black Hills Corp. BKH 30.00 30.60 0.37 3.6% 5.7%
Hawaiian Electric Industries, Inc. HE 22.79 24.02 0.31 4.0% 9.5%
IDACORP Inc. IDA 36.98 38.20 0.30 -1.8% 5.7%
Integrys Energy Group, Inc. TEG 48.51 50.07 0.68 1.1% 7.4%
ITC Holdings Corp. ITC 61.98 75.66 0.35 8.2% 23.7%
MDU Resources Group, Inc. MDU 20.27 21.34 -1.0% 6.9%
MGE Energy Inc. MGEE 42.76 42.15 0.38 3.5% 1.2%
Northwest Natural Gas Co. NWN 46.47 45.22 1.4% 0.1%
NorthWestern Corp. NWE 28.83 33.91 5.9% 20.1%
Otter Tail Corp. OTTR 22.54 20.56 0.30 0.4% -4.8%
Portland General Electric Co. POR 21.70 24.12 -2.7% 13.6%
Questar Corp. STR 17.41 18.74 0.15 2.5% 10.3%
Westar Energy, Inc. WR 25.16 26.65 3.3% 8.5%
Xcel Energy, Inc. XEL 23.55 24.67 2.8% 6.9%
Median 2.5% 8.5%
Mean 2.0% 9.4%
Dow Jones Industrial Average $11,577.51 $11,613.53 -4.4% 0.3%
Standard & Poors 500 1,257.64 1,218.89 -5.7% -3.1%
Russel 2000 783.65 726.81 -8.8% -7.3%
Dow Jones Utility Average 404.99 435.06 0.9% 7.4%
FactSet U.S. Utilities Index 1,158.70 1,263.45 1.4% 9.0%
FactSet U.S. Electric Utilities Index 1,151.63 1,268.04 2.0% 10.1%
FactSet U.S. Gas Utilities Index 986.33 1,054.65 -0.7% 6.9%
SymbolCompany Name
Source: FactSet

As shown in Table 2, FactSet’s broad index of 100 utilities included in the Russell 2000 index
rose 1.4% on a total return basis in August, compared to relatively steep declines in the broad
indices. Shares within our universe of mostly small to mid-cap utilities increased 2.0% on
average, with the best performers being ITC Holdings Corp. (+8.2%) and NorthWestern
Corp. (+5.9%), which are both fully-regulated and growth-oriented firms.

Leading our coverage universe from a year-to-date total return perspective are ITC Holdings
Corp., NorthWestern Corp., and Avista Corp., which have risen 23.7%, 20.1%, and 16.4%,
respectively, through August 31, 2011. Although each of these firms carries a different
strategic profile, it is our view that their outperformance is partially attributable to their dividend
growth prospects, as investors have sought to reduce risk by placing more weight on yield-
oriented names. We believe that dividends at each of these firms will continue to grow at rates
over 5% per year.

As depicted in Table 3, the mean 2012 price-earnings ratio has fallen to 13.8x, down from
14.5x on July 8th (the pricing date of our last utility monthly). The mean EV/EBITDA ratio
based on our 2012 forecast and the average current dividend yield in our coverage universe
are currently 7.5x and 4.4%, respectively. Otter Tail Corp. sports the highest yield in the
group (currently 6.1%) with a payout ratio of 170% of our 2011 earnings projection.

Relative Performance
D.A. Davidson & Co.
8
Table 3: D.A. Davidson & Co. Utilities Comparison

Price EPS EPS EPS P/E P/E P/E
9/9/11 2010 2011E 2012E 2010 2011E 2012E
ALLETE Inc.1,2,3 ALE N $36.56 $41.00 $1.3 $2.0 4.9% 68% $2.31 $2.60 $2.65 14.5 12.9 12.6 9.4 8.6 8.2 5.3 5.5 8.5% 3.3% 1.2 1.2 43.3% 64% 42%
Alliant Energy Corp.1,2 LNT B $38.16 $44.00 $4.2 $7.1 4.5% 55% $2.75 $3.07 $3.13 13.9 12.4 12.2 8.2 8.1 7.7 4.8 4.8 11.5% 3.6% 1.4 1.5 46.3% 67% 40%
Avista Corp.1 AVA N $23.51 $26.00 $1.3 $2.4 4.7% 64% $1.65 $1.71 $1.92 14.3 13.7 12.3 7.2 6.9 6.3 4.7 5.0 9.1% 2.7% 1.2 1.2 49.7% 49% 27%
Black Hills Corp.1,2 BKH N $29.59 $32.00 $1.2 $2.6 4.9% 81% $1.81 $1.80 $2.40 16.4 16.5 12.3 8.5 8.0 6.4 (3.4) (3.7) 6.1% 1.9% 1.1 1.6 58.6% 102% 45%
Hawaiian Electric Industries, Inc.1 HE N $23.16 $24.50 $2.2 $3.7 5.4% 89% $1.21 $1.39 $1.77 19.1 16.6 13.1 8.8 7.8 7.0 5.0 5.6 7.7% 1.3% 1.5 1.6 52.1% 38% 23%
IDACORP Inc.1 IDA B $35.57 $44.50 $1.8 $3.3 3.4% 42% $2.95 $2.86 $3.00 12.0 12.4 11.9 9.7 8.9 7.8 4.9 5.2 9.2% 3.1% 1.1 1.1 49.9% 46% 25%
Integrys Energy Group, Inc.1,2 TEG N $47.01 $49.00 $3.7 $5.8 5.8% 84% $3.13 $3.22 $3.41 15.0 14.6 13.8 7.2 7.5 7.3 5.8 6.0 8.3% 2.6% 1.2 1.6 43.6% 24% 15%
ITC Holdings Corp.1,2 ITC N $72.34 $80.00 $3.7 $6.2 1.9% 41% $2.87 $3.31 $4.10 25.2 21.9 17.6 13.9 12.5 10.7 3.4 3.6 14.1% 3.6% 3.1 19.4 68.3% 51% 31%
MDU Resources Group, Inc.1,2 MDU N $19.89 $22.50 $3.8 $5.1 3.3% 51% $1.30 $1.27 $1.46 15.3 15.7 13.6 6.7 6.6 5.9 9.2 10.0 9.1% 3.9% 1.4 1.8 34.4% 51% 38%
MGE Energy Inc.1,2 MGEE U $39.90 $37.00 $0.9 $1.3 3.8% 53% $2.43 $2.82 $2.70 16.4 14.1 14.8 8.8 7.6 7.8 8.4 8.2 11.7% 4.7% 1.7 1.7 40.4% 34% 25%
Northwest Natural Gas Co.1,2 NWN N $43.81 $46.00 $1.2 $1.9 4.0% 65% $2.58 $2.66 $2.60 17.0 16.5 16.9 8.9 8.6 8.6 5.4 5.4 9.9% 2.8% 1.6 1.9 52.1% 26% 16%
NorthWestern Corp.1,2 NWE B $31.85 $36.00 $1.2 $2.2 4.5% 63% $2.03 $2.30 $2.45 15.7 13.8 13.0 8.6 8.2 7.7 4.0 4.4 9.6% 2.7% 1.4 2.4 55.3% 68% 36%
Otter Tail Corp.1,2 OTTR N $19.36 $19.00 $0.7 $1.2 6.1% 170% $0.40 $0.70 $0.97 48.6 27.6 20.0 8.3 8.2 7.3 3.7 4.1 4.0% 1.5% 1.1 1.3 42.0% 77% 46%
Portland General Electric Co.1 POR B $23.06 $27.00 $1.7 $3.5 4.6% 53% $1.66 $2.01 $2.10 13.9 11.5 11.0 6.9 6.5 6.3 4.8 4.8 10.0% 2.9% 1.1 1.2 52.2% 75% 38%
Questar Corp.1,2 STR N $17.68 $20.00 $3.2 $4.3 3.5% 53% $1.12 $1.14 $1.22 15.8 15.5 14.4 8.2 7.9 7.6 8.9 4.3 19.5% 6.4% 2.9 2.9 50.3% 25% 19%
Westar Ener , Inc.1,2 WR B $24.88 $29.50 $2.9 $6.2 5.1% 73% $1.81 $1.75 $1.95 13.7 14.2 12.8 8.3 8.0 7.4 4.4 4.3 8.2% 2.4% 1.2 1.2 56.7% 82% 38%
Xcel Energy, Inc.1,2 XEL N $23.66 $26.00 $11.5 $21.5 4.4% 60% $1.62 $1.74 $1.83 14.6 13.6 12.9 8.7 8.0 7.5 4.5 4.4 10.0% 3.0% 1.4 1.4 54.6% 64% 34%
Median, 17 Utilities $1.8 $3.5 4.5% 63% 15.3 14.2 13.0 8.5 8.0 7.5 4.8 4.8 9.2% 2.9% 1.4 1.6 50.3% 51% 34%
Mean, 17 Utilities $2.7 $4.7 4.4% 69% 17.7 15.5 13.8 8.6 8.1 7.5 4.9 4.8 9.8% 3.1% 1.5 2.6 50.0% 56% 32%
EBITDA Interest
2011E
Company Name Symbol EV / EBITDA
2011E
EV / EBITDA
2012E
P / BVRating Debt /
Capital
EV
($B)
Mkt Cap
($B)
Dividend
Yield
ROAA
(ttm)
EV / EBITDA
2010
Price
Target
ROAE
(ttm)
Payout Ratio
2011E
EBITDA Interest
2012E
'11E-'13E CapEx/
Mkt Cap
1D.A. Davidson & Co. makes a market in this security.
2Results as shown exclude the impact of nonrecurring items discontinued operations.
3For purposes of calculating P/E, P/EBITDA, and EV/EBITDA ratios, the stock price of ALE has been reduced by our $3.00/sh point estimate of the value of ALLETE Properties.
Source: Company reports and D.A. Davidson & Co. estimates
P / TBV 11E-'13E CapEx/
EV

D.A. Davidson & Co.
Two Centerpointe Drive, Suite 400 • Lake Oswego, Oregon 97035 • [phone] • [phone] • www.dadavidson.com
Copyright D.A. Davidson & Co., 2011. All rights reserved.
9
Required Disclosures
D.A. Davidson & Co. expects to receive, or intends to seek, compensation for investment banking services from the companies
mentioned in this report in the next three months.
D.A. Davidson & Co. is a full service investment firm that provides both brokerage and investment banking services. James L.
Bellessa, Jr., CFA and Michael Bates the research analysts principally responsible for the preparation of this report, will receive
compensation that is based upon (among other factors) D.A. Davidson & Co.’s investment banking revenue. However, D.A. Davidson
& Co.’s analysts are not directly compensated for involvement in specific investment banking transactions.
We, James L. Bellessa, Jr., CFA and Michael Bates, attest that (i) all the views expressed in this research report accurately reflect our
personal views about the common stock of the subject company, and (ii) no part of our compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report.

Ratings Information
D.A. Davidson & Co.’s Institutional Research Rating Scale (maintained since 7/9/02): Buy, Neutral, Underperform

D.A. Davidson & Co. Institutional Research Ratings Buy Neutral Underperform
Risk adjusted return potential azbycx Over 15% total return
expected on a risk adjusted
basis over next 12-18 months
>0-15% return potential
on a risk adjusted basis
over next 12-18 months
Likely to remain flat or lose
value on a risk adjusted basis
over next 12-18 months
Distribution of Ratings (as of 3/31/11) Buy Hold Sell
Corresponding Institutional Research Ratings Buy Neutral Underperform
and Distribution 54% 41% 5%
Corresponding Individual Investor Group Ratings Outperform Market Perform Underperform
and Distribution 65% 35% 0%
Distribution of Combined Ratings 55% 40% 5%
Distribution of companies from whom D.A. Davidson & Co. has received compensation for investment banking services in last 12 mos.
Institutional Coverage 5% 4% 14%
Individual Investor Group Coverage 0% 11% 0%
Distribution of Combined Investment Banking 5% 4% 14%

Target prices are our Institutional Research Department’s evaluation of price potential over the next 12-18 months and 5 years, based
upon our assessment of future earnings and cash flow, comparable company valuations, growth prospects and other financial criteria.
Certain risks may impede achievement of these price targets including, but not limited to, broader market and macroeconomic
fluctuations and unforeseen changes in the subject company’s fundamentals or business trends.

For a copy of the most recent reports containing all required disclosure information for covered companies referenced in this report,
please contact your D.A. Davidson & Co. representative or call 1-800-755-7848.

Other Disclosures

Information contained herein has been obtained by sources we consider reliable, but is not guaranteed and we are not soliciting any
action based upon it. Any opinions expressed are based on our interpretation of data available to us at the time of the original
publication of the report. These opinions are subject to change at any time without notice. Investors must bear in mind that inherent in
investments are the risks of fluctuating prices and the uncertainties of dividends, rates of return and yield. Investors should also
remember that past performance is not necessarily an indicator of future performance and D.A. Davidson & Co. makes no guarantee,
express or implied, as to future performance. Investors should note this report was prepared by D.A. Davidson & Co.’s Institutional
Research Department for distribution to D.A. Davidson & Co.’s institutional investor clients and assumes a certain level of investment
sophistication on the part of the recipient. Readers, who are not institutional investors or other market professionals, should seek the
advice of their individual investment advisor for an explanation of this report’s contents, and should always seek such advisor’s advice
before making any investment decisions. Further information and elaboration will be furnished upon request.