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Minnesota Power, Inc. Business Information, Profile, and History

30 West Superior Street
Duluth, Minnesota 55802-2093
U.S.A.

Company Perspectives:

Minnesota Power, Inc. is an unusual blend of regulated utilities and entrepreneurial spirit. We've extended our reach outside Minnesota and diversified far beyond the selling of electricity to market some of the basic essentials of modern life&mdash-ergy, water, transportation and land.

History of Minnesota Power, Inc.

Minnesota Power, Inc., a broadly diversified utility, remains one of the lowest-cost electric producers in the country. Throughout its long history, the company's fortunes have been closely linked to the development of the considerable natural resources in the Arrowhead region of Minnesota. Approximately half of the company's total electric sales go to big industrial customers, particularly taconite and wood products plants. Proportionally, Minnesota Power holds the greatest number of industrial customers among investor-owned electric utilities. To offset this historically beneficial yet potentially limiting dependency, the utility entered into a variety of non-regulated ventures beginning in the 1980s and gained national attention in the process. Minnesota Power's holdings range from ADESA Corporation, one of the country's largest vehicle auction networks, to Lehigh Acquisition Corp., a Florida-based real estate company.

Forerunners: 1880s-1910s

Minnesota Power's roots go back to the late 1880s when small electric utilities were sprouting up across the nation. These early entrepreneurial ventures competed with each other to provide service to growing urban industrial and commercial areas. Duluth, Minnesota, at the southwestern tip of Lake Superior, was a port town receiving timber from the white pine forests of northeastern Minnesota and grain from the Red River Valley to the west. The electric utilities were eager to serve the lumber and shipping businesses on the shore of the big lake and the city itself. To do so, they needed to create an infrastructure to carry the electricity to their customers--a difficult task in a city built on rock.

Alexander W. Hartman was one of the people who was instrumental in electrifying Duluth. As was typical with early utilities ventures, Hartman's efforts materialized in many mergers and acquisitions, ending with the formation of Duluth Edison Electric Company in 1906. The electric power retailer would be one of the principal companies that merged with other regional electric utilities to form Minnesota Power & Light Company (MP & L).

While Hartman and other electric retailers were creating the systems of power lines to deliver the electric power, other visionaries were developing hydroelectric power from the area's abundant water resources. Investment banker Jay Cooke helped lay the groundwork for the construction of a dam on the lower St. Louis River which ran into Lake Superior. The Thomson Hydroelectric Station was constructed in 1907 by Great Northern Power Company, the second of the regional utilities which would form MP & L.

General Light and Power Co. in Cloquet, about 20 miles from Duluth, and the smallest of the four utilities to later form MP & L, had a history that is representative of the physical difficulties of electrifying the region. In Duluth, the utilities had trouble installing electric poles because of the rock bed on which the city was built. The Cloquet utility's problem with nature was the abundance of pine and aspen forests and the occurrence of devastating forest fires. Two such fires, one in the late 19th century and another in the early 20th century, destroyed entire systems of lines and caused more than a thousand deaths. Nature, in northeastern Minnesota, brought disaster on the one hand and on the other provided plentiful resources that served the growing utility industry.

The last decade of the 19th century was marked by the discovery of rich iron ore deposits in northeastern Minnesota. The Minnesota Utilities Company was created in 1917 from smaller utilities vying to serve the booming mining industry; it ranked as the state's third largest supplier of electricity. Usage of electric power by iron mines quadrupled from 1918 to 1924 and quadrupled again by 1929. In 1922, the year before its consolidation with MP & L, the Minnesota Utilities Company was earning a profit on revenues of $544,000.

Political and Economic Climates Shape Utilities: 1920s-40s

On October 23, 1923, Minnesota Power & Light was consolidated by Electric Bond and Share, a subsidiary of the Eastern electrical equipment manufacturer General Electric. The manufacturer, through its subsidiary, had been financially tied to small electric utilities in the area since the 1890s. By 1922, Electric Bond and Share Co., which provided capital for the small utilities, owned most of Duluth Edison Electric Co. and had a controlling interest in the Great Northern Power Company. Minnesota Utilities and General Light and Power entered into agreements with Electric Bond and Share that year. The consolidation of the four utilities was financed with 125,000 shares of preferred stock of American Power and Light Co., a holding company subsidiary, at a par value of $12.5 million. The sale was a complex one which would later be brought under federal scrutiny.

The federal government had encouraged the consolidation of utilities such as MP & L due to the massive needs of World War I, which helped foster the concept of the holding company, as well as the need to link up utility systems in order to provide an adequate supply of power. Herbert Hoover, as secretary of commerce in the early 1920s, promoted this 'super power' idea, the networking of electric utilities. In addition, the 1920 Federal Power Act had given electric utilities the right of eminent domain in building and operating hydroelectric dams on rivers.

Not surprisingly then, the 1920s were years of expansion for the newly created Minnesota Power & Light Co. Construction of three dams and the linkage of the four existing utility systems by transmission lines highlighted the decade. Total capitalization rose from about $41 million at the time of consolidation to $70 million at the end of the decade. In those early years, MP & L sold the bulk of its electricity to northeastern Minnesota industries--mines, paper mills, and coal shipping docks. In 1927, 66 percent of its kilowatt hours (kwh) went to industrial customers, and over 50 percent of revenues were derived from fewer than 200 customers. The company ended the decade with $6 million in annual sales.

The Great Depression of the 1930s brought with it social and economic change, and, with the election of Franklin Delano Roosevelt in 1932, the climate for the electric utility holding companies was drastically altered. Legislation created the Tennessee Valley Authority and the Rural Electrification Administration, which were intended to bring power to distressed areas and farmers. In effect, the federally financed projects directly competed with the utilities. The Public Utilities Holding Company Act was also passed, calling for the breakup of the holding companies. In Minnesota, in the region served by MP & L, a movement of local governments emerged to create publicly owned utilities in order to curb costs of electrifying their cities.

In spite of political and economic stresses brought on by the Depression and the accompanying recession in the iron and steel industries, MP & L survived the decade. Electric utilities were a growing industry at the time, and both commercial and residential use increased throughout the 1930s. Stock dividends were down and operations and wages cut back during the worst times, but by the end of the decade MP & L was back up to its 1929 revenue level.

The Roosevelt-era movement to change the face of electric utilities was put on hold in December 1941 when the United States entered World War II. As Bill Beck noted in Northern Lights: An Illustrated History of Minnesota Power & Light, 'The Sherman tanks rolling off assembly lines in Detroit, the airplanes being assembled in the California plants, the aircraft carriers sliding down the ways in East Coast shipyards--all were dependent upon the soft, red iron ore of the Mesabi Range.'

When the war ended, MP & L focused on recapitalization of its stock and reclassification of its accounts. The recapitalization was due to the 1935 Public Holding Company Act, which required subsidiaries to be separated from their holding companies. The reclassification was the result of other federal action in the 1930s. During an investigation of electric holding companies, MP & L was found to have overvalued stock at the time of consolidation. The decade was also marked by MP & L's decision to move from hydroelectric generation of power to coal-fired steam generation. Coincidentally, the region was facing the worst drought in decades. Nevertheless, MP & L weathered the turmoil and finished the 1940s financially strong while setting new records for power usage.

Independent Yet Interconnected: 1950s-70s

MP & L entered the 1950s by terminating its affiliation with American Power and Light as its holding company. Thus Minnesota Power began the new decade as a small utility serving the seasonal needs of the iron ore industry, with 58 percent of its power coming from hydroelectric sources and 42 percent through steam generation. It was a decade of increased defense needs due to the Korean War and a rapid increase of residential use due to widespread home modernization. MP & L's speedy construction of steam generating stations resulted in the first rate increase in its history. Economic diversification of the region helped MP & L grow. The St. Lawrence Seaway connected Duluth with the Atlantic Ocean, paper production in the city was expanded, and commercial ventures were on the rise. The 1950s also saw the advent of atomic power in utilities.

The 1960s marked the end of MP & L's relative isolation from other utilities when the company linked with the two other large utilities in the state, Northern States Power and Otter Tail Power. MP & L expanded its power pooling and transfer of bulk power through a regional grid when the Minnesota utilities joined those in Iowa and Wisconsin to form the Upper Mississippi Valley Power Pool in 1961. In 1963, the Midcontinental Area Power Planners linked 22 power suppliers in ten states and Canada.

The decade also proved a politically charged one for the utility, as it fought the expansion of federally funded electric cooperatives and pressure from Minnesota Senator Hubert H. Humphrey regarding MP & L's own rates. However, the company benefited from the passage of Minnesota's taconite amendment, which would revitalize the fading iron ore industry in the Arrowhead region. In 1968, the company decided to shift from high-sulfur Eastern coal to low-sulfur Western coal and began initiating extensive plant construction and adaptation of existing plants.

The 1970s was a growth decade for MP & L and the taconite industry, which unlike the iron ore industry demanded electric power 24 hours a day throughout the year. Revenues went from $50 million to $281 million in the ten-year period. As the taconite plants grew MP & L kept pace by adding additional coal-fired generating stations. According to Beck, 'During the latter half of the decade, MP & L was perhaps the fastest growing electric utility in the United States.' During the decade, the company also increased its power supply through a cooperative project with a utility in North Dakota. The Square Butte Electric Cooperative offered access to the area's vast lignite coal reserves through a 400,000 kilowatt mine-mouth generating plant and sent power to Minnesota via a state-of-the-art AC/DC transmission line. On the political front MP & L was entering the era of federal and state environmental regulation. The 1970s also marked the end of a 40-year trend toward lower rates. The low point of 2.26 cents per kwh in 1967 doubled to 4.51 cents in 1979.

In 1980, the company changed its name to Minnesota Power and began the decade with legal proceedings, fighting a 30 percent severance tax on Montana coal and a 62 percent rate increase by Burlington Northern Railroad, its sole rail shipper. More foreboding for the utility, however, was the national economic recession. The recession hit the taconite industry hard and production of the low-grade ore fell 40 percent from 1979 to 1982. In an effort to cut costs the utility trimmed 15 percent of its workforce between 1980 and 1985. Anthony Carideo, in an article for a November 1984 edition of the Minneapolis Star Tribune, observed that 'Five years ago, Minnesota Power looked like a candidate for the poor house. Strapped with an $850 million construction program, the Duluth-based utility was at the door of the Minnesota Public Utilities Commission (PUC) for rate increases every year except one between 1976 and 1981. Faced with a nearly insolvent utility, state regulators allowed the company to bill consumers for millions of dollars in construction costs before the work was finished, a concession it had never made before to any utility and has allowed only once since.' The company comeback was also served by the take-or-pay contracts it had entered into with the taconite companies when the industry was booming and they were building plants to keep up with the demand for power. Under such contracts, the companies had agreed to pay for a certain level of use each month whether they used it or not. However, by the mid-1980s, the taconite producers wanted out of the contracts.

Drive Toward Diversification: 1980s-Early 1990s

Fortunately, Minnesota Power had by then built a profitable investment portfolio (stocks and bonds of other utilities) and had formed a subsidiary, Topeka Group, Inc., which owned a five-state telephone firm and a water and wastewater treatment company in Florida. The utility was also embarking on a joint venture with St. Paul-based Pentair, Inc. to build a high-tech supercalender paper plant in Duluth. The plan was to keep investments in regulated and core support industries. Minnesota Power had used the post-construction cash buildup it had beginning in 1981 for its investments rather than give large stockholder dividends. By 1985, the company was looking at a 44 percent market return (stock movement plus dividends) according to Standard and Poor's, while the industry average was 25 percent. The company also exceeded the industry's five-year compound earnings growth and dividend growth with increases of 13 and eight percent, respectively. A December 1989 Forbes article reported that Minnesota Power had the second lowest electric utility rates in the country at 4.2 cents per kwh yet was among the most profitable with a five-year average return on equity of 15.8 percent. Forbes also reported that by the end of 1989 the utility had sold its telephone investment for three times the purchase price, expanded its water and wastewater ventures, and purchased a coal mining venture to serve its North Dakota power generation interests. Minnesota Power also sold about 100 megawatts of surplus capacity--a problem since the taconite industry downturn&mdashø a group of Wisconsin municipal utilities. The company still gained 57 percent of its $460 million in operating revenue from electric sales to industrial customers, compared with a 30 percent utility industry average.

The 1990s marked a change in the company's approach to its largest customer, the taconite industry. Jack Rowe, who led the company during the taconite hey days, had stood firm on the take-or-pay contracts. With Arend 'Sandy' Sandbulte at the helm, the company began to renegotiate rates to the remaining taconite plants, giving a 20 to 30 percent decrease in rates and shortening the length of contracts. The company continued to look toward a future that was less dependent on the taconite industry with a goal of accelerating the contributions of non-electric businesses to over 60 percent of total revenue by the year 2000.

The 1990s also saw increased involvement by Minnesota Power in the economic development of the Arrowhead region. Minnesota Power not only provided funding for start-up businesses but offered financial support as part of a state package to attract a Northwest Airlines' maintenance base and reservations center to Duluth and the Iron Range. In another move to create usage for its core business of electric power, Minnesota Power created Synertec, a waste paper reclamation subsidiary. In partnership with four competing paper mills, Synertec opened a $76 million paper recycling plant in Duluth, named Superior Recycled Fiber Industries.

In spite of Minnesota Power's move toward decreased dependency on the taconite industry, the company's financial strength was still clearly tied to it. When National Steel Co., one of its largest customers, shut down its Keewatin plant indefinitely in the fall of 1993, Minnesota Power experienced a more than $2 a share fall on the stock market. The utility responded by actively working with other stakeholders in the taconite industry to facilitate the restarting of the Japanese-owned plant. By mid-1994, new corporate management at National's subsidiary had recommitted to fully integrated steel operations and was prepared to end the deadlock and resume operations, following various concessions and the approval of union steelworkers. National Steel Pellet and Minnesota Power arrived at a new electric rate deal in July 1994.

In January 1994, Minnesota filed for a rate increase of up to 25 percent for residential and commercial customers. The last rate increase Minnesota Power had filed for was in 1987, one which was successfully fought by the Minnesota Senior Federation's Northeastern Coalition. Subsequently, rates for homes and businesses had not risen in 12 years. The utility asserted in the filing that industrial users had been carrying an unfair share of the company's costs; the Minnesota Public Utilities Commission granted the company a residential retail rate increase.

Also during this time, the company faced more changes on the regulatory front. The state of Minnesota began to require that utilities include environmental costs--such as air emissions of coal-burning plants--in the estimate of the costs of future plants.

In terms of the bottom line, a downturn in its usually strong investment portfolio, losses by the company's hydraulic lifting equipment company, Reach All, Inc., and heavy rainfall in Florida which depressed water utility revenue, all conspired to drop Minnesota Power's earnings to its lowest point in a decade.

Risky Route for Utility: Mid- to Late 1990s

In early 1995, Minnesota Power earned the scorn of some market analysts when the utility announced its intention to purchase North America's third largest auto auction company. Indianapolis-based ADESA Corporation sold 400,000 vehicles in 1994, up from 112,000 two years earlier, and netted $7.7 million.

'I think this is a negative for shareholders,' Eric Elverkrog, an analyst with Chicago-based Duff & Phelps, said in a January 1995 Duluth News-Tribune article. 'Buying an auto auction business is not a good strategic fit for Minnesota Power.' Elverkrog questioned the utility's ability to successfully negotiate the twists and turns of a rapid-growth industry.

About mid-year 1995, Minnesota Power pulled out of Lake Superior Paper, the joint venture with Pentair, and sold Reach All, freeing up resources for its other pursuits. Following the acquisition of an 80 percent share in ADESA in July, the company moved to bolster its real estate holdings. Minnesota Power had entered the Florida market in 1991 with the purchase of Lehigh Acres, a home site development near Fort Myers. In September 1995, Minnesota Power bought into Sugarmill Woods Communities, a development north of Tampa and, in April 1996, closed a deal to purchase nearly one-third of Palm Coast, a planned community south of St. Augustine.

Meanwhile, skepticism regarding the auto auction investment led Standard and Poor's to lower Minnesota Power's bond rating early in 1996. ADESA's earnings performance proved to be weaker than expected during its first few quarters under Minnesota Power majority ownership. Responding to the situation, the utility sped up the time table for acquiring the last shares of the company from the founder and remaining executives and gained 100 percent ownership in August 1996.

Elsewhere, Minnesota Power was fine-tuning its core electric operations. The utility negotiated long-term contracts with some of its large industrial customers, including an 11-year agreement with USX Corporation's Minntac iron ore processing plant, one of the top electric users in the country. By and large, previous long-term contracts with large customers had been tied to lender stipulations on new plant construction, but the move toward deregulation of the electric industry prompted Minnesota Power to stabilize those important relationships. One scenario in the restructuring of electric utility markets foresaw a time when Minnesota Power would be required to give transmission line access to competitors and therefore vie for the business of long established customers.

In the same vein, Minnesota Power launched a new power marketing division, MPEX, in 1996. The utility had been involved in group buying and selling of energy for 25 years, but the move further positioned the company to take advantage of opportunities in the wholesale power market which had largely been deregulated by state and federal lawmakers. Bulk power sales were the main contributor to the 14 percent increase in electric sales during 1996.

Developments in the water services segment included a name change for the Florida water utility affiliate. Southern States Utilities was renamed Florida Water Services. Minnesota Power also purchased a Florida-based predictive, preventive, and corrective maintenance company, Instrumentation Services, Inc., (ISI), which served clients such as Coca-Cola, Amoco, and the city of Houston. The utility largely pulled out of South Carolina, blaming the difficult regulatory environment, but it continued to push for regulatory relief in Florida operations, seeking the right to charge higher rates.

As Minnesota Power's auto auction business began to significantly contribute to earnings, analysts changed their tune about the utility's endeavor. 'This was for years the stock that everyone loved to hate,' said David Thickens, a Dain Bosworth analyst, in a June 1997 Knight-Ridder/Tribune News article. The Minnesota-based investment firm rated Minnesota Power a good buy during a time when utility stocks in general were sagging due to deregulation uncertainties. Minnesota Power, in addition to making gains with ADESA, was a solidly positioned, low-rate utility without the burdens related to nuclear power plants.

In 1997, Minnesota Power established a new telecommunications subsidiary, MP Telecom. Through MP Telecom, the utility sold bandwidth off its fiber optic network, a system established in the early 1970s to link far-flung substations and power plants. Minnesota Power's was the first utility-owned network in the nation. The company planned to offer system access to high volume users such as long distance phone companies, large businesses, and internet providers--the Telecommunications Act of 1996 had opened the door to this market.

Also in 1997, the utility added two new subsidiaries to the water services division: U.S. Maintenance and Management and America's Water Services, providing, respectively, predictive maintenance services and water and wastewater services. Elsewhere, ADESA's Automotive Finance Corp. (AFC) began providing dealer financing at independent auto auctions in the United States and Canada, expanding for the first time outside the ADESA. AFC wrote short-term inventory loans for wholesale and retail car dealers buying vehicles at those various auction sites.

The 1998 annual report touted ADESA as the fastest-growing automotive remarketing company in North America, and reported AFC had doubled in size every year since the 1995 purchase. In spite of the impressive gains, electric operations continued to produce the lion's share of Minnesota Power's operating revenues. On the year, profitability continued upward, and operating revenue topped $1 billion for the first time in company history.

1999/2000: Charging Up for an Electric Future?

Early in 1999, Minnesota Power moved to gain a toehold in the Chicago market as it signed an agreement to purchase electricity from a power plant to be constructed 30 miles southwest of the city. While electric consumption was stagnant in the company's retail service area, Chicago utilities needed to purchase excess power through the wholesale market, especially during the hot summer months. Down in Florida, Minnesota Power expanded its real estate holdings, buying about 2,500 acres of Cape Coral residential, commercial, and recreational properties for $45 million. North Carolina-based Heater Utilities acquired Mid-South Water Systems, Inc. in 1999 and was ranked as that state's largest investor-owned water business.

Faring less well in another area of its investments, Minnesota Power took a non-cash charge of $36.2 million against 1999 net operating income due to events related to the sale of Capital Re Corporation to ACE Ltd. The 21 percent interest Minnesota Power held in the reinsurance company represented a key component of its investment portfolio. Capital Re's value begun to plummet in the second half of 1998 due in part to extraordinary claims generated by a bankrupt client.

As automotive services continued to grow, so did the expectation that the segment would overtake Minnesota Power's electric business as the largest producer of net income early into the 21st century. ADESA operated 29 vehicle auction sites and was poised to enter the hot Los Angeles market. Other Minnesota Power automotive businesses offered customers such options as transport and information services. On the whole, automotive net income jumped 57 percent in 1999; electric operations net income declined.

Minnesota Power entered 2000 exclaiming, 'Now, more than ever, Minnesota Power is more than Minnesota ... and more than power.' While seemingly well positioned to negotiate the changing electric utility landscape, future growth was clearly tied to relatively new endeavors, particularly the automobile auction business. Stockholders and analysts alike would be sure to keep a watchful eye on Minnesota Power's progress on both fronts.

Principal Subsidiaries:ADESA Corporation; Lehigh Acquisition Corp.; Automotive Finance Corporation; Minnesota Power Telecom, Inc.; BNI Coal, Ltd.; Florida Water Services Corporation.

Principal Operating Units: Automotive; Water; Investments; Electric.

Principal Competitors: Alliant Energy Corporation; Copart, Inc.; Northern States Power Company; Otter Tail Power Company.

Related information about Minnesota

pop (2000e) 4 919 500; area 218 593 km²/84 402 sq mi. State in N USA, divided into 87 counties; bounded N by Canada; the ‘North Star State’ or the ‘Gopher State’; 32nd state admitted to the Union, 1858; the land E of the Mississippi R included in the North-west Territory, 1787; the land to the W became part of the USA with the Louisiana Purchase, 1803; permanently settled after the establishment of Fort Snelling, 1820; area became Minnesota Territory in 1849 and the 32nd state in 1858; Sioux Indian rebellion in S Minnesota, 1862; settled by many Scandinavians in the 1880s; capital, St Paul; other chief cities, Minneapolis and Duluth; Mississippi R source in the NC region; Minnesota and St Croix Rivers empty into the Mississippi; over 11 000 lakes scattered throughout the state; 5729 km²/22 114 sq mi of L Superior within the state boundary; Sawtooth Mts in the extreme NE; highest point Mt Eagle (701 m/2300 ft); glaciated terrain in the N, with boulder-strewn hills, marshland, and large areas of forest; major tourist area; iron ore mined in the E mountains; prairies in the S and W; agriculture the leading industry; nation's second biggest producer of dairy products, hay, oats, rye, turkeys; processed foods, machinery, electrical equipment, paper products.

Minnesota (IPA: ) is a state in the Midwestern region of the United States. the principal racial minorities are African Americans, Asians, Hispanics, Native Americans descended from the original inhabitants, and recent immigrant communities of Somali and Hmong people.

Slightly more than half of all Minnesota residents live in the Twin Cities metropolitan area, the center of transport, business and industry, and home to an internationally-known arts community. The remainder of the state, often referred to as Greater Minnesota, consists of western prairies now given over to intensive agriculture, eastern deciduous forests also heavily farmed and settled, and the less-populated northern boreal forest. It ranks among the healthiest states by a number of measures, with the fifth highest median household income and has one of the most highly-educated and literate populations. Accessed 08/31/06

Origin of the name

The word Minnesota comes from the Dakota name for the Minnesota River, mnisota. Many locations in the state contain the Dakota word for water, such as Minnehaha Falls ("Waterfall", not "laughing waters" as is commonly thought), Minneiska ("White water"), Minnetonka, ("Big water"), Minnetrista ("Crooked water"), and Minneapolis which is a combination of mni and the Greek word for "city", polis. its Northwest Angle is the only part of the 48 contiguous states lying north of the 49^th Parallel. The state borders Wisconsin on the east, and shares a water border in Lake Superior with Michigan. Iowa is to the south, North Dakota and South Dakota are west, and the Canadian provinces of Ontario and Manitoba are north.

Terrain

Much of the state is relatively flat, but pockmarked with lakes, having been eroded by glacial periods during the Ice Age. The extreme southeastern portion of the state is part of the Driftless Zone, which was not covered by the recent Wisconsin glaciation. It is here that Lake Pepin and the rugged high bluffs of the Mississippi River are found. The northeastern portion of the state is on the Canadian Shield and is covered by rugged ranges of hills, notably the Mesabi Range, rich in iron ore, the Sawtooth Mountains along the shore of Lake Superior, the Misquah Hills and the Laurentian Highlands in the Boundary Waters Canoe Area.

Two continental divides meet in the northwestern part of Minnesota, creating three watersheds. Rain falling in the state can follow the Mississippi River south to the Gulf of Mexico, the St. Lawrence Seaway east to the Atlantic Ocean, or the Hudson Bay watershed to the Arctic Ocean.

The state's average elevation is 1,200 feet (366 m).

Flora and fauna

Three of the great biomes of North America converge in Minnesota: the Great Plains of the west, the Eastern Deciduous Forest, and the Northern Boreal Forest of the Canadian Shield. While loss of habitat has created troubles for native animals such as the pine marten, North American elk, woodland caribou and bobcat, the state contains the nation's largest population of timber wolves outside Alaska and supports healthy populations of moose and whitetail deer. Located on the Mississippi Flyway, the state hosts migratory waterfowl such as geese and ducks, as well as game birds such as grouse, pheasants, and turkeys. Minnesota's lakes teem with the many sport fish of the region including walleye, bass, muskellunge, and northern pike. The streams in the southeast are populated with brook trout, brown trout, and rainbow trout.

Climate

Minnesota has temperature extremes characteristic of its continental climate, with cold winters and warm summers.

Minnesota is exposed to blizzards during its long winter, and thunderstorms the rest of the year. Tornado activity peaks during the months of May through July because the state is located on the northern edge of Tornado Alley.

Temperature extremes range from a low of -60 °Fahrenheit (-51 °C) measured at Tower in the north on February 2, 1996, to highs of 114 °F (45.5 °C) reached in both 1917 and 1936 in the western part of the state.Minnesota and United States Climate Extremes Retrieved 06/22/06 The average temperature in the coldest month, January, is 11.2 °F (-11.5 °C), and the average in the warmest month, July, is 73.1 °F (22.8 °C). Neighboring Wisconsin claims more (15,081), but admits the majority of that number are unnamed, and are under 10 acresWisconsin Lakes Accessed September 16, 2006 The Minnesota portion of Lake Superior is the largest (962,700 acres) and deepest (1,290 feet) body of water in the state.

Minnesota has 6,564 natural rivers and streams that traverse a total of 69,000 miles. The Mississippi River, largest in the United StatesDragonflyTV Accessed September 16, 2006 and at 2,340 miles, second in length only to the Missouri River's 2,540 miles)River and Water Facts Accessed September 16, 2006 begins a 680 mile journey through Minnesota at Lake Itasca. It is joined at Fort Snelling by the Minnesota River, and in the southeast by many trout streams. The Red River of the North, in the bed of glacial Lake Agassiz, drains the northwest part of the state northward towards Canada's Hudson Bay. The state has 71 state parks (List of Minnesota state parks), 53 state forests (List of Minnesota state forests), two national forests (List of U.S. national forests) and many other wildlife preserves and regional parks. The Boundary Waters Canoe Area Wilderness is located on the northeastern border of the state, and Itasca State Park, the official source of the Mississippi River, is located in the north central section. The Minnesota Department of Natural Resources is in charge of managing state parks and forests.

Areas under the management of the National Park Service include:

Grand Portage National Monument in Grand Portage
Mississippi National River and Recreation Area within the Twin Cities
North Country National Scenic Trail
Pipestone National Monument at Pipestone
Voyageurs National Park

History

Before European settlement, Minnesota was populated by the Anishinaabe, the Sioux, and the other Native Americans. European presence began with the arrival of French fur traders in the 1600s. During this century, the Ojibwe Indians migrated westward to Minnesota, and this caused tensions with the Sioux. Explorers such as Daniel Greysolon, Sieur du Lhut, Father Louis Hennepin, Jonathan Carver, Henry Schoolcraft, and Joseph Nicollet, among others, mapped out the state.

In 1805, Zebulon Pike acquired land at the confluence of the Minnesota and Mississippi rivers. This was followed by the construction of Fort Snelling between 1819 and 1825.

The soldiers built a grist mill and a sawmill at Saint Anthony Falls, and as industry later sprung up around the falls, the city of Minneapolis grew up around it. In 1839, the Army forced them to move downriver, and they settled in an area that became St. Paul. Minnesota Territory was formed on March 3, 1849. By 1858, thousands of people had come to build farms and cut timber, and Minnesota became the 32nd US state on May 11, 1858.

A number of treaties with the Sioux and Ojibwe gradually forced them off their land and onto smaller reservations. The result of the six-week war was the execution of 38 Indians, the largest mass execution in United States history, and the exile of most of the rest of the Sioux to the Crow Creek Reservation in Nebraska.

The early economy of Minnesota was based on logging and farming. By 1900, Minnesota mills, led by Pillsbury and the Washburn-Crosby Company (a forerunner of General Mills), were grinding 14.1 percent of the nation's grain.

Minnesota also became established as an iron mining state with the discovery of iron in the Vermilion Range and the Mesabi Range in the 1880s, followed by the discovery of iron in the Cuyuna Range in the early 1900s. University of Minnesota professor Norman Borlaug contributed to this knowledge as part of the Green Revolution. During this time, suburban development accelerated as a result of postwar housing demand, convenient transportation, and increased mobility to more specialized jobs.

Minnesota also became a center of technology after the war. Engineering Research Associates was formed in 1946 to develop computers for the United States Navy. It later merged with Remington Rand, and later became Sperry Rand. William Norris left Sperry in 1957 to form Control Data Corporation (CDC). Cray Research was formed when Seymour Cray left CDC to form his own company.

Cities and towns

The capital city of Minnesota is Saint Paul, located in the east-central part of the state along the east bank of the Mississippi River. together they and their suburbs are known as the Twin Cities metropolitan area, the 16^th largest metropolitan area in the United StatesPopulation in Metropolitan Statistical Areas Ranked by 2000 Census Accessed 08/16/2006 and home to about 59% of the state's population as of April 1, 2005.Minnesota Demographic Center Population Estimates Accessed 09/07/2006. MN Demographic Center estimate for the 11 MN counties of the MSP MSA is 3,090,377, or 59.37% of the estimated state total of 5,205,091 The remainder of the state is known as Greater Minnesota or Outstate Minnesota.

Minnesota cities with estimated 2005 populations above fifty thousand are, in descending order: Minneapolis, Saint Paul, Rochester, Duluth, Bloomington, Brooklyn Park, Plymouth, Eagan, St. Cloud, Coon Rapids, Burnsville, Eden Prairie, Maple Grove, Woodbury, Blaine, and Minnetonka.Minnesota Demographic Center Population Estimates 1 April 2005 Accessed 6 September 2006 Of these, only Rochester, Duluth, and St. Cloud are outside the Twin Cities metropolitan area.

Demographics

The Census Bureau estimates that Minnesota's population was 5,132,799 in 2005, making it the 21^st most populous state in the nation.

Race and ancestry

Over 75% of the population is of Western European descent, with the largest reported ancestries being German (37.3%), Norwegian (17.0%), Irish (12.2%), and Swedish (10.0%). The state had a reputation of being relatively homogenous, but that is changing. Chinese and Japanese people have had long presences in the state, and the Latino population of Minnesota continues to increase.Minnesota Population Projections by Race and Hispanic Origin Accessed 08/14/06 Recent immigrants have come from all over the world, including Hmongs, Somalis, Vietnamese, Indians, Middle Easterners, and emigrants from the former Soviet bloc. Recently immigrants have formed appreciable communities of Muslims, Buddhists and Hindus. Average household income per county averages range from $17,369 in Todd County to $42,313 in Hennepin County. The Twin Cities suburb of Roseville has the highest per capita sales, which recorded $14,870 per capita, but total revenues are much higher in Minneapolis, St. Paul, Bloomington, and Edina. State agribusiness has changed from mere production to processing and the manufacture of value-added food products by companies such as General Mills, Cargill (milling), Hormel Foods Corporation of Austin (prepackaged and processed meat products), and the Schwan Food Company of Marshall (frozen foods).

Forestry, another early industry, remains strong with logging, pulpwood processing, forest products manufacturing and paper production.

Minnesota was famous for its soft-ore iron mines which produced a significant portion of the world's iron ore for over a century.

Retail is represented by Target Corporation, Best Buy, and International Dairy Queen, all headquartered in the Twin Cities. The largest shopping mall in the United States, the Mall of America, is located in Bloomington. Ecolab provides sanitation services and supplies.

Financial institutions include U.S. Bancorp, TCF Bank, and Wells Fargo & Co.; insurers include St. Paul Travelers and Thrivent Financial for Lutherans.

An active high-technology sector is represented by Honeywell, Cray Computers, Imation, and a large IBM plant in Rochester.

Energy use and production

Ethanol fuel is produced in the state, and a 10% mix of ethanol into consumer gasoline has been mandated since 1997. Electricity producing wind turbines have become popular, particularly in the windy southwest region. The state does not produce any petroleum of its own but boasts the largest oil refinery of any non-oil-producing state, the Pine Bend Refinery. The state does not charge sales tax on clothing, some services, or food items for home consumption.Sales tax fact sheets Accessed 06/22/2006 It does tax prepared food, candy and soft drinks.Minnesota Statute § 297A.61, subd.

Culture

Fine arts and architecture

The Twin Cities area is considered the capital for the arts in the Upper Midwest, the lead region among others such as the Twin Ports (Duluth, Minnesota-Superior, Wisconsin), Madison, Wisconsin and Milwaukee, Wisconsin. There is a very high per-capita attendance of theatrical, musical, and comedy events across the area, which some believe may be boosted by the cold winters but can be more realistically attributed to the large number of colleges, universities, and a generally strong economy, providing strong supply and demand for arts.

Entertainment

Minnesotan musicians from all genres have gained notoriety over the years, with the singing Andrews Sisters gaining worldwide prominence during World War II, followed most notably by Hibbing, MN native Bob Dylan (who launched his career playing free shows on the West Bank of the University of Minnesota Minneapolis campus), to the rise of punk rockers Hüsker Dü, Soul Asylum, the Replacements, and the rhythm and blues stylings of Morris Day and the Time and Prince in the 1980s. R&B mega-producing team Jimmy Jam & Terry Lewis have origins in the Twin Cities, and jazz musician Lester Young lived there for a time in his youth.

These later sources brought the Minneapolis music scene to national attention; the period from about 1977 to 1987 was a period of incredible dynamism in the Minneapolis music scene, with offshoots in the punk scene including Soul Asylum, Babes in Toyland, the Clams and many other seminal favorites, while Prince's immense power in the industry (which peaked during this period) created a Rhythm and Blues mini-empire at his Paisley Park Studios, based in suburban Chanhassen.

Contemporary local artists continue to enjoy critical acclaim such as hip-hop duo Atmosphere and frontman Slug's label Rhymesayers Entertainment, the smaller Doomtree, and commercially successful pop-rockers Semisonic. For instance, while largely unnoticed on their home turf in New York City, the Twin Cities accounted for the majority of national sales for Soul Coughing's second album Irresistible Bliss during its first eight weeks of release; Ole and Lena jokes can't be fully appreciated unless delivered in the sing-songy accent of Scandinavian-Americans, and Garrison Keillor is known around the country for resurrecting the old-style radio comedy with A Prairie Home Companion. Local television had the satirical show The Bedtime Nooz in the 1960s, while area natives Lizz Winstead and Craig Kilborn helped create the increasingly influential Daily Show decades later. Joel and Ethan Coen have produced many films featuring dark comedy, and numerous others brought the offbeat cult shows Mystery Science Theater 3000 and Let's Bowl to the national cable-waves from the Twin Cities.

Popular culture

Stereotypical Minnesotan traits include Lutheranism, "Minnesota nice," "hot dish" (a Minnesotan term for casserole), "lutefisk" (a pungent preparation of fish from Scandinavian recipes that include soaking in lye), a strong sense of community and shared culture with many other Minnesotans instead of just with one's town or city, Minnesota's form of Upper Midwest American English (including Scandinavian-sounding words like "uff da"), and a distinctive type of upper Midwestern accent. Families frequently own or share cabins on central and northern tracts of land in forests and adjoining lakes, and weekend trips out to these properties are common, particularly in the summer. A concern for environmentalism is shared by most state residents in one form or another, vegans and hunters alike. As with other northwoods states (such as Wisconsin, Michigan and Maine), residents like to joke that the mosquito is the state bird because of their high populations in these areas.

Socio-economic

Education

One of the first acts of the Minnesota Legislature when it opened in 1858 was the creation of a Normal School at Winona. It ranks sixth on the 2005-06 Morgan Quitno Smartest State Award and first on the percentage of its residents with a high school diploma or higher.Smartest State Award Accessed 07/24/2006Statemaster Education Statistics High school diploma or higher Accessed 08/16/2006 While Minnesota has resisted movements in education such as school vouchers and the teaching of intelligent design, it is home to one of the first charter schools.

Health

The University of Minnesota Medical School is a highly-rated teaching institution which has made a number of significant breakthroughs in treatment, and its research activities significantly contribute to the state's growing biotechnical industry.University of Minnesota Medical Milestones Accessed 08/14/2006 The Mayo Clinic, a world-renowned medical practice, is based in Rochester, Minnesota. long life expectancies, and death rate per 100,000.Statemaster Health Statistics Physical Exercise by State Accessed 08/16/2006America's Health Rankings 2005 Accessed 08/16/2006Explore Minnesota Living Accessed 08/16/2006Statemaster Health Statistics > Death Rate per 100,000 Accessed 08/16/2006 These and other measures have led one group to rank Minnesota as the healthiest state in the nation, and another to rank it fourth.Statemaster Minnesota Health Statistics Accessed 08/16/2006WebMD Minnesota Ranked Healthiest State December 12,2005 Accessed 08/16/2006Statemaster Health Statistics Health Index by state Accessed 08/16/2006

Crime and safety

After reaching a record 97 homicides in 1995, the city of Minneapolis gained an unpleasant nickname because of the violence: Murderapolis. The term gained widespread use after The New York Times used it when reporting that Minneapolis had surpassed the per capita homicide rate of New York City. Minnesota's major Interstate highways are I-35, I-90, and I-94, all of which pass through or around the Minneapolis-St. Paul metropolitan area. Water transportation is primarily based in the Mississippi River system and ports along Lake Superior in northern Minnesota.

Minnesota's principal airport is Minneapolis-St. Paul International Airport (MSP), the headquarters and a major passenger and freight hub for Northwest Airlines. Large commercial jet service is also provided to and from airports at Duluth and Rochester, with scheduled commuter service available to six smaller cities.

Public transit in Minnesota is currently limited to bus systems in a number of the larger cities as well as a light rail commuter line in the Minneapolis-St. Paul area.

Law and government

As in the national government of the United States, power in Minnesota is divided into three main branches: Executive, Legislative, and Judicial.

Executive

The executive branch is headed by the governor, currently Tim Pawlenty, a Republican, whose term began 6 January, 2003. The current lieutenant governor of Minnesota is Carol Molnau. The other constitutional offices are secretary of state, attorney general and state auditor.

Legislative

The Minnesota Legislature is a bicameral body consisting of the Senate and the House of Representatives. Appeals are heard by the Eighth Circuit Court of Appeals based in St. Louis, Missouri and St. Paul. Some actions in the Twin Cities metropolitan area are coordinated by the Metropolitan Council, and many lakes and rivers are overseen by watershed districts and soil and water conservation districts.

Politics

Minnesota is known for active yet quirky politics, with populism being a longstanding force among all of the state's political parties. Minnesota politics include such oddities as Jesse Ventura, a professional wrestler turned governor and R.T. Rybak, a protester turned crowd-surfing mayor. Minnesota and the District of Columbia were the only electoral votes not won by incumbent Republican President Ronald Reagan. Mondale or Hubert Humphrey were on the Democratic ticket as candidates for President or Vice President in the 1964, 1968, 1976, 1980 and 1984 elections. The Reform Party was able to elect the former mayor of Brooklyn Park, and former professional wrestler, Jesse Ventura to the governorship in 1998. In 2000, Green Party candidate Ralph Nader received just over 5% of the presidential votes cast, gaining Major Party status for the Green Party of Minnesota.

Media

The Twin Cities area is the 15^th largest media market in the United States as ranked by Nielsen Media Research. The state's other top 210 media markets are Fargo-Moorhead (118^th), Duluth-Superior (137^th), Rochester-Mason City-Austin (152^nd), and Mankato (200^th).www.nielsenmedia.com/DMAs.html Accessed 07/23/2006

Broadcast television in Minnesota, and the Upper Midwest, started on April 27th, 1948 when KSTP-TV began broadcasting.kstp.com/article/41/ Accessed 07/23/2006 Hubbard Broadcasting Corporation which owns KSTP is now the only locally owned television company in Minnesota. The most prominent of these is City Pages, the alternative weekly, with 2002 newcomer The Rake offering some competition in the form of a free monthly.

Two of the largest public radio networks are based in Minnesota, Minnesota Public Radio (MPR) and Public Radio International (PRI). MPR has the largest audience of any regional public radio network, while PRI provides more than 400 hours of programming to affiliates across the United States.PRI factsheet Accessed August 17th, 2006About MPR Accessed August 17th, 2006

Sports

Minnesota has a team in all four major professional leagues (MLB, NFL, NBA, and NHL), and the University of Minnesota is part of the oldest functioning major college conference (Big Ten).

Club

Sport

League

Venue

Championships

Minnesota Twins

Baseball

Major League Baseball;AL

Hubert H. Humphrey Metrodome

World Series: 1987, 1991

Minnesota Vikings

American football

National Football League;NFC

Hubert H. The Dallas Stars of the NHL played as the Minnesota North Stars from 1967 to 1993. However, attendance for the Stars had declined significantly through the mid-nineties.fact Today, the NHL has returned, helping rejuvenate state pride in hockey (the Wild have sold out every game in existence).fact

State symbols

State Symbols
State bird	Common Loon
State butterfly	Monarch
State beverage	Milk
State fish	Walleye
State flower	Pink and White Showy Lady Slipper
State fruit	Honeycrisp apple (developed at the University of Minnesota)
State gemstone	Lake Superior agate
State grain	Wild rice
Territory Motto (actual)	Quo sursum velo videre ("I cover to see what is above" is the closest translation)
Territory Motto (intended)	Quae sursum volo videre ("I wish to see what is beyond")
State motto	L'Étoile du Nord ("Star of the North")
State muffin	Blueberry (adopted as part of a school project on how a bill becomes law)
State mushroom	Morel (sponge mushroom;

Chronology

Key Dates:
1906: Duluth Edison Electric Company is formed.
1917: Minnesota Utilities Company is created to serve mining industry.
1923: Four regional electric utilities consolidate as Minnesota Power & Light (MP & L).
1932: Election of FDR marks period of increased scrutiny and regulation of electric utilities, including MP & L.
1950: Minnesota Power terminates affiliation with American Power and Light as its holding company.
1968: Embarks on period of extensive plant construction.
1979-82:Taconite industry recession drives utility to near insolvency.
1985: Investment portfolio boosts market returns well above industry average.
1995: Buys automobile auction company.
1998: Revenues top $1 billion for first time.

Additional topics

Company HistoryElectricity & Utilities

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