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Russell steps down as Allete CEO

Ed Russell has resigned his positions of president, CEO and chairman of Allete, parent company of Minnesota Power, effective immediately. During his tenure, the company approximately doubled its revenue and income. It also maintained a high profi...

Ed Russell has resigned his positions of president, CEO and chairman of Allete, parent company of Minnesota Power, effective immediately.
During his tenure, the company approximately doubled its revenue and income. It also maintained a high profile as a community booster while anchoring Duluth's economy as its biggest taxpayer and one of its biggest employers.
However, his success was not without controversy as Russell's viewpoints sometimes clashed with others.
David G. Gartzke, senior vice president of finance and chief financial officer was named as Russell's replacement by Allete's board of directors Tuesday afternoon at a meeting in Minneapolis.
Gartzke, a graduate of the University of Minnesota-Duluth and the University of Wisconsin, Milwaukee, joined the company in 1975 and has held his current position since 1995.
Russell, 56, who was unavailable for comment Tuesday afternoon, issued the following statement.
"It has been a great opportunity to bring Allete to this strong plateau," he said. "I have been thinking about transition over the summer, and with the company in excellent shape and with a talented management team in place, now is a good time to do it. After six years, it's Dave Gartzke's turn at bat and I wish him every success in his new role and responsibilities. We have worked closely together and I know his skills and insight will serve Allete well."
James A. Roberts, vice president of corporate relations, said Russell's resignation came as a surprise. He said the decision to leave was an independent one made by Russell and the board did not force, nor ask him to resign.
"He decided now was the right time, and for whatever reason, this is a decision Ed made. He just resigned," Roberts said.
Russell had been on vacation at his home in Rhode Island last week and had not been in the office.
Roberts described Gartzke, 58, as well qualified for his position. He has been with the company on the utility side of the business for years, but has also been very involved in the diversification of the company.
"He is a known figure on Wall Street and he has been our CFO since 1995," Roberts said. "He is also the guardian of our portfolio."
Roberts said both Russell and Gartzke were responsible for maintaining a balance within the company to keep it profitable.
"I give Ed and Dave credit for making sure we didn't grow too quickly and they maintained very strong balance sheets," he said.
Russell, a Harvard business school graduate, joined the company in 1995 when the company's revenues were $673 million. In 2000, they had grown to just over $1.3 billion. Net income has risen from about $65 million in 1995 to $118 million in 2000.{IMG2}
While Allete's generation of electricity in Minnesota and Wisconsin through Minnesota Power was the company's first business, since the early 1990s, the company has diversified into four unrelated areas, energy, automotive services, water services and investments.
Adesa, the company's automobile auction subsidiary has seen major growth and generated $48.5 million in revenues in 2000, 36.2 percent of total revenues for the company, according to Better Investing magazine.
Roberts credits Russell for the company's "explosive diversification" during his tenure. "We had huge growth in a lot of different areas and he played a role and was the person who moved these things along," Roberts said.
"We want to thank Ed for how the company has been successfully transformed into a multi-services business and welcome David in his new role," said Nick Smith, chairman of executive committee of Allete's board of directors. "We are confident that David's intimate understanding and his proven strategic creativity, vision and leadership will help further build a company whose assets are fully appreciated by Wall Street."
Company changes names
Russell oversaw a name change for the company from Minnesota Power to Allete in 2000. The move was to reflect the company's various holdings.
"We're no longer simply a power company," said Russell, when he announced the new name. "We're a multi-service company. We operate in four distinct business units...39 states and six, soon to be eight Canadian provinces."
"We are a company that continues to change and will continue to change as we move ahead," he added. "Minnesota Power is only one leg on our stool, not all the legs."
While the company has enjoyed strong financial success under Russell's leadership, he has been the center of controversy close to home.
In September, 2000, former Great Lakes Aquarium employee Andrew Slade wrote a column in the Duluth News Tribune taking issue with the then-proposed Duluth to Wausau power line. (The Minnesota Power and Wisconsin Public Service Corp., project was recently approved.)
After the column first appeared, Slade received a letter from Allete, stating the column contained errors. Russell, a member of the aquarium board, also informed aquarium Executive Director David Londsale of alleged inaccuracies in the column.
Russell maintained Slade's column reflected badly on the educational programs at the aquarium and Allete requested its names be removed from the learning labs at the facility.
On Oct. 4, Slade submitted his voluntary resignation from the aquarium where he had worked for eight years.
Slade's resignation generated prolonged public debate and was reignited when Russell himself wrote a column, which appeared in the Budgeteer News and the Duluth News Tribune, criticizing Slade for the opinions expressed in his column.
"We chose to no longer be associated with the educational initiatives at the Great Lakes Aquarium because its educational director demonstrated little regard for making accurate and scientifically based determinations. Hence, we removed our name from the Learning Labs, but have remained a strong supporter of the Great Lakes Aquarium," Russell wrote. Russell later personally funded another exhibit at the aquarium.
Russell was in the center of another controversy in the fall of 2000, involving the Boy Scouts and the United Way of Greater Duluth. Russell publicly announced that he would withdraw his personal financial support of the United Way because of a decision by the Duluth charity not to fund the Boy Scouts due to its policy of exclusion toward gays.
Despite local controversies swirling around the former CEO, Allete has enjoyed a strong financial showing this year. In July, the company reported a 19 percent increase in earnings over 2000. Quarterly revenues were $443 million, compared to $327 million in 2000, according to a company press release. July's second quarter earnings were 13 percent ahead of last year's.
"Being a diversified company, we're not dependent on a single business to deliver value to our shareholders," Russell said in the press release. "Our strong second quarter is a clear example of this strategy at work, and we're delighted with the results."
Of late, the company has been in the local spotlight across the Northland as it announced plans for several major projects.
In Grand Rapids, Allete stated plans on Aug. 16 to build a new power plant for the Blandin/UPM Paper Company. On Aug. 9, the company announced it would build a natural-gas powered plant in Superior and in May announced plans to partner with Cleveland-Cliffs in an attempt to acquire all of the assets of closed LTV Steel Mining Company in Hoyt Lakes.
On Aug. 17, the Public Service Commission of Wisconsin approved a joint project of Minnesota Power and the Wisconsin Public Service Corp. to build a 250-mile power line between Duluth and Wausau.
Documents filed this year by Allete with the U.S. Securities and Exchange Commission show Russell held 127,482 shares of stock with another 12,338 shares held for his children. Based on Tuesday's closing quote, Russell's stock is valued at approximately $3.3 million.
His annual salary and bonuses for 2000 were worth approximately $1.3 million in addition to 87,466 stock options. Company contributions to his stock ownership, insurance and retirement plans was $303,564.
Details of Russell's separation agreement are confidential, Roberts said. As of late Tuesday afternoon, Allete employees were still being notified.
Tracking Russell's impact
Since he came to MP in 1995, annual operating revenues have increased from $673 million to just over $1.3 billion in 2000. Net income has risen from about $65 million in 1995 to $118 million in 2000.
In May 1996, Russell was named president, CEO and chairman of the board. That year the firm expanded in all divisions as he launched Minnesota Power's "Drive Toward 2000" strategy to take the company into the new century.
In MP's 1997 annual report, Russell said that the automotive services group had begun to demonstrate its potential and the company was operating 25 auctions in North America.
That year he announced a strong alliance with Manitoba Hydro to jointly deliver low-cost power across the Midwest and MP Telecom was established.
It was also the year that Grandma's Marathon became part of the Minnesota Power tradition. Inspired by the Norwest Bank running team, Russell launched a company fitness program and eventually hired a full-time wellness consultant.
Early in 1999, to the delight of shareholders, Russell announced a two- for-one stock split. This followed a year of significant earnings and dividends. But at the 1998 annual meeting, he portended the economic cloud that soon move the Iron Range.
In his 1998 letter to stockholders Russell cited effects of steel dumping on MP taconite producing customers, the domestic steel industry and related employment.
During 1999, MP acquired Palm Coast Utility Corporation, property in Cape Coral, Fla. and acquired an auto auction in Vancouver, B.C. It also increased its investment in MP Telecom, a fiber optic network.
Also in 1999, MP and its subsidiary Superior Water, Light and Power announced plans to construct a new natural gas fired power plant in Superior. It was a project that would slip out of the news until this summer.
At the 1999 annual meeting, held in May 2000 in Duluth, Russell rolled out "Horizon 2005," a strategy designed to significantly grow the size and profitability of the company. He also addressed the company's lagging stock prices. He predicted that would change once Wall Street took a harder look.
Last May, Allete again held its annual meeting in Duluth. It attracted about 1,000 stockholders and a handful of protesters. There were groups opposing the Arrowhead-Weston power line and Andrew Slade supporters.
Russell used the occasion to announce a new stock issue and recounted Allete's successes in 2000. He defended the proposed power line by pointing out the need to improve the state's energy infrastructure.
"I see the need in the state of Minnesota and the state of Wisconsin," he said. "If we do not complete the project, we will not provide the same level of service we are providing now."
Russell said he believed Allete would continue to progress regardless of the economy.
His confidence was justified by the company's most recent earnings report and Allete's involvements in several major Northland projects.

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