MGE Energy Inc. · NASDAQ:MGEE
MGE Energy — Q3 2014 Earnings Presentation
33 slides from MGE Energy's earnings presentation, Nov 6, 2014
Slide 1: Financial Update 3rd Quarter
November 6, 2014 Financial Update 3rd Quarter 1
Slide 2: Disclaimer
Disclaimer All statements in this presentation other than historical facts are forward-looking statements that involve risks and uncertainties which are subject to change at any time. Such statements are based upon management’s expectations at the time they are made. Various factors could cause actu
Slide 3: Highlights
Highlights Financial Strength Asset growth High Credit Quality Earnings growth Regulatory Support Strong Dividend History 3
Slide 4: Organizational Structure
Organizational Structure Exchange: NASDAQ Ticker: MGEE Organized: 2001 Madison Gas MGE Other and Electric Co. MGE Transco Power LLC Investment LLC (Est. 1896) (Est. 2002) Current ROE: (Est. 2005) 10.3% MAGAEL, LLC MGE Power (Est. 1973) MGE Power West Campus Current ROE: 12.2% Central Wisconsin Elm R
Slide 5: Service Territory
Service Territory Economic Outlook • Madison – Best place to live • Livability, 2015 – 4th best small metro college area • American Inst. for Econ. Research 2014-15 • Dane County – Population’s growth predicted to be the highest of any county in Wisconsin through 2035 – Low unemployment (Sep. 2014):
Slide 6: 2014 Public Utilities Fortnightly Ranking
2014 Public Utilities Fortnightly Ranking MGEE named 9th Best Energy Company in the US by Public Utilities Fortnightly MGEE achieved Top 40 honors for 7 consecutive years A quote from Michael Burr, Editor, Public Utilities Fortnightly: “The best players will be the ones that continue deliverin
Slide 7: Financial Strength: Investing in Our Core Utility
Financial Strength Investing in Our Core Utility Total Asset Growth Capital Expenditures ($ Millions) Dec. 2008 Dec. 2013 $120 $1,178 M $100 $908 $954 M $80 $665 $60 $40 $20 $289 $270 $0 2014 2008 2009 2010 2011 2012 2013 Est. Electric $47 $37 $34 $47 $82 $100 $64 Gas $8 $14 $14 $16 $14 $16 $20 Elec
Slide 8: Financial Strength: Electric Utility Revenue
Financial Strength Electric Utility Revenue Y-T-D Ended September 30 Actual Cooling Degree Days Y-T-D Ended September 30 $310 M $308 M (5.9% below normal and decreased 12.3% from 2013) 0.6% decrease 707 659 620 2013 2014 Electric Retail Sales (MWh) 2013 2014 Normal Y-T-D Ended September 30 0.5% Tota
Slide 9: Financial Strength: Gas Utility Revenue
Financial Strength Gas Utility Revenue Actual Heating Degree Days Y-T-D Ended September 30 Y-T-D Ended September 30 (16.1% above normal and $163 M increased 9.2% from 2013) $121 M 34.6% increase 4,799 5,240 4,512 2013 2014 Gas Retail Deliveries Y-T-D Ended September 30 2013 2014 Normal (Therms, 000’
Slide 10: Regulated Revenue: MGEE's Low Earnings Volatility
Regulated Revenue MGEE’s Low Earnings Volatility Low exposure to economically sensitive industrial customers Electric Retail Revenue, 2013 Gas Revenue, 2013 5% 10% 10% 2% 33% 34% 54% 52% Residential Residential Commercial Commercial Industrial Industrial Public authorities (including UW) Transportat
Slide 11: Solid Earnings Per Share Growth
Solid Earnings Per Share Growth* *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 $2.50 $2.16 $2.00 $1.86 $1.76 $1.66 $1.47 $1.50 $1.00 $0.50 $0.00 2009 2010 2011 2012 2013 11
Slide 12: Segment Earning Per Share (Three Months)
Segment Earning Per Share* Three Months Ended September 30 *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 $0.04 $0.70 $0.15 $0.04 $0.67 $0.14 $0.51 $0.49 2013 2014 12
Slide 13: Segment Earning Per Share (Year-to-Date)
Segment Earning Per Share* Y-T-D Ended September 30 *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 $0.12 $1.75 $0.13 $1.88 $0.44 $0.41 $1.34 $1.19 2013 2014 13
Slide 14: Strong Asset Base
Strong Asset Base Asset and Market Value Growth ($ millions) $1,587 $1,579 $1,620 $1,459 $1,268 $1,282 $1,318 $1,112 $1,334 $1,292 $982 $1,178 $917 $829 $1,081 $988 $767 $779 $826 $735 $756 $693 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q3 2014 Assets Market Cap. 14
Slide 15: Strong Balance Sheet
Strong Balance Sheet MGEE’s Low Leverage Manageable Debt Maturities (39.5% total debt at year end 2013) ($ Millions) Low Leverage $34.4 50.0% 45.4% $24.5 45.0% 39.5% 40.0% 35.0% 30.0% $4.1 $4.2 $4.3 25.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Debt/ Total Capitalization (%) 15
Slide 16: Financial Flexibility: Ample Liquidity
Financial Flexibility Ample Liquidity Lines of Credit ($ Millions) $250.0 Outstanding Short-Term Debt ($ Millions) $200.0 $195.0 $150.0 $150.0 $150.0 $114.5 $100.0 $115.0 $115.0 $115.0 $50.0 $22.5 $0.0 2009 2010 2011 2012 2013 Q3 2014 16
Slide 17: Financial Flexibility: Strong Capital Structure
Financial Flexibility Strong Capital Structure 120% 100% 7% 3% 0% 0% 0% 0% 14% 80% 38% 40% 38% 40% 38% 36% 31% 60% 40% 55% 57% 59% 60% 62% 60% 62% 20% 0% 2008 2009 2010 2011 2012 2013 Q3 2014 CSE LTD STD 17
Slide 18: Solid Credit Quality
Solid Credit Quality Highest Rated Investor-Owned Electric and Gas Utility S&P (Utility Ratings) Moody’s (Utility Ratings) • Corporate credit AA- • Secured Aa2 • Business risk Excellent • Unsecured A1 • Commercial paper A-1+ • Commercial paper P-1 • Outlook Stable • Outlook Stable “…MG&E’s managemen
Slide 19: Financial Flexibility: Strong Cash Flow
Financial Flexibility Strong Cash Flow ($ Millions) $180.0 $160.0 $153 $146 $140 $140.0 $131 $124 $119 $118 $120.0 $106 $98 $93 $100.0 $75 $78 $80.0 $65 $60 $60.0 $40.0 $20.0 $0.0 2008 2009 2010 2011 2012 2013 TTM 9/2014 Operating Cash Flow Capital Expenditure 19
Slide 20: PSCW Approved Environmental Capital Expenditure
PSCW Approved Environmental Capital Expenditure • Installed Environmental Controls at Columbia Energy Center Pollutant Design Removal Rate Control Technology Sulfur Dioxide (SO2) 90% reduction Scrubber, Fabric Filter Mercury (Hg) 90% reduction Carbon Injection, Fabric Filter • Unit 2 placed into ser
Slide 21: Additional Environmental Controls
Additional Environmental Controls Forecast $30-40 M 2014 2015 2016 2017 2018 Cumulative Expenditures • In July 2014, a Certificate of Authority was filed with the PSCW for the installation of the selective catalytic reduction system (SCR) • Estimated expenditures for the SCR at Columbia are about $3
Slide 22: Continued Growth in Transmission Investments
Continued Growth in Transmission Investments ATC Investment in Plant (Excludes DATC CapEx) ($ Billions) Projected $6 $5 $4 $3 $2 $1 MGE Investment: $67.5M $0 Current ROE: 12.2% 2010 2013 2014 2017 2018 2011 2012 2015 2016 2019 2020 Equity (2013): 45.6% MGE Ownership: 3.6% 10-year CapEx forecast: $3.
Slide 23: Duke American Transmission Co.
Duke American Transmission Co. • DATC purchased a 72% ownership take in the Path 15 transmission line in Central California • DATC’s Midwest Project Portfolio is navigating the regulatory approval process on an estimated $4.0 B of proposed projects: FERC approved 100% current return on CWIP FERC
Slide 24: Consistent Dividend Growth
Consistent Dividend Growth Dividend History and Shareholder Value *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 ($ / share) Dividend CAGR = 3.6% $1.10 $1.20 (1909 to September 2014) TTM Sept. 2014 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 1909 1922 1935 1948 1961 1974 1987 2000 2013 MGE has pa
Slide 25: Dividend Flexibility
Dividend Flexibility MGEE versus Industry Average (EEI) Dividend Payout Ratios 100% 90% 87% 79% 77% 80% 70% 67% 66% 62% Industry 60% 59% 58% average 60% 56% 50% 50% 40% 30% 20% 10% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 MGEE, Div. Payout Ratio EEI, Div. Payout Ratio 25
Slide 26: Delivering Competitive Shareholder Returns
Delivering Competitive Shareholder Returns December 31, 2013 MGEE 10.48% 10.59% 10-yr. Total Return 8.33% 6.82% MGEE 16.01% 11.17% 5-yr. Total Return 10.77% 17.61% MGEE 14.21% 11.88% 3-yr. Total Return 12.55% 12.61% DJUA SNL Electric Company DJIA 26
Slide 27: Fixed Return Assets
Fixed Return Assets (2001 Leased Generation Law) West Campus Cogeneration Facility Elm Road Generating Station Investment: $110 M (MGE share) Investment: $179 M (MGE share) Fixed ROE: 12.1% Fixed ROE: 12.7% Fixed Equity: 53% Fixed Equity: 55% Initial Lease Term: 30 years Initial Lease Term: 30 years
Slide 28: Supportive Regulatory Environment
Supportive Regulatory Environment Wisconsin’s regulatory ranking is Regulatory Research Association’s (RRA’s) highest 28
Slide 29: 2014 Rate Freeze
2014 Rate Freeze • On July 26, 2013, the PSCW approved MGE’s request of an electric and natural gas rate freeze through 2014 in an effort to provide rate stability to its customers • The approval authorized the following adjustments: MGE generated fuel-related savings in 2012 of $6.2 million; thes
Slide 30: 2015 Rate Filing
2015 Rate Filing • On April 17, 2014, MGE requested PSCW approval to decrease 2015 natural gas rates by 2.3%, increase electric rates by 2.8%, primarily driven by: – Columbia Energy Center costs associated with the construction of emission-reduction equipment – State electric transmission system imp
Slide 31: Environmental Steward
Environmental Steward • 1st utility in Wisconsin to participate in the highest level (Tier 2) of the DNR’s Green Tier environmental leadership program • 5th company in Wisconsin to achieve Tier 2 status • Voluntarily committed to continually improve environmental performance by developing management
Slide 32: Environmental Steward
Environmental Steward • 3rd highest green pricing participation rate of any investor-owned utility (NREL) • 6th highest green power sales as a percentage of total retail electricity sales (NREL) • Total renewable generation capacity of approximately 140 MW: – Wind (ownership) 41 MW – Wind (PPAs) 97
Slide 33: Questions?
Questions? Contact: Ken Frassetto Director - Shareholder Services and Treasury Management P. O. Box 1231 Madison, WI 53701-1231 Phone: 608-252-4723 Fax: 608-252-7098 E-mail: kfrassetto@mge.com 33