MGE Energy Inc. · NASDAQ:MGEE
MGE Energy — Q2 2012 Earnings Presentation
30 slides from MGE Energy's earnings presentation, Aug 7, 2012
Slide 1: Financial Update Second Quarter 2012
Financial Update August 7 2012 Second Quarter - 2012
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 Earnings / Supportive Asset Regulation Growth Strong High Dividend Credit History Quality 3
Slide 4: Organizational Structure and Returns
Organizational Structure and Returns Exchange: NASDAQ Ticker: MGEE Organized: 2001 MGE Other MGE Transco Madison Gas Power LLC Investment LLC and Electric Co. (Est. 2002) (Est. 2005) (Est. 1896) MGE Construct LLC MGE Power MGE Power Current ROE: 12.2% (Est. 2002) Current ROE: 10.3% West Campus LLC E
Slide 5: Service Territory
Service Territory Economic Outlook • Madison – Kiplinger.com, July 2012 1st of Top 5 cities for young adults – Policom Corp, June 2012 7th strongest economy nationally – Parenting.com, June 2012 7th best city for education nationally – Technology Index, June 2012 17th high-tech hub nationall
Slide 6: Recent News
Recent News • MGE Energy, Inc. (MGEE) • Madison Gas and Electric Company Public Utility Fortnightly (MG&E) U.S. Dept. of Energy – MGEE ranked as one of the – Awarded $5.5 million of federal “40 Best Energy Companies” stimulus money for Smart Grid Mergent Inc. technology investments; completed a netw
Slide 7: Financial Strength
Financial Strength Investing in Our Core Utility Capital Expenditures ($ Millions) Total Asset Growth $140 $120 Dec. 2006 Dec. 2011 $1,078 M $100 $775 M $80 $783 $60 $543 $40 $20 $295 $232 $0 2012 Electric Gas 2006 2007 2008 2009 2010 2011 Est. 2011 Assets: $1,078 M Electric $51 $71 $47 $37 $34 $47
Slide 8: Financial Strength: Electric Utility Revenue
Financial Strength Electric Utility Revenue Y-T-D Ended June 30 $177 M $186 M Actual Cooling Degree Days 5.3% increase Y-T-D Ended June 30 (97.6% above normal and increased 75.0% from 2011) 2011 2012 336 192 170 Electric Retail Sales Y-T-D Ended June 30 (MWh) 2011 2012 Normal 1,603 1,616 0.8% increa
Slide 9: Financial Strength: Gas Utility Revenue
Financial Strength Gas Utility Revenue Y-T-D Ended June 30 $102 M $76 M Gas revenues decrease is due in part 26.2% to the decrease in gas deliveries, decrease driven by milder winter weather, and lower gas prices 2011 2012 Gas Retail Deliveries Actual Heating Degree Days Y-T-D Ended June 30 (Therms,
Slide 10: Regulated Revenue
Regulated Revenue MGEE’s Low Earnings Volatility • Low exposure to economically sensitive industrial customers Electric Retail Revenue, 2011 Gas Revenue, 2011 10% 7% 2% 5% 33% 34% 57% 52% Residential Residential Commercial Commercial Industrial Industrial Public authorities (including UW) Transporta
Slide 11: Solid Earnings Per Share Growth
Solid Earnings Per Share Growth $3.00 $2.64 $2.50 $2.50 $2.38 $2.27 $2.21 $2.06 $2.00 $1.71 $1.77 $1.69 $1.62 $1.57 $1.50 $1.00 $0.50 $0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 11
Slide 12: Segment Earnings Per Share Three Months Ended June 30
Segment Earnings Per Share Three Months Ended June 30 $0.06 $- $0.62 $0.06 $- $0.55 $0.19 $0.19 $0.37 $0.30 2011 2012 12
Slide 13: Strong Asset Base
Strong Asset Base Asset and Market Value Growth ($ Millions) $1,507 $1,459 $1,282 $1,318 $1,268 $1,112 $982 $917 $1,081 $1,093 $829 $988 $726 $650 $826 $735 $767 $779 $756 $693 $577 $470 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012, Q2 Assets Market Cap. 13
Slide 14: Strong Balance Sheet
Strong Balance Sheet MGEE’s Low Leverage Manageable Debt Maturities • 39.8% total debt at year end 2011 ($ Millions) • Improved debt-to-total capital ratio over the past six years Low Leverage $4.1 $4.2 $4.3 45.2% $2.7 $3.0 2012 2013 2014 2015 2016 39.8% 2006 2007 2008 2009 2010 2011 Debt/ Total Cap
Slide 15: Ample Liquidity
Ample Liquidity Current Lines of Credit for MGE Energy ($40 M) and MG&E ($75 M) Available Lines of Credit ($ Millions) Outstanding Short-Term Debt ($ Millions) $250 On August 1, 2011, the amended Credit Agreement extended the termination date to $200 July 31, 2015. $195 $195 $150 $124.5 $114.5 * $10
Slide 16: Lower Leverage
Lower Leverage Decreased debt position provides financial flexibility for dividends 120% 3% 0% 0% 100% 8% 7% 13% 14% 80% 38% 40% 39% 37% 36% 33% 31% 60% 40% 57% 59% 60% 61% 55% 54% 55% 20% 0% 2006 2007 2008 2009 2010 2011 Q2 2012 CSE LTD STD 16
Slide 17: Solid Credit Quality
Solid Credit Quality Highest Rated Investor-Owned Electric and Gas Utility S&P (Utility Ratings) Moody’s (Utility Ratings) • Corporate credit AA- • Secured Aa2 • Commercial paper A1+ • Unsecured A1 • Outlook Stable • Commercial paper P-1 • Outlook Stable “MG&E’s business risk profile benefits from a
Slide 18: Strong Cash Flow
Strong Cash Flow Increased cash flows with the addition of the Power Elm Road and Power West Campus assets ($ Millions) $160 $136 $140 $131 $124 $124 $118 $120 $106 $101 $100 $77 $75 $78 $76 $80 $93 $65 $60 $60 $40 $20 $0 2006 2007 2008 2009 2010 2011 June 30, 2012 TTM Operating Cash Flow Capital Ex
Slide 19: PSCW Approved Environmental Capital Expenditure
PSCW Approved Environmental Capital Expenditure • Installing environmental controls on Columbia Energy Center near Portage, Wisconsin Pollutant Design Removal Rate Control Technology Sulfur Dioxide (SO2) 90% reduction Scrubber, Fabric Filter Mercury (Hg) 90% reduction Carbon Injection, Fabric Filter
Slide 20: Columbia Environmental Controls Capital Expenditure Forecast
Columbia Environmental Controls Capital Expenditure Forecast $140 M $68 M $54 M ** $14 M $4 M * 2011 2012 2013 2014 Cumulative Expenditures Annual Expenditures * Actual expenditure ** $20.8 M actual expenditure Y-T-D 20
Slide 21: Continued Growth in Transmission Investment
Continued Growth in Transmission Investment ATC Investment in Plant (Excludes DATC CapEx) ($ Billions) Projected $4 MGE investment: $59 M Current ROE: 12.2% Equity (2011): 46.0% $3 MGE ownership: 3.6% 10-year capex forecast: $3.8 - $4.4 B Regulator: FERC $2 Moody’s debt rating: A1 S&P debt rating: A
Slide 22: DUKE American Transmission Co.
DUKE American Transmission Co. • DATC, a newly-formed, 50/50 joint venture between Duke Energy and ATC, announced an integrated transmission development plan in five Midwestern states • Development Plan: • Includes seven, FERC approved projects spanning Wisconsin, Iowa, Illinois, Indiana and Ohio, w
Slide 23: Dividend History and Shareholder Value
Dividend History and Shareholder Value ($ / share) $1.54 $1.80 Dividend CAGR = 3.6% June 2012, TTM $1.60 (1909 to June 2012) $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.04 1909 $0.20 $- 1909 1926 1943 1960 1977 1994 2011 MGE has paid 2011 was our 36th June 2012 Dividend dividends annually dividend rate Y
Slide 24: MGEE versus Industry Average (EEI) Dividend Payout Ratios
MGEE versus Industry Average (EEI) Dividend Payout Ratios 90% 87% 79% 79% 80% 77% 70% 67% 66% 62% Industry 60% 59% average 60% 58% 50% 40% 30% 20% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 MGEE, Div. Payout Ratio EEI, Div. Payout Ratio 24
Slide 25: Delivering Competitive Shareholder Returns
Delivering Competitive Shareholder Returns Dec. 31, 2011 MGEE 10.41% 8.88% 10-yr. Total Return 4.76% 4.57% MGEE 9.41% 4.44% 5-yr. Total Return -0.86% 2.37% MGEE 16.95% 12.75% 3-yr. Total Return 8.32% 14.89% DJUA S&P Utilities DJIA 25
Slide 26: Fixed Return Assets (2001 Leased Generation Law)
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 27: Constructive & Supportive Regulation
Constructive & Supportive Regulation Wisconsin’s regulatory ranking is Regulatory Research Association’s (RRA’s) highest 27
Slide 28: 2013 Rate Filing
2013 Rate Filing In March 2012, MG&E filed for a 2013 rate increase with the PSCW: 5.8% retail electric customer rate increase driven by: • Construction costs of emission reduction equipment at Columbia Energy Center • Improvements to the state’s transmission system • Costs for a purchased power a
Slide 29: Environmental Steward
Environmental Steward • 2nd highest green pricing participation rate of any investor-owned utility • Total renewable generation capacity of approximately 140 MW: – Wind (ownership) 41 MW – Wind (PPAs) 97 MW • Early compliance with renewable portfolio standards • Solar Electric Power Association (SEP
Slide 30: Questions?
Questions? Contact: Ken Frassetto Director - Shareholder Services and Treasury Management Post Office Box 1231 Madison, WI 53701-1231 Phone: 608-252-4723 Fax: 608-252-7098 E-mail: kfrassetto@mge.com 30