MGE Energy Inc. · NASDAQ:MGEE
MGE Energy — FY2011 Earnings Presentation
30 slides from MGE Energy's earnings presentation, Feb 27, 2012
Slide 1: 2011 Financial Update
2011 FINANCIAL UPDATE February 27, 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 g g Financial Strength Earnings / Supportive Asset Regulation Growth Strong High Credit Dividend Quality li History 3
Slide 4: Organizational Structure and Returns
Organizational g Structure and Returns Exchange: NASDAQ Ticker: MGEE O Organized: i d 2001 200 MGE MGE Transco Madison Gas Other and Electric Co. Power LLC Investment LLC (Est. 1896) (Est. 2002) (Est. ( 2005)) MGE Construct LLC Current ROE: 12 12.2% 2% (E 2002) (Est. MGE Power MGE Power Investment:
Slide 5: Service Territory
Service Territory Economic Outlook • Madison – Kiplinger.com, p g , Sept. p 2011 Top 10 cities for young adults – Forbes Magazine, July 2011 12th in education – Newgeograph.com, N h J l 2011 July 15th best city for job growth – Policom Corp, May 2011 12th strongest economy in the United Stat
Slide 6: Recent News
Recent News • MGE Energy, Inc. (MGEE) • Madison Gas and Electric Company (MG&E) Public Utility Fortnightly U.S. Dept. of Energy – MGEE ranked as one of the – Awarded $5.5 million of federal “40 40 Best Energy Companies Companies” stimulus money for Smart Grid technology investments; completed a Merg
Slide 7: Financial Strength
Financial Strength g Investing in Our Core Utility Total Asset Growth C it l Expenditures Capital E dit ($ Millions) $140 Dec. 2006 Dec. 2011 $1 078 M $1,078 $120 $775 M $100 $783 $80 $60 $543 $40 $295 $232 $20 Electric Gas $0 2012 2006 2007 2008 2009 2010 2011 Est. 2011 Assets: $1,078 M Electric $5
Slide 8: Financial Strength: Electric Utility
Financial Strength g Electric Utility Revenue Year Ended Dec. 31 ($ 000’s) $360,729 $375 858 $375,858 4.2% increase Actual Cooling Degree Days Year Ended Dec. 31 (29.4% above normal and decreased 1.8% from 2010) 2010 2011 829 814 629 Electric Retail Sales Year Ended Dec. 31 (MWh) 3,327 3,353 0.8% 20
Slide 9: Financial Strength: Gas Utility
Financial Strength Gas Utility Revenue Year Ended Dec. 31 ($ 000’s) $165 915 $165,915 $165 271 $165,271 0.4% decrease Actual Heating Degree Days Year Ended Dec. Dec 31 (1.5% below normal and increased 2.9% from 2010) 2010 2011 6,798 6,993 7,096 Gas R G Retail t il Deliveries D li i Year Ended Dec. 3
Slide 10: Solid Earnings Growth
Solid Earnings g Growth $3.00 $2.64 $2.50 $2 50 $2.50 $2 38 $2.38 $2.27 $2.21 $2.06 $2.00 $1.77 $1.69 $ $1.71 $1.62 $1.57 $1.50 $1.00 $0 50 $0.50 $0.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 EPS ($) 10
Slide 11: Regulated Revenue
Regulated g 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) Transpor
Slide 12: Solid Earnings Growth
Solid Earnings Growth $0.22 $(0.03) $2.50 $0.22 ($0.01) $2.64 $0.68 $0.78 $1.63 $1.65 2010 2011 12
Slide 13: Strong Asset Base
Strongg Asset Base Asset and Market Value Growth ($ Millions) Milli ) $1,459 $1,318 $1,268 $1,282 $1 112 $1,112 $982 $917 $1,081 $829 $988 $726 $650 $826 $767 $779 $756 $569 $735 $693 $577 $452 $470 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Assets Market Cap. 13
Slide 14: Strong Balance Sheet
Strongg Balance Sheet MGEE’s Low Leverage Manageable Debt Maturities • 39.8% 39 8% total debt at year end 2011 • Note: Remarketing the $19 M M, • Improved debt‐to‐total capital Industrial Development Revenue ratio over the past six years Bonds in 2012. Low Leverage Manageable Debt Maturities 45.2% 3
Slide 15: Ample Liquidity
Ample Liquidity Current Lines of Credit for MGE Energy ($40 M) and MGE ($75 M) Available Lines of Credit ($ Millions) Outstanding Short‐Term Short Term Debt ($ Millions) $200 $195 $195 On August 1, 2011, the amended Credit Agreement extended the termination date to Julyy 31,, 2015. $ 0 $150 $124.5 $
Slide 16: 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 $131 $124 $118 $120 $106 $101 $93 $77 $75 $ $78 $80 $65 $60 $40 $0 2006 2007 2008 2009 2010 2011 Operating Cash Flow Capital Expenditure 16
Slide 17: Solid Credit Quality
Solid Credit Quality Q y Highest Rated Investor‐Owned Electric and Gas Utility S&P (Utility Ratings) Moody’s (Utility Ratings) • Corporate credit AA‐ • Secured Aa2 • Commercial paper A1+ A1 • Unsecured A1 • Outlook Stable • Commercial paper P‐1 • Outlook Stable “MG&E’s MG&E s business risk profile b
Slide 18: PSCW Approved Environmental Capital Expenditures
PSCW Approved Environmental Capital Expenditures • Installing environmental controls on Columbia Energy Center near Portage, Wisconsin Pollutant Design Removal Rate Control Technology Sulfur Dioxide (SO2) 90% reduction Scrubber, Fabric Filter Mercury (Hg) 90% reduction Carbon Injection, Fabric Filte
Slide 19: Columbia Environmental Controls Capital Expenditure Forecast
Columbia Environmental Controls Capital Expenditure Forecast ($ Millions) $140 $68 $53 $15 $4 2011 2012 2013 201 2014 Cumulative Columbia Environmental Expenditures 19
Slide 20: Continued Growth in Transmission Investment
Continued Growth in Transmission Investment ATC Investment in Plant (Excludes DATC CapEx) ($ Billions) Projected $4 MGE Investment: $57 M Current ROE: 12.2% Equity (2011): 43.0% $3 MGE Ownership: 3.6% 10‐year capex forecast: $3.8 ‐ $4.4 B Regulator: FERC $2 Moody’ss debt rating: A1 Moody S&P debt ra
Slide 21: DATC Transmission Development Plan
• 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 p projects j spanning p g Wisconsin,, Iowa,, Illinois, Indiana and Ohio • $4 billion of capital expenditure if
Slide 22: Dividend History and Shareholder Value
Dividend History and Shareholder Value ($/ share) $1.52 $1.60 2011 Dividend CAGR = 3.6% $1.40 (1909 to 2011) $1.20 $1.00 $0.80 $0.60 $0.40 $0.04 $0 04 $0.20 1909 $‐ 1909 1926 1943 1960 1977 1994 2011 MGE has increased 2011 is our 36th Dec. 2011 dividends annually dividend rate Dividend Yield = since
Slide 23: MGEE versus Industry Average Dividend Payout Ratios
MGEE versus Industry Average (EEI) Di id d Payout Dividend P t Ratios R ti 90% 87% 79% 79% 80% 77% 70% 67% 66% Industry 62% 60% 59% 58% average 60% 50% 40% 30% 20% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 MGEE, Div. Payout Ratio EEI, Div. Payout Ratio 23
Slide 24: Delivering Competitive Shareholder Returns
Delivering Competitive Shareholder Returns Dec 31, Dec. 31 2011 MGEE 10.41% 8 88% 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 24
Slide 25: Fixed Return Assets
Fixed Return Assets (2001 Leased Generation Law) West Campus Cogeneration Facility Elm Road Generating Facility 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 yy
Slide 26: Constructive / Supportive Regulation
Constructive / Supportive Regulation Wisconsin’s regulatory ranking is Regulatory Research Association’s (RRA’s) highest 26
Slide 27: Constructive / Supportive Regulation
Constructive / Supportive Regulation • RRA’s Evaluation of Wisconsin’s Constructive regulation – Forecasted test periods – Opportunity to maintain solid credit quality metrics – Current cash return on 50% of CWIP – Adjustments to reflect electric fuel and gas cost changes Public Service Commission o
Slide 28: 2012 Rate Order
2012 Rate Order • MGE filed a limited rate case for 2012 with the PSCW. PSCW On December 15, 2011, the Commission authorized a: 4.3%, retail electric customer rate increase, driven by: • Electric fuel and purchased power costs • Increased transmission costs • Updated Elm Road Units’ costs • Energy
Slide 29: Environmental Steward
Environmental Steward • 2nd highest green pricing participation rate of any investor‐owned utility • Total renewable generation capacity it off approximately i t l 140 MW: – Wind (ownership) 41 MW – Wind (PPAs) 97 MW • Early compliance with renewable portfolio standards • Solar Electric Power Associ
Slide 30: Questions?
Q Questions? Contact: Ken Frassetto K F tt 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