MGE Energy Inc. · NASDAQ:MGEE
MGE Energy — Q3 2011 Earnings Presentation
31 slides from MGE Energy's earnings presentation, Nov 4, 2011
Slide 1: Third Quarter 2011 Financial Update
THIRD QUARTER 2011 FINANCIAL UPDATE November 4, 2011
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 Credit Dividend Quality History 3
Slide 4: Organizational Structure and Returns
Organizational Structure and Returns Exchange: NASDAQ Ticker: MGEE Organized: 2001 MGE MGE Transco Madison Gas Other and Electric Co. Power LLC Investment LLC (Est. 1896) (Est. 2002) (Est. 2005) MGE Construct LLC Current ROE: 12.2% (Est. 2002) MGE Power MGE Power Investment: $57 M Central Wisconsin
Slide 5: Service Territory
Service Territory Economic Outlook • Madison – Kiplinger.com, Sept. 2011 Top 10 cities for young adults – Forbes Magazine, July 2011 12th in education – Newgeograph.com, July 2011 15th best city for job growth – Policom Corp, May 2011 12th strongest economy in the United States • Dane County
Slide 6: Recent News
Recent News • MGE Energy, Inc. (MGEE) Public Utility Fortnightly – MGEE ranked as one of the “40 Best Energy Companies” • Madison Gas and Electric Company (MG&E) U.S. Dept. of Energy – Awarded $5.5 million of federal stimulus money for Smart Grid technology investments – Green Power Tomorrow Program
Slide 7: Financial Strength
Financial Strength Investing in Our Core Utility Total Asset Growth Capital Expenditures ($ Millions) $90 Dec. 2005 Dec. 2010 $80 $964 M $70 $736 M $60 $701 $50 $496 $40 $30 $240 $263 $20 $10 Electric Gas $0 2011 2005 2006 2007 2008 2009 2010 Est. 2010 Assets: $964 M Electric $40 $51 $71 $47 $37 $34
Slide 8: Financial Strength: Electric Utility Revenue
Financial Strength Electric Utility Revenue Y-T-D Ended Sept. 30 ($ 000’s) $279,281 $291,804 4.5% increase Actual Cooling Degree Days Y-T-D Ended Sept. 30 (29.3% above normal and decreased 2.5% from 2010) 2010 2011 825 804 Electric Retail Sales 622 Y-T-D Ended Sept. 30 (MWh) 2,540 2,576 1.4% 2010 20
Slide 9: Financial Strength: Gas Utility Revenue
Financial Strength Gas Utility Revenue Y-T-D Ended Sept. 30 ($ 000’s) The 4.8% increase in gas revenues reflects higher gas deliveries, from $114,231 $119,748 colder weather partially offset by lower gas costs. 4.8% increase Actual Heating Degree Days Y-T-D Ended Sept. 30 (6.0% above normal and 2010
Slide 10: Solid Earnings Growth
Solid Earnings Growth $2.50 $2.50 $2.38 $2.27 $2.21 $2.06 $2.00 $1.77 $1.67 $1.69 $1.71 $1.63 $1.57 $1.50 $1.00 $0.50 $0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EPS ($) 10
Slide 11: Regulated Revenue
Regulated Revenue MGEE’s Low Earnings Volatility • Low exposure to economically sensitive industrial customers Electric Retail Revenue, 2010 Gas Revenue, 2010 10% 8% 2% 5% 33% 34% 56% 52% Residential Residential Commercial Commercial Industrial Industrial Public authorities (including UW) Transporta
Slide 12: Solid Earnings Growth: Three Months Ended Sept. 30
Solid Earnings Growth Earnings by Segment – Three Months Ended Sept. 30 ($0.01) $0.06 $- $0.91 $0.05 $0.86 $0.19 $0.18 $0.64 $0.66 2010 2011 12
Slide 13: Solid Earnings Growth: Year-To-Date Ended Sept. 30
Solid Earnings Growth Earnings by Segment – Year-To-Date Ended Sept. 30 $0.17 ($0.01) $2.23 $- $0.58 $0.16 $1.98 $0.51 $1.49 $1.31 2010 2011 13
Slide 14: Strong Asset Base
Strong Asset Base Asset and Market Value Growth ($ Millions) $1,318 $1,268 $1,282 $1,112 $982 $988 $917 $829 $826 $767 $779 $756 $726 $735 $693 $650 $607 $577 $569 $452 $470 $376 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Assets Market Cap. 14
Slide 15: Strong Balance Sheet
Strong Balance Sheet MGEE’s Low Leverage Manageable Debt Maturities • 40.6% total debt at year end 2010 • Note: Remarketing the $19 M, • Improved debt-to-total capital Industrial Development Revenue ratio over the past six years Bonds in 2012. Leverage ($ Millions) $4.2 $4.3 47.0% $4.1 40.6% $3.0 $2
Slide 16: Ample Liquidity
Ample Liquidity Current Lines of Credit for MGE Energy ($40 M) and MGE ($75 M) ($ Millions) Available Lines of Credit Outstanding Short-Term Debt $250 On August 1, 2011, the amended Credit Agreement extended the termination date to $195 $195 $200 July 31, 2015. $150 $125 $115 $115 $115 $100 $50 $23
Slide 17: Strong Cash Flow
Strong Cash Flow Increased cash flows with the addition of the Elm Road and Power West Campus assets ($ Millions) $160 $136 $140 $120 $106 $124 $101 $118 $100 $86 $78 $80 $93 $77 $60 $75 $60 $40 $53 $20 $0 2005 2006 2007 2008 2009 2010 Operating Cash Flow Capital Expenditure 17
Slide 18: Solid Credit Quality
Solid Credit Quality Highest Rated Investor-Owned Electric and Gas Utility S&P (Utility Ratings) Moody’s (Utility Ratings) • Corporate credit AA- • Secured Aa2 • Commercial paper A1+ • Unsecured A1 • Outlook Stable • Commercial paper P-1 • Outlook Stable “MG&E’s business risk profile benefits from a
Slide 19: PSCW Approved Environmental Capital Expenditures
PSCW Approved Environmental Capital Expenditures • Installing environmental controls on Columbia Energy Center near Portage, Wisconsin Pollutant Design Removal Rate Control Technology Sulfur Dioxide (SO2) 90% reduction Scrubber, Fabric Filter Mercury (Hg) 90% reduction Carbon Injection, Fabric Filte
Slide 20: Columbia Environmental Controls Capital Expenditure Forecast
Columbia Environmental Controls Capital Expenditure Forecast ($ Millions) $140 $68 $53 $13 $6 2011 2012 2013 2014 Cumulative Columbia Environmental Expenditures 20
Slide 21: Continued Growth in Transmission Investment
Continued Growth in Transmission Investment ATC Investment in Plant (Excludes DATC CapEx) ($ Billions) Projected $4 MGE Investment: $57 M Current ROE: 12.2% Equity (2010): 45.0% $3 MGE Ownership: 3.6% 10-year capex forecast: $3.4 B Regulator: FERC $2 Moody’s debt rating: A1 S&P debt rating: A+ $1 $0
Slide 22: DATC Integrated 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 projects spanning Wisconsin, Iowa, Illinois, Indiana and Ohio • $4 billion of capital expenditure if all proje
Slide 23: Dividend History and Shareholder Value
Dividend History and Shareholder Value ($/ share) $1.60 $1.51 TTM Dividend CAGR = 3.63% Sept. 2011 $1.40 (1909 through Sept. 30, 2011) $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.04 1909 $- MGE has increased 2011 is our 36th Sept. 2011 dividends annually dividend rate Dividend Yield = since 1975. increas
Slide 24: MGEE versus Industry Average Dividend Payout Ratios
MGEE versus Industry Average (EEI) Dividend Payout Ratios 100% 90% 87% 82% In line with industry average 79% 79% 80% 77% 70% 67% 66% 62% 60% 59% 60% 50% 40% 30% 20% 10% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 MGEE, Div. Payout Ratio EEI, Div. Payout Ratio 24
Slide 25: Delivering Competitive Shareholder Returns
Delivering Competitive Shareholder Returns Sept. 30, 2011 MGEE 9.47% 7.84% 10-yr. Total Return 6.23% 4.67% MGEE 9.05% 4.27% 5-yr. Total Return 4.19% 1.37% MGEE 9.77% 5.01% 3-yr. Total Return 7.65% 3.15% DJUA SNL Energy DJIA 25
Slide 26: Fixed Return Assets
Fixed Return Assets (2001 Leased Generation Law) West Campus Cogeneration Facility Elm Road Generating Facility Investment: $109 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 year
Slide 27: Constructive / Supportive Regulation
Constructive / Supportive Regulation • Supportive regulatory features – Forward-looking test year – Allows deferral of costs – Allows current returns on major projects – New fuel rules/purchased gas adjustment clause Public Service Commission of Wisconsin Facts TERM Commissioners: Phil Montgomery, (
Slide 28: Recent Rate Filing for 2012
Recent Rate Filing for 2012 • MGE filed a limited rate case for 2012 with the PSCW. The limited scope focuses on: – Increased costs related to fuel and purchased power – Increased costs in energy efficiency programs – Improvements to the state’s electric transmission system • The current status is:
Slide 29: Constructive / Supportive Regulation
Constructive / Supportive Regulation Regulatory Research Association (RRA) has assigned Wisconsin’s regulatory climate its highest rating 29
Slide 30: 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 31: 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 31