MGE Energy Inc. · NASDAQ:MGEE
MGE Energy — FY2010 Earnings Presentation
28 slides from MGE Energy's earnings presentation, Feb 28, 2011
Slide 1: 2010 Financial Update
2010 FINANCIAL UPDATE FEBRUARY 28, 2011
Slide 2: Forward-looking statements
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 actual results
Slide 3: Financial Strength
Financial Strength: Strong Asset Base Strong Capital Structure High Credit Quality Regulatory Support Strong Dividend History 3
Slide 4: Corporate structure and key facts
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: $54 M Central Wisconsin Current ROE: 10.3% Debt: 42% West Cam
Slide 5: Economic Outlook
Economic Outlook Madison Forbes Magazine, May 2010 – 7th Most Innovative City; 3rd in Tech and Science jobs; 5th in creative jobs; 9th in patents; and has one of the top 10 technology innovation and development parks Policom Corp, May 2010 – 9th strongest economy in the United States Dane Co
Slide 6: Awards and recognition
MGE Energy, Public Utility Fortnightly Sept. 2010 ranked MGE Energy, Inc. among the “40 Best Energy Companies” Madison Gas and Electric, US Dept. of Energy Selected Madison Gas & Electric Company’s application for federal stimulus money and awarded $5.5 million for its Smart Grid Technology
Slide 7: Investing in our core utility
Investing in our core utility Total Asset Growth Capital Expenditures ($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: $964 M 2011 Authorized utility ROE: 10.3% Electric 40 51 71 47
Slide 8: Electric utility revenue and retail sales
Electric Utility Revenue Year Ended Dec. 31 ($ Millions) $361 $332 Actual Cooling Degree Days 829 2009 2010 617 Electric Retail Sales Year Ended Dec 31 (MWh) 368 3,195 3,327 2009 2010 Normal 2009 2010 8
Slide 9: Gas utility revenue and retail sales
Gas Utility Revenue Year Ended Dec. 31 ($ Millions) $192 $166 Actual Heating Degree Days 7,357 7,080 6,798 2009 2010 Gas Retail Sales Year Ended Dec 31 (Therms, Millions) 2009 2010 Normal 207 189 2009 2010 9
Slide 10: MGE Power, LLC and Leased Generation Law
MGE Power, LLC Leased Generation Law While MGE Power is an unregulated entity, its sole purpose is to own generating assets and lease those assets exclusively to MG&E, the utility, under a long-term lease arrangement. These “fixed return” investments were made under a 2001 Wisconsin law called the
Slide 11: West Campus Cogeneration and Elm Road facilities
West Campus Cogeneration Facility Elm Road Generating Facility Investment: $109 M (MGE share) Investment: $180 M (MGE share) Fixed ROE: 12.1% Fixed ROE: 12.7% Fixed Equity: 53% Fixed Equity: 55% Initial Lease Term: 30 years Initial Lease Term: 30 years Service Date: April 2005 Service Date: U1 - Feb
Slide 12: ATC Investment in Plant
ATC Investment In Plant ($ Billions) $4.0 Projected $3.5 MGE Investment: $54 M $3.0 Current ROE: 12.2% MGE Ownership: 3.6% $2.5 Regulator: FERC $2.0 $1.5 $1.0 $0.5 $0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 12
Slide 13: EPS 2009 vs 2010 bridge
$0.22 ($0.03) $0.03 $2.50 $2.21 $0.68 $0.21 $0.05 $0.48 $1.63 $1.47 2009 2010 13
Slide 14: EPS ($)
$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 $0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 EPS ($) 14
Slide 15: Asset and Market Value Growth
Asset and Market Value Growth $1,268 $1,282 $1,318 $1,112 $982 $988 $917 $829 $826 $767 $779 $756 $726 $735 $693 $650 $607 $577 $569 $452 $470 $376 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Assets ($ Millions) Market Cap. ($ Millions) 15
Slide 16: Low leverage and manageable debt maturities
MGEE’s Low Leverage Manageable Utility Debt Maturities 40.6% Total Debt at YE 2010 Note: repricing only of $19M for Improved Debt to Total Industrial Development Revenue Capital ratio over the past Bonds in 2012 $54.4 six years $44.5 Leverage 47.0% 40.6% $22.0 $2.5 $3.0 $4.1 $4.2 $4.3 $4.6
Slide 17: Operating cash flow and capital expenditure
Maintained strong cash flows during periods of heavy capital expenditure $160 $136 $140 $120 $106 $124 $101 $118 $100 $78 $80 $93 $86 $77 $60 $75 $60 $40 $53 $20 $0 2005 2006 2007 2008 2009 2010 Operating Cash Flow ($ Millions) Capital Expenditure ($ Millions) 17
Slide 18: Total Assets 2005 vs 2010
December 2005 December 2010 $33 M, $54 M, 4% 4% $146 M, $300 M, 16% 23% $738 M, $964 M, 80% 73% Utility Fixed Return Assets Transmission Utility Fixed Return Assets Transmission Total Assets Total Assets $917 M $1,318 M 18
Slide 19: Lines of credit and short-term debt
Current Lines of Credit for MGE Energy ($40 M) & MG&E ($75 M) Available Lines of Credit ($ Millions) Outstanding Short-Term Debt ($ Millions) $250 $200 $195 $195 $150 $124.5 $114.5 * $115 $100 $50 $22.5 $0 2008 2009 2010 * Includes $50 million repaid in Feb. 2010, by MGE Power Elm Road 19
Slide 20: Highest rated investor-owned utility
Highest rated investor-owned electric and gas utility S&P (Utility Ratings) Moody’s (Utility Ratings) Secured Aa2 Corporate Credit AA- Unsecured A1 Commercial Paper A1+ Commercial Paper P-1 Outlook Stable Outlook Stable “MG&E’s business risk profile “…The stable outlook reflects an ben
Slide 21: Columbia Energy Center environmental compliance
Environmental compliance expenditures on Columbia Energy Center near Portage, WI These environmental expenditures will help to substantially reduce emissions of SO2 and mercury Total estimated environmental expenditures of $140M Projected In-Service date: 2015 PSCW approved the project in
Slide 22: Dividend history
$1.60 $1.49 TTM 2010 $1.40 Dividend CAGR = 3.64% $1.20 (1909-2010) $1.00 $0.80 $0.60 $0.40 $0.04, $0.20 1909 $- MGE has increased 2010 is our 35th December 2010 dividends annually dividend rate Dividend Yield = since 1975 increase 3.5% 22
Slide 23: Total return vs indices
11.35% MGEE 9.23% 11.03% 3.73% DJUA 3.89% -4.75% 4.62% S&P Electric Utilities 3.77% -7.44% 3.15% DJIA 4.31% -1.61% 10-yr. Total Return 5-yr. Total Return 3-yr. Total Return 23
Slide 24: Wind projects owned and purchased
• Lincoln Red River 11 MW Owned • Top of Iowa III 30 MW Purchase • Top of Iowa II 30 MW Power • Forward 17 MW Agreements • Endeavor 50 MW Future • Iowa Options Up to 175 MW Projects 24
Slide 25: Renewable energy and green pricing
One of the highest green pricing participation rate of any investor- owned utility Total renewable generation capacity of approximately 140 MW Wind (Ownership) 41 MW Wind (PPA’s) 97 MW Early compliance with Renewable Portfolio Standards Solar Electric Power Association (SEPA) recognized
Slide 26: Supportive Regulatory Features
Supportive Regulatory Features Forward-looking Test Year Allows Deferral of Costs Allows Current Returns on Major Projects New Fuel Rules / Purchased Gas Adjustment Clause PSCW Facts Commissioners 3 Elected/Appointed Governor Appointed Term 6 years Rate Case Test Year Forecasted 26
Slide 27: RRA ranking of Wisconsin regulation
Regulatory Research Association (RRA) ranks Wisconsin Regulation as highest for regulatory support – Above Average / 2 27
Slide 28: Contact
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 28