Form 10-Q

United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: March 31, 2021 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________
Commission File No.	Name of Registrant, State of Incorporation, Address of Principal Executive Offices, and Telephone No.	IRS Employer Identification No.
000-49965	MGE Energy, Inc. (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 \| mgeenergy.com	39-2040501
000-1125	Madison Gas and Electric Company (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 \| mge.com	39-0444025

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:

MGE Energy, Inc. Yes ☒ No ☐Madison Gas and Electric Company Yes ☒ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files):

MGE Energy, Inc. Yes ☒ No ☐Madison Gas and Electric Company Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company	Emerging Growth Company
MGE Energy, Inc.	☒	☐	☐	☐	☐
Madison Gas and Electric Company	☐	☐	☒	☐	☐

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

MGE Energy, Inc. ☐Madison Gas and Electric Company ☐

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):

MGE Energy, Inc. Yes ☐ No ☒Madison Gas and Electric Company Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading symbol(s)		Name of each exchange on which registered
Common Stock, $1 Par Value Per Share		MGEE		The NASDAQ Stock Market

Number of Shares Outstanding of Each Class of Common Stock as of April 30, 2021
MGE Energy, Inc.	Common stock, $1.00 par value, 36,163,370 shares outstanding.
Madison Gas and Electric Company	Common stock, $1.00 par value, 17,347,894 shares outstanding (all of which are owned beneficially and of record by MGE Energy, Inc.).

Table of Contents

PART I. FINANCIAL INFORMATION.3

Filing Format3

Forward-Looking Statements3

Where to Find More Information3

Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report4

Item 1. Financial Statements.6

MGE Energy, Inc.6

Consolidated Statements of Income (unaudited)6

Consolidated Statements of Cash Flows (unaudited)7

Consolidated Balance Sheets (unaudited)8

Consolidated Statements of Common Equity (unaudited)9

Madison Gas and Electric Company10

Consolidated Statements of Income (unaudited)10

Consolidated Statements of Cash Flows (unaudited)11

Consolidated Balance Sheets (unaudited)12

Consolidated Statements of Equity (unaudited)13

MGE Energy, Inc., and Madison Gas and Electric Company14

Notes to Consolidated Financial Statements (unaudited)14

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.30

Item 3. Quantitative and Qualitative Disclosures About Market Risk.44

Item 4. Controls and Procedures.46

PART II. OTHER INFORMATION.47

Item 1. Legal Proceedings.47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.47

Item 4. Mine Safety Disclosures.48

Item 5. Other Information.48

Item 6. Exhibits.48

Signatures - MGE Energy, Inc.49

Signatures - Madison Gas and Electric Company50

PART I. FINANCIAL INFORMATION.

Filing Format

This combined Form 10-Q is being filed separately by MGE Energy, Inc. (MGE Energy) and Madison Gas and Electric Company (MGE). MGE is a wholly owned subsidiary of MGE Energy and represents a majority of its assets, liabilities, revenues, expenses, and operations. Thus, all information contained in this report relates to, and is filed by, MGE Energy. Information that is specifically identified in this report as relating solely to MGE Energy, such as its financial statements and information relating to its nonregulated business, does not relate to, and is not filed by, MGE. MGE makes no representation as to that information. The terms "we" and "our," as used in this report, refer to MGE Energy and its consolidated subsidiaries unless otherwise indicated.

Forward-Looking Statements

This report, and other documents filed by MGE Energy and MGE with the Securities and Exchange Commission (SEC) from time to time, contain forward-looking statements that reflect management's current assumptions and estimates regarding future performance and economic conditions—especially as they relate to economic conditions, future load growth, revenues, expenses, capital expenditures, financial resources, regulatory matters, and the scope and expense associated with future environmental regulation. These forward-looking statements are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "expect," "anticipate," "estimate," "could," "should," "intend," "will," and other similar words generally identify forward-looking statements. Both MGE Energy and MGE caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied.

The factors that could cause actual results to differ materially from the forward-looking statements made by a registrant include: (a) those factors discussed in the registrants' 2020 Annual Report on Form 10-K: Item 1A. Risk Factors, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, as updated by Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, and Item 8. Financial Statements and Supplementary Data – Note 16, as updated by Part I, Item 1. Financial Statements – Note 8 in this report, and (b) other factors discussed herein and in other filings made by that registrant with the SEC.

Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. MGE Energy and MGE assume no obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date of this report, except as required by law.

Where to Find More Information

The public may read and copy any reports or other information that MGE Energy and MGE file with the SEC at the SEC's public reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents also are available to the public from commercial document retrieval services, the website maintained by the SEC at sec.gov, MGE Energy's website at mgeenergy.com, and MGE's website at mge.com. Copies may be obtained from our websites free of charge. Information contained on MGE Energy's and MGE's websites shall not be deemed incorporated into, or to be a part of, this report.

Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report

Abbreviations, acronyms, and definitions used in the text and notes of this report are defined below.

MGE Energy and Subsidiaries:

CWDCCentral Wisconsin Development Corporation

MAGAELMAGAEL, LLC

MGEMadison Gas and Electric Company

MGE EnergyMGE Energy, Inc.

MGE PowerMGE Power, LLC

MGE Power Elm RoadMGE Power Elm Road, LLC

MGE Power West CampusMGE Power West Campus, LLC

MGE ServicesMGE Services, LLC

MGE State Energy ServicesMGE State Energy Services, LLC

MGE TranscoMGE Transco Investment, LLC

MGEE TranscoMGEE Transco, LLC

North MendotaNorth Mendota Energy & Technology Park, LLC

Other Defined Terms:

2017 Tax ActTax Cut and Jobs Act of 2017

2021 PlanMGE Energy's 2021 Long-Term Incentive Plan

ACEAffordable Clean Energy

AFUDCAllowance for Funds Used During Construction

ATCAmerican Transmission Company LLC

ATC HoldcoATC Holdco, LLC

Badger Hollow IBadger Hollow I Solar Farm

Badger Hollow IIBadger Hollow II Solar Farm

BlountBlount Station

CACertificate of Authority

CAVRClean Air Visibility Rule

CCRCoal Combustion Residual

codificationFinancial Accounting Standards Board Accounting Standards Codification

ColumbiaColumbia Energy Center

COVID-19Coronavirus Disease 2019

CSAPRCross-State Air Pollution Rule

DthDekatherms, a quantity measure for natural gas

electric marginElectric revenues less fuel for electric generation and purchase power costs, a non-GAAP measure

Elm Road UnitsElm Road Generating Station

EPAUnited States Environmental Protection Agency

FERCFederal Energy Regulatory Commission

FTRFinancial Transmission Rights

GAAPGenerally Accepted Accounting Principles

gas marginGas revenues less cost of gas sold, a non-GAAP measure

GHGGreenhouse Gas

heating degree days (HDD)Measure of the extent to which the average daily temperature is below 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide heating

IRSInternal Revenue Service

kWhKilowatt-hour, a measure of electric energy produced

MISOMidcontinent Independent System Operator (a regional transmission organization)

MWMegawatt, a measure of electric energy generating capacity

MWhMegawatt-hour, a measure of electric energy produced

NAAQSNational Ambient Air Quality Standards

NO_xNitrogen Oxide

PGAPurchased Gas Adjustment clause, a regulatory mechanism used to reconcile natural gas costs recovered in rates to actual costs

PPAPurchased Power Agreement

PSCWPublic Service Commission of Wisconsin

RiversideRiverside Energy Center

ROEReturn on Equity

SCRSelective Catalytic Reduction

SECSecurities and Exchange Commission

SO₂Sulfur Dioxide

Stock PlanDirect Stock Purchase and Dividend Reinvestment Plan of MGE Energy

WCCFWest Campus Cogeneration Facility

working capitalCurrent assets less current liabilities

WPLWisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation

XBRLeXtensible Business Reporting Language

Item 1. Financial Statements.

MGE Energy, Inc.

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)


			Three Months Ended March 31,
			Three Months Ended March 31,
			2021		2020
	Operating Revenues:
	Electric revenues	$	100,645	$	93,028
	Gas revenues		67,270		56,845
	Total Operating Revenues		167,915		149,873

	Operating Expenses:
	Fuel for electric generation		13,171		9,706
	Purchased power		9,355		10,486
	Cost of gas sold		37,444		30,798
	Other operations and maintenance		45,682		44,369
	Depreciation and amortization		18,382		18,167
	Other general taxes		4,827		4,907
	Total Operating Expenses		128,861		118,433
	Operating Income		39,054		31,440

	Other income, net		2,078		5,671
	Interest expense, net		(5,740)		(6,061)
	Income before income taxes		35,392		31,050
	Income tax provision		(459)		(5,013)
	Net Income	$	34,933	$	26,037

	Earnings Per Share of Common Stock
	Basic	$	0.97	$	0.75
	Diluted	$	0.97	$	0.75

	Dividends per share of common stock	$	0.370	$	0.353

	Weighted Average Shares Outstanding
	Basic		36,163		34,668
	Diluted		36,165		34,668

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


		Three Months Ended
		March 31,
		2021		2020
Operating Activities:
Net income	$	34,933	$	26,037
Items not affecting cash:
Depreciation and amortization		18,382		18,167
Deferred income taxes		(796)		1,433
Provision for doubtful receivables		388		734
Employee benefit plan cost (credit)		1,461		(940)
Equity earnings in investments		(2,444)		(2,266)
Other items		(277)		(1,974)
Changes in working capital items:
(Increase) decrease in current assets		(2,851)		14,089
Decrease in current liabilities		(4,213)		(2,738)
Dividends from investments		1,967		2,700
Cash contributions to pension and other postretirement plans		(1,552)		(1,470)
Other noncurrent items, net		(1,115)		47
Cash Provided by Operating Activities		43,883		53,819

Investing Activities:
Capital expenditures		(34,746)		(46,758)
Capital contributions to investments		(670)		(1,643)
Other		(419)		(398)
Cash Used for Investing Activities		(35,835)		(48,799)

Financing Activities:
Cash dividends paid on common stock		(13,380)		(12,221)
Repayments of long-term debt		(1,182)		(1,155)
Net proceeds from short-term debt		1,500		3,000
Other		(523)		(664)
Cash Used for Financing Activities		(13,585)		(11,040)

Change in cash, cash equivalents, and restricted cash		(5,537)		(6,020)
Cash, cash equivalents, and restricted cash at beginning of period		47,039		25,814
Cash, cash equivalents, and restricted cash at end of period	$	41,502	$	19,794

Supplemental disclosures of cash flow information:
Significant noncash investing activities:
Accrued capital expenditures	$	8,843	$	8,129

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands)


		March 31,	December 31,
ASSETS		2021		2020
Current Assets:
Cash and cash equivalents	$	40,239	$	44,738
Accounts receivable, less reserves of $6,382 and $5,787, respectively		43,172		41,384
Other accounts receivable, less reserves of $1,307 and $1,290, respectively		9,702		7,300
Unbilled revenues		25,148		27,511
Materials and supplies, at average cost		32,222		32,513
Fuel for electric generation, at average cost		4,885		6,356
Stored natural gas, at average cost		1,578		8,396
Prepaid taxes		11,210		15,179
Regulatory assets - current		24,313		14,748
Other current assets		9,042		11,394
Total Current Assets		201,511		209,519
Other long-term receivables		1,486		1,435
Regulatory assets		139,667		142,504
Pension benefit asset		17,848		13,873
Other deferred assets and other		22,564		22,259
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,633,908		1,630,286
Construction work in progress		157,970		139,099
Total Property, Plant, and Equipment		1,791,878		1,769,385
Investments		95,283		94,676
Total Assets	$	2,270,237	$	2,253,651

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,800	$	4,771
Short-term debt		54,000		52,500
Accounts payable		53,840		54,642
Accrued interest and taxes		7,540		8,539
Accrued payroll related items		10,019		12,635
Regulatory liabilities - current		37,035		41,664
Derivative liabilities		9,790		10,160
Other current liabilities		6,774		6,015
Total Current Liabilities		183,798		190,926
Other Credits:
Deferred income taxes		236,903		231,471
Investment tax credit - deferred		21,588		21,821
Regulatory liabilities		143,365		142,239
Accrued pension and other postretirement benefits		77,941		78,168
Derivative liabilities		1,800		3,980
Finance lease liabilities		17,623		17,532
Other deferred liabilities and other		71,297		72,211
Total Other Credits		570,517		567,422
Capitalization:
Common shareholders' equity		997,711		976,000
Long-term debt		518,211		519,303
Total Capitalization		1,515,922		1,495,303
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization	$	2,270,237	$	2,253,651

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc.

Consolidated Statements of Common Equity (unaudited)

(In thousands, except per share amounts)


									Accumulated
					Additional				Other
	Common Stock				Paid-in		Retained		Comprehensive
	Shares		Value		Capital		Earnings		Income/(Loss)		Total
Three Months Ended March 31, 2020
Beginning Balance	34,668	$	34,668	$	316,268	$	504,740	$	-	$	855,676
Net income							26,037				26,037
Common stock dividends declared
($0.353 per share)							(12,221)				(12,221)
Ending Balance - March 31, 2020	34,668	$	34,668	$	316,268	$	518,556	$	-	$	869,492

Three Months Ended March 31, 2021
Beginning Balance	36,163	$	36,163	$	394,408	$	545,429	$	-	$	976,000
Net income							34,933				34,933
Common stock dividends declared
($0.3700 per share)							(13,380)				(13,380)
Equity-based compensation plans and other					158						158
Ending Balance - March 31, 2021	36,163	$	36,163	$	394,566	$	566,982	$	-	$	997,711

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Statements of Income (unaudited)

(In thousands)


			Three Months Ended
			March 31,
			2021		2020
	Operating Revenues:
	Electric revenues	$	100,645	$	93,028
	Gas revenues		67,270		56,845
	Total Operating Revenues		167,915		149,873

	Operating Expenses:
	Fuel for electric generation		13,171		9,706
	Purchased power		9,355		10,486
	Cost of gas sold		37,444		30,798
	Other operations and maintenance		45,538		44,150
	Depreciation and amortization		18,382		18,167
	Other general taxes		4,827		4,907
	Total Operating Expenses		128,717		118,214
	Operating Income		39,198		31,659

	Other (expense) income, net		(104)		3,380
	Interest expense, net		(5,753)		(6,111)
	Income before income taxes		33,341		28,928
	Income tax benefit (provision)		433		(4,371)
	Net Income	$	33,774	$	24,557
	Less Net Income Attributable to Noncontrolling Interest, net of tax		(5,501)		(5,493)
	Net Income Attributable to MGE	$	28,273	$	19,064

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


		Three Months Ended
		March 31,
		2021		2020
Operating Activities:
Net income	$	33,774	$	24,557
Items not affecting cash:
Depreciation and amortization		18,382		18,167
Deferred income taxes		(1,766)		976
Provision for doubtful receivables		388		734
Employee benefit plan cost (credit)		1,461		(940)
Other items		(252)		(1,721)
Changes in working capital items:
(Increase) decrease in current assets		(3,037)		12,953
(Decrease) increase in current liabilities		(4,037)		290
Cash contributions to pension and other postretirement plans		(1,552)		(1,470)
Other noncurrent items, net		(1,380)		(428)
Cash Provided by Operating Activities		41,981		53,118

Investing Activities:
Capital expenditures		(34,746)		(46,758)
Other		(462)		(406)
Cash Used for Investing Activities		(35,208)		(47,164)

Financing Activities:
Distributions to parent from noncontrolling interest		(5,000)		(7,000)
Repayments of long-term debt		(1,182)		(1,155)
Net proceeds from short-term debt		1,500		3,000
Other		(523)		(664)
Cash Used for Financing Activities		(5,205)		(5,819)

Change in cash, cash equivalents, and restricted cash		1,568		135
Cash, cash equivalents, and restricted cash at beginning of period		6,404		5,529
Cash, cash equivalents, and restricted cash at end of period	$	7,972	$	5,664

Supplemental disclosures of cash flow information:
Significant noncash investing activities:
Accrued capital expenditures	$	8,843	$	8,129

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Balance Sheets (unaudited)

(In thousands)

		March 31,	December 31,
ASSETS		2021		2020
Current Assets:
Cash and cash equivalents	$	6,709	$	4,103
Accounts receivable, less reserves of $6,382 and $5,787, respectively		43,172		41,384
Affiliate receivables		530		532
Other accounts receivable, less reserves of $1,307 and $1,290, respectively		9,698		7,295
Unbilled revenues		25,148		27,511
Materials and supplies, at average cost		32,222		32,513
Fuel for electric generation, at average cost		4,885		6,356
Stored natural gas, at average cost		1,578		8,396
Prepaid taxes		11,102		14,848
Regulatory assets - current		24,313		14,748
Other current assets		8,940		11,326
Total Current Assets		168,297		169,012
Affiliate receivable long-term		1,986		2,118
Regulatory assets		139,667		142,504
Pension benefit asset		17,848		13,873
Other deferred assets and other		22,877		22,448
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,633,936		1,630,314
Construction work in progress		157,970		139,099
Total Property, Plant, and Equipment		1,791,906		1,769,413
Investments		433		603
Total Assets	$	2,143,014	$	2,119,971

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,800	$	4,771
Short-term debt		54,000		52,500
Accounts payable		53,808		54,576
Accrued interest and taxes		9,574		10,405
Accrued payroll related items		10,019		12,635
Regulatory liabilities - current		37,035		41,664
Derivative liabilities		9,790		10,160
Other current liabilities		6,776		6,042
Total Current Liabilities		185,802		192,753
Other Credits:
Deferred income taxes		204,853		200,390
Investment tax credit - deferred		21,588		21,821
Regulatory liabilities		143,365		142,239
Accrued pension and other postretirement benefits		77,941		78,168
Derivative liabilities		1,800		3,980
Finance lease liabilities		17,623		17,532
Other deferred liabilities and other		71,445		72,173
Total Other Credits		538,615		536,303
Capitalization:
Common shareholder's equity		758,689		730,416
Noncontrolling interest		141,697		141,196
Total Equity		900,386		871,612
Long-term debt		518,211		519,303
Total Capitalization		1,418,597		1,390,915
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization	$	2,143,014	$	2,119,971

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Statements of Equity (unaudited)

(In thousands)

								Accumulated
					Additional				Other		Non-
	Common Stock				Paid-in		Retained	Comprehensive			Controlling
	Shares		Value		Capital		Earnings	Income/(Loss)			Interest		Total
Three Months Ended March 31, 2020
Beginning balance	17,348	$	17,348	$	222,917	$	397,021	$	-	$	140,303	$	777,589
Net income							19,064				5,493		24,557
Distributions to parent from
noncontrolling interest											(7,000)		(7,000)
Ending Balance - March 31, 2020	17,348	$	17,348	$	222,917	$	416,085	$	-	$	138,796	$	795,146

Three Months Ended March 31, 2021
Beginning balance	17,348	$	17,348	$	252,917	$	460,151	$	-	$	141,196	$	871,612
Net income							28,273				5,501		33,774
Distributions to parent from
noncontrolling interest											(5,000)		(5,000)
Ending Balance - March 31, 2021	17,348	$	17,348	$	252,917	$