2017 Annual Report

Sustainability through Technology

Better future, stronger communities

Technology is paving the way for a more sustainable energy future. New investments are advancing our clean energy goals. We are building a utility of the future, seizing opportunities to offer new products and services that build customer and shareholder value.

MGE Energy, Inc.

MGE Energy is an investor-owned public utility holding company headquartered in the state capital of Madison, Wis. MGE Energy is the parent company of Madison Gas and Electric Co. The utility provides natural gas and electric service in south-central and western Wisconsin. Assets total approximately $1.9 billion. In 2017, revenue was approximately $563 million.

MGE Energy (MGEE)

Year at a Glance
(Thousands, except per share amounts and shares outstanding)
2017 2016 Increase/ (Decrease) % Change
Total Market Value (Dec. 31) $ 2,187,574 $ 2,263,845 $ (76,271) -3.4
Market Price Per Share (Dec. 31) $ 63.10 $ 65.30 $ (2.20) -3.4
Book Value Per Share $ 22.45 $ 20.89 $ 1.56 7.5
Average Shares Outstanding 34,668,370 34,668,370 - 0.0
Shares Outstanding at Year-End 34,668,370 34,668,370 - 0.0
Operating Revenues $ 563,099 $ 544,745 $ 18,354 3.4
Net Income $ 97,606 $ 75,560 $ 22,046 29.2
Basic and Diluted Earnings Per Share $ 2.82 $ 2.18 $ 0.64 29.4
Dividends Declared Per Share $ 1.26 $ 1.21 $ 0.05 4.1
Dividend Payout Ratio 44.7% 55.5% (10.8)% -19.5
Total Assets $ 1,855,182 $ 1,801,060 $ 54,122 3.0
Total Retail Electric Sales (kWh) 3,237,248 3,323,438 (86,190) -2.6
Total Gas Deliveries (therms) 256,276 251,354 4,922 2.0

For detailed financial information, see the 2017 MGE Energy Form 10K 

Cumulative Total Return Comparison
Earnings Per Share

Gary J. Wolter, MGE Energy Chairman, with MGE President and CEO, Jeffrey M. Keebler

Gary J. Wolter, MGE Energy Chairman, with MGE President and CEO, Jeffrey M. Keebler


Letter to our Shareholders

We are putting new technologies to work to build a more sustainable future.

MGE Top Credit Quality and Dividends Per Share
The evolution of new technology is creating new pathways to greater sustainability. As innovators develop solutions, technology is helping us toward a cleaner and smarter energy future.

Our regulated subsidiary, Madison Gas and Electric (MGE), is putting new technology to work—constructing a new wind farm that is our largest and most efficient to date, implementing new smart home technologies, expanding the use of electric vehicles and more. We constantly scan for innovative technologies that can improve service to our customers and provide value to our shareholders.

Disciplined Financial Performance

At MGE Energy, we are carefully growing our company through strategic investments in cleaner energy and new technology. As we do so, we are maintaining a strong bottom line and top ratings.

In 2017, MGE Energy was cited as a top financial performer among electric utilities by Regulatory Research Associates, a division of S&P Global Market Intelligence.

This study reviewed 36 electric utilities nationwide. MGE Energy ranked among the top five companies in the eight financial quality metrics. For example, MGE Energy received a No. 1 rating for its return on total capital and a No. 2 rating for its capital structure, which is how a company finances its overall operations and growth.

In addition, MGE has the highest credit rating of any investor-owned combination utility in the nation from both Standard & Poor’s and Moody’s. These top ratings reflect our prudent approach to growing our company.

trees downtown Madison

Investments to Advance Energy 2030

Energy 2030 is our framework for building shareholder and customer value. We are investing in projects to move us forward.

These projected investments range from additional renewable energy resources to electric distribution and metering expenditures to information technology infrastructure. In 2018, we project an estimated $231 million in capital investment, more than $100 million of which is for our new wind farm.

These new investments continue our transformation to become a utility of the future and build upon our past expenditures. The investments are driven by our high standards for reliability, by new technologies and by our goals for a more sustainable energy future.

Shareholder Value

Capital Expenditures
In 2017, your Board of Directors approved our largest dividend increase in the last 30 years—increasing the regular quarterly dividend rate by nearly 5%. The action by our Board demonstrates confidence in our long-held strategy of providing solid returns for our shareholders.

We have increased the dividend for 42 consecutive years and consistently paid dividends for more than 100 years. The financial publisher Mergent recognizes MGE Energy as a "Dividend Achiever" for our dividend performance.

Many shareholders choose to reinvest their dividends to grow their value. The total return on your investment combines stock price with dividends. Over the last five years, MGE Energy's annualized total return was 16%—outperforming the Russell 2000 and the S&P 500. A $1,000 investment in MGE Energy, with dividends reinvested, would have grown to $2,109 during the five years ending Dec. 31, 2017.

We reported earnings of $2.82 per share in 2017 compared to $2.18 per share in 2016. Earnings for 2017 included a 62-cent per share one-time tax benefit due to the Tax Cuts and Jobs Act and a 3-cent per share expense from a voluntary contribution to the Madison Gas and Electric Foundation. The charitable contribution lowered the tax benefit on earnings per share to 59 cents. Excluding these amounts, earnings were $2.23 per share for 2017.

Our strong financial position has earned the company Value Line’s highest grade for investment safety and top marks for financial strength.

wind farm
EV charging

Left: Sunset at MGE's Top of Iowa wind farm, celebrating 10 years of generating clean energy.

Middle: Under MGE's new Charge@Home program, MGE installs, owns and maintains electric vehicle charging units at customers' homes.

Right: MGE served as utility coordinator for a major highway expansion project, which required relocation of our gas main and coordinating the relocation of facilities for several other utilities.

Pathways to Further Sustainability

Technological advances offer multiple paths to increased sustainability. Technology plays an important role in our Energy 2030 framework, which is our strategy to meet customer energy needs while responsibly growing investments.

Energy 2030 calls for greater use of renewable resources—30% by 2030—and further reduced carbon emissions—40% from 2005 levels by 2030. If we can move further faster toward these goals, we will. Already, we have reduced carbon emissions 21% since 2005.

In November 2017, we received regulatory approval for our $108 million wind project. The 66-megawatt wind farm will be our largest to date. The site near Saratoga, Iowa, was chosen for its strong wind speeds and proximity to existing transmission infrastructure. New wind turbine technology delivers greater efficiency, providing more electricity per turbine. The economics afforded by both the location and the technology will provide affordable, clean energy for years to come.

In January 2017, our Shared Solar project came online. This 500-kilowatt project, in partnership with the City of Middleton, offers our residential customers the opportunity to purchase locally generated solar energy.

As part of our transition away from coal generation, we have reduced our investment in the coal-fired Columbia Energy Center in Portage, Wis., a facility in which we are a minority owner. MGE no longer has a controlling interest in any coal-fired facilities, having discontinued coal use at our Blount Generating Station in 2011.

Energy Partnerships

While electric generation is a critical part of a sustainable future, so is the technology that customers use at home, at work and on the road.

MGE is helping to transform transportation in the Madison area by helping to advance electric vehicles at customers' homes, customers' businesses, and with public and private fleets.

For example, we are partnering with the City of Madison, which has a goal to electrify 50% of its bus fleet by 2035. Metro Transit has received a federal grant for three, zero-emission electric buses. MGE played a key role in securing the grant by providing the required local matching funds for charging infrastructure as well as technical expertise. Metro Transit, with MGE’s support, has applied for a second federal grant to further expand electric transportation.

MGE also is working to grow residential and workplace electric vehicle charging. For example, with regulatory approval, we expanded our Charge@Home program in 2017, offering more customers the convenience of faster electric vehicle charging at home.

For energy use inside of homes, we have programs to help customers reduce and manage energy consumption. One of MGE's new programs is testing the potential of using smart thermostats to reduce electric usage during periods of higher energy use, such as hot summer days.

For larger commercial customers, MGE launched a new program to serve businesses with renewable energy resources. The Renewable Energy Rider program allows a business to partner with MGE to develop renewable options specific to their business. MGE is the first utility in Wisconsin to offer this opportunity.

Operational Excellence

We consistently work to deliver safe, reliable energy. Our skilled employees, whether working out in the field or behind a desk, are committed to this core mission.

MGE's electric service reliability was ranked No. 2 in the nation for the fewest number of outages, according to a 2016 industry survey of more than 90 electric utilities. MGE has ranked in the top three utilities in the country for the fewest outages in each of the last 10 years.

In addition, MGE recorded the third-fastest average response time when called upon for a potential natural gas leak, according to a 2016 industry-wide survey. MGE's average response time of 15 minutes ranked near the top in this survey of more than 80 utilities.

Natural Gas Operations

MGE led a utility effort for a major Dane County highway expansion project. MGE relocated and upgraded its underground natural gas facilities to accommodate this expansion, serving as the lead coordinator for several other utilities relocating their underground facilities.

Under our ongoing gas expansion program, we continue to add natural gas customers to our service area. Since the program began in 2012, MGE has completed 18 expansion projects, which add homes, farms and businesses to our system. Our new customers appreciate their safe and dependable natural gas service.

New Board Members

Two new members, Marcia Anderson and James Berbee, joined our Board of Directors on March 1, 2018. They bring a breadth and diversity of professional and community experience that we are pleased to welcome to our Board of Directors.

At MGE Energy, we are committed to the communities we serve and to responsible growth for a sustainable future. Thank you for your confidence.

Gary Wolter signature

Gary J. Wolter

Jeff Keebler signature

Jeffrey M. Keebler
President and Chief Executive Officer