2019 Annual Report
Form 10-K
Proxy

Our complex world increasingly depends on safe, reliable, affordable and sustainable energy to power our daily lives and our local economy. As your community energy company, Madison Gas and Electric (MGE) is a critical services provider and community partner, dedicated to serving our customers and to enriching the areas we serve, including the evolving Capitol East District near our corporate headquarters in downtown Madison, Wis.

 

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 $2 billion. In 2019, revenue was approximately $569 million. See the Corporate Profile.
 

MGE Energy (MGEE)

Year at a Glance (Thousands, except per share amounts and shares outstanding)	2019	2018	Increase / (Decrease)	% Change
Total Market Value (Dec. 31)	$ 2,732,561	$ 2,078,715	$ 653,846	31.5
Market Price Per Share (Dec. 31)	$ 78.82	$ 59.96	$ 18.86	31.5
Book Value Per Share	$ 24.68	$ 23.56	$ 1.12	4.8
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	$ 568,855	$ 559,768	$ 9,087	1.6
Net Income	$ 86,874	$ 84,219	$ 2,655	3.2
Basic and Diluted Earnings Per Share	$ 2.51	$ 2.43	$ 0.08	3.3
Dividends Declared Per Share	$ 1.38	$ 1.32	$ 0.06	4.5
Dividend Payout Ratio	55.0%	54.3%	0.7%	1.3
Total Assets	$ 2,081,664	$ 1,988,618	$ 93,046	4.7
Total Retail Electric Sales (kWh)	3,213,882	3,289,425	(75,543)	-2.3
Total Gas Deliveries (therms)	291,786	282,700	9,086	3.2

For detailed financial information, see the 2019 MGE Energy Form 10-K.

Your community energy company is delivering on its vision of a more sustainable future, driven by cost-effective, clean energy investments and partnerships to grow the use of new technologies, such as electric vehicles (EV) and smart thermostats, with all customers.

Our goals are bold. Our regulated utility subsidiary, Madison Gas and Electric (MGE), was among the first utilities to announce a goal of net-zero carbon electricity by 2050. MGE’s target reflects our commitment to long-term sustainability and to our customers and the communities that rely on a robust community grid for safe, reliable, affordable and sustainable energy.

To achieve deep decarbonization, we are partnering with those we serve to decarbonize our electricity generation, building clean energy projects and expanding customer programs, like Shared Solar. We are engaging around energy efficiency, joining forces to make smart thermostats available to lower-income households, and we are working to grow the use of EVs with new tools and forward-thinking collaborations. MGE is seizing opportunities to build long-term value for our customers and loyal shareholders.

Strong financial performance

In 2019, we reported earnings of $2.51 per share, compared to $2.43 per share in 2018. Earnings for 2019 were positively impacted by an increase in owned renewable generation assets, namely our Saratoga Wind Farm, and colder weather in the first quarter of 2019.

We understand the importance of dividend growth and stock price appreciation for our investors. MGE Energy has increased the dividend for 44 consecutive years and paid dividends for more than 110 years. No other Wisconsin utility or utility holding company matches our history of dividend increases. The financial publisher Mergent consistently recognizes MGE Energy as a “Dividend Achiever.”

In 2019, your Board of Directors increased the annual dividends paid per share by 4.5% to $1.38. In the last five years, shareholders have seen 24% dividend growth.

We also have seen steady appreciation in our stock price. MGE Energy shares closed 2019 at $78.82, which is an increase from $59.96 at the close of 2018. Throughout the last five years, the price of MGE Energy stock has outpaced the national indices of the S&P 500 and the Russell 2000. In the last 10 years, our stock price has more than tripled.

An important indicator of your investment’s performance, total return is the combination of stock price appreciation and reinvested dividends. Throughout the last five years, MGE Energy’s annualized total return was 14%, outpacing the Russell 2000, S&P 500 and EEI Investor-Owned Electric Utilities. A $1,000 investment in MGE Energy, with dividends reinvested, would have grown to $1,932 during the five years ending Dec. 31, 2019.

MGE continues to maintain the highest credit ratings of any investor-owned combination utility in the nation from Standard & Poor's (S&P) and Moody's. Value Line also gives MGE Energy top marks for investment safety and its highest grades for financial strength.

All of the turbines at our newest, largest wind farm began generating carbon-free electricity in February 2019. MGE's Saratoga Wind Farm, located in Howard County, Iowa, about 200 miles west of Madison, is the company's fourth wind farm. More than 30 turbines dot the rural landscape, delivering clean electricity to the grid.

At nearly 500-feet tall, Saratoga's modern turbines stretch higher to take advantage of faster wind speeds. The blades sweep an area longer than a football field. The larger blades help to increase the amount of energy captured from the wind, which increases Saratoga's efficiency compared to other wind farms. The towers' individual footprints, however, measure only 18 feet across, allowing local farmers to continue to cultivate the land surrounding them.

Within the last 12 years, we have grown our wind capacity from 11 megawatts (MW) to 153 MW. Wind power has decreased in cost, increased in efficiency and carries no fuel costs, all of which help MGE to deliver on our commitment to provide safe, reliable, affordable and sustainable energy to all customers. MGE continues to seek additional opportunities to grow our investment in wind power.

 

Community partners help us grow local clean energy.

Growing our use of renewable energy is one of our strategies for achieving deep decarbonization and our goal of net-zero carbon electricity by 2050. By partnering with large customers, such as municipalities, local schools, businesses and others, we can advance shared sustainability goals.

One such example is our partnership with the City of Middleton and the Middleton-Cross Plains Area School District (MCPASD). Thirty percent of MGE's 5-megawatt (MW) Morey Field Solar project at the Middleton Municipal Airport will serve the City and the school district under Renewable Energy Rider agreements with MGE. Our Renewable Energy Rider is designed for large customers seeking a customized clean energy solution. The customer pays for costs associated with sourcing the renewable generation and for distributing the energy to the customer.

One MW of the Morey Field Solar array will serve nine local school buildings. The superintendent says the district's support for clean energy fits with its mission to educate students as members of their local community as well as the broader, global society.

A 0.5-MW share will serve the City, helping Middleton reach its near-term goal of 25% renewable energy for City operations by 2025 and 100% by 2035. The Morey Field Solar project builds upon MGE's existing clean energy partnership with the City. In early 2017, MGE's first Shared Solar project, located on the roof of Middleton's Municipal Operations Center, began serving Shared Solar participants.

    

Large solar projects capture the power of the sun for all.

A key, foundational objective in our clean energy transition is ensuring all customers benefit from the use of new, sustainable technologies. Like wind turbine technology, the cost of utility-scale solar has decreased, dropping about 80% in less than 10 years, and the technology has improved in productivity. Our investments in large, cost-effective solar projects deliver carbon-free energy to all customers.

MGE is purchasing 150 MW of solar capacity from two Wisconsin projects. The Badger Hollow Solar Farm is located in southwestern Wisconsin where the Bishop family has farmed for decades. The family is leasing some of its land for the 300-MW project. Brad Bishop says payments from the project will help to keep the farm in the family for future generations.

MGE will own 100 MW of the Badger Hollow Solar Farm. MGE also is investing in 50 MW from the 150-MW Two Creeks Solar project in northeastern Wisconsin. Both Two Creeks Solar and the Badger Hollow Solar Farm will feature native ground cover to attract pollinators and to enhance wildlife habitat.

 

 

 

MGE is advancing new technologies in partnership with our customers to help manage our collective use of energy. By employing new technologies to help customers save—whether through remote management of smart thermostats or electric vehicle (EV) home charging stations—we can better manage our grid, our environmental impact and long-term costs for all customers and help participating customers use energy efficiently.

Last summer, we launched MGE Connect™, an expansion of our smart thermostat demand response pilot program. With nearly 1,000 customers enrolled using a variety of smart thermostats, MGE tests the use of these Wi-Fi-connected devices to help manage the grid during summertime periods of peak electricity demand. Working with our partner, EnergyHub®, we are able to make minor temperature increases to household air conditioners during these periods with minimal, if any, impact on comfort.

Lauren and Kuba Krzyzostaniak signed up for MGE Connect after moving into their home on Madison's near east side. Lauren, who works from home, says she barely noticed the remote thermostat adjustments, which can last two to four hours. Customers can opt out of the adjustments at any time.

 

Shared Solar makes it easier than ever for customers to go solar.

MGE's Residential and Community Services team works with our residential customers and community organizations to understand their needs and to share information about energy efficiency, electric and gas safety, and new programs, such as our unique community solar program, Shared Solar.

Building on the success of our first Shared Solar project, MGE is expanding the optional program with a 5-megawatt solar array at Middleton Municipal Airport. Seventy percent of the solar project will serve the program. With minimal up-front cost, Shared Solar offers customers who either cannot or choose not to install solar panels themselves the opportunity to power their home or business with locally generated solar from MGE.

MGE partnered in summer with the Madison Area Chinese Community Organization to host multiple workshops introducing the expansion of the popular program. Partnerships such as this enable MGE to better communicate our programs, products and services with our diverse customer base. Dozens of people attended to hear from MGE energy experts about the convenience and affordability of Shared Solar.

The solar project, known as Morey Field Solar, will feature panels capable of tracking the sun throughout the day, resulting in about 25% more energy harvested compared to fixed panels. The program's share of the array will serve the equivalent of approximately 1,100 households.

    

Our EV charging program enhances sustainability in the workplace. 

It's fair to say Jay Sandvick is an electric vehicle (EV) enthusiast. He has driven an EV for almost 10 years. He used his background and expertise to work with MGE to launch an EV workplace charging program at Madison-Kipp Corporation (MKC), a Madison-based maker of high-pressure, aluminum die castings and other components used in various manufacturing industries, including transportation.

MGE helped Sandvick initiate an employee survey and determine the optimal charging equipment and location at the 120-year-old business. The survey revealed high interest in offering workplace charging with 50% of respondents reporting they would consider an EV if they could charge at work.

Sandvick and other MKC employees and guests keep their EVs charged at the charging station outside of the office. Sandvick says the chargers have generated more awareness of and discussion at the company about the benefits of EVs.

MKC is one of a growing number of local businesses embracing EV charging for both sustainability and employee recruitment and retention. MGE seeks to partner with all of our customers to enable the use of new technologies to meet customers' needs and to achieve our long-term goals.

 

The use of ridesharing services, such as Lyft, has increased dramatically in recent years. It's common to see ridesharing drivers operating at Dane County Regional Airport, which sees about two million travelers each year.

MGE is partnering with Lyft to grow the use of electric vehicles (EV) in the Madison area. MGE and Lyft are offering a $500 bonus to new EV drivers who sign up to drive with Lyft.

The largest contributor of U.S. greenhouse gas (GHG) emissions, transportation accounts for 29% of GHG emissions in the U.S. The electrification of transportation is a key strategy for reducing carbon emissions. Our partnership with Lyft helps to reduce emissions, grow the use of EVs and highlight their benefits. Riders get to experience first-hand what EVs have to offer.

MGE also continues to facilitate charging options across our community, including at Dane County Regional Airport where Lyft drivers and others will be able to charge at a DC fast-charging station powered by green energy. DC fast chargers typically provide 60 to more than 80 miles of range in about 20 minutes.

 

We are helping to educate our community's next generation.

The City of Madison's Fleet Service building served as the backdrop for a one-of-a-kind fall field trip for students from James Madison Memorial High School. The students, enrolled in engineering and consumer auto classes, visited to see and to learn about the City's growing fleet of EVs and the future of transportation.

MGE, the City of Madison, the Madison Metropolitan School District (MMSD) and Madison College teamed up to facilitate the daylong field trip, which included a stop at MGE. Gathered by MGE's public DC fast charger, students learned from MGE staff in Energy Products and Services about the different levels of EV charging. MGE has a public charging network of more than 40 green-powered charging stations, including four DC fast chargers.

MGE has a long history of partnering with our community and its schools to offer our youth lessons in safety, energy efficiency, renewable energy and new technologies. We continue to work with MMSD teachers and staff to bring an EV curriculum into the schools. The program uses real-world EV charging station data to help students learn about sustainability, STEM disciplines and sustainable transportation.

 

Our team works to enable EV charging where it's most popular.

The number of EVs on the road continues to grow. One of the reasons for their increasing popularity—convenience. Driving an EV means no more trips to the gas station to fill up when drivers can "fuel up" from the convenience of their home. More than 80% of EV charging happens at home.

Sabrina Guger understands the value of offering EV charging where people live. She manages several downtown Madison properties for Urban Land Interests (ULI), a longtime developer and provider of hundreds of residential rental units in the city of Madison.

Guger oversees Nine Line at the Yards across from Monona Bay. The 80-unit building features underground parking with EV charging for tenants. Guger worked with MGE to install EV charging stations at several ULI buildings after getting requests from residents and prospective tenants. "People want to charge when they're home," Guger says.

MGE works with many property managers, developers and owners of apartment buildings who say offering EV charging helps them to stay competitive. MGE staff help these customers navigate the process for getting a charging station installed and a charging program for tenants underway.

Our community's next generation can get a hands-on lesson in renewable energy and new energy technologies at the Madison Children's Museum (MCM). With support from the MGE Foundation, the museum's new Rooftop Ramble exhibit features an interactive solar flower installation and a whimsical repurposed windmill, which powers a water feature.

Sustainability is a core value at the museum. Cheryl DeWelt, Environmental Education Manager at the MCM, says improvements to its newly renovated green roof ensure "sustainability for all," providing access and opportunity for all young people to explore the museum's "paradise in the sky."

Inside the rooftop clubhouse, a child-sized electric vehicle (EV)—complete with its own charging station—serves to spark lessons about EVs and sustainable transportation.

The MGE Foundation averages more than a million dollars in charitable contributions annually to our community's nonprofits. The foundation is proud to support the MCM's mission of educating our youth through discovery and fun.

 

Safe, reliable natural gas helps to keep our economy growing.

American Packaging Corporation (APC) operates its 170,000-square-foot printing facility in DeForest, Wis., seven days a week, 24 hours a day. The three-year-old, $50 million investment uses natural gas to help power technically advanced rotogravure printing presses. MGE collaborated with APC before and during construction to design a gas delivery system that meets APC's critical needs for consistent, high-volume service with an eye toward expansion.

With $500 million in annual sales, the company provides consumer brands with flexible packaging for everything from food and beverage items to health care, wellness and beauty products. APC continues to advance new and sustainable technologies, such as its "recycle ready" family of products.

The company's rapid growth in recyclable and compostable packaging is already fueling another expansion in DeForest. Construction is underway for an additional 126,000 square feet of production space that should be ready by mid-2020. MGE is committed to working with our community's businesses to provide safe, reliable, affordable and sustainable energy that meets their needs and grows a healthy local economy.

  

We partner to foster innovation by our community’s entrepreneurs.

The city of Madison enjoys a robust entrepreneurial community driven, in part, by the area's expanding biohealth industry. In 2019, the business incubator Forward BIOLABS expanded on the city's west side in University Research Park, a longtime hub of innovation and affiliate of the University of Wisconsin-Madison.

The MGE Foundation continues to support research, innovation and economic development through its support of Forward BIOLABS. The life sciences incubator provides fully equipped and supported co-working lab space, eliminating the need for new and emerging biohealth companies to lease, equip and operate their own labs. More than a dozen companies call Forward BIOLABS home.

Forward BIOLABS cofounder and CEO Jessica Martin Eckerly says biohealth start-ups face unique, capital-intensive challenges, which the turnkey lab at Forward BIOLABS is designed to address.

"Our member companies are seeking to solve critical health care problems and to develop solutions that save lives," Eckerly says. "Forward BIOLABS enables young companies to focus their efforts on growing efficiently, giving member companies access to a supportive environment, resources and relationships to help them advance cutting-edge technologies."

As member companies graduate from Forward BIOLABS, companies may transition into the 100,000-square-foot MGE Innovation Center, established in 1989 at University Research Park.

 

 

Corporate leadership

Directors of MGE Energy and MGE

Note: Ages as of Dec. 31, 2019.
For detailed information on board members, see the MGE Energy Proxy Statement.

Officers of MGE Energy and MGE

1. Officers of MGE Energy and MGE. All others are MGE officers.
Note: Ages and years of service as of Dec. 31, 2019.
 

Shareholder information