November 6, Financial Update 3 rd Quarter 1

Transcription

1 November 6, 2014 Financial Update 3 rd Quarter 1

2 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 actual results to be significantly different than those contemplated, estimated or projected in forward-looking statements. Those factors include the assumptions and factors referred to in the statements themselves as well as risk factors described in the company s latest annual report on Form 10-K, subsequently filed quarterly reports on Form 10-Q and other reports filed with the Securities and Exchange Commission. The company assumes no responsibility to update any forward-looking statements for events occurring after the date hereof. This document does not constitute an offer to sell, or the solicitation of an offer to buy, any securities of MGE Energy, Inc., or Madison Gas and Electric Company. A registration statement relating to the common stock of MGE Energy, Inc., has been declared effective by the Securities and Exchange Commission. Any offering of such common stock is being made solely by means of a prospectus supplement and an accompanying prospectus, copies of which may be obtained from MGE Energy, Inc., at 133 South Blair Street, Madison, Wisconsin 53788, attention: Shareholder Services, telephone no. (800)

3 Highlights Financial Strength Asset growth Earnings growth High Credit Quality Regulatory Support Strong Dividend History 3

4 Organizational Structure Exchange: NASDAQ Ticker: MGEE Organized: 2001 Madison Gas and Electric Co. (Est. 1896) Current ROE: 10.3% MGE Power West Campus LLC (Est. 2003) MGE Power LLC (Est. 2002) Fixed ROE: 12.1% Debt: 47% Equity: 53% Investment: $110 M Lease term: 30 years MGE Power Elm Road LLC (Est. 2003) Fixed ROE: 12.7% Debt: 45% Equity: 55% Investment: Est. $179 M Lease term: 30 years MGE Transco Investment LLC (Est. 2005) Current ROE: 12.2% Investment: $68 M ATC investment Other MAGAEL, LLC (Est. 1973) Central Wisconsin Development Corp. (Est. 1986) North Mendota Energy & Technology Park. LLC (Est. 2013) NGV Fueling Services LLC (Est. 2013) MGE State Energy Services LLC (Est. 2014) 4

5 Service Territory Economic Outlook Madison Best place to live Livability, th best small metro college area American Inst. for Econ. Research Dane County Population s growth predicted to be the highest of any county in Wisconsin through 2035 Low unemployment (Sep. 2014): 3.3% (WI: 5.5%; U.S.: 5.9%) 5

6 2014 Public Utilities Fortnightly Ranking MGEE named 9th Best Energy Company in the US by Public Utilities Fortnightly MGEE achieved Top 40 honors for 7 consecutive years A quote from Michael Burr, Editor, Public Utilities Fortnightly: The best players will be the ones that continue delivering solid performance for shareholders even as they adapt to market changes 6

7 Financial Strength Investing in Our Core Utility Total Asset Growth Dec Dec $1,178 M ($ Millions) $120 Capital Expenditures $954 M $908 $100 $80 $665 $60 $40 $20 $289 $270 Electric Gas $ Est. Electric $47 $37 $34 $47 $82 $100 $64 Gas $8 $14 $14 $16 $14 $16 $20 7

8 Financial Strength Electric Utility Revenue Y-T-D Ended September 30 $310 M $308 M 0.6% decrease Actual Cooling Degree Days Y-T-D Ended September (5.9% below normal and decreased 12.3% from 2013) Electric Retail Sales (MWh) Y-T-D Ended September 30 2,524 2, % decrease Normal Total retail sales volume decrease was driven by cooler than normal weather

9 Financial Strength Gas Utility Revenue Y-T-D Ended September 30 $121 M $163 M 34.6% increase Actual Heating Degree Days Y-T-D Ended September 30 4,799 (16.1% above normal and increased 9.2% from 2013) 5,240 4, Gas Retail Deliveries Y-T-D Ended September 30 (Therms, 000 s) 157, , % increase Normal Gas revenue increased due to: Higher gas costs, under the purchased gas adjustment clause Increased gas deliveries, as a result of colder winter weather 9

10 Regulated Revenue MGEE s Low Earnings Volatility Low exposure to economically sensitive industrial customers Electric Retail Revenue, % 10% Gas Revenue, % 2% 33% 34% 54% 52% Residential Commercial Industrial Public authorities (including UW) Residential Commercial Industrial Transportation & other 10

11 Solid Earnings Per Share Growth* *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 $2.50 $2.16 $2.00 $1.50 $1.47 $1.66 $1.76 $1.86 $1.00 $0.50 $

12 Segment Earning Per Share* Three Months Ended September 30 *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 $0.15 $0.04 $0.70 $0.14 $0.04 $0.67 $0.51 $

13 Segment Earning Per Share* Y-T-D Ended September 30 *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 $0.44 $0.12 $1.75 $0.41 $0.13 $1.88 $1.19 $

14 Strong Asset Base Asset and Market Value Growth ($ millions) $829 $917 $735 $693 $1,268 $1,282 $1,318 $1,112 $982 $988 $767 $779 $826 $756 $1,587 $1,579 $1,620 $1,459 $1,334 $1,292 $1,178 $1, Q Assets Market Cap. 14

15 Strong Balance Sheet MGEE s Low Leverage (39.5% total debt at year end 2013) Manageable Debt Maturities ($ Millions) Low Leverage $ % 45.0% 40.0% 45.4% 39.5% $ % 30.0% 25.0% Total Debt/ Total Capitalization (%) $4.1 $4.2 $

16 Financial Flexibility Ample Liquidity $250.0 Lines of Credit ($ Millions) Outstanding Short-Term Debt ($ Millions) $200.0 $195.0 $150.0 $150.0 $150.0 $100.0 $114.5 $115.0 $115.0 $115.0 $50.0 $22.5 $ Q

17 Financial Flexibility 120% 100% 80% 60% 14% 31% Strong Capital Structure 7% 3% 0% 0% 0% 0% 36% 38% 40% 38% 40% 38% 40% 20% 0% 55% 57% 59% 60% 62% 60% 62% Q CSE LTD STD 17

18 Solid Credit Quality Highest Rated Investor-Owned Electric and Gas Utility S&P (Utility Ratings) Corporate credit AA- Business risk Excellent Commercial paper A-1+ Outlook Stable MG&E s management team has effectively executed its business strategy and operations, while controlling costs. Management has considerable experience and a record of success in operating its electric and gas businesses [and] done an excellent job managing regulatory risk. Source: S&P, February 2014 Moody s (Utility Ratings) Secured Aa2 Unsecured A1 Commercial paper P-1 Outlook Stable The rating reflects [Wisconsin s] above average regulatory environment, MGE s constructive relationship with the PSCW, MGE s ability to recover costs and generate returns, and the expectation that key metrics will remain commensurate with the current rating after completion of significant investments. Source: Moody s, April

19 Financial Flexibility ($ Millions) $180.0 $160.0 $140.0 $120.0 $100.0 $80.0 $60.0 $40.0 $20.0 $0.0 $106 $75 $118 $78 Strong Cash Flow $124 $60 $131 $65 $146 $98 $140 $119 $ TTM 9/2014 Operating Cash Flow Capital Expenditure $93 19

20 PSCW Approved Environmental Capital Expenditure Installed Environmental Controls at Columbia Energy Center Pollutant Design Removal Rate Control Technology Sulfur Dioxide (SO 2 ) 90% reduction Scrubber, Fabric Filter Mercury (Hg) 90% reduction Carbon Injection, Fabric Filter Unit 2 placed into service in April 2014 Unit 1 placed into service in July 2014 Total Capitalized Project amounted to $139 M of which $10 M consisted of AFUDC Wisconsin s Commission approved construction in early

21 Additional Environmental Controls Forecast $30-40 M Cumulative Expenditures In July 2014, a Certificate of Authority was filed with the PSCW for the installation of the selective catalytic reduction system (SCR) Estimated expenditures for the SCR at Columbia are about $30-40 million, subject to PSCW approval 21

22 Continued Growth in Transmission Investments ATC Investment in Plant (Excludes DATC CapEx) ($ Billions) $6 Projected $5 $4 $3 $2 $1 $0 ROE for transmission companies is being challenged MGE Investment: $67.5M Current ROE: 12.2% Equity (2013): 45.6% MGE Ownership: 3.6% 10-year CapEx forecast: $3.3 - $3.9 B Regulator: FERC Moody s debt rating: A1 S&P debt rating: A+ 22

23 Duke American Transmission Co. DATC purchased a 72% ownership take in the Path 15 transmission line in Central California DATC s Midwest Project Portfolio is navigating the regulatory approval process on an estimated $4.0 B of proposed projects: FERC approved 100% current return on CWIP FERC approved 12.2% ROE on 50% equity MISO is currently evaluating these projects Projects may require state-by-state approval DATC plans to begin Zephyr project permitting process Project connects Wyoming wind energy to load centers in the Southwest 23

24 Consistent Dividend Growth Dividend History and Shareholder Value *adjusted for 3-for-2 stock split, effective Feb. 7, 2014 ($ / share) $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 Dividend CAGR = 3.6% (1909 to September 2014) $1.10 TTM Sept $ MGE has paid dividends annually since was our 39th dividend rate increase Sept Dividend Yield = 2.9% 24

25 Dividend Flexibility MGEE versus Industry Average (EEI) Dividend Payout Ratios 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 87% 79% 77% 67% 66% 62% 60% 59% 58% 56% 50% MGEE, Div. Payout Ratio EEI, Div. Payout Ratio Industry average 25

26 Delivering Competitive Shareholder Returns December 31, yr. Total Return MGEE 8.33% 6.82% 10.48% 10.59% 5-yr. Total Return 11.17% 10.77% MGEE 16.01% 17.61% 3-yr. Total Return MGEE 14.21% 11.88% 12.55% 12.61% DJUA SNL Electric Company DJIA 26

27 Fixed Return Assets (2001 Leased Generation Law) West Campus Cogeneration Facility Investment: Fixed ROE: 12.1% Fixed Equity: 53% Initial Lease Term: $110 M (MGE share) 30 years Service Date: April 2005 Electric Capacity: Location: 150 MW Madison, WI Elm Road Generating Station Investment: Fixed ROE: 12.7% Fixed Equity: 55% Initial Lease Term: $179 M (MGE share) 30 years Service Dates: Unit 1 - Feb Unit 2 - Jan Electric Capacity: Location: 106 MW (MGE Share) Oak Creek, WI 27

28 Supportive Regulatory Environment Wisconsin s regulatory ranking is Regulatory Research Association s (RRA s) highest 28

29 2014 Rate Freeze On July 26, 2013, the PSCW approved MGE s request of an electric and natural gas rate freeze through 2014 in an effort to provide rate stability to its customers The approval authorized the following adjustments: MGE generated fuel-related savings in 2012 of $6.2 million; these savings will be used to offset projected cost increases in 2014 Apply 100% AFUDC on the Columbia environmental project Deferral of incremental ATC/MISO fees The authorized return on equity remains unchanged at 10.3% 29

30 2015 Rate Filing On April 17, 2014, MGE requested PSCW approval to decrease 2015 natural gas rates by 2.3%, increase electric rates by 2.8%, primarily driven by: Columbia Energy Center costs associated with the construction of emission-reduction equipment State electric transmission system improvement and reliability costs A request for escrow accounting treatment for transmission related costs starting in 2015 Revisions adjusted the natural gas rates decrease to 1.4% and electric rates increase to 4.3%, driven by: Increased coal delivery costs Lower transmission costs Increased pension and post-retirement benefit costs A PSCW decision is expected by the end of

31 Environmental Steward 1 st utility in Wisconsin to participate in the highest level (Tier 2) of the DNR s Green Tier environmental leadership program 5 th company in Wisconsin to achieve Tier 2 status Voluntarily committed to continually improve environmental performance by developing management strategies and adopting new technologies and practices 31

32 Environmental Steward 3 rd highest green pricing participation rate of any investor-owned utility (NREL) 6 th highest green power sales as a percentage of total retail electricity sales (NREL) 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 (SEPA) recognized MGE as a utility leader for adding solar energy into its generation portfolio 32

33 Questions? Contact: Ken Frassetto Director - Shareholder Services and Treasury Management P. O. Box 1231 Madison, WI Phone: Fax: kfrassetto@mge.com 33