MGE Energy(MGEE) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION. This section presents the unaudited consolidated financial information for MGE Energy, Inc. and Madison Gas and Electric Company, including financial statements, notes, and management's discussion and analysis Filing Format This combined Form 10-Q is filed by MGE Energy, Inc. and its wholly-owned subsidiary, Madison Gas and Electric Company, with MGE representing the majority of operations - The report is a combined Form 10-Q for MGE Energy, Inc. and its wholly-owned subsidiary, Madison Gas and Electric Company[7] Forward-Looking Statements The report contains forward-looking statements based on historical performance and current expectations, subject to inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on historical performance and current expectations, involving inherent risks and uncertainties that may cause actual results to differ materially[8] - Factors that could cause material differences are discussed in the 2024 Annual Report on Form 10-K (Item 1A, Item 7, Footnote 16) and updated in this report (Part I, Item 2, Footnote 8)[9] - MGE Energy and MGE do not undertake to publicly update or revise any forward-looking statement, except as required by law[10] Where to Find More Information MGE Energy and MGE file reports with the SEC, which are available on www.sec.gov and their respective company websites free of charge - SEC filings (10-K, 10-Q, 8-K) are available on **www.sec.gov**[11](index=11&type=chunk) - Reports are also available free of charge on MGE Energy's (mgeenergy.com) and MGE's (mge.com) websites[12] Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report This section provides a comprehensive list of definitions, abbreviations, and acronyms used throughout the report for clarity and consistency - The section defines various terms, abbreviations, and acronyms used in the report, including company names (e.g., MGE Energy, MGE), regulatory bodies (e.g., PSCW, SEC, EPA), and industry-specific terms (e.g., AFUDC, ATC, kWh, MW, MISO)[13][14] Item 1. Financial Statements. This section presents the unaudited consolidated financial statements for MGE Energy, Inc. and Madison Gas and Electric Company, including statements of income, cash flows, balance sheets, and common equity, along with detailed notes on significant accounting policies, new accounting standards, investments, taxes, pension plans, equity arrangements, share-based compensation, commitments, rate matters, derivatives, fair value measurements, joint plant ownership, revenue, and segment information MGE Energy, Inc. Consolidated Financial Statements This section presents the unaudited consolidated financial statements for MGE Energy, Inc., including statements of income, cash flows, balance sheets, and common equity Consolidated Statements of Income (unaudited) This section provides the unaudited consolidated statements of income for MGE Energy, Inc. for the three and six months ended June 30 MGE Energy, Inc. Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------- | :------------------ | :------------------ | :-------------------- | | Total Operating Revenues | $159,452 | $145,713 | +$13,739 | | Total Operating Expenses | $125,229 | $115,978 | +$9,251 | | Operating Income | $34,223 | $29,735 | +$4,488 | | Net Income | $26,498 | $23,794 | +$2,704 | | Basic EPS | $0.73 | $0.66 | +$0.07 | | Diluted EPS | $0.72 | $0.66 | +$0.06 | | Dividends per share | $0.450 | $0.428 | +$0.022 | MGE Energy, Inc. Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------- | :------------------ | :------------------ | :-------------------- | | Total Operating Revenues | $378,422 | $337,049 | +$41,373 | | Total Operating Expenses | $291,334 | $266,569 | +$24,765 | | Operating Income | $87,088 | $70,480 | +$16,608 | | Net Income | $68,090 | $57,608 | +$10,482 | | Basic EPS | $1.86 | $1.59 | +$0.27 | | Diluted EPS | $1.86 | $1.59 | +$0.27 | | Dividends per share | $0.900 | $0.855 | +$0.045 | Consolidated Statements of Cash Flows (unaudited) This section presents the unaudited consolidated statements of cash flows for MGE Energy, Inc. for the six months ended June 30 MGE Energy, Inc. Consolidated Statements of Cash Flows (Six Months Ended June 30) | Activity | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Cash Provided by Operating Activities | $133,953 | $130,434 | +$3,519 | | Cash Used for Investing Activities | $(118,254) | $(113,509) | -$4,745 | | Cash Used for Financing Activities | $(27,059) | $(12,414) | -$14,645 | | Change in cash, cash equivalents, and restricted cash | $(11,360) | $4,511 | -$15,871 | | Cash, cash equivalents, and restricted cash at end of period | $13,136 | $19,537 | -$6,401 | Consolidated Balance Sheets (unaudited) This section provides the unaudited consolidated balance sheets for MGE Energy, Inc. as of June 30, 2025, and December 31, 2024 MGE Energy, Inc. Consolidated Balance Sheets (As of June 30, 2025 and December 31, 2024) | Asset/Liability Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------------- | :--------------------------- | :----------------------------- | :------- | | Total Current Assets | $198,252 | $227,265 | -$29,013 | | Total Property, Plant, and Equipment | $2,340,734 | $2,287,346 | +$53,388 | | Total Assets | $2,860,537 | $2,827,959 | +$32,578 | | Total Current Liabilities | $109,837 | $125,563 | -$15,726 | | Total Other Credits | $719,453 | $708,561 | +$10,892 | | Common shareholders' equity | $1,269,973 | $1,230,138 | +$39,835 | | Long-term debt | $761,274 | $763,697 | -$2,423 | | Total Liabilities and Capitalization | $2,860,537 | $2,827,959 | +$32,578 | Consolidated Statements of Common Equity (unaudited) This section presents the unaudited consolidated statements of common equity for MGE Energy, Inc. for the six months ended June 30 MGE Energy, Inc. Consolidated Statements of Common Equity (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Beginning Balance | $1,230,138 | $1,140,073 | +$90,065 | | Net income | $68,090 | $57,608 | +$10,482 | | Common stock dividends declared | $(32,872) | $(30,930) | -$1,942 | | Direct Stock Purchase and Dividend Reinvestment Plan | $3,750 | — | +$3,750 | | Equity-based compensation plans and other | $867 | $877 | -$10 | | Ending Balance | $1,269,973 | $1,167,628 | +$102,345 | Madison Gas and Electric Company Consolidated Financial Statements This section presents the unaudited consolidated financial statements for Madison Gas and Electric Company, including statements of income, cash flows, balance sheets, and equity Consolidated Statements of Income (unaudited) This section provides the unaudited consolidated statements of income for Madison Gas and Electric Company for the three and six months ended June 30 Madison Gas and Electric Company Consolidated Statements of Income (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Total Operating Revenues | $159,452 | $145,713 | +$13,739 | | Total Operating Expenses | $124,941 | $115,849 | +$9,092 | | Operating Income | $34,511 | $29,864 | +$4,647 | | Net Income | $24,475 | $21,754 | +$2,721 | | Net Income Attributable to MGE | $18,761 | $15,988 | +$2,773 | Madison Gas and Electric Company Consolidated Statements of Income (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Total Operating Revenues | $378,422 | $337,049 | +$41,373 | | Total Operating Expenses | $290,749 | $266,026 | +$24,723 | | Operating Income | $87,673 | $71,023 | +$16,650 | | Net Income | $64,278 | $53,954 | +$10,324 | | Net Income Attributable to MGE | $52,965 | $42,591 | +$10,374 | Consolidated Statements of Cash Flows (unaudited) This section presents the unaudited consolidated statements of cash flows for Madison Gas and Electric Company for the six months ended June 30 Madison Gas and Electric Company Consolidated Statements of Cash Flows (Six Months Ended June 30) | Activity | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Cash Provided by Operating Activities | $127,988 | $128,429 | -$441 | | Cash Used for Investing Activities | $(112,518) | $(112,516) | -$2 | | Cash Used for Financing Activities | $(29,437) | $(15,484) | -$13,953 | | Change in cash, cash equivalents, and restricted cash | $(13,967) | $429 | -$14,396 | | Cash, cash equivalents, and restricted cash at end of period | $6,092 | $7,134 | -$1,042 | Consolidated Balance Sheets (unaudited) This section provides the unaudited consolidated balance sheets for Madison Gas and Electric Company as of June 30, 2025, and December 31, 2024 Madison Gas and Electric Company Consolidated Balance Sheets (As of June 30, 2025 and December 31, 2024) | Asset/Liability Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------------- | :--------------------------- | :----------------------------- | :------- | | Total Current Assets | $191,681 | $223,304 | -$31,623 | | Total Property, Plant, and Equipment | $2,340,762 | $2,287,373 | +$53,389 | | Total Assets | $2,729,740 | $2,705,395 | +$24,345 | | Total Current Liabilities | $109,626 | $125,858 | -$16,232 | | Total Other Credits | $686,257 | $676,035 | +$10,222 | | Common shareholder's equity | $1,018,884 | $989,419 | +$29,465 | | Noncontrolling interest | $153,699 | $150,386 | +$3,313 | | Total Liabilities and Capitalization | $2,729,740 | $2,705,395 | +$24,345 | Consolidated Statements of Equity (unaudited) This section presents the unaudited consolidated statements of equity for Madison Gas and Electric Company for the six months ended June 30 Madison Gas and Electric Company Consolidated Statements of Equity (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Beginning balance | $1,139,805 | $1,053,256 | +$86,549 | | Net income | $64,278 | $53,954 | +$10,324 | | Cash dividends paid to parent by MGE | $(23,500) | $(24,000) | +$500 | | Distributions to parent from noncontrolling interest | $(8,000) | $(10,000) | +$2,000 | | Ending Balance | $1,172,583 | $1,073,210 | +$99,373 | Notes to Consolidated Financial Statements (unaudited) This section provides detailed notes to the consolidated financial statements, covering significant accounting policies, new standards, investments, taxes, and other financial disclosures 1. Summary of Significant Accounting Policies. This section outlines the significant accounting policies applied in the preparation of the consolidated financial statements - MGE consolidates MGE Power Elm Road and MGE Power West Campus as VIEs due to contractual agreements[35] Cash, Cash Equivalents, and Restricted Cash (In thousands) | Category | MGE Energy (June 30, 2025) | MGE Energy (Dec 31, 2024) | MGE (June 30, 2025) | MGE (Dec 31, 2024) | | :-------------------------------- | :------------------------- | :------------------------ | :------------------ | :------------------ | | Cash and cash equivalents | $10,569 | $21,302 | $3,525 | $16,865 | | Restricted cash | $869 | $1,113 | $869 | $1,113 | | Receivable - margin account | $1,698 | $2,081 | $1,698 | $2,081 | | Total | $13,136 | $24,496 | $6,092 | $20,059 | - Early retirement of Columbia Unit 1 and 2 by the end of 2029 is probable, with assets classified as "plant to be retired" and depreciated on a straight-line basis[42][43] - No impairment loss was recorded as of June 30, 2025[44] 2. New Accounting Standards. This section discusses the adoption of new accounting standards and their expected impact on the financial statements - New FASB guidance on income tax disclosures (effective after Dec 15, 2024) has been adopted by MGE, with no material impact expected[45] - Future FASB guidance on disaggregation of income statement expenses (effective after Dec 15, 2026) is not expected to have a material impact[46] 3. Investment in ATC and ATC Holdco. This section details MGE Energy's subsidiaries' investments in ATC and ATC Holdco, accounted for using the equity method - MGE Energy's subsidiaries, MGE Transco and MGEE Transco, account for investments in ATC and ATC Holdco using the equity method, with earnings recorded as "Other income"[47][48] MGE Transco Investment in ATC (In thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Equity earnings from investment in ATC | $3,066 | $2,748 | $6,056 | $5,470 | | Dividends received from ATC | $2,345 | $2,132 | $5,632 | $4,238 | | Capital contributions to ATC | $2,679 | $1,070 | $5,171 | $1,785 | - MGE Transco made a $3.2 million capital contribution to ATC in July 2025[49] 4. Taxes. This section provides details on income taxes, including effective income tax rate reconciliations and tax credit sales Effective Income Tax Rate Reconciliation (Three Months Ended June 30) | Factor | MGE Energy 2025 | MGE Energy 2024 | MGE 2025 | MGE 2024 | | :-------------------------------- | :-------------- | :-------------- | :------- | :------- | | Statutory federal income tax rate | 21.0 % | 21.0 % | 21.0 % | 21.0 % | | State income taxes, net of federal benefit | 6.4 | 6.2 | 6.2 | 6.2 | | Amortized investment tax credits | (1.3) | (2.4) | (1.4) | (2.6) | | Credit for electricity from renewable energy | (13.2) | (11.7) | (14.4) | (12.9) | | AFUDC equity, net | (0.5) | (0.7) | (0.5) | (0.7) | | Amortization of utility excess deferred tax - tax reform | (2.5) | (6.8) | (2.7) | (7.5) | | Other, net | 0.2 | 0.2 | 0.2 | 0.1 | | Effective income tax rate | 10.1 % | 5.8 % | 8.4 % | 3.6 % | Effective Income Tax Rate Reconciliation (Six Months Ended June 30) | Factor | MGE Energy 2025 | MGE Energy 2024 | MGE 2025 | MGE 2024 | | :-------------------------------- | :-------------- | :-------------- | :------- | :------- | | Statutory federal income tax rate | 21.0 % | 21.0 % | 21.0 % | 21.0 % | | State income taxes, net of federal benefit | 6.3 | 6.2 | 6.2 | 6.2 | | Amortized investment tax credits | (1.3) | (2.3) | (1.5) | (2.5) | | Credit for electricity from renewable energy | (11.0) | (10.8) | (11.9) | (11.9) | | AFUDC equity, net | (0.6) | (0.7) | (0.6) | (0.7) | | Amortization of utility excess deferred tax - tax reform | (2.5) | (6.4) | (2.8) | (7.0) | | Other, net | 0.1 | (0.1) | 0.1 | (0.2) | | Effective income tax rate | 12.0 % | 6.9 % | 10.5 % | 4.9 % | - MGE sold transfer-eligible tax credits generated in 2023 and 2024, accounting for them under the framework of Accounting for Income Taxes, with proceeds presented in operating activities[51] 5. Pension and Other Postretirement Plans. This section details MGE's pension and other postretirement benefit plans, including net periodic benefit costs - MGE maintains qualified and nonqualified pension plans, health care, life insurance, and 401(k) plans for employees and retirees[53] Net Periodic Benefit Costs (Three Months Ended June 30, in thousands) | Benefit Type | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Pension Benefits (credit) | $(2,176) | $(1,740) | | Postretirement Benefits (cost) | $135 | $170 | Net Periodic Benefit Costs (Six Months Ended June 30, in thousands) | Benefit Type | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Pension Benefits (credit) | $(4,482) | $(3,772) | | Postretirement Benefits (cost) | $207 | $407 | - MGE recovered $0.1 million and $0.7 million of deferred pension and postretirement costs during the three and six months ended June 30, 2025, respectively, compared to $1.2 million and $2.6 million in 2024[56] 6. Equity and Financing Arrangements. This section describes MGE Energy's equity and financing arrangements, including its Direct Stock Purchase and Dividend Reinvestment Plan - MGE Energy transitioned to open market purchases for all shares issued under its Direct Stock Purchase and Dividend Reinvestment Plan (Stock Plan) effective May 2025[57] - During the six months ended June 30, 2025, MGE Energy issued approximately 40,995 shares of common stock under the Stock Plan, generating $3.8 million in net proceeds for general corporate purposes[57] - As of June 30, 2025, 30,803 shares were included in the diluted EPS calculation related to nonvested equity awards[58] 7. Share-Based Compensation. This section provides details on share-based compensation expense and awards granted under the incentive plan Share-Based Compensation Expense (in millions) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30 | $0.5 | $0.7 | | Six Months Ended June 30 | $1.7 | $1.9 | - In Q1 2025, MGE distributed $2.0 million cash and 11,213 common shares for 2022 awards[59] - In March 2025, MGE granted 18,136 performance units (liability awards) and 26,398 restricted stock units (equity awards) under the 2021 Incentive Plan[60][61] 8. Commitments and Contingencies. This section outlines MGE's significant commitments and contingencies, including plant retirements, environmental regulations, and future purchase contracts - MGE and Columbia co-owners plan to retire Columbia Units 1 and 2 by the end of 2029, subject to operational and regulatory considerations[62][135] - MGE is evaluating operational options and costs for Elm Road Units to comply with the EPA's finalized ELG rule (May 2024) for wastewater discharges, with a planned transition to natural gas[65][136] - The EPA's Good Neighbor Plan, aimed at reducing NOx and SO2 emissions, is currently stayed by the Supreme Court, with MGE monitoring developments as it could impact Elm Road Units in 2026[69][70] Future Commitments Related to Purchase Contracts (As of June 30, 2025, in thousands) | Commodity | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | | :---------------- | :----- | :----- | :----- | :----- | :----- | :--------- | :------ | | Coal | $9,437 | $8,387 | $4,043 | $4,126 | — | — | $25,993 | | Natural gas | $26,109 | $51,334 | $37,306 | $41,131 | $40,951 | $316,598 | $513,429 | | Renewable energy | $6,084 | $3,454 | $3,324 | $3,324 | $1,350 | $38,100 | $55,636 | | Total | $41,630 | $63,175 | $44,673 | $48,581 | $42,301 | $354,698 | $595,058 | 9. Rate Matters. This section discusses approved and proposed rate proceedings, including rate increases, authorized return on equity, and deferred fuel costs Approved and Proposed Rate Proceedings | Year | Service | Rate Increase | ROE | Common Equity Structure | Effective Date | | :--- | :------ | :------------ | :-- | :---------------------- | :------------- | | 2024 | Electric | 1.54% | 9.7% | 56.1% | 1/1/2024 | | 2024 | Gas | 2.44% | 9.7% | 56.1% | 1/1/2024 | | 2025 | Electric | 2.63% | 9.7% | 56.1% | 1/1/2025 | | 2025 | Gas | 1.32% | 9.7% | 56.1% | 1/1/2025 | | 2026 (Proposed) | Electric | 4.89% | 10.0% | 56.1% | 1/1/2026 | | 2026 (Proposed) | Gas | 2.33% | 10.0% | 56.1% | 1/1/2026 | | 2027 (Proposed) | Electric | 4.33% | 10.0% | 56.0% | 1/1/2027 | | 2027 (Proposed) | Gas | 2.16% | 10.0% | 56.0% | 1/1/2027 | - An earnings sharing mechanism dictates that if MGE's ROE exceeds the authorized 9.7%, a portion of excess earnings will be deferred and returned to customers[76][127] Deferred Electric Fuel-Related Costs (in millions) | Year | Fuel Costs (Savings) | Refund or Recovery Period | | :--- | :------------------- | :------------------------ | | 2022 | $8.8 | Oct 2023 - Sep 2024 | | 2023 | ($7.2) | Oct 2024 - Dec 2024 | | 2024 | ($3.0) | Oct 2025 | | 2025 | ($2.5) | Subject to 2026 PSCW review | 10. Derivative and Hedging Instruments. This section describes MGE's use of derivatives and FTRs to manage commodity price risk, including notional volumes and fair values - MGE uses derivatives and FTRs to manage commodity price risk, with a maximum hedging period of four years[79] Gross Notional Volume of Open Derivatives | Contract Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Commodity derivative contracts (MWh) | 279,520 | 307,640 | | Commodity derivative contracts (Dth) | 6,662,500 | 6,285,000 | | FTRs (MW) | 5,159 | 2,131 | - As of June 30, 2025, and December 31, 2024, the fair value of exchange-traded derivatives and FTRs exceeded their cost basis by $0.7 million and $0.1 million, respectively[82] Fair Value of Derivative Instruments on Consolidated Balance Sheets (In thousands) | Category | June 30, 2025 (Assets) | June 30, 2025 (Liabilities) | Dec 31, 2024 (Assets) | Dec 31, 2024 (Liabilities) | | :-------------------------- | :--------------------- | :------------------------ | :-------------------- | :------------------------- | | Commodity derivative contracts | $1,678 | $1,239 | $1,213 | $1,261 | | FTRs | $258 | — | $108 | — | 11. Fair Value of Financial Instruments. This section categorizes financial instruments by fair value levels and provides estimated fair market values for long-term debt - Fair value is categorized into Level 1 (quoted prices in active markets), Level 2 (observable market data for similar assets/liabilities or non-active markets), and Level 3 (unobservable inputs reflecting management's best estimate)[92][93] Estimated Fair Market Value of Long-Term Debt (In thousands) | Metric | June 30, 2025 (Carrying Amount) | June 30, 2025 (Fair Value) | Dec 31, 2024 (Carrying Amount) | Dec 31, 2024 (Fair Value) | | :-------------------------- | :------------------------------ | :------------------------- | :----------------------------- | :------------------------- | | Long-term debt | $770,775 | $710,479 | $773,400 | $698,765 | Recurring Fair Value Measurements (As of June 30, 2025, in thousands) | Category | Total | Level 1 | Level 2 | Level 3 | | :-------------------------- | :---- | :------ | :------ | :------ | | Assets: Derivatives, net | $1,936 | $1,416 | — | $520 | | Liabilities: Derivatives, net | $1,239 | $916 | — | $323 | | Liabilities: Deferred compensation | $6,753 | — | $6,753 | — | - Most exchange-traded derivative contracts are Level 1, while some exchange-traded contracts, over-the-counter transactions, and FTRs are classified as Level 3 due to unobservable inputs or limited market data[101] 12. Joint Plant Construction Project Ownership. This section details MGE's ownership interests in joint plant construction projects, including estimated costs and commercial operation dates MGE Joint Plant Construction Project Ownership (As of June 30, 2025) | Project | Ownership Interest | Source | Share of Generation | Estimated Costs (Excl. AFUDC) | Costs Incurred (Excl. AFUDC) | Date of Commercial Operation | | :---------------- | :----------------- | :----------- | :------------------ | :---------------------------- | :---------------------------- | :--------------------------- | | Paris | 10% | Battery | 11 MW | $25 million | $23.4 million | June 2025 Battery | | Darien | 10% | Solar/Battery | 25 MW/7.5 MW | $63 million | $46.3 million | March 2025 Solar, 2026 Battery | | Koshkonong | 10% | Solar/Battery | 30 MW/16.5 MW | $104 million | $24.8 million | 2026 Solar, 2027 Battery | | High Noon | 10% | Solar/Battery | 30 MW/16.5 MW | $99 million | $17.8 million | 2027 | | Columbia Energy Dome | 19% | Storage | 3 MW | $17 million | $0.7 million | 2027 | - MGE recognized $0.5 million and $2.1 million (after tax) in AFUDC for these projects during the three and six months ended June 30, 2025, respectively, compared to $1.5 million and $2.7 million in 2024[107] - Estimated costs for Paris, Darien, and Koshkonong are expected to exceed previously approved Certificate of Authority (CA) levels, with MGE requesting recovery in future rate case proceedings[109] 13. Revenue. This section provides a breakdown of MGE's operating revenues by source for the three and six months ended June 30 Operating Revenues by Source (Three Months Ended June 30, in thousands) | Revenue Source | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Electric revenues | $129,313 | $120,383 | +$8,930 | | Gas revenues | $29,925 | $25,116 | +$4,809 | | Non-regulated energy revenues | $214 | $214 | $0 | | Total Operating Revenue | $159,452 | $145,713 | +$13,739 | Operating Revenues by Source (Six Months Ended June 30, in thousands) | Revenue Source | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Electric revenues | $254,767 | $236,508 | +$18,259 | | Gas revenues | $123,406 | $100,285 | +$23,121 | | Non-regulated energy revenues | $249 | $256 | -$7 | | Total Operating Revenue | $378,422 | $337,049 | +$41,373 | 14. Segment Information. This section provides financial information by MGE Energy's five business segments, including net income and capital expenditures - MGE Energy operates in five business segments: electric utility, gas utility, nonregulated energy, transmission investment, and all other[110] MGE Energy Segment Net Income (Three Months Ended June 30, 2025, in thousands) | Segment | Net Income (Loss) | | :-------------------------- | :---------------- | | Electric Utility | $19,580 | | Gas Utility | $(1,297) | | Non-Regulated Energy | $6,192 | | Transmission Investment | $3,060 | | All Others | $2,225 | | Consolidated Total | $26,498 | MGE Energy Segment Net Income (Six Months Ended June 30, 2025, in thousands) | Segment | Net Income (Loss) | | :-------------------------- | :---------------- | | Electric Utility | $39,775 | | Gas Utility | $12,288 | | Non-Regulated Energy | $12,215 | | Transmission Investment | $4,539 | | All Others | $(727) | | Consolidated Total | $68,090 | MGE Energy Capital Expenditures by Segment (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Electric Utility | $83,034 | $86,755 | | Gas Utility | $22,975 | $20,879 | | Non-regulated Energy | $5,744 | $3,988 | | Transmission Investment | — | — | | All Others | — | — | | Consolidated Total | $111,753 | $111,622 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides an overview of MGE Energy's financial performance, highlighting net income growth for both MGE Energy and MGE for the three and six months ended June 30, 2025, driven by increased electric investments and higher gas retail sales. It discusses significant events such as rate proceedings, deferred fuel savings, large-scale utility projects, environmental initiatives, and potential impacts from solar procurement disruptions and new tax legislation (OBBBA). The section also details liquidity, capital resources, cash flows, and capitalization ratios - MGE Energy's net income increased to $26.5 million ($0.73/share) for Q2 2025 (vs. $23.8 million, $0.66/share in Q2 2024) and $68.1 million ($1.86/share) for H1 2025 (vs. $57.6 million, $1.59/share in H1 2024)[119][120] - MGE's net income increased to $18.8 million for Q2 2025 (vs. $16.0 million in Q2 2024) and $53.0 million for H1 2025 (vs. $42.6 million in H1 2024)[119][120] - Earnings growth was primarily driven by increased electric investments (2025 rate case) and higher gas retail sales (up 16% in H1 2025 due to 18% increase in heating degree days)[124][125] - MGE deferred $2.5 million in 2025 fuel savings as of June 30, 2025, subject to PSCW review in 2026[128] - MGE is pursuing large-scale generation projects including solar, battery, and wind facilities, with estimated capital expenditures for approximately 178 MW of solar, 18 MW of wind, and 118 MW of battery storage[130][135] - MGE aims for 80% carbon reduction by 2030 (from 2005 levels) by transitioning away from coal (Columbia retirement by 2029, Elm Road Units to natural gas by 2030/2032) and growing renewable generation[135][136] - Solar procurement disruptions (UFLPA, solar tariffs) and the One Big Beautiful Bill Act (OBBBA) pose risks of increased costs or delays for solar projects and impact tax credit eligibility[137][138][139][196][198][200] MGE Energy Capitalization Ratios | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Common shareholders' equity | 62.2% | 61.5% | | Long-term debt | 37.5% | 38.5% | | Short-term debt | 0.3% | 0.0% | Item 3. Quantitative and Qualitative Disclosures About Market Risk. There were no material changes to market risks previously disclosed, except for an increase in the value of employee benefit plan assets by approximately 7% during the first six months of 2025, which can impact future expenses - No material changes to market risks were disclosed, except for equity price risk related to pension-related assets[202] - The value of employee benefit plan assets, managed by third-party investment managers, increased by approximately 7% during the six months ended June 30, 2025, impacting future expenses[203] Item 4. Controls and Procedures. As of June 30, 2025, both MGE Energy and MGE's principal executive and financial officers concluded that their disclosure controls and procedures were effective. No material changes in internal controls over financial reporting occurred during the quarter - As of June 30, 2025, MGE Energy and MGE's management concluded that their disclosure controls and procedures were effective[205] - No material changes in internal controls over financial reporting occurred during the quarter ended June 30, 2025[206] PART II. OTHER INFORMATION. This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and exhibits Item 1. Legal Proceedings. MGE Energy and its subsidiaries are involved in various legal proceedings in the ordinary course of business, with no material adverse effect expected on consolidated results, financial condition, or cash flows - MGE Energy and its subsidiaries are involved in various legal proceedings in the normal course of business[207] - Accrued costs for these matters are not material, and their resolution is not expected to have a material adverse effect on consolidated results, financial condition, or cash flows[73] Item 1A. Risk Factors. There were no material changes from the risk factors disclosed in the 2024 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the 2024 Annual Report on Form 10-K[208] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. MGE Energy issues common stock through its Direct Stock Purchase and Dividend Reinvestment Plan, transitioning to open market purchases for participants starting May 2025 - MGE Energy issues common stock through its Direct Stock Purchase and Dividend Reinvestment Plan[209] - Starting May 2025, MGE Energy began purchasing shares in the open market for plan participants[209] Item 3. Defaults Upon Senior Securities. There were no defaults upon senior securities - No defaults upon senior securities[210] Item 4. Mine Safety Disclosures. This item is not applicable to MGE Energy and MGE - Not applicable to MGE Energy and MGE[211] Item 5. Other Information. During the three months ended June 30, 2025, no director or officer of MGE Energy or MGE adopted or terminated a Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2025[212] Item 6. Exhibits. This section lists the exhibits filed with the Form 10-Q, including certifications pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, certifications pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002, and XBRL-related documents - The exhibits include various certifications (Rule 13a-14(a), 15d-14(a), Section 1350 of Sarbanes-Oxley Act) and XBRL documents[213] Signatures - MGE Energy, Inc. This section contains the duly authorized signatures for MGE Energy, Inc.'s Form 10-Q report, including those of the Chairman, President and CEO, Chief Financial Officer, and Chief Accounting Officer, dated August 6, 2025 - The report is signed by Jeffrey M. Keebler (Chairman, President and CEO), Jared J. Bushek (VP - CFO and Treasurer), and Jenny L. Lagerwall (AVP - Accounting and Controller) for MGE Energy, Inc.[215][217] Signatures - Madison Gas and Electric Company This section contains the duly authorized signatures for Madison Gas and Electric Company's Form 10-Q report, including those of the Chairman, President and CEO, Chief Financial Officer, and Chief Accounting Officer, dated August 6, 2025 - The report is signed by Jeffrey M. Keebler (Chairman, President and CEO), Jared J. Bushek (VP - CFO and Treasurer), and Jenny L. Lagerwall (AVP - Accounting and Controller) for Madison Gas and Electric Company[219][221]