2007 Summary Annual Report
innovation at work
innovation at work
Table of Contents
1
2
6
8
10
12
14
15
16
17
17
18
20
21
2007 Highlights
To Our Shareholders
New energy solutions at work
Putting our economy to work
Environmental commitments that work
Community connections at work
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Balance Sheets
Consolidated Statements of Capitalization
Cumulative Five–Year Total Return Comparison
Corporate Leadership
Shareholder Information
Corporate Profile
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 $1.1 billion. In 2007,
revenue was more than $537 million. See the Corporate Profile on page 21.
About the Cover
We put innovation to work
when we constructed our
first wind farm—built in
1999 in Kewaunee County,
Wis. At the time, it was
the largest wind project
east of the Mississippi.
Nathanial and Olivia Theys
are now growing up
everyday with this wind
technology in their
backyard. As the next
generation of energy
consumers, they will
benefit from a cleaner
environment and a
responsible energy future.
Building on this vision
and initiative, MGE Energy
recently completed its
second major wind farm
in Iowa. Our $58 million,
30-megawatt wind farm
began operation in
early 2008.
As you read this report,
you’ll learn how we
constantly build on our
experience and knowledge
to manage our company.
We put innovation to work
for our customers and
loyal investors.
Gross Domestic Product Growth
(2001–2005 current dollars)
27.5%
23%
19.3%
2007 Highlights
Projected CO2 Emission Rate
(lbs. per kilowatt-hour)
2.01
1.80
MGE Energy (MGEE)
Wisconsin
U.S.
Source: U.S. Bureau of Economic Analysis
Madison
Year at a Glance
(Thousands, except per-share amounts)
2005
2015
2007
2006
Increase/
(Decrease)
%
Change
Wind Energy Capacity
(megawatts)
Projected CO2 Emission Rate
(lbs. per kilowatt-hour)
Operating Revenues
Net Income
Basic and Diluted Earnings Per Share
Dividends Declared Per Share
Dividend Payout Ratio
Average Shares Outstanding
Shares Outstanding at Year End
Return on Average Common Equity
Book Value Per Share
Market Price Per Share (Dec. 31)
Total Market Value (Dec. 31)
Total Assets
Total Electric Sales (kWh)
Total Gas Deliveries (therms)
2005
2015
2007
1.80
2.01
11
87
2008
$ 537,594
48,825
$
2.27
$
1.41
$
62.1 %
21,520
21,950
12.1 %
19.88
$
35.47
$
$ 778,567
$ 1,111,587
3,431,509
215,193
Dividends Paid Per Share
(rounded)
MGEE Assets
($ billions)
$1.41
$1.112
$.982
$.917
$.829
$.726
$0.60
$.982
2006
5.9
MGEE Assets
15.1
($ billions)
10.2
$.917
1.4
(8.0)
4.6
4.6
1.0
8.9
(3.0)
2005
1.5
13.2
2.5
6.0
$1.112
2007
$.726
$
$
$
$
507,546 $ 30,048
6,402
42,423 $
0.21
2.06 $
0.02
1.39 $
$.829
(5.4 )
67.5 %
956
20,564
975
20,975
0.12
12.0 %
1.63
18.25 $
$
(1.11 )
36.58 $
$
$ 767,266 $ 11,301
$ 982,232 $ 129,355
83,808
3,347,701
12,199
202,994
2003
2004
Earnings Per Share
$2.27
$2.06
$1.77
$1.71
$1.57
2003
2004
2005
2006
1977
2007
2007
2003
2004
2005
2006
2007
For detailed financial information, see the 2007 MGE Energy Form 10-K.
1
Earnings Per Share
$2.27
$2.06
$1.77
$1.71
$1.57
1977
2007
2003
2004
2005
2006
2007
Gross Domestic Product Growth
(2001–2005 current dollars)
27.5%
23%
19.3%
Wisconsin
U.S.
Madison
Source: U.S. Bureau of Economic Analysis
Wind Energy Capacity
(megawatts)
87
11
2007
2008
Dividends Paid Per Share
(rounded)
$1.41
$0.60
to our shareholders
built on innovation
Gary J. Wolter, MGE Energy
Chairman, President and
Chief Executive Officer,
with the city of Madison,
Wisconsin’s state capital,
in the background.
2
F or generations, we have put innovation to work at MGE Energy.
It is embedded in our culture. For us, innovation is not just a
new product or technology. Instead, innovation is fundamental
to how we conduct and build our business. It is an integral part of
our process. At MGE Energy, we encourage our employees to gener-
ate ideas and take initiative—to imagine how things can be better.
Because of our innovative approach, MGE Energy stands out year
after year as an industry leader—in financial performance, in
serving customers and in environmental stewardship. We create
the solutions that address the challenges we face.
Gross Domestic Product Growth
(2001–2005 current dollars)
27.5%
23%
19.3%
Projected CO2 Emission Rate
(lbs. per kilowatt-hour)
2.01
1.80
Wisconsin
U.S.
Madison
Source: U.S. Bureau of Economic Analysis
2005
2015
MGEE Assets
($ billions)
$.982
$1.112
$.917
$.829
$.726
2003
2004
2005
2006
2007
Earnings Per Share
$2.27
$2.06
$1.77
$1.71
$1.57
2003
2004
2005
2006
2007
Projected CO2 Emission Rate
(lbs. per kilowatt-hour)
2.01
1.80
2005
2015
MGEE Assets
($ billions)
$.982
$1.112
$.917
$.829
$.726
2003
2004
2005
2006
2007
3
Earnings Per Share
$2.27
$2.06
$1.77
$1.71
$1.57
Wind Energy Capacity
(megawatts)
87
11
2007
2008
Dividends Paid Per Share
(rounded)
$1.41
$0.60
1977
2007
Gross Domestic Product Growth
(2001–2005 current dollars)
27.5%
23%
19.3%
Top Credit Quality
(MGE)
S&P
Corporate Credit: AA-
Outlook: Stable
Wisconsin
Madison
U.S.
Source: U.S. Bureau of Economic Analysis
Moody’s
Secured: Aa2
Outlook: Stable
Wind Energy Capacity
(megawatts)
87
11
2007
2008
Dividends Paid Per Share
(rounded)
$1.41
$0.60
1977
2007
2003
2004
2005
2006
2007
Financial performance
Innovation turns creativity into success. Innovation drives business
growth, increases the bottom line and produces results for our
shareholders.
MGE Energy reached a milestone when its assets topped $1 billion in
2007. In the last five years, assets have grown from $726 million to
$1.1 billion.
This steady growth in assets helped produce record earnings of $2.27
per share in 2007. Sales growth in electric deliveries to the residential
and commercial sectors also contributed to these earnings. Your
company has produced record earnings for four of the last five years.
In 2007, your Board of Directors raised the regular quarterly dividend
to $0.355 per share on the company’s common stock. The amount
of the dividend increase was double 2006’s change and the largest
increase in 15 years. Cash dividends paid in 2007 totaled $1.41 per
share. MGE Energy is one of only 95 U.S. companies and one of
six electric utilities to raise dividends annually for 30 or more
consecutive years.
Independent rating agencies have taken note of our performance.
Madison Gas and Electric Co. (MGE), our main subsidiary, maintained
the highest bond rating (AA-) of all investor-owned, combination
utilities in the nation from Standard & Poor’s. Likewise, Moody’s
Investor Service gives MGE the high mark of Aa2 for its sound
business strategy and supportive regulatory environment. MGE
Energy’s financial performance earned one of Value Line’s top ratings
for financial strength and its highest ranking for a safe investment.
Energy future
Technology is shaping the future of our industry. We are investing
in new projects that provide reliable energy and environmental
stewardship.
I am proud that we recently commissioned a new 30-megawatt,
MGE Energy wind farm. In the last year, our wind energy capacity
increased from 11 to 87 megawatts with the new project and two
other wind farms from which we purchase energy.
to our shareholders
This increase in renewable energy has allowed us to significantly expand our green pricing
program and lower the cost of our green pricing for customers. Our Green Power Tomorrow
program provides a clean mix of solar and wind power.
While these renewable energy projects are moving forward, we also are developing new baseload
energy. MGE Energy is investing in a cleaner coal power plant expansion on Lake Michigan. This
state-of-the-art generation facility will supply affordable, reliable energy with far lower emission
rates than standard coal-fired plants.
Commitments to the environment
As we modernize our fleet of electric generation, we recognize our responsibility to protect the
environment. MGE developed a 10-year electric supply plan—called Energy 2015—that is anticipated
to produce significantly lower emission rates. We expect the combination of more green energy,
switching to new coal generation, greater customer conservation and new technologies to drive
down emission rates for carbon dioxide, sulfur dioxide, nitrogen oxide, particulates and mercury.
Part of the way we pursue environmental innovation is to invest in demonstration projects. For ex-
ample, we have more than a dozen solar photovoltaic demonstrations in our service area. We learn
which specific solar technologies are most effective in our climate and best serve our customers.
Prospering economy
Innovation goes hand-in-hand with the rapidly growing, knowledge-based economy in our service
area. Madison is in the center of the Midwest’s I-Q Corridor. In fact, bizjournals.com lists Madison
as the fourth “brainiest” medium-sized city in the nation.
For years, our company has been in step with the area’s emerging economies—first the high-tech
fields and more recently the biotech industry. Life sciences is a $5 billion industry in Wisconsin,
and it’s centered in Madison. With $125 million earmarked for a new federal bioenergy research
center here, we expect the biofuels sector to be the next significant frontier.
Our service territory is not just a high-tech powerhouse. The greater Madison area also is a
wonderful place to live. Middleton, a flourishing suburb, was named No. 1 of the 100 “Best Places
to Live” nationally by Money magazine. It’s no wonder our area is growing. From 2000 to 2030,
Dane County’s population is estimated to grow 36%—adding more than 150,000 new residents.
Projects to meet growing demand
This vibrant growth requires infrastructure to meet increasing energy demands. In addition to
investing in new generation, we also continually improve the systems that deliver energy. Just
southwest of Madison, Fitchburg and Verona are rapidly expanding. In 2007, MGE installed
new natural gas lines and other facilities to boost gas capacity for this area.
Minneapolis
★
Madison
★
Milwaukee
★
Chicago
★
The Midwest’s I-Q Corridor is
a region packed with ideas and
a knowledge-based economy—
especially in biotech, biofuels
and technology development.
4
Left photo: Tim Caruso (left) and
Tony Masino help oversee an MGE
natural gas expansion project.
Right photo: Ken Alderson (left) and
Scott Lindloff check control panels
in MGE’s East Campus Substation.
MGE made significant upgrades to the electric system serving parts of downtown Madison and
the University of Wisconsin-Madison campus. To power this fast-growing area, the capacity of
the East Campus Substation was increased by 50%. Three new building developments—with a
total of $380 million in construction—are significantly increasing electric load within blocks of
the substation.
Employee innovation
We encourage our employees to make business improvements through innovation. Our employees
were resourceful in creating a flexible database to manage compliance with new federal electric
reliability standards. These standards are designed to protect the country’s electric system. Other
utilities have turned to MGE for advice on creating their own databases.
Another group of creative employees faced a daunting task last summer. Raging floodwaters
submerged parts of western Wisconsin where MGE provides natural gas service. Worst hit was
the village of Gays Mills. Drawing on their ingenuity, our employees used the assistance of a swift-
water rescue team to safely turn off submerged gas valves. Later, employees isolated the areas
with the worst flooding to keep other customers in service.
Director changes
Londa J. Dewey, president of The QTI Group, was elected to the Board of Directors effective
Feb. 1, 2008. Donna K. Sollenberger resigned from the board in 2007 after seven years of
dedicated service. We wish her well in her new job in Houston.
Built on innovation
You can count on us to combine innovation and initiative with our sound business principles. We
are committed to excellent customer service and outstanding shareholder returns.
Thank you for your confidence in MGE Energy.
Gary J. Wolter
Chairman, President and Chief Executive Officer
5
We use new electric generation technologies
to create a cleaner energy future.
innovation
new energy solutions at work
Our experience with wind
energy illustrates that
innovation is core to how
we conduct our business.
In the early 1980s, we
began monitoring potential
wind sites. By 1984, MGE
had three of its own pilot
wind projects.
In 1999, MGE took a bold
step and constructed the
largest wind farm east of
the Mississippi. This wind
farm remains an integral
part of our growing renew-
able energy mix.
In the last year, we grew
our wind power capacity
by nearly eight times—
from 11 to 87 megawatts.
We are harvesting clean
wind energy from a new
$58 million MGE wind
farm and purchasing
energy from two other
installations.
Innovating with technology
is one key to meeting
tomorrow’s energy needs.
6
At MGE Energy’s new wind farm, a crane hoists the blades to the top of a 260-foot-tall tower.
Modernizing generation assets. MGE’s Energy 2015 plan is
a comprehensive 10-year electric generation strategy. We are retiring old,
less efficient coal generation while investing in a cleaner coal power plant
with state-of-the-art emission controls. Our renewable wind resources have
increased nearly eight times. In 2005, MGE commissioned a natural gas-fired
cogeneration facility, one of the cleanest and most efficient power plants in
the Midwest. MGE works to provide the best balance of cost and efficiency
to deliver reliable energy with the least environmental impacts.
MGE Energy is a partner in We Energies’ Oak Creek power plant expansion. This
cleaner coal facility is under construction and set to come online beginning in 2009.
Improving reliability. We look for win-win situations that can
benefit local businesses while improving electric reliability for all customers.
In 1998, MGE launched a new program—the Backup Generation Service.
Since then, the program’s success has been firmly established. Customers in
the program pay a charge for the assurance of backup generation. If power
to the customer’s facility is interrupted, the generator automatically starts.
The program’s 55 generators also provide an additional 45 megawatts of
generating capacity for MGE to use during peak electric use periods.
Bob Connor (right), an MGE account manager, and Kevin Snitchler, a Dean Health
System administrator, check the large generator behind them. The Dean West Clinic
and Urgent Care uses backup generation service.
Demonstrating technologies. For years, MGE has invested in
pilot technology projects to better understand highly efficient and renewable
energy systems. The geothermal heat pump, an evolving technology, is an
example. MGE recently installed geothermal heat pumps to handle the
heating and air-conditioning needs at Madison’s new Lussier Community
Center. The unit extracts the earth’s heat and uses it to help warm the
building in the winter and cool it in the summer. We expect an overall
energy savings of 30%. MGE gains expertise from technology projects
that we then share with customers.
A geothermal heat pump uses a series of looped pipes to capture the earth’s
temperature. Fluid circulates through the pipes and transfers the energy to
pumps that amplify the heating or cooling.
7
MGE Energy helps seed future economic growth. We
support the discoveries that spur our local high-tech,
biotech economy.
innovation
putting our economy to work
MGE has long encouraged
business incubators. In
1989, the MGE Innovation
Center opened with space
for 12 tenants at the UW
Research Park. The very
first tenant was a small
biotech start-up called
Novagen—now a successful
Madison-based company.
In total, the Innovation
Center has spawned over
70 high-tech and biotech
firms.
We have provided support
for eight business incuba-
tors. Madison has more
business incubators per
capita than most U.S.
cities. In fact, Madison is
one of 30 “Fast Cities”
around the world, according
to Fast Company magazine.
Fast Cities are places
“where the most
important ideas and
the organizations of
tomorrow are centered.”
MGE Energy is dedicated
to promoting economic
success.
8
Anthony Lauer is an associate scientist at Mirus Bio Corp.—a leader in gene therapy and gene silencing.
Mirus is graduating from the MGE Innovation Center and expanding into a new facility with 50% more space.
Tapping the potential. Bioenergy research is gaining a strong
foothold in Madison with the new Great Lakes Bioenergy Research Center. The
University of Wisconsin-Madison earned a $125 million federal grant to fund
the new center, which will research ways to convert plant matter into fuel for
automobiles and power plants. MGE is one of the center’s corporate partners
and was instrumental in helping UW-Madison secure the grant. The center
may become a magnet in Madison for bioenergy companies.
Phyllis Wilhelm (left), MGE’s economic development director, and Molly Jahn,
dean of the UW’s College of Agriculture and Life Sciences, collaborated to secure
the bioenergy grant.
2.01
Projected CO2 Emission Rate
(lbs. per kilowatt-hour)
Healthy economy. Madison, with its wealth of high-tech and biotech
companies, is well positioned to compete in the global economy of the 21st
century. One important indicator is the growth of Madison’s gross domestic
product (GDP), which is stronger than the state’s or nation’s. The GDP is a
key instrument used to measure an economy. And, Madison’s success has not
gone unnoticed. In 2007, Madison was named in the nation’s top 10 metro
areas for income growth and in the top 15 metro areas for companies actively
looking to expand or relocate their facilities.
1.80
Madison’s gross domestic product surpassed the state’s and nation’s from 2001 to
2005. The GDP measures the total market value of goods and services produced.
2005
2015
Locally grown. MGE’s Shared Savings financing program is about to
reach the $25 million mark after 15 years of helping grow local businesses.
Firms can use a Shared Savings loan to finance energy efficiency improve-
ments to their businesses. The companies pay off the financing with savings
$.982
in their energy budgets. Businesses save energy and money, while MGE is
able to help support the local economy. A recent loan to Eflexgroup.com,
an innovator in the flexible spending account industry, helped the company
relocate to a new, larger corporate facility.
MGEE Assets
($ billions)
$1.112
$.726
$.829
$.917
Ric Joyner (left), COO of Eflexgroup.com, worked with Randy Popp, an MGE engineer,
to secure a $200,000 loan for high-efficiency heating and cooling equipment.
2003
2004
2005
2006
2007
9
Earnings Per Share
$2.27
$2.06
$1.77
$1.71
$1.57
Gross Domestic Product Growth
(2001–2005 current dollars)
27.5%
23%
19.3%
Wisconsin
U.S.
Source: U.S. Bureau of Economic Analysis
Madison
Wind Energy Capacity
(megawatts)
87
11
2007
2008
Dividends Paid Per Share
(rounded)
$1.41
$0.60
1977
2007
2003
2004
2005
2006
2007
Innovation is key to our efforts to create
a healthier environment.
innovation
environmental commitments that work
More than 30 years ago,
MGE and the Wisconsin
Utilities Association built
an experimental solar-
powered home. As the
technology advanced, so
did we. In the mid-1980s,
MGE conducted various
solar photovoltaic energy
research projects.
By the early 2000s, solar
technology was far more
efficient. We launched new
demonstration projects
including solar installations
on all the high schools in
our electric service area.
We learn about renewable
technology options to find
ways to offer innovative
programs. Now, we are
launching a new program
to encourage customers
to install their own solar
units that feed into our
electric grid.
Renewable energy is
growing at MGE Energy.
1010
New solar panels collect energy on the 100-year-old home of MGE customers Jean and Dr. Jonathan Patz,
a university professor and a member of a U.N. climate change panel awarded the 2007 Nobel Peace Prize.
Gross Domestic Product Growth
(2001–2005 current dollars)
27.5%
23%
19.3%
Projected CO2 Emission Rate
(lbs. per kilowatt-hour)
2.01
1.80
Wisconsin
U.S.
Madison
Source: U.S. Bureau of Economic Analysis
2005
2015
MGEE Assets
($ billions)
$.982
$1.112
$.917
$.829
$.726
2003
2004
2005
2006
2007
Earnings Per Share
$2.27
$2.06
$1.77
$1.71
$1.57
Wind Energy Capacity
(megawatts)
87
11
2007
2008
Dividends Paid Per Share
(rounded)
$1.41
$0.60
1977
2007
2003
2004
2005
2006
2007
Reducing emissions. We work to protect our environment while
providing reliable energy. MGE anticipates its Energy 2015 plan will produce
lower emission rates across the board—even though electric use is growing.
Energy 2015 is a balanced plan that combines building more renewable
energy, retiring older coal facilities, switching to cleaner coal generation
and encouraging greater customer conservation. This combination is
projected to lower emission rates for carbon dioxide, sulfur dioxide,
nitrogen oxide, particulates and mercury by 2015.
Even though carbon dioxide (CO2) is not currently regulated, MGE is working to
reduce CO2 emissions. We project a decrease in MGE’s CO2 emission rates. For more
details, see our Environmental Responsibility Report on mgeenergy.com.
Renewable fuels. MGE has supported Virent Energy System’s ground-
breaking work to turn plant sugars into fuel for generators and engines.
Virent is a local company commercializing technology that can help us move
from a fossil-fuel economy to one using renewable fuels. In a demonstra-
tion project, Virent’s SuperNatural™ gas prototype system fuels an internal
combustion engine that can generate 10 kilowatts of electricity for MGE
customers. We recognize how this type of visionary technology is needed to
drive a cleaner future.
Greg Keenan, vice president of business development at Virent Energy Systems, leads
engineering and business development. MGE was an early, local supporter of Virent
that has grown significantly since it was founded in 2002.
Mercury free. MGE is a leader in installing mercury-free encoders in
the meters on customers’ homes and businesses. When MGE decided to install
an automated meter reading system, we asked the manufacturer to develop
mercury-free encoders—which have now become the industry standard in the
United States. We look for opportunities to go beyond compliance in day-to-
day operations and pursue clean options.
This small encoder allows MGE to read meters remotely. With about 275,000
encoders throughout our service area, it was important to us that the devices be
mecury free and environmentally friendly.
1111
We work hard to listen and stay connected. This is
how we make a difference in the communities we serve.
innovation
community connections at work
Responding to customer
needs is a long-standing
commitment. In the 1980s,
when the United States
faced an energy crisis,
MGE stepped up its conser-
vation efforts. Our home
energy audit program
ranked second in the
nation in 1983.
More recently, open
discussions at our town-
hall meetings, called
Community Energy
Conversations, helped
us better understand our
customers’ preferences
for future energy supply.
The discussions shaped
our Energy 2015 plan.
Former MGE Chairman
Frederick Mackie (above)
explained our position well
in 1976: “We do want our
customers and stockholders
to understand the decisions
we must make are for
the sake of running our
business properly and in
response to their needs.
This presents a real chal-
lenge, but we believe it
can be met.”
It’s a challenge we still
meet today.
12
Mayra Medrano, an MGE customer service representative, meets with MGE green power customers
Vickie Hackbarth and Mark Shimasaki.
Solar lighting. MGE and the University of Wisconsin-Madison worked
closely with the community to plan the West Campus Cogeneration Facility.
This natural gas-fired plant provides electricity to MGE customers and heating/
cooling to the campus. MGE and UW-Madison joined with others and made
commitments to improve our local environment. Now, we are completing our
final commitment with solar lighting along a new campus bike path. This
$220,000 photovoltaic technology project draws attention to renewable energy
while providing safe lighting at night. The bike path opens in 2008.
Bob Stoffs (left), an MGE community services manager, and Rob Kennedy, a UW-
Madison transportation supervisor, check a solar panel during bike path construction.
Community ties. We continuously create opportunities for
stakeholders to engage with us. MGE asked community
members to serve on an advisory committee to help shape
our Environmental Cooperative Agreement with the Wisconsin
Department of Natural Resources. We recently renewed the
voluntary five-year agreement that commits us to superior environmental
performance at Blount Generating Station.
Several Community Environmental Advisory Group members meet at MGE including
(left to right) John Shenot, DNR environmental assistance coordinator; Rich Bogovich,
a local environmentalist; Michael Ricciardi, MGE’s environmental director; and
Judy Olson, former Madison alderperson.
Power of working together. When we partner with others, we
can reach customers more effectively. For example, we are working with the
City of Madison on the city’s Clean Energy Challenge to reduce greenhouse
gases. Some of our most rewarding collaborations involve teaching the next
generation. MGE reaches thousands of students through classroom programs.
Last summer, we took another step with the Boys and Girls Club and sponsored
a series of energy education projects.
Jesse Shields (right), an MGE marketing representative, helps Anthony Washington
cook a hot dog in a solar oven. Children at the Boys and Girls Club of Dane County
constructed solar ovens to learn more about clean, renewable energy sources.
13
Consolidated Statements of Income
For the years ended December 31
(in thousands, except per-share amounts)
Operating Revenues
2007
2006
2005
Regulated revenues ............................................................................................................ $ 532,413
$ 504,138
$ 511,517
Nonregulated revenues .....................................................................................................
5,181
3,408
1,853
Total Operating Revenues ............................................................................................
537,594
507,546
513,370
Operating Expenses
Fuel for electric generation .............................................................................................
56,694
49,227
65,016
Purchased power ................................................................................................................
77,594
77,164
81,676
Natural gas purchased ......................................................................................................
140,838
129,331
146,110
Other operations and maintenance ..............................................................................
130,831
126,086
117,552
Depreciation and amortization.......................................................................................
32,199
31,342
29,275
Other general taxes ...........................................................................................................
15,771
15,402
13,269
Total Operating Expenses ............................................................................................
453,927
428,552
452,898
Operating Income ..................................................................................................................
83,667
78,994
60,472
Other income, net ..............................................................................................................
6,069
4,329
4,938
Interest expense ..................................................................................................................
( 13,056 )
(15,001 )
(13,448 )
Income before income taxes ......................................................................................
76,680
68,322
51,962
Income tax provision .........................................................................................................
(27,855 )
(25,899 )
(19,871 )
Net Income ............................................................................................................................... $ 48,825
$ 42,423
$ 32,091
Earnings Per Share of Common Stock (basic and diluted) ...................................... $
2.27
Dividends Paid Per Share of Common Stock ............................................................... $
1.41
$
$
2.06
1.39
$
$
1.57
1.37
Average Shares Outstanding (basic and diluted) ........................................................
21,520
20,564
20,436
14 innovation at work
For detailed financial information, see the 2007 MGE Energy Form 10-K.
Consolidated Statements of Cash Flows
For the years ended December 31
(in thousands)
2007
2006
2005
Operating Activities
Net income ........................................................................................................................... $ 48,825
$ 42,423
$ 32,091
Items not affecting cash:
Depreciation and amortization ..................................................................................
Deferred income taxes ..................................................................................................
Amortization of investment tax credits ..................................................................
AFUDC – equity funds ..................................................................................................
Equity earnings in ATC* ................................................................................................
Employee benefit plan expenses ...............................................................................
Provision for doubtful accounts receivable ............................................................
Amortization of debt issuance costs and discount ..............................................
Reserve for fuel refund .................................................................................................
Gain on sale of investments .......................................................................................
Other items ......................................................................................................................
32,199
750
(410 )
(1,927 )
(6,047 )
8,101
3,080
543
—
(778 )
1,950
31,342
5,241
(432 )
(554 )
(5,317 )
10,178
3,230
595
2,312
—
653
Changes in working capital items:
(Increase) decrease in current assets ...................................................................
Increase (decrease) in current liabilities .............................................................
Proceeds from Congestion Cost and Line Loss Allocation Agreement ...............
Dividend income from ATC* .............................................................................................
Cash contributions to pension and other postretirement plans ............................
Other noncurrent items, net ...........................................................................................
Cash Provided by Operating Activities.....................................................................
(12,312 )
3,818
2,545
4,441
(6,346 )
(1,846 )
76,586
13,042
(4,299 )
—
4,003
(5,779 )
4,401
101,039
Investing Activities
Capital expenditures ..........................................................................................................
Capital contributions to ATC* and other investments .............................................
Repayment from ATC* related to WCCF** .....................................................................
Proceeds from sale of property to ATC* .......................................................................
Advance to Wisconsin Electric Power Co. for ATC* work related to Elm Road .......
Other ......................................................................................................................................
Cash Used for Investing Activities ............................................................................
(136,258 )
(255 )
—
724
(138 )
1,136
(134,791 )
Financing Activities
Issuance of common stock, net ......................................................................................
Issuance (purchase) of treasury stock ...........................................................................
Cash dividends paid on common stock ........................................................................
Repayment of long-term debt ........................................................................................
Issuance of long-term debt .............................................................................................
Increase (decrease) in short-term debt .......................................................................
Other ......................................................................................................................................
Cash Provided by/(Used for) Financing Activities .................................................
32,786
—
(30,295 )
(15,000 )
25,000
46,500
—
58,991
(92,575 )
(1,974 )
—
—
(808 )
916
(94,441 )
17,050
119
(28,513 )
—
30,000
(25,500 )
(82 )
(6,926 )
29,275
10,900
(460 )
(414 )
(4,871 )
9,665
2,080
493
—
—
1,109
(32,323 )
8,515
—
3,550
(5,536 )
(697 )
53,377
(85,771 )
(1,686 )
12,964
—
(1,599 )
359
(75,733 )
2,259
(119 )
(28,054 )
—
20,000
29,225
(1,128 )
22,183
Change in Cash and Cash Equivalents ...........................................................................
Cash and cash equivalents at beginning of period ..................................................
Cash and cash equivalents at end of period .............................................................. $
786
3,003
3,789
(328 )
3,331
3,003
$
(173 )
3,504
3,331
$
* American Transmission Co.
** West Campus Cogeneration Facility
For detailed financial information, see the 2007 MGE Energy Form 10-K.
innovation at work 15
Consolidated Balance Sheets
2007
2006
At December 31
(in thousands)
Assets
Current Assets
Cash and cash equivalents ............................................................................................................................ $
Restricted cash ..................................................................................................................................................
Accounts receivable, less reserves of $3,709 and $3,489, respectively ...........................................
Other accounts receivable, less reserves of $114 and $107, respectively ........................................
Unbilled revenues .............................................................................................................................................
Materials and supplies, at lower of average cost or market ................................................................
Fossil fuel ............................................................................................................................................................
Stored natural gas, at lower of average cost or market ......................................................................
Prepaid taxes ......................................................................................................................................................
Regulatory assets – current ...........................................................................................................................
Other current assets ........................................................................................................................................
Total Current Assets ....................................................................................................................................
Other long-term receivables ..............................................................................................................................
Special billing projects ........................................................................................................................................
Regulatory assets ..................................................................................................................................................
Other deferred charges .......................................................................................................................................
3,789
2,896
43,668
3,397
30,370
14,809
5,136
28,483
14,696
189
8,242
155,675
6,166
999
53,375
5,881
638,774
Property, Plant and Equipment, Net .............................................................................................................
205,214
Construction work in progress .....................................................................................................................
843,988
Total Property, Plant, and Equipment .....................................................................................................
Other Property and Investments ....................................................................................................................
45,503
Total Assets ................................................................................................................................................... $ 1,111,587
Liabilities and Capitalization
Current Liabilities
Long-term debt due within one year ......................................................................................................... $ 30,000
103,500
Short-term debt ................................................................................................................................................
58,498
Accounts payable ..............................................................................................................................................
3,964
Accrued interest and taxes ............................................................................................................................
4,153
Deferred income taxes .....................................................................................................................................
2,924
Regulatory liabilities – current .....................................................................................................................
607
Pension liability – current ..............................................................................................................................
16,466
Other current liabilities ..................................................................................................................................
220,112
Total Current Liabilities ..............................................................................................................................
Other Credits
Deferred income taxes ....................................................................................................................................
Investment tax credit – deferred .................................................................................................................
Regulatory liabilities ........................................................................................................................................
Accrued pension and other postretirement benefits .............................................................................
Other deferred liabilities .................................................................................................................................
Total Other Credits.......................................................................................................................................
107,393
3,087
20,885
74,056
25,982
231,403
Capitalization
Common shareholders’ equity ...........................................................................................................................
Long-term debt .....................................................................................................................................................
Total Capitalization .....................................................................................................................................
Commitments and Contingencies ....................................................................................................................
427,726
232,346
660,072
—
Total Liabilities and Capitalization ....................................................................................................... $ 1,111,587
$
3,003
4,243
33,397
4,508
26,038
15,052
6,010
31,465
13,748
4,270
7,679
149,413
4,631
1,861
50,841
5,874
632,474
95,949
728,423
41,189
$ 982,232
$ 15,000
57,000
45,063
3,430
3,917
2,943
614
15,894
143,861
101,700
3,497
24,207
76,050
20,285
225,739
375,348
237,284
612,632
—
$ 982,232
16 innovation at work
For detailed financial information, see the 2007 MGE Energy Form 10-K.
Consolidated Statements of Capitalization
At December 31
(in thousands)
Common Shareholders’ Equity
Common stock – par value $1 per share:
Authorized 50,000,000 shares
2007
2006
Issued 21,950,335 and 20,975,392 shares, respectively ....................................................................... $ 21,950
280,217
123,916
1,643
427,726
Additional paid-in capital ..............................................................................................................................
Retained earnings .............................................................................................................................................
Accumulated other comprehensive income, net of tax ........................................................................
Total Common Shareholders’ Equity .......................................................................................................
$ 20,975
248,406
105,386
581
375,348
Redeemable Preferred Stock
Cumulative, $25 par value, 1,175,000 authorized but unissued .......................................................
—
—
First Mortgage Bonds
7.70%, 2028 Series ..........................................................................................................................................
1,200
1,200
Other Long-Term Debt
7.49%, due 2007 ................................................................................................................................................
6.02%, due 2008 ..............................................................................................................................................
4.875% 2012 Series, Industrial Development Revenue Bonds ...........................................................
5.875% 2034 Series, Industrial Development Revenue Bonds ...........................................................
6.58%, due 2012 ..............................................................................................................................................
5.26%, due 2017 ..............................................................................................................................................
5.25%, due 2017 ..............................................................................................................................................
7.12%, due 2032 ..............................................................................................................................................
6.12%, due 2028 ..............................................................................................................................................
5.68%, due 2033 ..............................................................................................................................................
5.19%, due 2033 ..............................................................................................................................................
6.247%, due 2037 ............................................................................................................................................
Total Other Long-Term Debt .....................................................................................................................
—
30,000
19,300
28,000
15,000
20,000
30,000
25,000
20,000
30,000
20,000
25,000
262,300
15,000
30,000
19,300
28,000
15,000
20,000
30,000
25,000
20,000
30,000
20,000
—
252,300
Long-term debt due within one year .........................................................................................................
Unamortized discount .....................................................................................................................................
(30,000 )
(1,154 )
(15,000 )
(1,216 )
Total Long-Term Debt .................................................................................................................................
232,346
237,284
Total Capitalization .................................................................................................................................... $ 660,072
$ 612,632
Cumulative Five–Year Total Return Comparison
Assumes $100 invested on Dec. 31, 2002, in each of the Company's Common Stock, Russell 2000 and the EEI Index.
Cumulative Five-Year Total Return Comparison
(assumes dividends reinvested)
MGEE
Russell 2000
EEI Index
$400
$100
$0
2002
2003
2004
2005
2006
2007
MGEE
Russell 2000
EEI Index
2002
$ 100
2003
2004
2005
2006
2007
$ 123 $
$ 147
$ 144
$ 161
$ 163
$ 100
147
$ 174
$ 182
$ 216
$ 212
$ 100
$ 123
$ 152
$ 176
$ 213
$ 248
For detailed financial information, see the 2007 MGE Energy Form 10-K.
innovation at work 17
Corporate Leadership
Frederic E. Mohs
Partner
Mohs, MacDonald, Widder
& Paradise, Attorneys at Law
Age 70
Director since 1975
John R. Nevin
Executive Director, Center for Brand
and Product Management; Executive
Director, Grainger Center for Supply Chain
Management; and Professor, School of
Business, University of Wisconsin-Madison
Age 64
Director since 1998
H. Lee Swanson
Chairman of the Board and
President, SBCP Bancorp, Inc.,
and Chairman of the Board,
State Bank of Cross Plains
Age 69
Director since 1988
Gary J. Wolter
Chairman, President and Chief
Executive Officer
MGE Energy, Inc., and
Madison Gas and Electric Co.
Age 53
Director since 2000
Directors of MGE Energy and MGE
Richard E. Blaney
Retired President
Richard Blaney Seeds Inc.
Age 71
Director since 1974
Londa J. Dewey
President
The QTI Group, Inc.
A human resources and staffing company
Age 47
Director since 2008
F. Curtis Hastings
Chairman
J. H. Findorff & Son, Inc.
Commercial and industrial
general contractors
Age 62
Director since 1999
Regina M. Millner
President
RMM Enterprises Inc.
Attorney, analyst and broker
Age 63
Director since 1996
Note: Ages as of Dec. 31, 2007.
For detailed information on board members, see the MGE Energy Proxy Statement.
18 innovation at work
Officers of MGE Energy and MGE
Gary J. Wolter*
Chairman, President and
Chief Executive Officer
Age 53
Years of Service, 23
Terry A. Hanson*
Vice President, Chief
Financial Officer and
Secretary
Age 56
Years of Service, 26
Jeffrey C. Newman*
Vice President and Treasurer
Age 45
Years of Service, 23
Lynn K. Hobbie
Senior Vice President
Age 49
Years of Service, 22
James G. Bidlingmaier
Vice President –
Administration and Chief
Information Officer
Age 61
Years of Service, 35
Kristine A. Euclide
Vice President and
General Counsel
Age 55
Years of Service, 6
Scott A. Neitzel
Vice President –
Energy Supply
Age 47
Years of Service, 10
Peter J. Waldron
Vice President and
Operations Officer
Age 50
Years of Service, 27
Gregory A. Bollom
Assistant Vice President –
Energy Planning
Age 47
Years of Service, 25
Craig A. Fenrick
Assistant Vice President –
Electric Transmission
and Distribution
Age 48
Years of Service, 25
Joseph P. Pellitteri
Assistant Vice President –
Human Resources
Age 59
Years of Service, 8
John M. Yogerst
Assistant Vice President –
Gas Operations
Age 50
Years of Service, 27
* Officers of MGE Energy and MGE. All others are MGE officers.
Note: Ages and years of service as of Dec. 31, 2007.
innovation at work 19
Shareholder Information
2008 Annual Shareholder Meeting
Tuesday, May 20, 2008
Marriott Madison West
1313 John Q. Hammons Drive
Greenway Center
Middleton, Wis.
Stock Listing
• MGE Energy common stock trades on
The Nasdaq Stock Market®
• Stock symbol: MGEE
• Listed in newspaper stock tables as MGE
or MGE Engy
Shareholder Services
We welcome inquiries from
shareholders. Please notify
us promptly if:
• A stock certificate is lost
or stolen.
• A dividend check or
statement is not received
within 10 days of the
scheduled payment date.
• Your name or
address changes.
Shareholder Services: (from left)
Jerilyn Geishirt, Lynne Harper,
Kari Foster, Ken Frassetto.
Materials Available
More financial information is available upon
request or on the company’s Web site, including:
• Form 10-K (filed with the Securities and
Exchange Commission).
• Dividend Reinvestment and Direct Stock Purchase Plan.
Dividend Reinvestment and Direct Stock
Purchase Plan
MGE Energy’s Dividend Reinvestment and Direct Stock
Purchase Plan allows investors to:
• Buy common stock directly through the company.
• Reinvest dividends or receive cash payments.
• Deposit certificates for safekeeping.
National Association of Investors Corp.
MGE Energy is a corporate sponsor of
the NAIC and participates in a number of
programs including the Low Cost Investment Plan,
Investor’s Information Report (Green Sheet), Own Your
Own Shares of America and regional investor fairs.
Web Address: betterinvesting.org
20 innovation at work
2008 Expected Record and Dividend
Payment Dates
MGEE Common Stock
Record Dates
March 1
June 1
Sept. 1
Dec. 1
Payment Dates
March 15
June 15
Sept. 15
Dec. 15
Contact MGE Energy Shareholder Services
E-mail:
Web Address:
Madison Area:
Continental U.S.:
Business Hours:
investor@mgeenergy.com
mgeenergy.com
(608) 252-4744
1-800-356-6423
8:00 a.m. to 4:30 p.m.
(Central Time)
Monday through Friday
MGE Energy Shareholder Services
Post Office Box 1231
Madison, WI 53701-1231
133 S. Blair St.
Madison, WI 53703
Mailing Address:
Location:
Online Account Access
Registered shareholders can now access their account
information online. Visit MGE Energy's Web site to log on
through the secure My Shareholder Account link.
Contact shareholder services for a security code to help
you set up private access to your account.
Go to the home page at mgeenergy.com and click the
My Shareholder Account button.
Eliminate Duplicate Proxy Mailings
If you receive more than one proxy mailing from
MGE Energy, you can reduce the mailbox clutter.
• Registered shareholders: call or e-mail MGE Energy
• Brokerage shareholders: contact your broker
Sign Up For Electronic Delivery
You may choose to receive e-mail alerts when annual
meeting invitations, proxy materials, the annual
report and newsletters are available on our Web site.
Registered shareholders can sign up by visiting
mgeenergy.com/paperless. If your MGEE shares are
held in a brokerage account, contact your broker.
Independent Registered Public
Accounting Firm
PricewaterhouseCoopers LLP
One N. Wacker Drive
Chicago, IL 60606
Corporate Profile
MGE Energy is the parent company of Madison Gas and
Electric Co. (MGE) and its divisions, which serve natural
gas and electric customers in south-central and western
Wisconsin.
MGE Power owns assets in the West Campus Cogeneration
Facility in Madison, Wis., and the Elm Road coal plant under
construction at Oak Creek, Wis.
MGE Transco Investment owns interest in the American
Transmission Co. through its members, MGE and MGE Energy.
MGE Construct provides construction services for building
new generation facilities.
Central Wisconsin Development Corp. promotes business
growth in MGE’s service area.
MAGAEL holds title to properties acquired for future utility
plant expansion.
MGE Electric Services
Generation and Distribution
Customers: 136,000
Population: 290,000
Area: 315 square miles
Communities served: Cross Plains,
Fitchburg, Madison, Maple Bluff,
Middleton, Monona and Shorewood Hills
Generating facilities:
Blount Station, West Campus Cogeneration
Facility, combustion turbines and solar units at
Madison, Columbia Energy Center at Portage,
natural gas combustion turbine at Marinette,
MGE wind farm in Kewaunee County, Top of Iowa
Wind Farm in north-central Iowa and Elm Road
Power Plant expansion at Oak Creek, scheduled
for completion in 2009 and 2010.
MGE Natural Gas Services
Purchase and Distribution
Customers: 140,000
Population: 404,000
Area: 1,625 square miles
Counties served: Columbia, Crawford,
Dane, Iowa, Juneau, Monroe and Vernon
Learn more at
mgeenergy.com
Madison Gas
and Electric Co.
Est. 1896
MGE Transco
Investment LLC
Est. 2005
MGE Construct LLC
Est. 2002
Central Wisconsin
Development Corp.
Est. 1986
MAGAEL, LLC
Est. 1973
Viroqua Gas Division
Acq. 1992
Elroy Gas Division
Acq. 1993
Prairie du Chien
Gas Division
Acq. 2001
MGE Power LLC
Est. 2002
MGE Powe r
West Campus, LLC
Est. 2003
MGE Power
Elm Road, LLC
Est. 2003
innovation at work 21
P.O. Box 1231
Madison, WI 53701-1231
mgeenergy.com
MGE is committed to environmental stewardship.
This report is printed on recycled paper produced
with renewable energy.