2008 Summary Annual Report
Celebrating 100 years of
delivering dividends to you
Celebrating 100 years of
delivering dividends to you
About the Cover
We have paid annual
dividends since 1909 —
the year President Taft was
inaugurated, Model T cars
rolled off production lines
and the average worker
made $12.98 a week.
Now, 100 years later,
we remain dedicated to
helping our loyal investors
build value over time.
Durlin Radlund of Sun
Prairie, Wis., is one of
our younger shareholders
growing up in a world that
seems light-years away
from Model T cars. Yet,
the wisdom of saving and
investing remains sound —
passed down through his
family. The stock purchased
for Durlin and his twin sister Grace is set aside for their
college educations.
On pages 6 and 7, you can read brief profiles of
other shareholders.
100 years of delivering dividends:
Since 1909, our annual dividend
has grown from 4 cents to
$1.43 per share.
Table of Contents
1 2008 Highlights
2 Letter to our Shareholders
6 Building Shareholder Value
8 Responding to our Customers
10 Growing a Healthy Economy
12 Serving our Communities
14 Consolidated Statements of Income
15 Consolidated Statements of Cash Flows
16 Consolidated Balance Sheets
17 Consolidated Statements of Capitalization
17 Cumulative Five-Year Total Return Comparison
18 Corporate Leadership
20 Shareholder Information
21 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 $1.3 billion. In
2008, revenue was approximately $596 million.
See the Corporate Profile on page 21.
2008 Highlights
MGE Energy (MGEE)
Year at a Glance
(Thousands, except per-share amounts)
2008
2007
Increase/
(Decrease)
%
Change
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)
$
$
$
$
595,993
52,768
2.38
1.43
60.1 %
22,197
22,905
11.8 %
21.54
$
33.00
$
$
755,865
$ 1,268,275
3,380,892
244,396
$
$
$
$
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
58,399
3,943
0.11
0.02
(2.0 )
677
955
(0.3 )
1.66
$
(2.47 )
$
$
(22,702 )
$ 156,688
(50,617 )
29,203
10.9
8.1
4.8
1.4
(3.2)
3.1
4.4
(2.5)
8.4
(7.0)
(2.9)
14.1
(1.5)
13.6
Earnings Per Share
$2.38
$2.27
$2.06
$1.77
$1.57
Assets
($ billions)
$1.268
$1.112
$.980
$.916
$.828
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
For detailed financial information, see the 2008 MGE Energy Form 10-K.
1
Letter to our shareholders
This year, MGE Energy celebrates
100 consecutive years of delivering
dividends to you— our loyal
shareholders.
This remarkable century of dividend
payments is built on our consistently
strong financial performance. Over
the years, shareholders have benefited
from MGE’s dedication to our core
business, our strategic investments
and our prudent financial management. We are
proud to provide you with such an outstanding
history of shareholder value.
Our customers and the communities we serve have also benefited. Our
performance has allowed us to remain a local company focused on customer
service and reliability. We have invested strategically in energy infrastructure,
environmentally responsible technologies and smart economic growth.
Our firm financial position allowed us to reward investors with consistent
dividend payment and growth over time and enabled MGE Energy to remain
strong during the economic crisis in 2008.
Dedicated to dividends since 1909
100 years of delivering dividends is an accomplishment very few companies can
claim. In fact, only 58 U.S. companies have paid annual dividends for 100 or
more years, according to DividendInvestor.com. No other Wisconsin utility has
a dividend track record that matches MGE Energy’s achievement. We stand with
a select group of U.S. companies that remain dedicated to investor dividends.
Cumulative dividends paid to our shareholders totaled $647 million since 1909.
Gary J. Wolter, MGE Energy Chairman,
President and Chief Executive Officer
Cumulative Dividends Paid
(millions)
$647
1909
2008
2
MGE Energy has raised dividends each year since 1976. Dividends increased
from $0.55 to $1.43 per share during that time. MGE Energy is one of only six
electric utilities to raise dividends annually for 30 or more consecutive years.
This record of dividend increases puts MGE Energy on Mergent’s list of
Dividend Achievers. Only 10% of dividend-paying common stocks are classified
Dividend Achievers because they demonstrate the consistent ability to increase
dividend payments over a substantial period of time.
MGE Energy also is a national leader in solid financial management. 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 in 2008.
Likewise, Moody’s Investors Service gave MGE the highest mark among utilities
(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.
MGE Energy stock weathered Wall Street’s extreme market volatility far better
than the major stock indexes. Your company finished 2008 as the best-performing
utility stock in Wisconsin and one of the top-performing stocks in the state.
Solid earnings, growing assets
MGE Energy produced earnings of $2.38 per share in 2008. Earnings benefited
from colder winter weather and gains on local economic development investments.
MGE Energy’s assets reached nearly $1.3 billion in 2008. This is a 1,000 fold
increase over the last 100 years.
One of our recent investments is in We Energies’ Oak Creek Power Plant
expansion. MGE Energy’s 8.33% ownership interest is approximately $172
million (excluding capitalized interest). The first of two 615-megawatt (MW)
advanced technology, cleaner coal units will be ready to serve customers in early
2010. The second unit is planned for later that year. We also expanded our assets
in renewable energy by bringing a new $59 million wind farm online in 2008.
Dividends Paid Per Share
(rounded)
$1.43
$0.55
1976
2008
Top Credit Quality
(MGE)
S&P
Corporate Credit: AA-
Outlook: Stable
Moody’s
Secured: Aa2
Unsecured: Aa3
Outlook: Stable
Asset Growth
$1.3 billion
2008 Stock Price Performance
(% change month-to-month)
MGEE
$1.4 million
1909
2008
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-35.0%
-40.0%
-45.0%
12/31/07
12/31/08
MGEE
DJUA
DJIA
S&P500
MGE Energy compared to Dow Jones Utilities, Dow Jones Industrials and the S&P 500.
3
Letter to our shareholders
An industry leader for customers
In 2008, MGE had the highest residential green
pricing participation rate of any investor-owned utility
in the country. About 10% of our residential customers
now purchase clean wind and solar energy through our
innovative program.
We also provide highly dependable energy for customers.
MGE was rated No. 1 in the country for electric service
reliability in a 2007 national utility survey. Our electric
service reliability ranked among the top 10 utilities in the
country for the five years ended in 2007. MGE pays
diligent attention to maintaining excellent gas and electric
distribution systems.
Cleaner environment
In response to our customers, we chose to increase our wind
resource capacity by 12 times in 2008. Our wind energy
capacity grew from 11 to 137 MW. In 2009, renewable
energy is expected to account for more than 12% of MGE’s
total energy supply, up dramatically from 1.6% in 2007.
This increased wind capacity comes from our new 30-MW
wind farm in northern Iowa and wind power purchases
from two other new Iowa wind projects and one new wind
farm in Wisconsin.
We also know that many customers and shareholders
are concerned about global climate change and carbon
dioxide (CO2) emissions. In 2008, we partnered with
others to launch a new Web site, CO2gether.org, which
gives customers the knowledge they need to reduce their
energy use and CO2 emissions. This one-stop Web site
allows people to calculate the CO2 impacts of their energy
and transportation use, track their actions and share their
results with others.
Thomas Wapneski, an MGE line technician, works on upgrade
and improvement projects that make the electric system more
efficient and help prevent service interruptions.
Steve Beversdorf (left) and John Wichern, MGE gas systems
engineering technicians, check the progress of a gas construction
project on Madison’s growing west side.
4
Under our strategic energy supply plan, Energy 2015,
MGE’s CO2 impacts are projected to decline system-wide
even though total energy use is expected to increase. We
project a 10% decrease for CO2 rates and an 8% decrease
for total CO2 emissions from 2005 to 2015.
Resilient local economy
We are fortunate to serve an area that has good jobs, a
diversified economy and strong educational institutions.
It all adds up to an outstanding quality of life. In 2008, the
Madison area was ranked 8th in the country in Best Life’s
annual “100 Best Places to Raise a Family” survey.
Over the years, MGE has provided support to help keep
our economy healthy and growing. Our innovative
approaches have helped fuel significant economic growth
in our community.
Gross Domestic Product Growth
(2001 – 2006 current dollars)
32%
30%
23%
Wisconsin
U.S.
Madison
Source: U.S. Bureau of Economic Analysis
Our area’s economic
strength is reflected in
a national survey that
ranked Madison’s
economy 15th among
363 metro areas. Madison
has been rated in the top
20 for the last five years in
the Policom report.
Another important
indicator is Madison’s
gross domestic product
growth rate, which has
increased faster than the
U.S. and Wisconsin rates.
Officer and board changes
Your Board of Directors elected Jeffrey C. Newman as
Vice President, Chief Financial Officer, Secretary and
Treasurer of MGE Energy and MGE effective Jan. 1, 2009.
Mr. Newman previously served as Vice President and
Treasurer and has been with the company for 24 years. He
replaced Terry A. Hanson, Vice President, Chief Financial
Officer and Secretary, who retired on Dec. 31, 2008.
Thomas R. Stolper was elected to the Board of Directors
of MGE Energy and MGE effective Dec. 19, 2008. Mr.
Stolper is the Chief Financial Officer and an owner of
TRAC Microbiology, Inc., a food and consumer products
testing, research, auditing and consulting corporation. He
also is an owner of Pro Chemicals LLC, a cleaning and
sanitizing products manufacturer.
A century of dividends
As we mark our significant history of dividend payments,
I want to recognize our loyal investors. Thank you for your
confidence and commitment to our company.
We are proud to celebrate with you 100 years of
delivering dividends.
Gary J. Wolter
Chairman, President and Chief Executive Officer
5
100 years of delivering
dividends to our shareholders
Since 1909, the United States has rolled through World War I, the
Roaring Twenties, the Great Depression, World War II, the race for
space, the 9/11 terrorist attacks and now our nation’s current economic
crisis. Through it all, your company has built value and paid annual
dividends to its investors. Several investors are profiled here.
Reinvesting dividends. Skip Baker knows
the importance of building assets carefully
over time. He and his partner Paul Davenport
bought Triggs Plumbing in 1972 when he was
just 24 years old. Thirteen years later, he and
his wife, Gloria, began building an investment
in MGE Energy. “We’re good savers. I like the
dividend reinvestment plan and how it helps
the stock grow,” Skip says. With retirement
approaching, the Bakers are putting more
money into MGE Energy because they see it
as a sound investment.
As a small business owner, Skip Baker of Triggs
Plumbing in Madison looks out for his
future with diversified investments
that include MGE
Energy stock.
100 years of delivering dividends:
Currently, 79% of our registered
shareholders choose to reinvest
their dividends to build value.
6
A century of dividends
On Jan. 26, 1909, Madison Gas and Electric’s Board of
Directors passed a resolution to provide the first dividends
to our shareholders. That resolution was the start of what
has become a remarkable record for your company —
a century of continuous dividend payments.
Only 58 U.S. companies have paid annual dividends for
100 or more years.
Furthermore, for each of the last 33 years, MGE Energy
increased its dividend. Only 97 companies in the nation and
only six utilities have provided consistent dividend growth
for 30 or more years.
We are dedicated to building shareholder value over time.
In 1909, the annual dividend was 4 cents per share. Now
100 years later, MGE Energy’s annual dividend totaled
$1.43 per share.
Our shareholders see the worth of MGE Energy in a
balanced portfolio. MGE Energy investors hold shares an
average of 12 years. The compounded total return of $100
invested 12 years ago grew to $304 in 2008. Total return
includes stock appreciation and reinvested dividends.
Annual Dividend per Share
12-Year Total Return
$1.43
$304
$100
$0.04
1909
2008
12/31/96
12/31/08
Bob Derr meets with Jerilyn Geishirt, an MGE Energy Share-
holder Services specialist. Bob invests for himself and has separate
accounts for his three grandchildren.
The Helblings benefited from their grandfather’s generosity and
investment advice. Dan Helbling, 22, enjoys pizza with sisters
Emily (left) and Natasha.
Dividends for retirement. When Bob Derr moved to
Madison in 1990, he decided to invest directly in his local
utility company. “What’s great is that I invest the principal,
and MGE Energy does the rest of the work for me,” Bob
says. As a retiree, he enjoys his quarterly dividend check
and the stock’s stable performance. Bob appreciates the
convenience of meeting with MGE Energy’s Shareholder
Services staff and their help in managing his accounts.
Next generation. Investment advice can go full circle in
a family. The Helblings are learning from their grandfather,
Kurt Hauser, an MGE Energy investor. About 10 years
ago, he gave them money that their parents invested in
MGE Energy. At age 19, Dan Helbling sold his stock and
purchased a house in Racine County, Wis., where he grew
up. He rented the home to make the mortgage payments
while attending college. Dan has since moved up to a
second home, completed his biology degree and works in
medical research. Dan says, “Like my grandpa, I now
invest in MGE Energy.”
7
Delivering dividends
to our customers
We listen to customers so we can design services and products to
meet their needs. We have responded with reliable power, innovative
environmental initiatives and green energy options.
First in reliability. MGE ranked No. 1 in electric service
reliability in a 2007 nationwide utility industry survey. Our
ranking reflects our excellent track record when it comes to
dependable energy. For the five years ended in 2007, our
electric service reliability ranked among the top 10 utilities
in the country.
We are proud to deliver the dependability that our
customers expect.
Maintaining a reliable electric system takes a dedicated team
and an ongoing effort. Key to MGE’s strong track record is a
reliability committee that meets monthly to review service out-
ages and to identify improvements to help prevent recurrences.
MGE’s electric system reliability
Year
2007
2006
2005
2004
2003
National Ranking
1st
5th
2nd
6th
7th
Regular maintenance is critical for a reliable electric
system. Rob Priestley (left) and Bob Harper, MGE line
technicians, replace a cross arm on a power pole.
100 years of delivering dividends:
35% of our registered shareholders
are also MGE customers.
8
MGE’s newest wind farm came online in early 2008. MGE built
its first wind farm in 1999 and purchases energy from three other
wind projects.
Renewable energy leader. MGE now has the highest
green pricing participation rate of any investor-owned
utility in the country. About 10% of our residential
customers purchase clean wind and solar energy.
Through our expanded Green Power Tomorrow program,
approximately 12,000 residential customers buy renewable
energy. Most customers choose to buy enough green power
to offset 100% of the carbon dioxide emissions from their
electricity use. In addition, green energy sales to our
business customers has increased 10 fold.
In response to our customers, we expanded our wind capacity
by 12 times and launched a new solar-energy program.
Partners address climate change. We are giving
customers concerned about global climate change the tools
they need to reduce their carbon impacts and save energy.
CO2gether.org is an innovative Web site that allows our
customers and others to measure, track and manage the
carbon dioxide (CO2) emitted from their energy use.
Through the Web site, customers can collaborate and learn
from each other. People also can track their transportation
use. The Web site was developed by MGE, 1000 Friends
of Wisconsin and the University of Wisconsin-Madison
Center for Sustainability and the Global Environment.
Working on the new Web site CO2gether.org are (left to right)
Brad Nordeng, an MGE Web services manager, Anne Shudy
Palmer of the University of Wisconsin-Madison and Sonjia Short,
an MGE communications manager.
Solar energy. MGE is working together with
customers in a new pilot program, which supports the
development of solar power. MGE’s Clean Power Partners
program encourages customers to install solar photovoltaic
systems on their homes or businesses and then sell the
energy back to MGE. Since the launch in 2008, we doubled
the capacity of the program to meet customer demand. The
solar energy is part of our overall green pricing program.
Jeff Ford, an MGE market analyst, meets with Becky Steinhoff,
director of the Goodman Community Center in Madison. The
center installed a 10-kilowatt solar system on the roof of its new
gym and joined the Clean Power Partners program.
9
Delivering dividends
to our local economy
MGE is committed to helping create a vibrant and healthy
economy. We work with others to support and maintain
our community’s economic strength.
Dane County Economic Indicators
(2001-2006)
28.5%
25.8%
20.7%
7.7%
4.8%
3.0%
10.4%
6.8%
5.6%
Personal Income
Population
Job Growth
Wisconsin
U.S.
Dane Co.
Our service area encompasses one of the strongest local
economies in the nation. Madison is rated the top U.S.
city for future job growth, according to a Forbes.com
report. The study cites Madison’s low unemployment
rate, the University of Wisconsin-Madison as a major
employer and the growth of biotech, health care and
medical-device industries.
100 years of delivering dividends:
MGE Energy is one of only 58 U.S.
companies to pay annual dividends
for 100 or more years.
Resilient economy. MGE works with business and community
leaders to ensure well-planned economic growth. We enjoy a strong
local economy built on good jobs. Dane County’s competitive
economic growth outpaces the state and the nation in personal
income, population and jobs.
In addition, Madison was named smartest city in the nation
according to a Bizjournals survey. The survey cited three local
employment sectors that place a premium on education. Specifically,
the report points out that Madison is home to the University of
Wisconsin-Madison, the state government of Wisconsin and
many biotechnology firms.
10
Meeting energy needs. Data centers are choosing to
locate in our service area. MGE knows how to meet the
critical electric reliability needs of these energy-intensive
customers. Being a dependable energy partner is key to
attracting and retaining these businesses. Data centers
operate 24/7 with high-energy loads. They house computer
servers and backup systems for major businesses. These
hubs require redundant power sources and backup electric
generation. MGE is able to provide the reliable energy these
customers need.
Don Larson (left), director of operations at the TEAM
Technologies data center in Fitchburg, meets with John Drury
of MGE. TEAM Technologies plans to invest $40 million in
three phases at its center.
Opening for entrepreneurs. The Metro Innovation
Center opened recently near Madison’s vibrant downtown
with the help of MGE. This offshoot from the successful
University Research Park targets high-tech entrepreneurs.
MGE donated a central computer server that will help
save energy and provide added value to start-up companies
looking to open in Madison.
The information technology sector of our economy
continues to grow and add new, high-paying jobs. In
2008, both Google and Microsoft opened offices and labs
in Madison near the new Metro Innovation Center.
Jim Mohrbacher (right), an MGE business development manager,
checks out the new Metro Innovation Center’s computer server with
Greg Hyer, associate director of the University Research Park.
Tapping success. In 2008, MGE and its partners more than
doubled important funding to help local emerging technology
companies. The Venture Debt Fund is now capitalized at $4.5 million.
It provides loans to start-up companies with the potential of long-
term success. Since it began in 2004, the fund has invested in
11 firms in the Madison area. The fund, which leverages new
dollars from other investors, allows our economy to reap the
dividend of future jobs and growing companies.
Lavanya Ranganathan works at Gentel Biosciences,
which recently received a second round of financing
from the Venture Debt Fund. Gentel Biosciences,
located in the Fitchburg Technology Campus,
provides novel products and services that
allow biomedical researchers to more quickly
discover and confirm disease biomarkers. This
speeds better diagnostic test results to patients.
11
Delivering dividends
to our communities
MGE is a community energy company closely tied to the people and
areas we serve. Together, we move forward on innovative energy and
environmental initiatives.
Harvest the wind. MGE Energy commissioned a new
30-megawatt wind farm in northern Iowa in 2008. This wind
farm, along with new wind power purchases, allowed us to
dramatically expand our wind power production in 2008.
Farming communities benefit from wind
projects. Gary Knudtson farms the land
owned by his mother Arlene. They sup-
port helping the environment and using
locally produced energy. “Northern Iowa
is like a wind tunnel. The wind blows in
this county every day so why not capture
it and use it,” Gary says. Only a small
amount of farmland is taken out of pro-
duction when locating new turbines. This
allows farmers to harvest their crops while
MGE harvests the wind for its customers.
Arlene Knudtson and son Gary have two wind
turbines on the Iowa land they have farmed since
1965. The steady lease payments from MGE
helps family farmers through the ups and downs
of commodity prices, fuel costs and weather.
To learn more, watch a Harvest the Wind video
at www.mgeenergy.com/harvestwind.
Production from Wind
(MWh)
237,000
21,000
2007
2008
100 years of delivering dividends:
Since 1909, cumulative dividends paid
by MGE Energy totaled $647 million.
12
Plug in for the future. MGE began piloting plug-in electric
hybrid vehicles in 2008. MGE employees are testing this new
technology to see how it can help consumers better control
energy use and reduce our dependence on foreign fuel sources.
Our Toyota Prius and Ford Escape can be charged by plugging
into standard household electrical outlets. The vehicles can then
travel 30 to 40 miles before engaging the gasoline fuel system.
MGE is participating in a federal Department of Energy study
that tracks the performance, electricity use and emissions from
plug-in vehicles as we use them throughout our community.
John Coleman, MGE’s business ally manager, watches as Joshua Block
of Waunakee, Wis., checks out how MGE’s plug-in Prius works. MGE
employees drive the plug-ins to test them as typical commuting vehicles.
Energy improvements. MGE offers grants that help
rejuvenate neighborhoods and provide affordable, energy-
efficient housing. MGE has awarded more than $760,000
in Neighborhood Revitalization Grants since 1998 to fund
energy-efficient designs, equipment and construction.
Recently, MGE worked with Stone House Development
on a new apartment building. “The expertise and assistance
that MGE provided through the Neighborhood Revitaliza-
tion program has proved invaluable. It allowed us to
maximize the energy efficiency of this development,
which has significantly reduced energy costs for us and
our residents,” said Rich Arnesen, vice president of
Stone House Development.
Rich Arnesen, vice president of Stone House Development,
checks high-efficiency water heaters in the new 76-unit Park
Central Apartments on Madison’s east side.
13
MGE’s new 10-kilowatt urban turbine, located in McKee Farms
Park in Fitchburg, Wis., has a rotating helix that sits on a 30-foot
pole. It is designed to fit well into a residential landscape.
Demonstrating technology. MGE is in the forefront
with a variety of pilot technology projects. We locate these
projects in public places so the community can learn first-
hand from these renewable energy innovations. In 2008,
we installed a 42-foot-tall urban wind turbine in a popular
Fitchburg park. This vertical axis turbine is one of only a
few in the U.S.
We also built one of the largest solar-powered lighting
projects in the country. The 9.25-kilowatt solar system
features 5-foot-by-5-foot solar panels on 37 light poles
along a bike path bordering the University of Wisconsin-
Madison campus.
Consolidated Statements of Income
For the years ended December 31
(in thousands, except per-share amounts)
Operating Revenues
2008
2007
2006
Regulated revenues ................................................................................................
$ 588,560
$ 532,413
$ 504,138
Nonregulated revenues ..........................................................................................
7,433
5,181
3,408
Total Operating Revenues ..................................................................................
595,993
537,594
507,546
Operating Expenses
Fuel for electric generation ...................................................................................
54,748
56,694
Purchased power ....................................................................................................
74,676
77,594
49,227
77,164
Cost of gas sold ........................................................................................................
171,545
140,838
129,331
Other operations and maintenance ......................................................................
151,176
130,831
126,086
Depreciation and amortization ..............................................................................
39,273
32,199
Other general taxes .................................................................................................
16,793
15,771
31,342
15,402
Total Operating Expenses ...................................................................................
508,211
453,927
428,552
Operating Income ........................................................................................................
87,782
83,667
78,994
Other income, net ....................................................................................................
8,044
6,069
4,329
Interest expense, net ..............................................................................................
(14,002 )
(13,056 )
(15,001 )
Income before income taxes .............................................................................
81,824
76,680
68,322
Income tax provision ...............................................................................................
(29,056 )
Net Income ...................................................................................................................
$
52,768
Earnings Per Share of Common Stock (basic and diluted) .................................. $
Dividends Paid Per Share of Common Stock ......................................................... $
2.38
1.43
(
$
$
$
27,855 )
(25,899 )
48,825
$
42,423
2.27
1.41
$
$
2.06
1.39
Average Shares Outstanding (basic and diluted) ..................................................
22,197
21,520
20,564
14
For detailed financial information, see the 2008 MGE Energy Form 10-K.
Consolidated Statements of Cash Flows
For the years ended December 31
(in thousands)
2008
2007
2006
Operating Activities
Net income ................................................................................................................
$
52,768
$
48,825
$
42,423
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 ..............................................................................
Gain on sale of property .....................................................................................
Other items ............................................................................................................
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 ............................................................
Investing Activities
Capital expenditures ...............................................................................................
Capital contributions to ATC* and other investments .......................................
Proceeds from sale of investments ......................................................................
Proceeds from sale of property ............................................................................
Advance to Wisconsin Electric Power Co. for ATC* work related to Elm Road .
Other ..........................................................................................................................
Cash Used for Investing Activities ....................................................................
Financing Activities
Issuance of common stock, net ............................................................................
Issuance 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 .........................................
39,273
8,583
(351 )
(858 )
(7,241 )
7,891
4,273
545
5,506
(3,113 )
(295 )
1,663
(39,202 )
1,616
—
5,272
(7,665 )
6,047
74,712
(105,777 )
(3,678 )
3,612
304
(330 )
1,587
(104,282 )
30,997
—
(31,780 )
(30,000 )
40,000
21,000
(330 )
29,887
Change in Cash and Cash Equivalents ....................................................................
Cash and cash equivalents at beginning of period ...........................................
Cash and cash equivalents at end of period ......................................................
$
317
3,789
4,106
$
* American Transmission Co.
32,199
750
(410 )
(1,927 )
(6,047 )
8,101
3,080
543
—
(778 )
—
1,950
(12,312 )
3,818
2,545
4,441
(6,346 )
(1,846 )
76,586
( 136,258 )
(255 )
910
724
(138 )
226
( 134,791 )
32,786
—
(30,295 )
(15,000 )
25,000
46,500
—
58,991
786
3,003
3,789
$
31,342
5,241
(432 )
(554 )
(5,317 )
10,178
3,230
595
2,312
—
—
653
13,042
(4,299 )
—
4,003
(5,779 )
4,401
101,039
(92,575 )
(1,974 )
—
—
(808 )
916
(94,441 )
17,050
119
(28,513 )
—
30,000
(25,500 )
(82 )
(6,926 )
(328 )
3,331
3,003
For detailed financial information, see the 2008 MGE Energy Form 10-K.
15
Consolidated Balance Sheets
At December 31
(in thousands)
Assets
Current Assets
2008
2007
Cash and cash equivalents ................................................................................................................
Restricted cash ....................................................................................................................................
Accounts receivable, less reserves of $4,076 and $3,709, respectively ....................................
Other accounts receivable, less reserves of $200 and $114, respectively .................................
Unbilled revenues ................................................................................................................................
Materials and supplies, at average cost ..........................................................................................
Fossil fuel ..............................................................................................................................................
Stored natural gas, at average cost .................................................................................................
Prepaid taxes ........................................................................................................................................
Regulatory assets – current ...............................................................................................................
Other current assets ...........................................................................................................................
Total Current Assets ........................................................................................................................
Other long-term receivables ..................................................................................................................
Special billing projects ...........................................................................................................................
Regulatory assets ....................................................................................................................................
Other deferred charges ..........................................................................................................................
$
4,106
4,805
45,266
7,659
34,701
15,592
3,228
42,146
15,671
9,876
10,828
193,878
3,005
464
116,165
5,620
$
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
Property, Plant and Equipment, Net .....................................................................................................
Construction work in progress ..........................................................................................................
Total Property, Plant, and Equipment ...........................................................................................
Other Property and Investments ...........................................................................................................
......................................................................................................................................
Total Assets
702,549
198,694
901,243
47,900
$ 1,268,275
638,774
205,214
843,988
45,503
$ 1,111,587
Liabilities and Capitalization
Current Liabilities
Long-term debt due within one year ................................................................................................
Short-term debt ....................................................................................................................................
Accounts payable ................................................................................................................................
Accrued interest and taxes ................................................................................................................
Deferred income taxes ........................................................................................................................
Regulatory liabilities – current ...........................................................................................................
Pension liability – current ...................................................................................................................
Other current liabilities .......................................................................................................................
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 ...........................................................................................................................
Capitalization
Common shareholders’ equity ...............................................................................................................
Long-term debt .........................................................................................................................................
Total Capitalization ..........................................................................................................................
Commitments and Contingencies .........................................................................................................
Total Liabilities and Capitalization ..............................................................................................
$
—
124,500
47,229
4,070
3,306
5,974
813
19,349
205,241
117,505
2,736
18,814
137,286
36,083
312,424
$
30,000
103,500
58,498
3,964
4,153
2,924
607
16,466
220,112
107,393
3,087
20,885
74,056
25,982
231,403
478,202
272,408
750,610
—
$ 1,268,275
427,726
232,346
660,072
—
$ 1,111,587
16
For detailed financial information, see the 2008 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
2008
2007
Issued 22,904,573 and 21,950,335 shares, respectively ..................................................................
Additional paid-in capital ...................................................................................................................
Retained earnings ................................................................................................................................
Accumulated other comprehensive income, net of tax ................................................................
Total Common Shareholders’ Equity .............................................................................................
$
22,905
310,202
144,904
191
478,202
$
21,950
280,217
123,916
1,643
427,726
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
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 ....................................................................................................................................
5.59%, due 2018 ....................................................................................................................................
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 ...........................................................................................................
Long-term debt due within one year ................................................................................................
Unamortized discount .........................................................................................................................
—
19,300
28,000
15,000
20,000
30,000
40,000
25,000
20,000
30,000
20,000
25,000
272,300
—
(1,092 )
30,000
19,300
28,000
15,000
20,000
30,000
—
25,000
20,000
30,000
20,000
25,000
262,300
(30,000 )
(1,154 )
Total Long-Term Debt ......................................................................................................................
272,408
232,346
Total Capitalization
.........................................................................................................................
$ 750,610
$ 660,072
Cumulative Five–Year Total Return Comparison
Assumes $100 invested on Dec. 31, 2003, in each of the Company's Common Stock, Russell 2000 and the EEI Index.
Cumulative Five-Year Total Return Comparison
(assumes dividends reinvested)
$250
$100
$0
2003
2004
2005
2006
2007
2008
MGEE
Russell 2000
EEI Index
MGEE
Russell 2000
EEI Index
2003
2004
2005
2006
2007
2008
$ 100 $
$ 120
$ 117
$ 132
$ 133
$ 129
100
$ 118
$ 124
$ 146
$ 144
$ 95
$ 100
$ 123
$ 143
$ 172
$ 201
$ 149
For detailed financial information, see the 2008 MGE Energy Form 10-K.
17
Corporate Leadership
Directors of MGE Energy and MGE
Richard E. Blaney
Retired President
Richard Blaney Seeds Inc.
Age 72
Director since 1974
Londa J. Dewey
President
The QTI Group, Inc.
A human resources and staffing company
Age 48
Director since 2008
F. Curtis Hastings
Chairman
J. H. Findorff & Son, Inc.
Commercial and industrial
general contractors
Age 63
Director since 1999
Regina M. Millner
President
RMM Enterprises Inc.
Attorney, analyst and broker
Age 64
Director since 1996
Frederic E. Mohs
Partner
Mohs, MacDonald, Widder
& Paradise, Attorneys at Law
Age 71
Director since 1975
18
John R. Nevin
Executive Director, Grainger Center for
Supply Chain Management; Grainger
Wisconsin Distinguished Professor,
School of Business; and Chair,
Marketing Department, University
of Wisconsin-Madison
Age 65
Director since 1998
Thomas R. Stolper
Chief Financial Officer and an owner,
TRAC Microbiology, Inc., a food and
consumer products testing, research,
auditing and consulting corp.; and an
owner, Pro Chemicals LLC, a cleaning
and sanitizing products manufacturer
Age 60
Director since 2008
H. Lee Swanson
Chairman of the Board and
President, SBCP Bancorp, Inc.,
and Chairman of the Board,
State Bank of Cross Plains
Age 70
Director since 1988
Gary J. Wolter
Chairman, President and Chief
Executive Officer
MGE Energy, Inc., and
Madison Gas and Electric Co.
Age 54
Director since 2000
Note: Ages as of Dec. 31, 2008.
For detailed information on board members, see the
MGE Energy Proxy Statement.
Officers of MGE Energy and MGE
Gary J. Wolter*
Chairman, President and
Chief Executive Officer
Age 54
Years of Service, 24
Jeffrey C. Newman* (a)
Vice President,
Chief Financial Officer,
Secretary and Treasurer
Age 46
Years of Service, 24
Lynn K. Hobbie
Senior Vice President
Age 50
Years of Service, 23
James G. Bidlingmaier
Vice President –
Administration and
Chief Information Officer
Age 62
Years of Service, 36
Kristine A. Euclide
Vice President and
General Counsel
Age 56
Years of Service, 7
Scott A. Neitzel
Vice President –
Energy Supply
Age 48
Years of Service, 11
Peter J. Waldron
Vice President and
Operations Officer
Age 51
Years of Service, 28
Gregory A. Bollom
Assistant Vice President –
Energy Planning
Age 48
Years of Service, 26
Craig A. Fenrick
Assistant Vice President –
Electric Transmission
and Distribution
Age 49
Years of Service, 26
Joseph P. Pellitteri
Assistant Vice President –
Human Resources
Age 60
Years of Service, 9
John M. Yogerst
Assistant Vice President –
Gas Operations
Age 51
Years of Service, 28
* Officers of MGE Energy and MGE. All others are MGE officers.
(a) Assumed the titles of chief financial officer and secretary as of Jan. 1, 2009, replacing Terry A. Hanson, who retired.
Note: Ages and years of service as of Dec. 31, 2008.
19
Shareholder Information
2009 Annual Shareholder Meeting
Tuesday, May 19, 2009
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
Shareholder Services
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
2009 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:
Shareholder Services: (from left) Jerilyn Geishirt, Lynne Harper, Kari Foster,
Ken Frassetto.
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.
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.
Online Account Access
Registered shareholders can 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
20
Corporate Profile
Wisconsin
MGE Combustion Turbine
MGE Wind Farm
Elroy
Viroqua
Columbia Plant
Madison
Prairie du Chien
Elm Road Plant
Top of Iowa Wind Farm
Iowa
Des Moines
MGE Gas/Electric Service
MGE Gas Service
MGE Electric Services
Generation and Distribution
Customers: 137,000
Population: 292,000
Area: 316 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 service in 2010.
MGE Natural Gas Services
Purchase and Distribution
Customers: 141,000
Population: 408,000
Area: 1,631 square miles
Counties served: Columbia, Crawford,
Dane, Iowa, Juneau, Monroe and Vernon
Learn more at mge.com
MGE Energy, Inc.
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.
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 Power
West Campus, LLC
Est. 2003
MGE Power
Elm Road, LLC
Est. 2003
21
mgeenergy.com
MGE is committed to environmental stewardship.
This report is printed on recycled paper produced
with renewable energy.
P.O. Box 1231
Madison, WI 53701-1231
100 years of delivering dividends:
MGE Energy is one of only six
investor-owned electric utilities in
the U.S. to raise annual dividends
for 30 or more years.