COMMON EQUITY

6 Months Ended

Jun. 30, 2011

COMMON EQUITY.

COMMON EQUITY

NOTE 9—COMMON EQUITY

Various laws, regulations, and financial covenants impose restrictions on our ability to pay dividends to the sole holder of our common stock, Integrys Energy Group.

The PSCW allows us to pay normal dividends on our common stock of no more than 103% of the previous year’s common stock dividend.  In addition, the PSCW currently requires us to maintain a financial common equity ratio of 50.24% or higher.  We must obtain PSCW approval if the payment of dividends would cause us to fall below this authorized level of common equity.  Integrys Energy Group’s right to receive dividends on our common stock is also subject to the prior rights of our preferred shareholders and to provisions in our restated articles of incorporation, which limit the amount of common stock dividends that we may pay if our common stock and common stock surplus accounts constitute less than 25% of our total capitalization.

Our short-term debt obligations contain financial and other covenants, including but not limited to, a requirement to maintain a debt to total capitalization ratio not to exceed 65%.  Failure to comply with these covenants could result in an event of default which could result in the acceleration of outstanding debt obligations.

As of June 30, 2011, total restricted net assets were approximately $1,071.6 million.  Included in this amount is our equity in undistributed earnings of 50% or less owned investees accounted for by the equity method, which was approximately $25.7 million at June 30, 2011.

Except for the restrictions described above and subject to applicable law, we do not have any other significant dividend restrictions.

Integrys Energy Group may provide equity contributions to us or request a return of capital from us in order to maintain utility common equity levels consistent with those allowed by the PSCW.  Wisconsin law prohibits us from making loans to or guaranteeing obligations of Integrys Energy Group or its other subsidiaries.  During the six months ended June 30, 2011, we returned $75.0 million of capital to Integrys Energy Group and paid common dividends of $51.2 million to Integrys Energy Group.  We did not receive any equity contributions from Integrys Energy Group during the six months ended June 30, 2011.