Condensed Parent Company Financial Statements

12 Months Ended

Dec. 31, 2021

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Parent Company Financial Statements

Schedule I

Condensed Parent Company Financial Statements

MGE Energy, Inc.

Statements of Income

(Parent Company Only)

(In thousands)

	For the Years Ended December 31,
	2021			2020			2019
Operating Expenses:
Other operations and maintenance	$	711		$	882		$	815
Total Operating Expenses		711			882			815
Operating Loss		(711	)		(882	)		(815	)
Equity in earnings of investments		107,883			92,922			87,728
Other income (loss), net		(2,163	)		94			(1,500	)
Interest income, net		5			78			1,224
Income before income taxes		105,014			92,212			86,637
Income tax provision		747			206			237
Net Income	$	105,761		$	92,418		$	86,874

The accompanying notes are an integral part of the above consolidated financial statements.

MGE Energy, Inc.

Statements of Cash Flows

(Parent Company Only)

(In thousands)

	For the Years Ended December 31,
	2021			2020			2019
Net Cash Flows Provided by Operating Activities	$	27,535		$	27,631		$	27,901
Investing Activities:
Contributions to affiliates		—			(32,157	)		(33,631	)
Contributions to other investments		(4,006	)		(3,809	)		(4,496	)
Other		843			622			214
Cash Used for Investing Activities		(3,163	)		(35,344	)		(37,913	)
Financing Activities:
Issuance of common stock, net		—			79,635			—
Cash dividends paid on common stock		(54,788	)		(51,729	)		(47,842	)
Cash Provided by (Used for) Financing Activities		(54,788	)		27,906			(47,842	)
Change in cash, cash equivalents, and restricted cash		(30,416	)		20,193			(57,854	)
Cash, cash equivalents, and restricted cash at beginning of period		37,375			17,182			75,036
Cash, cash equivalents, and restricted cash at end of period	$	6,959		$	37,375		$	17,182

The accompanying notes are an integral part of the above consolidated financial statements.

Schedule I

Condensed Parent Company Financial Statements (continued)

MGE Energy, Inc.

Balance Sheets

(Parent Company Only)

(In thousands)

	As of December 31,
ASSETS	2021		2020
Current Assets:
Cash and cash equivalents	$	6,959	$	37,375
Other current assets		1,681		1,494
Total Current Assets		8,640		38,869
Other deferred assets and other		244		364
Investments:
Investments in affiliates		1,036,347		953,810
Other investments		18,927		15,634
Total Investments		1,055,274		969,444
Total Assets	$	1,064,158	$	1,008,677
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable to affiliates	$	548	$	530
Other current liabilities		2,516		66
Total Current Liabilities		3,064		596
Other Credits:
Deferred income taxes		32,014		29,926
Accounts payable to affiliates		1,589		2,118
Other deferred liabilities		23		37
Total Other Credits		33,626		32,081
Shareholders' Equity:
Common shareholders' equity		431,066		430,571
Retained earnings		596,402		545,429
Total Shareholders' Equity		1,027,468		976,000
Commitments and contingencies (see Footnote 3)
Total Liabilities and Shareholders' Equity	$	1,064,158	$	1,008,677

The accompanying notes are an integral part of the above consolidated financial statements.

Schedule I

Condensed Parent Company Financial Statements (continued)

Notes to Condensed Financial Statements

(Parent Company Only)

1.Basis of Presentation.

MGE Energy is a holding company and conducts substantially all of its business operations through its subsidiaries. For Parent Company only presentation, investment in subsidiaries are accounted for using the equity method. These condensed Parent Company financial statements and related notes have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X. These statements should be read in conjunction with the financial statements and the notes in Item 8. Financial Statements and Supplementary Data of the Annual Report on Form 10-K for the year ended December 31, 2021.

2.Credit Agreements.

As of December 31, 2021, MGE Energy had access to an unsecured, committed credit facility with aggregate bank commitments of $50.0 million. As of December 31, 2021, no borrowings were outstanding under this facility. See Footnote 13 of the Notes to Consolidated Financial Statements in this Report for further information regarding MGE Energy's credit agreement.

3.Commitments and Contingencies.

See Footnote 16 of the Notes to Consolidated Financial Statements in this Report for information regarding commitments and contingencies.

4.Dividends from Affiliates.

	Dividends from Affiliates
(In thousands)	2021		2020		2019
MGE	$	5,000	$	—	$	—
MGE Power Elm Road		10,500		15,500		15,500
MGE Power West Campus		4,500		6,000		8,000
MGE Transco		5,464		5,864		4,653
MGEE Transco		—		350		93
Total	$	25,464	$	27,714	$	28,246

Dividend Restrictions

Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. MGE's thirteen month rolling average common equity ratio as of December 31, 2021, is 60.7% as determined under the calculation used in the rate proceeding. This restriction did not impact MGE's payment of dividends in 2021. Cash dividends of $5.0 million were paid by MGE to MGE Energy in 2021. No cash dividends were paid by MGE to MGE Energy in 2020. The rate proceeding calculation includes as indebtedness imputed amounts for MGE's outstanding purchase power capacity payments and other PSCW adjustments but does not include the indebtedness associated with MGE Power Elm Road or MGE Power West Campus, which are consolidated into MGE's financial statements but are not direct obligations of MGE.

MGE has covenanted with the holders of its first mortgage bonds not to declare or pay any dividend or make any other distribution on or purchase any shares of its common stock unless, after giving effect thereto, the aggregate amount of all such dividends and distributions and all amounts applied to such purchases, after December 31, 1945, shall not exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2021, approximately $604.3 million was available for the payment of dividends under this covenant.

See Footnotes 13 and 14 of the Notes to Consolidated Financial Statements in this Report for more information on dividend restrictions appearing in credit agreements and long-term debt, respectively.