Investments

12 Months Ended

Dec. 31, 2017

Investments - MGE Energy and MGE.

a. Equity Method Investments, Available for Sale Securities, and Other Investments.

		MGE Energy				MGE
(In thousands)		2017		2016		2017		2016
Available for sale securities:
Cost basis	$	6,662	$	2,216	$	455	$	455
Gross unrealized gains		675		346		-		40
Gross unrealized losses		(46)		(8)		(46)		(8)
Fair value		7,291		2,554		409		487
Equity method investments:
ATC and ATC Holdco^(a)(b)		59,298		72,458		-		-
Other		1,128		1,158		-		-
Total equity method investments		60,426		73,616		-		-
Other investments		55		120		-		-
Total	$	67,772	$	76,290	$	409	$	487

(a) MGE Transco holds an ownership interest in ATC, and MGEE Transco holds an ownership interest in ATC Holdco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. See Footnote 8 for further discussion of noncontrolling interest. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see "ATC and ATC Holdco" below for additional information.

(b) In December 2017, there was a $20.4 million one-time tax impact related to ATC as a result of the Tax Act. See Footnote 12 for further information.

MGE Energy's and MGE's available for sale securities represent publicly traded securities and private equity investments in common stock of companies in various industries.

During the years ended December 31, 2017, 2016, and 2015, certain investments were liquidated. As a result of these liquidations, MGE Energy and MGE received the following:

		MGE Energy						MGE
(In thousands)		2017		2016		2015		2017		2016		2015
Cash proceeds	$	677	$	408	$	19	$	-	$	16	$	19
Gain (loss) on sale		522		121		10		-		(8)		10

b. ATC and ATC Holdco.

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which, since December 1, 2016, is owned by MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary of MGE Energy.

MGE Transco and MGEE Transco have accounted for their investment in ATC and ATC Holdco, respectively, under the equity method of accounting. For the years ended December 31, 2017, 2016, and 2015, MGE Transco recorded the following:

(In thousands)		2017		2016		2015
Equity earnings from investment in ATC	$	10,125	$	8,670	$	7,728
Dividends received from ATC^(a)		9,078		7,926		6,645
Capital contributions to ATC		3,551		2,486		710

(a) MGE Transco recorded a $2.3 million and $2.1 million dividend receivable from ATC as of December 31, 2017 and 2016, respectively. A cash dividend was received in January of each of the proceeding years.

ATC Holdco was formed in December 2016. In the near term, it is expected that ATC Holdco will be pursuing transmission development opportunities that typically have long development and investment lead times before becoming operational. In 2017, MGEE Transco recorded capital contributions of $2.9 million to ATC Holdco.

At December 31, 2017 and 2016, MGE Transco held a 3.6% ownership interest in ATC. At December 31, 2017 and 2016, MGEE Transco held a 4.4% and 4.0% ownership interest in ATC Holdco, respectively. In January 2018, MGE Transco made a $0.7 million capital contribution to ATC and MGEE Transco made a $0.1 million capital contribution to ATC Holdco.

In June 2016, the PSCW required MGE to transfer its interest in ATC to MGE Energy, which was to be completed by December 31, 2022. The requirement arose in the context of requests for regulatory approvals by several owners of ATC in connection with a reorganization of ATC. MGE's ownership interest in ATC, held through MGE Transco, was transferred net of deferred tax liabilities to MGE Energy by way of a dividend in kind of $15.8 million as of December 1, 2016. As a result of the transfer, MGE's ownership interest in MGE Transco was completely eliminated in favor of MGE Energy. See Footnote 12 for further discussion of the transfer of deferred tax liabilities. The change had no effect on MGE Energy's consolidated financial statements.

ATC's summarized financial data for the years ended December 31, 2017, 2016, and 2015 is as follows:

(In thousands)
Income statement data for the year ended December 31,		2017		2016		2015
Operating revenues	$	721,672	$	650,806	$	615,836
Operating expenses		(344,935)		(322,517)		(319,321)
Other income		5,285		3,225		1,176
Interest expense, net		(109,394)		(98,758)		(97,250)
Earnings before members' income taxes	$	272,628	$	232,756	$	200,441

Balance sheet data as of December 31,		2017		2016
Current assets	$	87,730	$	75,790
Noncurrent assets		4,598,919		4,312,893
Total assets	$	4,686,649	$	4,388,683

Current liabilities	$	767,248	$	495,126
Long-term debt		1,790,590		1,865,302
Other noncurrent liabilities		240,286		271,495
Members' equity		1,888,525		1,756,760
Total members' equity and liabilities	$	4,686,649	$	4,388,683

During 2017, 2016, and 2015, MGE recorded $29.2 million, $29.1 million, and $28.2 million, respectively, for transmission services received from ATC. MGE also provides a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. As of years ended December 31, 2017 and 2016, MGE had a receivable due from ATC of $0.2 million and $0.1 million, respectively.