MGE ENERGY INC

MGE Energy and MGE expect to have adequate liquidity to support future operations and capital expenditures over the next twelve months. Available resources include cash and cash equivalents, operating cash flows, liquid assets, borrowing working capacity under revolving credit facilities, and access to equity and debt capital markets. In September 2024, MGE Energy began issuing new shares of common stock to participants in our Direct Stock Purchase and Dividend Reinvestment Plan. MGE Energy also expects to generate funds from operations and both long-term and short-term debt financing. See "Credit Facilities" under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the 2023 Annual Report on Form 10-K for information regarding MGE Energy's and MGE's credit facilities.

Cash Flows

The following summarizes cash flows for MGE Energy and MGE during the nine months ended September 30, 2024 and 2023:

Cash Provided by Operating Activities

Cash flows from operating activities for MGE Energy and MGE principally reflect the receipt of customer payments for electric and gas service and outflows related to fuel for electric generation, purchased power, gas, and operation and maintenance expenditures.

The principal increases (decreases) in cash flows from operating activities during the nine months ended September 30, 2024, compared to the same period in 2023, were as follows:

Capital Requirements and Investing Activities

MGE Energy

MGE Energy's cash used for investing activities increased $11.1 million during the nine months ended September 30, 2024, when compared to the same period in the prior year.

Capital expenditures during the nine months ended September 30, 2024, were $164.1 million. This amount represents an increase of $13.8 million from the expenditures made in the same period in the prior year. This increase primarily reflects an increase in electric and gas utility expenditures.

Proceeds from the sale of investments increased $1.3 million during the nine months ended September 30, 2024, when compared to the same period in the prior year.

Capital contributions in ATC and other investments decreased $1.6 million during the nine months ended September 30, 2024, when compared to the same period in the prior year.

MGE

MGE's cash used for investing activities increased $13.9 million during the nine months ended September 30, 2024, when compared to the same period in the prior year.

Capital expenditures during the nine months ended September 30, 2024, were $164.1 million. This amount represents an increase of $13.8 million from the expenditures made in the same period in the prior year. This increase primarily reflects an increase in electric and gas utility expenditures.

Capital Expenditures

The following table shows MGE Energy's forecasted capital expenditures for 2024 through 2029:

(a)

Includes actual capital expenditures already incurred in 2024 and estimated capital expenditures for the remainder of the year.

Forecasted capital expenditures are based upon management's assumptions with respect to future events, including the timing and amount of expenditures associated with environmental compliance initiatives, legislative and regulatory action, supply chain and market disruptions, customer demand and support for electrification and renewable energy resources, energy conservation programs, load growth, the timing of any required regulatory approvals, and the adequacy of rate recovery. Actual events may differ materially from these assumptions and result in material changes to those forecasted amounts.

MGE is targeting at least 80% carbon reduction from electric generation by 2030 (from 2005 levels) and net-zero carbon electricity by 2050. Solar, wind, and battery storage projects are a major step toward deep decarbonization and greater use of clean energy sources in pursuit of our goal. In addition, natural gas generation projects help enable MGE's clean energy transition and ensure reliability for customers as the energy supply is decarbonized. MGE continues to evaluate solar, wind, battery storage, and natural gas generation projects that align with its goals as legacy fossil fuel-fired facilities are retired.

The following table provides further detail of MGE Energy's forecasted capital expenditures, separating spending into capital project categories for 2025 through 2029:

(a)

Includes solar and wind generation and battery storage.

Our forecasted capital expenditures reflect the following significant renewable projects that are currently under construction or pending regulatory approval:

(a)

Approved by the PSCW.

(b)

(c)

MGE received PSCW approval to recover 100% AFUDC.

(d)

See Footnote 12 of Notes to Consolidated Financial Statements in the Report for information on costs incurred.

(e)

Pending approval by the PSCW.

(f)

Estimated costs are expected to exceed PSCW previously approved CA levels. Notifications are provided to the PSCW when costs increase above CA levels. MGE has and will continue to request recovery of the updates in its rate case proceedings.

MGE continues to assess the potential impact of procurement disruptions on current and future solar projects that may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we have filed, and expect to continue to file, notifications with the PSCW and expect to request recovery of any increases in MGE's future rate proceedings. See further information on procurement disruptions discussed under "Other Matters" section below.

Columbia Energy Storage Project: In August 2024, MGE was included in a Joint Application to develop an Energy Dome closed-loop gas-to-liquid solution. This project would use vaporized liquid carbon dioxide to power an electric generating turbine. MGE holds a 19% ownership interest in this project.

West Riverside: In June 2024, MGE purchased an additional 25 MW of capacity of West Riverside for approximately $25 million. After purchase, MGE owns 50 MW of capacity of West Riverside. West Riverside is a natural gas-fired generating plant.

Electric and Gas Distribution: In 2024 through 2029, electric and gas capital expenditures include investment in enhanced metering solutions to provide customers with more timely and detailed energy use information. Investments in advanced metering infrastructure will provide additional benefits including outage and demand response and automated meter reading capabilities. Forecasted total capital expenditures for those years is approximately $57 million.

Cash Used for Financing Activities

The principal sources and uses of cash are related to short-term and long-term borrowings and repayments and the payment of cash dividends.

The principal increases (decreases) in cash flows from financing activities during the nine months ended September 30, 2024, compared to the same period in 2023, were as follows:

(a)

The noncontrolling interest arises from the accounting required for the entities, which are not owned by MGE but are consolidated as VIEs.

(b)

During the nine months ended September 30, 2023, MGE issued $50 million of senior unsecured notes that were used to assist with financing additional capital expenditures and other corporate obligations. In addition, $19.3 million of Industrial Development Revenue Bonds were tendered by their holders as required by the terms of the bonds and remarketed as permitted by those terms.

Capitalization Ratios

MGE Energy's capitalization ratios were as follows:

(a)

Includes the current portion of long-term debt.

Credit Ratings

MGE Energy's and MGE's access to the capital markets, including, in the case of MGE, the commercial paper market, and their respective financing costs in those markets, may depend on the credit ratings of the entity that is accessing the capital markets.

None of MGE Energy's or MGE's borrowing is subject to default or prepayment as a result of a downgrading of credit ratings, although a downgrading of MGE's credit ratings would increase fees and interest charges under both MGE Energy's and MGE's credit agreements.

Environmental Matters

See the discussion of environmental matters included in the 2023 Annual Report on Form 10-K, as updated by Footnote 8.a. of Notes to Consolidated Financial Statements in this Report.