MGE ENERGY INC

and Equipment - MGE Energy and MGE.

Property, plant, and equipment consisted of the following as of December 31:

(a)

Includes Paris Solar placed in service in December 2024. See Footnote 6 for further information on Paris Solar.

(b)

An asset that will be retired in the near future and substantially in advance of its previously expected retirement date is subject to abandonment accounting. In the second quarter of 2021, the operator of Columbia received approval from MISO to retire Columbia Units 1 and 2. The co-owners intend to retire Unit 1 and Unit 2 by the end of 2029. Final timing and retirement dates are subject to change depending on operational, regulatory, capacity needs, and other factors impacting one or more of the Columbia co-owners. As of December 31, 2024, early retirement of Columbia was probable. "Plant anticipated to be retired early" in table above is the net book value of these generating units. Assets for Columbia Unit 1 and Unit 2 are currently included in rate base, and MGE continues to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW that included retirement dates of 2029 for Unit 1 and Unit 2. If it becomes probable that regulators will disallow full recovery or a return on the remaining net book value of a generating unit that is either abandoned or probable of being abandoned, an impairment loss would be required. An impairment loss would be recorded to the extent that the remaining net book value of the generating unit exceeds the present value of the amount expected to be recovered from ratepayers. No impairment was recorded as of December 31, 2024.

(c)

Includes Paris (battery), Darien (solar and battery), and Koshkonong (solar and battery) projects. See Footnote 6 for further information on renewable projects.

MGE's utility plant is subject to a lien with respect to its Indenture of Mortgage and Deed of Trust. See Footnote 14 for further discussion of the mortgage indenture and the entitlement of certain unsecured notes to be equally and ratably secured if MGE issues additional first mortgage bonds.

Leas

es - MGE Energy and MGE.

As part of its regular operations, MGE enters into various contracts related to IT equipment, substations, cell towers, land, wind easements, and other property in use for operations. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Determination as to whether an arrangement is or contains a lease is completed at inception. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets; lease expense for these leases are recognized on a straight-line basis over the lease term. Leases with initial terms in excess of 12 months are recorded as operating or financing leases on the consolidated balance sheets.

Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. For leases that do not provide an implicit rate, a collateralized incremental borrowing rate based on the information available at commencement date, including lease term, is used in determining the present value of future payments. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Operating lease expense is recognized on a straight-line basis over the lease term. As of December 31, 2024, MGE had no significant leases not yet commenced that would create significant future rights and obligations.

The following table shows lease expense for the years ended December 31:

MGE has regulatory treatment and recognizes regulatory assets or liabilities for timing differences between net lease costs recognized and lease cash payments made. These deferred costs have not been reflected in the table above. See Footnote 8 for further details of deferred lease costs.

The following table shows the lease assets and liabilities on the consolidated balance sheets as of December 31:

The following table shows other lease information for the years ended December 31:

The following table shows the weighted average remaining lease terms and discounts as of December 31:

The following table shows maturities of lease liabilities as of December 31,2024:

Joint Plant Ownership - MGE Energy and MGE.

MGE has undivided ownership interests in jointly owned facilities. Generation and operating expenses are primarily divided between the joint owners under the same method as ownership. MGE provides its own financing, and the respective portion of facilities and costs are included in the corresponding operating expenses (fuel for electric generation, purchased power, other operations and maintenance, etc.) in the consolidated statements of income.

The following tables shows MGE's interest in utility plant in service, operating expense (net of deferred costs), and the related accumulated depreciation reserves and other information related to MGE's jointly owned facilities:

(a)

MGE and the other co-owners announced plans to retire Columbia, a two unit coal-fired generation facility located in Portage, Wisconsin. The co-owners intend to retire Unit 1 and Unit 2 by 2029. Final timing and retirement dates are subject to change depending on operational, regulatory, capacity needs, and other factors impacting one or more of the Columbia co-owners. As of December 31, 2024 and 2023, early retirement of Columbia was probable. See Footnote 4 for further information.

(b)

Two coal-fired generating units in Oak Creek, Wisconsin. In 2021, MGE announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. By the end of 2030, MGE expects coal to be used only as a backup fuel at the Elm Road Units. This transition will help MGE meet its 2030 carbon reduction goals. By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal, which will eliminate coal as an internal generation source for MGE.

(c)

MGE Power West Campus and the UW jointly own the West Campus Cogeneration Facility (WCCF) located on the UW campus in Madison, Wisconsin. The UW owns a controlling interest in the chilled-water and steam plants, which are used to meet the needs for air-conditioning and steam-heat capacity for the UW campus. MGE Power West Campus owns a controlling interest in the electric generation plant, which is leased and operated by MGE.

(d)

In March 2023, MGE purchased an ownership interest in West Riverside, a natural gas-fired facility located in Beloit, WI, from WPL, operator and co-owner of the plant. West Riverside was placed in-service in 2020. In June 2024, MGE purchased an additional ownership interest in West Riverside, increasing its interest to 6.9%.

(e)

Operating charges are allocated to the UW based on formulas contained in the operating agreement. Under the provisions of this arrangement, the UW is required to reimburse MGE for their allocated portion of fuel and operating expenses. For the years ended December 31,2024, 2023, and 2022, the UW's allocated share of fuel and operating costs was $7.0 million, $6.7 million, and $8.7 million, respectively.

(f)

The Forward Wind Energy Center (Forward Wind) consists of 86 wind turbines located near Brownsville, Wisconsin.

(g)

The Two Creeks solar generation array is located in the Town of Two Creeks and the City of Two Rivers in Manitowoc and Kewaunee Counties, Wisconsin. Date of commercial operation of the solar array was November 2020.

(h)

The Badger Hollow I and II solar farm is located in southwestern Wisconsin in Iowa County, near the villages of Montfort and Cobb. Date of commercial operation of Badger Hollow I was November 2021 and December 2023 for Badger Hollow II.

(i)

The Red Barn Wind Farm is located in the Towns of Wingville and Clifton in Grant County, Wisconsin. MGE purchased its share of Red Barn in 2023.

(j)

The Paris Solar-Battery Park is located in the Town of Paris in Kenosha County, Wisconsin. Date of commercial operation of the solar array was December 2024.

MGE currently has ongoing jointly-owned generation construction projects. MGE's share of the Paris battery generation is 11 MW. Darien Solar Energy Center is located in Walworth and Rock Counties in southern Wisconsin. MGE's ownership interest is 10% and its share of generation is 25 MW (solar) and 7.5 MW (battery). Koshkonkong Solar Energy Center is located in the Towns of Christiana and Deerfield in Dane County, Wisconsin. MGE's ownership interest is 10% and its share of generation is 30 MW (solar) and 16.5 MW (battery). As of December 31, 2024, $22.4 million, $43.0 million, and $15.4 million respectively, (excluding AFUDC) related to Paris, Darien, and Koshkonong is reflected in "Construction work in progress" on the consolidated balance sheets. Construction of these projects are expected to completed in phases. Paris battery is expected to be completed in 2025. Darien is expected to be completed in 2025 (solar) and 2026 (battery). Koshkonong is expected to be completed in 2026 (solar) and 2027 (battery).

Investments - MGE Energy and MGE.

a.

Equity Securities, Equity Method Investments, and Other Investments.

Equity securities represent publicly traded securities and private equity investments in common stock of companies in various industries. MGE had no material investments in 2024 or 2023.

For the years ended December 31, 2024, 2023, and 2022, there were no material liquidated investments for MGE. For the years ended December 31, 2024, 2023, and 2022, certain investments were liquidated for MGE Energy. As a result of these liquidations, the following was received:

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, a subsidiary of 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 subsidiary of MGE Energy.

As of December 31, 2024 and 2023, MGE Transco held a 3.6% ownership interest in ATC. As of December 31, 2024 and 2023, MGEE Transco held a 4.4% ownership interest in ATC Holdco. MGE Transco and MGEE Transco have accounted for their investment in ATC and ATC Holdco, respectively, under the equity method of accounting. Equity earnings from investments are recorded as "Other income, net" on the consolidated statements of income of MGE Energy. For the following years ended December 31, MGE Transco recorded the following:

In January 2025, MGE Transco made a $2.5 million capital contribution to ATC.

ATC Holdco was formed in December 2016. In 2024, 2023, and 2022 MGEE Transco recordedno capital contributions to ATC Holdco.

ATC's summarized financial data is as follows:

MGE receives transmission and other related services from ATC. For the years ended December 31, 2024, 2023, and 2022, MGE recorded $36.3 million, $33.8 million, and $31.4 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 December 31, 2024 and 2023, MGE had a receivable due from ATC of $2.0 million and $5.3 million, respectively, related primarily to transmission interconnection at Badger Hollow and Paris solar generation sites. MGE will be reimbursed for these costs after the new generation assets are placed into service.

Regulator