MGE ENERGY INC

and Equipment - MGE Energy and MGE.

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

(a)

Includes Paris Battery and Darien Solar placed in service in 2025. See Footnote 6 for further information on Paris and Darien.

(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. As of December 31, 2024, coal operations at Columbia Units 1 and 2 were expected to conclude by the end of 2029, and therefore met the criteria to be considered probable of abandonment. The related net book value of $121,576 (in thousands) was presented separately in the 2024 Form 10-K. As a minority owner, MGE and the other Columbia co-owners currently plan to continue coal operations at least through 2029. Final timing and retirement dates continue to be evaluated, and depend upon operational regulatory considerations, capacity needs, and availability. As of December 31, 2025, early retirement of Columbia Unit 1 and 2 was no longer probable.

(c)

Includes Koshkonong (solar and battery), High Noon (solar and battery), Sunnyside (solar and battery), and Saratoga (solar and battery) projects. See Footnote 6 for further information on renewable projects.

As of December 31, 2025, MGE's utility plant was subject to a lien with respect to its Indenture of Mortgage and Deed of Trust. In January 2026, MGE completed a redemption of all outstanding first mortgage bonds, and delivered to the Trustee a satisfaction and discharge which, pursuant to the terms of the Indenture, effectively discharged the Indenture. See Footnote 14 for further discussion of the mortgage indenture.

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, 2025, 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 31,2025:

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 show 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)

As of December 31, 2024, coal operations were expected to conclude at Columbia Units 1 and 2 by the end of 2029, and thus at that time Columbia Units 1 and 2 met the criteria to be considered probable of abandonment. As a minority owner, MGE and the other Columbia co-owners currently plan to continue coal operations at least through 2029. Final timing and retirement dates continue to be evaluated, and depend upon operational regulatory considerations, capacity needs, and availability. As of December 31, 2025, early retirement of Columbia Unit 1 and 2 was no longer probable. See Footnote 4 for further information.

(b)

Two coal-fired generating units in Oak Creek, Wisconsin. In October 2025, MGE, along with the plant co-owners, filed a joint application with the PSCW 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, coal is expected to be used only as a backup fuel at the Elm Road Units. By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal.

(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)

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

(f)

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 31,2025, 2024, and 2023, the UW's allocated share of fuel and operating costs was $8.4 million, $7.0 million, and $6.7 million, respectively.

(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. Date of commercial operation of battery was June 2025.

(k)

The Darien Solar Energy Center is located in Walworth and Rock Counties in southern Wisconsin. Date of commercial operation of the solar array was March 2025.

MGE currently has ongoing jointly-owned generation construction projects, as shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" or "Construction work in progress" on the consolidated balance sheets.

(a)

(b)

Darien Solar Energy Center is located in Walworth and Rock Counties in southern Wisconsin.

(c)

Koshkonong Solar Energy Center is located in the Towns of Christiana and Deerfield in Dane County, Wisconsin.

(d)

High Noon Solar Project is located in Columbia County, Wisconsin.

(e)

Columbia Energy Dome is located in Columbia County, Wisconsin.

(f)

Badger Hollow Wind is located in Iowa and Grant Counties, Wisconsin.

(g)

Whitetail Wind is located in Grant County, Wisconsin.

(h)

Ursa Solar Park is located in Columbia County, Wisconsin.

(i)

Saratoga Solar Energy Center is located in Wood County, Wisconsin.

(j)

Estimated costs are expected to exceed PSCW previously approved Certificate of Authority (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.

Investments - MGE Energy and MGE.

a.

Equity Securities, Equity Method Investments, and Other Investments.

Equity securities represent private equity investments in common stock of companies in various industries. MGE had no material investments in 2025 or 2024.

For the years ended December 31, 2025, 2024, and 2023, there were no material liquidated investments for MGE. For the years ended December 31, 2025, 2024, and 2023, 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, 2025 and 2024, MGE Transco held a 3.6% ownership interest in ATC. As of December 31, 2025 and 2024, 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 2026, MGE Transco made a $4.5 million capital contribution to ATC.

ATC Holdco was formed in December 2016. In 2025, 2024, and 2023 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, 2025, 2024, and 2023, MGE recorded $40.8 million, $36.3 million, and $33.8 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, 2025 and 2024, MGE had a receivable due from ATC of $2.5 million and $2.0 million, respectively, related primarily to transmission interconnection at renewable solar and battery generation sites. MGE will be reimbursed for these costs after the new generation assets are placed into service.

Regulator