MADISON GAS & ELECTRIC CO

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, including our at-the-market program. In May 2026, MGE Energy also completed a public offering of common stock, including forward sale agreements that will provide an additional source of liquidity and financial flexibility to support future capital investment needs upon settlement of the shares of common stock sold under the agreements, as described in Footnote 6.c. of the Notes to Consolidated Financial Statements in this Report. The amount and timing of any financings will be primarily driven by capital investments and cash requirements and will depend upon market conditions, regulatory approvals, and other factors. MGE plans to maintain a capital structure consistent with authorized levels approved by its regulator. 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 2025 Annual Report on Form 10-K for information regarding MGE Energy's and MGE's credit facilities, together with the disclosure under the heading "Third Amended and Restated Credit Agreements" below and Footnote 6 of the Notes to Consolidated Financial Statements in this Report.

Cash Flows

The following summarizes cash flows for MGE Energy and MGE during the nine months ended September 30, 2026 and 2025:

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, 2026, compared to the same period in 2025, were as follows:

Capital Requirements and Investing Activities

The principal increases (decreases) in cash flows from investing activities during the nine months ended September 30, 2026, compared to the same period in 2025, were as follows:

Capital Expenditures

The following table shows MGE Energy's forecasted capital expenditures for 2026 through 2031:

(a)

Includes actual capital expenditures already incurred in 2026 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.

Forecasted capital expenditures reflect the following significant generation and storage 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 this 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.

(g)

The project was awarded with a grant from the U.S. Department of Energy Office of Clean Energy Demonstrations. The grant will reduce the total estimated project expenses. MGE holds a 19% ownership interest in this project and the cost, after grant, is expected to be approximately $16 million.

(h)

In October 2025, MGE and other co-owners filed a joint application with the PSCW for upgrades to the non-regulated Elm Road Units. The project would convert existing coal-fired boilers to natural gas. MGE holds an 8.33% ownership interest in the facility. MGE's estimated cost is approximately $11 million. If approved, the project is expected to be placed in service in 2028.

(i)

In February 2026, MGE executed an asset purchase agreement to acquire a 33.4% ownership interest in the RockGen Energy Center, an existing natural gas-fired generating plant near Cambridge, Wisconsin. MGE's estimated cost is approximately $203 million. If approved, the project is expected to be placed in service in 2027.

MGE continues to assess the potential impact of procurement disruptions on current and future generation 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.

Other local solar and battery storage projects: In 2026 through 2028, electric renewable capital expenditures include local investments in solar generation and battery storage. Forecasted total capital expenditures for those years are approximately $46 million.

Cash Provided by 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, 2026, compared to the same period in 2025, were as follows:

(a)

In January 2026, MGE issued $90 million of senior unsecured notes that were used to assist with financing additional capital expenditures and other corporate obligations. In January 2026, MGE completed a redemption of $1.2 million of its outstanding first mortgage bonds. In September 2026, MGE repaid $15 million of outstanding long-term debt.

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

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 and may affect the collateral required to be posted under derivative transactions.

Third Amended and Restated Credit Agreements

As of September 30, 2026, MGE Energy and MGE had revolving credit facilities with aggregate commitments of $50 million and $130 million, respectively.

On October 1, 2026, MGE Energy and MGE entered into third amended and restated credit agreements which amended and restated their existing revolving credit facilities to, among other things, (i) extend the maturity dates to October 1, 2031 and (ii) increase the aggregate commitment under MGE's revolving credit facilities from $130 million to $250 million. MGE Energy's revolving credit commitment remained $50 million.

Environmental Matters

See the discussion of environmental matters included in the 2025 Annual Report on Form 10-K, as updated by Footnote 8.a. of Notes to Consolidated Financial Statements in this Report.