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As Filed with the Securities and Exchange Commission on February 13, 2002

SECURITIES AND EXCHANGE COMMISSION

Amendment No. 2

MGE ENERGY, INC.

133 South Blair Street

Terry A. Hanson, Vice President, Chief Financial Officer and Secretary

Copy To:

Richard W. Astle, Esq.

     Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement and the date on which all other conditions to the share exchange between the common shareholders of Madison Gas and Electric Company and MGE Energy, Inc. pursuant to the Agreement and Plan of Share Exchange described in the Proxy Statement and Prospectus contained herein have been satisfied or waived.

     If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  o

     If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o 

     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

      Shareholders of record at the close of business on March 5, 2002 are entitled to vote at the meeting.

      The matters to be acted upon at the meeting are described in the accompanying proxy statement and prospectus.

April 5, 2002

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PROXY STATEMENT

MADISON GAS AND ELECTRIC COMPANY

PROSPECTUS

COMMON STOCK OF

MGE ENERGY, INC.

133 South Blair Street

      This document combines a proxy statement for the 2002 Annual Meeting of Shareholders of Madison Gas and Electric Company (MGE) with a prospectus of MGE Energy, Inc. (MGE Energy). The enclosed proxy is solicited by the Board of Directors of MGE to be voted at the 2002 Annual Meeting of Shareholders, including any adjournment of that meeting.

      The Board of Directors proposes to reorganize MGE into a holding company structure. At the Annual Meeting of Shareholders, you are being asked to approve the Agreement and Plan of Share Exchange attached to this document as Exhibit A. Upon the effectiveness of the plan, MGE Energy will issue up to 17,500,000 shares of common stock in exchange for shares of MGE common stock. Each share of MGE common stock will be exchanged for one share of common stock of the holding company.

      The share exchange involves risks, which you should consider. Please refer to “Risk Factors” on page 6.

      MGE’s common stock is quoted on the Nasdaq National Market. We anticipate that shares of MGE Energy’s common stock will be approved for quotation on the Nasdaq National Market following completion of the proposed reorganization and that it will be traded under the symbol “MGEE.”

      This document, together with the accompanying proxy, are first being mailed on or about April 5, 2002. MGE’s annual report to shareholders, which includes consolidated financial statements, is being mailed to all shareholders of record together with this document. The date of this document is                          , 2002.

      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offense.

      This document incorporates important business and financial information about MGE that is not included in or delivered with it. Please see “Incorporation Of Certain Documents By Reference” on page 8 for more information regarding what documents have been incorporated and how you can obtain copies of those documents.

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Where You Can Find Information About this Document

      This document provides information about the annual meeting of MGE, including information about the reorganization of MGE into a holding company structure, and the common stock of MGE Energy that will be issued to the holders of common stock of MGE in connection with the reorganization.

      We have included cross-references to sections in this document where you can find further related discussions. You can also find references to key topics in the table of contents.

      This document incorporates important business and financial information that is not included in or delivered with the document. You can request a copy of this information, at no cost, by writing, telephoning or e-mailing us at:

Madison Gas and Electric Company

      To receive this information in time for the annual meeting, you must request it no later than May 7, 2002, five business days prior to the date of that meeting.

      You should rely only on the information contained or incorporated by reference in this document. We have not authorized anyone else to provide you with any different information. If anyone provides you with different or inconsistent information, you should not rely on it. The information in this document is current only as of the date of this document.

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QUESTIONS AND ANSWERS

MGE Energy is a direct, wholly owned subsidiary of MGE that was organized for the purpose of becoming the new parent holding company of MGE. Currently, MGE Energy has no assets and has not engaged in any business operations. Its principal executive office is located at the principal executive office of MGE.

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

MGE Selected Consolidated Financial Information

      The following table sets forth selected consolidated financial information with respect to MGE and its subsidiaries (including MGE Energy). This financial information is derived from, and qualified by reference to, the consolidated financial statements contained in MGE’s Form 10-K Reports for the years ended December 31, 1997 through 2001, and incorporated herein by reference.

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      The consolidated assets and liabilities of MGE Energy and its subsidiaries (including MGE) immediately after the share exchange will be the same as the consolidated assets and liabilities of MGE and its subsidiaries (including MGE Energy) immediately before the share exchange. Please refer to “Proposal to Approve the Formation of A Holding Company and Agreement and Plan of Share Exchange — Financial Statements; Accounting Treatment” on page 18.

MGE Historical Per Share Information

      MGE’s common stock is quoted on the Nasdaq National Market under the symbol “MDSN.” MGE Energy’s common stock is not traded. We expect that MGE Energy common stock will be approved for quotation on the Nasdaq National Market and will be traded under the symbol “MGEE” after completion of the share exchange.

      The closing price for MGE common stock on November 1, 2001, the last trading day before we announced the formation of a holding company structure, was $24.86.

      In the table above, we provide selected historical per share data for MGE. You should read the per share information in conjunction with the historical consolidated financial information of MGE incorporated by reference herein and the rest of the selected consolidated financial information on page 4.

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RISK FACTORS

Unregulated Businesses May Involve More Risk

      The formation of a holding company allows us to pursue, through separate subsidiaries, business opportunities in markets that are both regulated and unregulated. Unregulated businesses may involve more risk than those of MGE, which is primarily a regulated utility. The value of a common shareholder’s investment in the holding company could be adversely affected because of the greater risk of these businesses.

Dividends on the Holding Company Common Stock Depend on Dividends Paid on MGE Common Stock

      After the share exchange, MGE, as a subsidiary of the holding company, will be, at least initially, the holding company’s largest source of income. MGE will own, either directly or indirectly, most of the operating assets. When the restructuring takes effect, it is expected that dividends on the holding company common stock will be declared and paid on the same schedule and rate currently followed for dividends on MGE common stock. Subsequently, holding company dividends will depend on the future earnings and financial condition of the holding company and its subsidiaries. For more information on the restriction of MGE’s ability to pay dividends, see “Dividend Policy” on page 13.

Rights of MGE Energy Shareholders to the Assets of the Holding Company May be Limited

      In the event of liquidation or bankruptcy of MGE or MGE Energy following the share exchange, the rights of MGE Energy shareholders to its assets will be subordinate to the rights of creditors and holders of any preferred stock of MGE, as would presently be the case, and also to the rights of any creditors of MGE Energy to the extent that the obligations to such creditors were not satisfied out of the assets of the holding company or its nonutility subsidiaries.

VOTING

Number of Votes Per Share

      Each share of common stock issued and outstanding as of the record date for the meeting is entitled to one vote at the meeting, except as described below for shareholders who own more than a specified percentage of the common stock. If you are a participant in the MGE Dividend Reinvestment and Direct Stock Purchase Plan, the shares you have accumulated in that plan are held by the administrator under the nominee name of Madge & Co., and those shares, including your reinvestment shares, will be voted in accordance with the direction given on your proxy. As of March 5, 2002, the record date for the meeting, there were                               shares of common stock of MGE issued and outstanding.

      At MGE’s 1985 Annual Meeting of Shareholders, shareholders approved an amendment to the MGE Articles of Incorporation limiting the voting power of any shareholder who acquires more than 10 percent of the outstanding voting stock of MGE. In addition, under the Wisconsin Business Corporation Law, the voting power of shares held by any person in excess of 20 percent of the voting power in the election of directors is limited to 10 percent of the full voting power of the excess shares. To our knowledge, neither of these limitations currently apply to any shareholder.

How Street Name Holders May Vote

      If you own shares through a broker, the registered holder of those shares is your broker or its nominee. If you receive MGE proxy materials from your broker, you should vote your shares by following the procedures specified by your broker. Your broker will tabulate the votes it has received from its customers and submit a proxy card to MGE reflecting those votes. If you plan to attend the annual meeting and vote in person your shares held by your broker, you should contact your broker to obtain a broker’s proxy card and MGE’s Shareholder Services (1-800-356-6423) to make a reservation for the meeting.

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How Record Holders May Vote

      The record date for the meeting is March 5, 2002. Holders of record as of such date can vote in person at the meeting or by proxy. By giving MGE your proxy, you are authorizing the individuals named on our proxy card (the proxies) to vote your shares in the manner you indicate.

      As a convenience to you, we are providing you with the option to vote by proxy via the Internet or via toll-free touch-tone telephone. You may still cast your vote by returning your signed and dated proxy card. Instructions regarding all three methods of voting are included on the proxy card. If you sign and return the proxy card without specifying any instructions and without indicating expressly that you are not voting some or all of your shares, your shares will be voted for the Agreement and Plan of Share Exchange and for the election of all three director nominees. The signature on the proxy card should correspond exactly with the name of the shareholder as it appears on the proxy card. Where stock is registered in the name of two or more persons, each of them should sign the proxy. If you sign a proxy card as an attorney, officer, personal representative, administrator, trustee, guardian, or similar capacity, please indicate your full title in that capacity.

Holders Needed to Establish a Quorum

      A quorum is necessary to hold a valid meeting of shareholders. If shareholders entitled to cast at least a majority of the shares entitled to vote at the meeting are present in person or by proxy, a quorum will exist. In order to assure the presence of a quorum, please vote via the Internet, telephone, or sign and return your proxy card promptly in the enclosed postage-paid envelope even if you plan to attend the meeting. Abstentions and broker nonvotes are counted as present for establishing a quorum. A broker nonvote occurs when a broker votes on one or more matters on the proxy card, but not on others because the broker does not have the authority to do so.

The Vote Necessary for Action to be Taken

      In voting on the Agreement and Plan of Share Exchange, you may vote in favor of the plan or against the plan or you may abstain from voting. The vote required to approve the plan is the affirmative vote of two-thirds of the outstanding shares of MGE common stock. As a result, abstentions, as well as broker nonvotes, will have the same legal effect as a vote against the Agreement and Plan of Share Exchange.

      In voting for the election of directors, you may vote for the election of all of the nominees or you may withhold your votes as to all or specific nominees. The three persons receiving the greatest number of votes will be elected to serve as Class I directors. Accordingly, withholding authority to vote for a director and broker nonvotes with respect to the election of directors will not affect the outcome of the election of directors.

Revocation of Proxies

      If you are a registered holder of MGE common stock, you may revoke your proxy by giving written revocation to MGE’s Corporate Secretary at any time before your proxy is voted, by executing a later-dated proxy card which is voted at the meeting, or by attending the meeting and voting your shares in person. If your shares are held by a broker, you must contact your broker to revoke your proxy. Attendance at the meeting will not automatically revoke your proxy.

Electronic Access to Proxy Materials and Annual Report

      Shareholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail. You can choose this option by marking the appropriate box on your proxy card or by calling MGE’s Shareholder Services toll-free number (1-800-356-6423).

Where You Can Find More Information

      MGE is currently the parent company of MGE Energy. MGE files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. MGE’s SEC filings

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Incorporation of Certain Documents by Reference

      SEC rules allow us to “incorporate by reference” the information that we file with them. This means that we can disclose important information to you by referring you to those filed documents. The information incorporated by reference is an important part of this document, and information that is filed later with the SEC will automatically update and replace this information.

      We incorporate by reference the following documents and any filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 from the date of this document until all of the MGE common stock is exchanged for the common stock of MGE Energy:

      MGE Energy has filed a registration statement with the SEC under the Securities Act of 1933. The primary purpose of the registration statement is to register the shares of MGE Energy common stock that will be issued in the share exchange. This document does not contain all of the information set forth in the registration statement.

      You should not assume that our business affairs have not changed since the date of this document just because this document is delivered to you or a sale is made hereunder.

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ITEM I: PROPOSAL TO APPROVE THE FORMATION OF

Formation of a Holding Company

      We are asking you to approve the formation of a holding company through the exchange of MGE common stock for common stock of MGE Energy. After the share exchange, MGE will become a wholly owned subsidiary of MGE Energy.

      MGE and MGE Energy, the proposed holding company, have entered into an Agreement and Plan of Share Exchange. A copy of that plan is attached as Exhibit A and is incorporated by reference into this document. Highlights include:

      Up to 17,500,000 shares of MGE common stock may be exchanged for shares of MGE Energy common stock upon the effectiveness of the share exchange. The exact number of shares will depend upon the number of shares issued and outstanding at the time of the share exchange. This number may change for various reasons, including the issuance of additional shares under MGE’s dividend reinvestment plan.

Reasons for Formation of a Holding Company

      The primary purposes of the proposed restructuring are:

      Management anticipates that the holding company structure will permit the use of financing techniques that are more directly suited to the particular requirements, characteristics, and risks of the MGE system’s

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      In addition to flexible financing options, we believe that a holding company structure will better facilitate the deployment of any portion of MGE’s earnings that are not required for reinvestment in the utility business, as well as the deployment of capital that may be raised by the holding company.

      MGE has operated primarily as a traditional combination utility that generates and distributes electricity and also purchases, transports and distributes natural gas. The regulation of utilities and the markets that the company has traditionally served are changing. In recent years, federal and state initiatives have promoted the development of competition in the generation and sale of electricity, as well as in the natural gas business. These initiatives have sought to separate the services that utilities traditionally have provided, such as separating retail sales and related distribution from wholesale sales and related transmission. They have also enabled certain types of customers to purchase electricity and natural gas directly from suppliers other than their local transmission or distribution utilities and natural gas suppliers.

      The traditional utility company structure is no longer best suited for meeting the business demands of a competitive energy marketplace. The holding company structure is a well established form of organization for companies engaging in multiple lines of business, and is increasingly prevalent in the electric utility industry. Many utilities already are organized under a public utility holding company structure. Under a holding company structure, we would be able to engage in non-utility businesses without obtaining the prior approval of the PSCW. This would enable us to pursue such business opportunities in a timely manner. The holding company structure would also allow us to consider using alternative financing structures, recently authorized in Wisconsin state law, to construct new generation facilities that will help MGE meet the supply needs of its customers.

      Industry changes inside and outside MGE’s Wisconsin service territory are already presenting us with new business opportunities. We have already begun to take advantage of these opportunities.

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      We will consider various opportunities as the energy industry continues to change. Our primary focus will continue to be to service our core utility customers in the communities we serve. The holding company structure will facilitate competitive new generation projects and allow for the financial returns from these projects to be retained for the benefit of MGE’s system and the holding company’s shareholders. We currently anticipate that MGE Energy through a subsidiary will build and own electric generation and will lease that generation to MGE under long-term lease arrangements subject to approval by the PSCW.

      The corporate segregation afforded by a holding company structure will allow the separation of MGE’s ancillary lines of business from its remaining core electric and gas utility business, while retaining common ownership of these businesses under the holding company. When new business opportunities arise, new lines of businesses can be operated through the holding company subsidiaries. We believe that the segregation of business functions will facilitate the development of ancillary businesses, and better protect the utility and its customers from the risks associated with the operations of ancillary business activities.

      In contrast to a holding company structure, MGE’s current corporate structure does not allow the same degree of financial separation because all business activities must either be part of the utility itself or be conducted in entities owned by the utility. As a result, any volatility in earnings associated with these other businesses will continue to be reflected in the present utility’s financial results. In a holding company structure, these other businesses will be operated as subsidiaries of the holding company. The utility will be more effectively protected from the potential volatility of these operations because the activities of sister companies of MGE will not be reflected in the utility’s financial statements. Any unfavorable financial results or liabilities of these companies generally will not adversely affect MGE’s equity capital.

      The Wisconsin Holding Company Act, which requires PSCW approval before the proposed restructuring would take effect, provides that the maintenance of a financially healthy utility depends upon the maintenance of an economically healthy service territory. The public interest and the interest of investors and consumers are benefited when public utility holding companies conduct substantial business activities, attract new businesses, expand existing business, provide investment capital for new business ventures, and otherwise promote employment and commerce in the service territories of their utility affiliates or in Wisconsin. The Board of Directors has proposed the restructuring with a view toward engaging in those activities as well as advancing the other purposes indicated above.

      We intend that the utility operations of MGE continue to constitute the predominant activity of the holding company for the foreseeable future, and that forming a holding company not impair the operation of MGE’s utility business. We continue to be committed to providing high-quality utility service in MGE’s franchised territory. Forming a holding company will not, in any way, affect our responsibilities, qualifications or authority to operate and maintain our utility assets.

Companies Subject to Share Exchange

     MGE

      Madison Gas and Electric Company, a Wisconsin corporation organized in 1896, is a public utility that generates and distributes electricity in Dane County, Wisconsin (250 square miles). MGE also purchases, transports and distributes natural gas in seven Wisconsin counties: Columbia, Crawford, Dane, Iowa, Juneau, Monroe and Vernon (1,325 square miles). MGE’s principal executive office is located at 133 South Blair Street, Post Office Box 1231, Madison, Wisconsin 53701-1231 (telephone: (608) 252-7000).

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     MGE Energy

      MGE Energy was incorporated in Wisconsin on October 31, 2001. It is a direct, wholly owned subsidiary of MGE. On the effective date of the share exchange, MGE Energy will become the parent of MGE. MGE Energy’s principal executive office is located at 133 South Blair Street, Post Office Box 1231, Madison, Wisconsin 53701-1231 (telephone: (608) 252-7000).

      Currently, MGE Energy has no assets and has not engaged in any business operations. All of MGE’s business operations conducted by MGE and its subsidiaries immediately before the effective date of the share exchange will continue to be conducted by MGE and its subsidiaries immediately after the effective date, except that MGE will be a subsidiary of MGE Energy. The consolidated assets and liabilities of MGE and those of MGE’s subsidiaries immediately before the effective date will be the same as the consolidated assets and liabilities of MGE and its subsidiaries immediately after the effective date. We currently expect that MGE Energy will not itself be an operating company at the parent company level.

      MGE Energy will not be subject to regulation by FERC, except to the extent that the rules and orders of that agency impose restrictions on the holding company’s relationship with MGE or MGE’s relationship with other subsidiaries of the holding company. The holding company will be subject to the regulation of the PSCW as further described under “Regulatory Matters — Public Service Commission of Wisconsin Regulation” on page 20. In addition, MGE Energy will be a “public utility holding company” under the Public Utility Holding Company Act of 1935; however, we expect MGE Energy to be exempt from most of the provisions of that law. Please refer to “Regulatory Matters” on page 20.

      We have not yet determined the final corporate structure of MGE Energy after the share exchange. After the share exchange and subject to regulatory approval, the holding company intends to realign MGE’s subsidiaries. This realignment may include the transfer of the common stock of MGE’s subsidiaries to MGE Energy, making them direct subsidiaries of the holding company. MGE Energy may also form new subsidiaries. The manner and timing of any realignment will depend on a number of factors, including the regulatory approvals and the business judgment of our Board of Directors. You are not being asked to vote on the timing or manner of this realignment of MGE’s businesses.

Termination or Amendment of Plan of Share Exchange

      After shareholder approval of the share exchange:

Conditions to Share Exchange

      The share exchange will not happen until all of the following conditions are satisfied:

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      We expect to receive the approval or waiver of FERC and the PSCW after approval by MGE shareholders of the share exchange.

Listing of MGE Energy Common Stock

      We expect that MGE Energy common stock will be approved for quotation on the Nasdaq National Market. MGE Energy common stock will trade under the stock symbol “MGEE” after completion of the share exchange.

Rights of Dissenting Shareholders

      Under the Wisconsin Business Corporation Law, holders of MGE common stock are not entitled to dissenters’ rights in connection with the share exchange and corporate restructuring. Although holders of MGE common stock are entitled to vote on the plan, dissenters’ rights are not provided by the Wisconsin Business Corporation Law for shares which on the record date for voting on a plan of share exchange were quoted on the Nasdaq National Market, subject to certain exceptions inapplicable to the share exchange. On the record date for the annual meeting, MGE common stock was quoted on the Nasdaq National Market.

No Exchange of Stock Certificates

      MGE shareholders do not have to exchange their stock certificates after the share exchange.

      After the share exchange, each stock certificate representing shares of MGE common stock will automatically represent the same number of shares of MGE Energy common stock. When stock certificates representing MGE common stock are presented for transfer as part of the regular trading of stock after the share exchange, new certificates representing MGE Energy common stock will be issued.

Dividend Policy

      After the share exchange, we expect that quarterly dividends on MGE Energy common stock will be declared and paid on the same schedule currently followed for dividends on MGE common stock. The most recent quarterly dividend paid on MGE common stock was $0.3333 per share payable on December 15, 2001 to holders of record on December 1, 2001.

      Consistent with the current policy, there is no guarantee of the amount of the quarterly dividend or of the payment of future dividends. The rate and timing of dividends on the common stock of the holding company will depend on the future earnings and financial condition of the holding company and its subsidiaries, including MGE, and on other factors affecting dividend policy, all of which cannot now be determined. As a practical matter, the ability of MGE Energy to pay dividends on its common stock will be governed by the ability of the operating subsidiaries to pay dividends to the holding company. For a period of time after the share exchange, the funds needed by MGE Energy to pay dividends on its common stock are expected to come primarily from the dividends paid by MGE. In the future, dividends from MGE Energy’s subsidiaries other than MGE may also be a source of funds for dividend payments by the holding company.

      MGE intends to pay dividends to MGE Energy in amounts which, to the extent not otherwise provided by dividends and other funds from any other subsidiaries, will be sufficient to pay cash dividends on the common stock of the holding company. The amount of dividends to be paid by MGE will also be used to pay the operating expenses of the holding company and for other corporate purposes that the Board of Directors of the holding company determines.

      MGE’s ability to make regular cash dividends to MGE Energy after the share exchange will be subject to the availability of earnings and the needs of its business. Because MGE will remain subject to regulation by the PSCW and FERC, the amount of its earnings and dividends will be affected by the manner in which these commissions regulate MGE.

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Directors and Executive Officers

      The MGE Energy Board of Directors will consist of nine directors divided into three classes, with one class to be elected each year for a three year term. On the effective date of the share exchange, the members of the Board of Directors of MGE serving immediately prior to the share exchange will become members of the Board of Directors of MGE Energy, in the same class as each director then currently serves.

      After the share exchange, we expect that the following executive officers will hold the following offices with MGE Energy, which are the same offices that they currently hold with MGE:

      MGE Energy and MGE each may have directors or executive officers who are not directors or executive officers of the other.

      Immediately after the share exchange, we expect that MGE Energy will use various services of MGE, including facilities and equipment, executive management, administration, accounting, finance, communications, purchasing, billing, information systems, corporate secretarial, insurance and others. The use of these services may change in the future.

      The directors and executive officers of MGE and their affiliates hold [less than one percent] of the outstanding common stock of MGE.

Common Stock of MGE

     Authorization

      The authorized capitalization of MGE currently consists of:

     Preferences

      Dividends and distributions of assets, if MGE were liquidated, are payable first to holders of MGE preferred stock, if any such preferred stock is outstanding, then to the holders of its common stock. To the extent the holding company depends on MGE for its dividend payments, the common stock of the holding company would also receive dividends only after dividends were paid to holders of outstanding MGE preferred stock, if any.

     Rights of Shareholders

      MGE’s Articles and By-laws contain the following provisions that relate to MGE common stock:

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Common Stock of the Holding Company

     Authorization

      MGE Energy is authorized to issue 50,000,000 shares of common stock, $1 par value.

      As of March 5, 2002, the record date, 100 shares of MGE Energy common stock were outstanding and held by MGE, and no other shares of stock were issued or outstanding. After the share exchange, the Board of Directors of MGE Energy can issue all or any portion of its unissued common stock. Holders of common stock of the holding company will have no right to subscribe for or to purchase any future issue of common stock of the holding company.

     Preferences

      Dividends and distributions of assets, if MGE Energy were liquidated, are payable to holders of the holding company’s common stock. Initially the operations of the holding company will be conducted primarily through MGE, and the rights of the holders of common stock of MGE Energy to participate in the distribution of assets of MGE upon the liquidation or reorganization of that subsidiary or otherwise will be subject to the prior claims of any holders of preferred stock of MGE. Currently there is no outstanding preferred stock of MGE.

      Dividends on MGE Energy common stock will be paid as determined by the MGE Energy Board of Directors from time to time out of funds available for that purpose. Please refer to “Dividend Policy” on page 13 for a discussion of our dividend policy and the holding company’s expected dependence on MGE’s declaration of dividends.

     Rights of Shareholders

      Except as described below under “Comparison of MGE Common Stock and MGE Energy Common Stock,” the rights of holders of MGE Energy common stock will not be materially different from the rights of holders of MGE common stock.

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      The Amended and Restated Articles of Incorporation and Amended and Restated By-laws of the holding company contain the following provisions that relate to MGE Energy common stock:

     Board of Directors

      Immediately after the share exchange, the Board of Directors of the holding company will have nine members, three in each of three classes, serving staggered three-year terms. The initial directors of MGE Energy will be the same as the directors of MGE immediately prior to the share exchange.

Comparison of MGE Common Stock and MGE Energy Common Stock

      As Wisconsin corporations, both MGE and MGE Energy are governed by the Wisconsin Business Corporation Law. As a result of the share exchange, holders of MGE common stock, whose rights as shareholders are currently governed by MGE’s Articles of Incorporation and By-laws, will become holders of MGE Energy common stock, whose rights as shareholders will be governed by the MGE Energy Articles of Incorporation and By-laws.

      The following table summarizes the principal differences between the rights of MGE shareholders and holders of MGE Energy common stock after the share exchange under the Wisconsin Business Corporation Law and the respective Articles of Incorporation and By-laws of each company. We have attached the MGE Energy Amended and Restated Articles of Incorporation as Exhibit B for your convenience. The MGE Energy Amended and Restated By-laws are included as an exhibit to the registration statement of which this document forms a part.

      MGE Energy’s Articles of Incorporation do not authorize the issuance of preferred stock. The SEC has indicated in the past that it does not favor what it considers to be complex capital structures for public utility holding companies. Although we believe that MGE Energy will be exempt from the Public Utility Holding Company Act of 1935, we nevertheless believe that it is prudent to maintain a simple capital structure at the holding company level. After the share exchange, MGE will still have authorized preferred stock that it may

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      Although the maximum number of directors making up the MGE and MGE Energy Boards of Directors is the same, the minimum numbers are seven and one, respectively. Until the effective time of the share exchange, MGE Energy will have only one director. Since the holding company will be a wholly-owned subsidiary of MGE and will not conduct business operations until that time we do not feel that it is necessary or desirable to have more than one director. At the effective time of the share exchange the MGE Energy Board will be increased to nine members and all of the members of the MGE Board will become members of the Board of Directors of the holding company. Please refer to “Directors and Executive Officers” on page 14. We do not believe that it is necessary to state a default number of directors as is done in the MGE By-laws, as the Board of Directors of MGE Energy will always be able to specify the number of directors.

Possible Anti-Takeover Effects of Certain Provisions of the Holding Company Articles of Incorporation and By-Laws and Wisconsin State Law

     Articles and By-laws

      Provisions of MGE Energy’s Articles and By-Laws providing for a classified board of directors, limiting the rights of shareholders to remove directors, reducing the voting power of persons holding 10% or more of the common stock of the holding company, requiring a two-thirds vote with respect to an amendment of the Articles and various fundamental corporate changes and permitting the holding company to issue additional shares of common stock without further shareholder approval except as required under rules of the Nasdaq National Market could have the effect, among others, of discouraging takeover proposals for MGE Energy or impeding a business combination between MGE Energy and a major shareholder of the holding company. All of these provisions are included in the Articles and By-Laws of MGE. Please refer to “Comparison of MGE Common Stock and MGE Energy Common Stock” on page 16.

     Wisconsin Holding Company Act

      The Wisconsin Holding Company Act provides that no person may take, hold or acquire, directly or indirectly, more than 10 percent of the outstanding voting securities of a holding company unless the PSCW determines that such action is in the best interest of utility consumers, investors and the public.

     Wisconsin Antitakeover Statutes

      Sections 180.1140 to 180.1144 of the Wisconsin Business Corporation Law, which are referred to as the Wisconsin business combination statutes, prohibit a Wisconsin corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless prior to such date the board of directors approved the business combination or the transaction in which the person became an interested stockholder. Under specified circumstances, a Wisconsin corporation may engage in a business combination with an interested stockholder more than three years after the stock acquisition date. For purposes of the Wisconsin business combination statutes, a “business combination” includes a merger or share exchange, or a sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets equal to at least 5 percent of the aggregate market value of the stock or assets of the corporation or 10 percent of its earning power, or the issuance of stock or rights to purchase stock having a market value equal to at least 5 percent of the outstanding stock, the adoption of a plan of liquidation or dissolution, and other enumerated transactions involving an interested stockholder. An “interested stockholder” is a person who beneficially owns 10 percent of the voting power of the outstanding voting stock of the corporation or who is an affiliate or associate of the corporation and beneficially owned 10 percent of the voting power of the then outstanding voting stock within three years prior to the date in question.

      Sections 180.1130 to 180.1133 of the Wisconsin Business Corporation Law, which are referred to as the Wisconsin fair price statutes, require that business combinations involving a “significant shareholder” and a

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      Subject to specified exceptions, Section 180.1150 of the Wisconsin Business Corporation Law, which is referred to as the Wisconsin control share statute, limits the voting power of shares of a Wisconsin corporation held by any person or persons acting as a group, including shares issuable upon the exercise of options, in excess of 20 percent of the voting power in the election of directors, to 10 percent of the full voting power of those excess shares. This provision may deter any shareholder from acquiring in excess of 20 percent of MGE Energy’s outstanding voting stock.

      Section 180.1134 of the Wisconsin Business Corporation Law, which is referred to as the Wisconsin defensive action restriction, provides that, in addition to the vote otherwise required by law or the articles of incorporation, a Wisconsin corporation must receive approval of the holders of a majority of the shares entitled to vote before the corporation can take the actions discussed below while a takeover offer is being made or after a takeover offer has been publicly announced and before it is concluded. Under the Wisconsin defensive action restriction, shareholder approval is required for the corporation to acquire more than 5 percent of the outstanding voting shares at a price above the market price from any individual who or organization which owns more than 3 percent of the outstanding voting shares and has held those shares for less than two years, unless a similar offer is made to acquire all voting shares. This restriction may deter a shareholder from acquiring shares of common stock if the shareholder’s goal is to have the holding company repurchase the shareholder’s shares at a premium over the market price. Shareholder approval is also required under the Wisconsin defensive action restriction for the corporation to sell or option assets of the corporation which amount to at least 10 percent of the market value of the corporation, unless the corporation has at least three independent directors and a majority of the independent directors vote not be governed by this restriction.

Treatment of MGE Preferred Stock

      Currently, there are no shares of MGE preferred stock issued and outstanding and MGE does not anticipate issuing any preferred stock prior to the share exchange. Any shares of MGE preferred stock issued and outstanding at the time of the share exchange will not be converted or otherwise affected by the exchange.

Treatment of MGE Indebtedness

      All of MGE’s indebtedness outstanding immediately before the share exchange will continue to be outstanding indebtedness of MGE immediately after the share exchange.

      MGE’s first mortgage bonds will continue to be secured by first mortgage liens on all of its properties that are currently subject to these liens. We expect that no indebtedness of MGE will be assumed or guaranteed by the holding company.

Dividend Reinvestment Plan

      If the share exchange is consummated, no shares of MGE common stock will thereafter be available for issuance under its Dividend Reinvestment and Direct Stock Purchase Plan (Investors Plus Plan). The holding company will succeed to the Investors Plus Plan as in effect immediately prior to the effective time of the share exchange. The Investors Plus Plan will be amended as necessary to provide for the issuance of MGE Energy common stock on and after the effective time.

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Transfer Agent and Registrar

      The transfer agent and registrar for the common stock of MGE Energy is Continental Stock Transfer & Trust Company.

Financial Statements; Accounting Treatment

      The consolidated financial statements of MGE are incorporated by reference into this document. Financial statements of MGE Energy are not presented in this document because MGE Energy is an inactive company without material assets or liabilities or operating history.

      The consolidated assets and liabilities of MGE Energy and its subsidiaries (including MGE) immediately after the share exchange will be the same as the consolidated assets and liabilities of MGE and its subsidiaries (including MGE Energy) immediately before the share exchange. MGE Energy, on an unconsolidated basis, will record its investment in MGE and in any subsidiaries transferred by MGE to the holding company at their net book value. The share exchange will result in MGE Energy becoming the owner of all of the outstanding shares of MGE common stock. This change in ownership will have no accounting effect on MGE. If MGE transfers any of its subsidiaries to the holding company, the transfer will reduce MGE’s retained earnings by an amount equal to the net book value of such subsidiaries.

Material Federal Income Tax Consequences

     General

      The following discussion summarizes the material federal income tax consequences relating to the share exchange. This summary is not a complete analysis of all of the potential federal income tax consequences relating to the transaction and may not address all aspects of income taxation that may be relevant to every shareholder. The personal tax circumstances of shareholders differ and shareholders may be subject to special treatment under the income tax laws, including:

      Except as otherwise indicated, statements of legal conclusion about tax treatments, effects or consequences are the opinion of Sidley Austin Brown & Wood, counsel for MGE and MGE Energy. No rulings have been requested from the Internal Revenue Service. You should consult your own tax advisor about the specific tax consequences of the share exchange, including the application and effect of state or local income and other tax laws.

      The following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, currently applicable Treasury regulations and existing judicial and administrative interpretations and decisions. Future legislation, regulations, administrative interpretations or court decisions could significantly change these legal conclusions either prospectively or retroactively.

      The share exchange will be treated as a transfer of all of the outstanding common stock of MGE by MGE’s shareholders to MGE Energy solely in exchange for all of the outstanding common stock of the holding company. This exchange will qualify for nonrecognition treatment under Section 351 of the Code.

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     Tax Implications to MGE Shareholders

      For federal income tax purposes, no gain or loss will be recognized by the holders of MGE common stock as a result of the share exchange. The aggregate tax basis of MGE Energy common stock received by a shareholder will be the same as the shareholder’s aggregate tax basis in MGE common stock surrendered in the share exchange. The holding period of the common stock of the holding company held by a shareholder will include the period during which the shareholder held MGE common stock, provided that the common stock was held as a capital asset on the date of the share exchange.

     Tax Implications to MGE and the Holding Company

      No gain or loss will be recognized by MGE or MGE Energy for federal income tax purposes as a result of the share exchange. For federal income tax purposes, the basis of MGE common stock received by the holding company will be the same as MGE’s net asset basis immediately before the share exchange, subject to adjustments under Treasury Regulations relating to consolidated groups; and the holding company’s holding period in the MGE common stock received in the share exchange will include the period during which that stock was held by the shareholders.

     Other Tax Aspects

      Apart from federal income tax aspects, no attempt has been made to determine any tax that may be imposed on a shareholder by the country, state or jurisdiction in which the holder resides or is a citizen. You may be subject to other taxes, such as state or local income taxes that may be imposed by various jurisdictions. You may also be subject to intangible property, transfer, estate and inheritance taxes in your state of domicile. You should consult your own tax advisor with regard to state and local income, property transfer, inheritance and estate taxes.

      The federal income tax discussion set forth above is intended to provide only a summary of the material tax consequence of the share exchange, and does not address tax consequences which may vary with, or are contingent on, individual circumstances. Moreover, this discussion does not address any foreign, federal, state, or local tax consequences of the disposition of stock in MGE or MGE Energy either before or after the share exchange. Accordingly, you are strongly urged to consult with your tax advisor to determine the particular tax consequences to you of the share exchange or a disposition of stock.

Regulatory Matters

     Exemption from Public Utility Holding Company Act of 1935

      MGE Energy will be a “public utility holding company” as defined in the Public Utility Holding Company Act of 1935 following the share exchange; however, we believe that it will qualify for an exemption from substantially all of the provisions of that law. The exemption is available to holding companies whose business operations, including its public utility operations, are predominantly intrastate in character. The exemption does not, however, exempt a holding company from the law’s requirement that SEC approval be obtained for direct or indirect acquisitions by the holding company of five percent or more of the voting securities of any other electric or gas utility company.

      MGE Energy and MGE are Wisconsin corporations and will carry on their businesses substantially in Wisconsin and should be viewed as predominantly intrastate in character. MGE Energy will need to file an exemption statement with the SEC in order to claim the exemption discussed above, which it will do around the effectiveness of the share exchange, and will need to file annual exemption statements with the SEC in order to maintain the exemption. The exemption may be revoked by the SEC if a substantial question of law or fact exists as to whether the holding company continues to meet the exemption’s requirements or if it appears that the exemption may be detrimental to the public interest or the interest of investors or consumers.

      If the holding company is not exempt from this law, it will be subject to the law’s provisions that require SEC approval for a wide range of transactions, including financings, acquisitions, and intrastate transactions. The holding company would also be subject to various accounting and reporting requirements.

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     Public Service Commission of Wisconsin Regulation

      MGE will continue to be subject to the jurisdiction of the PSCW as to electric and gas rates, standards of service, issuance of securities, construction of new facilities, levels of short-term debt obligations, accounting, billing practices, certain transactions with non-utility affiliates (including the holding company) and various other matters. In setting rates, the PSCW will be required to consider MGE as a wholly independent corporation and to impute a capital structure to MGE and establish a cost of capital for MGE on a stand-alone basis.

      MGE Energy will be subject to limited regulation by the PSCW under the provisions of the Wisconsin Holding Company Act. That Act regulates the formation of holding companies as well as specified activities of holding companies.

      MGE will apply to the PSCW for approval of the holding company formation. The PSCW may modify any terms of, or add terms to, any approval granted. In approvals of holding company formations by other electric and gas public utility systems operating in Wisconsin, the PSCW has imposed various conditions. These conditions have included:

MGE is unable to determine whether similar or other conditions will be imposed by the PSCW in connection with MGE’s application.

      Activities subject to regulation under the Wisconsin Holding Company Act include:

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      The Wisconsin Holding Company Act prohibits:

The prohibitions above notwithstanding, a public utility affiliate may transfer to a nonutility affiliate, at book value, land, generating equipment, or associated facilities for purposes of implementing a leased generation contract as defined in section 196.52(9)(a)3 of the Wisconsin Statutes.

      The Wisconsin Holding Company Act limits diversification by holding companies by limiting the dollar amount of non-utility investments relative to the dollar amount of utility investments. The Act provides that the net book value of the assets of all non-utility affiliates, after excluding investments in other holding company affiliates, may not exceed the sum of 25% of the net book value of all electric utility affiliates and a percentage, to be determined by the PSCW (but not less than 25%), of the net book value of all other public utility affiliates. That limit is reduced further during the first 36 months after holding company formation to 40 percent of the amount allowed under the foregoing provisions. These limits are subject to certain modifications, including: (a) the exclusion of specified non-utility assets, particularly those used in energy-related activities; and (b) the assets that MGE contributed to the American Transmission Company count as utility assets for the purposes of the computation.

      The Wisconsin Holding Company Act also requires the PSCW, no sooner than 36 months after MGE Energy’s formation as a holding company, and at least once every three years thereafter, to investigate the impact of its operation on MGE and to determine whether each non-utility affiliate does, or can reasonably be expected to do, at least one of the following:

      Furthermore, the PSCW is authorized to order a holding company to terminate its interest in a public utility affiliate if the PSCW finds that, based upon clear and convincing evidence, termination of the interest is necessary to protect the interest of utility investors in a financially healthy utility and the interest of consumers in reasonably adequate utility service at a just and reasonable price.

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     Federal Energy Regulatory Commission Approval

      MGE has applied for the approval of FERC for the formation of the holding company, which is required under the provisions of the Federal Power Act. If FERC finds that the holding company proposal is consistent with the public interest, it is required to grant its approval. Nonetheless, FERC may condition its approval in such manner as it deems necessary to maintain adequate utility service.

Legal Opinions

      The validity of the shares of MGE Energy common stock being issued in the share exchange has been passed upon by LaFollette Godfrey & Kahn, Wisconsin counsel to MGE and MGE Energy. Sidley Austin Brown & Wood, counsel to MGE and MGE Energy, has passed on certain tax matters.

Experts

      [To come.]

THE BOARD OF DIRECTORS OF MGE RECOMMENDS A VOTE “FOR” THE FORMATION OF A HOLDING COMPANY AND THE AGREEMENT AND PLAN OF SHARE EXCHANGE.

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ITEM II:     ELECTION OF DIRECTORS

General

      The Board of Directors of MGE consists of nine directors divided into three classes, each class having three directors, with one class being elected each year for a term of three years.

      Mr. Mebane, Ms. Millner and Ms. Sollenberger are currently Class I directors whose terms expire at the 2002 Annual Meeting of Shareholders. They have been nominated for reelection to serve as Class I directors for three-year terms expiring at the 2005 Annual Meeting of Shareholders and upon the election and qualification of their successors.

      Each of the nominees has indicated a willingness to serve if elected, and the Board has no reason to believe that any nominee will be unavailable. If any nominee should become unable to serve, it is presently intended that your proxy will be voted for a substitute nominee designated by the Board.

      The following table sets forth information about the nominees and the current directors who will continue in office after the meeting.

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Beneficial Ownership of Common Stock

      The following table lists the beneficial ownership of MGE common stock as of December 15, 2001 of each director and nominee, the individuals named in the summary compensation table, the directors and executive officers as a group, and each person known by MGE to be the beneficial owner of more than 5 percent of the outstanding shares of its common stock. In each case, the indicated owner has sole voting power and sole investment power with respect to the shares shown except as noted.

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Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires MGE’s directors, executive officers, and persons who own more than ten percent of MGE’s common stock to file reports of ownership and changes in ownership with the SEC. Those persons are also required to furnish MGE with copies of all such reports.

      Based solely on its review of the copies of the reports received by MGE and written representations from certain reporting persons, MGE notes that its directors and executive officers (MGE does not have any greater than ten percent shareholders) filed all required reports during or with respect to the year ended December 31, 2001, on a timely basis.

Meetings and Committees of the MGE Board

      MGE has an Audit Committee, a Compensation Committee, an Executive Committee, and a Personnel Committee.

      The following table sets forth the membership of each committee and the number of meetings held during 2001:

      The Board of Directors of MGE met 12 times during 2001. Each director attended at least 75 percent of the aggregate number of meetings of the Board and the committees on which the director served.

      The function of the Audit Committee is to meet with MGE’s internal auditors and independent public accountants and discuss with them the scope and results of their audits, accounting practices, and the adequacy of MGE’s internal controls. The Audit Committee also approves services performed by MGE’s independent public accountants. The Audit Committee consists of seven independent directors as defined in Rule 4460(d)(2)(B) of the National Association of Securities Dealers’ listing standards.

      The function of the Compensation Committee is to review the salaries, fees, and other benefits of officers and directors and recommend compensation adjustments to the Board.

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      The Executive Committee acts in lieu of the full Board and between meetings of the Board. The Executive Committee has the powers of the Board in the management of the business and affairs of MGE, except action with respect to dividends to shareholders, election of principal officers, or the filling of vacancies on the Board or committees created by the Board.

      The Personnel Committee makes recommendations with respect to the election of MGE directors and officers. Nominations for the Board by shareholders, which are submitted to the Chief Executive Officer and/or President of MGE in the manner described under “Other Information — Shareholder Proposals for the 2003 Meeting,” will be considered by the Personnel Committee, the Board, or the Chief Executive Officer.

Audit Committee Report

      [The Audit Committee oversees MGE’s financial reporting process on behalf of its Board of Directors. The Audit Committee consists of eight independent directors. Its duties and responsibilities are set forth in the Audit Committee Charter adopted by the Board. The Audit Committee Charter is included in this document as Exhibit C.

      In the course of fulfilling its responsibilities, the Audit Committee has:

      Based on the foregoing, the Audit Committee recommended to the Board that the audited financial statements referred to above be included in MGE’s annual report on Form 10-K and the annual report to shareholders for the fiscal year ended December 31, 2001.

Director Compensation

      Directors who are not employees of MGE receive an annual retainer of $14,000, plus $900 for each Board meeting attended and $350 for each Audit, Compensation, Executive, or Personnel Committee meeting attended. Neither Mr. Mebane nor Mr. Wolter receive additional compensation for serving as a director. The chairperson of the Audit Committee receives an additional $2,000 retainer.

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Executive Officers of MGE

      The executive officers of MGE (elected annually by the Board of Directors) are: