ASSIGNMENT AND ASSUMPTION AGREEMENT

EXHIBIT 10.16

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT dated as of November 4, 2005 (this “ Agreement ”), between MGE POWER ELM ROAD, LLC, a Wisconsin limited liability company (the “ Assignor ”) and MADISON GAS AND ELECTRIC COMPANY, a Wisconsin corporation (the “ Assignee ”).

W I T N E S S E T H :

WHEREAS , Wisconsin Electric Power Company (“Wisconsin Electric”), as Grantor, Assignor, as a Grantee, and Wisconsin Public Power Inc., also as a Grantee, have entered into a certain Easement and Indemnification Agreement dated December 17, 2004, for Elm Road Generating Station Unit 1 recorded in the Register of Deeds for Milwaukee County at Deed Book _____, Page ____ and the Register of Deeds for Racine County at Deed Book ___, Page ____ (the “Easement Agreement”); and

WHEREAS, the parties hereto desire to effect (a) the assignment by the Assignor to the Assignee of all of the right, title and interest of the Assignor in, under and with respect to, the Easement Agreement and the real estate interests referenced therein, and (b) the assumption by the Assignee of the obligations of the Assignor accruing thereunder; and

WHEREAS, Section 8.1 of the Easement Agreement permits such assignment and assumption under the terms and conditions thereof;

NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto do hereby ag ree as follows:

Section 1.

Assignment .

Effective as of the date hereof (the “Transfer Date”), the Assignor hereby irrevocably sells, assigns, transfers and conveys to the Assignee all of its right, title and interest in, to and under the Easement Agreement and the real estate interests referenced therein, being with regard to the Land more particularly described in Exhibit A attached hereto, Parcel 1, Parcel 2 and the Retained Land all as more particularly described in Exhibit B attached hereto, the New Common Facilities Easement Area more particularly described in Exhibit C attached hereto, and the Access Easement Area more particularly described in Exhibit D attached hereto, and all other documents, agreements and instruments executed and delivered by the Assignor and the other parties thereto in connection with the Easement Agreement.

Section 2.

Assumption .

On and as of the Transfer Date, the Assignee hereby accepts the assignment set forth in Section 1 hereof, and assumes all of the obligations, liabilities and duties of the Assignor under the Easement Agreement (such assumed obligations, as may be amended, supplemented, revised or restated at any time and from time to time, being defined as the “ Assumed Obligations ”) and confirms that it shall be deemed a party to the Easement Agreement as if it were named as a Grantee therein, and effective on and as of the Transfer Date, the Assignor shall have no further duty, obligation, liability or burden under the Easement Agreement or other contract, agreement, document or other instrument relating thereto, but only for so long as this Agreement is in effect.  

Section 3.

Consideration .

In consideration of the assignment to the Assignee hereunder, Assignee agrees to pay Assignor an annual fee (the “Annual Fee”) of FIFTEEN THOUSAND and 00/100 DOLLARS ($15,000.00).  The Annual Fee shall be payable on the Transfer Date and on or before the anniversary date of the Transfer Date for so long as this Agreement shall remain in effect.  If applicable, the Annual Fee shall be prorated for the first and/or last years of the term of this Agreement.   Provided, however, that in the event the Annual Fee as defined in the Easement Agreement is recalculated pursuant to the provisions of Section 4.1 of the Easement Agreement, the Annual Fee hereunder shall be deemed readjusted to be equal to the Annual Fee as recalculated under the Easement Agreement, and shall be payable in accordance therewith.

Section 4.

Term .

This Agreement shall be effective from the Transfer Date and shall terminate on the date that: Assignee shall no longer be either an owner or a lessee of an undivided interest in the Unit 1 Facility (as defined in the Easement Agreement).

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Section 5.

Assignee Representations and Warranties .

The Assignee hereby represents and warrants to the Assignor that as of the Transfer Date:

(a)

it is a corporation duly organized, validly existing and in good standing under the laws of Wisconsin, and has the full corporate power, authority and legal right under the laws of such jurisdiction to conduct its business as presently conducted and to enter into and perform its obligations under this Agreement and to perform the Assumed Obligations;

(b)

it has duly authorized, executed and delivered this Agreement, and its performance of this Agreement and the Assumed Obligations have been duly authorized and constitute legal, valid and binding obligations of the Assignee, enforceable against the Assignee in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, rehabilitation, liquidation, conservation, dissolution, moratorium or similar laws affecting the rights of creditors generally (including the rights of creditors of insurance companies) and by general principles of equity (regardless of whether enforcement is pursuant to a proceeding in equity or at law);

(c)

the execution, delivery and performance by the Assignee of this Agreement and the performance of the Assumed Obligations are not in violation of its organizational documents and do not and will not contravene the provisions of, or constitute a default under, any material indenture, agreement, long-term lease, license or other agreement or instrument to which the Assignee is a party;

(d)

neither the execution and delivery by the Assignee of this Agreement nor the performance by the Assignee of any of the Assumed Obligations require the Assignee to obtain the consent or approval of, give prior notice to, register with, or take any other action with respect to, any governmental authority or register with or take any other action with respect to any applicable law (other than in the normal course of business) (provided that no representation or warranty is made as to any applicable law to the extent the Assignee may be subject thereto as a result of the activities of the Assignor as a Grantee);

(e)

there are no pending or, to the knowledge of the Assignee, threatened actions, suits or proceedings against or affecting the Assignee or any of its property before or by any court or administrative agency in respect of this Agreement, which if adversely determined, will materially adversely affect the financial condition, business or operations of the Assignee or the ability of the Assignee to perform the Assumed Obligations.

Section 6.

Assignor Representations and Warranties .

The Assignor hereby represents and warrants to the Assignee that as of the Transfer Date:

(a)

it is a limited liability company duly organized, validly existing and in good standing under the laws of Wisconsin, and has the full corporate power, authority and legal right under the laws of such jurisdiction to conduct its business as presently conducted and to enter into and perform its obligations under this Agreement;

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(b)

it has duly authorized, executed and delivered this Agreement and the Easement Agreement, and its performance of this Agreement and the Easement Agreement have been duly authorized and constitute legal, valid and binding obligations of the Assignor, enforceable against the Assignor in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, rehabilitation, liquidation, conservation, dissolution, moratorium or similar laws affecting the rights of creditors generally (including the rights of creditors of insurance companies) and by general principles of equity (regardless of whether enforcement is pursuant to a proceeding in equity or at law);

(c)

the execution, delivery and performance by the Assignor of this Agreement and the Easement Agreement is not in violation of its organizational documents and does not and will not contravene the provisions of, or constitute a default under, any material indenture, agreement, long-term lease, license or other agreement or instrument to which the Assignor is a party;

(d)

the execution and delivery by the Assignor of this Agreement and the Easement Agreement does not require the Assignor to obtain the consent or approval of, give prior notice to, register with, or take any other action with respect to, any governmental authority or register with or take any other action with respect to any applicable law (other than in the normal course of business) (provided that no representation or warranty is made as to any applicable law to the extent the Assignor may be subject thereto as a result of the activities of the Assignee);

(e)

there are no pending or, to the knowledge of the Assignor, threatened actions, suits or proceedings against or affecting the Assignor or any of its property before or by any court or administrative agency in respect of this Agreement, which if adversely determined, will materially adversely affect the financial condition, business or operations of the Assignor or the ability of the Assignor to perform its obligations hereunder.

Section 7.

Assignor’s Right To Grant Security Interests in This Agreement .

Assignor shall have the right to assign as collateral, encumber, pledge or hypothecate its interest in this Agreement in favor of or to any lender providing financing to the Assignor.  To the extent appropriate, the terms and provisions of Sections 8.6(a) and (b) of the Easement Agreement shall apply to any such collateral assignment, encumbrance, pledge or hypothecation.

Section 8.

General Indemnity .

(a)

Each party hereto (an “ Indemnifying Party ”) shall indemnify the other party hereto, their respective officers, directors, employees, representatives and agents (each an “ Indemnitee ”) from, and hold each of them harmless against, any and all claims that may at any time be imposed on, asserted against or incurred by any Indemnitee as a result of, or arising out of, or in any way related to (a) the execution, delivery or performance by the Indemnifying Party of this Agreement, (b) any breach or default by the Indemnifying Party of any of its covenants or representations and warranties under this Agreement, (c) any violation by the Indemnifying Party of any applicable law or Government approval, and (d) any liability to any person arising out of the management, use, control, ownership or operation, as the case may be, by the Indemnifying

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Party of Unit 1 and/or the Unit 1 Facility, or the Elm Road Site (all as such terms are defined in the Easement Agreement); provided, however , that in no event shall an Indemnitee be indemnified for any such claims caused by reason of the gross negligence or willful misconduct of such Indemnitee.  

(b)

The provisions of this Section 8 shall survive the expiration, early termination or surrender of this Agreement.

Section 9.

Indemnification Procedures .

(a)

Cooperation Regarding Claims .  If any Indemnitee receives notice or has knowledge of any such claim that may result in a claim for indemnification by such Indemnitee against an Indemnifying Party pursuant to this Section 9, such Indemnitee shall as promptly as possible give the Indemnifying Party notice of such claim, including a reasonably detailed description of the facts and circumstances relating to such claim, a complete copy of all notices, pleadings and other papers related thereto, and in reasonable detail the basis for its claim for indemnification with respect thereto.  Failure to promptly give such notice or to provide such information and documents shall not relieve the Indemnifying Party from the obligation hereunder to respond to or defend the Indemnitee against such claim unless such failure shall materially diminish the ability of the Indemnifying Party to respond to or to defend the Indemnitee against such claim.  The Indemnifying Party, upon its acknowledgment in writing of its obligation to indemnify the Indemnitee in accordance with this Section 9 shall be entitled to assume the defense or to represent the interest of the Indemnitee, as the case may be, with respect to such claim, which shall include the right to select and direct legal counsel and other consultants, appear in proceedings on behalf of such and to propose, accept or reject offers of settlement, all at its sole cost.  If and to the extent that any claim is other than for money damages, then (i) the terms of the foregoing sentence shall not apply, (ii) pursuant to the terms of Article 7 of the Easement Agreement, Wisconsin Electric shall be entitled to assume the defense with respect to such claim, which shall include the right to select and direct legal counsel and other consultants, and (iii) any settlement will be subject to the reasonable approval of the Indemnifying Party.  Nothing herein shall prevent an Indemnitee from retaining its own legal counsel and other consultants and participating in its own defense at its own cost and expense.  The parties hereto shall cooperate with each other in any notification to insurers.  

(b)

Limitation on Liability .  Notwithstanding any provision in this Agreement to the contrary, no party hereto shall be liable under this Agreement for any consequential or indirect loss or damage, including loss of profit, cost of capital, loss of goodwill, replacement power, loss of revenue from the sale of capacity or energy or any other special or incidental damages.

Section 10.

Governing Law .

This Agreement shall in all respects be governed by and construed and interpreted in accordance with, the laws of the State of Wisconsin.

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Section 11.

Entire Agreement .

This Agreement constitutes the entire agreement between the parties hereto with respect to the assignment and assumption hereunder.

Section 12.

Notices .

All notices and other communications required under the terms and conditions hereof shall be in writing or shall be produced by a telecommunications device capable of creating a written record, and any such notice shall become effective (a) upon personal delivery thereof, including by overnight mail or next business day or courier service (b) in the case of notice by United States mail, certified or registered, postage prepaid, return receipt requested, upon receipt thereof, or (c) in the case of notice by such a telecommunications device, upon transmission thereof, provided such transmission is promptly confirmed by either of the methods set forth in clauses (a) or (b) above, in each case addressed as provided below or to such other address as any party may designate by written notice to the other parties:

(a)

If to the Assignor, to:

MGE Power Elm Road, LLC

P.O. Box 1231
Madison, WI 53701

Attn:  Manager
Tel:

608-252-7149
Fax:

608-252-4794

(b)

If to the Assignee, to:

Madison Gas and Electric Company

P.O. Box 1231
Madison, WI 53701-1231
Attn:  Chief Financial Officer

Tel:

608-252-7075
Fax:

608-252-7098

Section 13.

Counterparts .

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered on the date first above written.

STATE OF WISCONSIN

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) ss
COUNTY OF DANE

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Personally came before me this 4 ^th day of November, 2005, the above-named Jeffrey C. Newman, a Manager of MGE Power Elm Road, LLC, and Kristine Euclide, the Manager, to me known to be the persons who executed the foregoing instrument and acknowledged the same on behalf of said company.

Notary Public, State of Wisconsin

My Commission:  

STATE OF WISCONSIN

)

) ss
COUNTY OF DANE

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Personally came before me this 4 ^th day of November, 2005, the above-named Terry A. Hanson, the Chief Financial Officer of Madison Gas and Electric Company, and Jeffrey Newman, the Vice President and Treasurer, to me known to be the persons who executed the foregoing instrument and acknowledged the same on behalf of said corporation.

Notary Public, State of Wisconsin

My Commission:  

This instrument drafted by:

Philip M. Battles, III

Hunton & Williams LLP

1900 K Street, N.W.

Washington, DC  20006

EXHIBIT A

Legal Description of the Land

Parcel Identification Numbers: _________________________