Xcel Energy(US:XEL)2025-02-27 21:07Business Overview Xcel Energy is a regulated utility serving millions of customers across eight states, focused on clean energy transition, operational excellence, and strong financial performance Company and Strategy Overview Xcel Energy is a major regulated utility serving millions across eight states, focused on clean energy, operational excellence, and consistent financial performance - Xcel Energy operates as a regulated electric and natural gas utility serving customers in eight states through four primary subsidiaries: NSP-Minnesota, NSP-Wisconsin, PSCo, and SPS11 Utility Subsidiary Key Metrics | Metric | Value | | :--- | :--- | | Electric Customers | 3.9 million | | Natural Gas Customers | 2.2 million | | Total Assets | $70 billion | | Owned Electric Generating Capacity | 20,426 MW | - The company's strategy is built on three priorities: enhancing customer experience, providing a rewarding employee experience, and delivering excellent operational, financial, and clean energy performance1516 - Xcel Energy has a strong financial track record, having met or exceeded its initial ongoing earnings guidance for 20 consecutive years and increased its dividend for 22 consecutive years35 Utility Subsidiaries Details Four utility subsidiaries operate with distinct footprints, financial profiles, and regulatory metrics like rate base and authorized ROE NSP-Minnesota Key Metrics (2024) | Metric | Value | | :--- | :--- | | Electric Customers | 1.6 million | | Natural Gas Customers | 0.6 million | | Total Assets | $27.5 billion | | Rate Base (est.) | $17.4 billion | | GAAP ROE | 9.07% | | Ongoing ROE | 9.46% | PSCo Key Metrics (2024) | Metric | Value | | :--- | :--- | | Electric Customers | 1.6 million | | Natural Gas Customers | 1.5 million | | Total Assets | $26.6 billion | | Rate Base (est.) | $19.3 billion | | GAAP ROE | 7.63% | SPS Key Metrics (2024) | Metric | Value | | :--- | :--- | | Electric Customers | 0.4 million | | Total Assets | $10.8 billion | | Rate Base (est.) | $7.6 billion | | GAAP ROE | 9.57% | NSP-Wisconsin Key Metrics (2024) | Metric | Value | | :--- | :--- | | Electric Customers | 0.3 million | | Natural Gas Customers | 0.1 million | | Total Assets | $4.1 billion | | Rate Base (est.) | $2.7 billion | | GAAP ROE | 8.98% | Operations Overview Xcel Energy's electric and natural gas operations generated significant revenue in 2024, with a diverse energy mix and strategic renewable investments 2024 Electric Operations Breakdown | Category | Sales Volume % | Customers % | Revenues % | | :--- | :--- | :--- | :--- | | Residential | 23% | 86% | 32% | | C&I | 59% | 12% | 49% | | Other | 18% | 2% | 19% | 2024 Electric Energy Generation by Source | Source | Percentage of Total | | :--- | :--- | | Natural Gas | 33% | | Wind | 29% | | Coal | 15% | | Nuclear | 8% | | Solar | 5% | | Other | <1% | - The company plans to retire or convert all existing coal generation by the end of 2030, with specific retirement dates scheduled for various units between 2025 and 203068 - Significant investments are underway in renewable energy, including approximately 1,900 MW of owned wind under development or repowering and 2,700 MW of owned and PPA solar under development5961 Governmental and Environmental Regulations Xcel Energy's operations are subject to extensive federal and state regulations, including emerging rules on emissions and contaminants, with costs typically recoverable - The EPA has finalized rules to control CO2 emissions from new natural gas and existing coal plants. Xcel Energy anticipates minimal financial impact due to its scheduled plant retirements and expects cost recovery through rates99 - The EPA has designated certain PFAS chemicals as hazardous substances and set drinking water standards, creating potential but currently uncertain costs for the company, which are expected to be recoverable through rates100101 Environmental Costs (Operating Expenses) | Year | Amount (Millions) | | :--- | :--- | | 2024 | $290 | | 2023 | $275 | | 2022 | $365 | Environmental Capital Expenditures | Year | Amount (Millions) | | :--- | :--- | | 2024 | $25 | | 2023 | $20 | | 2022 | $20 | Risk Factors The company faces diverse operational, financial, macroeconomic, and policy risks, including physical hazards, regulatory uncertainties, market volatility, and evolving environmental and cybersecurity threats Operational Risks The company faces significant operational risks including physical hazards, climate change impacts, commodity price volatility, nuclear operations, and supply chain - Natural gas and electric operations involve inherent hazards that could result in loss of life, property damage, and substantial financial losses not fully covered by insurance124125 - Climate change presents physical and financial risks, including extreme weather events like wildfires, which have increased in frequency and severity, potentially leading to damages exceeding insurance coverage136140145 - The company is subject to commodity price risk for fuel and energy. Significant increases in fuel costs could lead to adverse regulatory outcomes and higher bad debt expense146 - NSP-Minnesota's two nuclear plants are subject to risks including the handling of radioactive material, limitations on insurance coverage, and potential for increased regulation and costs imposed by the NRC159172 Financial Risks Financial stability is exposed to regulatory, capital market, and credit risks, including cost recovery challenges, increased financing costs, and capital access disruptions - Profitability is highly dependent on the ability to recover costs through regulated rates. Adverse regulatory rulings, cost disallowances, or changes in recovery mechanisms could negatively impact financial results161163167 - Reductions in credit ratings could increase financing costs, impact the ability to access capital markets, and require posting collateral for certain contracts168169 - As a capital-intensive business, the company is subject to capital market and interest rate risks. Market disruptions could prevent the issuance of new securities or lead to unfavorable financing terms170 - The company's ability to pay dividends depends on cash flows from its subsidiaries, which are subject to statutory and contractual restrictions, including potential limitations imposed by state utility commissions181183 Macroeconomic and Policy Risks The company faces macroeconomic risks from downturns, significant cybersecurity threats, and policy challenges including natural gas restrictions and costly climate regulations - A cybersecurity incident could disrupt generation, transmission, and distribution, cause the release of sensitive data, and result in significant financial liability and reputational harm197200205 - Public policy efforts to restrict the use of natural gas for power generation and heating could lead to stranded costs on existing investments and impact the ability to serve customers reliably and affordably210 - Legislative and regulatory responses to climate change could be difficult and costly to comply with. Failure to recover these costs through rates could materially affect financial results211214 - The company's ability to achieve its environmental strategies is subject to factors outside its control, such as technological developments, regulatory standards, and financing availability. Failure to meet these goals could harm its reputation and increase litigation risk219 Cybersecurity Xcel Energy maintains a comprehensive cybersecurity risk management program, overseen by the Board of Directors, with no material incidents reported to date Cybersecurity Risk Management and Governance Xcel Energy maintains a comprehensive cybersecurity risk program aligned with NERC and NIST frameworks, overseen by the Board, with no material incidents reported - The company's security risk program is designed to identify, assess, and manage material risks from cybersecurity incidents and complies with NERC critical infrastructure protection standards224 - Oversight is provided by the Board of Directors, with the ONES Committee having primary responsibility, augmented by the Audit Committee. The Chief Security Officer, who has extensive experience, is responsible for managing the program228230231 - As of February 27, 2025, there have been no material cybersecurity incidents to report, and no past incidents have had a material impact on the business or results of operations232 Properties Xcel Energy's properties include diverse electric generating stations, extensive transmission and distribution networks, and natural gas infrastructure across its four utility subsidiaries Company Properties Xcel Energy owns a diverse portfolio of electric generating stations, extensive transmission and distribution networks, and natural gas infrastructure across its four utility subsidiaries - NSP-Minnesota's generating assets include major coal plants (A.S. King, Sherco), two nuclear plants (Monticello, Prairie Island), and a significant portfolio of owned wind farms totaling 2,445 MW234 - PSCo's properties include large coal facilities (Comanche, Craig, Hayden), numerous natural gas combustion turbines, and two large owned wind farms (Rush Creek, Cheyenne Ridge) totaling 1,059 MW235 - SPS operates a mix of natural gas and coal steam plants, including the Harrington and Tolk stations, and owns two large wind farms (Hale, Sagamore) with a combined capacity of 985 MW238 Electric and Gas Infrastructure Mileage (Conductor/Main Miles) | Infrastructure | NSP-Minnesota | NSP-Wisconsin | PSCo | SPS | | :--- | :--- | :--- | :--- | :--- | | Electric Transmission | 33,783 | 11,995 | 24,604 | 40,975 | | Electric Distribution | 86,549 | 28,293 | 81,589 | 24,878 | | Natural Gas Mains | 11,016 | 2,613 | 26,110 | 35 | Legal Proceedings Xcel Energy faces significant wildfire litigation, including the Marshall Fire with unquantifiable losses and the Smokehouse Creek Fire with a $215 million estimated liability, both potentially exceeding insurance coverage Wildfire Litigation Xcel Energy faces significant litigation from the 2021 Marshall Fire with unquantifiable losses and the 2024 Smokehouse Creek Fire with a $215 million estimated liability, potentially exceeding insurance - Regarding the 2021 Marshall Fire, the Boulder County Sheriff's Report identified PSCo's power lines as the most probable cause of a second ignition. PSCo disputes this finding and is facing over 300 complaints. Due to uncertainty, the company cannot estimate the amount or range of possible loss701702709 - For the 2024 Smokehouse Creek Fire, the Texas A&M Forest Service determined the cause to be power lines owned by SPS. Xcel Energy has deemed a loss probable and recorded an estimated liability of $215 million, which is the lower end of its reasonably estimable range710716717 - The company has recorded an insurance receivable of $210 million related to the Smokehouse Creek Fire. However, total damages from either fire could exceed the approximate $500 million of insurance coverage available for the respective policy periods709718720 Management's Discussion and Analysis (MD&A) This section details Xcel Energy's financial performance, regulatory environment, critical accounting policies, liquidity, capital resources, and future earnings guidance Results of Operations In 2024, Xcel Energy's GAAP diluted EPS increased to $3.44, driven by regulatory rate outcomes, partially offset by higher depreciation, interest, and O&M expenses GAAP vs. Ongoing Diluted EPS | Year | GAAP Diluted EPS | Ongoing Diluted EPS | | :--- | :--- | :--- | | 2024 | $3.44 | $3.50 | | 2023 | $3.21 | $3.35 | Key Drivers of EPS Change (2024 vs. 2023) | Component | Impact on EPS | | :--- | :--- | | Electric Regulatory Rate Outcomes & Riders | $0.73 | | Natural Gas Regulatory Rate Outcomes & Riders | $0.14 | | Higher Depreciation & Amortization | ($0.40) | | Higher Interest Charges, net | ($0.24) | | Higher O&M Expenses | ($0.13) | - Weather-normalized electric sales grew 1.0% in 2024 (leap-year adjusted), driven by C&I growth at SPS (9.0%), while other subsidiaries saw modest declines. Weather-normalized natural gas sales declined 0.7%274 - Electric revenues decreased by $299 million, primarily due to lower fuel cost recovery and increased PTCs flowed back to customers, which were partially offset by positive regulatory rate outcomes278 Public Utility Regulation Xcel Energy's subsidiaries are engaged in numerous regulatory proceedings, including rate cases, resource planning, and wildfire mitigation filings, with significant renewable capacity approved - NSP-Minnesota filed a two-year electric rate case in November 2024 seeking a $491 million revenue increase, and received approval for $192 million in interim rates effective January 2025303 - The MPUC approved the NSP System's Upper Midwest Resource Plan, which includes adding 3,200 MW of wind, 400 MW of solar, and 600 MW of storage by 2030, and extending the lives of the Prairie Island and Monticello nuclear plants321 - PSCo filed its 2024 Electric Resource Plan, forecasting a need for 5-14 GW of new capacity by 2031 to meet projected sales growth of 3-7% annually, driven by data centers and electrification336339 - PSCo filed an updated Wildfire Mitigation Plan in Colorado with an estimated total cost of approximately $1.9 billion for 2025-2027. A decision is expected in Q3 2025343 - SPS filed its Texas System Resiliency Plan in December 2024, proposing a $538 million spend from 2025-2028 on grid hardening and wildfire mitigation366370 Critical Accounting Policies and Estimates The company's financial statements rely on critical accounting policies and estimates, including regulatory accounting, income taxes, employee benefits, nuclear decommissioning, and wildfire loss contingencies - Regulatory accounting is critical, with $3.4 billion in regulatory assets and $6.9 billion in regulatory liabilities recorded as of Dec. 31, 2024. The recoverability of these assets depends on future regulatory decisions390393 - For employee pension plans, key assumptions for 2025 cost calculations include a 7.13% rate of return on assets and a 5.88% discount rate403404405 - The ARO for nuclear decommissioning was $2.5 billion as of Dec. 31, 2024. This estimate is based on periodic studies and is sensitive to assumptions about retirement dates, technology, and cost escalation418419 - Estimating loss contingencies for wildfires, such as the Marshall and Smokehouse Creek fires, is a critical area involving complex judgments about the probability and amount of potential losses429 Liquidity and Capital Resources Xcel Energy projects a $45 billion capital expenditure plan for 2025-2029, funded by cash, debt, and equity, supported by strong liquidity and a recent dividend increase Base Capital Expenditure Forecast (2025-2029) | By Function | Amount (Millions) | | :--- | :--- | | Electric Distribution | $15,830 | | Electric Transmission | $12,560 | | Renewables | $5,020 | | Electric Generation | $4,470 | | Natural Gas | $3,420 | | Other | $3,700 | | Total | $45,000 | Capital Expenditure Funding Plan (2025-2029) | Funding Source | Amount (Millions) | | :--- | :--- | | Cash from Operations (Net) | $25,320 | | New Debt (Net) | $15,180 | | Equity (DRIP & Other) | $4,500 | | Total Funding for Capex | $45,000 | - The company maintains $3.55 billion in committed credit facilities expiring in September 2027 to support liquidity and back its commercial paper programs463580 - In February 2025, the Board of Directors announced a 4.1% increase in the annual dividend, reflecting confidence in the company's financial condition and long-term growth objectives460 2025 Guidance and Long-Term Objectives Xcel Energy issued 2025 ongoing EPS guidance of $3.75 to $3.85 per share and reiterated long-term objectives for EPS and dividend growth, maintaining a 50-60% payout - The 2025 ongoing EPS guidance is set at a range of $3.75 to $3.85 per share470 - Key assumptions for the 2025 guidance include constructive regulatory outcomes, normal weather, and an approximate 3% increase in weather-normalized retail electric sales472 - Long-term objectives are to deliver 6% to 8% annual EPS growth, 4% to 6% annual dividend growth, and maintain a dividend payout ratio between 50% and 60%473 Financial Statements and Supplementary Data This section includes the auditor's unqualified report, critical audit matters related to rate regulation and wildfire contingencies, and detailed notes on debt, pension plans, and segment financials Auditor's Report and Critical Audit Matters The auditor issued an unqualified opinion on the financial statements and internal controls, highlighting critical audit matters related to rate regulation and wildfire contingencies - The auditor issued an unqualified (clean) opinion, stating the financial statements are presented fairly and the company maintained effective internal control over financial reporting480 - A Critical Audit Matter was identified related to regulatory assets and liabilities, highlighting the subjective judgments management must make about the outcomes of future decisions by regulatory commissions487489 - A second Critical Audit Matter was identified for wildfire-related contingencies, emphasizing the high degree of judgment needed to assess the probability of loss and estimate the financial impact from the Marshall and Smokehouse Creek fires491493 Notes to Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, financial instruments, and contingencies, including debt, pension status, wildfire accruals, and segment financials Long-Term Debt by Entity (as of Dec. 31, 2024) | Entity | Long-Term Debt (Millions) | | :--- | :--- | | Xcel Energy Inc. | $6,337 | | NSP-Minnesota | $7,607 | | PSCo | $8,391 | | SPS | $3,551 | | NSP-Wisconsin | $1,406 | | Total (approx.) | $27,300 | - In November 2024, the company entered into forward sale agreements for 21.1 million shares of common stock, with expected cash proceeds of approximately $1.36 billion upon settlement, which can occur up to June 30, 2026593596 Pension Plan Funded Status (as of Dec. 31) | (Millions of Dollars) | 2024 | 2023 | | :--- | :--- | :--- | | Benefit Obligation | $2,752 | $2,943 | | Fair Value of Plan Assets | $2,504 | $2,690 | | Funded Status (Underfunded) | ($248) | ($253) | 2024 Segment Financials | (Millions of Dollars) | Regulated Electric | Regulated Natural Gas | | :--- | :--- | :--- | | Operating Revenues | $11,147 | $2,230 | | Net Income | $1,846 | $237 |