Xcel Energy - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 GAAP diluted EPS was $0.81 (ongoing $0.81) on $3.12B of total operating revenue; net income was $464M. Full-year 2024 GAAP EPS was $3.44 and ongoing EPS $3.50, driven by increased recovery of infrastructure investments offset by higher D&A, interest and O&M.
• Xcel reaffirmed 2025 ongoing EPS guidance of $3.75–$3.85 and reiterated long‑term targets: 6–8% EPS growth (upper half targeted) and 4–6% dividend growth with 50–60% payout ratio.
• Management emphasized accelerating grid and generation investment amid robust data center and industrial load; five‑year base capex totals $45B with potential $10B+ incremental (transmission/RFPs/data centers) and ~40% equity/60% debt funding for incremental capital.
• Wildfire items remain a watchpoint: Smokehouse Creek estimated losses of $215M (before insurance) with $210M insurance receivable recorded; Marshall Fire trial set for September 2025 with liability first, damages later; potential exposure could exceed ~$500M insurance limits in adverse outcomes.
• Note: S&P Global consensus estimates were not accessible at run-time; vs‑consensus comparisons are therefore unavailable (we will flag “N/A”).

What Went Well and What Went Wrong

• What Went Well

  • Delivered guidance for the 20th consecutive year; 2024 ongoing EPS $3.50 met range despite headwinds. CEO: “we delivered on our earnings guidance for the 20th year in a row….”; reiterated on call.
  • Strategic execution: Sherco Solar Phase 1 in service; Harrington coal-to-gas conversion near completion; wind fleet availability reached 97% (best in 5 years, first‑quartile) supporting PTCs and lower bills.
  • Growth and grid thesis: 5‑year base capex $45B with >9% rate base CAGR; management targets upper half of 6–8% LT EPS growth; robust pipeline from MISO/SPP/Colorado/Minnesota resource plans.

• What Went Wrong

  • Q4 revenue fell 9% YoY to $3.12B (lower fuel/commodity pass‑through, PTC flow‑backs); operating income down to $347M vs $575M in Q4’23.
  • Cost pressure: 2024 O&M up $96M on generation maintenance, storm response, wildfire mitigation and damage prevention; interest expense up $200M on higher debt/ rates.
  • Wildfire/legal overhang: $215M estimated Smokehouse Creek losses (before insurance) and Marshall Fire litigation continues; adverse outcomes could exceed ~$500M insurance.

Transcript

Operator (participant)

Hello, and welcome to Xcel Energy 2024 Year-End Earnings Conference Call. My name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star followed by one on your keypad to register your question at any time. Questions will only be taken from institutional investors. Reporters can contact media relations with inquiries, and individual investors and others can reach out to investor relations. If you require assistance at any point, please press star zero to be connected to an operator. I'll now turn the call over to Roopesh Aggarwal, Vice President, Investor Relations. Please go ahead.

Roopesh Aggarwal (VP of Investor Relations)

Good morning and welcome to Xcel Energy's 2024 Fourth Quarter Earnings Call. Joining me today are Bob Frenzel, Chairman, President, and Chief Executive Officer, and Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions if needed. This morning, we will review our 2024 full year results and highlights, provide updated 2025 assumptions, and share recent business and regulatory updates. Slides that accompany today's call are available on our website. Some comments during today's call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings. Today, we will discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release.

As a reminder, we recorded a charge of $0.06 per share in 2024 related to the disallowance of replacement power costs associated with an extended outage at our Sherco plant in 2011. Given the outage occurred 13 years ago and non-recurring nature of this item, this charge has been excluded from full year ongoing earnings. As a result, our GAAP earnings for 2024 were $3.44 per share, while our ongoing earnings, which exclude this non-recurring charge, were $3.50 per share. All further discussion in our earnings call will focus on our annual ongoing earnings. For more information on this, please see the disclosure in our earnings release. I will now turn the call over to Bob.

Bob Frenzel (Chairman, President, and CEO)

Thank you, Roopesh, and good morning, everybody. At Xcel Energy, we know that economic growth and prosperity of our communities and country depends on our ability to deliver energy to our customers when and where they need it while keeping their bills as low as possible, and in 2024, we delivered on another year of solid operational and financial progress to that end. Across our eight states, we invested more than $7.5 billion to build and maintain infrastructure that supports our customers' energy needs in areas like advanced technology for a smarter, more reliable grid, long-haul and regional transmission to support customer growth and system reliability needs, and carbon-free generation to continue our pursuit of a cleaner energy future.

We navigated considerable headwinds during the year and posted ongoing earnings of $3.50 per share, delivering within our guidance range for the 20th consecutive year, one of the best track records in our industry. Our long-term performance is attributable to our committed team at Xcel Energy, who show up every day on behalf of our customers with safety, affordability, and reliability as their top priorities. I recognize that this is the first time we've been below the midpoint of our target range in over 15 years. We made decisions in 2024 to make investments to improve resiliency and protect our customers throughout the year. When we coupled with December weather that was considerably warmer than normal and little time to adjust, the result was earnings at the low end.

But because of the operational improvements and investments we made in 2024, we remain confident in our ability to deliver on our 2025 guidance range of $3.75-$3.85 per share, the midpoint of which reflects 7% growth from the midpoint of our 2024 range. And over the next decade, we expect to invest significantly in our infrastructure to deliver reliable, resilient, and cleaner energy for our customers, as well as serve significant forecasted customer growth. Our five-year base capital plan delivers rate-based growth in excess of 9% and should deliver long-term EPS growth in the upper half of our 6%-8% guidance range. At Xcel Energy, our long-term strategic model and value proposition is to make smart capital investments for the benefit of our customers, which improve reliability, resiliency, and sustainability, provide excellent customer service, and to keep bills as low as possible for our customers.

In 2024, we reached several important milestones towards these goals. In November, phase I of our Sherco solar project started commercial operation. Two additional phases will come online in 2025 and 2026, and once complete, Sherco's total capacity of 710 MW will make it the largest solar facility in the Upper Midwest. By using existing interconnection from our retired coal unit, we saved customers money and accelerated deployment by several years, providing opportunities to serve new customers, including multiple data center projects on and around the Sherco site. We're also near completion of the conversion of our 1,000-MW Harrington coal plant to natural gas, which provides essential energy, resiliency, and reliability to our customers and will benefit the local community there for years to come. In 2024, our wind fleet achieved availability of 97%, marking our best performance in five years and achieving first quartile benchmarks.

High turbine availability ensures our customers benefit from the zero fuel cost resource and provides production tax credits that keep their bills low. In line with our Minnesota resource plan, the NRC approved a 20-year license renewal for our Monticello nuclear facility. This allows customers to continue to benefit from a critical, low-cost, carbon-free energy resource through 2050. One of the keys to energy resiliency and growth is expanding our electrical grid to ensure that customers have access to the generation resources needed to meet their daily requirements. I'm proud to say that for the past 15 years, Xcel Energy has been the leading provider of new transmission line miles in the country. In July, we began construction on the final segment of our Colorado Power Pathway project, which started construction in 2023.

The Power Pathway is a 675-mi double circuit 345 kV transmission loop that will enable Xcel Energy to connect more than 5,000 MW of essential energy resources in Eastern Colorado. And in the fourth quarter, the MISO board approved Tranche 2.1 of its long-term transmission portfolio, and the SPP board approved its 2024 ITP portfolio. These two portfolios will enhance transmission systems in our regions and interregionally, ensuring that we can meet customer growth and resiliency needs. Our portions of these transmission projects could result in $3 billion-$4 billion of capital investment in excess of our base plan. We've also made considerable progress to protect our customers, communities, and system from the increasing threats of extreme weather that we continue to see across the country.

During 2024, we filed an updated wildfire mitigation plan in Colorado, a new system resiliency plan in Texas, and issued wildfire mitigation plans for each of our other states. We've also accelerated a number of risk reduction efforts, including operational mitigation, such as enabling public safety power shutoffs and wildfire safety operations across our entire system and making investments to better sectionalize and automate these capabilities. Physical mitigations that include the repair or replacement of priority one and two distribution poles across our system and over 600 mi of vegetation management in Colorado, among other milestones. We've developed foundational tools, completing comprehensive wildfire risk mapping of our system and deployment of advanced risk modeling tools like Technosylva.

We've increased situational awareness, where in Colorado we completed installation of 42 AI-equipped cameras and completed the installation of 25 utility pole-mounted weather stations, with many more planned across our system in 2025 and beyond. Equally importantly, our customer bills have remained among the lowest in the country. This is attributable to our thoughtful investments, access to some of the lowest cost renewable resources in the country, and focus on continuous improvement through our lean operating principles. Since 2020, our continuous improvement programs have generated nearly $500 million of sustainable savings for customers while improving operations and reducing enterprise risk. Since 2017, our Steel for Fuel program has saved customers nearly $5 billion in avoided fuel costs and production tax credit benefits. Our average residential electric and natural gas bills are 28% and 12% below the national average, with historical growth rates well below the rate of inflation.

In addition, we've reduced our residential electric customer share wallet by 13% since 2014. And with our low energy prices, customers have the further potential to reduce their energy expenditures by over 40% as they adopt electric vehicles. At the same time, we've reduced carbon emissions on our electric system by 57% relative to 2005 levels and remain on track to meet our goal of 80% carbon reduction by 2030, proving that our geographic advantage for renewable resources ensures that customers don't have to sacrifice costs or reliability to achieve sustainability.

Looking forward, we are focused in 2025, working to capture the unprecedented opportunities for growth we laid out in our base capital investment plan, to deliver on our incremental capital opportunities, to advance our clean energy leadership, and to raise the bar on delivering a compelling experience for our customers in order to make energy work better for them and the communities we serve. Finally, I'd like to express my thanks to Paul Johnson. Earlier this year, Paul announced his retirement from Xcel Energy after 41 years of service. Over his career, his commitment, his integrity, and his acumen have been critical to the success of our controller, our treasury, and our investor relations programs. He has mentored countless programs inside the company and across the investment community. I consider Paul more than just a chair's colleague. He's become a personal friend.

I know you will all miss him, as will I. I want to extend my sincere appreciation to Paul, his wife Renee, their two sons, and two dogs, and we wish him nothing but the best in his retirement. With that, I'll turn it over to Brian.

Brian Van Abel (EVP and CFO)

Thanks, Bob. And I think everyone in this room certainly echoes your comments about Paul. So let's turn to starting with our financial results. Xcel Energy had ongoing earnings of $3.50 per share for full year 2024, compared to ongoing earnings of $3.35 per share in 2023. The most significant earnings drivers for the year include the following: outcomes from rate cases and riders increased earnings by $0.87 per share, and higher other income, which increased earnings by $0.16 per share due to interest income on cash balances and a gain on debt repurchase that we proactively used to offset increased spend on our wildfire risk reduction measures. Offsetting these positive drivers, higher depreciation and amortization decreased earnings by $0.40 per share, reflecting our capital investment programs.

Higher interest charges, net of AFUDC debt, decreased earnings by $0.24 per share, driven by increased debt levels to fund capital investments and higher interest rates. Higher O&M decreased earnings by $0.13 per share, and other smaller items combined decreased earnings by $0.11 per share. Turning to sales, fourth quarter and full year weather adjusted electric sales increased by 3% and 1% respectively, driven by increased C&I load in SPS and residential sales in PSCo. For 2025, we continue to expect full year weather adjusted electric sales to increase 3%. Shifting to expenses, O&M expenses increased $96 million in 2024, reflecting actions we took to reduce future operational risk by increasing investment in wildfire mitigation. In addition, we experienced increased costs from generation maintenance, damage prevention, and storm response. We also made progress on a light rate case calendar.

In our Minnesota electric rate case, interim rates of $192 million were approved, effective January 2025, and in North Dakota, we filed an electric rate case, and the commission approved our settlement in our natural gas rate case. Moving to 2025, we are looking to several milestones as we make progress on adding 15,000-29,000 MW of generation to replace retiring capacity and serve load growth. In the first quarter, we anticipate a decision from the Minnesota Commission on our RFP and IRP settlement. The RFP includes 720 MW of company-owned firm dispatchable resources. The IRP includes an additional 4,200 MW of generation needs. By summer 2025, we expect to file recommendations for up to 3,500 MW of this need across three RFPs. In the second quarter in SPS, we anticipate filing recommendations for 5,000-10,000 MW of generation from our RFP that is in flight.

And finally, in the third quarter in Colorado, we anticipate a commission decision on a resource plan for the 5,000-14,000 MW resource need, with RFPs to follow in late 2025 or early 2026. We're excited to execute on this significant opportunity and look forward to working with our stakeholders to drive economic growth for our communities and continue our clean energy leadership. Moving to our five-year sales forecast of data centers. We have already signed contracts for approximately half of our new data center capacity included in our five-year sales forecast. These projects are under construction and will begin energization late this year. Additionally, we expect to have executed contracts for the remaining amount that is included in our five-year sales forecast by this fall.

We are in active discussions with several counterparties and look forward to bringing on these large customers that will drive economic development and benefit to all of our customers. Given our large backlog of additional opportunities, we are confident in our long-term sales forecast. Additionally, we continue to see significant growth in other parts of the business, particularly in the oil and gas region in SPS. As a reminder, our data center growth represents only half of our 5% long-term sales growth that we are projecting. To help fund our $45 billion five-year capital plan, we issued nearly $1.4 billion in forward equity in 2024. This issuance significantly reduces financing risk, helps maintain a strong balance sheet and credit metrics, and funds accretive growth for our customers and investors. We also continue to make strong progress in the Smokehouse Creek wildfire claims process.

We've resolved 113 of the 199 submitted claims, which we continue to view as constructive. We have committed $73 million in settlement agreements, of which $35 million have been paid. There is no change to our estimated liability of $215 million, as we describe in our disclosure. With that, I'll wrap up with a quick summary. Xcel Energy posted ongoing 2024 earnings of $3.50 per share, navigating significant headwinds and meeting guidance for the 20th consecutive year, one of the best track records in the industry. We continue to lead the clean energy transition while ensuring safe, clean, and reliable service and keeping customer bills as low as possible. We are focused on reducing operating risk in our system from extreme weather, including proactive mitigations across our system, our resiliency plan filing in Texas, and updated wildfire mitigation plan in Colorado.

Going forward, we are excited to make significant progress in our $10 billion pipeline of additional investment opportunities. We continue to maintain a strong balance sheet and credit metrics, using a balance of debt and equity to fund accretive growth. Finally, we are reaffirming our 2025 guidance of $3.75-$3.85 per share. This concludes our prepared remarks. Operator, we will now take questions.

Operator (participant)

Thank you very much. As a reminder, if you would like to ask a question, you may press star followed by one on your keypad to register your question. You will be advised when to ask your question. Our first question is from Nick Campanella with Barclays. Please go ahead.

Nick Campanella (Director)

Hey, thanks. Thanks for all the information today, so I just wanted to kind of get your general thoughts, you know. I know there's been a lot of headlines in the new administration, but particularly around, you know, renewable permitting and siting, and you know, are any of your projects kind of in scope from either a federal or a private permitting halt perspective? And then maybe you can kind of also just remind us what's embedded in the plan from a transferability perspective. Thank you.

Bob Frenzel (Chairman, President, and CEO)

Hey, Nick, it's Bob. Thanks for the question. You know, look, broadly speaking, when I think about the EOs, you know, they support, you know, the energy dominance goals of the administration. We're supportive of a broad and all the above energy strategy. And, you know, Brian's comments in the prepared remarks talking about, you know, sales growth and need of our customers for our product and our electrons would suggest that, you know, we need to move, and we need to be able to move very quickly on building our infrastructure and making sure that we can serve our customers. You know, we know that the administration supports economic development. We know that they support low-cost energy. And while many of the EOs are directed at oil and natural gas, you know, our focus area is really on the electricity side of the ledger.

You know, look, we support permitting reform broadly at a national and even state and local levels in order to be able to build the infrastructure we need to meet this era of growth. You know, we have about 30% expected load growth over the next five years, and, you know, making sure that we can deliver on that is important. So, you know, we think that any of the executive orders and any of the challenges that may be embedded in there today are things that we can always work through. As a reminder, we don't have any offshore wind. We don't have projects on federal lands. And our permitting needs are actually relatively light for wind and solar and storage assets. So I think we'll be able to work through it all, and I'm optimistic that our capital plan for 2025 and beyond are going to remain intact.

And we'll be able to work with the administration and all the agencies to make progress here. I don't know, Brian, you want to add anything?

Brian Van Abel (EVP and CFO)

Yeah, Nick, I can just add a little bit of color to that. I know there was an article yesterday around the Army Corps and our projects. We do not expect that to impact our projects in flight. And as Bob said, the other projects in flight, we feel comfortable with where we stand in the permits that we have and our continuing construction and continuing progress on all our projects in flight. And obviously, with the RFPs, once whether it's tariffs or regulations or EOs, we can certainly look at how that impacts RFPs. But we feel very good about the need and our overall pipeline and executing on both the stuff in flight and the pipeline. Just quickly, your other question was about PTCs. We have approximately $700 million a year in transferability embedded in our forecast, right? That's a reduction to revenue.

And then we transfer the credits. And so, that's been pretty consistent over the past year in terms of what we've forecasted.

Nick Campanella (Director)

Hey, I appreciate the answer on that. That's really helpful. And then, you know, at the end of your prepared, you kind of talked about you do seem to have some line of sight to announce additional customers this year. Just how do you kind of think about the cadence of pulling in those, you know, 8.9 GW customer requests? And at which point do you think you would, you know, reevaluate that sales CAGR? Is that more of an EEI later in the year item? Or just, you know, how much of that can actually fall into this five-year time horizon and, you know, impact where you are in the six to eight years? Thank you.

Brian Van Abel (EVP and CFO)

Yeah, and I think expect us in terms of updating capital plans, five-year sales forecast plans. All of that generally is our Q3 earnings release, so we can talk about EEI, so expect that all of that to be a comprehensive update on a regular cadence. Now, what I mentioned in my prepared remarks is we expect to be able to sign contracts that will fulfill what we have in our base plan for the data centers, and we expect to. We're actively working in negotiations on several of those and expect to have them all executed by the fall, so pretty excited about that, and then, yeah, as you alluded to, we have a backlog behind that, which we'll turn to working on that as we, you know, get through these, and I think that just highlights the kind of pretty significant opportunity that we have.

You know, by the time we're done, I expect to talk about this in greater detail in the fall, as we'll have a data center in every one of our operating companies. So we have regional diversity, data center diversity. There'll be deals with different hyperscalers. So we feel really good about the long-term sales prospects. And as we continue to move forward, we'll see if there's opportunities to add more. It's not just the demand there, but ensuring that we have the discussions with our stakeholders and commissions about being able to build those assets. I mean, you heard Bob say we need all the above energy strategy. We need to build these. And so it's really working with our stakeholders to drive economic development and benefits for all of our customers.

Nick Campanella (Director)

Thanks for all the thoughtful answers today. We'll see you soon.

Brian Van Abel (EVP and CFO)

Yeah, thanks, Nick.

Operator (participant)

Thank you. Our next question comes from Jeremy Tonet with JPMorgan. Please go ahead.

Brian Van Abel (EVP and CFO)

Hey, Jeremy.

Jeremy Tonet (Research Analyst and Managing Director)

Hi, good morning. Paul, we will certainly miss working with you. Best of luck in retirement. Maybe just, you know, if we could touch on the wildfires a little bit here, just given national headlines recently, and it seems like developments in other states might have impacted Xcel trading recently. And just wondering what thoughts you could provide here, incremental as far as the outlook, the possibility for federal wildfire policy changes, any views from D.C. here, just, you know, in conversations within Colorado as well, just trying to get some color there.

Bob Frenzel (Chairman, President, and CEO)

Hey, good morning, Jeremy. It's Bob. Look, obviously the California fires were a tragedy for that community. And it does bring both a federal and a state highlight to potential solutions there. And we're going to work at both levels through EEI, largely at the federal level, and then obviously across our states for, you know, anything we can do to continue to protect our customers and our communities from that kind of threat and that kind of risk. I'd say the dialogues are active across the federal government and at the state level. You know, obviously at the federal side, there's a lot going on. I think a lot on TCJA, IRA, and items like that. So I think any wildfire movement at the federal level is probably a back half of the year kind of effort and focus.

But California certainly, you know, put a bright light on the issue and, you know, national problems need national solutions. And I think there's a big role for the federal government here to help setting standards, helping with insurance backstops, getting to functional markets, both on the insurance side and on the capital market side, as you alluded to. So I think there's a big role for the federal government here. On the state basis, you know, we're having great conversations, Texas, Colorado, the Dakotas, around everything from roles of the companies and roles of the states and how are we going to set standards for forestry, how are we going to set standards for building infrastructure, for operations, and making sure that there's a clean line of responsibility for, you know, who's doing what to make sure that we can protect our customers and our communities.

I don't have anything to talk about that's advancing right now, but we're early in legislative sessions, and, you know, maybe we'll come back to you in the first quarter call.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. That's helpful there. And just going to D.C. at large, is there anything else? I know you talked about a bit with Nick there as far as changes you think going forward, especially as it relates to, I guess, transferability. Is there a need to go through the federal government anyway? Do you see anything changing there?

Brian Van Abel (EVP and CFO)

Hey, Jeremy, you just broke up in the very first part of your question there. What did you say? I caught the last part.

Jeremy Tonet (Research Analyst and Managing Director)

Just about any changes out of D.C. I know you touched on that a bit there.

Brian Van Abel (EVP and CFO)

Yeah. You know, certainly, you know, we're working very closely with our policymakers around D.C. You know, obviously one of the things we're plugging on and working is around the IRA and what happens through legislation. You know, certainly as we see it now, I think what we're hearing is that they're going to attempt to do one bill, but if that slows down, they'll split it into two. I think you've heard me speak before is we believe the key tenets of the IRA are intact. When I say that, I'm talking about tax credits and transferability. They kind of go hand in hand. So we feel good about that. I mean, it is. There's an incredible amount of jobs in manufacturing and economic benefit being driven by the IRA, which is primarily going into red states. I think there's a recognition of that.

So we feel good about where that stands overall, and we'll just watch it play out and continue to be plugged in.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. And just the last point there, does transferability go through the federal government or is it bilateral?

Bob Frenzel (Chairman, President, and CEO)

So I think the permissibility of transferability is definitely embedded within the IRA. I think the transferability themselves is a bilateral contract with us and any other taxpaying entity. And I think that persists.

Brian Van Abel (EVP and CFO)

Yeah, that's exactly. We negotiate directly with our other companies. You know, we have a number of Fortune 500 companies in our backyard here in Minneapolis that we partner with. The one caveat is co-ops or municipalities that use direct pay would go directly with the government, but we don't use direct pay or use in transferability.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. And if I could just finish up on D.C. real quick here. The new administration, there's more of a focus, I think, on gas than maybe there was in the past. And at the same time, resource adequacy has been, you know, very much in focus lately. And just wondering your thoughts on adding incremental gas-fired generation to meet higher than expected load growth. Has that evolved in any way based on what's coming out of D.C. or just, you know, higher growth expectations and have conversations with large C&I customers changed on this side as well at all?

Bob Frenzel (Chairman, President, and CEO)

Yeah. So look, I made a comment in my prepared remarks about sort of the real advantage we have across our eight-state footprint and the ability to deliver low-cost energy with wind and solar. And that persists. And so we think that those are very valuable asset classes for our customers. They're very important for our hyperscaler and data center customers who are trying to have their own sustainability goals. And we think that persists. We've been clear that we're going to continue to focus and achieve our 80% carbon reduction by the end of the decade. But we've been clear since we made that announcement that we need dispatchable resources to support that. So gas has a real role to play in our active resource plans right now.

We've got CT builds in the Upper Midwest, in Colorado, and in the Southwest, and in our resource plans that are on the come. We also have incremental gas resources in there. They're all combustion turbines. So we think we need peaking resources. We don't think we need base load gas because of our advantage in wind and solar and our ability to deploy solar and storage. We will have new gas across our systems. They'll have low capacity factors. You know, we've talked about having them, you know, clean fuel capable at construction and other items to make sure that we can meet sustainability goals in our states. We will have new gas coming. We are converting some of our coal stations to gas as well.

You know, increasing importance for gas in our footprint, but a maintenance of a real sustainability footprint as well, given our geographic advantage.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. Understood. Thank you for that.

Operator (participant)

Thank you. Our next question is from Julien Dumoulin-Smith with Jefferies. Please go ahead.

Julien Dumoulin-Smith (Research Analyst of Power, Utilities, and Clean Energy)

Hey, good morning, team. Thank you guys very much. And Paul, it's been a real pleasure, I got to say.

Jeremy Tonet (Research Analyst and Managing Director)

Thanks.

Julien Dumoulin-Smith (Research Analyst of Power, Utilities, and Clean Energy)

There we go. Absolutely. You can hear me? So guys, let me talk a little bit about 2024 and 2025 real quickly. I know we've talked about some of the bigger picture items here, but coming back to obviously, as you say, a little bit out of the norm for you guys historically on 2024, some items that, as you say, you were trying to deal with through the course of 2024. But in addition here, when you look at the 2025 drivers, there's a few items that net to, you know, I suppose up to $40 million negative versus the prior kind of bits and pieces here, if you will. How do you think about where you're positioned on 2025 and getting "back on track"?

What I mean by that is back on track relative to what you guys have consistently delivered in terms of within or at or above your midpoint level.

Brian Van Abel (EVP and CFO)

Yeah. Hey, Julien, thanks for the question. I can provide a little bit of color on that. I think on face, it adds up to that. But I think you got to look at the property taxes are offset in regulatory mechanisms. So that doesn't have an impact. And I look at some of the other offsets is, you know, it's probably less than half of the impact that you quoted. And so when I think about 2025, we feel very comfortable with where we sit. It's early in the year. You know, we always target midpoint of guidance. So I expect that we deliver this year, like you said. Last year was a little bit of an anomaly for us. But overall, I feel very comfortable with 2025. And there's just some other offsetting stuff in there that gives me that comfort.

Julien Dumoulin-Smith (Research Analyst of Power, Utilities, and Clean Energy)

Got it. Right. So, bottom line, back on track 2025 onwards here.

Brian Van Abel (EVP and CFO)

Yep.

Julien Dumoulin-Smith (Research Analyst of Power, Utilities, and Clean Energy)

I appreciate it. And I don't want to wordsmith you guys too much, but you guys have made several times your confidence in the sales growth outlook. You made it in the prepared remarks. You said it in the Q&A. At the same time, how do you think about the backdrop here when I think you guys dropped the sales growth number from the slides itself? I can't discern. Was that purposeful? Is there some sort of update coming at some point here? Just wanted to kind of ask you to elaborate. Maybe I'm nitpicking too much.

Brian Van Abel (EVP and CFO)

I think you might be reading into that too much, Julien. I mean, generally, we talk about our five-year sales growth on the Q3 call. I mean, you just heard me reiterate it. And in 2025, our 3% sales growth is unchanged. We feel good about that. So there has been no change. I mean, basically sitting here, what we wanted to do is give a little bit more context in the data center growth because that's about half of that 5%. And the fact that we already have three signed contracts in construction, all three of those planned to energize later this year. We expect to deliver the rest of that contract or the capacity that's in our base sales forecast by this fall. And we're in active negotiations exchanging term sheets right now with multiple counterparties.

So that's where you, I think, you might be reading into it a little bit. But our 2025 sales growth is unchanged, and our outlook, five-year outlook, is unchanged. And I think I just add, I said this in the opening remarks is plus only half of our load is from data centers in our five-year sales forecast. Having this diversity of growth is also a benefit too. I mean, we continue to see very strong growth out of the oil and gas sector in the Permian, in Texas, and in New Mexico. So overall, hopefully that helps with a little bit of additional color with how we feel.

Julien Dumoulin-Smith (Research Analyst of Power, Utilities, and Clean Energy)

Yeah. Absolutely. All right. Well, thank you guys very much. I'll leave it there. All right. We'll talk soon. We'll talk to you on the third quarter call on that sales update.

Bob Frenzel (Chairman, President, and CEO)

Thanks, Julien.

Brian Van Abel (EVP and CFO)

Thanks.

Julien Dumoulin-Smith (Research Analyst of Power, Utilities, and Clean Energy)

Cheers.

Operator (participant)

Thank you. Our next question comes from Steve Fleischman with Wolfe Research. Please go ahead.

Steve Fleischman (Managing Director and Senior Analyst)

Yeah. Hi, good morning. I'll wish you a final Skol. Good to miss you. So just I guess just one other thing on the data centers that I can't recall, the 8,900 MW pipeline, is that number the same as before? Did that go up? And just maybe on that topic, just a little more on the tone of conversations, any shift in the last few months?

Brian Van Abel (EVP and CFO)

Yeah. So Steve, that number is unchanged. We just provided additional color into kind of that what's included in our base and what we have contracted already. So we didn't change that top side. We have a lot of discussions. But question around tone, you know, I guess you could bring this back to DeepSeek and what we're hearing. So we had discussions with a number of hyperscalers post-DeepSeek. And, you know, some of the common themes is the efficiency gains were expected. It didn't catch them off guard. And DeepSeek was focused on training and not inferencing where we really think the long-term growth is going to be. And then in all of our discussions with the data centers, these active discussions around the ESAs is there is no change in tone. There is no slowing down. So absolutely not.

I think that's why we feel really good about where we are relative to the data centers. So as you'd expect us to be, we were in contact with a lot of them post that news and just given the reaction it had on, or the impact it had on, our industry. So but we feel good about the growth plan going forward.

Steve Fleischman (Managing Director and Senior Analyst)

Okay. Thanks. And then just a quick numbers question. SPS, I think was basically flat on the year despite all that growth. Is that just regulatory lag?

Brian Van Abel (EVP and CFO)

I think we've been in the bottom line or just a wholesale customer load roll-off that started last year. So you saw the full annualization of it this year is one of the bigger drivers of it. So that'll get captured as it going forward.

Steve Fleischman (Managing Director and Senior Analyst)

That's right. Okay.

Brian Van Abel (EVP and CFO)

Thank you.

Operator (participant)

Thank you. Our next question comes from Carly Davenport with Goldman Sachs. Please go ahead.

Carly Davenport (VP of Equity Research)

Hey, good morning. Thanks so much for taking the questions. Maybe just two quick follow-ups on a couple of the topics we've hit on so far. First, just on the data center comments. As you sign those remaining contracts that are in the five-year plan by the fall, is that something where we should expect to see any sort of announcements around those transactions or investments to support those facilities, or is that something that more will happen in the background?

Brian Van Abel (EVP and CFO)

Hey, Carly, good question. A little bit depends on the counterparty and potentially the regulatory filing around it. So maybe a little bit TBD of whether there'll be an actual formal announcement now. But we're certainly, you know, want to respect the wishes of our data center customers depending on how they want to handle this.

Carly Davenport (VP of Equity Research)

Got it. Okay.

Bob Frenzel (Chairman, President, and CEO)

I might just add that there are times that the local economic development teams are also very happy to have supported, you know, the governor's priorities in our states. And so sometimes the communities or the state wants to make an announcement too. So, you know, I would suggest that we may have more to say as we go through the year, or it might be quiet until we give an update on the third quarter call.

Carly Davenport (VP of Equity Research)

Got it. Great. That's very clear. I appreciate those comments. And then maybe just circling back to the wildfire mitigation front, obviously it's been very much in focus. Just as you think about the two proceedings on the Colorado mitigation plan and the Texas SRP, how are you guys thinking about the prospects to reach a settlement in those proceedings, or do you think they'll go the full way?

Brian Van Abel (EVP and CFO)

You know, I think we're certainly, as we look forward, we'll take Texas first. You know, we've seen a settlement in the SRP by some of our peers in Texas. So we're certainly hopeful that we can reach a settlement. I think it's recognized in Texas by our stakeholders the importance of wildfire mitigation and making sure that we are protecting our communities and our customers. And so I think we're hopeful there in Texas. In Colorado, we'll just start to engage. We haven't received any testimony yet. We'll receive answer testimony from our stakeholders here later in February. It should be next week, I think late next week. And then there's a settlement deadline. So that's the deadline to watch. April, mid-April is a settlement deadline in Colorado. So we'll start to engage those conversations and certainly hopeful we can reach a settlement.

But certainly we're comfortable going through this given the importance of this plan, the significance of this plan, going through hearings and a decision deadline, which we'd expect at the end of August from the commission.

Carly Davenport (VP of Equity Research)

Great. Thank you so much for all the color.

Operator (participant)

Thank you. Our next question comes from Durgesh Chopra from Evercore ISI. Please go ahead.

Durgesh Chopra (Managing Director of Power and Utilities)

Hey, team. Good morning. Thank you for taking my questions. Just maybe Marshall Fire, that's where I want to start. And then I'll go back to a big picture question. Just what's the latest there? You know, obviously the trials start in September 2025. What should we be tracking between now and 2025? Could there be sort of a settlement or, you know, some sort of resolution between the parties? Maybe just latest thoughts there, please. Thank you.

Bob Frenzel (Chairman, President, and CEO)

Hey, Durgesh. It's Bob. Thanks for the question. Look, there's not a lot going on, a lot of changes in the Marshall proceeding. As you indicated, the trial is set for September, and the judge reaffirmed that recently. And as we indicated in the fourth quarter, we have made some decisions. The presiding judge has made some decisions around the structure of the trial. We'll do a liability-only trial in September and, if necessary, subsequent trials around damages. And so not much has changed. I guess the only new news out of the judge is probably the venue decision that he made was going to keep the trial in Boulder County as opposed to the adjacent county, Jefferson, which there was a venue change request. So not much going, not much new there. And again, back to your second question, which is really around settlement and settlement opportunities.

As we've said previously, you know, we disagree with the sheriff's report and the source of the second ignition and are prepared to defend that in the trial in September.

Durgesh Chopra (Managing Director of Power and Utilities)

Good. Thanks, Bob, and then one big picture question on tariffs. Obviously, you have a very sizable renewable investment in the plan, and the China tariffs are now in effect, so if they're going to be sort of there for a prolonged period of time, you know, how are you thinking that impacts your plan, how are you de-risking your supply chain? Your thoughts there, please. Thank you.

Brian Van Abel (EVP and CFO)

Yeah. Hey, good morning, Durgesh. And thanks for the question. I mean, I think the China tariffs were probably well communicated. And it's not as though we haven't dealt with tariffs before. There were tariffs under the previous Trump administration. We had tariffs under the Biden administration, AD/CVD investigation. So something that we've gotten pretty familiar with in working with our suppliers and the manufacturers in terms of whether there's manufacturing capacity outside of China or just ensuring we're making the right procurement decisions to deliver the best possible price to our customers. So I would say the China tariff is not unexpected and not surprising. And as you would expect, given our forward-looking nature and all the renewable stuff that happened in flight, that we had planned for something like that and have taken the appropriate actions.

Durgesh Chopra (Managing Director of Power and Utilities)

Awesome. Thank you, and Paul, we will miss you greatly. All the best. Thank you.

Operator (participant)

Thank you. Our next question comes from Anthony Crowdell from Mizuho. Please go ahead.

Anthony Crowdell (Senior Analyst)

Hey, good morning. I don't know if we can go that far, but yeah, congrats, Paul. Thanks again. Just I guess two quick questions. I wanted to follow up on Steve's comments, I guess more on the tone of the data center. I'm just curious if we can contrast the tone between maybe customers associated with the data centers and non-data centers. I mean, is there more of a sense of urgency with maybe data center customers to hook up, or do you see it's the same across whatever customers are coming to you?

Brian Van Abel (EVP and CFO)

Anthony, you mean like other C&I or oil and gas or just?

Anthony Crowdell (Senior Analyst)

Exactly. Yes.

Brian Van Abel (EVP and CFO)

I mean, I think from the data center side, it is certainly always speed to market continues to be one of the most important factors in terms of can we deliver the transmission generation capacity on the timeline that they're looking for. As for other customers, I mean, we continue to see significant growth out of the oil and gas industry. I think that's probably reflect, not probably, it is reflected in the resource plan that we filed in New Mexico and our RFP. When you look at the upside of that RFP in Texas and New Mexico, that is 14,000 MW of generation. That's informed by our oil and gas customers in terms of what their electrification needs are.

I also think what you saw out of SPP with the recent approval of this big portfolio of projects, including a 765 kV that is awarded to us and we'll build, is that continued growth. And our customers are looking to get connected. So I wouldn't differentiate, we don't differentiate between among customers, but overall, it hasn't shaded the tone, hasn't changed with data centers related to kind of their speed to market and how important it is for them.

Anthony Crowdell (Senior Analyst)

Great. And then just on that, if I think about maybe political or regulatory support that you get with new customer hookups, I'm sure it's great for all the communities, whether it's property tax offsets or what the property tax would pay. I mean, but I think there's probably more economic development associated with the non-data center customers. Is that fair to look at it that way and maybe that they get maybe greater continued regulatory support or political support than maybe the data centers or actually, as you said earlier, there's no differentiation between the type of customer that's getting hooked up? A hookup is great for regulators.

Brian Van Abel (EVP and CFO)

I think, Anthony, I think it really depends. I mean, if you're talking about a data center that's going to build out to a gigawatt plus of capacity, you have years and years of construction jobs. And then they may be doing other development within the community to support the community's significant property tax base. And it does provide benefit to all of our other customers. And when you're talking about a data center load that large, it does drive benefit for all of our customers. So I don't think it, I wouldn't characterize it that way because, you know, the data centers and these large world customers understand that they need to bring economic development and benefit to all of our customers for us to get it approved in front of the commission.

Anthony Crowdell (Senior Analyst)

Great. Thanks for taking my question, guys. Thanks again.

Operator (participant)

Thank you. Our next question is from Travis Miller from Morningstar. Please go ahead.

Travis Miller (Senior Equity Analyst of Energy and Utilities)

Good morning. I'll echo much appreciation, Paul. I've enjoyed over the years and appreciate all the help over the years. At a high level, we're trying to figure out kind of what are some of the constraints really across the industry on some of the big CapEx numbers and the growth numbers coming out. What about labor? A lot of questions about equipment and tariffs, et cetera, et cetera, but what about labor availability, both for you and what you maybe see across the industry? Is that a constraint?

Bob Frenzel (Chairman, President, and CEO)

Yeah. Hey, Travis, it's Bob. Great question, and certainly one that we're focused on and probably have been focused on for a number of years. We've been working actively with both national and local IBEWs and other trade organizations that we work with to, you know, hire the critical talent that we need to own and operate these assets. We've been working trying to give insights into our backlog of capital projects that we need to our vendor partners to make sure that they know where our growth is coming from. And so our job is really massively in terms of partnership with people who help provide us the human talent that we need to do this big buildout. Now that gets pressured by other people also needing talent.

And so, you know, we're in constant competition for human capital and talent, both at our vendor side and for our company talent as well. So it's a great question. I think we started the process. There's more work to do there. Everything from funding programs in developmental junior colleges and technical colleges going into high schools and recruiting at that level, trying to get folks that may want to, you know, bypass a university and go straight into a trade or a craft. So any and everything we can do to make sure that we've got the human capital to make sure that we can do the buildout that we need.

Travis Miller (Senior Equity Analyst of Energy and Utilities)

Okay. Great. That's very helpful. And then just specific on the data centers, apologies if I missed this in any of the comments, but do you anticipate any specific regulatory filings for any of the customers either you have signed or you're working with? Just thinking about something that might need such a big buildout that you need some kind of pre-approval or approval.

Brian Van Abel (EVP and CFO)

Hey, Travis, yeah, we would likely expect. We haven't disclosed which states that we're negotiating with these customers on, but yeah, we'd likely expect that we would seek regulatory approval. And that's a little bit back to my comment of the data centers understand for us to get regulatory approval. It's got to show benefit to our current customers and benefit kind of the communities.

Travis Miller (Senior Equity Analyst of Energy and Utilities)

Okay. Great. Thanks so much. That's all I had.

Brian Van Abel (EVP and CFO)

So, well, with that, I just want to lastly echo Bob's comments around Paul retiring. You can tell he's in the room with us for one last time. He's been a mentor to me, a mentor to many of us in this room, and a close and personal friend to me ever since the 15 years that I've been at the company. So thank you again, Paul. Roopesh, welcome to the first earnings call. We look forward to many more going forward. So with that, I'll wrap up. Thank you for participating in our earnings call this morning. Please contact our investor relations team with any follow-up questions.

Operator (participant)

Thank you very much. That concludes today's conference. You may now disconnect.