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    XCEL ENERGY (XEL)

    Q1 2024 Earnings Summary

    Reported on Apr 25, 2024 (Before Market Open)
    Pre-Earnings Price$55.33Last close (Apr 24, 2024)
    Post-Earnings Price$55.51Open (Apr 25, 2024)
    Price Change
    $0.18(+0.33%)

    What went well

    • The Department of Commerce recommended a $44 million rate increase in the Minnesota natural gas rate case with a 9.4% ROE, and Xcel Energy is engaging stakeholders to potentially reach a favorable settlement, which could boost earnings.
    • Xcel Energy expects to be highly competitive in the Southwestern Public Service RFP process due to their scale and expertise in utility-owned wind, solar, and storage, positioning them to win new generation projects.
    • The company is proactively managing potential cost pressures from reindustrialization and data center build-outs, ensuring robust capital forecasts while capitalizing on growth opportunities.

    What went wrong

    • Xcel Energy faces potential financial liability from the Smokehouse Creek wildfire in Texas, accruing a $215 million loss, and has been named as defendants in 15 lawsuits related to the fire.
    • There is no cap on noneconomic damages in Texas, which could increase Xcel Energy's financial exposure related to wildfire litigation.
    • The company anticipates cost pressures due to increased infrastructure build-out, including potential increases in materials and labor costs, which could affect profitability of planned projects.

    Q&A Summary

    1. Texas Wildfire Impact
      Q: What is included in the Texas fire damage estimate?
      A: The company estimates the lower end of damages at $215 million , which includes noneconomic damages. Texas does not cap noneconomic damages , increasing potential liability exposure.

    2. Equity Needs and Financing Plans
      Q: Any change to equity plans given lower multiples?
      A: Management expects no changes to current equity plans despite lower multiples. They aim to maintain a strong balance sheet to fund clean energy investments and are not considering asset sales at this time. They may have timing flexibility on equity issuance.

    3. CapEx Outlook and Cost Pressures
      Q: Are infrastructure costs expected to rise?
      A: The company acknowledges potential cost pressures from increased infrastructure build-out, such as higher costs for concrete and steel, but believes current plans account for these factors.

    4. Data Center Growth
      Q: How is data center growth progressing?
      A: Xcel is seeing significant interest from data center customers across all service territories , including at the old Sherco site, which is powered with grid energy benefiting from renewable sources.

    5. Nuclear Life Extension Impact
      Q: What's the financial impact of nuclear life extension?
      A: The company plans to extend one plant to 2050 and another into the early 2050s , but has not yet recognized the lower depreciation rates in customer rates; approvals will take at least 18 months.

    6. Wildfire Mitigation and Regulatory Impact
      Q: Updates on wildfire mitigation plans?
      A: They filed a Colorado Wildfire Mitigation Plan focusing on early warning systems, asset resilience, and system segmentation to reduce customer impact. They view Public Safety Power Shutoffs (PSPS) as a last resort but necessary for public safety.

    7. Insurance Costs
      Q: Are insurance costs changing?
      A: Wildfire insurance premiums are expected to rise, with current coverage over $500 million at a $40 million premium. Future capacity may decrease, and premiums are under pressure.

    8. Rate Cases in Minnesota and Colorado
      Q: Any updates on Minnesota and Colorado gas cases?
      A: In Minnesota, the Department of Commerce recommended a $44 million increase with a 9.4% ROE ; hearings are in mid-July, and the company aims for a settlement. Colorado is early in the process with hearings in mid-September.

    9. Potential Wildfire Legislation
      Q: Goals for proactive wildfire legislation?
      A: The company seeks federal backstop insurance programs, limitations on liabilities for utilities with approved mitigation plans, and relief on insurance costs to support the energy transition.

    10. SPS Resiliency Plan
      Q: Timing and size of SPS resiliency plan?
      A: Filing is expected in late Q4 2024, with approval likely in the following year's Q3. Details on spending are being developed, focusing on wildfire mitigation and distribution investments.

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