Q3 2024 Earnings Summary
- Xcel Energy anticipates significant electric sales growth driven by data center expansion, with nearly 9,000 megawatts of data center opportunities in the customer pipeline before 2030. They have included approximately 25% of this in their five-year sales forecast, indicating potential upside.
- The company plans to invest heavily in clean energy generation and grid enhancements, adding between 15,000 and nearly 30,000 megawatts of generation by 2030, and expects to build at least $10 billion worth of these projects.
- These investments are expected to result in 9.4% annual rate base growth, and the company is confident about executing at the upper half of their earnings growth range, potentially exceeding it.
- Significant increase in wildfire insurance premiums, with premiums tripling and capacity shrinking, could pressure earnings if cost recovery is not approved by regulators.
- Large capital expenditure plans require substantial equity issuances, including $1.1 billion issued via ATM in 2024, potentially leading to shareholder dilution.
- Lowered dividend growth objective to the low end of the 4%-6% range to retain cash and reduce equity needs, which may disappoint investors expecting higher dividend growth.
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
EPS | Q3 2024 (year-to-date) | Full-year 2024 EPS of $3.50 - $3.60 | 2.63 (sum of Q1 2024 EPS = 0.88, Q2 2024 EPS = 0.54, Q3 2024 EPS = 1.21) | Met |
Electric Sales | Q3 2024 vs. Q3 2023 (yoy) | 1% increase for 2024 | Regulated Electric revenue increased from 3,387In Q3 2023 to 3,393In Q3 2024 (~0.2%) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Long-term EPS growth guidance increases | No mention of the official 6%-8% range in Q2, Q1, or Q4 (they stayed at 5%-7% and indicated confidence in reaching the top end). | Raised guidance from 5%-7% to 6%-8% and indicated delivering earnings in the upper half of the new range. | New official range introduced in Q3 2024. |
Large capital expenditure plans | No reference to increasing from $39B to $45B in Q2 or Q1 (Q1 still referenced $39B). In Q4 2023, they disclosed an updated plan but with fewer details. | Increased 5-year capex plan from $39B to $45B, focusing on clean energy, safety, and reliability. Noted 9.4% annual rate base growth. | Fully detailed and reaffirmed in Q3 2024. |
Data center-driven electric load growth | In Q2 2024, emphasized pipeline from ~6,700 MW to ~9,000 MW. Q1 2024 mentioned data center interest but not the expanded pipeline. Q4 2023 gave only a broad reference. | Pipeline expanded from ~6,700 MW to ~9,000 MW. ~25% included in the 5-year sales forecast. Data centers expected to drive ~50% of 5% annual electric growth. | Consistently emphasized with higher load forecasts. |
Regulatory environment shifts | Q2 2024 cited supportive policy in Colorado and lengthier processes in Minnesota. Q1 2024 included basic regulatory updates. Q4 2023 did not detail any major shifts. | Mixed outcomes in Minnesota: reached a settlement in resource planning, but commission disallowed $46M of replacement costs. Some optimism for approval of new resource plan. | Continuing focus with more controversy around Minnesota. |
Wildfire risks and liabilities | Q2 2024 continued mitigation efforts (expansion of AI fire detection, advanced modeling) and Smokehouse Creek settlements. Q1 2024 focused on liability accruals and Texas exposure. Q4 2023 maintained a strong defense for Marshall Fire cases. | Detailed Marshall Fire litigation (trial set for September 2025), $500M in liability insurance, and ongoing mitigation measures (AI cameras, PSPS, system hardening). | Persistent concern with increasing detail each quarter. |
Equity issuance and share dilution | Q2 2024 noted ATM as the main equity vehicle. Q1 2024 discussed $39B in capex, requiring flexible equity issuance. Q4 2023 anticipated ~$500M of annual issuances, plus opportunistic raises. | Issued $1.1B in 2024 via ATM to support credit quality. Plans a further $4.5B equity raise from 2025-2029, alongside a balanced 40% equity / 60% debt mix. | Recurrent with expanded detail on planned issuances. |
Dividend growth strategy changes | Only mentioned in Q4 2023, when the dividend growth rate was set to the low end of 5%-7% to reduce financing needs. Not repeated in Q1 or Q2 [—]. | No additional discussion of dividend strategy changes this quarter. | Introduced in Q4 2023 and not revisited later. |
Cost pressures from materials and labor | Discussed in Q1 2024: potential pressures on concrete, steel, and skilled labor due to infrastructure build-out. Not mentioned in Q2 or Q4. | No mention in Q3 2024. | No longer referenced after Q1 2024. |
New large-scale transmission and generation | Q2 2024 mentioned ongoing transmission expansion without specific details for MISO Tranche 2 or 14,000 MW. Q1 2024 had no data. Q4 2023 highlighted up to 10,000 MW expansions in SPS and MISO/SPP opportunities. | Discussed MISO Tranche 2, SPP ITP (~$2B each), and up to 14,000 MW of new generation in Colorado to replace coal and meet demand. | Growing opportunities with more specifics in Q3 2024. |
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CapEx Increase vs. Equity Needs
Q: Why does equity need not match CapEx increase?
A: Despite a $6 billion rise in CapEx, equity needs increased by only $0.5 billion due to improved cash flow timing and a slight benefit from lowering the dividend growth rate, which provides more flexibility long-term. Credit metrics remain stable, allowing a more favorable financing mix than the typical 40-60% debt-to-equity ratio. -
Load Growth Expectations
Q: How will load growth trend over the next years?
A: Load growth is expected at 3% in 2025, increasing to 5-8% in subsequent years. This acceleration is driven by data centers, oil and gas development in the Permian Basin, and beneficial electrification like EV adoption in Colorado. -
Wildfire Mitigation and Insurance Costs
Q: What actions are taken on wildfire mitigation?
A: The company has enhanced wildfire protection mechanisms, including operating the system with safety, enhanced power line safety settings, and the ability to execute Public Safety Power Shutoffs (PSPS). Insurance premiums have tripled, but they include constructive regulatory outcomes in their 2025 guidance, aiming for recovery of increased insurance costs and wildfire mitigation investments. -
Financing Plans and ATM Issuance
Q: Are you done with equity issuance for the year?
A: Yes, with about $1 billion of ATM issuance in Q3, the company's equity needs for the year are fulfilled. While they may remain opportunistic, there's no need to issue more equity through the end of the year. The ATM is viewed as an efficient mechanism, but they will consider other financing options moving forward. -
Large Customer's Land Acquisition in Minnesota
Q: Is a major land acquisition included in forecasts?
A: An undisclosed customer made a significant land acquisition in Minnesota, which is included in the company's 5% consolidated load growth outlook. Negotiations on services and rate design are progressing, and discussions with the Minnesota Commission are constructive. This project is expected to drive economic growth and benefit all customers. -
Timing of Equity in Capital Plan
Q: How should we think about timing of equity issuance?
A: Equity issuance is expected to follow the shape of annual CapEx over the next five years, which is larger in the first few years. While specific timing isn't provided, it generally aligns with the capital spending schedule. -
Impact on Customer Bills
Q: What is the expected impact on customer bills?
A: Customer bills are projected to increase by 1-3% over the next five years, which is considered manageable. In Colorado, a long-term plan projects a 2.2% bill increase over a 20-year period, even with significant investments and a 9% rate base growth. The company starts from a strong position, with bills lower than a decade ago and among the lowest share of wallet in the country. -
Hydrogen Initiatives
Q: Any updates on green hydrogen projects?
A: Green hydrogen initiatives are currently on the back burner. The company received a hydrogen grant with the DOE, but progress has been slow. No capital expenditures for hydrogen are included in the current forecast, though they recognize the potential future need for clean fuels.