Q4 2024 Earnings Summary
- Strong projected load growth driven by data centers and other sectors: Xcel Energy expects significant load growth, with data centers representing only half of their projected 5% long-term sales growth. They are actively negotiating contracts to fulfill their base sales forecast by this fall and have a backlog of 8,900 MW of customer requests. Additionally, they anticipate 30% expected load growth over the next five years, including growth from the oil and gas sector. , ,
- Confidence in meeting financial guidance and EPS growth: Management expresses confidence in achieving the 2025 earnings guidance of $3.75 to $3.85 per share, targeting the midpoint of the guidance range. They also expect to deliver long-term EPS growth in the upper half of their 6% to 8% growth guidance range. ,
- Proactive management of regulatory and environmental challenges: Xcel Energy is effectively navigating potential impacts from tariffs and regulatory changes. They have experience dealing with tariffs and do not expect recent China tariffs to impact their projects. They are also actively managing wildfire mitigation efforts, with plans in Texas and Colorado and are hopeful to reach settlements in those proceedings. , ,
- Uncertainty in data center growth could impact Xcel Energy's sales projections. Data centers represent approximately half of the company's projected 5% long-term sales growth, but there are concerns about the timing and execution of contracts. Analysts questioned the removal of the sales growth number from slides and the cadence of securing data center contracts. The company expects to sign remaining contracts by the fall but acknowledges that announcements depend on counterparties and regulatory filings.
- Potential regulatory and permitting challenges under the new administration could delay renewable energy projects. There are concerns about the impact of China tariffs on renewable components and possible new executive orders affecting energy projects. Analysts questioned how these factors might impact Xcel Energy's sizable renewable investments and supply chain. The company believes it can work through these challenges but acknowledges they could affect future projects.
- Labor availability constraints could impede execution of capital expenditure plans. The industry-wide competition for skilled labor may affect Xcel Energy's ability to build and maintain infrastructure necessary for growth. The company is in constant competition for human capital and talent, and while they are actively recruiting and partnering with trade organizations, labor shortages could lead to delays or increased costs in project completion.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –9% (from $3,442M to $3,120M) | Total Revenue decreased by 9% YoY due to declines in regulated electric and natural gas revenues. In Q4 2024, the lower electric revenue (which fell ~10.7% YoY) along with a small decrease in natural gas revenue contributed significantly, reflecting both market pricing and regulatory factors. |
Regulated Electric Revenue | ~–10.7% (from $2,697M to $2,409M) | Regulated Electric revenue dropped by about 10.7% as a result of lower recovery on wholesale and fuel-related costs, combined with diminished regulatory rate outcomes compared to the previous period, indicating both market pressure and possibly changes in customer demand metrics. |
Regulated Natural Gas Revenue | –3.7% (from $721M to $694M) | Regulated Natural Gas revenue saw a modest decline of 3.7% likely due to lower natural gas prices and reduced sales volumes, despite some offsetting regulatory recovery adjustments that were less effective in the current period compared to prior figures. |
Operating Income | –40% (from $575M to $347M) | Operating Income dropped sharply by about 40% owing to the steep decline in overall operating revenues which outweighed reductions in operating expenses. The increase in cost factors such as depreciation, amortization, and less favourable cost recoveries further accentuated the drop. |
Net Income | +13% (from $409M to $464M) | Net Income improved by approximately 13% due to operational efficiencies, lower effective tax rates, and better non-operating income performance that more than offset the revenue and operating income declines, despite a challenging revenue environment. |
EPS | Increased from $0.74 to $0.81 | EPS rose from $0.74 to $0.81 reflecting the improved bottom line and better net income performance despite higher depreciation and operating expense pressures, thereby illustrating the company’s ability to pass cost improvements and tax benefits onward to earnings per share. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
EPS | FY 2025 | $3.75 to $3.85 | $3.75 to $3.85 | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
EPS (Diluted) | FY 2024 | $3.50–$3.60 | $3.44 (Sum of Q1 0.88, Q2 0.54, Q3 1.21, and Q4 0.81) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Data center-driven load growth | Q1–Q3: Mentioned as a major growth driver, with forecasts increasing from 2–3% to 4–5%. Q1 provides early interest ( ); Q2 updates outlook to 4–5% and up to ~6,700 MW backlog ( ); Q3 targets 5% long-term growth with ~9,000 MW pipeline ( ). | Q4: Reiterates 5% long-term growth, ~8,900 MW backlog, no observed slowdown ( ). | Consistently highlighted across all periods, forecasts steadily increased. |
EPS guidance focus | Q1–Q3: Q1–Q2 reaffirm 5–7% long-term EPS growth ( ); Q3 expresses strong confidence in achieving the upper half of 6–8% growth, citing a 19-year track record of meeting guidance ( ). | Q4: Maintains confidence in the upper half of 6–8% range; reiterates meeting or exceeding targets ( ). | Stable and recurring focus on delivering within or above long-term EPS growth guidance. |
Regulatory & environmental challenges | Q1–Q3: Addressed wildfire mitigation, cost recovery, and tariff risks. Early caution noted in Q1–Q2 ( ) shifts to greater confidence in Q3, with progress on wildfire and regulatory fronts ( ). | Q4: Emphasizes proactive wildfire plans (e.g., AI-equipped cameras, resiliency strategies) and ability to navigate tariffs. Shows stronger confidence in regulatory outcomes ( ). | Sentiment improved from caution (Q1–Q2) to stronger confidence (Q3–Q4). |
Smokehouse Creek wildfire liabilities | Q1–Q2: Broadly covered with ~US$215 mn accrued liability and insurance offset ( ). Q3 mentions settling claims, maintaining the same liability estimate ( ). | Q4: Brief mention of continuing settlements; no material change in the overall liability figure ( ). | Reduced emphasis after Q2–Q3, though still acknowledged in Q4. |
Labor availability constraints | Q1: Identified as a risk factor to major project execution ( ). Q2–Q3: Not raised as a specific concern in the earnings calls. | Q4: Highlighted again as a potential bottleneck, with proactive hiring and trade partnerships to secure skilled workers ( ). | New emphasis in Q4, renewing focus on human capital risks. |
Data center growth sentiment | Q1–Q3: Consistently positive but acknowledging need for regulatory approvals and contract finalizations ( ). | Q4: Remains optimistic, though still mindful of timing for contract signings and related regulatory reviews ( ). | Positive yet tempered by approval timelines. |
Future growth drivers | Q1–Q3: Data center expansions, renewables, and large-scale capital projects repeatedly cited; includes Sherco conversions, solar/wind additions, $45 bn capital plan ( ). | Q4: Underscores data center load, major renewables (Sherco Solar), and substantial transmission investments as primary growth levers ( ). | Major factors for Xcel’s long-term expansion, consistently reinforced. |
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Data Center Load Growth
Q: What's the outlook for data center growth and sales CAGR?
A: Management expects to sign contracts fulfilling their base plan for data centers by the fall, supporting their 3% sales growth target in 2025. They are in active negotiations and confident about long-term sales prospects, with data centers representing about half of their 5% five-year sales forecast, and strong growth also coming from the oil and gas sector in Texas and New Mexico.
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Impact of New Policies on Renewables
Q: Are new federal policies affecting your renewable projects?
A: Management does not expect significant impacts from recent federal executive orders on their projects. Their permitting needs for wind, solar, and storage assets are relatively light, and they remain optimistic that their capital plan for 2025 and beyond will remain intact. They support permitting reform at all levels to meet their expected 30% load growth over the next five years.
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Wildfire Liabilities and Litigation
Q: What's the latest on the Marshall wildfire litigation?
A: The trial is set for September 2025, focusing first on liability. Management disagrees with the allegations and is prepared to defend in court. The trial venue will remain in Boulder County, and there have been no significant changes in the case.
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Tax Credit Transferability and IRA Impacts
Q: Are you expecting any changes in federal policies affecting tax credit transferability?
A: Management believes the key tenets of the Inflation Reduction Act, including tax credits and transferability, remain intact. They feel confident due to the significant economic benefits and job creation driven by the IRA. Transferability is embedded in their forecast, with approximately $700 million per year expected.
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Tariff Impacts on Renewable Investments
Q: How do China tariffs affect your renewable investment plan?
A: The China tariffs are not unexpected and have been planned for. Management has experience dealing with tariffs and is working with suppliers to ensure procurement decisions deliver the best prices. They have taken appropriate actions to mitigate impacts on their renewable projects.
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Resource Adequacy and Gas Generation
Q: Are you adding gas-fired generation to meet load growth?
A: Management acknowledges the need for dispatchable resources to support their goal of 80% carbon reduction by 2030. Gas plays a role in their resource plans, including combustion turbine builds in the Upper Midwest, Colorado, and the Southwest. They plan to add new gas resources with low capacity factors, making them clean fuel capable at construction.
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Labor Constraints on Capital Plans
Q: Are labor availability issues constraining your capital plans?
A: Management is actively working with trade organizations to hire critical talent and ensure they have the human capital needed for their build-out. They are funding programs at technical colleges and recruiting at high schools to address labor constraints.
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Wildfire Mitigation Proceedings
Q: What are the prospects for settlements in Colorado and Texas wildfire mitigation proceedings?
A: Management is hopeful to reach settlements, especially in Texas, where stakeholders recognize the importance of wildfire mitigation. In Colorado, they are starting to engage with stakeholders, with a settlement deadline in mid-April. They are prepared to proceed through hearings if necessary.
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Regulatory Support for Customer Connections
Q: Do non-data center customers get more regulatory support?
A: Management does not differentiate between customers. Data centers provide significant economic benefits, including years of construction jobs and substantial property tax base, benefiting all customers. Large load customers understand the need to bring economic development benefits to gain regulatory approval.
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2025 Earnings Guidance
Q: How are you positioned for getting back on track in 2025?
A: Management feels comfortable with 2025 and targets the midpoint of guidance. They expect offsets to certain impacts, with less than half of the previously cited negative impacts affecting them. They aim to deliver consistent results, noting that last year was an anomaly.
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SPS Earnings and Growth
Q: Why was SPS earnings flat despite growth?
A: They had a wholesale customer load roll-off that started last year, with full annualization impacting this year. This was a significant driver, which will be captured going forward.
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Data Center Contract Announcements
Q: Will you announce new data center contracts publicly?
A: It depends on the counterparty and regulatory filings. Announcements may be made based on the customer's wishes and community interest. Updates may come later in the year or during the third quarter call.
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Venue Decision for Marshall Trial
Q: Has the trial venue for the Marshall wildfire litigation been decided?
A: Yes, the trial will remain in Boulder County, as the judge denied the venue change request.
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Customer Load Growth Tone
Q: Has the tone of customer discussions changed recently?
A: There has been no change in tone with data center customers. Efficiency gains from technologies were expected and did not catch them off guard. There is no slowing down in active discussions, and management feels good about growth prospects.