xcel energy better_investing_april2008
TRANSCRIPT
Financial Success Through Financial Success Through Environmental LeadershipEnvironmental Leadership
Better InvestingBetter InvestingInvestorInvestor’’s Fairs FairApril 26, 2008April 26, 2008
This material includes forwardThis material includes forward--looking statements that are subject to looking statements that are subject to certain risks, uncertainties and assumptions. Such forwardcertain risks, uncertainties and assumptions. Such forward--looking looking statements include projected earnings, cash flows, capital statements include projected earnings, cash flows, capital expenditures and other statements and are identified in this docexpenditures and other statements and are identified in this document ument by the words by the words ““anticipate,anticipate,”” ““estimate,estimate,”” ““expect,expect,”” ““projected,projected,””““objective,objective,”” ““outlook,outlook,”” ““possible,possible,”” ““potentialpotential”” and similar and similar expressions. Actual results may vary materially. Factors that expressions. Actual results may vary materially. Factors that could could cause actual results to differ materially include, but are not lcause actual results to differ materially include, but are not limited to: imited to: general economic conditions, including the availability of credigeneral economic conditions, including the availability of credit, t, actions of rating agencies and their impact on capital expendituactions of rating agencies and their impact on capital expenditures; res; business conditions in the energy industry; competitive factors;business conditions in the energy industry; competitive factors;unusual weather; effects of geopolitical events, including war aunusual weather; effects of geopolitical events, including war and acts nd acts of terrorism; changes in federal or state legislation; regulatioof terrorism; changes in federal or state legislation; regulation; actions n; actions of accounting regulatory bodies; and other risk factors listed fof accounting regulatory bodies; and other risk factors listed from rom time to time by Xcel Energy in reports filed with the SEC, inclutime to time by Xcel Energy in reports filed with the SEC, including ding Exhibit 99.01 to Xcel EnergyExhibit 99.01 to Xcel Energy’’s report on Form 10s report on Form 10--K for year 2007.K for year 2007.
Safe HarborSafe Harbor
Traditional RegulationTraditional Regulation
Operate in 8 StatesOperate in 8 States
Combination UtilityCombination UtilityElectric 84% of net incomeElectric 84% of net incomeGas 16% of net incomeGas 16% of net income
CustomersCustomers3.3 million electric3.3 million electric1.8 million gas1.8 million gas
2007 Financial Statistics2007 Financial StatisticsNI Ongoing: $612 million NI Ongoing: $612 million NI GAAP: $577 millionNI GAAP: $577 millionAssets: $23 billionAssets: $23 billionEquity ratio: 43%Equity ratio: 43%
Company ProfileCompany Profile
NSPNSP--WisconsinWisconsin6% of net income*6% of net income*
NSPNSP--MinnesotaMinnesota40% of net income*40% of net income*
SPSSPS5% of net income*5% of net income*
PSCoPSCo50% of net income*50% of net income*
2007 EPS Ongoing: $1.43, GAAP: $1.352007 EPS Ongoing: $1.43, GAAP: $1.352007 Dividend $0.92 per share annualized2007 Dividend $0.92 per share annualized
* Percentages based on 2007 net income* Percentages based on 2007 net income
Xcel Energy Corporate StrategyXcel Energy Corporate Strategy
Achieve annual EPS growth of 5 Achieve annual EPS growth of 5 –– 7%7%Increase dividend by 2 Increase dividend by 2 –– 4% annually4% annuallyReduce emissions by 2020Reduce emissions by 2020
Grow our core business andGrow our core business andmeet the environmental challengemeet the environmental challenge
Carbon StrategyCarbon Strategy
Reduce carbonReduce carbon emissions by 2020emissions by 2020Implement strategy by operating companyImplement strategy by operating companyMaintain reasonable ratesMaintain reasonable ratesEnsure appropriate regulatory treatmentEnsure appropriate regulatory treatment
Climate Change Climate Change –– the Disruptive Policythe Disruptive Policy
Climate Change policy will require:Climate Change policy will require:
—— Significant emission reductionsSignificant emission reductions
—— Significant capital investmentsSignificant capital investments
—— LongLong--term technological transformationterm technological transformation
—— A diverse portfolio of resourcesA diverse portfolio of resources
Utilities will bear the lionUtilities will bear the lion’’s share of the reductionss share of the reductions
Xcel Energy States at ForefrontXcel Energy States at Forefront
N/AN/A.2%.2%5% by 20155% by 2015TXTX
N/AN/AN/AN/A10% by 201510% by 2015WIWI
10% by 202010% by 2020(over 2000)(over 2000).3%.3%20% by 202020% by 2020NMNM
N/AN/A.6%.6%20% by 202020% by 2020COCO
30% by 202530% by 2025(over 2005)(over 2005)1.5%1.5%30% by 202030% by 2020MNMN
Carbon Carbon ReductionReduction
DemandDemand--Side Side Management Management (annual MWh (annual MWh
savings)savings)
Renewable Renewable Portfolio Portfolio
Standards Standards StateState
Benefits of a Stability/Reduction PlanBenefits of a Stability/Reduction Plan
Reduce riskReduce risk
—— Federal and state carbon regulationFederal and state carbon regulation
—— Community and litigation risksCommunity and litigation risks
—— Mitigate longMitigate long--term costs to customersterm costs to customers
Demonstrate continued environmental leadershipDemonstrate continued environmental leadership
Potential for investment opportunitiesPotential for investment opportunities
Value of Clean TechnologiesValue of Clean Technologies
0
500
1000
1500
2000
2500
3000
35003500
19901990 19951995 20002000 20052005 20102010 20152015 20202020 20252025 20302030
U.S. Electric Sector CO2 Emissions (million metric tons)
EIA Base Case 2007
Advanced Coal Generation
Distributed GenerationPlug-in Hybrid VehiclesCarbon Capture & Sequestration
EfficiencyRenewablesNuclear Generation
Technology
Source: EPRISource: EPRI
Clean Energy ActionsClean Energy Actions
Increase renewable energyIncrease renewable energyUprate and extend lives of nuclear plantsUprate and extend lives of nuclear plantsExpand demand side management, energy Expand demand side management, energy efficiency and conservation effortsefficiency and conservation effortsIncrease investment in transmissionIncrease investment in transmissionUpgrade environmental systems and improve Upgrade environmental systems and improve efficiencies of generation plants efficiencies of generation plants Replace/repower inefficient generationReplace/repower inefficient generationEvaluate carbon capture and storageEvaluate carbon capture and storage
Minnesota Resource PlanMinnesota Resource Plan
Reduces carbon emission by 22% by 2020Reduces carbon emission by 22% by 2020
Adds 2,600 megawatts of wind by 2020Adds 2,600 megawatts of wind by 2020
Seeks to expand output from Prairie Island and Monticello Seeks to expand output from Prairie Island and Monticello nuclear plants by 230 MWnuclear plants by 230 MW
Requests environmental upgrades and capacity expansion of Requests environmental upgrades and capacity expansion of 80 MW at Sherco80 MW at Sherco
Seeks approval of Manitoba Hydro 375 MW PPASeeks approval of Manitoba Hydro 375 MW PPA
Would add 2,300 MW of natural gas generationWould add 2,300 MW of natural gas generation
Expands DSM effortsExpands DSM efforts
Plan requires Commission approvalPlan requires Commission approval
Colorado Resource PlanColorado Resource Plan
Reduces carbon emission by 10% by 2017 and puts Reduces carbon emission by 10% by 2017 and puts PSCo on path to achieve 20% reduction by 2020PSCo on path to achieve 20% reduction by 2020
Adds 800 MW of wind by 2015Adds 800 MW of wind by 2015
Replaces four coal units with natural gas generationReplaces four coal units with natural gas generation
Acquire 25 MW of solar with plans to add up to 200 Acquire 25 MW of solar with plans to add up to 200 MW of solar as technology developsMW of solar as technology develops
Expands DSM effortsExpands DSM efforts
Plan requires Commission approvalPlan requires Commission approval
Source: National Renewable Energy Laboratory
Xcel Energy and Wind PotentialXcel Energy and Wind Potential
Wind DensityWind DensityHighHigh
LowLowXcel EnergyXcel EnergyStates ServedStates Served
Changing Supply Mix Changing Supply Mix
Coal Coal ****46%46%
GasGas17%17%
NuclearNuclear13%13%
Estimated 2020 Estimated 2020 Energy Supply Mix *Energy Supply Mix *
** Percentage of MW capacity, includes purchasesPercentage of MW capacity, includes purchases**** LowLow--sulfur western coalsulfur western coal
20072007Energy Supply Mix *Energy Supply Mix *
NuclearNuclear12%12%
Coal Coal ****57% 57%
GasGas21%21%
RenewablesRenewables10%10%
Renewables Renewables 24%24%
Success FactorsSuccess Factors
Key components of past growthKey components of past growth—— Constructive rate case outcomesConstructive rate case outcomes—— MERPMERP—— Comanche 3Comanche 3
Key components of future growthKey components of future growth—— Transmission riders (MN, CO, ND, SD)Transmission riders (MN, CO, ND, SD)—— Favorable wind recovery (MN, CO)Favorable wind recovery (MN, CO)—— Environmental rider (MN)Environmental rider (MN)—— Planned forward test year (CO)Planned forward test year (CO)—— Nuclear recovery mechanism (MN)Nuclear recovery mechanism (MN)—— Southwestern Public Service (SPS)Southwestern Public Service (SPS)
Capital Expenditure ForecastCapital Expenditure Forecast
Dollars in millionsDollars in millionsDollars in millions Denotes enhanced recovery mechanismDenotes enhanced recovery mechanismDenotes enhanced recovery mechanism20082008 20092009 20102010 20112011
Base & Other Base & Other $1,245$1,245 $1,285$1,285 $1,310$1,310 $1,300$1,300MERPMERP 170170 2525 1010 00Comanche 3Comanche 3 330330 6060 1010 00MN Wind Tran/CapX 2020MN Wind Tran/CapX 2020 4040 6565 115115 270270Sherco UpgradeSherco Upgrade 55 2020 7575 230230MN Wind GenerationMN Wind Generation 135135 00 00 00Nuclear Capacity/Life ExtNuclear Capacity/Life Ext 7575 120120 180180 200200Fort St. Vrain CTFort St. Vrain CT 100100 2525 00 00Total CommittedTotal Committed $2,100$2,100 $1,600$1,600 $1,700$1,700 $2,000$2,000
Potential ProjectsPotential Projects 00--100100 200200--400400 200200--400 400 200200--500500RangeRange $2,100$2,100-- $1,800$1,800-- $1,900$1,900-- $2,200$2,200--
$2,200$2,200 $2,000$2,000 $2,100$2,100 $2,500$2,500
Recovery on Capital Investment *Recovery on Capital Investment *
* Capital forecast based on middle of range* Capital forecast based on middle of range
Depreciation
0
400
800
1,200
1,600
2,000
2,400
2,800
2008 2009 2010 2011
Traditional Recovery Enhanced Recovery
Dollars in millionsDollars in millions
$2,150$2,150$1,900$1,900 $2,000$2,000
$2,350$2,350
Potential Cash from Operations Potential Cash from Operations
* Net Income growth based on middle of range* Net Income growth based on middle of range
0
400
800
1,200
1,600
2,000
2,400
2008 2009 2010 2011Net Income * Depreciation NOL
Dollars in millionsDollars in millions
Delivering on Rate Base Growth *Delivering on Rate Base Growth *
$16.9$15.7$14.9$14.0$12.8$11.7
2006 2007 2008 2009 2010 2011
CAGR = 7.5%CAGR = 7.5%
Dollars in billionsDollars in billions
* Growth based on middle of capital forecast range* Growth based on middle of capital forecast range
Regulated Utility $1.55 $1.61 – $1.71 Holding Company $(0.12) $(0.16) Ongoing Earnings $1.43 $1.45 – $1.55
PSRI/COLI $(0.08) –Continuing Operations $1.35 $1.45 - $1.55Disc Ops – –GAAP Earnings $1.35 $1.45 – $1.55
Regulated UtilityRegulated Utility $1.55 $1.55 $1.61 $1.61 –– $1.71 $1.71 Holding CompanyHolding Company $(0.12)$(0.12) $(0.16) $(0.16) Ongoing Earnings Ongoing Earnings $1.43$1.43 $1.45 $1.45 –– $1.55$1.55
PSRI/COLIPSRI/COLI $(0.08)$(0.08) ––Continuing OperationsContinuing Operations $1.35$1.35 $1.45 $1.45 -- $1.55$1.55Disc Ops Disc Ops –– ––GAAP Earnings $1.35GAAP Earnings $1.35 $1.45 $1.45 –– $1.55$1.55
Earnings Guidance Range Earnings Guidance Range
2007A2007A2007A 200820082008Dollars per shareDollars per share
Delivering on 5Delivering on 5--7% EPS Growth7% EPS Growth
$1.15$1.15$1.30$1.30
$1.43$1.43
2005 2005 OngoingOngoing
2006 2006 OngoingOngoing
2007 2007 OngoingOngoing
Guidance RangeGuidance Range
13%10%
$1.45 $1.45 -- $1.55$1.55
5%*
2008 2008 GuidanceGuidance
Ongoing EPS excludes the impacts of COLI and disc ops.Ongoing EPS excludes the impacts of COLI and disc ops.A reconciliation to GAAP earnings is included in the appendix.A reconciliation to GAAP earnings is included in the appendix.
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* Estimated growth rate based on middle of guidance range* Estimated growth rate based on middle of guidance range
Delivering onDelivering onDividend Growth ObjectiveDividend Growth Objective
2003 2004 2005 2006 2007
$0.75$0.75
20042004––2007 CAGR = 3.5%2007 CAGR = 3.5%
Annualized dividend per shareAnnualized dividend per share
$0.83$0.83 $0.86$0.86 $0.89$0.89 $0.92$0.92
Xcel Energy Share OwnershipXcel Energy Share Ownership
RetailRetail36%36%
Growth/GARPGrowth/GARP22%22%
ValueValue9%9%
QuantQuant6%6%
OtherOther10%10%
IndexIndex16%16%
OtherOther<1%<1%
USAUSA92%92%
EuropeEurope8%8%
P/E Valuation as of April 18, 2008P/E Valuation as of April 18, 2008
WEC
AEEDUK
LNT PNW PGNPCG ED
SCGCNP
CMS
XELAEP
SO
AVG
11
13
15
17WEC
AEEDUK
LNT PNW PGNPCG ED
SCGCNP
CMS
XELAEP
SO
AVG
11
13
15
17P/E based on 2008 estimated EPSP/E based on 2008 estimated EPSP/E based on 2008 estimated EPS
XEL P/E Discount ~ 1%XEL P/E Discount ~ 1%
Short InterestShort Interest
0
5
10
15
20
25
30
35
Mar-07
Apr-07
May-07
Jun-07
Jul-0
7
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
Millions of SharesMillions of Shares
-16%
-12%
-8%
-4%
0%
4%
12/31
/2007
1/30/2
008
2/29/2
008
3/30/2
008
Peer Avg XEL
Stock Price ChangeStock Price Change
Attractive Value PropositionAttractive Value Proposition
Low risk, fully regulated and integrated utilityLow risk, fully regulated and integrated utility
Constructive regulatory environment with enhanced Constructive regulatory environment with enhanced recovery of major capital projectsrecovery of major capital projects
Pipeline of investment opportunitiesPipeline of investment opportunities
Environmental leader, wellEnvironmental leader, well--positionedpositionedfor changing rulesfor changing rules
Attractive Total ReturnAttractive Total ReturnSustainable annual EPS growth of 5% Sustainable annual EPS growth of 5% –– 7%7%with upside potentialwith upside potentialStrong dividend yield of 4.4%Strong dividend yield of 4.4%Sustainable annual dividend growth of 2% Sustainable annual dividend growth of 2% –– 4%4%
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AppendixAppendix
Ongoing Earnings $1.15 $1.30 $1.43PSRI/COLI $0.05 $0.05 $(0.08)Continuing Operations $1.20 $1.35 $1.35Disc Ops $0.03 $0.01 –GAAP Earnings $1.23 $1.36 $1.35
Ongoing Earnings Ongoing Earnings $1.15 $1.15 $1.30$1.30 $1.43$1.43PSRI/COLIPSRI/COLI $0.05$0.05 $0.05$0.05 $(0.08)$(0.08)Continuing OperationsContinuing Operations $1.20$1.20 $1.35$1.35 $1.35$1.35Disc Ops Disc Ops $0.03$0.03 $0.01 $0.01 ––GAAP Earnings $1.23 GAAP Earnings $1.23 $1.36$1.36 $1.35$1.35
Reconciliation Reconciliation -- Ongoing EPS to GAAP Ongoing EPS to GAAP
200720072007Dollars per shareDollars per share
200620062006200520052005
As a result of the termination of the COLI program, Xcel Energy’s management believes that ongoing earnings provide a more meaningful comparison of earnings results between different periods in which the COLI program was in place and is more representative of Xcel Energy’s fundamental core earnings power. Xcel Energy’s management uses ongoing earnings internally for financial planning and analysis, for reporting of results to the Board of Directors, in determining whether performance targets are met for performance-based compensation, and when communicating its earnings outlook to analysts and investors.
Senior Debt RatingsSenior Debt Ratings
SecuredSecured UnsecuredUnsecuredFitch Moody’s S&P Fitch Moody’s S&PFitch Moody’s S&P Fitch Moody’s S&P
Holding Co. BBB+ Baa1 BBBNSPM A+ A2 A A A3 BBBNSPW A+ A2 A A A3 BBB+ PSCo A A3 A A- Baa1 BBBSPS BBB+ Baa1 BBB+
Holding Co. BBB+ Baa1 BBBNSPM A+ A2 A A A3 BBBNSPW A+ A2 A A A3 BBB+ PSCo A A3 A A- Baa1 BBBSPS BBB+ Baa1 BBB+