xcel energy Lehman_Sept_2008-SEC

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  • 1. Success Through Stakeholder Alignment Lehman Brothers Conference September 3-4, 2008
  • 2. Safe Harbor This material includes forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements include projected earnings, cash flows, capital expenditures and other statements and are identified in this document by the words “anticipate,” “estimate,” “expect,” “projected,” “objective,” “outlook,” “possible,” “potential” and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures; business conditions in the energy industry; competitive factors; unusual weather; effects of geopolitical events, including war and acts of terrorism; changes in federal or state legislation; regulation; actions of accounting regulatory bodies; and other risk factors listed from time to time by Xcel Energy in reports filed with the SEC, including Exhibit 99.01 to Xcel Energy’s report on Form 10-K for year 2007.
  • 3. Why We are Positioned for Success Ability to meet state RPS and environmental initiatives Well positioned for potential Federal climate policy Uniquely able to provide clean energy to customers and hedge against fuel price volatility Renewable portfolio extends the decision time horizon for new base load generation Geographic advantage
  • 4. Addressing Public Policy State legislative mandates and goals Minnesota: 30% RPS mandate by 2020 30% carbon reduction goal by 2025 Colorado: 20% RPS mandate by 2020 20% carbon reduction goal by 2020 New Mexico: 20% RPS mandate by 2020 10% carbon reduction goal by 2020 Expanding emphasis on DSM and conservation Emerging Federal climate policy If Lieberman Warner Bill had passed: • 21% carbon reduction by 2020 • 31% carbon reduction by 2030 • 75% carbon reduction by 2050 Federal climate policy likely in the next administration
  • 5. Projected Renewable Resources Energy 2007 2020 Nuclear Nuclear 11% 13% Renewables Natural Renewables 24% Gas 9% Natural 31% Gas 17% Coal Coal 49% 46% Capacity Wind Hydro Solar Biomass RDF Landfill Geothermal MW 2007 2,700 365 17 182 100 15 0 2020 7,400 400 600 250 60 20 20
  • 6. Wind Development Minnesota Propose adding 2,600 MW by 2020 in Resource Plan NSP 500 MW Wind RFP in progress • Issued December 2007 • Bids received in March 2008 • Currently negotiating with bidders Colorado Propose adding 800 MW by 2015 in Resource Plan PSCo 100-150 Wind RFP in progress
  • 7. Solar Development Central Solar Alamosa Central Solar Plant 8.2 MW Resource Plan expands solar Current RFP 75 MW Potential RFP’s 600 MW Distributed Solar Solar*Rewards 8.5 MW / 1,600+ installations Accepted additional 5 MW for 2009 Resource Plan expands solar 63.5 MW Customer-sited by 2015
  • 8. Transmission Investment Net book value of $2.4 billion at year-end 2007 17,619 miles of transmission pole lines #3 in total transmission pole miles 232 miles of transmission pole lines added in 2007 Capital Expenditure in $millions $600 $500 $500 $390 $400 $325 $300 $300 $200 $100 $0 2008 2009 2010 2011
  • 9. Capital Expenditures Forecast* Dollars in millions 2008 2009 2010 2011 Elec Generation $935 $480 $525 $745 Elec Transmission 300 325 390 500 Elec Distribution 355 345 355 360 Gas 140 155 160 155 Nuclear Fuel 145 150 140 105 Common/Other 225 145 130 135 Potential Projects 50 300 300 350 Total $2,150 $1,900 $2,000 $2,350 * Capital forecast based on middle of range
  • 10. Rate Base Growth Drives EPS* Dollars in billions CAGR = 7.3% $16.6 $15.4 $14.5 $13.7 $12.5 2007A 2008F 2009F 2010F 2011F * Growth based on middle of capital forecast range
  • 11. Constructive Regulation Transmission riders – CO, MN, ND, SD Renewable riders – CO, MN MERP rider – MN Conservation/DSM riders – CO, MN Environmental riders – MN, ND, SD Capacity rider – CO Comanche 3 forward CWIP via general rate case – CO IGCC rider – CO Air quality improvement rider – CO
  • 12. Projected Rider Revenue Dollars in millions 240 Metro Emissions Reduction Project (MN) Air Quality Improvement Rider (CO) $195 200 Renewable Energy Standard (MN) Transmission Rider (CO) $166 Transmission Rider (MN) 160 120 $107 $73 80 40 0 2006 2007 2008 2009
  • 13. Recovery on Capital Expenditures* Dollars in millions 2,800 $2,350 2,400 $2,150 $2,000 $1,900 2,000 1,600 1,200 800 400 0 2008 2009 2010 2011 Depreciation Traditional Recovery Enhanced Recovery * Capital expenditure forecast based on middle of range
  • 14. Pending Rate Cases Requested Status New Mexico Electric March 2008 Order Pending $16.6 million Fall 2008 10.7% ROE North Dakota Electric June 2008 Pending $17.9 million Fall 2008 10.75% ROE Interim rates SPS Wholesale March 2008 Pending $14.9 million Fall 2008 12.2% ROE Texas Electric June 2008 Pending $61.3 million overall Qtr 1 2009 11.25% ROE NSP-Wisconsin August 2008 Pending Limited Reopener Qtr 4 2008 $47.1 million
  • 15. Financial Execution Delivering on 5 – 7% EPS Growth Guidance Range 2005 – 2008 CAGR = 9.3% $1.45 – $1.55 $1.43 $1.30 $1.15 2005 2006 2007 2008 Ongoing* Ongoing* Ongoing* Guidance * Ongoing EPS excludes the impacts of COLI and disc ops. A reconciliation to GAAP earnings is included in the appendix. ** Estimated CAGR is based on middle of 2008 guidance range
  • 16. Financial Execution Delivering 2 – 4% Dividend Growth* Annualized dividend per share 2004 – 2008 CAGR = 3.4% $0.95 $0.92 $0.89 $0.86 $0.83 2004 2005 2006 2007 2008 * Xcel Energy increased the dividend by 3¢ on May 21, 2008
  • 17. Value Proposition Low risk, fully regulated and integrated utility Constructive regulation with enhanced recovery of major capital projects Pipeline of investment opportunities Environmental leader, well–positioned for changing rules Attractive Total Return Sustainable annual EPS growth of 5% – 7% with upside potential Strong dividend yield of ~ 4.6% Sustainable annual dividend growth of 2% – 4%
  • 18. Appendix
  • 19. Company Profile Traditional Regulation NSP-Wisconsin Operate in 8 States NSP-Minnesota 6% of earnings * 40% of earnings * Combination Utility Electric 85% of net income Gas 15% of net income PSCo 49% of earnings * Customers 3.3 million electric 1.8 million gas SPS 2007 Financial Statistics 5% of earnings * NI Ongoing: $612 million NI GAAP: $577 million * Percentages based on 2007 Ongoing Earnings Assets: $23 billion Equity ratio: 43% 2007 EPS Ongoing: $1.43; GAAP: $1.35 2008 Dividend $0.95 per share annualized
  • 20. Reconciliation – Ongoing EPS to GAAP Dollars per share 2007 2005 2006 Ongoing Earnings $1.15 $1.30 $1.43 PSRI/COLI 0.05 0.05 (0.08) Continuing Operations $1.20 $1.35 $1.35 Disc Ops 0.03 0.01 – GAAP Earnings $1.23 $1.36 $1.35 As a result of the termination of the COLI program, Xcel Energy’s management Energy’s believes that ongoing earnings provide a more meaningful comparison of earnings comparison results between different periods in which the COLI program was in place and is more representative of Xcel Energy’s fundamental core earnings power. Energy’s Xcel Energy’s management uses ongoing earnings internally for financial planning Energy’s planning and analysis, for reporting of results to the Board of Directors, in determining Directors, whether performance targets are met for performance-based compensation, performance-based and when communicating its earnings outlook to analysts and investors. investors.
  • 21. Earnings Guidance Range Dollars per share 2007A 2008 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 – 1.55 Disc Ops – – GAAP Earnings $1.35 $1.45 – $1.55
  • 22. Capital Expenditure Forecast Denotes enhanced recovery mechanism Dollars in millions 2008 2009 2010 2011 Base & Other $1,245 $1,285 $1,310 $1,300 MERP 170 25 10 0 Comanche 3 330 60 10 0 MN Wind Tran/CapX 2020 40 65 115 270 Sherco Upgrade 5 20 75 230 MN Wind Generation 135 0 0 0 Nuclear Capacity/Life Ext 75 120 180 200 Fort St. Vrain CT 100 25 0 0 Total Committed $2,100 $1,600 $1,700 $2,000 Potential Projects 0-100 200-400 200-400 200-500 Range $2,100- $1,800- $1,900- $2,200- $2,200 $2,000 $2,100 $2,500
  • 23. Capital Expenditures by Operating Company* Dollars in millions 2008 2009 2010 2011 NSPM $935 $955 $1,060 $1,380 PSCo 945 650 680 750 SPS 170 205 180 140 NSPW 100 90 80 80 Total $2,150 $1,900 $2,000 $2,350 * Capital forecast based on middle of range
  • 24. Credit Ratings Secured Unsecured Fitch Moody’s S&P Fitch Moody’s S&P Holding Co. – – – BBB+ Baa1 BBB NSPM A+ A2 A A A3 BBB NSPW A+ A2 A A A3 BBB+ PSCo A A3 A A– Baa1 BBB A– SPS – – – BBB+ Baa1 BBB+
  • 25. Debt Maturities Dollars in millions $1,200 SPS $1,000 PSCo NSPW $800 NSPM $600 Xcel Energy $400 $200 $0 2008 2009 2010 2011 2012 2013 2014 2015
  • 26. Strong Access to Credit Markets in 2008 Hold Co - issued $400 million of retail hybrid securities with a 7.6% coupon in January NSP-Minnesota - issued $500 million of first mortgage bonds with 10 year maturity and 5.25% coupon in March PSCo - issued $600 million of first mortgage bonds in August: 10 year tranche with a 5.8% coupon 30 year tranche with a 6.5% coupon Potential debt issuances: 2nd half 2008 NSP–Wisconsin: Up to $250 million of first mortgage bonds SPS: Up to $250 million of unsecured debt
  • 27. Geographic Competitive Advantage Biomass Resource Wind Resource Source: National Renewable Energy Laboratory Solar Resource Wind Density High Low Xcel Energy States Served
  • 28. Reducing Carbon Dioxide Emissions* Millions of tons 80 75 70 65 60 2003 2004 2005 2006 2007 * Owned–generation carbon dioxide emissions
  • 29. Smart Grid Pilot Project Pilot project in Boulder, Colorado: Five major partners Total project cost ~ $100 million Xcel Energy portion ~ $15 million Build out completed in 2009 Scope: Smart meters Real time, high speed, two–way communications Intelligent home/smart appliances Demand Side Management Distributed generation Renewable energy sector growth Energy storage devices
  • 30. Regulatory Results Rate relief granted 2006-2007: $400 million 2006 Minnesota electric rate case: $131 million 2006 Colorado electric rate case: $151 million 2006 Wisconsin gas and electric rate cases: $47 million 2007 Colorado gas rate case: $32 million Other: $39 million
  • 31. 2007 Rate Base and ROE Dollars in millions Weather Normalized Rate Base Earned ROE Minnesota Electric $4,054 11.02% Minnesota Gas 456 7.74 North Dakota Electric 202 2.96 North Dakota Gas 44 7.66 South Dakota Electric 251 9.28 Colorado Electric 3,569 10.09 Colorado Gas 1,096 10.45 Wisconsin Electric 554 8.33 Wisconsin Gas 77 8.59 Texas Electric 940 4.61* New Mexico Electric 276 2.24* Wholesale 982 Not Reported Total Rate Base $12,501 * Texas and New Mexico ROE’s are actual earned, not weather normalized