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xel_050205 Presentation Transcript

  • 1. AGA Financial Forum May 1-3, 2005
  • 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; final approval and implementation of the pending settlement of the securities, ERISA and derivative litigation; costs and other effects of legal administrative proceedings, settlements, investigations and claims; actions of accounting regulatory bodies; risks associated with the California power market; the higher degree of risk associated with Xcel Energy’s nonregulated businesses compared with Xcel Energy’s regulated business; 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 2004.
  • 3. Low-Risk Strategy Invest in utility assets to meet sales growth AND Earn our allowed return on equity Total return objective: 7 to 9% per year Dividend yield 5% Earnings growth 2 to 4% Nearly 100% of income from regulated operations
  • 4. Drivers to Value Creation Earn Authorized Return Increase Equity Increase Investment Service Territory Growth
  • 5. Northern States Power Company- Minnesota Northern States Power Company- Public Service Wisconsin Company of Colorado Strong Regional Economy Unemployment rate — Southwestern February 2005 Public Service US 5.8% Xcel service area 4.7% Job growth – 2005 Forecast Xcel service area 2.4% 4th largest US electric and gas utility — Xcel Annual sales growth — Customers: 2005-2009 Electric 2.0% 3.3 Million Electric Gas 1.2% 1.8 Million Gas
  • 6. Earnings Growth Drivers Annual growth rate of: Rate base Regulatory Net Income + % Equity capitalization Model Growth + Return on equity - Shares outstanding = Earnings per share growth rate
  • 7. Net Income Growth Potential Annual 2005 – 2009 Growth 2004 Potential Rate Rate Base $11 B* $13 B 3 to 3.5% Utility Equity Capitalization 49% 52% 0 to 1.2% Earned Return on Equity Rate Base 9.5%* 11.5% 0 to 3.9% * Preliminary estimate
  • 8. Power Supply Additions Minnesota MERP 300 MW 2007-2009 $1 Billion * Comanche 3 ** 500 MW 2009 $1 Billion Minnesota/South Dakota Combustion Turbines 480 MW 2005 $125 Million Minnesota Resource Plan Estimated 2015 need: 3,100 MW; 1,125 MW baseload 1,600 MW 3 Units: 2010; 2013; 2014 Nuclear plant relicensing * Cost including refurbishment of existing 1,228 MW and 300 MW of additional capacity ** Public Service of Colorado share of 750 MW Comanche 3 coal unit Investment includes environmental upgrades at Comanche 1 & 2
  • 9. Capital Expenditure Forecast Dollars in Millions 2005 2006 2007 2008 2009 Minnesota MERP $ 191 $ 404 $ 197 $ 125 $ 56 Comanche 3 59 179 287 298 125 Base Level Capital Expenditures 991 917 1,021 929 1,085 Total $1,241 $1,500 $1,505 $1,352 $1,266
  • 10. Capital Expenditure Forecast by Operating Company Dollars in Millions 2005 2006 2007 2008 2009 NSP-Minnesota $ 645 $ 832 $ 713 $ 571 $ 605 NSP-Wisconsin 60 79 75 74 68 PSCo 425 499 593 591 488 SPS 111 90 124 116 105 Total $1,241 $1,500 $1,505 $1,352 $1,266
  • 11. Minnesota Metro Emissions Reduction Program (MERP) Convert two in-city coal plants to natural gas & refurbish a third in-city coal plant Improves environment SO2 NOx Mercury Particulate CO2 93% 91% 78% 55% 21% Cash return on investment begins January 2006 Target ROE 10.86% with incentive sliding scale 9.97 to 11.46% Equity ratio 48.5%
  • 12. Minnesota MERP — Potential Earnings Dollars in Millions 2005 2006 2007 2008 2009 Capital Expenditures Current Year $191 $404 $197 $125 $56 Cumulative $238 $642 $839 $964 $1,020 Equity Ratio 48.5% 48.5% 48.5% 48.5% 48.5% Return on Equity 10.86% 10.86% 10.86% 10.86% 10.86% Equity Return $8 $24 $40 $48 $53
  • 13. Colorado — Comanche 3 Net emissions of SO2 and NOx for Comanche Units 1, 2, & 3 will not exceed current emissions Construction expenditures up to a formula-based cap are deemed prudent PSCo equity ratio up to 60% deemed reasonable for 2006 rate case proceeding Capital expenditures to be included in rate recovery prior to project completion, depending on credit rating
  • 14. Comanche 3 — Potential Earnings Dollars in Millions 2005 2006 2007 2008 2009 Capital Expenditures Current Year $59 $179 $287 $298 $125 Cumulative $62 $241 $528 $826 $951 Equity Ratio 56% 56% 56% 56% 56% Return on Equity 10.75% 10.75% 10.75% 10.75% 10.75% Equity Return $2 $9 $23 $41 $54
  • 15. Strengthen Balance Sheet with Increased Equity Net Income Sensitivity 100 Basis Point Change in Dec 31, 2004 Target Equity Ratio Equity Equity Millions Company Ratio Ratio NSPM 50% 49 to 51% $3 NSPW 56 54 to 56 1 SPS 48 48 to 50 2 PSCo 48 55 to 56 4 Xcel Energy Consolidated 42 44 to 46
  • 16. Earn Return Authorized by Regulators Net Income Sensitivity 2003 100 Basis Point Rate Base Change in ROE * Billions Millions Colorado $3.9 $19 Minnesota 3.3 16 Texas 0.8 4 Wisconsin 0.6 3 * Assuming 50% common equity
  • 17. Regulatory Initiatives 2005 WI Electric MN CO ND WI Electric MN MN, ND & & Gas FERC Gas Gas Gas SD Electric & Gas Resource Case Plan Transmission Case Case Case Case Case Decision Decision Case Decision Filed Decision Filed Decision Filed December Year-end May May June June July Winter MN, ND & 2006 WI Electric SD Electric CO MERP Rider & Gas Interim Gas Case CO Electric MN, ND & SD Rates Rates Rates Rates Case Electric Case In Effect In Effect In Effect In Effect Filed Decision January January January January Spring Fall 2007 Case Decision Rates In Effect Colorado Electric Case Filed Rates In Effect January
  • 18. Key Assumptions for 2005 Earnings Guidance Seren is held for sale and accounted for as discontinued operations Normal weather patterns are experienced for 2005 Weather-adjusted retail electric sales growth of 1.6 to 2.0% Weather-adjusted retail natural gas sales growth of 1.0 to 1.3% A successful outcome in the NSP-Minnesota gas rate case A successful outcome in the FERC rate case Capacity costs are projected to increase by $15 million, net of recovery No additional margin impact associated with the fuel allocation issue at SPS 2005 trading and short-term wholesale margins are projected to decline from 2004 levels by approximately $30 million to $55 million
  • 19. Key Assumptions for 2005 Earnings Guidance (Continued) 2005 utility other operating and maintenance expense is expected to increase between 2 to 3% compared with 2004 levels 2005 depreciation expense is projected to increase approximately 7 to 8% compared with 2004 2005 interest expense is projected to increase approximately $10 million to $15 million compared with 2004 levels Allowance for funds used during construction-equity is projected to be relatively flat compared with 2004 Xcel Energy continues to recognize COLI tax benefits of 9 cents per share in 2005 The effective tax rate for continuing operations is expected to be approximately 27 to 30% percent Average common stock and equivalents of approximately 426 million shares in 2005, based on the “If Converted” method for convertible notes
  • 20. 2004 Earnings and 2005 Guidance Dollars per Share 2005 2004 Guidance Regulated utility continuing operations $1.32 $1.27 – 1.37 Holding Company finance costs (0.08) (0.11) Other nonregulated & Holding Company 0.03 0.02 Total earnings from continuing operations $1.27 $1.18 – 1.28 Discontinued operations (0.40) Total Earnings per Share diluted $0.87
  • 21. Dividend Objective Current annual dividend rate of 83 cents Review dividend — Spring 2005 Annual dividend increases consistent with long-term earnings growth
  • 22. Senior Debt Ratings Moody’s S&P Secured Unsecured Secured Unsecured Holding Co. -- Baa1 -- BBB- NSPM A2 A3 A- BBB- NSPW A2 A3 A- BBB PSCo A3 Baa1 A- BBB- SPS -- Baa1 -- BBB Outlook Stable Stable
  • 23. Low-Risk Business Plan Low-Risk No competitive threats Constructive regulation Executable strategy Identify and manage risks Solid balance sheet Total return objective of 7 to 9% per year
  • 24. Appendix
  • 25. Organizational Structure 2004 Results Income from Continuing Xcel Energy Inc. Operations (Dollars in Millions) $527 Holding Company $(43) Northern Northern Subsidiaries Southwestern Public States States Eloigne Public Service Power Power Quixx Service Company of Company - Company - Company Colorado Minnesota Wisconsin $230 $54 $218 $55 $13 Nonregulated Regulated
  • 26. Northern States Power — Minnesota 2004 Electric 2004 Gas Avg. Retail % of Xcel Energy Avg. Retail % of Xcel Energy Customers Retail Customers Customers Retail Customers 1,340,000 41.0% 447,500 25.7% ROE Allowed (Electric) 11.47% North Dakota Minnesota ROE on Average GAAP Equity 12.1% GAAP % Equity in Capital Structure 49.7% Minneapolis/ St. Paul Senior Unsecured Credit Rating A3/BBB- Electric/Gas Net Income Mix 90%/10% Net Income (Millions) $230 South Dakota
  • 27. Northern States Power — Wisconsin 2004 Electric 2004 Gas Avg. Retail % of Xcel Energy Avg. Retail % of Xcel Energy Customers Retail Customers Customers Retail Customers 240,035 7.3% 97,463 5.5% Michigan ROE Allowed (Electric & Gas) 11.9% ROE on Average GAAP Equity 12.7% GAAP % Equity in Capital Structure 55.4% Senior Unsecured Credit Rating A3/BBB Electric/Gas Net Income Mix 95%/5% Net Income (Millions) $54 Wisconsin
  • 28. Public Service Company of Colorado 2004 Electric 2004 Gas Avg. Retail % of Xcel Energy Avg. Retail % of Xcel Energy Customers Retail Customers Customers Retail Customers 1,293,000 39.6% 1,197,000 68.8% Colorado ROE Allowed (Electric) 10.75% ROE on Average GAAP Equity 9.9% GAAP % Equity in Capital Structure 47.7% Senior Unsecured Credit Rating Baa1/BBB- Electric/Gas Net Income Mix 72%/28% Net Income (Millions) $218
  • 29. Southwestern Public Service 2004 Electric Avg. Retail % of Xcel Energy Customers Retail Customers 395,000 12.1% ROE Allowed (Electric – Texas) 11.5% Kansas ROE on Average GAPP Equity 6.9% New Mexico % Equity in Capital Structure 47.5% Oklahoma Senior Unsecured Credit Rating Baa1/BBB Electric/Gas Net Income Mix 100%/NA Net Income (Millions) $55 Texas
  • 30. Retail Electric Rate * Comparison Cents per KWh * EEI typical bills – Summer 2004 18 16 14 12 10 8 6.01 6.06 6 4.87 4 2 0 r illo City ouis nve aul ines City ukee enix ago iami ston ork ar e . L e Y cM D St. P Mo sas ilwa Pho Chi o m ak t w B AL Ne S / es an M sD K t pl l Sa M
  • 31. Supply Requirement and Capability Thousands of MW 27 Resource need without renewal of expiring 26 purchase contracts 25 Supply requirement 24 With approved additions 23 22 Current capability based on existing generation 21 and contracted purchases 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
  • 32. Energy Supply Mix — 2004 Owned and Purchased Fuel Mix Purchased Energy Gas Nuclear Other Gas 21% 12% 11% 27% Renewable 7% Owned Coal * Generation 54% 68% * Low-sulfur, low-mercury western coal
  • 33. Coal Supply Contracted Coal Coal Transportation 2005 99% 100% 2006 78 75 2007 65 45 2008 46 45 Annual consumption: 32 Million tons of low-sulfur, low-mercury western coal
  • 34. Electric Fuel and Purchased Energy Cost Recovery Mechanisms Minnesota: Monthly recovery of prospective costs Colorado: Recovery of costs with sharing of deviations up to + $11.25 million from benchmark Texas: File for semi-annual adjustments – required if + 4% annually Wisconsin: Biennial rate case – file for interim adjustment if costs fall outside + 2% annually New Mexico: Recovery of costs with 2 month lag
  • 35. Environmental Initiatives Owned Generation (GWh) Pounds per MWh 6.0 86,000 82,000 78,000 5.0 74,000 4.0 70,000 66,000 3.0 62,000 1997 1998 1999 2000 2001 2002 2003 2004* Nitrogen Oxide emissions Owned generation (GWh) Sulfur Dioxide emissions * Estimated
  • 36. Commitment to Wind Power MW 2500 2206 Actual Projected 2000 1596 1500 1000 829 884 469 478 500 316 348 138 25 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 ** ** Timing dependent on renewal of Production Tax Credit