This document provides an overview and summary of Xcel Energy's strategy to reduce carbon emissions while growing earnings. Key points include:
- Xcel aims to achieve annual EPS growth of 5-7% and increase its dividend by 2-4% annually while reducing carbon emissions 30% by 2020 through investments in renewables, energy efficiency, and environmental upgrades.
- Resource plans for Minnesota and Colorado outline specific goals and investments to reduce emissions through increased wind and solar generation, gas plant additions, and efficiency programs.
- Constructive regulation and riders support recovery of capital investments in areas like transmission, renewables and environmental upgrades.
- A track record of meeting earnings and dividend growth targets demonstrates the company's ability
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. Xcel Energy Corporate Strategy
Grow our core business and
meet the environmental challenge
Achieve annual EPS growth of 5 – 7%
Increase dividend by 2 – 4% annually
Reduce emissions by 2020
4. 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
5. Attractive Investment Opportunity
Environmental leader with both a willingness and
the ability to address environmental challenges
Constructive regulation with enhanced recovery
of major capital projects
Rate base growth opportunities
Track record of successful execution
Strong corporate governance
6. Impact of Potential
Climate Change Legislation
Climate Change legislation would require:
Significant emission reductions
Significant capital investments
Long-term technological transformation
A diverse portfolio of resources
7. Xcel Energy States at Forefront
Demand-Side
Renewable Management
Portfolio (annual MWh Carbon
State Standards savings) Reduction
30% by 2025
MN 30% by 2020 1.5%
(over 2005)
CO 20% by 2020 .6% N/A
10% by 2020
NM 20% by 2020 .3%
(over 2000)
WI 10% by 2015 N/A N/A
TX 5% by 2015 .2% N/A
8. Benefits of a Stability/Reduction Plan
Reduce risk
Federal and state carbon regulation
Community and litigation risks
Mitigate long-term costs to customers
Demonstrate continued environmental leadership
Potential for investment opportunities
9. Geographic Competitive Advantage
Biomass Resource
Wind Resource
Source: National Renewable Energy Laboratory
Solar Resource
Wind Density
High
Low
Xcel Energy
States Served
10. Clean Energy Actions
Increase renewable energy
Uprate and extend lives of nuclear plants
Expand demand side management, energy
efficiency and conservation efforts
Increase investment in transmission
Upgrade environmental systems and improve
efficiencies of generation plants
Replace/repower inefficient generation
Evaluate carbon capture and storage
11. Minnesota Resource Plan
Reduces carbon emission by 22% by 2020
Adds 2,600 megawatts (MW) of wind by 2020
Seeks to expand output from Prairie Island and
Monticello nuclear plants by 230 MW
Requests environmental upgrades and capacity
expansion of 80 MW at Sherco
Seeks approval of Manitoba Hydro 375 MW PPA
Would add 2,300 MW of natural gas generation
Expands DSM efforts
Plan requires Commission approval
12. Colorado Resource Plan
Reduces carbon emission by 10% by 2017 and puts
PSCo on path to achieve 20% reduction by 2020
Adds 800 MW of wind by 2015
Replaces four coal units with natural gas generation
Acquire 25 MW of solar with plans to add up to 200
MW of solar as technology develops
Expands DSM efforts
Plan requires Commission approval
15. 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
16. Projected Rider Revenue
Dollars in millions
240
CO AQIR
MN Renewable Energy Standard $195
200
CO Trans Cost Adjustment
MN Trans Cost Recovery $166
MN MERP
160
120 $107
$73
80
40
0
2006 2007 2008 2009
17. 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
18. Recovery on Capital Investment*
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
Traditional Recovery Enhanced Recovery Depreciation
* Capital forecast based on middle of range
19. Delivering on Rate Base Growth*
Dollars in billions
CAGR = 7.5%
$16.9
$15.7
$14.9
$14.0
$12.8
$11.7
2006 2007 2008 2009 2010 2011
* Growth based on middle of capital forecast range
20. Proven Track Record
Delivering on 5 – 7% EPS Growth
Guidance Range
$1.45 – $1.55
$1.43
$1.30
$1.15
~5%**
10%
13%
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 growth rate based on middle of guidance range
21. Proven Track Record:
Delivering 2 – 4% Dividend Growth*
Annualized dividend per share
2004 – 2008 CAGR = 3.4%
$0.95
$0.92
$0.89
$0.86
$0.83
$0.75
2003 2004 2005 2006 2007 2008
* Xcel Energy increased the dividend by 3¢ on May 21, 2008
22. Strong Corporate Governance
Independent Lead Director
Annual election of all directors
12 independent directors on 13 person board
Management compensation aligned with
shareholders – stock ownership guidelines:
CEO ownership 5x annual base salary
CFO/Other Officers ownership 3x base salary
23. 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 ~ 4.7%
Sustainable annual dividend growth of 2% – 4%
25. 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.
28. 2008 Regulatory Status
Requested Status
New Mexico Electric December 2007 Pending
$17.3 million Summer 2008
11.0% ROE
North Dakota Electric December 2007 Pending
$20.5 million August 2008
11.5% ROE Interim rates
PSCo Wholesale February 2008 Settlement
Base rates $8.8 million $6.5 million
CWIP $3.7 million Blackbox
11.5% ROE
SPS Wholesale March 2008 Pending
$14.9 million
12.2% ROE
Texas Electric June 2008 Pending
$61.3 million overall
11.25% ROE
29. 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
30. 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
31. Capital Expenditures by Function*
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
32. 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+
33. 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
34. Strong Access to Credit Markets
Issued $400 million of retail hybrid securities
with a 7.6% coupon in January 2008
Issued $500 million of first mortgage bonds
at NSP–Minnesota with 5.25% coupon in March 2008
Potential FMB debt issuances: 2nd half 2008
PSCo: $500 to $600 million
NSP–Wisconsin: Up to $250 million