Xcel Energy Inc. · NASDAQ:XEL
Xcel Energy — Merrill Lynch Global Power & Gas Leaders Conference 2006
33 slides from Xcel Energy's conference presentation, Sep 26, 2006
Slide 1: Building the Core, Executing the Strategy
Building the Core Executing the Strategy Dick Kelly Chairman, President and CEO Merrill Lynch Global Power & Gas Leaders Conference September 26 – 27, 2006
Slide 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,” “estima
Slide 3: Xcel Energy at a glance
Northern States Power Company-Minnesota 44% Net Income Public Service Company of Colorado 39% Net Income Southwestern Public Service 12% Net Income Northern States Power Company-Wisconsin 5% Net Income 5th Largest Combination Electric and Gas Utility (based on customers) Traditional Regulation 2005
Slide 4: Strategy: Building the Core
Diverse, reliable supply Environmentally responsible Fairly priced energy Strategy: Building the Core Targeted investment to meet increasing customer needs:
Slide 5: Attractive Total Return
Attractive Total Return EPS growth rate objective 5 – 7% per year * Annual dividend growth objective 2 – 4% per year Dividend yield ~ 4.3% * Excluding any impact from corporate-owned life insurance (COLI)
Slide 6: 2005 Average Retail Electric Rate Comparison
Des Moines 2005 Average Retail Electric Rate Comparison Cents per kWh Amarillo Kansas City Denver Mpls/St. Paul Boston Chicago Milwaukee Phoenix Salt Lake City 6.80 St. Louis Miami New York Washington DC 5.97 7.34 0 4 8 12 16 20
Slide 7: Xcel Energy Service Area Growth Continues
MW Xcel Energy Service Area Growth Continues Owned Generation Supply Requirement Contracted Purchases 0 7,000 14,000 21,000 28,000 2007 2009 2011 2013 2015
Slide 8: Xcel Energy and Wind Potential
Xcel Energy and Wind Potential Wind Density High Low Xcel Energy States Served Source: National Renewable Energy Laboratory
Slide 9: Earnings Growth Drivers
Rate Base $10.8 B $13 B 4.5% Regulatory Equity Capitalization 52% 52 – 54% 0 to 1% Return on Equity 9.6% 10.5 to 11% 2.3 to 3.5% Earnings Growth Drivers Annual 2009 Growth 2005 Potential Rate
Slide 10: Investment Opportunities 2006-2020
Investment Opportunities 2006 - 2020 MERP Comanche 3 CapX 2020 Group 1 Colorado IGCC Mercury CAIR License Extension & Uprate: Plant Repowering & Uprate New Generation/Gas Storage Environmental Improvements CapX 2020 Group 2 CapX 2020 Group 3 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 $700 $900 $60
Slide 11: Incremental Investment Driven by Economic Signals
Incremental Investment Driven by Economic Signals Customer need Managing cost Supportive regulatory treatment Risk-adjusted return Increased customer and shareholder value Allocation of capital based on:
Slide 12: Metro Emissions Reduction Program Status
Engineering ~ 100% 60% 3% Equipment purchase ~ 100% 70% Project cost ~ 90% 76% 20% Construction 60% 25% Completion May May May 2007 2008 2009 Metro Emissions Reduction Program Status High King Bridge Riverside
Slide 13: Comanche Project
Comanche 3 – 500 MW share of 750 MW super-critical pulverized coal plant Comanche 1 & 2 – Upgrades to environmental systems Comanche Project Estimated Comanche 3 completion: 2009 Engineering 30% Equipment Purchase 90% Project Cost 80% Construction 5% Percent Complete/Under Contract
Slide 14: Building the Core — Transmission: CapX 2020
Building the Core — Transmission CapX 2020: Collaborative Effort Three project groups to: Maintain/improve reliability Support new generation Reduce constraints Group II Group III South Dakota Iowa Minnesota Wisconsin North Dakota Group I
Slide 15: CapX 2020 — Project Groups
CapX 2020 — 3 Project Groups Group I — In-service 2011 – 2012 Total Cost SE Twin Cities-Rochester-LaCrosse WI / 345kV $1.3 Billion Bemidji - Grand Rapids / 230 kV Fargo - St. Cloud/Monticello area / 345 kV Xcel Share Brookings - SE Twin Cities / 345 kV $700 Million Group II — In-service 2012 – 2020
Slide 16: Increasing Our Earned Return on Equity
Increasing Our Earned Return on Equity Rate Cases with 2006 Impacts Dollars in millions Colorado Gas $34.5 $22.0 11.0% 10.5% Wisconsin Electric 53.1 43.4 11.9 11.0 Wisconsin Gas 7.8 3.9 11.9 11.0 Minnesota Electric * 156 131/115 ** 11.0 10.54 Dollar Increase Return on Equity Requested Granted Reques
Slide 17: Colorado Electric Rate Case Highlights
Colorado Electric Rate Case Highlights Requested $210 million increase Electric rate base = $3.4 billion 11% return on common equity Equity ratio = 60% Historical test year with adjustments for known and measurable Final decision expected late 2006 Rates expected to be in effect early 2007
Slide 18: Colorado Electric Rate Case Details
Under earning: 8.5% ROE vs 10.75% $ 64 Increase ROE to 11% and higher equity ratio 17 Comanche 3 24 Depreciation 33 Wholesale contract expiration 14 Employee related costs 6 Other 20 $178 PCCA Impact & Amendment 37 Rider 32 Total requested $210 Dollars in millions Colorado Electric Rate Case Details
Slide 19: Colorado Electric Rate Case Staff Recommendation
PCCA & Base Amend- Rates ment 37 Total Increase requested $ 178 $ 32 $ 210 ROE 9.5% vs. 11% - 48 Average Comanche rate base - 13 Wholesale contracts - 8 Incentive compensation - 5 Weather-normalization - 4 Other - 9 Total $ 91 $ 32 $ 123 Earnings neutral Depreciation - 20 - 20 Total $ 71 $ 103 Dolla
Slide 20: Colorado Electric Rate Case Schedule
Colorado Electric Rate Case Schedule Rebuttal testimony — September 29 Hearings — October 23 through November 9 Statement of positions — November 20 Deliberations — December 1 Initial decision — December 18
Slide 21: Texas Electric Rate Case Highlights
Texas Electric Rate Case Highlights Requested $48 million increase Electric rate base = $943 million 11.6% return on common equity Equity ratio = 51% Historical test year with adjustments for known and measurable
Slide 22: Texas Electric Rate Case Developments
Texas Electric Rate Case Developments Schedule calls for decision by March 2, 2007 Company identified change to jurisdictional allocations that increase Texas revenue requirement by $15 million Filed changes with the ALJ on September 25 Working with parties on negotiating a reasonable extension Anti
Slide 23: Potential Additional Rate Cases with 2007 Impact
Potential Additional Rate Cases with 2007 Impact Colorado Gas Planned for 2006 Minnesota Gas Planned for 2006 North Dakota Electric Potential New Mexico Electric Potential South Dakota Electric Potential
Slide 24: Earnings Guidance
Earnings Guidance Range Regulated utility $1.25 – $1.35 Holding company and other (0.10) COLI – tax benefit 0.10 Continuing operations $1.25 – $1.35 2006 Dollars per share
Slide 25: Financial Performance Objectives
Financial Performance Objectives EPS growth rate target 5 – 7% per year * Annual dividend increases of 2 – 4% per year Deliver an attractive total return Credit rating — Senior unsecured debt BBB+ to A range * Excluding any impact from COLI
Slide 26: Appendix
(2) Xcel Energy’ Appendix
Slide 27: Senior Debt Ratings
Senior Debt Ratings Holding Co. BBB+ Baa1 BBB- NSPM A+ A2 A- A A3 BBB- NSPW A+ A2 A- A A3 BBB PSCo A- A3 A- BBB+ Baa1 BBB- SPS A- Baa1 BBB Fitch Moody’s S&P Fitch Moody’s S&P Secured Unsecured
Slide 28: 2005 Owned Generating Facilities and Energy Supply Mix
Coal 36 8,138 Natural Gas 61 4,918 Nuclear 3 1,617 Hydro 83 508 Oil 24 492 RDF 6 96 Wind - 25 Total 15,794 2005 Owned Generating Facilities Unit Type Number MW * Xcel Energy supplies in excess of 1100 MWs of wind power * Xcel Energy Supply Sources Nuclear 10% Coal ** 45% Gas & Oil 38% * Includes pur
Slide 29: Nuclear Relicensing Status
Nuclear Relicensing Status License renewal approvals expected 2006 Life Cycle and power uprate modifications to be installed 2008 – 2012 License renewal application — Submit to NRC and Minnesota PUC in 2008 — Approvals expected mid 2010 Unit 2 steam generator replacement expected 2013 Monticello Pra
Slide 30: Minnesota Cost Recovery Mechanisms
Minnesota Cost Recovery Mechanisms Projected electric fuel and purchased energy costs billed for the current month with subsequent true-up; MISO costs recovered through FCA on interim basis, with final recovery mechanism being developed by stakeholders Projected purchased gas cost billed for the cur
Slide 31: Colorado Cost Recovery Mechanisms
Colorado Cost Recovery Mechanisms Energy Cost Adjustment recovers electric fuel and purchased energy costs (through 2006) – Filed for new plan Monthly Gas Cost Adjustment recovers natural gas commodity, interstate pipeline and storage costs Purchased Capacity Adjustment recovers the demand component
Slide 32: 2005 Rate Base and Returns
2005 Rate Base and Returns Colorado Electric $3,120 8.5% Colorado Gas 1,084 7.00 Minnesota Electric 3,230 10.61 9.98% Minnesota Gas 422 6.30 7.42 North Dakota Electric 175 12.46 12.65 North Dakota Gas 42 5.71 6.81 South Dakota Electric 191 SPS Electric 1,422 Wisconsin Electric 613 Wisconsin Gas 83 R
Slide 33: Corporate-Owned Life Insurance Litigation (COLI)
Corporate-Owned Life Insurance Litigation (COLI) Positive pre-deduction cash flows Mortality gains The buildup of cash values The court’s opinion in the Dow case outlined three indicators of potential economic benefits to be examined in a COLI case. In Xcel Energy’s COLI case, the plans: Were projec
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