01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Xcel Energy (XEL) reported 2011 GAAP EPS of $1.72a (diluted), up from $1.62 in 2010, and ongoing EPS of $1.72 versus $1.62, with net income of $841.2 million versus $755.8 million.
Growth was driven primarily by higher electric margins from retail rate increases in Minnesota, Wisconsin, Texas, North Dakota and Michigan, the cost recovery of PSCo's Rocky Mountain and Blue Spruce gas plants acquired in December 2010, and warmer summer weather. Operating revenues rose 3.3% to $10.65 billionb, while O&M rose 4.0% and depreciation rose 3.7%. Management guides 2012 ongoing EPS to the lower half of $1.75 to $1.85 and targets 5-7% long-term EPS growth and 2-4% dividend growth through at least 2013.
The balance sheet expanded meaningfully: total assets reached $29.5 billionc (up from $27.4 billion), and operating cash flow rose to $2.41 billion, helped by a $100 million DOE spent-fuel settlement and working-capital timing. Capital spending is projected at $13.4 billion over 2012-2016, supporting a targeted 7% annual rate base growth. Investors should weigh several risks: a Sherco Unit 3 outage since November 2011 with uncertain restart timing, a pending Minnesota electric rate settlement, Monticello and Prairie Island uprate delays, a rising nuclear decommissioning ARO (now $1.48 billion), potential Ashland MGP remediation costs ($104.3 million accrued), and large litigation exposures including a $240 million+ enXco claim.
Also notable: Xcel redeemed all $108 milliond of preferred stock in October 2011, issued $750 million of new long-term debt during 2011, and made $190.5 million of pension contributions in January 2012, which will weigh on near-term cash flow. Pension expense is projected to rise sharply, from $81 million in 2011 to $124 million in 2012.
02—Key points
Key Highlights
- 2011 GAAP and ongoing diluted EPS of $1.72, up from $1.62 in 2010 (about 6% growth); net income rose to $841.2 million from $755.8 million.
- Operating revenues grew 3.3% to $10.65 billion, led by $8.77 billion in electric revenue, with electric margin up $334 million (7.5%) on retail rate increases and PSCo gas plant cost recovery.
- 2012 ongoing EPS guidance is in the lower half of $1.75-$1.85; management plans $13.4 billion of utility capital investment over 2012-2016 and targets 7% rate base growth.
- Operating cash flow increased to $2.41 billion from $1.89 billion, though $190.5 million of pension contributions in January 2012 will pressure 2012 cash flow.
- Sherco Unit 3 (860 MW, 59% owned by NSP-Minnesota) has been offline since a November 2011 turbine/generator failure, with restart timing unknown; insurance is expected to cover most costs above a $1.5 million deductible.
- Nuclear decommissioning ARO rose to $1.48 billion from $809.5 million after the triennial study, and the Monticello and Prairie Island uprate projects were delayed, with the Prairie Island uprate needing significant redesign.
- Pending rate proceedings include a Minnesota electric settlement (~$58 million 2011 increase), a PSCo Colorado electric case requesting $141.9 million (decision expected July 2012), and a Texas/New Mexico SPS settlement.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $10.65B$10.31B | +3.3% |
| Operating Expenses | $8.87B$8.69B | +2.1% |
| Operating Income | $1.78B$1.62B | +10.0% |
| Interest Expense | $591.30M$577.29M | +2.4% |
| Net Income | $834.38M$751.59M | +11.0% |
| EPS (Basic) | $1.72$1.63 | +5.5% |
| EPS (Diluted) | $1.72$1.62 | +6.2% |
| Shares Outstanding (Basic) | 485.04M462.05M | +5.0% |
| Shares Outstanding (Diluted) | 485.62M463.39M | +4.8% |
05—Questions
Frequently Asked Questions
How did Xcel Energy perform financially in 2011?
Xcel reported GAAP and ongoing diluted EPS of $1.72 for 2011, up from $1.62 in 2010, and net income of $841.2 million. The improvement came mainly from higher electric margins due to rate increases across several states, cost recovery on PSCo's acquired gas plants, and warmer summer weather. Higher O&M, depreciation and property taxes partly offset these gains.
What is Xcel's earnings outlook for 2012?
Management expects 2012 ongoing EPS in the lower half of the $1.75 to $1.85 range. Key assumptions include constructive rate outcomes, normal weather, 0.5-1.0% growth in weather-adjusted retail electric sales, and O&M growth of 1-3%. Management also targets long-term EPS growth of 5-7% and dividend growth of 2-4% through at least 2013.
What are the biggest operational or regulatory risks for investors?
The main near-term risks are the Sherco Unit 3 outage, whose restart date is uncertain; the Monticello and Prairie Island nuclear uprate delays, which have added regulatory uncertainty; the NRC's post-Fukushima safety requirements, estimated at $20-250 million of capital; and pending rate decisions in Minnesota, North Dakota, South Dakota and Colorado. Large litigation exposures include the enXco Merricourt claim, which exceeds $240 million, and the Kivalina climate case, where Xcel believes the risk of loss is remote.
How is Xcel's capital investment program funded and how levered is the company?
Xcel plans roughly $13.4 billion of utility capital expenditures from 2012 to 2016, about $2.3-3.3 billion per year. Funding comes from operating cash flow, long-term debt, and equity, with 2012 financings planned at roughly $1.75 billion of first mortgage bonds. Long-term debt was $8.85 billion at year-end 2011 and equity was $8.48 billion. The company redeemed all $108 million of preferred stock in October 2011 and issued 2011 debt including $250 million of 4.80% senior notes and $250 million of 4.75% PSCo bonds.
What does the pension and retiree health cost picture look like?
Pension expense is projected to rise from $81.0 million in 2011 to $124.1 million in 2012 and $138.1 million in 2013, driven by phasing in losses from the 2008 market decline. Xcel made $190.5 million of pension contributions in January 2012, and the unfunded pension obligation was $556 million at year-end 2011. Postretirement health costs are expected to be about $39 million of contributions in 2012, and management has flagged the rising cost of these benefits as an earnings risk.
06—Continue