Summary
This 8-K filing from Xcel Energy Inc. (XEL) on March 9, 2015, details the outcome of a prudence investigation by the Minnesota Public Utilities Commission (MPUC) concerning the Monticello life cycle management (LCM)/extended power uprate (EPU) project. The project, completed by Xcel Energy's subsidiary NSP-Minnesota, incurred total capitalized costs of approximately $748 million. The MPUC's decision allows full recovery with a return on only about $415 million of the project costs, while the remaining $333 million will be recovered without a return for 2015 and beyond. Additionally, only 50% of the investment was deemed used and useful for 2014. This ruling effectively disallows approximately $155 million in costs and is expected to result in a one-time pre-tax loss of approximately $125 million in the first quarter of 2015, with a further reduction in the 2015 revenue requirement and pre-tax income for Xcel Energy and NSP-Minnesota. Despite this adverse regulatory decision, Xcel Energy is reaffirming its 2015 ongoing earnings guidance of $2.00 to $2.15 per share. Management views the financial impact of the Monticello project decision as a non-recurring, one-time event and plans to exclude the approximately $125 million loss from its 2015 ongoing earnings calculation. The company anticipates a final order in the second quarter of 2015 and retains the right to file for reconsideration. Investors should note the potential for this decision to set a precedent for other state commissions, though Xcel Energy aims to mitigate the impact on its core ongoing financial performance.
Key Highlights
- 1MPUC prudence investigation concludes for Monticello LCM/EPU project, impacting NSP-Minnesota.
- 2MPUC allows full recovery with return on ~$415 million of project costs; remaining ~$333 million without return from 2015.
- 3Only 50% of project investment deemed used and useful for 2014 by MPUC.
- 4Estimated disallowance of ~$155 million in project costs.
- 5Anticipated one-time pre-tax loss of ~$125 million in Q1 2015 due to the disallowance.
- 62015 revenue requirement and pre-tax income expected to be reduced by $25 million and $16 million for Xcel Energy, respectively.
- 7Xcel Energy reaffirms its 2015 ongoing earnings guidance of $2.00 to $2.15 per share, treating the loss as non-recurring.