Did Xcel Energy change its 2024 earnings outlook?

No. Xcel reaffirmed 2024 ongoing EPS guidance of $3.50 to $3.60 per share. The guidance assumes constructive outcomes in all pending rate cases, normal weather for the rest of the year, and 1% to 2% growth in weather-normalized retail electric sales, along with other assumptions on O&M, depreciation, interest, and tax rates.

How large is the financial exposure from the Texas Panhandle wildfires?

Xcel recorded a $215 million pre-tax charge for the Smokehouse Creek Fire Complex, which it considers the low end of its reasonably estimable loss range, and recorded an offsetting $215 million insurance receivable. Xcel's insurance coverage is about $500 million for the annual policy period. The company says it cannot estimate the upper end of the range, and it excludes potential fines, exemplary damages, and certain government and third-party claims. If SPS is found liable for amounts beyond available coverage, the impact could be material.

Why did revenue drop while earnings rose?

Revenue fell 11% to $3.65 billion, mostly because natural gas revenues decreased $347 million and electric revenues decreased $78 million. Those declines mirror lower commodity costs, such as cost of natural gas sold and electric fuel and purchased power, which are recovered from customers through regulatory mechanisms. Because those costs are passed through, the revenue decline has little effect on earnings. Earnings rose mainly from recovery of infrastructure investments, higher AFUDC, and lower O&M expenses.

What are the key regulatory decisions ahead for investors to monitor?

Key upcoming items include the Minnesota natural gas rate case (about $59 million requested, with evidentiary hearings July 10-12, 2024, and an MPUC order due by March 14, 2025), the Colorado natural gas rate case (about $171 million requested, with a proposed effective date of Nov. 1, 2024), and the Minnesota Upper Midwest Resource Plan, for which a decision is expected in 2025. SPS also expects to issue a new-generation RFP in July 2024. The Colorado and Minnesota gas requests were filed with ROE requests of 10.25% and 10.2%, while the DOC recommended 9.4% in Minnesota.

Are there signs of pressure on Xcel's credit profile?

Yes. Several ratings carry Negative outlooks, including Xcel Energy Inc.'s S&P (BBB) and Fitch (BBB+) ratings and S&P ratings for several subsidiaries. Xcel also reported higher interest charges ($291 million versus $253 million) and total debt of $27.4 billion, up from $26.3 billion at year-end 2023. Management's long-term objective to maintain senior secured debt ratings in the A range depends on maintaining credit quality, so further pressure from wildfire liabilities or rising financing costs could be a concern.

XEL/XELLL 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 25, 2024. Cited figures are marked; the original filing is the authoritative source.

Xcel Energy (XEL) reported first-quarter 2024 GAAP and ongoing diluted EPS of $0.88^a, up from $0.76 in Q1 2023, on net income of $488 million versus $418 million.

The increase was driven primarily by recovery of infrastructure investments, higher AFUDC, and lower O&M, partially offset by higher interest charges and depreciation. Revenue declined to $3.65 billion^b from $4.08 billion, but this reflects pass-through of lower natural gas and electric fuel costs, which carry minimal earnings impact. The company reaffirmed its 2024 ongoing EPS guidance of $3.50 to $3.60 and its long-term objectives of 5% to 7% EPS growth and 5% to 7% annual dividend increases.

The dominant risk for investors is the Smokehouse Creek Fire Complex in the Texas Panhandle, which Texas A&M's forest service attributed to SPS power lines. Xcel recorded a pre-tax charge of $215 million^c (before insurance) and an offsetting insurance receivable of $215 million, with insurance coverage of roughly $500 million for the annual policy period. Potential losses beyond the accrual, including penalties, exemplary damages, and other claims, are not estimable, and an adverse outcome could exceed insurance coverage and materially affect results.

Separately, the Marshall Fire litigation against PSCo (trial set for September 2025) remains unquantified. Credit outlooks for Xcel Energy Inc. (S&P BBB, Negative; Fitch BBB+, Negative) and several subsidiaries were also flagged as negative, which bears watching as financing needs grow. Regulatory activity is substantial, including pending rate cases in Minnesota (natural gas, $59 million^d requested), Colorado (natural gas, $171 million requested), and Texas (SPS settlement approved April 11, 2024, with a $65 million base rate increase).

The company also filed a Minnesota Upper Midwest Resource Plan calling for 3,600 MW of wind and solar and 600 MW of battery storage by 2030. Weather-normalized retail electric sales declined 0.3% year-to-date on a leap-year-adjusted basis, driven by lower per-customer usage, which is a watch item against the company's guidance assumption of 1% to 2% growth for the full year.

02—Key points

Key Highlights

Q1 2024 GAAP and ongoing diluted EPS of $0.88, up 16% from $0.76 in Q1 2023; net income rose to $488 million from $418 million.
2024 ongoing EPS guidance of $3.50 to $3.60 reaffirmed, with long-term targets of 5% to 7% EPS growth off a $3.35 2023 base and 5% to 7% annual dividend growth.
$215 million pre-tax charge recorded for the Smokehouse Creek Fire Complex (before insurance), matched by a $215 million insurance receivable; coverage is roughly $500 million, and losses above the accrual are not yet estimable.
Marshall Fire litigation against PSCo (302 complaints, at least 4,047 plaintiffs) remains unquantified, with trial scheduled for September 2025.
Credit outlooks were revised to Negative for Xcel Energy Inc. (S&P BBB, Fitch BBB+) and for several utility subsidiaries' S&P ratings, a watch item given $4.5 billion in total liquidity and ongoing capital needs.
Revenue fell to $3.65 billion from $4.08 billion, mainly from lower natural gas and fuel costs that are passed through to customers, so the decline has minimal earnings impact.
Major regulatory items include a $59 million Minnesota gas rate case, a $171 million Colorado gas rate case, SPS Texas settlement approved on April 11, 2024, and a 3,600 MW wind and solar addition proposed in Minnesota's Upper Midwest Resource Plan.

03—Questions

Frequently Asked Questions

Did Xcel Energy change its 2024 earnings outlook?
No. Xcel reaffirmed 2024 ongoing EPS guidance of $3.50 to $3.60 per share. The guidance assumes constructive outcomes in all pending rate cases, normal weather for the rest of the year, and 1% to 2% growth in weather-normalized retail electric sales, along with other assumptions on O&M, depreciation, interest, and tax rates.
How large is the financial exposure from the Texas Panhandle wildfires?
Xcel recorded a $215 million pre-tax charge for the Smokehouse Creek Fire Complex, which it considers the low end of its reasonably estimable loss range, and recorded an offsetting $215 million insurance receivable. Xcel's insurance coverage is about $500 million for the annual policy period. The company says it cannot estimate the upper end of the range, and it excludes potential fines, exemplary damages, and certain government and third-party claims. If SPS is found liable for amounts beyond available coverage, the impact could be material.
Why did revenue drop while earnings rose?
Revenue fell 11% to $3.65 billion, mostly because natural gas revenues decreased $347 million and electric revenues decreased $78 million. Those declines mirror lower commodity costs, such as cost of natural gas sold and electric fuel and purchased power, which are recovered from customers through regulatory mechanisms. Because those costs are passed through, the revenue decline has little effect on earnings. Earnings rose mainly from recovery of infrastructure investments, higher AFUDC, and lower O&M expenses.
What are the key regulatory decisions ahead for investors to monitor?
Key upcoming items include the Minnesota natural gas rate case (about $59 million requested, with evidentiary hearings July 10-12, 2024, and an MPUC order due by March 14, 2025), the Colorado natural gas rate case (about $171 million requested, with a proposed effective date of Nov. 1, 2024), and the Minnesota Upper Midwest Resource Plan, for which a decision is expected in 2025. SPS also expects to issue a new-generation RFP in July 2024. The Colorado and Minnesota gas requests were filed with ROE requests of 10.25% and 10.2%, while the DOC recommended 9.4% in Minnesota.
Are there signs of pressure on Xcel's credit profile?
Yes. Several ratings carry Negative outlooks, including Xcel Energy Inc.'s S&P (BBB) and Fitch (BBB+) ratings and S&P ratings for several subsidiaries. Xcel also reported higher interest charges ($291 million versus $253 million) and total debt of $27.4 billion, up from $26.3 billion at year-end 2023. Management's long-term objective to maintain senior secured debt ratings in the A range depends on maintaining credit quality, so further pressure from wildfire liabilities or rising financing costs could be a concern.

04—Continue

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