管理層發言
Hello, and welcome to Xcel Energy's Second Quarter 2025 Earnings Conference Call. My name is George, and I will be coordinating today's event. Please note that this conference is being recorded. I would like to turn it over to your hosts today, Mr. Roopesh Aggarwal, Vice President of Investor Relations, to begin the conference. Please go ahead, sir.
Thank you, George. Good morning, and welcome to Xcel Energy's Second Quarter 2025 Earnings Call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer; and Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions if needed. This morning, we will review our second quarter 2025 results and highlights, provide updated 2025 assumptions and share recent business and regulatory updates. Slides that accompany today's call are available on our website. Some comments during today's call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings. Today, we will discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. I will now turn the call over to Bob.
Thank you, Roopesh, and good morning, everyone. In the second quarter of 2025, Xcel Energy showcased our dedication to our customers, investors, and communities by striving to enhance energy delivery. We achieved strong earnings of $0.75 per share and invested $2.6 billion in robust energy infrastructure. We navigated changing energy policies to ensure the provision of safe, clean, reliable, and affordable electric and natural gas services. We also advanced our wildfire risk reduction initiatives to foster safer communities. Based on our performance in the first half of the year, we are confident in our ability to meet our earnings expectations for the 21st consecutive year, which is one of the strongest records in our field. At Xcel Energy, we believe we are at the beginning of an infrastructure investment cycle in the U.S. that will shape various industries for years to come. Beyond the frequently highlighted AI boom, we see substantial investment potential in onshoring and reshoring manufacturing and energy-intensive industries.
Given our reliability, cost-effectiveness, and sustainability, we believe we will be appealing to these sectors. Additionally, there is a strong demand for investment in oil and gas and energy infrastructure, especially in our SPS region, which serves significant parts of the Permian and Delaware basins. We continue to experience robust energy demand driven by the electrification of transportation, manufacturing, and home heating. Xcel Energy is committed to meeting our customers' needs. Last fall, we established a five-year capital investment plan forecasting $45 billion to address rising energy demand and essential upgrades to our transmission and distribution networks. At that time, we anticipated that our customers' requirements could surpass this base forecast. We now estimate an additional $15 billion in capital investment will be necessary to meet these needs, primarily within our current five-year forecast and some beyond that.
Several factors contribute to this increased requirement. In June, we submitted a generation plan to meet energy demands in our rapidly growing Texas and New Mexico region. Our proposed portfolio features nearly 5,200 megawatts of generation storage expected to commence operation by 2030, with over 4,500 megawatts anticipated to be company-owned. This encompasses 1,300 megawatts of wind, 700 megawatts of solar, 2,100 megawatts of natural gas CTs, and 500 megawatts of storage. We plan to seek regulatory approval for these projects in the coming months, with commission decisions expected in 2026. We also foresee a second RFP later this year for additional resources in the region. In the Upper Midwest, Minnesota approved two firm dispatchment projects totaling 720 megawatts alongside at least an additional 2,800 megawatts of company-owned wind energy that will utilize our new Minnesota Energy Connection transmission line, expected to be operational in 2029.
Ongoing RFPs for additional generation projects are in place to satisfy customer demand and ensure grid reliability, with expected commission decisions in 2026. We are set to invest an extra $3 billion to $4 billion in regional transmission projects to bolster reliability and regional development, including two 765 kV lines from MISO tranche 2.1 and the Southwest Power Pool ITP portfolio. Further to the $15 billion incremental need, we are engaged in the resource planning process in Colorado, potentially requiring between 5 and 14 gigawatts of new generation by 2031. We are still in various stages of securing regulatory approvals for numerous projects and will provide updates as they unfold. We plan to formally adjust our five-year forecast through 2030 during our third-quarter earnings update. As we actively build the necessary generation and transmission infrastructure to support growth and reliability demands, we are also addressing a fast-changing energy policy landscape.
While we primarily focus on state-level resource plans and transition initiatives, we are also monitoring federal legislation regarding tax credits and permitting impacts on customer outcomes. On July 4, the budget reconciliation bill was enacted, yielding some challenges to wind and solar tax credits, yet also producing positive outcomes for our customers. Reduced corporate tax rates lead to lower energy bills, and accelerated capital depreciation benefits customers, along with the efficiency of transferring eligible credits, both of which were preserved in the One Big Beautiful Bill. Incentives for qualified energy storage, advanced geothermal, nuclear generation, and carbon sequestration also contribute favorably to the future of our energy landscape. Naturally, renewable tax credits were a focal point in the legislative discourse. Consequently, we anticipated some limitations to these credits as Congress sought to address a substantial budget deficit.
Over the past few years, we've collaborated with state commissions and stakeholders to address the significant generation necessary in our regions to fulfill reliability and growth demands. We estimate needing between 15 and 29 gigawatts of new generation by 2031, much of which could derive from wind and solar sources. We have already committed significant capital and initiated construction on clean energy resources included in our base capital plan, along with those necessary for our incremental investment pathways, to cater to our customers' data center and electrification needs. We will keep monitoring executive orders, agency regulations, and tariff actions, making necessary adjustments to continue developing the energy assets required in our regions. Moreover, we have secured 19 gas turbine reservations to ensure our customers' reliability needs are met. Serving customers in some of the nation’s most resource-rich areas, our combination of wind, solar, energy storage, and gas backup enables us to deliver clean, reliable, and affordable energy at the pace our customers demand.
Xcel Energy is also making strides in mitigating risks from wildfires and extreme weather, which involves investments in advanced camera and weather station technologies, power line safety enhancements, pole inspections and replacements, and operational initiatives like wildfire safety protocols and public safety power shutoffs. We have seen excellent support from our commissions and states for investing in wildfire risk reduction. In June, the Colorado PUC approved our unanimous settlement for our $1.9 billion Wildfire Mitigation Plan, which included mechanisms to limit customer bill impacts and further our excess liability insurance deferral. In July, the Texas Commission approved our $500 million system resiliency initiative. Both plans are designed to improve the reliability and resilience of these systems in response to increasingly unpredictable weather patterns. On the legislative front, both Texas and North Dakota enacted favorable wildfire legislation.
In North Dakota, the law clarifies that utilities complying with an approved Wildfire Mitigation Plan are considered to have exercised reasonable care. In Texas, similar legislation states that electric utilities cannot be held liable for wildfire-related damages if they comply with an approved wildfire mitigation plan without negligence. Lastly, I want to express appreciation for our dedicated line workers and employees who have been working tirelessly in challenging conditions this week to restore power for our customers after two major storms impacted the Upper Midwest. Approximately 200,000 customers faced outages during those storms on Sunday and Monday nights, mainly in Minnesota, Wisconsin, and South Dakota. Over 2,000 crew members participated in recovery efforts, including teams from our Colorado and Texas service areas, as well as contractors and mutual aid partners. Their commitment to serving our customers during difficult times is commendable, and I am very proud of what they have accomplished recently. Now, I will hand the call over to Brian.
Thanks, Bob. Good morning, everyone. Starting with our financial results. Xcel Energy delivered earnings of $0.75 per share for the second quarter of 2025 compared to earnings of $0.54 per share in the second quarter of 2024. Most significant earnings drivers for the quarter included the following: higher revenue from electric and natural gas service reflecting rate case outcomes and sales growth, increased earnings by $0.24 per share and higher AFUDC increased earnings by $0.07 per share. Offsetting these positive drivers, higher interest charges decreased earnings by $0.04, reflecting higher debt levels and interest rates. Higher depreciation and amortization decreased earnings by $0.03, driven by increased system investment, and increased O&M decreased earnings by $0.02 per share. Turning to sales. Weather-normalized electric sales increased 3.5% for the second quarter, driven by strong sales growth across segments in SPS and PSCo.
For the full year, we continue to forecast 3% weather-normalized growth. Shifting to rate case activity. In South Dakota, we filed an electric rate case requesting a $44 million increase based on a 10.3% ROE and a 52.9% equity ratio. Looking forward, we are evaluating options to file an electric rate case in New Mexico, a natural gas rate case in Minnesota and rate cases in Colorado later this year. Moving to data centers. We are making solid progress on our target pipeline and are in active negotiations on several ESAs. We remain on track to meet our goal of contracting our total base plan by the end of this year, as we have spoken about before. We also continue to make strong progress on the Smokehouse Creek wildfire claims process. We've resolved 187 of the 253 submitted claims, which we continue to view as constructive. In addition, we have settled or dismissed 11 of 27 lawsuits. We have committed to $176 million in settlement agreements, of which $123 million has been paid through the second quarter of 2025.
Based on current information and the settlement activity, we are reaffirming the low end of our estimated liability of $290 million, which remains well below our insurance coverage of approximately $500 million as we described in our earnings disclosure. Regarding the Marshall trial, we are preparing for trial starting September 25 and expect it to conclude by mid- to late November. Please see our earnings release and slides for additional disclosure on Marshall and Smokehouse Creek. Moving to guidance. We are reaffirming our 2025 guidance range of $3.75 to $3.85 per share. We remain confident in our ability to deliver long-term earnings growth in the upper half of our 6% to 8% target range. Updates to key assumptions are included in our slides and earnings release. With that, I'll wrap up with a quick summary. Xcel Energy posted strong second quarter 2025 earnings of $0.75 per share. We continue to lead the clean energy transition, while ensuring safe, clean and reliable service and keeping customer bills as low as possible.
We now have visibility to $15-plus billion of opportunity in our investment pipeline. We continue to make investments to reduce risk to our system and communities from extreme weather, alongside constructive support from our states. We maintain a strong balance sheet and credit metrics using a balance of debt and equity to fund accretive growth. And finally, we reaffirm our 2025 EPS guidance of $3.75 to $3.85. We remain confident in our ability to deliver long-term earnings growth in the upper half of our 6% to 8% target range. This concludes our prepared remarks. Operator, we will now take questions.
分析師問答
Our very first question today is coming from Carly Davenport of Goldman Sachs.
Maybe to start on the line of sight to the CapEx upside moving from that $8 billion up to $15 billion. I guess how should we be thinking about the potential conversion of that upside into the base capital plan next quarter? Is there a spend that could fall outside from a timing perspective or any regulatory considerations that could keep dollars out of the base plan update? Just any color there would be helpful.
Carly, I'll keep this brief. Regarding the SPS RFP, we are still in the early stages of that process. We plan to file with the New Mexico and Texas commissions in August and hope to receive decisions on the certificates of need in the first half of next year. In Minnesota, we are continuing to address the RFPs, and we have significant transmission projects in SPP and MISO. Most of this is expected to occur between 2026 and 2030, with some projects starting sooner. Generally, we take a conservative approach from a regulatory standpoint, so we will provide clear and transparent information in Q3 about what is included in our base plan and what is not. Overall, we feel optimistic about our progress, having increased the $15 billion-plus line of sight in terms of developments in Minnesota and SPS. We believe we have one of the strongest growth prospects in the industry, and we will ensure we present this clearly in Q3.
Just to add on to what Brian said, I agree with everything. Look, these projects are largely generation and transmission-related in the incremental need category. And while a lot of it is driven by reliability needs of the existing footprint, some of it's driven by growth as well. And we know as a company, as an industry, there's tremendous need for electricity in this country right now to meet growing demand from all the things I mentioned in my prepared remarks. And so we think that this incremental need is real. It's going to materialize and whether it's in the front 5 or 6 or 7, it's definitely coming towards our territories to support reliability and to support growth.
Yes. And I think about above the Colorado resource plan that we're working through right now and expect a commission decision here in Q3 that spend, the commercial operations for those projects is through 2031. So that's both going to be in this 5-year and kind of that incremental CapEx for longer.
Great. I appreciate all that color, super helpful. And then maybe just on the SPS resource plan, as you pointed to that in your previous answer. Just could you remind us on your turbine procurement position just as we think about executing on the gas generation included in that plan? If I recall, when you initially filed it, it was supposed to come into service by kind of the 2030 time frame. So could you just lay out the details on that front?
Sure. Happy to, Carly. In the prepared remarks, I said that we had 19 turbine reservation slots to support either projects that we already know are coming or we will need them for. I think the SPS portfolio requires 9 of those 19. And so I think we're largely ready to supply those on time.
Yes. We consider our overall scale and relationships with our OEMs and the need for gas generation across our footprint. We reserve turbine slots in the 2027-2028 timeframe well ahead of the market so we can deliver on these projects because we see a significant need for gas generation across all of our operating companies to integrate renewables and ensure reliability. We're well positioned from that perspective, not only on the EPC side but also on the OEM side, especially given the demand on EPCs and the construction of gas units across the country.
Next question will be coming from Nicholas Campanella from Barclays.
I wanted to address OBB, specifically regarding the treasury order expected in the next few weeks. It appears that your interest in renewable development remains consistent now that we have moved past this stage. However, if the time frame for safe harbor is reduced, how do you see that impacting your plans? I understand that you took significant advantage of safe harbor under the original 45, so I wanted to confirm that you don't anticipate any negative outcomes, but I'll let you elaborate.
Sure, that's a complex question, so if I miss any parts, please remind me to touch on them. Looking at our $45 billion base plan, we've made progress by starting physical construction on several projects last year and continuing to do so this year in the first half. We're confident about our base plan and the additional $15 billion in projects we have in sight. We believe we are well-positioned to deliver these projects for our customers and are making good progress in terms of start-up construction. Regarding treasury guidance, the term "beginning to construction" has a long-standing definition, and we've been actively engaging with our industry partners in Washington. We anticipate some developments by mid-August, although I won't speculate on what those may entail. We're committed to continuing physical work on our projects and appreciate the guidance as it comes. Overall, we feel very well situated with our current position and the generation needs of our customers.
Okay. And then just with the $15 billion of CapEx upside becoming more of a reality now, just that should boost pressure higher on rate base growth. Your cash flow profile is already improving from the investments you're making today? And then you kind of talked about the depreciation benefits of OBBB and we could have sales growth later in the plan as well. So just as we kind of think about getting further out in the plan. How should EPS growth kind of track against rate base growth? Should we be kind of expecting similar types of equity issuance? Or is that kind of improving in your view?
If I think about it, I'll take that in a couple of different ways, again, really excited about the growth prospects and delivering for our customers here as we see the demand growth increase. From an equity perspective, no, we've always been managing a strong balance sheet. We do a balanced mix of debt and equity. If you look at our earnings release in our Q, we issued over $1 billion of equity via ATM in Q2. And so that really our base plan had $4.5 billion of equity, and we already accomplished $2.5 billion between before late last year and this ATM issuance. So we're in a really good place, and we'll continue to do that. We do see the incremental capital as we always said, coming with a balanced mix of debt and equity and roughly rule of thumb we've always given is that 40% equity and we view that ATM is our plan to be, but we'll also look at other products, mandatory converts as our equity needs to grow to fund our accretive growth. As I think about that translating from rate base growth to EPS growth, obviously, we'll provide a holistic update in Q3 around our new 5-year capital plan, our incremental pipeline, our sales growth, rate base growth. And even what we said last year when we moved to 6% to 8%, we talked about being above the high end at times, and I think that's a good way to think about it.
Okay. Very fair. And just one last one on Marshall. I know that trial in September, I think mediation deadline was today, but just is settlement of that fully off the table for now? Or is there still an opportunity to do that into trial and just taking your temperature there?
Nick, it's Bob. Thanks for the question. Look, so technically, the court order mediation concluded at the end of July, but that doesn't mean the parties don't continue to talk. As we step back and think about the trial broadly in the fire broadly, we continue to maintain that our equipment didn't start the second ignition in the wildfire, and we're prepared to go to court, as Brian indicated in his prepared remarks at the end of September, and that trial is likely to last through middle to late November. Between now and then, you're probably going to see some filings back and forth from plaintiffs and us around pre-trial briefs and things like that. But we're planning to go to trial. We're always open to settlement discussions, but we have to start with the idea that our equipment didn't cause that second ignition, and we maintain that.
Next question will be coming from Jeremy Tonet of JPMorgan.
I was just wondering if you could turn to the competitive transmission opportunities. How do you think about incorporating them into your plan? Do you probability weight the chance of winning contracts here? Or do you include them kind of on a binary basis?
Jeremy, I can speak broadly about it. We don't include them in our capital plan unless they're one. And we're very disciplined on the competitive side. You don't see us bidding on projects generally outside of our service territories. So pretty disciplined. I mean we look at all of our growth capital that we have within our service territories, the transmission we need to build in SPP, MISO longer term Colorado and all the generation. You don't expect us to be chasing competitively bid transmission projects kind of outside of our service areas.
Got it. Understood. And I just want to, I guess, turn to the data centers a little bit more. What is your contracting progress on the base data center assumption here? And can you provide any more color on the counterparty type, long-term ramp for the portion of your base forecast currently contracted?
Jeremy, let me start. This is Bob, and then I'll kick it over to Brian. As a company, we're very excited about the opportunity to serve this type of critical infrastructure. We have about 1.1 gigawatts of data centers under construction and under contract. And our plan is for by the balance of the year to hit another sort of gig of data centers, ultimately hitting about 2.5% by 2030 time frame. And then we've got a really robust pipeline behind that high-quality stuff that we're working on right now of 7 or so gigs that I would talk about is maybe Tier 2 opportunities, and then there's even Tier 3 and beyond stuff beyond that total. So really excited as I sit and think about our business, we have interest in all parts of our 3 operating areas, the upper Midwest, Colorado and the Desert Southwest and for different reasons. Each of those regions are very attractive to our data center counterparts, whether you're a hyperscaler or a data center developer. With specific contract stuff, I'll kick it over to Brian tell the ramp profile. But big picture, I think we see this as a real growth opportunity, a real opportunity to grow sales on our system, bring rates down for all of our customers and be beneficial for both hyperscalers as well as our existing customer base.
We are making significant progress in the ESA negotiations with various counterparties, including those in Minnesota, Wisconsin, and Colorado. Some of these are expected hyperscalers, and we are advancing with their system impact studies, facility studies, and land assessments, moving towards finalizing the terms of the agreements. Additionally, we have a new opportunity in Amarillo, Texas that we are currently working on. However, we do not plan to update our data center slide every quarter. Our pipeline remains strong, and as Bob mentioned, we continue to receive inquiries and look forward to executing the agreements we have discussed for the remainder of the year.
Got it. Very helpful there. And just a quick last one, if I could. If you could speak a bit more on the gain on debt repurchases there? And was this contemplated or the plan or any other color there?
Yes, Jeremy. No, it wasn't part of our plan. What we saw is we used it opportunistic. It's a great tool. When you think about we saw some headwinds in our venture capital investments related to clean energy. And you know this is a challenging market for clean energy. And so you saw some negative mark-to-market this year in the first half, and we just used that to offset that. So not an earnings driver at all.
Next question will be coming from Julien Smith of Jefferies.
Bob, let me ask you this. I mean, you say at times, we can do the math. But if I heard you right earlier in the call, I mean, it seems like you might actually be doing the math for us here, at least as it pertains to the third quarter update. I mean, are you guys actually going to refresh the full suite of guidance in a more affordable way with that roll forward?
Yes. So I think, as always, our third quarter update has a full and comprehensive update on all of the assumptions, whether it's sales or capital deployment, rate base growth, earnings growth, financing needs, et cetera, and we plan to do a full roll forward on the third quarter call.
Going back to your returns on equity in the PSCo context, you have the distribution rider in play. How do you view the potential for improved earned returns there? This may be one of the key factors affecting the relationship between rate base and earnings, especially in the medium term. How do you feel about those prospects, particularly in light of the 7.8?
Yes, Julien, I can address that. You’re referring to a rolling 12-month average of 7.8%. The distribution rider has been an effective tool for us. We’ve made significant investments in our distribution systems that benefit our customers in terms of both resilience and increased capacity. This year, the rider was capped, so it is only partially implemented now, with full implementation expected next year. We anticipate that the 7.8% will improve as we progress through the year and continue to improve next year. We are actively working on this, and once the distribution rate is fully implemented, it should help us tackle some of these issues next year.
Yes. I also think Brian mentioned in his prepared remarks that we were looking at potential cases in Colorado at the end of the year. That's a composite return on equity. We have done a lot of work to enhance the electric side of that return on equity, while the gas has some mechanisms that still lag. Considering the majority of the capital in that company going forward will be electric, we expect the electric return on equity to continue improving, as Brian mentioned, whether it's through a distribution rider, a renewable energy rider, a transmission rider, or a new rate case.
Yes. So next question is coming from Steve Fleishman, Wolfe Research. I think we lost our operator.
Well, that might be me. I thought I lost the call. So just a follow-up on the question regarding the kind of OBBB and executive orders. Do we need to be concerned at all about federal land issues with respect to your renewable projects?
We don't have any projects on federal land, so that's an easy answer.
I prefer straightforward answers. Regarding the topic of the Marshall Fire, Bob, you mentioned that you don’t believe you caused a second ignition. Your slides also indicate that much of the damage was already occurring from the first ignition. I assume that remains part of your court case as well?
Yes, definitely, Steve. When I reflect on the trial as a whole, the report indicates that the fire started on land owned by the 12 tribes. The initial ignition faced winds nearing 100 miles per hour for over an hour and twenty minutes, which led to the fire spreading into the towns in Colorado. At some point, there's a claimed second ignition. We believe, for the trial, it needs to be demonstrated that we were negligent in the upkeep and operation of our lines regarding this second ignition. This leads us into discussions about liability, specifically how damages are apportioned based on causation. Overall, we are confident in the circumstances and evidence in our case and are ready to proceed.
Okay. And then there is still an opportunity to kind of settle if you deem that it makes sense.
Sure. There's no prevention from a settlement proposal. We've got probably 2 months before the trial begins. And you could settle even during the pendency of the trial. So there's lots of opportunity there. But again, we feel very good about our facts, and we're prepared to go to trial.
We'll now move to Sophie Karp of KeyBanc.
I have a follow-up on the trial. Could you remind us if there was any sort of range of estimate on the damages? I know that ultimately that will be decided at the second trial, but what are the estimates that are currently being contemplated?
Sophie, it's Bob. I think you got it right. The structure of the trial is such that we look at liability in the first trial and in the second trial would be any damages if we get that far. We don't have an aggregate estimate of damage claims. What we do believe is that from the insurance companies, there was about $2 billion worth of property damage that they paid off in their claim process.
Got it. My second question is about the growth opportunities that lie ahead for you. It seems that you will likely need some equity to support that growth, especially since your current valuation does not reflect these opportunities in my view. Have you considered or are you planning to explore options besides equity raises, such as selling off some non-core assets or those you consider less essential to your electric operations? How should we approach this?
Sophie, I can address that. I mentioned earlier that ATM is part of our strategy, but we will also consider mandatory and convertible options. We have a solid balance sheet and are open to issuing equity to support that growth. We have consistently stated that we are not particularly interested in minority interest sales. We see our assets as essential, and if we were to make any changes, it would be for strategic purposes, not to cover investments we need to make. We have maintained a disciplined approach on the strategic side for the past 20 years.
We'll now move to Paul Patterson of Glenrock Associates.
Can you hear me?
You're breaking up again. So next question is Paul Patterson with Glenrock Associates.
Hello? Can you hear me?
Yes, sir. Your line is open, sir.
Okay. Gentlemen it appears he did not hear us. Right now, we do not have any further questions. I'll turn the call over to Mr. Brian Van Abel for any additional closing remarks.
Thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions.
Thank you very much, sir. Ladies and gentlemen, that will conclude today's conference. You may now disconnect. Have a good day and goodbye.