10-Q: Xcel Energy Reports First Quarter 2025 Results, Impacted by Higher Expenses

Xcel Energy's first quarter 2025 earnings per share decreased to $0.84, driven by higher operating and maintenance expenses, depreciation, and interest charges, partially offset by increased infrastructure investment recovery.

Summary

• Xcel Energy's first quarter GAAP and ongoing diluted earnings were $0.84 per share, compared to $0.88 per share in the same period of 2024.
• The decrease in earnings per share was primarily due to higher O&M expenses, depreciation, and interest charges, which were partially offset by increased recovery of infrastructure investments.
• Electric revenues increased due to recovery of higher fuel costs, non-fuel riders, and regulatory rate outcomes.
• Natural gas revenues also increased due to regulatory rate outcomes, recovery of higher gas costs, and conservation revenue.
• O&M expenses increased due to operational activities, including higher nuclear generation costs, distribution system maintenance, and increased insurance and benefits costs.
• Depreciation and amortization expenses increased due to system investment and depreciation rate updates.
• Interest charges increased due to higher debt levels and interest rates.
• Xcel Energy reaffirmed its 2025 ongoing earnings guidance of $3.75 to $3.85 per share.
• The company expects long-term annual EPS growth of 6% to 8% and annual dividend increases of 4% to 6%.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While earnings are down, the company reaffirmed guidance and expects long-term growth. Litigation and cost pressures are concerns, but the company is taking steps to mitigate them.

Positives

• Electric and natural gas revenues increased due to regulatory rate outcomes and recovery of higher costs.
• Xcel Energy reaffirmed its 2025 ongoing earnings guidance.
• The company expects long-term annual EPS growth and dividend increases.
• PSCo's earnings increased due to higher recovery of electric and natural gas infrastructure investments.

Negatives

• First quarter earnings per share decreased compared to the prior year.
• O&M expenses, depreciation, and interest charges increased.
• NSP-Minnesota's earnings decreased due to increased O&M expenses and depreciation.
• NSP-Wisconsin's earnings decreased due to higher O&M expenses, depreciation, and interest charges.

Risks

• The company faces risks related to operational safety, commodity markets, regulation, credit ratings, economic conditions, cybersecurity threats, weather events, environmental laws, and labor market conditions.
• The company is involved in litigation related to the Marshall Fire and the Smokehouse Creek Fire Complex, which could result in material liabilities.
• The company's ability to meet customer energy requirements and execute its capital expenditure program depends on maintaining an efficient supply chain, which is subject to disruptions and inflationary pressures.
• The company is subject to various tariffs and trade complaints that could impact its procurement and development activities.
• The company's excess liability insurance coverage has been reduced and premiums have increased, which could increase its exposure to potential liabilities.

Future Outlook

Xcel Energy's 2025 ongoing earnings guidance is a range of $3.75 to $3.85 per share, and the company expects long-term annual EPS growth of 6% to 8% and annual dividend increases of 4% to 6%.

Management Comments

• Xcel Energy expects to deliver an attractive total return to our shareholders through a combination of earnings growth and dividend yield.

Industry Context

The announcement reflects the ongoing challenges and opportunities facing the utility industry, including the need to invest in infrastructure, manage rising costs, and navigate evolving regulatory landscapes. The company's focus on renewable energy and grid modernization aligns with broader industry trends.

Comparison to Industry Standards

• Xcel Energy's long-term EPS growth target of 6-8% is comparable to other large-cap utilities like NextEra Energy (NEE) and Duke Energy (DUK), which also aim for similar growth rates.
• The company's dividend payout ratio target of 50-60% is within the typical range for utilities, which are often favored by income-seeking investors.
• The company's capital expenditure plans are significant, reflecting the industry-wide need to invest in renewable energy, grid modernization, and infrastructure upgrades, similar to companies like Southern Company (SO) and American Electric Power (AEP).
• The challenges related to wildfire risk and insurance coverage are also common among utilities operating in the western United States, such as PG&E (PCG) and Edison International (EIX).

Legal Proceedings

• One case remains active in the Gas Trading Litigation which includes a multi-district litigation matter consisting of a Wisconsin purported class (Arandell Corp.).
• PSCo is aware of 307 complaints, most of which have also named Xcel Energy Inc. and Xcel Energy Services Inc. as additional defendants, relating to the Marshall Fire.
• SPS is aware of approximately 25 complaints, most of which have also named Xcel Energy Services Inc. as an additional defendant, relating to the Smokehouse Creek Fire Complex.

Stakeholder Impact

• Customers may see changes in their rates as a result of regulatory proceedings and cost recovery mechanisms.
• Shareholders are expected to receive an attractive total return through a combination of earnings growth and dividend yield.
• Employees are impacted by changes in pension and benefit obligations.
• The company's operations and investments impact the environment and local communities.

Next Steps

• NSP-Minnesota expects to file for approval of recommended projects in summer 2025 related to the 1,200 MW of wind assets to replace capacity and reutilize interconnection rights associated with the retiring Sherco coal facilities.
• NSP-Minnesota and NSP-Wisconsin plan to file for the requisite approvals of the selected resources with the MPUC and PSCW, respectively, in the second half of 2025 related to the 1,600 MW of wind, solar, storage or hybrid resources to interconnect to the NSP System, including reutilization of the interconnection rights associated with the retiring Sherco coal units, and 650 MW of solar and storage resources to specifically reutilize the interconnection rights associated with the retiring King coal unit.
• SPS expects a PUCT decision on the settlement by the third quarter of 2025 related to the Texas System Resiliency Plan.
• SPS expects a portfolio selection filing in the second quarter of 2025 followed by a certificate of need filing for the specific assets in the third quarter of 2025 related to the New Mexico Resource Plan (IRP).
• A CPUC decision is expected by the third quarter of 2025 on the settlement in the Wildfire Mitigation Plan.
• A CPUC decision on the settlement is expected by the third quarter of 2025 related to the PIMs associated with the generation projects in the portfolio.
• A CPUC decision on the resource plan is expected by the fall of 2025 (Phase I) with the competitive solicitation for resource additions expected in early 2026 related to the 2024 Colorado Electric Resource Plan.
• A PSCW decision is anticipated in the fourth quarter of 2025 related to the Wisconsin Electric and Natural Gas Rate Case.
• A NDPSC decision is expected in late 2025 related to the 2024 North Dakota Electric Rate Case.

Key Dates

Keywords

Xcel Energy, earnings, financial results, rate case, regulatory, EPS, revenue, expenses, litigation, wildfire, capital expenditures, debt, dividends, insurance, supply chain, tariffs