8-K: Xcel Energy Reports Solid 2023 Earnings, Reaffirms 2024 Guidance

Xcel Energy announced its 2023 financial results, with GAAP earnings per share of $3.21 and ongoing earnings per share of $3.35, and reaffirmed its 2024 EPS guidance of $3.50 to $3.60 per share.

Summary

• Xcel Energy's 2023 GAAP diluted earnings per share were $3.21, up from $3.17 in 2022.
• The company's ongoing diluted earnings per share for 2023 were $3.35, compared to $3.17 in the previous year.
• Xcel Energy reported 2023 GAAP earnings of $1.77 billion, an increase from $1.74 billion in 2022.
• Ongoing earnings for 2023 were $1.85 billion, compared to $1.74 billion in 2022.
• The company has reaffirmed its 2024 EPS guidance of $3.50 to $3.60 per share.
• Xcel Energy's average residential electric and natural gas bills have been 28% and 14% below the national average over the last five years, respectively.
• The company retired the first of three coal-fired units at the Sherburne County Generating Station in Minnesota.
• Xcel Energy is targeting long-term annual EPS growth of 5% to 7% and annual dividend increases of 5% to 7%.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with solid earnings and reaffirmed guidance, but there are some concerns about increased expenses and potential liabilities from the Marshall Wildfire litigation. The company's commitment to clean energy and long-term growth is encouraging.

Positives

• Xcel Energy achieved a 19th consecutive year of meeting its earnings guidance.
• The company's ongoing earnings per share increased to $3.35 in 2023, up from $3.17 in 2022.
• Xcel Energy's customer bills remain among the lowest in the country.
• The company is making progress on its clean energy transition, including retiring a coal-fired unit.
• Xcel Energy is projecting a 2% to 3% increase in weather-normalized retail electric sales for 2024.

Negatives

• Xcel Energy experienced a $34 million loss due to a jury verdict related to the Comanche Unit 3 litigation.
• The company incurred $72 million in workforce reduction expenses in 2023.
• Depreciation expense is projected to increase by approximately $250 million to $260 million in 2024.
• Interest expense is projected to increase by $130 million to $140 million in 2024.
• The company is facing potential liabilities related to the Marshall Wildfire litigation, which could exceed insurance coverage.

Risks

• Xcel Energy faces risks related to operational safety, including its nuclear generation facilities.
• Commodity risks associated with energy markets and rising energy prices could impact the company.
• Changes in regulation and reductions in credit ratings could affect Xcel Energy's financial performance.
• The company is exposed to cybersecurity threats and data security breaches.
• Xcel Energy is subject to risks related to climate change, weather events, and natural disasters.
• The Marshall Wildfire litigation could result in significant liabilities exceeding insurance coverage.
• The company is facing challenging labor market conditions and the ability to attract and retain a qualified workforce.

Future Outlook

Xcel Energy reaffirms its 2024 EPS guidance of $3.50 to $3.60 per share and expects to deliver long-term annual EPS growth of 5% to 7% and annual dividend increases of 5% to 7%.

Management Comments

• Bob Frenzel, chairman, president and CEO of Xcel Energy, stated that 2023 was another strong year for Xcel Energy, its customers, communities, and investors.
• He also highlighted the company's 19th consecutive year of meeting earnings guidance, which is critical to maintaining a competitive cost of capital.
• Frenzel noted the advancement of the Colorado Energy Plan and the retirement of a coal-fired unit in Minnesota as key milestones.

Industry Context

Xcel Energy's focus on clean energy transition and infrastructure investments aligns with broader industry trends towards decarbonization and grid modernization. The company's performance is being closely watched as a bellwether for the utility sector's ability to balance financial performance with environmental goals.

Comparison to Industry Standards

• Xcel Energy's ongoing ROE of 8.79% for its operating companies is comparable to other large regulated utilities, but varies by subsidiary.
• For example, NSP-Minnesota's ongoing ROE is 9.11%, while PSCo's is 7.77%.
• Companies like NextEra Energy (NEE) and Duke Energy (DUK) also have a focus on renewable energy, but their financial metrics and regulatory environments differ.
• Xcel's capital expenditure plan of $39 billion over the next five years is significant, reflecting the industry-wide need for infrastructure upgrades and renewable energy investments.
• The company's customer bills being below the national average is a positive differentiator compared to peers facing rising costs.

Legal Proceedings

• Xcel Energy and PSCo are facing litigation related to the Marshall Wildfire, with potential liabilities exceeding $500 million.
• PSCo intends to appeal the jury verdict in the Comanche Unit 3 litigation.

Stakeholder Impact

• Shareholders can expect continued dividend growth and potential capital appreciation.
• Customers will benefit from lower bills compared to the national average.
• Employees may be impacted by workforce reductions and changes in the company's structure.
• Communities will benefit from the company's investments in clean energy and infrastructure.

Next Steps

• Xcel Energy will host a conference call to review financial results on January 25, 2024.
• The company will continue to execute its capital expenditure plan from 2024 to 2028.
• Xcel Energy will continue to pursue constructive outcomes in pending rate cases and regulatory proceedings.
• The company will submit a Just Transition Plan filing in Colorado by June 1, 2024.
• SPS expects to issue an RFP for new generation in mid-2024.

Key Dates

Keywords

Xcel Energy, Earnings, EPS, Renewable Energy, Clean Energy, Rate Case, Capital Expenditures, Financial Results, Utilities, Dividend