Xcel Energy Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report; quarterly data is included, but the filing is not a standalone fourth-quarter report. Xcel Energy is a regulated electric and natural gas utility serving approximately 3.7 million electric and 2.1 million gas customers across eight states.
Financial performance and condition
| Metric | 2020 | 2019 |
|---|---|---|
| Operating revenue | $11.526 billion | $11.529 billion |
| Operating income | $2.116 billion | $2.104 billion |
| Net income | $1.473 billion | $1.372 billion |
| Diluted EPS | $2.79 | $2.64 |
| Cash from operating activities | $2.848 billion | $3.263 billion |
| Capital and construction expenditures | $5.369 billion | $4.225 billion |
| Long-term debt | $19.645 billion | $17.407 billion |
Electric revenue was $9.802 billion and electric margin was $6.290 billion, up from $9.575 billion and $6.065 billion, respectively. Natural gas revenue fell to $1.636 billion from $1.868 billion; natural gas margin was nearly flat at $947 million versus $950 million. The company reported a $6 million income tax benefit, versus $128 million of tax expense in 2019. The effective tax rate was negative 0.4%, primarily reflecting wind production tax credits and plant-related regulatory differences.
Operating cash flow declined $415 million, principally due to working capital and regulatory asset/liability movements. Investing cash outflow was $4.740 billion, including $5.369 billion of capital expenditures and $684 million of proceeds from the sale of Mankato Energy Center (MEC). Financing cash inflow was $1.773 billion. Year-end cash was $129 million. The company’s February 16, 2021 credit facilities provided $1.804 billion of available liquidity, including cash.
Material changes and key developments
- Net income increased $101 million and diluted EPS rose $0.15. Higher electric margins, lower income taxes, increased AFUDC and lower O&M were partly offset by higher depreciation and interest expense.
- Retail electric sales declined 2.3% overall; weather-normalized, leap-year-adjusted sales declined 3.1%. Residential demand increased while commercial and industrial sales fell, primarily reflecting COVID-19 effects. Sales true-ups and decoupling mechanisms mitigated some revenue exposure.
- Depreciation and amortization increased 10.4% to $1.948 billion, reflecting new renewable facilities and rate changes. Interest charges rose 8.7% to $840 million as debt increased to fund investment.
- Capital investment expanded renewable generation: approximately 1,450 MW of owned wind and about 700 MW of wind PPAs entered service in 2020. Total assets increased to $53.957 billion from $50.448 billion.
- Long-term debt increased, while declared dividends rose to $1.72 per share from $1.62. The company issued $727 million of common stock during the year, including settlement of forward equity agreements.
Outlook, commentary and risks
Management’s 2021 GAAP and ongoing EPS guidance is $2.90–$3.00. Assumptions include constructive regulatory outcomes, modest COVID-19 impacts, normal weather, approximately 1% weather-normalized retail electric sales growth, relatively flat natural gas sales, and relatively flat O&M. Management forecast higher depreciation and property taxes and lower equity AFUDC. In February 2021, the company announced a quarterly dividend of $0.4575 per share, a 6.4% increase.
Base capital expenditures for 2021–2025 are forecast at $23.5 billion, funded principally by operating cash flow, new debt and equity. The company’s clean-energy objectives include an 80% carbon reduction by 2030 from 2005 levels and 100% carbon-free electricity by 2050. Coal retirements, renewable additions, transmission and grid modernization depend on regulatory approvals, execution and cost recovery.
Post-period event: Winter Storm Uri in February 2021 drove preliminary estimated incremental electric and natural gas fuel costs of approximately $1.2 billion through February 16. Xcel expects to seek recovery through regulatory mechanisms but anticipates heightened regulatory review and plans to increase debt issuance to manage payment and collection timing and potential collateral needs.
Principal risks include regulatory disallowance or delayed recovery of costs, climate and environmental requirements, early plant retirements and potentially stranded investment, severe weather and wildfire exposure, commodity supply and price volatility, cyber and physical security incidents, nuclear operations, pension funding, credit ratings and capital-market access. COVID-19 could continue to affect customer demand, bad debt and operations. The filing reports no material off-balance-sheet arrangements beyond those disclosed and states that current litigation is not expected to materially affect the financial statements, while identifying specific proceedings and contingencies.
Most important facts for investors to verify
- Whether regulators approve recovery of the estimated $1.2 billion of Storm Uri fuel costs, and the timing and financing cost of collection.
- Progress and outcomes in key rate cases, riders and resource-plan proceedings, including the Minnesota stay-out agreement and 2021 rate filings in Texas and New Mexico.
- Execution, cost and regulatory approval of the $23.5 billion 2021–2025 capital program, and the resulting debt, equity issuance and credit metrics.
- Whether EPS guidance assumptions hold, especially regulatory outcomes, sales recovery, weather, depreciation, property taxes and AFUDC.
- Material environmental and legal exposures, including coal-ash corrective actions, Texas emissions requirements, wildfire mitigation and the Sherco and Westmoreland proceedings.