Business context and reporting period
Xcel Energy Inc. filed this Form 10-K for the fiscal year ended December 31, 2018. It is a regulated electric and natural gas utility serving approximately 3.6 million electric and 2.0 million natural gas customers across eight states, through four operating companies.
Financial performance and key metrics
Unless stated otherwise, amounts are in millions of dollars. The filing presents full-year results; fourth-quarter figures are noted separately.
| Metric | 2018 | 2017 |
|---|---|---|
| Operating revenues | $11,537 | $11,404 |
| Operating income | $1,965 | $2,223 |
| Net income | $1,261 | $1,148 |
| Diluted EPS, GAAP | $2.47 | $2.25 |
| Ongoing diluted EPS | $2.47 | $2.30 |
| Cash from operating activities | $3,122 | $3,126 |
| Cash used in investing activities | ($3,986) | ($3,296) |
| Cash from financing activities | $928 | $168 |
| Long-term debt | $15,803 | $14,520 |
| Total assets | $45,987 | $43,030 |
| Dividends declared per share | $1.52 | $1.44 |
- Electric revenues were $9,719, versus $9,676; natural gas revenues were $1,739, versus $1,650.
- Electric margin was $5,865, down $54, including a $314 reduction associated with TCJA-related customer benefits. Before that impact, electric margin increased $260. Natural gas margin was $896, up $69, including a $39 TCJA-related reduction; before that impact it increased $108.
- Operating expenses increased $391. Depreciation and amortization rose $163 (11%), O&M rose $82 (3.6%), and interest expense rose $37 (5.6%). Income tax expense fell to $181 from $542; the effective tax rate was 12.6%, compared with 32.1%, reflecting tax reform and related items.
- Retail electric sales increased 3.2% and natural gas deliveries increased 15.1%. Weather-normalized retail electric sales grew 1.3%; weather-normalized natural gas sales grew 2.4%.
- Year-end cash was $147; current assets were $3,094 and current liabilities were $4,460. Short-term debt was $1,038 and long-term debt was $15,803. As of February 20, 2019, committed credit facilities provided $1,931 of available capacity and total cash liquidity of $1,934, including $3 of cash.
- Fourth-quarter 2018 revenue was $2,880, net income $214, and diluted EPS $0.42, compared with $2,796, $189, and $0.37, respectively, in fourth-quarter 2017.
Material changes versus the prior comparable period
- Net income rose 9.8% and GAAP diluted EPS increased from $2.25 to $2.47. Ongoing EPS rose from $2.30 to $2.47; 2017 ongoing EPS excluded a $23 one-time, noncash TCJA-related tax expense.
- Operating income declined to $1,965 from $2,223, despite higher revenue. The TCJA reduced customer rates and reported margins, while depreciation, O&M, and interest costs increased.
- Operating cash flow was nearly flat, down $4. Investing cash outflow increased $690, primarily due to wind-project spending. Financing cash inflow increased $760, reflecting debt and equity issuance and lower long-term debt repayments.
- Capital investment expanded: net property, plant and equipment increased to $36,944 from $34,329. Long-term debt increased by $1,283.
- Wind and clean-energy development continued, including the Rush Creek 600 MW wind farm entering service in Colorado and construction starting on the Sagamore and Hale County projects. The company reported a 40% reduction in customer-serving generation CO2 emissions from 2005 levels.
Outlook, management commentary, risks and contingencies
- 2019 GAAP and ongoing EPS guidance is $2.55–$2.65. Key assumptions include normal weather, constructive regulatory outcomes, weather-normalized electric sales broadly consistent with 2018, natural gas sales growth of 0%–1%, and an effective tax rate of approximately 6%–8%.
- Management targets long-term annual EPS and dividend growth of 5%–7%, a dividend payout ratio of 60%–70% of ongoing EPS, and customer bill increases at or below inflation. In February 2019, the quarterly dividend was raised 6.6% to $0.405 per share.
- Management forecasts $20.1 billion of base capital expenditures for 2019–2023, including $5.5 billion in 2019. The stated funding plan includes $13.1 billion from operating cash after dividends and pension funding, $6.2 billion of new debt, and equity issuances.
- Clean-energy plans include a 2050 vision to serve customers with 100% zero-carbon emissions and an 80% emissions-reduction objective by 2030, relative to 2005. These objectives and investment plans depend on regulatory approvals, project execution, tax credits, and cost recovery.
- Key risks include regulatory decisions and cost recovery, capital-market access and interest rates, fuel and commodity prices, weather and natural disasters, cyber and physical security, nuclear plant safety and spent-fuel disposal, environmental requirements, pension assumptions, and customer adoption of distributed generation.
- Material matters include pending rate and transmission proceedings; appeals and potential customer refunds related to TCJA treatment; litigation involving transmission rights and line-extension claims; and environmental remediation and compliance. A potential Texas rule requiring dry scrubbers at SPS’s Tolk plant could entail approximately $600 million of investment; the rule was under reconsideration and a stay was in effect. Xcel also reported groundwater standards exceedances at Colorado coal-ash sites, with corrective-action costs not yet clear.
- NSP-Minnesota recorded regulatory assets for terminating the Benson and Laurentian biomass PPAs ($103 million and $109 million, respectively); recovery was approved, and termination was expected to save customers more than $600 million over ten years. Nuclear decommissioning AROs were $1.968 billion; permanent federal spent-fuel disposal remains unavailable.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; management reported effective controls.
Most important facts for investors to verify
- Whether regulators approve the rate recovery and customer-refund treatment assumed in 2019 guidance, particularly for TCJA benefits and pending proceedings.
- Whether EPS guidance is achieved given the specified assumptions for weather, sales, O&M, depreciation, interest expense, and AFUDC.
- How the $20.1 billion five-year capital program is funded and how planned debt and equity issuance affects leverage, credit metrics, and per-share results.
- Whether major wind and generation projects proceed on schedule and within budget, and whether anticipated tax credits and customer savings materialize.
- The eventual cost and regulatory treatment of coal-ash, water, air-emissions, remediation, nuclear decommissioning, and spent-fuel obligations.
- Liquidity and refinancing needs: the company drew the remaining $250 million under its term loan in February 2019, leaving no additional capacity under that loan.