Xcel Energy XEL announced an agreement to sell its Michigan natural gas operations to SEMCO ENERGY Gas Company and electric operations to Upper Peninsula Power Company (“UPPCO”). The transaction involves 6,000 natural gas customers and 9,000 electric customers across Gogebic and Ontonagon counties. The divestiture is subject to state and federal regulatory approvals and expected to close in 2027.
The proposed divestiture is expected to streamline Xcel Energy’s operations and improve capital allocation by allowing greater focus on its core utility markets. This move could support infrastructure modernization, enhance grid reliability and help meet rising electricity demand, strengthening the company’s long-term growth prospects.
Xcel Energy’s proposed divestiture could enhance financial flexibility and operational efficiency by allowing it to focus investments on the core service territories. This strategic move may support grid modernization, efficient capital allocation and regulated rate base expansion, strengthening XEL’s long-term earnings growth prospects, subject to regulatory approvals.
Recently, another utility, Suncor Energy SU, planned an offshore asset divestiture for $1.2 billion in upfront cash, which will strengthen financial flexibility and reduce future liabilities. This transaction allows Suncor to focus investments on its core, long-life oil sands assets, improve capital allocation and support free cash flow growth, enhancing long-term profitability and shareholder returns.
Robust Investment Plan Fuels Long-Term Growth
Xcel Energy plans to invest $60 billion during 2026-2030, with more than $10 billion in additional investment opportunities. These investments in generation, transmission and distribution infrastructure are expected to drive approximately 11% annual regulated rate base growth through 2030, supporting the company's long-term earnings growth and financial performance.
Xcel Energy expects retail electricity sales to grow nearly 5% annually through 2030, supported by rising data center demand and industrial expansion. With nearly 4 gigawatts (GW) of data center capacity targeted for contracting by 2027, the company anticipates 6-8% or higher annual EPS growth, strengthening its long-term investment appeal.
Rising AI Data Center Demand Fuels Electric Utility Growth
Growing electricity demand from AI-powered data centers is creating significant long-term growth opportunities for electric utilities. The increasing need for uninterrupted power supply is driving investments in new generation facilities, transmission upgrades and grid modernization. These capital expenditures are likely to strengthen regulated rate bases, boost revenues and support steady earnings growth, enhancing the industry's long-term investment prospects.
Utilities like Dominion Energy D and FirstEnergy FE are benefiting from accelerating electricity demand driven by AI-powered data centers. Dominion Energy Virginia had approximately 53.8 GW of contracted data center capacity as of July 2026, supporting its $65 billion investment plan through 2030.
Meanwhile, FirstEnergy's data center contracted load and pipeline reached 24.8 GW in second-quarter 2026, reinforcing its $36 billion Energize365 investment program and long-term growth prospects.
XEL’s Price Performance
In the past six months, Xcel Energy’s shares have lost 12.5% compared with its industry's decline of 13.6%.
Price Performance (Six months)
Image Source: Zacks Investment Research
Zacks Rank
Xcel Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).