Xcel Energy Inc. 2019 Form 10-K Summary
Business context and reporting period
Xcel Energy is a regulated electric and natural gas utility serving approximately 3.7 million electric and 2.1 million natural gas customers across eight states. This annual report covers the fiscal year ended December 31, 2019; quarterly figures below include the three months ended that date.
Financial and operating performance
| Metric | 2019 | 2018 |
|---|---|---|
| Operating revenue | $11.529 billion | $11.537 billion |
| Operating income | $2.104 billion | $1.965 billion |
| Net income | $1.372 billion | $1.261 billion |
| Diluted EPS | $2.64 | $2.47 |
| Operating cash flow | $3.263 billion | $3.122 billion |
| Cash used in investing activities | $4.343 billion | $3.986 billion |
| Cash provided by financing activities | $1.181 billion | $0.928 billion |
| Total assets | $50.448 billion | $45.987 billion |
| Long-term debt | $17.407 billion | $15.803 billion |
| Dividends declared per share | $1.62 | $1.52 |
Electric revenue was $9.575 billion, down from $9.719 billion, while natural gas revenue rose to $1.868 billion from $1.739 billion. Management reported electric margin increased $200 million and natural gas margin increased $54 million. O&M expense declined $14 million (0.6%); depreciation and amortization rose $123 million (7%), and interest expense rose $73 million (10.4%). The effective tax rate fell to 8.5% from 12.6%.
For fourth-quarter 2019, revenue was $2.798 billion versus $2.880 billion; net income was $292 million versus $214 million; diluted EPS was $0.56 versus $0.42.
Cash and cash equivalents were $248 million at year-end. Current liabilities were $4.568 billion. In addition to $17.407 billion of long-term debt, the balance sheet reported $702 million of current maturities and $595 million of short-term debt. Available committed credit capacity was $2.984 billion at December 31, 2019; the filing reported $2.100 billion of total liquidity, including cash, as of February 18, 2020. Utility capital and construction expenditures were $4.225 billion in 2019.
Material changes versus the prior comparable period
- Net income increased 8.8% and diluted EPS increased $0.17, while total revenue was essentially flat.
- Management attributed earnings growth mainly to higher electric margins, regulatory rate outcomes, higher natural gas margins, and lower O&M. These benefits were partly offset by higher depreciation and interest and lower allowance for funds used during construction (AFUDC).
- Electric retail sales declined 1.2% overall; weather-normalized retail electric sales declined 0.3%. Weather-normalized natural gas sales increased 2.7%.
- Long-term debt increased $1.604 billion, and total assets rose $4.461 billion, reflecting substantial investment and financing activity.
- In 2019 Xcel adopted lease accounting, recognizing approximately $1.7 billion of operating-lease right-of-use assets and corresponding liabilities; the company said adoption did not otherwise significantly affect its financial statements.
Guidance, outlook, risks and unusual items
For 2020, management guided to GAAP and ongoing EPS of $2.73–$2.83. Key assumptions include constructive regulatory outcomes, normal weather, approximately 1% growth in weather-normalized retail electric and firm natural gas sales, O&M growth of 1%–2%, and an effective tax rate near 0%. The filing cautions that ongoing EPS may differ from GAAP EPS for unplanned or unknown adjustments.
Xcel forecast $21.970 billion of base capital expenditures for 2020–2024, including $4.630 billion in 2020. Planned funding over the five years includes $13.905 billion of cash from operations (net of dividends and pension funding), $6.665 billion of new debt, and equity issuance. The separate $650 million MEC acquisition is excluded from that capital forecast; it was completed in January 2020 through a nonregulated subsidiary. The February 2020 quarterly dividend was raised 6.2% to $0.43 per share.
The company’s strategy calls for a 60% renewable generation mix by 2030, an 80% carbon-emissions reduction from 2005 levels by 2030, and an aspiration for carbon-free electricity by 2050. Plans include significant wind and solar additions, grid investment, and coal retirements. Approved or proposed retirements, regulatory approvals, cost recovery, project timing, and customer affordability remain important execution dependencies.
Key risks include regulatory decisions that could delay or limit recovery of costs or returns; environmental compliance and climate-related requirements; commodity and fuel-price exposure; severe weather, wildfire and other operational events; nuclear safety, decommissioning and spent-fuel storage; cybersecurity and physical security; capital-market access, interest rates and credit ratings; and customer demand and distributed generation. The filing identified a potential Texas coal-plant emissions rule that could require approximately $600 million of scrubber investment, though the rule was stayed and under reconsideration. The company expects many compliance costs to be recoverable through rates, but recovery is not assured.
Environmental operating costs were approximately $345 million in 2019, with average annual expense estimated at approximately $400 million for 2020–2024. Pension funding contributions were $154 million in 2019, with $150 million contributed in January 2020. Nuclear decommissioning AROs were $2.1 billion at year-end. The auditor issued unqualified opinions on the financial statements and internal controls; rate-regulation accounting was identified as a critical audit matter. Management reported effective disclosure controls and no material internal-control weakness.
Most important facts for investors to verify
- Progress and final regulatory outcomes for major rate cases, riders, resource plans, and recovery of capital and environmental costs.
- Whether 2020 EPS guidance assumptions—including regulatory outcomes, normal weather, sales growth, and cost estimates—remain achievable.
- Execution, cost, and in-service timing of the planned $21.970 billion five-year capital program and renewable projects, plus funding needs and resulting debt/equity issuance.
- Debt maturities, credit-facility availability, covenant headroom, credit ratings, and the timing and proceeds of the pending forward-equity settlement.
- Exposure to coal-retirement and emissions requirements, nuclear decommissioning and waste obligations, remediation, and wildfire or severe-weather losses.
- Effects of the January 2020 MEC acquisition and related PPA and lease-accounting changes on future earnings, cash flow, and reported obligations.