Xcel Energy Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Xcel Energy is a regulated electric and natural gas utility serving customers across multiple U.S. states. Quarterly results are seasonal and are not necessarily indicative of full-year performance.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Operating revenue | $3.751 billion | $3.541 billion | Up 6% |
| Operating income | $510 million | $507 million | Up $3 million |
| Net income | $380 million | $362 million | Up 5% |
| Diluted EPS | $0.70 | $0.67 | Up $0.03 |
| Cash from operating activities | $1.140 billion | $(136) million | Improved $1.276 billion |
| Capital/construction expenditures | $942 million | $1.024 billion | Down $82 million |
- Electric margin, defined by the company as electric revenue less fuel and purchased power, rose to $1.539 billion from $1.484 billion. Natural gas margin increased to $380 million from $348 million. These measures reflect regulated utility margins, not consolidated operating margins.
- Revenue growth included higher natural gas revenue, primarily reflecting commodity prices and sales; associated gas costs are generally recovered through regulatory mechanisms. Electric revenue was lower year over year, partly due to reduced wholesale revenue, while electric margin increased.
- Management attributed the $0.03 EPS increase principally to higher electric margin, a lower effective tax rate and higher natural gas margin. Higher depreciation, O&M and interest expense partly offset those gains. The effective tax rate was negative 15.2%, versus negative 6.5%, primarily reflecting wind production tax credits and regulatory tax items.
Cash, debt and liquidity
- Operating cash flow swung to $1.140 billion from a use of $136 million, primarily because of the timing of Winter Storm Uri cost deferrals and regulatory balances in the prior-year quarter. Investing activities used $952 million; financing activities used $264 million. Cash and restricted cash ended the quarter at $90 million, down from $166 million at year-end 2021.
- At March 31, 2022, long-term debt, including its current portion, was $22.385 billion; short-term debt was $996 million. Together these totaled approximately $23.4 billion. Current maturities of long-term debt were $851 million.
- Committed revolving credit facilities totaled $3.1 billion, with $2.064 billion available at March 31, including support for commercial paper and letters of credit. The facilities expire in June 2024. Cash was $90 million at quarter-end.
- Dividends paid were $240 million. The quarterly dividend declared was $0.4875 per share, up from $0.4575 in Q1 2021.
Material changes, outlook and management commentary
- GAAP and ongoing diluted EPS were both $0.70 for the quarter; the company reported no adjustments between those measures.
- 2022 GAAP and ongoing EPS guidance remained $3.10–$3.20. Assumptions include constructive regulatory outcomes, normal weather, weather-normalized retail electric sales growth of approximately 1%–2%, natural gas sales growth of approximately 1%, and O&M expense growth of approximately 1%.
- Long-term objectives are annual EPS growth of 5%–7% from a 2021 base of $2.96, dividend growth of 5%–7%, a 60%–70% dividend payout ratio and senior secured debt ratings in the A range. Guidance depends on assumptions and may differ from actual results.
- Capital spending, regulatory rate recovery and financing needs remain important to results. The company planned 2022 debt issuance of approximately $2.2 billion across the parent and utility subsidiaries, subject to change based on market conditions, regulatory outcomes and other factors.
- Winter Storm Uri: Xcel Energy deferred approximately $1 billion of extraordinary natural gas, fuel and purchased-energy costs. In Minnesota, intervenors recommended disallowances, including up to $148 million from the OAG; an ALJ decision was expected in late May 2022 and an MPUC decision in Q3 2022. Colorado recovery settlements and Texas fuel recovery proceedings were also pending.
- Comanche Unit 3 experienced an extended outage beginning in January 2022. PSCo did not plan to seek recovery of incremental replacement-power costs, estimated at approximately $25 million assuming normal conditions; $9 million had been incurred by March 31.
- Solar projects face supply-chain and potential tariff uncertainty following a U.S. Commerce Department investigation into imported solar panels and cells. The company noted possible project delays, higher costs and contingency planning needs.
- A March 2022 class-action suit relates to the Marshall Fire in Colorado. The cause remained under investigation; the company said it had seen nothing indicating its equipment or operations caused the fire. In the remote event of liability, damages could exceed insurance coverage and materially affect results or financial condition.
- Other risks include regulatory decisions on rates and cost recovery, environmental compliance and remediation, commodity and interest-rate exposure, credit and counterparty risk, supply constraints, inflation, weather, cybersecurity and geopolitical events. Management reported no material changes to previously disclosed risk factors.
Key investor verification points
- Track final regulatory decisions on Winter Storm Uri cost recovery and potential disallowances, particularly in Minnesota.
- Verify whether rate-case and rider outcomes support the $3.10–$3.20 2022 EPS guidance and stated sales, expense and financing assumptions.
- Monitor Comanche Unit 3 outage costs and service restoration, as well as the status and potential exposure of Marshall Fire litigation.
- Assess solar project timing and costs as supply-chain conditions and the Commerce Department investigation develop.
- Review cash generation, planned debt issuance, capital expenditure requirements and available credit capacity alongside the company’s dividend and credit-rating objectives.