The operator welcomes participants to the Xcel Energy Third Quarter 2023 Earnings Conference Call and introduces the host, Paul Johnson, who is joined by the CEO and CFO. They will discuss the company's third quarter results, business and regulatory developments, capital and financing plans, and provide 2024 guidance. Non-GAAP measures will be discussed and a recent legal decision will be appealed.

The article discusses the third quarter earnings for 2023, which includes a one-time charge related to a legal dispute. The focus of the earnings call will be on ongoing earnings. The company has recorded solid results and has narrowed their guidance for ongoing earnings for 2023 and initiated a guidance for 2024. They have also updated their infrastructure plan for 2024 to 2028, which includes resiliency investments but not clean energy generation investments. These investments could result in an additional capital need and reduced carbon emissions in various states if approved by commissions.

Xcel Energy's resource plans in Colorado and Minnesota demonstrate their commitment to clean energy and their ability to bring benefits to their customers. In Colorado, they plan to double the amount of renewable energy, shut down coal units, and invest in battery storage and dispatchable gas resources. This will result in a significant reduction in carbon emissions and provide economic benefits to local communities. In Minnesota, they have received approval for 350 megawatts of new renewable generation, including a large solar facility at their Sherco plant.

In October, the company issued an RFP for wind energy and filed a resource plan in New Mexico. They anticipate needing 5,000-10,000 MW of new generation by the end of the decade and have proposed solar and battery projects. Xcel Energy also received funding from the Department of Energy for clean energy innovation projects, including a hydrogen hub and battery pilots. They remain committed to working with policymakers to advance their clean energy goals.

Xcel Energy has been awarded two grants from the DOE for grid resilience and innovation partnerships. One is for $100 million to mitigate the threat of wildfires and improve grid resiliency, while the other is for $464 million to expand transmission and improve reliability. In addition, Xcel Energy has filed a Clean Heat program in Colorado to reduce greenhouse gas emissions and plans to file a similar plan in Minnesota. The company also announced the construction of a $700 million data center in Minnesota, with potential for more growth in the future.

Xcel Energy has not seen any major developments in the Marshall Wildfire litigation and currently has 14 complaints with 675 plaintiffs. They plan to file an updated wildfire mitigation plan next year, which will include a variety of options for consideration. Looking ahead, Xcel Energy is committed to providing clean energy and plans to invest in 15,000 to 20,000 megawatts of new clean generation by 2030. They will continue to innovate their transmission and distribution systems to ensure reliability and are working towards achieving net zero greenhouse gas emissions on their natural gas system. Despite these investments, their residential customer electric and natural gas bills remain below the national average.

The company had a successful third quarter with ongoing earnings of $1.23 per share, driven by lower O&M expenses and increased conservation and demand side management expenses. Electric sales also saw a 1.1% increase, mainly due to strong C&I sales. O&M expenses decreased by $25 million and the company expects them to continue to decline. Progress was made in several regulatory proceedings, including the approval of a settlement in the Colorado electric rate case, resulting in a $95 million rate increase.

The company has received approval for an electric rate case settlement in New Mexico and is working towards a settlement in Texas. They are also expecting a decision on their electric and natural gas rate cases in Wisconsin by the end of the year. The company plans to file for a natural gas rate case in Minnesota and Colorado in the first quarter of next year. They have also executed contracts for production tax credit transferability and anticipate further sales in the fourth quarter. The company has issued a five-year base capital plan with a focus on renewable projects and investments in resiliency and reliability.

In addition to our current capital investments, we have additional opportunities for renewable energy and firm capacity, which could result in $10 billion of additional investment and a 10.7% annual rate base growth through 2028. We have a balanced financing strategy with a mix of debt and equity, and we have updated our 2023 earnings guidance to reflect the latest information. We anticipate strong earnings in the fourth quarter due to incremental revenue, cost management, and better-than-expected sales growth.

The company has announced their 2024 ongoing earnings guidance range and their long-term EPS growth objective. They have executed clean energy plans and proposed a preferred plan in Colorado. They have secured DOE grants for various projects and resolved cases in different states. They are nearing their 2023 earnings guidance and have announced a robust capital investment program. They remain confident in their ability to deliver long-term earnings and dividend growth. The call is now open for questions.

The speaker asks about the credit rating agencies' monetization policies and how it will impact their financing plan. The company has included tax credit transfer ability in their plan and expects it to be included in their credit metrics. They are also excited about the Colorado Energy Plan and have been working on it for two years.

The company has been working collaboratively with stakeholders and the PUC to implement their plan for Colorado customers. The plan includes doubling the renewable portfolio, increasing fossil portfolio, and expanding storage. The process is expected to be completed by early Q1 of next year. The company also has plans for SPS Solar+Storage, a wind RFP, and a resource plan for New Mexico. These projects are expected to be completed in 2022 and 2025.

The speaker discusses the potential for an update to the company's earnings CAGR outlook and other related metrics after getting clarity on commission approvals. The speaker also mentions that equity will continue to be programmatic in the company's five-year plan, with a focus on the 2025-2027 time frame for spending on steel for fuel 2.0 opportunities. The speaker also addresses the commission's exploration of a risk-sharing mechanism for renewable assets and how it may affect the plan.

The company expects to receive some forms of customer protection, capital costs, or energy cost providers as per their proposal submitted to the commission. They have thoroughly examined the plan and believe it complements the state's geographic diversity. The company's long-term sales forecast has been updated to 2% to 3% CAGR, but they believe it could be conservative given the potential growth in data centers, which currently represent less than 1% of their sales. The company is also seeing potential for significant electrification in the oil and gas region, particularly in the Permian Basin. They are working closely with their large customers in the area.

The company has been a leader in transferability and has made great strides in this area. They have increased their target for the year from $200 million to $300 million to $400 million.

In this paragraph, Brian Van Abel discusses the impact of transferability on the power plant's $1.8 billion in raised funds. He mentions that the company was initially conservative in estimating around $200 million, but has already executed two contracts for $250 million and is working on another. He also mentions that they have a $500 million annual transfer of PTC credits and a total of $2.7 billion over their five-year forecast. Additionally, he provides an update on the gas price risk management plan that they need to file in Colorado by November 1st, and mentions the use of a smoothing mechanism to reduce volatility for customers.

The company has been focused on reducing volatility and has proposed various solutions such as additional storage and financial hedging. They have also reduced their reliance on fossil fuels and have accrued significant savings for their customers. The company has also seen a high demand for tax credit transferability and the market has evolved as expected with pricing and demand exceeding supply.

The company is waiting for the treasury to set up their portal and fulfill additional administrative requirements before executing contracts. They have a strong tax department and credit quality, making it easy for them to identify credits and do business. They are also having discussions for longer-term contracts with multiple years and are pleased with the interest from counterparties. The Hydrogen Hub process has been awarded, but it will take about two years for negotiations and final engineering. Capital deployment will not start until the end of the company's five-year plan and the project is expected to be completed by the end of the decade. The project is a $5 billion investment, with half of it being attributable to the company's proposed projects.

Xcel Energy plans to invest $2 billion of company capital and $0.5 billion of federal money in projects in Colorado. This is not included in their financial plan and they are still working with federal offices and state partners to advance these projects. The company is waiting for guidance from Treasury on nuclear qualifying for hydrogen PTC, which is expected in November. The company expects a rate base growth of more than 10% and will need to issue equity to fund accretive growth. It is important for the company to maintain a strong balance sheet.

The company has been consistent in funding incremental growth and there is a slight divergence between rate base and EPS growth. The O&M guidance for next year is expected to be up 1-2%, but this is offset by management actions taken this year. The company is focused on investing in technology and improving processes to reduce costs. The sales outlook is supported by the data center opportunity and is expected to continue at 2-3% beyond 2024.

The company anticipates further acceleration over the five-year plan due to favorable tailwinds and increased activity in the Permian Basin. Sales growth is projected to be 2-3% over the next five years, with potential for even more growth beyond that. There is no significant update on the ongoing Marshall wildfire litigation, with 675 plaintiffs and an estimated $2 billion in damages.

The company has not made any changes or updates to its cases and complaints, which have been consolidated into one. The statute of limitations ends at the end of the year, and it is expected to be quiet until then, with a potential for a few more plaintiffs to join. The company expects to receive a litigation calendar early next year. There may be additional capital investments in Colorado for wildfire mitigation, but nothing on the scale of Steel for Fuel 2.0. The company's renewable aspirations in Colorado have significantly increased.

Bob Frenzel and Brian Van Abel discuss the potential for an acceleration and step change in renewables in Minnesota, with 15,000 to 20,000 megawatts of generation expected by the end of the decade. They mention that there are opportunities for investment in SPS and NSP, with some projects potentially being outside of the current plan period. They also mention ongoing wind and solar RFPs and plans for wind repowering in Minnesota.

The company is looking at opportunities to buy savings for customers and invest in renewables. Despite rising costs in the renewable supply chain, the Inflation Reduction Act has offset these increases and kept the levelized cost of energy affordable for customers. The company has seen a 30-40% increase in capital costs for wind projects, but the IRA and improved technology have kept LCOEs in line with previous projects. The company is able to put wind in service for around $20-22 per megawatt-hour, making it an attractive option for economic development opportunities.

The speaker discusses the potential impact of offshore wind on the East Coast and the economic benefits it could bring. They also mention a 1-2% increase in sales and its corresponding impact on revenue. The speaker then talks about plans for new technology and hydrogen projects, which will likely be put through the traditional regulatory process and added to rate base in the Upper Midwest.

The speaker asks a question about the accounting process for nonmonetary assets and gains and losses related to source ones. The speaker wonders if there are any guidelines from FASB or the IRS and mentions working closely with an audit firm. The speaker also mentions that it is an income tax model election for them.

The company will run all gains and losses through income tax expense on the income statement, including discounts on sales. They hope to have regulatory approval for deferral treatment of the discount, which will then be reflected in cash from operations. The company plans to appeal the $26 million jury award in the Comanche litigation, as they believe they have a strong legal basis for challenging it. This charge was reflected in the third quarter results.

The speaker says that there are no current plans for PPA buy-ins or buyouts, but they may consider opportunities in the future. They have received a $100 million grant from the DOE for wildfire mitigation and are looking for ways to partner with stakeholders in their states. There may not be a significant increase in capital investment opportunities from the grant.

The wildfire mitigation plan in Colorado is expected to be filed soon and will focus on proactive measures to minimize the risk of ignition for customers. The company has received grants and funding for new technology, including a long-duration battery, and is looking for additional opportunities. The CFO thanked participants for joining the earnings call and invited them to contact the investor relations team with any follow-up questions.

This summary was generated with AI and may contain some inaccuracies.