埃克西爾能源 (XEL) 2003 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Your conference will be underway shortly. Ladies and gentlemen, thank you for standing by. Welcome to the Xcel Energy first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. If you should require any assistance during the call, press zero, then star. This conference is being recorded. I would now like to turn the conference to our host, Mr. Richard Kolkmann, go ahead.

Thank you, Tom. Welcome to Xcel Energy's first quarter 2003 earnings conference call. I'm Dick Kolkmann, Manager of Investor Relations. With me today is Dick Kelly, Vice President CFO of Xcel Energy. In addition, we have several other people from the company to help provide answers to your questions. Some of the comments that will be made today contain forward-looking information; significant factors that could cause results to differ from those anticipated are described in our earnings release and Xcel Energy and NRG, NRG Energy filings with the Securities and Exchange Commission. Now I will turn the call over to Dick Kelly.

Thanks Dick. For the first quarter of 2000 I am pleased to announce that Xcel Energy reported preliminary GAAP earnings per share of 48 cents per share, compared with 29 cents per share in 2002. Excluding the impact of NRG and the gain on the sale of Viking Gas, Xcel Energy reported pro forma earnings per share from continuing operations worth 33 cents per share for the first quarter of 2003 compared with 35 cents per share for the first quarter of 2002. Our pro forma earnings exceeded the consensus estimate of 29 cents per share.

I'd like to draw your attention to the share account. As a result of operating losses at NRG, Xcel recorded a loss from continuing operations. In this situation, the accounting rules require us to use actual shares outstanding to calculate EPS, not common stock and equivalents. So, our EPS for the first quarter of 2003 was based on 399 million shares, instead of approximately 425 million shares. This provided a benefit of 2 cents per share. For the year, we still expect the common stock and equivalents to average $4 -- 425 million shares.

Our utilities subsidiaries provided strong earnings of 37 cents per share for the quarter compared with 38 cents for -- per share last year. Sales growth, higher than expected short-term margins and lower OEMs expenses offset higher interest expense and shared dilution and expense. Although utility EPS is down slightly due to more shares outstanding, utility net income increased in 2003 over 2002. Our other non-regulated subsidiaries and holding company costs resulted in a loss of 4 cents per share for the first quarter of 2003 compared with a 3-cent loss for the same period in 2002. Keep in mind as a result of using the actual shares outstanding, we did not reduce interest expense at the holding company for the convertible notes as would have been required under the if-converted methodology.

NRG recorded earnings of 10 cents per share for the first quarter of 2003, results reflecting a gain of 48 cents a share from the transfer of [killing home] to the lenders. This is an offset to the impairment charge in 2002 -- related to [killing home] from transferring project to lenders. Exclude -- excluding this gain, NRG had a loss of 38 cents per share compared with a loss of 6 cents per share in 2002. Pending a financial restructuring, NRG's's operating margins remain insufficient to cover its financing costs. Overall, it was a good quarter for our core business and gotten strong results out of the block. We are reaffirming our 2003 earnings guidance with no change from what we originally provided in March.

Overall, we expect Xcel Energy's 2003 pro forma earnings per share from continuing operations to be between $1.15 and $1.20 per share. This pro forma earnings guidance does not include the financial results of NRG or the gain on the sale of Viking. In our earnings release we have including a reconciliation of our pro forma guidance to GAAP EPS. In addition, assuming we meet our earnings guidance, we expect to generate cash from operations of approximately $1.3 billion for Xcel Energy without NRG in 2003. Our projected cash from operations does not include the positive impact from the tax benefits associated with the write-off of our investment in NRG. After funding our 2003 capital expenditures projected at approximately $900 million and our project annual dividend requirement of $300 million, we expect to be able to generate approximately $100 million of positive cash flow in 2003. We are focused on achieving or exceeding our guidance with a solid first quarter and we're off to a good start.

Let me provide you an update on dividends situation. On March 26th this year, we announced we would have to delay the declaration of the dividend on our common stock. As we've previously disclosed, a provision of the public utility company holding act requires that retained earnings -- one component of shareholders' equity -- be a positive value as condition to declare and pay a dividend. As a result of write-offs and operating losses at NRG, our retained earnings are not sufficiently positive for us to declare and pay the quarterly dividend at this time.

In December of 2002 we requested a waiver from the SCC to allow us to pay dividends out of capital surplus in the event our retained earnings were negative. In March 2003 we provided the SCC is final 2002 audited financial statements and details on our preliminary settlement with the NRG creditors. I met with the SCC on April 14th and explained our situation in person. The meeting went very well and we are hopeful that the SCC will act in a timely manner on our waiver request. Even if the request is not granted to pay dividends out of capital surplus, we are forecasting the prior to the end of the year our retained earnings will be sufficiently positive to allow us to declare dividends at that time. It is important to emphasize that we have more than enough cash to pay the dividend and it's our intention make every effort to pay out the full 75 cents per share in 2003.

Now a brief update on NRG. As you are aware, NRG is involved in an involuntary bankruptcy proceeding in Minnesota the at this point in time we're waiting for the judge to issue a ruling. There are several potential outcomes that could occur. The judge could one, dismiss the involuntary bankruptcy proceeding, two, put NRG into bankruptcy in Minnesota, or three, defer a decision. Until the judge issues a ruling we can not speculate on the final outcome. However, we do not expect a decision to affect our sentiment with NRG creditors. We are in the process of finalizing the documentation of the settlement. Basic terms have been agreed to by Xcel Energy, NRG and representatives of NRG's creditors. In the event of a bankruptcy filing, we could expect NRG would file with the bankruptcy court a plan of reorganization and disclosure statement which will include and incorporate the terms of the settlement at the time of or shortly after the bankruptcy filing. Releases from NRG creditors will be solicited during the summer in connection with the solicitation of approval of the NRG plan of reorganization. The releases will be effective upon the effective date of the plan of reorganization, which we expect to occur prior to the end of the year.

Finally, I want to draw your attention to our liquidity footnote in our earnings release. You will find our liquidity continues to improve even as we have retired long-term debt. As a result of strong liquidity, we terminated the $100 million facility we had with Perry Capital on king Street. We have also provided detail on our immediate financing plans for the next few months. We are taking proactive steps to renew our credit facilities at NSP Minnesota and Public Service Co. of Colorado well ahead of when they mature. We had our bank kick off meeting in mid-April and we expect to close on the facilities in May. The initial commitments have been excellent.

In addition, we plan to issue long-term debt at our various operating Companies during 2003. Our intention is to ensure strong liquidity and to take advantage of our improved credit profile by reducing some of the higher coupon debt that currently exists. In summary, I'd like to remind you that in January, Wayne Brunetti our Chairman and CEO, indicated to you that our priorities for the year were NRG, the successful completion of the Colorado rate proceeding, to improve our bond rating and deliver good financial performance in 2003. As you look at the first four months of the year, I think you'll agree, we've made significant progress. We have reached a tentative settlement with NRG creditors. We have settled the Colorado Public Service rate case. We have refinanced $250 million of debt and saved over 100 basis points in the process. We have developed a proactive financing plan to enhance liquidity, lower interest expense and improve our credit matrix and we have delivered strong first quarter results in our core utility business. We still have much to accomplish before we consider the year a complete success but we feel we are off to good start and are determined to continue delivering on our goals. With that we will now open for questions.

Our first question today comes from the line of Charles Fishman from AG Edwards. Go ahead.

Good morning.

I thought the $100 million term loan at the holding company was supposed to go through October and it was my understanding that that was almost a safety net for some of the financings coming up. Can we assume, since you terminated this early, that you're feeling very comfortable about the refinancing through the rest of the year?

Yes, that's correct. It did go through October, but we did terminate it because we are feeling very positive about where we are.

Okay, thank you.

Our next question comes from the line of Teresa Ho with Bank of America. Please go ahead.

Yes, good morning.

Good morning.

My question relates to the NRG volunteer petition. Can you go over -- I guess better in terms of the parties involved. I understand that Shaw has a claim, but it's not on NRG, it's actually on Pike, versus the other creditors' claims, whether it's disputed or undisputed, and how I guess you're looking at that in terms of whether you would appeal or not.

A lot of that you know, I can't give you much of an update on it. I think you're right about the Shaw group. It's filed against NRG for Pike, FORTAstar has filed, as has First Energy. That's for the judge to decide in Minnesota what he does or doesn't do with the claims. We haven't heard from the judge, so we really can't speculate what all that means and what the final outcome might be. We have to wait for the judge to make his ruling.

Do you know when that ruling could come? I mean, is this expected to come so you could file for bankruptcy in May?

He indicated when we had the hearing in April 10th that he would make his decision as quickly as he could and was hoping by the end of the month. So we're hoping any day.

Okay, thank you.

Next, we have a question from the line of Elizabeth Parrella with Merrill Lynch.

I'm sorry if you addressed this in the overview. I missed the beginning of the call. Can you update us on more detail on the discussions with -- or the documentations process -- with the NRG creditors. Seems to be taking a little bit longer than you might have been thinking at the end of March when you announced it. And I guess just update us on where that is as well as getting the lock-UPS from the creditors. And if you could also address this issue of how much you need to get -- you talked about a simple majority, yet I guess the final approval would require 85%. If you could just go into that.

Yes, we continue with the negotiations. We have an agreement in principle, there's a few details we're still trying to wrap up. Hopefully today, tomorrow, sometime very quickly we'll have those all done. The lockup agreement the lawyers have agreed on the language, but they've not been sent out to anybody, but we do have agreement on the language, so we are making progress, even though at times it seems it's very painful and it's slower than most would expect. We are making progress. What we really are waiting for is the judge in Minnesota to rule, that on the case -- that's what the time line is right now. Yeah, we expect to get a majority of the banks -- 85% is -- we need to have an 85% of the creditors give grant Xcel the releases that we've asked for before the plant will become effective.

But you don't need 85% to file a pre-negotiated thing?

That's correct, we do not.

Okay, thank you.

A question from the line of Carrie Stevens with Morgan Stanley. Go ahead.

Hi, good morning.

Good morning.

I just wanted to address the issue brought up with NRG and the pending resolution of a decision in Connecticut. If that may entail an additional write-down of NRG and what that magnitude may be?

The decision just came out yesterday. We don't have a written decision, just oral. We're trying to analyze what it means now. Your conclusion is correct that if -- depending what the decision is, there may or may not be a write-down, based on what the cash flow from those assets are over a period of time and factoring what the ferc allow us. Our first reading of it, we're encouraged, but until we find out what the exact order says, we're unable to predict right now what it might be.

Okay. And I just wanted to also, if you have a preliminary estimate of maybe you know, the savings from these refinancings that you've been doing at the utilities?

No, we don't. We haven't calculated that yet, but we will get that out as we start working through the refinancings that we can do and what obviously the interest rates might be.

I'm assuming that would be more of an '04 impact than '03.

There will be some '03 burkts the vast majority in '04, correct.

All right, thank you.

Next, a question from Michael Lloyd with Duetsche Banc.

Quick question, in the first quarter, sale of [killing home] was finalized. NRG had 385 of cash as of December 3. What is the net effective on cash from the sealing of [killing home].

[killing home] was not sold, just turned over to the creditors. So there's be no impact on the transaction of [killing home].

We have a question from Steven Staden from AG Edwards. Go ahead.

I was wondering about your comments concerning the involuntary actions filed recently, but I think you've already addressed that.

Okay.

We have a question from the line of Susan Vorhees with JP Morgan.

Last one on just a follow-up on the involuntary -- in terms of any outstanding issues that are before the bankruptcy judge. Are there any remaining issues to be decided that he could delay on or have all arguments been submitted and made?

I think -- you know, I think all have been made so far, but I think until he decides, obviously other people can bring up issues -- for example First Energy and FORTAstar. Nothing is definitive or closed out. I think other issues could come up, but we don't know of any.

With FORTAstar, they have filed a jointer petition, but it has to be determined whether or not they're allowed in?

That's correct.

Okay.

Next, we have a question from the line of Danielle Sites from Smith Barney.

Good morning. Do you anticipate a response as far as the SCC waiver pretty soon? I mean, or do you think you may have to wait until year-end?

I'm hoping we'll get some kind of response from the SCC fairly quickly. They've been very helpful and supportive. We've given them all the information that they have requested from us. So I'm hoping that within a reasonable time here they can rule for us.

Before the end of the second quarter?

That's what we're hoping for, yes.

Okay, great, thanks.

We have a question from the line of David Bullock with Sandal Asset Management. Go ahead.

Hi, guys, my question was answered, it was relating to the four-star capital issue -- I mean, it was answered, but I'm wondering what the -- you know, what your view of the process is on that.

I really don't know. I would have to wait and see what the judge does first. I mean, it's hard to speculate until he makes his first move, then we'll see what happens after that. I really don't know.

And there's no guidance in terms of the time frame?

No, no.

Okay.

We have a question from the line of Paul Devis with Value Line. Go ahead.

Hi, do you have any other rate cases pending or anything upcoming besides getting at the Colorado settlement approved?

No, we do not. Wisconsin we do Wisconsin every other year, so Wisconsin will be up, but that's it.

Thank you.

We have a question from the line of Jay Medina with Forest Investments. Go ahead.

Hi, do you guys have an up -- update with the IRS, whether they've given you the green light for deducting the NRG potential payments, and any other rulings that you might need from them?

No, we haven't asked for any kind of ruling from the IRS. We think it's standard what we'll file for, and you know, there's no reason for us to go ask. We have not done that.

And final question is, you were talking about refinancings at the subsidiary levels -- are you gonna be dividending some cash flows up to the parent level?

Our normal -- what we normally do -- yes.

Okay, thanks.

We have a question from the line of Carl Sellinson from Krode Management. Go ahead.

Good morning, Dick. After saying the announcement about David Wig staying at DWAP, I wonder if if you could share information about who will run NRG once it needs somebody other than you.

Other than me would be good. No, I mean, not that I can't share the information, I don't have any information on that. That's a process that will continue on and certainly we'll look for input from the banks and bonds and other people.

Okay, thank you.

Ladies and gentlemen, if there are any additional questions or comments, press the 1 at this time. And we have a follow-up from Teresa Ho and Banc of America. Go ahead.

Just a quick question in terms of the timing with the dividends issue. What are your expectations of getting the waiver before your June 11th shareholder meeting?

That would be really nice if we did get that. I would like to think that that's a possibility, but again, the SCC event has been cooperative and helpful, so I'm assuming they will get through it as quickly as possible and help us through this problem, but I'm hopeful we'll get there. Okay, thank you. If there are no further questions, we'll wrap up the call, Tom.

Okay, we have one final question. With you like to take that?

Yes.

It's from the line of David Bullock please go ahead.

I was wondering if you could talk a little bit about the dividend and just as a follow-up. What's the motivation there? In other words, if you're paying an out of capital, isn't there a tax consequence to shareholders?

No.

Meaning, doesn't it lower their tax basis? In the common stock.

Yeah -- there's different rules how you calculate the tax basis. Right now we don't think it would have any impact on the tax basis of the shareholders.

Okay, but can you explain why?

Why don't we -- this is a fairly detailed question. Why don't we get back with you and go through the detailed explanation with you.

Okay, thank you.

Thank you.

I'd like to thank you all for participating our call today. If you have any follow-up questions, you can call myself, Dick, or Paul, and we will be around all day to answer your questions. Thank you again.

Ladies and gentlemen, this conference will be available for replay after 12:30 P.M. Today until May third at midnight. You may access the AT&T executive play-back service any time at 1-800-475-6701. Enter the access code of 681071. International participants may dial 1-320-365-3844. Those numbers once again are 800-475-6701. International: 1-20-365-3844. And the access code is 681071. That concludes our conference for today. Thanks for your participation and for using AT&T's executive