埃克西爾能源 (XEL) 2011 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Xcel Energy 2011 first quarter earnings conference call. (Operator instructions) This conference is being recorded today, Thursday, April 28, 2011.

I would now like to turn the conference over to Paul Johnson, Managing Director of Investor Relations and Assistant Treasurer. Please go ahead.

Thank you, and welcome to Xcel Energy's first quarter 2011 earnings release conference call. With me today are Ben Fowke, President and Chief Operating Officer, Dave Sparby, Vice President and Chief Financial Officer, Teresa Madden, Vice President and Controller, Scott Wilensky, Vice President, Regulatory and Resource Planning, George Tyson, Vice President and Treasurer, and Dennis Cole, Vice President and Chief Nuclear Officer.

Today we plan to cover our first quarter results and accomplishments. In addition, we are reaffirming our annual earnings guidance of $1.65 to $1.75 per share. Please note that there are slides that accompany the conference call, which are available on our web page. I want to remind everyone that some of our comments may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filings with the SEC.

You will notice that today's press release refers to both GAAP and ongoing earnings. First quarter 2011 ongoing earnings were $0.42 per share, compared with $0.42 per share in 2010. First quarter 2011 GAAP earnings were also $0.42 per share, compared with $0.36 per share in 2010. While there was no difference between GAAP and ongoing earnings in 2011, during the first quarter of 2010 ongoing earnings excluded the impact of adjustments related to the discontinued COLI program and adjustments associated with Medicare Part D subsidies. Management believes ongoing earnings provides a more meaningful comparison of earnings results, and is representative of Xcel Energy's fundamental core earnings power. As a result, we will only discuss ongoing earnings during this call. Please see our earnings release for a reconciliation of GAAP to ongoing earnings.

With that, I'll now turn the call over to Ben.

Thank you, and good morning.

As Paul mentioned, we reported first quarter ongoing earnings of $0.42 per share, compared with $0.42 per share in 2010. I'm pleased to report that in addition to delivering a solid quarter financially, we continued to execute on our strategy. This morning I'll focus my prepared comments on three items of current interest. Our decision to terminate the Merricourt Wind Project, our preliminary take on EPA's proposed MACT rules, and the depth of our safeguards at our nuclear operations.

Earlier this month, we terminated our agreement with enXco for the development of the 150-megawatt Merricourt Wind Project in North Dakota. This was slated to be a $400 million project going into service in late 2011. We terminated the agreements because the project did not close by the contractual closing date and certain conditions required for closing were not satisfied. These conditions included a failure to resolve concerns about potential adverse consequences the project could have on two endangered species, and a failure to obtain the certificate of site compatibility. Given the uncertainty around the timing, cost and prospects for resolving these issues, we concluded it was in the best interests of our customers to terminate our agreements for this project, based on our contractual rights. As a result of this decision, all of our investment in the project has been refunded. We are now forecasting 2011 capital expenditures of approximately $2 billion. We've also updated our rider revenue guidance for 2011 to reject the termination of this agreement. We remain interested in owning additional wind capacity, and we are evaluating wind ownership opportunities in North Dakota.

Turning to the recently proposed EPA rules. Last month, the EPA issued their proposed MACT tools addressing emissions. Like many of our peers, we are in the process of evaluating what, if any, impact they may have on our operations. Based on our preliminary review, we do not anticipate that the rule will require extensive changes to our plans at NSP and PSCo. Our proactive steps to reduce emissions through the [MERP] project in Minnesota and our plans for the Clean Air Clean Jobs Act in Colorado put us in good position to comply with these rules. The proposed rules may have a significant impact on our facilities at SPS. However at this point, we do not anticipate a material change to our five-year CapEx forecast.

Lastly, I will comment on the safety of our nuclear fleet. In response to the recent events at Fukushima Nuclear Plants, all US nuclear power plants, including our Prairie Island and Monticello plants, have assessed their capability to maintain safety in the face of severe adverse events, including the loss of significant operational and safety systems. Nuclear power plants are built to withstand environmental hazards, including earthquakes, hurricanes, tornadoes and floods. Even plants like ours, that are located outside of areas with extensive seismic activity, are designed for safety in the event of such a natural disaster. If either of our plants experienced an adverse event, our normal safety systems would keep the reactor core cool. We have two diesel generators for each unit, each one capable of supplying power to meet all the safety-related needs for that unit, should the plant be disconnected from the power grid. In addition, our fuel tanks are stored and sealed below ground, which protects them from natural disasters. Should diesel generators fail, our facilities are equipped with battery backup systems. In addition, we have pumped driven by steam turbines that do not depend on electricity. In the unlikely event that none of the normal and back-up safety systems were available to keep the reactor core cool, we have portable pumps that could be hooked up to supply cooling water into the reactor from the Mississippi River. Finally, our plants have multiple sources of getting water into the core. For example, our Monticello plant has eight independent ways to get water into the core during an emergency, while our Prairie Island plant has nine independent ways to get water into the core.

In summary, we believe the design of our plants, their geographic location, and the robust nature of our systems significantly reduce the likelihood of an emergency on the scale experienced in Japan. That said, there are always lessons learned from a disaster. We are participating in an industry working group. The group's focus will center on understanding the events that occurred at Fukushima, and recommending actions to improve the ability of US plants to withstand similar events. In the meantime, we continue to work to complete the life extension at our Prairie Island plant, and our planned power upgrades at both Monticello and Prairie Island. We anticipate the time frame may be delayed a bit, but we don't anticipate any material changes to our plans.

I will now turn the call over to Dave, who will walk you through our first quarter results and provide a regulatory update. Dave?

Thanks, Ben.

Now let's take a look at the details of our first quarter results, beginning with a review of each of our subsidiaries. For the quarter, earnings at PSCo decreased by $0.03 per share, due to the impact of lower seasonal rates, as well as higher O&M expenses, property tax and depreciation expense. These expense increases were partially driven by capital investments made in 2010, including Comanche 3 and the natural gas plants we acquired in Colorado. At NSP Minnesota earnings increased by $0.04 per share, due to interim rate increases in Minnesota and North Dakota as well as moderate sales growth and colder weather. The positive items were partially offset by higher O&M expenses, property tax and depreciation expense. Earnings at NSP Wisconsin and SPS were both flat for the quarter.

Next I'll discuss the drivers that affected various lines of the income statement, beginning with retail electric margin. Our first quarter electric margin increased by $90 million, driven by two primary items. Retail rate increases in Colorado, Texas and Wisconsin, along with interim rate increases in Minnesota and North Dakota increased electric margin by $34 million. The impact of rate increases was partially offset by the impact of lower seasonal electric rates in Colorado. Electric margin also increased by $34 million, due to recovery of the revenue requirements associated with PSCo's acquisition of two natural gas facilities in late 2010. Please note that the increase in revenue requirements was partially offset by expenses, such as higher O&M, depreciation and property taxes. Increased rider, conservation and DSM revenue, as well as increased sales and weather, also contributed to the quarterly improvement in electric margin.

Natural gas margins increased $13 million in the first quarter, due primarily to increased conservation and DSM revenue, which is partially offset by expenses. In addition, colder than normal weather also helped to offset a modest sales decrease.

Turning to expenses, first quarter O&M expenses increased about $29 million, or about 6%. This was driven by several items, including higher employee benefit expenses related to pension, higher labor costs, as well as higher plant generation and nuclear plant generation costs. We expect that O&M expense will increase up to 4% in 2011. The quarterly increase is slightly higher than our annual guidance, largely due to the timing of O&M expenses. Depreciation and amortization expense increased about $19 million, or 9%. This increase is consistent with our expectations, and was driven by several plants coming online in 2010, including Comanche 3, the Nobles Wind Farm, and the acquisition of two natural gas plants. Finally, other taxes increased approximately $15 million, or 19%, largely due to increased property tax from capital projects going into service, primarily in Minnesota and Colorado.

Next, I'll discuss our 2011 financing plans. We've updated our plans to reflect a 2011 capital expenditure forecast of approximately $2 billion. As a result, we no longer plan to issue first mortgage bonds at NSP Minnesota this year. The rest of our financing plans remain unchanged. In addition to periodic issuance and repayment of short-term debt, we plan to issue the following securities. Approximately $250 million of first mortgage bonds at PSCo during the second half of 2011, SPS may issue approximately $150 million of bonds during the summer of 2011, and we anticipate issuing approximately $75 million of equity through Xcel Energy strip and various benefit programs in 2011. Naturally, our financing plans are subject to change, depending on capital expenditures, internal cash generation, market conditions and other factors.

Lastly I'll provide an update on the rate cases that are currently underway in our various jurisdictions. In Minnesota, we have a pending electric case seeking a 2011 rate increase of $148 million based on a 2011 forecast test year, 11.25% ROE, rate base of $5.6 billion and a 52.6% equity ratio. Interim rates of $123 million, subject to refund, went into effect in January. We also requested to increase 2012 rates by an additional $48 million for known and measurable cost increases. Earlier this month, interveners filed direct testimony. The primary intervener, the Office of Energy Security, recommended an increase of approximately $57 million for 2011, based on a recommended ROE of 10.53% and an equity ratio of 52.6%. They also recommended an additional $34 million rate increase for 2012. While the overall recommendation was lower than anticipated, we've planned to file rebuttal testimony next month in which we will provide additional support for our position and adjust our request, as appropriate. We're confident that we can work through many of the more complex issues, such as income tax adjustments and pension costs, which represent a large portion of the difference. We anticipate a decision from the Minnesota Commission in the fourth quarter.

In Colorado, we have a $26 million gas request pending. The request is based on a 2011 forecast test year, a 10.9% ROE, and an equity ratio of 57%. In April, interveners filed testimony and we were disappointed by the recommendations. The staff recommended a rate decrease of $20 million, based on a historical test year, a 9.375% ROE, and a hypothetical capital structure with an equity ratio of 51.8%. Next month, we'll file rebuttal testimony, in which we'll provide a significant amount of additional support for our position on a number of issues, including the cost of capital. Ultimately, we expect to reach a constructive outcome.

In North Dakota, we're requesting a $20 million electric rate increase. Interim rates of $17.4 million went into effect in February. Intervener testimony is scheduled for June, and rebuttal testimony in July. We anticipate a decision later in 2011.

As SPS, we filed an electric rate case in New Mexico seeking an annual base rate increase of $20 million. Notably, the rate filing is based on a 2011 test year, adjusted for known and measurable changes for 2012. Rates are expected to be effective in early 2012.

In Texas, the Commission approved our settlement, which provided for an overall increase of $23 million in 2011 and a step-in increase of $13 million for 2012. While there is still work to be done, we continue to make progress at SPS.

Looking ahead, we're required to file an electric and gas rate case in Wisconsin early in June. We'll update you on this request during our second quarter conference call. You may have noticed that we've adjusted some of our key guidance assumptions in our earnings release. Specifically, we reduced our rider revenue depreciation and interest expense assumptions to reflect the cancellation of the Merricourt project, a reduction of $0.02 per share for 2011. The overall impact is a reduction in EPS of about $0.02 per share for 2011. However, we've had another solid quarter and remain on-track to deliver earnings within our annual earnings guidance of $1.65 to $1.75 per share.

With that, let's open it up for questions.

(Operator Instructions)

And our first question is from the line of James Bellessa with D.A. Davidson. Please go ahead.

Good morning, guys. This is actually Michael Bates here with Jim.

I just wanted to follow up on your comment, Dave, about your taxes other than income taxes. It's higher this year, because you brought on new capital projects, but is the $96.6 million level that we saw in the first quarter a good kind of run rate, going forward? Was there anything that you saw as irregular about that?

You know, property tax rates may creep up throughout the year. I mean, what we've seen is primarily attributable, of course, to property additions. But all of the counties we serve, of course, are continuously evaluating their property tax rates, and it is possible that we could see some additional creep towards the end of the year.

Great. Thanks, guys.

Thank you.

(Operator Instructions)

And I'm showing no further questions. Please continue with any closing remarks.

Yes. I want to thank everyone for attending the call this morning. If there's any follow-up questions, please direct them to our IR team. Thank you very much for attending.

Ladies and gentlemen, this concludes the Xcel Energy first quarter 2011 earnings conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1-800-406-7325, followed by the access code 4431007 and the pound sign.

Thank you for your participation. You may now disconnect.