埃克西爾能源 (XEL) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Xcel Energy fourth-quarter 2012 earnings conference call. During today's presentation, all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions)

This conference is being recorded today, Thursday, January 31, 2013. At this time, I would like to turn the conference over to Mr. Paul Johnson, Vice President of Investor Relations and Business Development. Please go ahead, sir.

Thank you, and welcome to Xcel Energy's 2012 year-end earnings release conference call. Joining me today are Ben Fowke, Chairman, President and Chief Executive Officer; Teresa Madden, Senior Vice President and Chief Financial Officer; Dave Sparby, Senior Vice President and Revenue Group President; Scott Wilensky, Senior Vice President and General Counsel; George Tyson, Vice President and Treasurer; and Jeff Savage, Vice President and Controller. This morning we will review our 2012 results, update you on recent business and regulatory developments, and reiterate our 2013 earnings guidance. There are slides that accompany today's call available on our web page. In addition, later today, we will post a brief video of Teresa Madden summarizing our financial results.

As a reminder, some of the comments during this morning's conference call 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. Today's press release refers to both ongoing and GAAP earnings. 2012 GAAP earnings of $1.85 per share reflect a $0.03 per share positive impact of the restoration of tax benefits expense in 2010 associated with the federal subsidies for prescription drug plans. This benefit is not included in ongoing earnings, which is consistent with our treatment in 2010. Management believes ongoing earnings provides a more meaningful comparison. As a result, comments this morning will focus on ongoing earnings. I will now turn the call over to Ben Fowke

Well, thanks, Paul, and good morning, everyone. I am very pleased to report 2012 ongoing earnings of $1.82 per share compared to $1.72 per share in 2011. This represents a 6% increase consistent with our long-term objective of growing EPS 5% to 7%. It also marks the 8th consecutive year in which we have met or exceeded our earnings guidance, and the 3rd consecutive year in which we have delivered earnings in the upper half of our guidance range. In addition to strong earnings growth, we raised your dividend $0.04, or nearly 4%, consistent with our long-term commitment to increase the dividend 2% to 4% annually. The financial results are particularly satisfying considering some of the headwinds we faced in the beginning of 2012. But our financial results are only one part of many successes we had in 2012.

Notably, we continue to make significant investments to refresh aging infrastructure and improve reliability; key projects remain on track and on budget. For example, in Texas, construction of the Jones 4 Unit is now 85% complete and we continue to target a May 2013 in-service date. In Colorado, we continue to make progress on the Clean Air Clean Jobs Act projects. Also in 2012, we continued our transmission build-out, investing over $700 million in a variety of projects throughout our service territories. All four initial CapEx 2020 projects have received state regulatory approval and are now in the construction phase. In addition, the entire Bemidji-Grand Rapids 230 KV line is now fully energized.

Looking ahead, we plan to invest over $1 billion in 2013 transmission projects. To finance these initiatives, we took advantage of historically low interest rates, issuing $1.8 billion in first mortgage bonds in 2012. Our credit quality remains high, and there's strong demand for our bonds. More specifically, at NSP-Minnesota, we issued a $300 million 10-year bond priced at a 2.15% coupon and a $500 million 30-year bond priced at a 3.4% coupon. Both of these represented record low utility coupons for their respective tenors. The $800 million of PSCo bonds were issued at slightly higher rates, but still among the lowest for the utility sector. Locking in these low rates will provide benefits to our customers for years to come.

Our customers also benefited from continued high levels of reliability. As you recall, the mild winter gave way to a hot and stormy summer season. I'm proud to say that our system held up extraordinarily well and our reliability scores were among the best in the nation. Good reliability underscores how our strategy of prudently investing in our systems results in excellent service, even when faced with extreme weather cycles and events. Our customers appreciate excellent service, as our consistently high satisfaction scores indicate. And 2012 was a big year with several rate cases completed and filed. Of note, we implemented a multi-year plan in Colorado and reached constructive outcomes in several other cases.

Finally, I'm really proud of how we achieved these results. We improved employee safety by almost 20%, making 2012 our best year ever. In summary, I couldn't have asked for a better first full year as Chairman and CEO. We certainly plan to build on these successes and add to our solid track record of performance in 2013 and beyond. With that, I will now turn the call over to Teresa.

Thanks, Ben, and good morning. Today I will discuss year-end results, provide an update on our regulatory proceedings, review our 2013 financing plan, and reiterate our 2013 earnings guidance. Let's begin a review of 2012 results at each of our four operating companies. 2012 earnings at PSCo increased $0.08 per share, primarily due to the multi-year electric rate plan implemented in May and warmer summer weather.

Earnings at NSP-Minnesota decreased $0.03 per share due to warmer-than-normal winter weather, lower weather-normalized electric sales, as well as higher property taxes, O&M, and depreciation expenses. SPS earnings increased $0.04 per share as a result of rate increases implemented in both New Mexico and Texas in January 2012. Finally, earnings at NSP-Wisconsin were flat. While we had some ups and downs by company, the consolidated results clearly emphasize the benefits of diversification.

Now I will review some of the key items that affected the consolidated income statement beginning with electric margin. For the year, electric margin increased $118 million, driven primarily by $125 million of rate increases across all eight states. Other positive factors included increased demand in transmission revenue; in addition, conservation and DSM incentive also helped to improve retail electric margin. Overall, weather was not a driver of the increase in electric margin.

While summer weather was warmer than normal in 2012, we also experienced a hot summer in 2011. These positive drivers were partially offset by a $48 million decrease related to the expiration of a long-term power sell agreement with Black Hills Corporation effective at the beginning of 2012. While it varied by jurisdiction, weather-normalized consolidated electric sales were flat for the year. However, when eliminating the impact of Leap Day in 2012, sales declined by 0.03%. We believe that sluggish sales were driven by a combination of the economy, conservation efforts, and improvements in appliance efficiency and saturation. In addition, we lost a couple of large customers in Minnesota, which reduced our sales by about 0.5%.

Natural gas margins increased $8 million for the year, reflecting the implementation of the pipeline system integrity rider in Colorado, as well as new rates in Colorado and Wisconsin. These positive factors were primarily offset by the negative impact of weather and a decrease in conservation and DSM revenue. Due to the record warm winter experienced across much of our service territory, firm natural gas sales decreased 11%, reducing consolidated EPS by approximately $0.035 when compared to 2011. On a weather-normalized basis, sales declined by about 1%.

Turning to expenses, O&M increased $36 million or 1.7% for the year. Virtually the entire annual O&M increase occurred during the fourth quarter. Primary drivers of the increase were employee benefits, including pension costs, the pipeline system integrity costs, partially offset by lower plant generation costs, lower bad debt expense and other smaller items. After implementing cost-management initiatives at the beginning of the year to offset warmer-than-normal winter weather and other headwinds, we held O&M flat for the first three quarters of the year. However, after experiencing a very hot summer, we took advantage of this favorable situation investing more in our operating infrastructure to help maintain high levels of reliability going forward.

Additionally, during the fourth quarter, we recognized a $10-million charge related to the Minnesota Commission approval to terminate the Prairie Island Uprate Project, as well as an $11-million charge associated with the recent ALJ recommendation to disallow the recovery of certain costs of our SmartGridCity project in Colorado. Because we pursued the Prairie Island Uprate Project under the terms of an approved a certificate of need and the investment did yield tangible and significant benefit for these customers, we plan to seek recovery of our full investment, including return on these costs in our 2014 rate case. Looking ahead, we anticipate that higher nuclear, healthcare, chemical, and other costs will drive a 2013 O&M increase of approximately 4% to 5% over 2012. Longer term, we forecast O&M to grow 3% to 4% annually. One additional year in variance of note was within other taxes, which increased $34 million or 9.1%, largely due to increased property taxes in Minnesota.

I will now provide an update on a few of our regulatory proceedings, touching on certain key items. Significant details related to our rate cases can be found in today's press release. Late last year, we filed several cases, which will impact both 2013 and 2014. These rate cases reflect the continued investment in our utilities. Primary drivers of such investments are to replace aging infrastructure to ensure excellent reliability. These investments are expected to provide outstanding value to our customers and create jobs in our communities.

In December, we reached constructive outcomes in our Wisconsin electric and gas cases with new rates becoming effective earlier this month. In the electric case, the Commission approved a $35.5 million increase compared to our $39.1 million request. In the natural gas case, the Commission approved a $2.7 million increase compared to our $5.3 million request. As part of this approval, we will begin cost recovery for the Ashland environmental remediation, which, for the first time, includes a return on the unamortized balance. This was done to offset the longer amortization time period, which will minimize the customer impact. In South Dakota, we implemented interim rates in January, subject to refund, while we continue to work with the staff to reach a settlement in the ongoing rate case.

In November, in Minnesota, we filed a $285-million electric rate increase request, based on a 2013 test year and a 10.6 ROE and a 56 -- 52.56 equity ratio. An interim rate increase of $251 million was approved and implemented on January 1. The procedural schedule for this case has been established. Key dates include intervener testimony on February 28, rebuttal testimony on March 25, evidentiary hearings beginning April 18, and an ALJ report on July 3. We anticipate a Commission decision this fall.

We also filed several other cases during the fourth quarter of 2012, which include a $90-million electric rate request in Texas, which is based on an ROE of 10.65%. We anticipate a decision this summer, with final rates effective by mid-year. In Colorado, we filed a $70-million multi-year natural gas rate case based on a forward test year and a 10.5% ROE. This request includes a $48.5-million increase in 2013 with step increases of $9.9 million in 2014 and $12.1 million in 2015. As part of the Colorado natural gas case, we also requested an extension and expansion of the pipeline integrity rider. In addition, we requested a $5-million increase in steam rates over the next three years. We anticipate a Commission decision on these requests later this year, with final rates expected to be effective in the third quarter.

In North Dakota, we filed an electric case seeking a $17-million increase based on a forecast test year and a 10.6% ROE. Interim rates, subject to refund, have been approved by the Commission and will go into effect in mid-February. We anticipate a Commission decision in the third quarter, with final rates effective in the fourth quarter. Finally, in New Mexico, we filed an electric case seeking a $46-million increase based on a forecast test year and a 10.65% ROE. We anticipate a Commission decision later this year, with final rates effective in 2014. We remain confident that, while each request will receive scrutiny, the requests are well grounded, driven primarily by necessary capital investments and, as a result, we will ultimately add to our track record of constructive outcomes.

Turning to capital expenditures, we've updated our five-year forecast to reflect the termination of the Prairie Island Upright Project. We now anticipate spending approximately $13 billion over the next five years. In addition, we have updated our projected cash from operation to reflect the recent extension of bonus depreciation. As a result of these changes, we've reduced our overall projected five-year financing needs. In 2013, the intent is to approximately $1 billion of first mortgage bonds to finance our capital expenditures during the first half of the year including $500 million at PSCo, $400 million at NSP-Minnesota, and $100 million at FDS. This morning, we are reaffirming our 2013 ongoing guidance of $1.85 to $1.95 per share. We've updated some of the guidance assumptions to reflect 2012 actual results. Details of these changes can be found in today's press release.

In closing, we are pleased to deliver another solid year. Despite experiencing early challenges, we moved aggressively to right size our O&M without negatively impacting customer service or safety. These efforts, combined with constructive outcomes in several rate cases and hot summer weather helped us achieve ongoing earnings growth of 6%, consistent with our 5% to 7% target. As Ben indicated, we have now met or exceeded our annual earnings guidance eight years in a row. We also raised the dividend by nearly 4%, consistent with our goal of 2% to 4% annual increases, and marking this as the 9th consecutive year of achieving this objective.

We issued $1.8 billion of first mortgage bonds at attractive rates, lowering our coupon rates and extending our maturities. On the regulatory front, we again achieved constructive outcomes in a variety of cases, adding to our solid track record of managing multiple rate cases across our jurisdiction. On the operational front, we made excellent progress on our capital investment program, delivered strong reliability, and improved our customer satisfaction scores. Overall, it was another great year for Xcel Energy. That concludes my prepared remarks. Operator, we will now take questions.

Thank you, ma'am. Ladies and gentlemen, we will now begin the question-and-answer session.

(Operator Instructions).

One moment please for our first question. Our first question is from the line of Anthony Crowdell with Jefferies & Company. Please go ahead.

Good morning. Just two quick questions. One is actually when I compare third-quarter '12 and fourth-quarter '12 interest expense, it looks like interest expense has gone down by $10 million. I know, I think third quarter, you guys have some maybe principle payments in there, but that was roughly $3 million; just wonder if you could give some more color on the $7 million. And the second question is I guess you have had an increase in AFUDC year-over-year, I just want to know if you could highlight what projects you have that are building up the quick balance. Thank you.

Well, maybe if we start with the AFUDC, in terms of the rate will, in part, be higher because we have higher [equit] balances this year, so that's the primary driver in terms of the variance of there. And then the interest expense, the changes in that, I mean, we basically refinanced a substantial amount of debt during the year, but that was all completed by the end of the third quarter, so the differences are driving that fourth-quarter variance.

Are there any particular projects though that are driving the higher equit balances?

Well, it's in Minnesota, we've had a lot of spend in CapEx 2020, we have also had a lot of spend in Clean Air Clean Jobs in Colorado. So those are the two biggest -- Jones 4, also in Texas, so those are the big projects that we are working on right now.

Great, thank you.

Thank you. Our next question is from the line of [Neo Meta] with Goldman Sachs. Please go ahead.

Good morning.

Good morning.

As you mentioned, your guidance in [BO] O&M expense growth of 4% to 5% in 2013, that's a little higher than the utility average and higher than you came in this year, as well. Can you provide more details on what's driving this and is there flexibility to manage this if BO disappoints?

Well, maybe if we just start with 2012 variance to '11, we only had an increase of 1.7%, so we have relatively low-level that we're starting from in 2012. So it's been driving somewhat the increase of 4% to 5%, but the drivers in terms of 2013, we will start with nuclear; we do have some increases in our nuclear costs. The second piece of that is pensions; pensions, we are assuming now a 4% discount rate, so we are seeing increases in that. And then we have just across the board, some higher insurance, a small amount of bad debt and some chemicals and some of our plant-related costs. In the long run, we expect go back to a 3% to 4% overall increase on an annual basis.

Got it. And in Minnesota, obviously a lot of attention on the regulatory front there. Do think there's the possibility of a multi-year rate deal in Minnesota, and if not, should we be thinking about Xcel going back and filing in 2014 for 2015 rates?

Well, I don't know if I -- first of all, I don't know if I would classify it as tension, if I heard you right. As far as the multi-year plans go, the Commission continues to study that and we will get their reaction, their formal reaction later in the year. So that, along with some other reasons, is the reason why we filed a single test year case this year, and that's what we are proceeding to march forward with. As far as what we will do in 2014 and 2015, we will obviously take a look at what the Commission decides on the applicability of a multi-year rate of test years, and we will file accordingly.

Got it. And then the last question is in terms of regional trends, in terms of demand growth, are you continuing to see strength in Texas and relative challenges in Minnesota, and what are you seeing in Colorado?

Well, everything -- overall, on the residential side, it is safe to say everything is pretty flat. So then you move to the C&I side, and actually, the strongest C&I growth was is in Wisconsin this year, followed by Texas and then followed by Colorado, which had small growth, and then we didn't grow at all in Minnesota for a number of reasons. That said, the economy definitely saw some signs of improvement in 2012. Housing permits were up, job growth was better than the national average, unemployment was equal to or better than the national average. So I think the economies are in decent shape across all our jurisdictions; doesn't necessarily mean it translates to high sales growth, and that's consistent with our forecast. We are not anticipating that we're going to see a tremendous rebound in sales, even as the economies start to improve a bit. I mean, I think that's our new normal, frankly.

Thanks, Ben. Thanks, Teresa.

Thank you. Our next question is from the line of Travis Miller from Morningstar. Please go ahead.

Hey, Travis.

Good morning, hi. On that 1% decline in gas sales that you are projecting for 2013, what are you seeing now that we are in 2013, and essentially know what some of the drivers would be on that demand side? What are the key drivers that you are seeing on that?

Well, maybe I will start with 2013. We haven't closed out January, so we haven't actually seen our January results, but we would expect to see consistent what we saw last year. Again, the drivers of it are primarily the same thing in terms of some efficiency use among the customers, but the same overall trends to a certain degree that we've seen in our electric business.

What's the EPS impact on that in your guidance?

Very minimal, Travis. There's not a lot of gas margin, so it's not going to have much impact.

Okay, great. Thanks a lot.

Thank you. Our next question is from the line of Ali Agha with SunTrust. Please go ahead.

Thank you. Good morning, hi. Can you again remind us, Teresa, at the [OpCo] level, what's the current regulatory lag in your system in terms of earned ROEs versus [alt] priced?

Well, the regulatory lag tends to be between 50 basis points to 100 basis points, and it is going to depend which jurisdiction has had the most recent rate increase in place. So we tend to have more regulatory lag, like in Texas, where we are using a historical test year, although I will say that in terms of ROEs, relative to the 2012 period, they actually ended up in the 9%. So really, if we just look at 2012, all utilities except for NSP-Minn, where a 9% return range actually in the middle, and NSP-Minnesota was slightly less than nine, so we're seeing some regulatory lag, in part, that's why we are filing such a large case.

Okay. And also on the Minnesota case, how concerned are you guys about this recent request that the Commission posed to you about looking at potentially reducing the authorized equity ratio? Can you give us some insight on that?

Ali, I mean, we are always concerned when we are filing a rate case, but I mean, we have been filing rate cases for a number of years now, and these issues are always reviewed. What is a Commission going to be interested in? The appropriate ROE, the appropriate equity ratio? Weather expenses are justified, and I think we will do fine in just all of those areas. I mentioned, and I think Teresa did, too, we issued some of the lowest record coupons of debt last year. Well, you can't do that unless you have a good credit profile and if you -- and I think our Commissions understand that. So while I think it gets looked at, I think at the end of the day, the constructive regulatory compact continues.

Okay. Also the impact of bonus depreciation. As we look into 2013, your share count still implies some potential for equity issuance on the higher end, but can you just give us an update on your insights there because of bonus depreciation? Is it less likely that you will issue equity this year, or what are you thinking right now?

Well, I mean, as you can see in the release, Ali, we expect to -- we have changed that number now to $400 million over the next five years. We do have, as you can see, our capital program is very front-end loaded in terms of the five-year period. So we do think we have flexibility in terms of issuing equity, and it probably will be more front-end loaded, either 2013 or 2014. But we provided for that range, and that's really indicating we do believe we have some flexibility.

Okay. Last question, also if you can remind us, if you look at your CapEx program '13 through '17, if you translate that into rate-based growth using '12 as a base year. So over the next five years, what kind of rate base growth does that support?

If we look at the first two years, I mean, we continue at our 6% rate, and then that will -- that would be '13 of '14, and then of course, then we taper down after that through the remainder of the period.

What, like five -- (multiple speakers)

Yes, it is around there.

Yes and Ali, I think it is important to note that we are not anticipating a tremendous amount of sales growth, therefore, we aren't anticipating the need for new generation. So as you know, having followed us for years, are CapEx forecast can certainly change as those out-years become the current years, and we will look at what's happening with the economy and what our customer needs are, etcetera. I think as we've also spoke about it, if those CapEx plans don't change, Teresa is right; the rate base growth slows, and that will translate to slower growth for us. And of course, that's when we can do more with the dividend, and I think we've got lots of options to reward investors.

Understood. Thanks, Ben.

Thank you. Our next question comes from the line of Andrew Weisel with Macquarie Capital. Please go ahead.

Hi, good morning, everyone. A few questions on behalf of Andrew [Sorazinski]. First question is you talked quite a bit qualitatively about the low growth expectations, but can you give us the number that you are expecting for 2013 and in the long-term?

Sure. In terms of 2013, maybe if I just talk about it by operating company. For NSP-Minnesota, we are looking at a decrease of about 1.2%; NSP-Wisconsin expected to be flat. In Colorado, up just under 1%, actually, that's more about 0.6%, and in Colorado -- excuse me, and in Texas, over just around 3%, I would say. So overall, we expect it to come in between up to 0.5% on a consolidated basis.

Maybe in the longer-term?

In the longer term, for the next five years, we are projecting just up to 1%.

Okay, great. Then with the CapEx, obviously, some downsizing of certain -- or termination of projects and downsizing of the overall. Are there any other projects that you see as particularly at-risk if the low growth doesn't recover or it gets worse?

I don't think we see any particularly at risk. A lot of them our infrastructure projects. We have some transmission projects that are underway that we need to complete like CapEx 2020. We have some large ones in progress in Texas, as well, so in terms of that risk, we don't see that right now.

Okay, great. Then lastly, you talked in the past about the long term EPS guidance of 5% to 7%. Is that still your target and expectation?

As Teresa and I both said, I think that's our expectation for the next couple years, and after that, we will have to take a look at what happens with our CapEx plans again. As we just spoke to, we are not anticipating too much sales growth, that could certainly change. We will have to see how the regulatory outcomes proceed and the macroeconomic conditions, etcetera, and environmental regulations, which by the way, we're very well-positioned to meet. But if the CapEx forecast stays the same, yes, I think you'll see that EPS growth rate modulate as we -- and again, we'll -- gives us a chance to take a look at what the growth rate of our dividend ought to be.

Okay, very good. And just one last thing here, you mentioned, I believe, that in the quarter, Wisconsin was actually stronger than Texas, yet for '13, you are expecting Wisconsin flat and Texas up 3%. Was there anything unusual in the quarter in Wisconsin driving that?

We were speaking year-to-date.

Yes.

Yes.

Okay.

Yes, we were speaking year-to-date, and what Ben indicated, we have seen some uptick in the sand mining industry. So maybe we have some more upside in Wisconsin as we look forward, but we are being conservative about that.

Great.

Clearly, as we have seen the oil and gas impact.

Great, thank you very much.

Thank you.

(Operator Instructions).

Our next question is from the line of Michael Bates with the D.A. Davidson & Company. Please go ahead.

Good morning. If we could, I would like to circle back to your financing plan a little bit. When you compare this forecast with what you had previously indicated, it looks like your cash from operations increased probably $400 million. Can you just go over that with us again? What has changed in the last few months that drove that increase?

There is two things that have changed. First, we have taken out the $200 million related to the EPU Upright in Minnesota that we are -- this is Prairie Island, which we are not pursuing. Then we have also incorporated the impacts of President Obama just signed into law the extension of bonus depreciation for 2013 at the 50% level, which for us, will actually continue into 2014 because of our long-term projects. So it is a combination of those that are driving the decrease in terms of that need.

Thank you very much.

Thanks.

Thank you. Next question is from the line of Andy Levy with Avon Capital. Please go ahead.

I'm all set, but thank you.

Thank you.

Thanks.

Next question is from the line of Eli Kraicer, Millennium Partners. Please go ahead.

Good morning. It is actually Steve Gambuzza. The impact of bonus depreciation that you just highlighted, can you just review the impact that will have on the rate base that you previously disclosed for '13 and '14?

Sure. In total, it is about $300 million, about two-thirds of that, or about $200 million in '13 and $100 million in '14.

Thank you very much.

Thank you. Our next question is a follow-up question from the line of Travis Miller with Morningstar. Please go ahead.

Hi, thanks, one more. What's the situation in Boulder? Update there and any impacts on 2013 or even 2014, depending on how the negotiations go?

I don't think there will be any impacts in '13 or '14. What's going on there is that the staff, the consultants, etcetera, will make a recommendation to the City Council whether or not they go forward. And that's supposed to take place, I believe, in April?

February.

February is when they give the recommendation, and then they roll on it in April.

Right.

So we will see. But regardless, we currently serve them, as you know, Travis, and so if they decide they don't want to service, that begins a -- what is a pretty lengthy and long process, and we will continue to serve them through that process.

Sure, great. Thanks a lot.

All right, thank you.

Our next question is a follow-up from the line of Andy Levy with Avon Capital. Please go ahead.

Actually, I am going to ask a question. How are you?

(laughter). Good.

Just back to Minnesota, because I think there has been some I don't know if you want us to call it misinformation, or maybe people being a little bit over zealous in their assumptions, but just back to the equity debt issue that has been brought up. I know you made a filing on Friday regarding that. Can you guys just talk about that as far as what your perception is on what may or may not happen? And then there has been one or two [sell side] reports that have talked about fairly, not large numbers, but as much as $0.10 of possible earnings effect from that. Which we can't come up with anywhere close to that, so I don't know if there's a way that you can walk us through looking at the rate base, and how that would be affected. If there was a 1% or 2% change in the debt/equity ratio, and if there was, I don't know how you would get there. Would you buy back stock? How would that work?

Okay, well, Andy, let me take a stab at it and I will ask for help if we are not completing your question. The first thing I think you noted is our capital structure study was approved. That has, I believe, the 52-point something equity ratio in it, so -- and I think the questions were raised, how do we take advantage of this historically low interest rate environment? Which, of course, we are. And we are doing that because we can issue debt with good credit ratings, which result in these great rates. So obviously, if you were to dilute that credit rating to a core equity structure, you wouldn't be able to take advantage of that, so having the capital structure approved, I think, was a good signal.

The other question, I think you asked was on an analyst report that said if the ROE, I think sells 500 basis points, it would have $0.10 impact. We struggle a little bit to get the number too, and that's a pretty big fall. I think that also doesn't assume, Andy, that we would take any reaction to it, which I think is the latter part of your question. Certainly, if we had a major adjustment to our credit ratio, we would have to adjust our financing plans, and there would be a number of ways you could do that. You would reduce equity injections from the whole [co] etcetera, and you would get the equity ratio to where the Commission wanted it to be. I don't think that would be a good result, ultimately, for our customers, and I do think that there has been more emphasis placed on it than perhaps it warrants.

Again, we have got a -- I think a thoughtful Commission and we have got a constructive regulatory compact. It is never easy to file rate cases. We take it very seriously, but all you have to look at is what are we trying to accomplish? Re-licensing our nuclear plants for another 20 years, keeping our infrastructure reliable and resilient and being on the forefront of getting ready for these environmental challenges. Which I think really are starting to pay dividend for our customers as we look at match rules and other things like that that we've been very well prepared for. So I don't think there is any question we are spending our money in the right place, and I don't think there's any question that a strong balance sheet is necessary to complete these capital programs. The biggest risk we face every year is public policy risk, and we been facing it for years and managing it, and I'm cautiously optimistic we will have a good year managing that -- those rate cases this year, as well.

Thank you for that. And the other question I had is based on the refinancings that you did in 2012, and then I guess we saw in the fourth quarter, and I understand that you will be issuing more debt, but just on the refinancings. How much is the annual savings do you think on that?

The annual savings was about $30 million to $35 million from the refinancing.

Okay, and how much of that was realized in 2012?

Well, some of our midyear -- I would say about half, potentially.

Great. Okay. Thank you.

Thank you. At this time, I'm showing no further questions. I'd like to turn the conference back over to the Management team for any closing remarks.

Thank you for all participating in our year-end earnings call this morning. Please contact Paul Johnson and the IR team if you have any follow-up questions.

Thank you ma'am. Ladies and gentlemen, if you would like to listen to a replay of today's conference, please dial 1-800-406-7325 or 303-590-3030 using the access code 4577479 followed by the pound key. This does conclude the Xcel Energy fourth-quarter 2012 earnings conference call. I would like to thank you very much for your participation and you may now disconnect.