Thursday, April 19, 2018

Xcel Beats Consensus Despite Revenue Shortfall

By Tom Kleckner

Xcel Energy released fourth-quarter and year-end earnings results Thursday, beating investors’ expectations for earnings per share by a penny but missing their fourth-quarter revenue forecasts by hundreds of millions of dollars.

Minneapolis-based Xcel said it earned $227.5 million ($0.45/share) during the fourth quarter, up from $209 million ($0.41/share) for the same period last year. Zacks Investment Research’s consensus estimate was 44 cents/share.

At the same time, the company reported fourth-quarter revenue of $2.8 billion, up from $2.65 billion a year ago, but short of the expected $3.5 billion. Xcel laid the blame on warmer-than-expected weather.

Xcel Energy wind farm | Xcel Energy

CEO Ben Fowke called 2016 an “excellent year” in a press release Thursday. During a later conference call with analysts, he said, “I don’t think the quarter is indicative of where we think trends will go. We are seeing good customer growth in Colorado and Minnesota and other jurisdictions.”

Fowke said the company plans to invest $3.5 billion in its “steel-for-fuel” strategy, taking advantage of ample wind resources in Colorado and the Dakotas. Xcel completed its first project, the 200-MW Courtney Wind Farm, as a general contractor in North Dakota last year. Regulatory approval in hand, its 600-MW Rush Creek project in Colorado is expected to go into service in 2018.

Xcel is also adding 1,500 MW of wind in Minnesota through power purchase agreements and another 750 MW through “self-build” proposals, in which as owners, the company will benefit from 100% of the production tax credit and “maximize the fuel savings” for customers. Fowke said the company has received 95 proposals from 17 bidders for almost 10,000 MW wind generation and will soon file for regulatory approval.

The company is embroiled in a regulatory and legislative tug-of-war in Minnesota over plans to retire two 680-MW coal units by 2026 at its Sherco plant northwest of Minneapolis. The Minnesota Public Utilities Commission in January opened a docket over Xcel’s plans to build a 780-MW combined cycle natural gas unit as a replacement, but a state legislator has since filed a bill that would give the company authority to construct, own and operate the unit without obtaining PUC approval.

Sherco Generating Station | Xcel Energy

“The bill was driven by legislators who are concerned about the loss of jobs and tax revenue and wanted to expedite the decision process,” Fowke said. “It’s important to note we have provided extensive justification for the plant, and the commission will still need to approve cost recovery.”

Fowke said any capital investment for the project, expected to cost more than $1 billion, “will likely” happen after 2021.

The company raised its dividend by 6.3% to $1.36/share, the 13th straight year it has increased it. Fowke also noted Xcel met or exceeded its earnings guidance for the 12th straight year. Its stock price closed up 83 cents at the end of the week, to $41.45.

Xcel reaffirmed its 2017 earnings guidance of $2.25 to $2.35/share.


Leave a Comment