| Quarter | Q4 FY24 |
|---|---|
| Call date | 2025-02-06 |
| Results reported | 2025-02-06 |
| Length | 51 minutes |
| Speakers | Rupesh Agrawal, VP, Investor Relations; Robert Frenzel, Chairman, President and CEO; Brian J Van Abel, EVP, Chief Financial Officer |
Results, guidance and Q&A analysis for this call
Melissa (Operator)
Hello and welcome to Xcel Energy 2024 Year End Earnings Conference Call. My name is Melissa and I will be your coordinator for today's events. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing STAR, followed by 1 on your keypad to register your question at any time. Questions will only be taken from institutional investors. Reporters can contact media relations with inquiries, and individual investors and others can reach out to Investor Relations. If you require assistance at any point, please press *0 to be connected to an operator. I'll now turn the call over to Rupesh Agrawal, Vice President, Investor Relations. Please go ahead.
Rupesh Agrawal (VP, Investor Relations)
Good morning and welcome to Excel Energy's 2024 fourth quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer and Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions if needed. This morning we will review our 2024 full year results and highlights, provide updated 2025 assumptions and share recent business and regulatory updates. Slides that accompany today's call are available on our website. Some comments during today's call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings. Today we will discuss certain metrics that are non GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. As a reminder, we recorded a charge of $0.06 per share in 2024 related to the disallowance of a replacement power costs associated with an extended outage at our Sureco plant in 2011. Given the outage occurred 13 years ago and non recurring nature of this item, this charge has been excluded from full year ongoing earnings. As a result, our GAAP earnings for 20/24 were $3.44 per share, while our ongoing earnings which exclude this non recurring charge with $3.50 per share. All further discussion in our earnings call will focus on our annual ongoing earnings. For more information on this, please see the disclosure in our earnings release. I will now turn the call over to Bob.
Robert Frenzel (Chairman, President and CEO)
Thank you for patient. Good morning, everybody. At Xcel Energy, we know that economic growth and prosperity of our communities and country depends on our ability to deliver energy to our customers when and where they need it while keeping their bills as low as possible. And in 2024, we delivered on another year of solid operational and financial progress. To that end, across our eight states, we invested more than 7 1/2 billion dollars to build and maintain infrastructure that supports our customers energy needs in areas like advanced technology for a smarter, more reliable grid, long haul and regional transmission to support customer growth and system reliability needs and carbon free generation to continue our pursuit of a cleaner energy future. We navigated considerable headwinds during the year and posted ongoing earnings of $3.50 per share, delivering within our guidance range for the 20th consecutive year, one of the best track records in our industry. Our long term performance is attributable to our committed team at Xcel Energy who show up every day on behalf of our customers with safety, affordability and reliability as their top priorities. Recognize that this is the first time we've been below the midpoint of our target range in over 15 years. We made decisions in 2024 to make investments to improve resiliency and protect our customers throughout the year. And we coupled with December weather that was considerably warmer than normal and little time to adjust, the result was earnings at the low end. But because of the operational improvements in investments we made in 2024, we remain confident in our ability to deliver on our 25 guidance range of $3.75 to $3.85 per share, the midpoint of which reflects 7% growth from the midpoint of our 2024 range. And over the next decade, we expect to invest significantly in our infrastructure to deliver reliable resilience and cleaner energy for our customers as well as serve significant forecasted customer growth. Our five year base capital plan delivers rate base growth in excess of 9% and should deliver long term EPS growth in the upper half of our 6 to 8% guidance range. At Xcel Energy, our long term strategic model and value proposition is to make smart capital investments for the benefit of our customers, which improve reliability, resiliency and sustainability, provide excellent customer service and to keep bills as low as possible for our customers. In 2024, we reached several important milestones towards these goals. In November, phase one of our Circo Solar project started commercial operation. Two additional phases will come online in 2025 and 2026. And once complete, Circo's total capacity of 710 megawatts will make it the largest solar facility in the Upper Midwest. And by using existing interconnection from our retired coal unit, we save customers money and accelerated deployment by several years, providing opportunities to serve new customers, including multiple data center projects on and around the CIRCO site. We're also near completion of the conversion of our thousand MW Harrington coal plant to natural gas, which provides essential energy resiliency and reliability to our customers and will benefit the local community there for years to come. In 2024, our wind fleet achieved availability of 97%, marking our best performance in five years in achieving first quartile benchmarks. High turbine availability ensures our customers benefit from the 0 fuel cost resource and provides production tax credits that keep their bills low. In line with our Minnesota resource plan, the NRC approved a 20 year license renewal for our Monticello nuclear facility. This allows customers to continue to benefit from a critical low cost carbon free energy resource through 2050. One of the keys to energy resiliency and growth is expanding our electrical grid to ensure that customers have access to the generation resources needed to meet their daily requirements. And I'm proud to say that for the past 15 years, Xcel Energy has been the leading provider of new transmission line miles in the country. In July, we began construction on the final segment of our Colorado Power Pathway project, which started construction in 2023. The power pathway is a 675 mile double circuit, 345 KV transmission loop that will enable Xcel Energy to connect more than 5000 megawatts of essential energy resources in Eastern Colorado. And in the fourth quarter, the MISO Board approved Tranch 2.1 of its long term transmission portfolio and the SPP Board approved its 2024 ITP portfolio. These two portfolios will enhance transmission systems in our regions and interregionally ensuring that we can meet customer growth and resiliency needs. Our portions of these transmission projects could result in three to $4 billion of capital investment in excess of our base plan. We've also made considerable progress to protect our customers, communities and system from the increasing threats of extreme weather that we continue to see across the country. During 2024, we filed an updated wildfire mitigation plan in Colorado, a new system resiliency plan in Texas and issued wildfire mitigation plans for each of our other states. We've also accelerated a number of risk reduction efforts, including operational mitigation such as enabling public safety power shut off and wildfire safety operations across our entire system and making investments to better sectionalize and automate these capabilities. Physical mitigations that include the repair replacement of priority one and two distribution poles across our system and over 600 miles of vegetation management in Colorado, amongst other milestones. We've developed foundational tools completing comprehensive wildfire risk mapping of our system and deployment of advanced risk modeling tools like Tecla Silva and we've increased situational awareness. We're in Colorado. We completed installation of 42 AI equipped cameras and completed the installation of 25 utility pole mounted weather stations with many more planned across our system in 2025 and beyond. Equally importantly, our customer bills have remained amongst the lowest in the country, is attributable to our thoughtful investments, access to some of the lowest cost renewal resources in the country and focus on continuous improvement through our lean operating principles. Since 2020, our continuous improvement programs have generated nearly $500 million of sustainable savings for customers while improving operations and reducing enterprise risk. Since 2017, our Steel for Fuel program has saved customers nearly $5 billion in avoided fuel costs and production tax credit benefits. Our average residential electric and natural gas bills are 28 and 12% below the national average with historical growth rates well below the rate of inflation. In addition, we've reduced our residential electric customer share wallet by 13% since 2014. With our low energy prices, customers have the further potential to reduce their energy expenditures by over 40% as they adopt electric vehicles. The same time, we've reduced carbon emissions on our electric system by 57% relative to 2005 levels and remain on track to meet our goal of 80% carbon reduction by 20-30, proving that our geographic advantage for renewable resources ensures that customers don't have to sacrifice costs or reliability to achieve sustainability. Looking forward, we are focused in 2025, working to capture the unprecedented opportunities for growth we laid out in our base capital investment plan to deliver on our incremental capital opportunities to advance our clean energy leadership and to raise the bar on delivering A compelling experience for our customers in order to make energy work better for them and the communities we serve. Finally, I'd like to express my thanks to Paul Johnson. Earlier this year, Paul announced his retirement from Xcel Energy after 41 years of service. Over his career, his commitment, his integrity and his acumen have been critical to the success of our Controller, our Treasury and our investor relation programs. He has mentored countless programs inside the company and across the investment community. I consider Paul more than just a cherished colleague, he's become a personal friend. I know you will all miss him as well. I want to extend my sincere appreciation to Paul, his wife Renee, the two sons and two dogs, and we wish him nothing but the best in his retirement. With that, I'll turn over to Brian.
Unknown (XEL Executive/Management)
Thanks, Bob. And I think everyone in this room certainly echoes your comments about Paul. So let's turn to starting their financial results.
Brian J Van Abel (EVP, Chief Financial Officer)
Excel Energy had ongoing earnings of $3.50 per share for full year 2024 compared to ongoing earnings of $3.35 per share in 2023. The most significant earnings drivers for the year include the following. Outcomes from rate cases and riders increased earnings by $0.87 per share and the higher other income which increased earnings by $0.16 per share due to interest income on cash balances and the gain on debt repurchase that we proactively use to offset increased spend on our wildfire risk reduction measures. Offsetting these positive drivers, higher depreciation and amortization decreased earnings by $0.40 per share, reflecting our capital investment programs. Higher interest charges net of AFUDC debt decreased earnings by $0.24 per share, driven by increased debt levels of fund capital investments and higher interest rates. Higher O&M decreased earnings by $0.13 per share and other smaller items combined decreased earnings by 11 cents per share. Turning to sales, fourth quarter and full year weather adjusted electric sales increased by 3% and 1% respectively, driven by increased C and I load and SPS and residential sales in fiasco. For 2025, we continue to expect full year weather adjusted electric sales to increase 3%. Shifting to expenses, O&M expenses increased $96 million in 2024, reflecting actions we took to reduce future operational risk by increasing investment in wildfire mitigation. In addition, we experienced increased cost from generation maintenance, damage prevention and storm response. We also made progress on a light rate case calendar. In our Minnesota electric rate case, interim rates of $192 million were approved effective January 2025. And in North Dakota, we filed an electric rate case and the Commission approved our settlement in our natural gas rate case. Moving to 2025, we're looking to several milestones as we make progress on adding 15,000 to 29,000 megawatts of generation to replace retiring capacity and serve low growth. In the first quarter, we anticipate a decision from the Minnesota Commission on our RFP and IRP settlement. The RFP includes 720 megawatts of company owned firm dispatchable resources. The IRP includes an additional 4200 megawatts of generation needs by summer 2025. We expect to file recommendations for up to 3500 megawatts of this need across 3 RFPs in the second quarter. In SPS, we anticipate filing recommendations for 5000 to 10,000 megawatts of generation from our RFP that is in flight. And finally in the third quarter in Colorado, we anticipate a Commission decision on a resource plan for the 5000 to 14,000 MW resource need with RFPs to follow in late 2025 or early 2026. We are excited to execute on the significant opportunity and look forward to working with our stakeholders to drive economic growth for our communities and continue our clean energy leadership. Moving to our five year sales forecast of data centers, we have already signed contracts for approximately half of our new data center capacity included in our five year sales forecast. These projects are under construction and we will begin energization late this year. Additionally, we expect to have executed contracts for the remaining amount that is included in our five year sales forecast by this fall. We are in active discussions with several counterparties and look forward to bringing on these large customers that will drive economic development and benefit to all of our customers. Given our large backlog of additional opportunities, we are confident in our long term sales forecast. Additionally, we continue to see significant growth in other parts of the business, particularly in the oil and gas region and SPS. As a reminder, our data center growth represents only half of our 5% long term sales growth that we are projecting to help fund our $45 billion five year capital plan. We issued nearly $1.4 billion in forward equity in 2024. This issue and significantly reduces financing risk, helps maintain a strong balance sheet and credit metrics and funds accretive growth for our customers and investors. We also continue to make strong progress in the Smokehouse Creek wildfire claims process. We've resolved 113 of the 199 submitted claims, which we continue to view as constructive. We've committed $73 million in settlement agreements of which $35 million have been paid. There's no change or estimated liability of $215 million as we.
Unknown (XEL Executive/Management)
Described in our disclosure. With that, I'll wrap up.
Brian J Van Abel (EVP, Chief Financial Officer)
With a quick summary, Xcel Energy posted ongoing 2024 earnings of $3.50 per share, navigating significant headwinds and meeting guidance for the 20th consecutive year, one of the best track records in the industry. We continue to lead the clean energy transition while ensuring safe, clean and reliable service and keeping customer bills as low as possible. We are focused on reducing operating risk in our system from extreme weather, including proactive mitigations across our system, our resiliency plan filing in Texas and updated wildfire mitigation plan in Colorado. Going forward, we are excited to make significant progress in our $10 billion pipeline of additional investment opportunities. We continue to maintain a strong balance sheet and credit metrics using a balance of debt and equity to fund the creative growth. And finally, we are reaffirming our 2025 guidance of $3.75 to $3.85 per share. This concludes our prepared remarks. Operator, we will now take questions.
Melissa (Operator)
Thank you very much. As a reminder, if you would like to ask a question, you may press * followed by 1 on your keypad to register your question. You will be advised when to ask your question.
Melissa (Operator)
Our first question is from Nick Campanella with Barclays. Please go ahead. Hey.
Unknown (Analyst)
Thanks. Thanks for all the information today. So I just wanted to kind of get your general thoughts. You know, I know there's been a lot of headlines for the new administration, but particularly around, you know, renewable permitting exciting. And you know, are any of your projects kind of in scope from either a federal or private permitting halt perspective? And then maybe you can kind of also just remind us what's embedded in the plan from a transferability perspective? Thank you.
Robert Frenzel (Chairman, President and CEO)
Hey, Nick, it's Bob. Thanks for the question. You know, look, broadly speaking, when I think about the E OS, you know they support, you know, the energy dominance goals of the administration. We're supportive of a, a broad and all the above energy strategy and you know, Brian's comments in the prepared remarks talking about, you know, sales growth in need of our customers. For our product and our electrons would suggest that you know, we need to move, we need to be able to move very quickly on building our infrastructure and making sure that we can serve our customers. You know, we know that the administration supports economic development. We know that they, they support low cost energy and while many of the E OS are directed at oil and natural gas, you know, our and our focus areas is really on the, on the electricity side of the Ledger. You know, look, we support permitting reform broadly at a national and, and even state and local levels in order to be able to build the infrastructure we need to, to meet this era of, of growth. You know, we we have about 30% expected load growth over the next five years and you know, making sure that we can deliver on that is, is important. So you know any, we think that any of the executive orders and any of the challenges that may be embedded in there today are things that we can always work through. As a reminder, we don't have any offshore wind, We don't have projects on federal lands and our permitting needs are actually relatively light for wind and solar and storage assets. So I think we'll be able to work through it all. And I'm optimistic that our our capital plan for 25 and beyond are going to remain intact and we'll be able to work with the administration and all the agencies to make progress here. I know, Brian, you want to.
Unknown (XEL Executive/Management)
Yeah, Nick, I can just add a little bit of color to that. And there's, there's an article yesterday around the Army Corps and our projects. We do not expect that to impact our projects in flight. And and as Bob said, are the other projects in flight that we feel comfortable with where we stand in, in the permits that we that we have in our continuing construction and continuing progress on, on all our projects in flight. And obviously when with the RFP's once whether it's tariffs or regulations or or Els are considering look at how that impacts RFP's. But we feel very good about the need and our overall pipeline and executing on, on both the stuff in flight and the pipeline. Just quickly, you got your other questions about PTCS. We have approximately $700 million a year in transferability embedded in in our forecast, right. That's a reduction to revenue and then we transfer the credits. And so that's been pretty consistent over the past year in terms of what we've forecasted. Hey, I appreciate the answer on that. That's, that's really helpful. And then the, you know, at the end of your prepared, you kind of talked about, you do seem to have some line of sight to announce additional customers this year. Just how do you kind of think about the cadence of pulling in those, you know, 8.9 GW customer requests? And at which point do you think you would, you know, re evaluate that that sales CAGR? Is that more of a EEI later in the year item or just, you know, how much of that can actually fall into this five year time horizon and and you know, impact where you are in the 6:00 to 8:00? Thank you. Yeah. And I I think expect us in terms of updating capital plans, five year sales forecast plans, all that generally is our our Q3 earnings release. So we can talk about EI. So expect that all that the comprehensive update on a regular cadence. Now what I mentioned in my prepared remarks is we expect to be able to sign contracts that will fulfill the the what we have in our base plan for, for the data centers. And we expect to we're working actively working in negotiations on several of those and expect to have them all executed by the fall. So pretty excited about that. And then yeah, as you alluded to, we have a backlog behind that which will turn to to working on that as we know get through these. And I think that just highlights the kind of pretty significant opportunity we have. You know, by the by the time we're we're donning expect to talk about this in greater detail in the fall is we'll have a data center in every one of our operating companies. So we have regional diversity on data center diversity. They'll be deal with different hyper scaler. So we feel really good about the long term sales prospect. And as we continue much forward, we'll see if there's opportunities to add more. It's not just the demand there, but ensuring that we have the discussions are stakeholders and commissions about being able to build those assets. I mean you heard Bob say we need an all the above energy strategy, we need to build these. And so it's really working with our stakeholders to drive economic development and benefit for all of our customers.
Robert Frenzel (Chairman, President and CEO)
Thanks for all the thoughtful answers.
Unknown (Analyst)
Today I'll see you soon. Yeah. Thanks, Nick.
Melissa (Operator)
Thank you. Our next question comes from Jeremy Connett with JP Morgan. Please go ahead.
Unknown (Analyst)
Hey, Jeremy. Hi, good morning, Paul. We will certainly miss working with you. Best of the best of luck in retirement. Maybe just you know, if we, if we could touch on the wildfires a little bit here just given national headlines recently and seems like developments in other states might have impacted Excel trading recently. And just wondering what thoughts you could provide here incremental as far as the outlook, the possibility for federal wildfire policy changes. Any views from from DC here? I'm just, you know, in conversations within Colorado as well. Just trying to get some color there.
Robert Frenzel (Chairman, President and CEO)
Hey, good morning, Jeremy. It's Bob. Look, obviously the California fires were a tragedy for that community and it does bring a both a federal and and a state highlight to potential solutions there. And we're going to work it at both levels through EEI, largely at the federal level and and then obviously across our states for, you know, anything we can do to continue to protect our customers and our and our communities from that kind of of threat and that kind of risk. I'd say the dialogues are active across the federal government and at the state level, you know, obviously at the federal side, there's a lot going on, I think a lot on TCJIRA and, and items like that. So I think any wildfire movement and the federal levels probably a back half of the year kind of of efforts and focus. But California certainly, you know, put a put a bright light on the issue and, and, you know, national problems need national solutions. I think there's a big role for the federal government here to help setting standards, helping with insurance backstops, getting to functional markets, both on the insurance side and on the capital market side, as you alluded to. So I think there's a big role for the federal government here on the state basis. You know, we're having great conversations, Texas, Colorado, the Dakotas around everything from roles of the companies and roles of the States and, and how are we going to set standards for forestry? How are we going to set standards for building infrastructure for operations and, and making sure that there's a clean line of responsibility for, you know, who's doing what to make sure that we can protect our customers and our communities. I don't have anything to talk about that's advancing right now, but we're early in legislative sessions and you know, maybe we'll come back to you in the first quarter call.
Unknown (Analyst)
Got it. It's that's helpful there. And just going to DC at large, is there anything else I know you talked about a bit with Nick there as as far as changes you think going forward, especially as it relates to I guess transferability, is there a need to go through the federal government anyway? Do you see anything changing there? Hey. Jeremy, you just broke up in the very first part of the of your question there. What did you say? I got the last part. Just about any changes out of DCI know you, you touched on that a bit there. Yeah. You know, you certainly, you know, we're working very closely with our policy makers around DC. You know, obviously one of the things we're we're plugging out and working is, is around the IRA and what happens through legislation. And you know, certainly as, as we see now, I think what we're hearing is that they're going to attempt to do one bill, But if that's was almost split it into two, I think you've heard me speak before. It is we believe the key tenants of the IRA are intact. When I say that, I'm talking about a tax credits and transferability, they kind of go hand in hand. And so we we feel good about that. I mean it is, there's an incredible amount of jobs in manufacturing and economic benefit on being driven by the array which is is primarily going into red states. So I think there's a recognition of that. So we feel good about where that stands overall and and we'll just watch a play out and continue to be plugged in and. Got it. And and just the last point there, does transferability go through the federal government or is it bilateral?
Robert Frenzel (Chairman, President and CEO)
So I think the the permissibility of transferability is, is definitely embedded within the IRAI think the transferability themselves is, is a bilateral contract with us and any other tax paying entity.
Unknown (XEL Executive/Management)
And I think that's that persist. Yeah, that's exactly we negotiate directly with with our other companies and we have a number of of Fortune 500 companies in our backyard here in Minneapolis that we that we partner with. The one caveat is co-ops or municipalities that use direct pay would go directly with the government, but we don't use direct pay. Reason transferability. Got it. And if I could just finish up on DC real quick here. The new administration is more of a a focus I think on on gas and maybe the was in the past. And at the same time resource adequacy has been, you know, very much in focus late and just wondering your thoughts on adding in incremental gas by a generation to meet higher than expected low growth. Is that evolved in any way based on what's coming out of DC or just, you know, higher growth expectations and have conversations with large CNI customers changed on the side as well at all?
Robert Frenzel (Chairman, President and CEO)
Yeah. So look, we, we I made a comment, my prepared remarks about sort of the real advantage we have across our eight state footprints and the ability to deliver low cost energy with wind and solar and that persists. And so we think that those are very valuable asset classes for our customers. They're very important for our hyper scaler and data center customers who are trying to have their own sustainability goals and we think that persists. We've been clear that we're we're going to continue to focus and achieve our 80% carbon reduction by the end of the decade. But we've been clear since we made that announcement that we need dispatchable resources to support that. So gas has a real role to play in our active resource plans. Right now we've got CT builds in, in, in the upper Midwest, in Colorado and in the Southwest. And in our, our, our resource plans that are on the Comm. We also have incremental gas resources and they're, they're all combustion turbines. So we think we need peaking resources and then we don't think we need base load gas because of our advantage in wind and solar and and our ability to deploy solar and storage. But we will have new gas across our systems. They'll have low capacity factors. You know, we've talked about having them, you know, clean fuel capable at construction and other items to make sure that we can meet sustainability goals in our state. But we will have new gas coming and we are converting some of our coal stations to gas as well. So you know, increasing importance for gas in our footprint, but a maintenance of a real sustainability footprint as well given our geographic advantage.
Unknown (Analyst)
Got it. Understood. Thank you for that.
Melissa (Operator)
Thank you. Our next question is from Julian Dumoulin Smith with Jefferies. Please go ahead.
Unknown (Analyst)
Hey, good morning, team. Thank you guys very much. And Paul, it's been a real pleasure, I got to say. Thanks. There we go. Absolutely. You getting me? So guys, let me.
Brian J Van Abel (EVP, Chief Financial Officer)
Talk a little bit about.
Unknown (Analyst)
24 and 25 real quickly, I know we've talked about some of the bigger picture items here, but coming back to obviously, as you say, a little bit out of the norm for you guys historically on 24, some items that as you say you were trying to deal with through the course of 24. But in addition here when you look at the 25 drivers, there's a few items that net to, you know, I suppose up to 40 million negative versus the prior kind of bits and pieces here, if you will. How do you think about where you're positioned on 25 and getting quote UN quote back on track? And what I mean by that is back on track relative to what you guys have consistent delivered in terms of within your mid, within or at or above your midpoint level. Yeah. Hey, Julian, thanks for the question. I can provide a little bit of color and I I think on face it adds up to that. But I think you got to look at the property taxes are offset in regulatory mechanisms. So that doesn't have an impact and look at some of the other offsets as you know, it's it's probably less than half of the impact that you quoted. And so when I think about 2025, we feel very comfortable where we sit. It's early in the year, you know, we always target midpoint of guidance. So I I expect that we deliver this year. Like you said, last year was a little bit of an anomaly for us. But overall, I feel very comfortable 2025 and there's just some other offsetting stuff in there that gives me that comfort. Got it right. So bottom line, back on track 25 onwards here. Yeah, I, I appreciate it and, and, and and I don't want to wordsmith you guys too much, but you guys have made several times your confidence in the sales growth outlook. You. You. Made, made it in the prepared remarks, you said it in the Q&A. At the same time, how do you think about the backdrop here when I think you guys dropped the sales growth number from the slides itself? I, I, I can't discern is that, is that, was that purposeful? Is there some sort of update coming at some point here? Just wanted to kind of ask you to elaborate, maybe I'm not taking too much. I think you might be reading into that, that too much, Julian. I mean, generally we talk about our five year sales growth on the Q3 call. I mean, you just heard me reiterate it and in 2025 or 3% sales growth is unchanged. We feel good about that. So I, I, there has been no change. I I mean, basically sitting here, what we wanted to do is give a little bit more context in the data center growth because that's about half that 5%. And the fact that we're, do you have 3 signed contracts in construction. All three of those plan to energize later this year. We expect to deliver the rest of that contracted or the capacity that's in our space sales forecast by this fall. And we're in active negotiations exchanging term sheets right now with multiple counterparties. So that, that's where he, so I think you might be reading into it a little bit, but our, our 2025 sales girl has is unchanged in our outlook. Five year outlook is unchanged. And I think I just add, I said this in the open remarks is plus only half of our load is from data centers in our five year sales forecast. Having this diversity of growth is also a benefit to and we continue to see very strong growth out of the oil and gas sector in the Permian, in Texas, in New Mexico. So overall, hopefully that helps with a little bit of additional color with how we feel. Yeah, absolutely. Well, thank you guys very much. I'll leave it there. All right, we'll talk soon. We'll talk to you on the third quarter call and that sales update. Thanks, Julia. Thanks.
Robert Frenzel (Chairman, President and CEO)
Cheers.
Melissa (Operator)
Thank you. Our next question comes from Steve Fleischman with Wolf Research. Please go ahead.
Unknown (Analyst)
Yeah. Hi. Good morning. I'll wish you a final skull. Good to miss you. So. Just I guess just one other thing on the day on the data centers that I can't recall the 8900 megawatts pipeline is that did that, is that number the same as before? Did that go up? And just maybe on that topic, just a little more on the the tone of conversations, any shift in the last few months? So see that number's unchanged. We just tried additional color into kind of that what's included in our base and what we have contracted already. So we didn't change that top side. We have a lot of lot of discussions, but the question around tone and I guess you could you bring this back to DeepSeek and what we're hearing. So we had discussions with a number of hyper scalers post DeepSeek and you know, come some of the common themes is this is the efficiency gains were expected. It didn't catch them off guard and deep sequence focus on training and not inferencing where we really think the long term growth is going to be. And then in all of our discussions with the data center, these active discussions around the ESA is, is there is no change in tone, there is no slowing down. So absolutely not. I, I think that's why we feel really good about where we are relative the data center. So as you'd expect us to be where we were in, in in contact with a lot of them post that news and just given the reaction it had on or the impact it had on our industry. So, but we feel good about the growth plans going forward. OK, thanks. And then just a quick numbers question, SPSI think was basically flat on the year despite all that growth. Is that just regulatory lag? That's a good question. You had a wholesale customer load roll off that started last year. So you saw the full annualization of it this year is is one of the bigger drivers of it. So that will get captured as you going forward. That's right. OK. Thank you.
Melissa (Operator)
Thank you. Our next question comes from Dark Carly Davenport with Goldman Sachs. Please go ahead.
Unknown (Analyst)
Hey, good morning. Thanks so much for taking the questions. Maybe just two quick follow-ups on a couple of the topics we've had on so far. First, just on the data center comments, as you sign those remaining contracts that are in the five year plan by the fall, is that something where we should expect to see any sort of announcements around those transactions or investments to support those facilities or is that something that more will happen in the background?
Brian J Van Abel (EVP, Chief Financial Officer)
Hey, Carly, good question. A little bit depends on the counter party and potentially the regulatory filing around it.
Unknown (XEL Executive/Management)
So maybe a little bit TBD of whether they'll be actual formal or not or not, but we're certainly, you know, want to respect the wishes of our data center customers depending on how they want to handle this. Got it. I might just.
Robert Frenzel (Chairman, President and CEO)
I might just add that there are times that the local economic development teams are also very happy to have supported, you know, the governor's priorities in our states. And so sometimes the communities or the state wants to make an announcement too. So you know, I would suggest that that we may have more to say as we go through the year or it might be quiet until we give an update on the third quarter call.
Unknown (Analyst)
Got it. Great. That's very clear. Appreciate those comments. And then maybe just circling back to the wildfire mitigation front, obviously it's been very much in focus. Just as you think about the two proceedings on the Colorado mitigation plan and the Texas SRP, how are you guys thinking about the prospects to reach a settlement in those proceedings or do you think they'll go, go, go the full way? You know, I, I think we're, we're certainly, as we, we look forward, we'll take Texas first. Know we've seen a settlement in the SRP by some of our, some of our peers in Texas. So we're certainly hopeful that we can reach, reach a settlement. I think it's, it's recognized in Texas by our stakeholders the importance of wildfire mitigation and making sure that we are protecting our communities and our customers. And so I, I think we're hopeful there in Texas, in, in Colorado. We'll just start to engage. We haven't received any testimony yet. We'll receive an answer testimony from our stakeholders here later in Feb should be next week, I think late next week. And then there's a settlement deadline. So that's the deadline to watch April, mid-april is a settlement deadline in Colorado. So we'll start to engage those conversations and certainly hopeful we can reach a settlement. But certainly we're comfortable going through this given the importance of this plan, the significance of this plan going through hearings in a decision deadline that you would expect at the end of the the August from the Commission. Great. Thank you so much for all the color. Thank.
Melissa (Operator)
You Our next question comes from Durgesh Chopra from Evercore ISI. Please go ahead.
Unknown (Analyst)
Hey team, good morning. Thank you for taking my questions. Just maybe March so far, that's where I want to start and then I'll go back to a big picture question. Just what's the latest there? You know, the obviously trials start in September 2025. What should we be tracking between now and 25? Could there be sort of a settlement or you know some sort of resolution between the parties? I mean, just latest thoughts there please. Thank you.
Robert Frenzel (Chairman, President and CEO)
Heydrick, Ash. It's Bob. Thanks for the question. Look, there's not a lot going on, a lot of changes in the Marshall proceeding. As you indicated, the trial is is set for September and the judge reaffirmed that recently. And as we indicated in the fourth quarter, we have made some decisions, The presiding judge has made some decisions around the structure of the trial will do a liability only trial in September and and if necessary subsequent trials around around damages. And so not much has changed. I guess the only new news out of out of the judge is probably the the venue decision that he made was going to keep the the the trial in Boulder County as opposed to the adjacent county Jefferson, which is there was a venue change request. So not much going, not much new there. And and again, back to your, your second question is, which is really around settlement and settlement opportunities. You know, as we've said previously, you know, we disagree with the sheriff's report and the source of the second ignition and a prepare prepared to defend that in the trial in September.
Unknown (Analyst)
You got it. Thanks, Bob. And then one big, big picture question on tariffs. Obviously you have a very sizable renewable investment in the plan and the the China tariffs are now in effect. So if they're going to be sort of there for a prolonged period of time, you know how you thinking that impacts your plan, how you did risking your supply chain, your thoughts there please. Thank you. Yeah. Hey, good morning Dirge and thanks for the question. I mean, I think the, the, the China tariffs were, were probably well communicated. And it's not as though we haven't dealt with tariffs before. There is tariffs under the previous Trump administration. We had tariffs under the Biden administration ADCVD investigation. So something that we've gotten pretty familiar with in working with our suppliers in the manufacturing in terms of whether there's manufacturing capacity outside of China or just ensuring we're making the right procurement decisions to deliver the best possible price to our customers. So I would say that the and the tariff is not unexpected and not surprising it. And as you you'd expected given for our forward-looking nature and all the renewable stuff I have in flight that we had planned for something like that and have taken the appropriate actions. Awesome. Thank you. And and Paul, we will miss you greatly. All the best. Thank you.
Melissa (Operator)
Thank you. Our next question comes from Anthony Crowdo from the Zuho. Please go ahead.
Unknown (Analyst)
Hey, good morning. I don't know if we can go that far, but yeah, Congrats, Paul. Thanks again. Just, I guess 2 quick questions. I wanted to follow up on Steve's comments. I guess more on the tone of the data center. I'm just curious if we can contrast the tone between maybe customers associated with the data centers and non data centers. I mean, is there more of a sense of urgency with maybe data center customers to hook up or do you see it's the same across which whatever customers are coming to you? Anthony, you mean like other CNI or oil and gas or just exactly Yes, I mean, I, I think from the data center side, it is certainly always speed. The market continues to be the one of the most important factors in, in, in terms of of can can we deliver the transmission generation capacity on the timeline that they're looking for As for other customers, I mean.
Brian J Van Abel (EVP, Chief Financial Officer)
We continue to see.
Unknown (XEL Executive/Management)
Significant growth on the oil and gas industry and I I think that's probably reflect, not probably it is reflected in the resource plan that we found New Mexico and our RF RP. When you look at the upside of that RFP in Texas, New Mexico, that is 14,000 megawatts of generation that's informed by our oil and gas customers in terms of what their electrification needs are. I also think what you saw out of SPP with the recent approval of this big portfolio of projects including a 765 KV that is a word of Joyce and will build is that continued growth and our customers are are looking to get connected. So I wouldn't differentiate, we don't differentiate between among customers, among customers. But overall it hasn't changed. The tone hasn't changed with data centers related to kind of their speed to market and how important it is for them. Great. And then just on that, if I think about maybe political or regulatory support that you get with new customer hookups, I'm sure it's great for all the communities, whether it's property tax offsets or what the property tax would pay. I mean, but I think there's probably more economic development associated with the non data center customers. Is, is that fair to look at it that way And maybe that they get maybe greater continued regulatory support or political support then maybe the data centers are actually, as you said earlier, there's there's no different differentiation between the type of customer that's getting hooked up. A hookup is great for regulators. Well, I think Anthony, I think it really depends. I mean if you're talking about a data center that's going to build low to a GW plus of capacity, you have years and years of construction jobs and then they may be doing other development within the communities or the community's significant property tax base. And it does provide benefit to all of our other customers. And when you're talking about the data center load that large, it does drive benefit for all of our customers. So I, I don't think it, I wouldn't characterize it that way because you know, the data centers and these large low customers understand that they need to bring economic development and benefit to all of our customers for us to get it through.
Brian J Van Abel (EVP, Chief Financial Officer)
In front of the Commission.
Unknown (Analyst)
Great. Thanks for taking my question, guys. Thanks again.
Melissa (Operator)
Thank you. Our next question is from Travis Miller from Morningstar. Please go ahead.
Unknown (Analyst)
Good morning. I'll echo much appreciation Paul's enjoyed over the years and appreciate all the help over the years. Question of a high level, we're trying to figure out kind of what are some of the constraints really across the industry on some of the big CapEx numbers and the growth numbers coming out. What about labor? You know, a lot of that's a lot of lot of questions about equipment and tariffs etcetera, etcetera. But what about labor availability both for you and what you maybe see across the industry?
Robert Frenzel (Chairman, President and CEO)
Is that a constraint? Travis is Bob? Great question. And certainly one that we're focused on and and probably have been focused on for a number of years. We've been working actively with both national and local IB, WS and other trade organizations that we work with to, you know, hire the critical talent that we need to, to own and operate these assets. We've been working, trying to give insights into our backlog of capital projects that we need to our, our vendor partners to make sure that they know where our growth is coming from. And so our, our, our job is really massively in terms of partnership with people who help provide us the human talent that we need to do this, this big build out now that gets pressured by other people also needing talents. And so, you know, we're, we're in, in, in constant competition for human capital and talent, both at our vendor side and at our and for our company talent as well. So it's a great question. I think we started the process. There's more work to do there, everything from funding programs and, and developmental junior colleges and technical colleges going into high schools and recruiting at that level, trying to get folks that that may want to, you know, bypass the university and, and go straight into a trader of craft. So any and everything we can do to make sure that we've got the human capital, to make sure that we can do the build out that we need.
Unknown (Analyst)
OK, great. That's, that's very helpful. And then just a specific on the data center, apologies if I missed this in any of the comments, but do you anticipate any specific regulatory filings for any of the customers either you have signed or you're or you're working with just thinking about something that might need such a big build out that you need some kind of pre approval or or approval? Travis, yeah, we, we would likely expect, we haven't disclosed which states that we're, we're we're negotiating with these customers on. But yeah, we'd likely expect that we would seek regulatory approval. And that's a little bit back to my comment of the data centers understand for us to get regulatory approval that's got to show benefit to our current customers and benefit kind of the communities. OK, great. Thanks so much. Just all ahead. So, well, with that, I just want to lastly echo Bob's comments around Paul retiring. You can tell he's in the room with us for one last time. He's been a mentor to me, a mentor to many of us in this room and a close and personal friend to me ever since the the 15 years that I've been at the company. So thank you again, Paul. Rupesh, welcome to the first earnings call. We look forward to that many more going forward. So with that, I'll wrap up. Thank you for participating in our earnings call this morning. Please contact our Investor Relations team with any follow up questions.
Melissa (Operator)
Thank you very much. That concludes today's conference. You may now disconnect.
Other transcripts: Q2 FY26 transcript · Q1 FY26 transcript · Q4 FY25 transcript · Q3 FY25 transcript · Q2 FY25 transcript · Q1 FY25 transcript
All XEL earnings · Back to XEL overview
Transcript produced by Signals.AI from the company's own earnings call audio; speech recognition can mishear a word. Not personalized investment advice.