Xcel Energy Inc. Earnings Call Nuggets: Minnesota, Colorado

On Thursday, Xcel Energy Inc (NYSE:XEL) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Minnesota

Travis Miller – Morningstar: Wanted to go to Minnesota here for a little bit. If you get that property tax deferral there, do you think you can earn the allowed return at 10.37 in 2012 and corollary there is that embedded in your guidance weather normalized?

Benjamin G.S. Fowke III – Chairman, President and CEO: The deferral of the property taxes is embedded in our guidance and the reality is Travis even with that deferral – the accounting order for the deferral of property taxes we won’t earn the allowed return of 10.37. I think we anticipate NSP-Minnesota would probably be in the low nine.

Travis Miller – Morningstar: What’s the biggest thing driving that, is the capital side or the operating costs side?

Benjamin G.S. Fowke III – Chairman, President and CEO: Well, I mean it’s the erosion of sales that we’ve seen in Minnesota which is and probably the most pronounced in all of our jurisdiction, this is really the essentially the second year of staying out of our rate case and so there’s a number of factors like that have push that down.

Excel Energy Earnings Cheat Sheet>>

Teresa S. Madden – SVP and CFO: Ben, I would just add to that. Greatest impact of our weather is in the Minnesota Company so.

Travis Miller – Morningstar: What risks do you see if you file in November, do you expect based on the negotiations from the previous year. So, the risk I’m thinking of ROE cut potentially from even 10.37, disallowance of some kind of operating cost, disallowance of potential capital cost, what are the key risks based on settlement negotiations et cetera from the previous case that could go into the November ’12 case?

Benjamin G.S. Fowke III – Chairman, President and CEO: Well, I think the issues that you raised are always the issues whenever you file a rate case. So, I would probably say that the ROE, it’s one of the key things we defend. Our capital, Travis, tends to be a much easier sell, particularly because it’s pretty easy to see the value of that we’re doing. This is a year again we didn’t talk about it on the call, but we’re starting the year off very strongly and with reliability and all the operating indicators that are so important to our customers. It’s really a reflection of the money we’ve been putting into our systems. So, at the end of the day, it’s litigated, we have interveners that see it another way, but I think at the end of the day, we’ve got a track record that demonstrates that we get constructive outcomes. I think one of the advantage of going to a multiyear plan, like we did in Colorado, is we get that regulatory certainty and we get a little pause. We have recognized that when you modernize an infrastructure, you follow a lot of rate cases. So, I think it’d be nice to get a multiyear plan or something close to it and kind of get our marching orders and move on with it.

Colorado

Ali Agha – SunTrust Robinson Humphrey: Ben, if you look at Colorado, and assuming you do get the settlement approved, at least in Colorado, should we assume that that gives you the tools to earn your authorized returns or are there going to be lag there as well?

Benjamin G.S. Fowke III – Chairman, President and CEO: There still will be some lag, but I think we will close it a bit and I think we have a little more control of our destiny. We didn’t get everything we wanted and that’s kind of the way it goes when you do a settled agreement, but I think we made a lot of progress, we set the precedent going forward for multi-year plans and I think if we manage expenses and capital in our business well that we can help eliminate some of that lag that plagued us in Colorado, but we won’t cut it out completely by any stretch.

Ali Agha – SunTrust Robinson Humphrey: I mean, along those lines if you look your two biggest jurisdictions Minnesota and Colorado you are looking at multi-year plans, you get into run rate increases you got that in Minnesota as well. From a logistic point of view, is that a particular functional change that is still required in both of those jurisdictions to be able to earn an authorized ROE, what needs to – in broad terms what big item needs to change for you to eliminate the lags in Minnesota and Colorado?

Benjamin G.S. Fowke III – Chairman, President and CEO: It will help us bounce back. I mean, that would be one thing that helps in between rate cases. It is some of the expenses that we’ve had, the pension amortization which hopefully starts to level-off I think in 2013 and beyond that will help and I mean as we start to – as capital forecast starts to flatten-out, albeit at a relatively higher amount than we have seen historically, I think that will be helpful too. I don’t know, Teresa, if you want to add anything?

Teresa S. Madden – SVP and CFO: I think you have covered the major items.

Ali Agha – SunTrust Robinson Humphrey: Last question, looking more near-term, when you look at the trends that you reported in the first quarter, including the tax benefit, was that sort of plugged in to your budget for the year? In other words, was Q1 pretty much on track, because if you took the tax benefit out, that’s about $0.03 swing right there? So I’m just wondering, was that a positive offset to some other slowdown or how should we be thinking about that in the context of your own budget?

Benjamin G.S. Fowke III – Chairman, President and CEO: I guess let me start it out and I’ll have Teresa add. I mean the plan there – we knew we were planning around this tax benefit. The question was going to be what quarter we would take it in, which is why we don’t do quarterly guidance. So, it was always in our always in our guidance range of $1.75 to $1.85 and we knew we had that when we talked about it. So, as far as the timing of it, I think that’s a function of when the planning was completed and some things like that. Teresa, I don’t know if you want to add anything.

Teresa S. Madden – SVP and CFO: You’re exactly right, Ben. I mean we had assumed certain level in terms of the tax planning strategy. We actually completed the work at the end of the first quarter. Obviously, we consulted with our auditors about the methodology, the approach, and the amount, and including the timing, and in fact, we determined it was most appropriate to recognize it in the first quarter. So, gain, short answer is, yes, we had assumed a level in our guidance, and in the quarterly estimates, there was some variability in that.

Ali Agha – SunTrust Robinson Humphrey: But earlier today, you called out that you’re budgeting a 34% to 35% effective tax rate for the year. Remind me was that not the original plan or is it down from what your original plan was for the tax rate for the year?

Teresa S. Madden – SVP and CFO: It’s down, it was 34% to 36% originally and which is now at 34% to 35%.

Benjamin G.S. Fowke III – Chairman, President and CEO: Keep in mind, Ali we expected that this would possibly come in, but weren’t necessarily sure on the timing and the ultimate magnitude of it.