EX-99.05 6 a05-20881_1ex99d05.htm EXHIBIT 99
















 

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Executing
The Financial Plan

 

Financial

Performance

 

 

 

Regulators/

Legislators

 

 

 

Value to

 

Environmental

Customers

 

Stewardship

 

 

 

Invest in Regulated Utility Business

 

Ben Fowke Vice President & Chief Financial Officer

 


 

Safe Harbor

 

This material includes forward-looking statements that are subject to certain risks, uncertainties and assumptions.  Such forward-looking statements include projected earnings, cash flows, capital expenditures and other statements and are identified in this document by the words “anticipate,” “estimate,” “expect,” “projected,” “objective,” “outlook,” “possible,” “potential” and similar expressions.  Actual results may vary materially.  Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures; business conditions in the energy industry; competitive factors; unusual weather; effects of geopolitical events, including war and acts of terrorism; changes in federal or state legislation; regulation; final approval and implementation of the pending settlement of the securities, ERISA and derivative litigation; costs and other effects of legal administrative proceedings, settlements, investigations and claims including litigation related to company-owned life insurance (COLI); actions of accounting regulatory bodies; risks associated with the California power market; the higher degree of risk associated with Xcel Energy’s nonregulated businesses compared with Xcel Energy’s regulated business; and other risk factors listed from time to time by Xcel Energy in reports filed with the SEC, including Exhibit 99.01 to Xcel Energy’s report on Form 10-K for year 2004.

 


 

Financial Performance Objectives

 

•                  EPS growth rate 2005 – 2009

•                  Target 5 – 7% per year*

 

•                  Annual dividend increases

•                  Consistent with dividend growth objective of 2 – 4% per year

 

•                  Credit rating

•                  Senior unsecured debt BBB+ to A range

 

* Excluding any impact from COLI

 


 

Capital Expenditure Forecast

 

Dollars in millions

 

 

 

2005

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Base level

 

$

982

 

$

1,035

 

$

1,016

 

$

920

 

$

1,031

 

 

 

 

 

 

 

 

 

 

 

 

 

Minnesota MERP

 

211

 

336

 

228

 

180

 

44

 

 

 

 

 

 

 

 

 

 

 

 

 

Comanche 3

 

62

 

198

 

331

 

284

 

73

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,255

 

$

1,569

 

$

1,575

 

$

1,384

 

$

1,148

 

 

 

 

 

 

 

 

 

 

 

 

 

Anticipated annual growth in average rate base

 

4

%

4

%

7

%

5

%

2

%

 


 

Potential Rate Base

 

Dollars in millions

 

 

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average rate base

 

$

10,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected rate base growth

 

 

 

4

%

4

%

7

%

5

%

2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected average rate base

 

 

 

$

10,920

 

$

11,357

 

$

12,152

 

$

12,759

 

$

13,015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity ratio

 

 

 

51

%

51

%

51

%

51

%

51

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average equity rate base

 

 

 

$

5,570

 

$

5,790

 

$

6,200

 

$

6,510

 

$

6,640

 

 


 

Potential Regulatory Net Income

 

Dollars in millions

 

 

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Equity rate base

 

$

5,790

 

$

6,200

 

$

6,510

 

$

6,640

 

 

 

 

 

 

 

 

 

 

 

ROE

 

 

 

 

 

 

 

 

 

9.2%

 

$

530

* 

$

570

 

$

600

 

$

610

 

9.5%

 

$

550

*

$

590

* 

$

620

 

$

630

 

10.0%

 

$

580

* 

$

620

* 

$

650

* 

$

660

 

10.5%

 

$

610

 

$

650

* 

$

680

* 

$

700

*

11.0%

 

 

 

$

680

 

$

720

* 

$

730

*

 

*  Potential trajectory

 


 

Financial Model Assumptions

 

•                  The forecast scenario is illustrative of a potential outcome, and does not imply guidance or a most likely outcome

 

•                  Average allowed return on equity is 11% and by 2009 the Company is able to earn at that level in all jurisdictions

 

•                  Depreciation grows at the same level as rate base

 

•                  No change in working capital

 

•                  Dividend rate increase 3% per year – the mid-point of the 2 – 4% objective range

 

•                  Dividends increase in 2007 and 2008 for expected conversion of convertible notes

 

•                  COLI resolved successfully

 


 

Potential Net Income*

 

Dollars in millions

 

 

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Assumed earned ROE

 

 

**

10

%

10.5

%

11

%

 

 

 

 

 

 

 

 

 

 

Potential regulatory income

 

$

575

 

$

620

 

$

680

 

$

730

 

 

 

 

 

 

 

 

 

 

 

COLI expense

 

(20

)

(20

)

(20

)

(20

)

 

 

 

 

 

 

 

 

 

 

COLI tax benefit

 

40

 

40

 

40

 

40

 

 

 

 

 

 

 

 

 

 

 

Holding company expense

 

(40

)

(40

)

(40

)

(40

)

 

 

 

 

 

 

 

 

 

 

Potential net income**

 

$

555

 

$

600

 

$

660

 

$

710

 

 

*                 This illustration represents one potential scenario, and does not represent guidance or a most likely outcome

 

**          2006 Net income is based on the mid-point of the guidance range and implies an earned ROE of less than 10%

 


 

Potential Cash Provided by Operations*

 

Dollars in millions

 

 

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Potential net income

 

$

555

 

$

600

 

$

660

 

$

710

 

 

 

 

 

 

 

 

 

 

 

Depreciation & amortization

 

900

 

960

 

1,010

 

1,030

 

 

 

 

 

 

 

 

 

 

 

NOL tax benefit

 

125

 

125

 

125

 

125

 

 

 

 

 

 

 

 

 

 

 

Potential cash provided by operations

 

$

1,580

 

$

1,685

 

$

1,795

 

$

1,865

 

 

*                 This illustration represents one potential scenario, and does not represent guidance or a most likely outcome

 


 

Potential Cash Used for Investing & Cash Provided/(Used) from Financing*

 

Dollars in millions

 

 

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

 

Capital expenditures

 

$

(1,569

)

$

(1,575

)

$

(1,384

)

$

(1,148

)

Decommissioning

 

(80

)

(80

)

(80

)

(80

)

Asset sales & other

 

50

 

0

 

0

 

0

 

Cash used for investing

 

$

(1,599

)

$

(1,655

)

$

(1,464

)

$

(1,228

)

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Dividend

 

$

(353

)

$

(366

)

$

(395

)

$

(412

)

Equity/DRIP

 

40

 

40

 

40

 

40

 

Net debt

 

350

 

300

 

0

 

(250

)

Cash provided (used) for financing

 

$

37

 

$

(26

)

$

(355

)

$

(622

)

 

*                 This illustration represents one potential scenario, and does not represent guidance or a most likely outcome

 


 

Potential Capital Structure*

 

Dollars in millions

 

 

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Common equity

 

 

 

 

 

 

 

 

 

Beginning

 

$

5,418

 

$

5,660

 

$

6,164

 

$

6,527

 

Potential net income

 

555

 

600

 

660

 

710

 

Dividends

 

(353

)

(366

)

(395

)

(412

)

Convertible note

 

0

 

230

 

58

 

0

 

DRIP

 

40

 

40

 

40

 

40

 

Ending

 

$

5,660

 

$

6,164

 

$

6,527

 

$

6,865

 

 

 

 

 

 

 

 

 

 

 

Debt

 

 

 

 

 

 

 

 

 

Beginning

 

$

7,229

 

$

7,579

 

$

7,649

 

$

7,591

 

Convertible note

 

0

 

(230

)

(58

)

0

 

Net issuance/(repayment)

 

350

 

300

 

0

 

(250

)

Ending

 

$

7,579

 

$

7,649

 

$

7,591

 

$

7,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred equity

 

$

104

 

$

104

 

$

104

 

$

104

 

 

*                 This illustration represents one potential scenario, and does not represent guidance or a most likely outcome

 


 

Potential Capital Ratios*

 

 

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Common equity ratio

 

42.4

%

44.3

%

45.9

%

48.0

%

 

 

 

 

 

 

 

 

 

 

Preferred equity ratio

 

0.8

 

0.7

 

0.7

 

0.7

 

 

 

 

 

 

 

 

 

 

 

Debt ratio

 

56.8

 

55.0

 

53.4

 

51.3

 

 

 

 

 

 

 

 

 

 

 

 

 

100.0

%

100.0

%

100.0

%

100.0

%

 

*                 This illustration represents one potential scenario, and does not represent guidance or a most likely outcome

 


 

Potential Consolidated Net Income*

 

Dollars in millions

 

 

 

 

 

 

 

 

 

 

 

Growth

 

 

 

 

 

 

 

 

 

 

 

rate from

 

 

 

 

 

 

 

 

 

 

 

2005

 

 

 

2006

 

2007

 

2008

 

2009

 

guidance*

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory ROE

 

 

 

 

 

 

 

 

 

 

 

9.5%

 

$

530

^

$

570

 

$

600

 

$

610

 

4.3

%

10.0%

 

$

560

^ 

$

600

^

$

630

^

$

640

 

5.6

%

10.5%

 

$

590

 

$

630

^ 

$

660

^

$

680

^

7.2

%

11.0%

 

 

 

$

660

 

$

700

^

$

710

^

8.4

%

 

*                 The growth rate uses an estimate of 2005 net income of $515 million, which is based on the mid-point of the lower half of the $1.18 – $1.28 guidance range

 

^                Potential trajectory

 


 

Conclusions

 

•                  Earnings growth rate of 5 – 7% is reasonable and achievable under varying regulatory and financing scenarios

 

•                  Capital expenditure program can be financed with only DRIP and modest debt offerings without increasing leverage

 

•                  Potential need for an equity issuance beyond DRIP would be influenced by

•                  Outcome of rate case

•                  Capital expenditure opportunities

•                  Changes in cash from operations

•                  Strategic accretive opportunities

•                  Credit rating objectives

 


 

Actions to Address Imputed Debt Associated with Purchased Power Contracts

 

•                  Working with our regulators and legislators

 

•                  Increasing equity levels at the operating companies

 

•                  Proposing a purchased power equity rider in Minnesota electric rate case

 

•                  Planning to pursue a purchased power equity rider or similar mechanism in our other jurisdictions

 

•                  Evaluating other strategies

 

•                  Adding generation

 


 

Earnings Guidance Range

 

Dollars per share

 

 

 

2005

 

2006**

 

 

 

 

 

 

 

Regulated utility

 

$1.18 – $1.28

 

$1.25 – $1.35

 

Holding company and other

 

(0.09

)

(0.10

)

COLI – Tax benefit

 

0.09

 

0.10

 

 

 

 

 

 

 

Continuing operations

 

$1.18 – $1.28

* 

$1.25 – $1.35

 

 

*                 Expected to be in lower half of range

**          See earnings guidance assumptions in appendix

 


 

Financial Performance Objectives

 

•                  EPS growth rate 2005 – 2009

•                  Target 5 – 7% per year*

 

•                  Annual dividend increases

•                  Consistent with dividend growth objective of 2 – 4% per year

 

•                  Credit rating

•                  Senior unsecured debt BBB+ to A range

 

*                 Excluding any impact from COLI