Xcel Energy Inc.

Hello and welcome to the Xcel Energy third quarter 2023 earnings conference call. My name is George. I'll be a coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. A question and answer session will follow the prepared remarks and questions will only be taken from institutional investors and analysts. Reporters can contact media relations with inquiries and individual investors and others can reach out to investor relations. To register for a question, please press star 1 on your telephone keypad. If you require assistance at any point, please press star 0 and you will be connected to an operator. I'd like to hand the call over to your host today, Mr. Paul Johnson, Vice President, Treasurer, and Investor Relations to begin today's conference. Please go ahead, sir.

Thank you. Good morning and welcome to Xcel Energy's third quarter earnings call. Joining me today are Bob Frenzel, Chairman, President, 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 third quarter results and highlights, share recent business and regulatory developments, update our capital and financing plans, and provide 2024 guidance. Slides that accompany today's call are available on our website. As a reminder, some of the 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 our SEC filings. Today we'll discuss certain measures that are non-GAAP measures. Information on comparable GAAP measures and reconciliations are included in our earnings release. Earlier this week, a jury in Denver District Court found Xcel Energy liable in its dispute with Core Cooperative regarding prior years lost power damages at our Comanche power plant. We intend to appeal the decision. For the third quarter of 2023, we recorded gap earnings of $1.19 per share, which includes a one-time non-recurring pre-tax charge of $34 million related to the ongoing legal dispute. As a result, we have taken a non-recurring charge of $0.05 per share, which we don't consider part of ongoing earnings. All further discussion in our earnings call will focus on ongoing earnings. For more information on this matter, please see the disclosure in our earnings release. I'll now turn the call over to Bob.

Thanks, Paul. Good morning, everybody. Let's start with the quarter. We had solid results recording ongoing earnings of $1.23 per share for 2023 compared to $1.18 per share in 2022. As a result, we're narrowing our 23 ongoing earnings guidance to $3.32 to $3.37 per share. We're also initiating 2024 ongoing earnings guidance to $3.50 to $3.60 per share, which is consistent with our 5% to 7% long-term EPS growth rate. With past practices, we've reviewed our customer and operational needs and have updated our infrastructure plan for 2024 to 2028. This revised forecast reflects $34 billion of needed capital investment, an increase of $4.5 billion from our previous plan. This base infrastructure investment plan includes substantial resiliency investments in both transmission and distribution including additional upgrades required to support the colorado energy plan however does not include clean energy generation investments that could result from the resource plans in colorado texas and new mexico or in the upper midwest if approved by our commission these cost-effective clean energy generation investments could result in an additional capital needs totaling 10 billion dollars from 2024 to 2028 and dramatically reduce carbon emissions in various states. Xcel Energy's resource plans also demonstrate the benefits of the Inflation Reduction Act, our state's geographic advantages that enable high-capacity renewable generation, and our operational expertise in commercial acumen can bring to our customers. In September, we filed our recommended plan in Colorado. seeks to double the amount of renewable energy in the state, making it the largest clean energy transition ever in Colorado history and demonstrates our strong alignment with the state's environmental goals. Our proposal contemplates the shutdown or conversion of our remaining coal units, replaces them with approximately 6,500 megawatts of renewable energy and battery storage, and 600 megawatts of dispatchable gas resources to ensure system reliability in times of low wind or solar conditions. These amounts include 4,800 megawatts as proposed to be owned and operated by Xcel Energy for the benefit of our customers. Including the approximately $3 billion in required transmission investment to ensure deliverability and reliability, this Colorado energy plan represents nearly an $11 billion total investment by Xcel Energy. In addition, this portfolio also includes $10 billion in IRA savings to customers, It creates local jobs, promotes economic development, and provides over $2 billion in tax benefits to local communities in the coming decades. At the same time, it will reduce carbon emissions by over 80% from 2005 levels in Colorado, while having an expected annual rate impact of only 2.3%. This competitive portfolio provides our Colorado customers an industry-leading opportunity for a cleaner economy at a fraction of the cost most other states would incur. Moving to Minnesota, in September, the Commission approved 350 megawatts of new renewable generation, including an additional 250 megawatts at our Sherco facility. This brings the total amount of company-built solar at Sherco to over 700 megawatts, making it one of the largest solar facilities in the country. In October, we also issued an RFP seeking 1,200 megawatts of wind that will utilize our transmission interconnect at our retiring Sherco coal facility and will be issuing additional RFPs to fulfill the remainder of the approved Upper Midwest Resource Plan in 2024. Finally, in October, we filed a resource plan in New Mexico. Based on our filing, SPS could require an additional 5 to 10,000 megawatts of new generation by the end of the decade to accommodate increasing demand, plant retirements, and ensure resiliency and reliability of the grid. We've already proposed 418 megawatts of company-owned solar and battery projects that are pending commission approval, and we anticipate filing another RFP in 2024 for the additional generation resources. Shifting to our clean energy innovation projects, the Department of Energy recently announced nearly $1.5 billion in awards to support multiple Xcel Energy-affiliated projects. Starting with the Heartland Hydrogen Hub, this estimated $5 billion initiative, which includes multiple projects from Xcel Energy and others, received an award of up to $925 million by the DOE. This game-changing funding will serve as a catalyst for a clean hydrogen ecosystem in the Upper Midwest and the foundation of our clean fuels efforts at Xcel Energy. Fortunately, the Western Interstate Hydrogen Hub in Colorado, New Mexico, Wyoming, and Utah was not successful in this round of DOE funding. And that said, we remain committed to working with policymakers and federal offices with the hopes that our projects can progress to advance our shared clean energy goals. The DOE also awarded Xcel Energy up to $70 million to support two 10-megawatt, 100-hour battery pilots with Forum Energy. Combined with the grants from Breakthrough Energy's Catalyst Fund, we've secured up to $90 million to support these long-duration energy storage pilots, a critical asset class to ensure cost-effective reliability in a high-renewable grid. With respect to DOE's Grid Resilience and Innovation Partnerships Program, Xcel Energy was selected as part of two different awards. First, the DOE awarded Xcel Energy $100 million to support projects to mitigate the threat of wildfires. and ensure resiliency of the grid through extreme weather. Projects include vegetation management, selective undergrounding, advanced infrastructure technologies, drones, and several additional resiliency projects. Xcel Energy was also a party to GRIF's $464 million grant to expand transmission as part of the MISO and SPP SEAMS program to fund high voltage transmission to improve interregional transfer capability, reliability, and resolve grid constraints. We're appreciative of the DOE support, as well as many of our partners in these projects, including our state and regional transmission organizations. Funding support helps us accelerate critical carbon-free technologies, enhance safety and resiliency, while keeping costs low for customers. Turning to our natural gas utility, in August, we followed our Clean Heat program in Colorado This first of a kind plan provides a framework to reduce greenhouse gas emissions consistent with state goals in our net zero emissions target. The plan fast tracks solutions such as electrification, demand side management, clean fuels, and certified natural gas. The proposed clean heat plus portfolio reduces greenhouse gas emissions by 28% by 2030, ensures customer reliability and choice while optimizing customer bill impact. We plan to file our natural gas innovation plan, a corresponding framework for our Minnesota gas utility, in the fourth quarter. In September, Meta announced construction of a $700 million data center in Minnesota, which eventually could be one of our largest customers in the state. We continue to evaluate a number of additional data center and commercial opportunities that will further support low growth and economic development in our communities. Finally, there are not many new material developments with the Marshall wildfire litigation. We currently have 14 complaints with 675 plaintiffs, which have been consolidated into a single case. For the past four years, Xcel Energy has been operating under a commission-approved wildfire mitigation program in Colorado. We intend to file an updated wildfire mitigation plan next year, which will include a wide range of options for stakeholder consideration, including new technologies, undergrounding, additional vegetation management, composite poles, selective use of covered conductor, and preventative power system shutoffs. Let me wrap up with just a few summary comments before I turn it over to Brian. As we look forward across the next five years and beyond, we see a future that is bright for our communities, our customers, and our investors. Xcel Energy is committed to providing a clean energy economy in our region, and it will require meaningful investment to accomplish. For our customers, we have the potential to deploy 15 to 20,000 megawatts of new clean generation on our systems by 2030, dramatically lowering our emissions profile affordably powering our customers' homes and businesses while ensuring 99.99% reliability that they come to expect from Xcel Energy. And through leveraging the benefits of the IRA and the IIJA, we are able to accelerate deployment of renewable resources and pairing them with affordable energy storage assets and other firm dispatchable clean fuel resources to provide reliability. We continue to invest in and innovate our transmission and distribution systems to ensure reliability and resilience and provide for regional and interregional deliverability. We're laying the framework to achieve net zero greenhouse gas emissions on our natural gas system. All the while, our residential customer electric and natural gas bills are amongst the lowest in the country, at 28 and 14% below the national average. Given that the regions where we serve customers are the most resource-rich in wind and solar, we believe that we can lead this clean energy transition for our customers more cost-effectively than almost any other company. With that, I'll turn it over to Brian.