Xcel Energy Inc.

Hello and welcome to Xcel Energy third quarter 2024 earnings call. My name is Melissa and I will be your 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. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star followed by one on your telephone keypad to register your question. 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 star followed by zero and you will be connected to an operator. I'll now turn the call over to Paul Johnson, Vice President, Treasury and Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Xcel Energy's 2024 Third Quarter Earnings Call. Joining me today are Bob Frenzel, President, Chairman, Chief Executive Officer, 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 questions if needed. This morning, we'll review our third quarter results and highlights, share recent business and regulatory updates, update our capital and financing plans, and provide 2025 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 releases and SEC filings. Today we will discuss certain metrics that are non-GAAP measures. Information on comparable GAAP measures and reconciliations are included in our earnings release. In the third quarter of 24, The Minnesota Commission disallowed $46 million of replacement power costs associated with the extended outage at our Sherco plant in 2011. As a result, we recorded a charge of $35 million or 4 cents in the third quarter, which was in addition to an $11 million or 2 cent charge that was accrued in the second quarter of 24 related to that matter. Given the non-recurring nature of these items, Both charges have been excluded from third quarter and year-to-date earnings. As a result, our GAAP earnings for the third quarter of 24 were $1.21 per share, while our ongoing earnings, which exclude this charge, were $1.25 per share. All further discussion in our earnings call today will focus on ongoing earnings. For more information on this, please see the disclosure in our earnings release. I'll now turn the call over to Bob.

Thank you, Paul. Good morning, everyone, and thank you for joining us today. I'm pleased to report that we delivered another quarter of solid operational and financial progress. We continue to deploy capital for the benefit of our customers and communities. And we enable a future powered by cleaner fuels and a more resilient and intelligent grid. We partner with stakeholders to encourage economic development, and we provide products and services capable of meeting our customers most important needs. In the most recent quarter, we invested $2 billion in resilient and reliable energy infrastructure. We delivered ongoing earnings of $1.25 per share for our owners. We provided industry-leading storm response and strong customer reliability despite challenging conditions. We accelerated our wildfire risk reduction measures to enable safer and more resilient communities. Xcel Energy's commitment to our communities and investors is anchored by our core investment thesis as a clean energy leader. For more than two decades, we've been a leading provider of wind energy, and with our filed resource plans, we expect to stay in that position. We've delivered on our earnings guidance for 19 straight years, one of the best records in the industry, and looking to make it 20 this year. We have a long-term and transparent growth plan, making investments in clean generation, new and enhanced energy grids, and economic development programs to support our community's vitality. We've deepened our commitment to serve and support customer needs efficiently. For example, since 2020, our continuous improvement programs have saved almost a half a billion in O&M expense while improving operating outcomes and reducing risk. In addition, we've kept our O&M costs significantly below the rate of inflation over the last 10 years. And our Steel for Fuel strategy has delivered more than $4 billion in customer fuel-related savings since 2017. This discipline alongside supportive state and federal policies enable us to reduce emissions and keep residential electric and natural gas bills 28 and 14% below the industry average and growth well under the rate of inflation. For 16 cents ahead of 2023 year to date earnings and, as a result, we are reaffirming our 2024 guidance of $3 and 50 cents to $3 and 60 cents per share. and we are initiating our 2025 earnings guidance range of $3.75 to $3.85 per share. And today we're introducing our updated five-year $45 billion capital investment plan, which centers on four key areas. Clean energy, which continues investment in generation that provides customers with a secure and clean energy future while helping our state and our customers meet their ambitious policy goals. Customer electrification, which helps customers electrify their transportation needs, transitioning homes and businesses away from fossil fuel heating, and converting fossil fuel loads to clean electric-powered loads. New load growth, which expands our electric system to support customers' surging demand and requirements over the next decade and beyond. And safety and reliability, which modernizes and hardens our system to ensure continued safe operations and address increasing risks from severe weather. There's a lot of focus across our industry and country regarding data centers. Xcel Energy has nearly 9,000 megawatts of opportunities in our customer pipeline before 2030. The scale of this pipeline gives us the ability to thoughtfully negotiate agreements that deliver the energy and capacity needed to important new customers in the region while protecting Xcel Energy and its customers ensuring lasting relationships with our data center customers, ensures that new data center load that's brought onto our system benefits all customers, drives load growth to our increasingly decarbonized energy system, generates economic growth and vitality in our communities, and delivers on the national imperative to support a domestic data center industry. As a result of these guiding principles, we anticipate We will secure contracts with about 25% of this pipeline in the five-year forecast period. We also expect these opportunities to continue to grow and the need extends well past the next decade. We've previously signed data center agreements with META and QTS and completed land sales with entities including Microsoft to support new facilities. In October, a new data center customer completed a land acquisition in our service territory, and we're in the final stages of signing service contracts with that party. Turning to the supply side of the equation, we continued progress during the quarter on our clean energy transition through multiple resource planning and RFP processes. We reached a settlement in our upper Midwest resource plan. As part of that settlement, 720 megawatts of company-owned natural gas CTs and battery investments were selected. In addition, the agreement reflects the need for an incremental 4,200 megawatts of wind, solar, and storage, a portion of which is included in existing RFP solicitations. The settlement is pending a decision by the Minnesota Commission, which is expected in the first quarter of 2025. In October, we made a new energy resource filing in Colorado called the Just Transition solicitation. Our projections indicate the need for up to 14,000 megawatts of new generation to meet the phase out of our coal plants, to accommodate increasing demand from data centers, and to achieve state and customer emissions goals. We anticipate a decision on that filing in fall of 2025, with RFPs to be issued in early 2026. And we're working on our solicitation and SPS, which could ultimately yield more than 5000 megawatts of renewable and firm dispatchable generation. These are due in January of next year, and we expect commission approvals in 2026. Protecting our customers from the threats of extreme weather also remains a top priority. In August, severe thunderstorms brought heavy rain, hail, and winds of over 60 miles an hour to customers in Minnesota and Wisconsin. Xcel Energy employees and contractors safely and promptly restored power to over 250,000 customers who lost service during those storms. We're thankful for the dedication of our employees and contractors that ensure that our communities continue to have safe and reliable service that they expect from Xcel Energy. In addition, we'd like to thank our crews who've worked tirelessly to provide mutual aid assistance to other utilities to support recovery and restoration efforts from the devastating hurricanes Helene and Milton. And regarding wildfire risk reduction, we continue to make progress on our accelerated wildfire mitigation efforts, as well as our Colorado wildfire mitigation plan filing. In the fourth quarter, we anticipate filing our Texas resiliency plan, which will include wildfire mitigation in the Southwest. Finally, turning to a tradition that i'm very proud during the third quarter nearly 2200 volunteers from excel energy in our communities took action to support nonprofit organizations during our 14th annual day of service. volunteers dedicated almost 8000 hours to support 125 projects for nonprofits across our eight states. we're grateful to the thousands of volunteers and nonprofits that came together. come together year after year to put good energy into action that fuels growth, influences change, and lifts up our neighbors. With that, I'll turn it over to Brian.

Thanks, Bob, and good morning, everyone. Starting with our financial results, Xcel Energy had ongoing earnings of $1.25 per share for the third quarter of 2024, compared to ongoing earnings of $1.23 per share in 2023. The most significant earnings drivers for the quarter included the following. Outcomes from rate cases and non-fuel riders increased earnings by $0.25 per share and higher AFUGC increased earnings by $0.04 per share. Offsetting these positive drivers were higher O&M expenses decreased earnings by $0.09 per share, higher depreciation and amortization decreased earnings by $0.08 per share, reflecting our capital investment programs. Higher interest charges decreased earnings by $0.08 per share, driven by rising interest rates and increased debt levels to fund capital investments. And other items decreased earnings by $0.02 per share. Turning to sales, year-to-date weather and leap year adjusted electric sales increased 0.2%. However, third quarter weather adjusted sales increased 1.3%. Based on our forecast, we are reaffirming our full year guidance of a 1% increase in weather adjusted electric sales. Our new five year plan includes 5% per year electric sales growth. Of which approximately 50% is from data centers with other growth coming from the oil and gas industry in EVs. Our sales forecast only assumes contracted or high probability data centers. We also expect large data center We also expect that large data center low growth will continue beyond our five-year plan, and there is upside to what we have included. Year to date, O&M increased $58 million, primarily driven by increased generation maintenance, damage prevention, wildfire mitigation, and storm expenses. In addition, we are facing increased costs from our recent excess liability insurance renewal. As such, we're revising our full year O&M forecast to 3 to 4% increase relative to 2023. During the quarter, we also made progress in several rate cases. Earlier this month, the Colorado Commission completed deliberations on our natural gas rate case, which reflects an estimated rate increase of approximately $130 million, which includes $15 million of incremental depreciation that was not included in our original request. The decision was based on a historic test year with an average rate base and a weighted average cost of capital of 7%, reflecting an ROE range of 9.2 to 9.5% and an equity ratio of 52 to 55%. Rates will go into effect in November. In early November, we plan to file a Minnesota Electric rate case seeking a rate increase of $490 million over two years. based on an ROE of 10.3% and a 52.5% equity ratio. We're also requesting interim rates of $224 million to go into effect in January of 2025. Final decision is expected in 2026. We continue to make progress in the Smokehouse Creek wildfire claims process. We've settled 86 of the 179 submitted claims, which we view as a positive and constructive outcome. 23 lawsuits have also been filed. In addition, there is no change to our estimated accrued liability of $215 million. As a reminder, we have approximately $500 million of excess liability insurance coverage for this fire. Shifting to our investment plans, we provided an updated $45 billion five-year base capital expenditure forecast, which reflects annual rate-based growth of 9.4%. These investments are critical to serve growing electric demand, meet clean energy goals, and ensure system safety and reliability. We have an additional $10 billion plus of pipeline of potential investment, which we view as conservative and could be significantly higher. This additional capital reflects generation from RFPs and resource plans, low growth from data centers and beneficial electrification, and additional transmission including opportunities from MISO Tranche 2 and the Southwest Power Pool. We also refreshed our base financing plan, which reflects approximately $19 billion of debt and $4.5 billion of equity. We anticipate that any incremental capital investment would be funded by approximately 40% equity and 60% debt. It's important to recognize we've always maintained a balanced financing strategy. which includes a mix of debt and equity to fund accretive growth while maintaining a strong balance sheet and credit metrics. As a result, you'll notice we issued $1.1 billion of equity via our ATM program this year. This equity issuance is not part of our 25 to 29 financing plan and reflects our commitment to credit quality while delivering on our long-term financial objectives. Maintaining solid credit ratings and favorable access to capital markets are critical to fund the clean energy transition, deliver strong shareholder returns, and keep customer bills low. Moving to earnings, we're reaffirming our 2024 ongoing earnings guidance range of $3.50 to $3.60 per share. We're also initiating our 2025 earnings guidance range of $3.75 to $3.85 per share, which reflects 7% growth from the midpoint of 2024 guidance. Key assumptions are detailed in our earnings release. We're updating our long-term EPS growth objective to 6% to 8% with expectations to deliver earnings in the upper half of the range. The increase in the EPS growth rate reflects our significant investment pipeline and confidence in our financial outlook. We also modified our dividend growth objective to 4% to 6% with the expectation to be at the low end of the range. A lower dividend growth rate allows us to retain additional cash flow to fund growth and lowers equity funding needs. In addition, it will lower our dividend payout ratio over time, which provides greater financial flexibility and drive powder for the future. With that, I'll wrap up with a quick summary. We reached a settlement in our Minnesota resource plan and found our latest Colorado resource plan, which allow us to lead the clean energy transition ensuring customer affordability and reliability while driving economic growth. We continue to make progress on our wildfire mitigation plans, which reduce risk from extreme weather. We announced an updated capital investment program that provides strong, transparent rate-based growth and significant customer value. We provided a balanced financing plan to fund accretive growth while maintaining a strong balance sheet and credit metrics. We're on track to meet our 2024 ongoing earnings guidance and have provided 2025 guidance consistent with our growth objectives. And we revise our long-term earnings growth to the upper half of the 6% to 8% objective range and dividend growth to the low end of the 4% to 6% objective range, which is indicative of our significant capital investment pipeline. This concludes our prepared remarks. Operator, we will now take questions.

Thank you very much. As a reminder, if you would like to ask a question on today's call, you may press star followed by one on your keypad to register your question. To withdraw your question for any reason, you may press star two. Our first question is from Nicholas Campanella with Barclays. Please go ahead.

Hey, good morning. Thanks for taking my question. Morning, Nick. Morning.

So I just wanted to ask, You talked in your prepared remarks. You had a customer make a large land acquisition. You know, what specifically, where was that exactly? Was that in Minnesota? Or could you provide more details on that? And then is that included in this 5% kind of consolidated load growth outlook long term for the company? Or is that pressure higher? And then how do we think about rate design there? I know that's a lot in one. Thanks.

Hey, Nick. Yeah, good morning. Undisclosed customer, but yes, it was in Minnesota. And that's one of the, as we think about high probability loads, we've been, as you can imagine, in active discussions with them and significant progress on services agreement. So great to see the continued progress we have on the data center front. And so, I mean, we're getting into As part of his negotiations you get into rate design and in terms of pricing, but I think is important is Bob laid out the guiding principles and how we think about it and ensuring that. All of our customers benefit from these large loads that come on, so it helps drive economic growth for our state, but also benefits all of our customers. I think there's just something i'm not sure if people caught it, but there was a planning session at the Minnesota Commission on Tuesday on that included. the data centers, IBEW, Department of Commerce, Austin, other significant stakeholders talking about how do we support and move faster on the data center front. And so we're pretty excited about those conversations that are really constructive and look forward to working with our commission on these opportunities.

And Nick, just to answer, I think probably part two of a three part question was, you know, is it included in our forecast? So we've got About a quarter of that 9,000 megawatts are included in our five-year sales forecast. This land acquisition would be one of the projects that would be a part of that forecast. Obviously, you know, we think that this is a trend that's likely to continue in our regions for a lot of reasons, and we have, you know, real confidence in our ability to meet that forecast as well as to continue to see sales growth transition into our regions over time.

Hey, that's great. I appreciate that. Maybe a one-part question, but on the financing, I know you priced the $1.1 billion. Are you done for the year? Would you de-risk the five-year plan at this point? And, you know, what's the right, you know, mechanisms to do that in your mind? Thanks.

Yeah, Nick, thanks for the question. Yeah, as you can see, we did about a billion dollars of ATM issuance in Q3. So certainly a very strong quarter for us. And that does fulfill our equity needs for the year. That was our plan for the year. Now, it doesn't mean we can't be opportunistic. If we think through the end of the year we like something, but actually we don't need to do anything through the end of the year. Second part of your question, you know, look, we view an ATM, and we've always talked about this, as it's an efficient mechanism to get our equity issuances done. But, you know, it doesn't mean we won't look at all other products and options on the table as we move forward. Thank you so much.

Thank you. Our next question comes from Steve Fleischman from Wolf Research. Please go ahead.

Yeah. Hi. Good morning. Good morning. Okay. Yeah, we can hear you great. Good. So just wanted to reconcile the CapEx increase with the equity because I think CapEx went up about $6 billion, but equity only went up half a billion so it's kind of a lot less than that 40 60. so is that because you pre-funded some with this billion one is that because cash flows just getting better or just how should we think about that yeah hey steve a couple things and thanks for the question um

Well, you're right. Um, you know, generally we guide investors to a 40%, 60% mix. Um, part of that is, you know, we do get a little bit of benefit as we lower the dividend growth rate that I talked about. Um, that helps a little bit in the five-year, uh, but also gives us a more dry powder longer term. Um, but it's really about kind of the cashflow and the timing of the capital. And if you look at how we design it, um, when we put together that slider on the credit metrics, our credit metrics are very stable. So, but generally still going forward, we expect that 40-60 mix, but we're able to be a little bit flexible here and not have as much equity as we needed as we rolled forward with our five-year.

Okay, great. That's helpful. And then totally separate question, just, you know, knock on wood, we're getting hopefully near the end of wildfire season if it ever ends, and We haven't seen anything happen, so maybe you could just talk to Bob, maybe just talk to the actions that you've taken on wildfire mitigation, how you feel they're working, what else you might do. And then related, could you just clarify the insurance amount, and are you including deferral of that in your guidance, or are you assuming you have to expense it in 25? Yeah, that'd be helpful.

Yeah, great questions. Appreciate it. You know, I've said before, I'm very proud of the activities and the accomplishments that the company has executed to protect our customers and our communities, you know, since the March timeframe. I think we've really built a lot of muscle around our wildfire protection mechanisms. You know, first and foremost is operating the system with safety. And so our capabilities in both enhanced power line safety settings and our abilities to execute PSPS is first and foremost in our minds of what helps protect our customers and communities in that process. I think we built a lot of muscle and capability there. Over time, we know that we have to harden the system and segment the system, and we take a lot of lessons learned from our peers in California and what they've done in terms of situational awareness, the ability to see weather coming sooner, the ability to alert their customers faster and more confidently, and their ability to segment the system so that the impacts of EPSS or PSPS are mitigated or muted in that process. We've been working on the intelligence side of that. We've installed AI cameras. We're starting to look at weather stations and starting to incorporate other data feeds in this timeframe. And again, huge benefits from being a fast follower here to what other people have plowed ground on and learnings that they've had over a decade of dealing with this kind of risk. And then on the regulatory side, obviously we're moving forward with our wildfire plan in Colorado and a system resiliency plan in Texas. All of those will help us do accelerated poll inspections, accelerated replacements of of anything that we see out there, more aggressive vegetation management. So I think we've done a lot to protect the system in the short term, and I think our actions as we go forward are going to be very much focused on how we mitigate the impacts on our customers over the long term and making sure that we have a resilient and safe system into the future.

Hey, Steven, I'll handle that second part of the question around just insurance deferrals. We completed our insurance renewable this month. Premiums were significantly higher, as we kind of alluded to in Q2. We saw premiums triple on us. The capacity did shrink some. So we do have, we have a regulatory deferral docket in front of the Colorado Commission where they have set an expedited schedule to get decision by the end of the year. And we're in discussions with our peer utilities and staff in Texas around the industry issue around increasing excess liability premium. So we do include constructive regulatory outcomes in our 2025 guidance, and that is included in getting recovery of our deferrals and constructive cost recovery around our welfare mitigation plans in the overall part of our constructive regulatory outcomes for 25.

Okay, thank you.

Thank you. Our next question comes from Carly Davenport from Goldman Sachs. Please go ahead.

Hey, good morning. Thanks for taking the questions and for all the updates. Maybe just to start on the new capital plan, I guess, how should we think about the kind of $6 billion capital increase relative to the 40 basis points increase in the rate-based CAGR? Is that just a function of base effects rolling forward the plan in other years or anything else that we should be keeping in mind there?

No, Carly, you're exactly right. It's just a function of rolling forward and having a bigger base as we roll forward to the next five years. So that's all it is a function of, nothing else going on.

Got it. Okay, great. And then maybe to follow up just on the 5% new load growth forecast, you mentioned in the slides that being sort of back-end loaded due to the timing of data center load coming in. So is there any other granularity you can provide in terms of sort of when you expect to see that more significant inflection and load and any sense of the magnitude there?

Yeah, Carla, I think, you know, if you look at our 2025 guidance, our sales guidance is 3% for 25 and expected to go up to there to 5 to 8% in the years after that in really peaking in 2028 as we see it. And that's really driven by, like I said, kind of a combination, which is what we view as great to have the diversity. Half of that sales growth of the 5% is coming from data centers. But we also have significant growth in the oil and gas region in SPS out of the Permian Basin. And we're starting to see the effects of beneficial electrification around EVs and other BE in Colorado that helps drive in kind of the other part of that growth. So I think we see kind of more kind of middle to back end weighted, but also having this diversity in growth is helpful in the overall plan.

Great. Thanks so much for the color.

Thank you. Our next question is from Jeremy Tonnet with JC Morgan. Please go ahead.

Hi, good morning. Hey, good morning, Jeremy. And happy Halloween. Thank you for all the details that you provided on the call today. Just wanted to come back to kind of high-level thought process here. Historically, you've stuck to the conservative 5% to 7% EPS CAGR with a plus more recently, but noted that there's all these array of new opportunities that you talked about. And so just wanted to get, I guess, your thought process on moving it to 6% to 8% CAGR at this point. And it sounds like you're still at the high end there. So just wanted to kind of walk through that a little bit more, if possible.

yeah hey jeremy uh good morning you know i i think you think about it in two i think about it in two ways it's one let me just look at our base plan you know the majority of that of that capital is investing in our wires business right we're focused on that kind of safe and safety and resiliency in our wires business uh and that base plan drives nine percent nine point four percent rate based growth But then it's all about the additional steel in the ground related to the projects we need to deliver on retiring our coal plants, as Bob talked about, and executing on 5 plus percent electric growth. So we view that as a tremendous opportunity. You know, Bob talked about our resource plans in flight. When you add all those up, there's between 15,000 and nearly 30,000 megawatts of generation we need to add to our system to serve our customers. um over the call through 2030 so a huge opportunity and i think the other part is we've demonstrated through the rfp process recently that can be extremely competitive in these generation procurement processes that we have a top tier internal regulated development team that can bring projects that are are very competitively priced um and so we expect to build a no and i would say at least 10 billion dollars of those pipeline projects and that's why we're sitting here very confident about not only the next five years, but longer-term executing at the upper half of the range and potentially going above it.

Got it. That's very helpful there. So with that last comment, potentially going above it, I thought it might be too early to ask there, but I just wanted to dive in a little bit more. I think you talked about three buckets that feed into the incremental CapEx opportunity. Can you lay out, I guess, over the next 12 months what some of the milestones could be and kind of what it would take to move more of that into plan?

Joe Trumpey, yeah so let's hit the first ones that are more near term of my so tranch 2.1 which we should get a decision by the end of the year, then we'll need to go through the regulatory approval processes. Joe Trumpey, But that's roughly about $2 billion of transmission opportunities we got the SPP itp that was just approved by the board this month. That's another about $2 billion of projects that we expect to be awarded to us because they're reliability-driven projects, meaning that the need is within a few years. So those are kind of the transmission buckets. The SPS RFP is another big bucket, 5,000 to 10,000 megawatts. We'll get bids in in January, and the first look investors will probably get is roughly – probably Q2 of next year, and we follow our preferred portfolio with New Mexico. So that'll at least get some insight into that with approvals going into 2026 for that. The Minnesota resource plan, we should get a Q1 decision out of our commission on the overall resource plan, which includes, as Bob mentioned, 720 megawatts of storage and CTs in there, along with some additional RFPs we're working through. And then finally, um, related to Colorado, we just filed the Colorado resource plan, which we're pretty excited about, uh, with upwards of 14,000 megawatts, uh, in that, you know, we'll work through that resource plan, call it in within a year, and then we'll file RFPs. So that'll be a little bit longer dated out of the opportunities, but you'll continue to see, you know, uh, execution opportunities throughout the next 12 to 24 months for us.

You know, Jeremy, just to add on to Brian's comment, um, I'm really excited. We're starting to see this energy transition we've been talking about and working on for the past five years really start to accelerate as we start to get to the periods where we're, you know, proactively, you know, removing our coal plants from the system and replacing them with cleaner and, in some cases, lower cost generation resources. Brian's right. The development team that we've built in-house, starting with our 2017 Steel for Fuel Plan has been an incredible asset for the company. I'd be remiss if I didn't talk about our transmission capabilities. Obviously, we have a lot of transmission to build in the company and across the country. We've been the leading provider of new line miles of transmission over the last 15 years as a company. And with all the projects we mentioned here, whether it's the Colorado Power Pathway, whether it's LRTP 2.0, 2.1, the ITP process in the Southwest. We've got a terrific transmission development construction team here that are helping us execute on a very strategic asset for the company and the country.

Got it. Exciting times ahead. Thank you for that.

Thank you. Our next question is from Julian DeMilleen Smith from Jefferies. Please go ahead.

Hey, good morning, team. Keep going. I'm super impressed here, so thank you. Look, I wanted to follow up on the six to eight, and obviously the timing here is obviously coincident with an accelerating backdrop on sales growth here. But what does this say about confidence in wildfire outcomes in your mind? Is there anything implicit in the reading to this? I mean, again, somewhat of an unknowable, but I'm just curious if there's anything that you see in a litany of recent developments on that front as well here, if you can.

Look, I'd suggest, sorry, Julius, Bob, thanks for the question. First of all, as I think about, you know, wildfire current proceedings as well as litigation and long-term, you know, outcomes in our states, you know, I feel confident in our wildfire position, both from, you know, my comments earlier on what we're doing to protect the customers and the community going forward, as well as, you know, our position is unchanged as it pertains to our litigation matters, both in the Southwest and in Colorado regarding Marshall and Smokehouse Creek. You know, long-term, I think we're doing the right things in the system to harden it and protect our customers. There's obviously some investment that's needed there. You know, I would suggest that, you know, obviously 6 to 8 is an ongoing earnings number, and if we had an unexpected outcome and any of the proceedings, you know, we'd have to accommodate that. But, you know, our position has been we didn't work, we didn't act negligently in our systems, you know, in the Smokehouse Creek, you know, our accruals are consistent quarter over quarter and within our limits of our insurance. And we look forward to working through those proceedings and really, you know, getting them behind us and starting to partner with our communities as we move forward in time with our resiliency plans.

Okay, all right, fair enough, Bob. And actually, just going back to Steve's question from earlier, and for the record, I get Jeremy all the time. It's just, on what was said, you mentioned EPSS and PSPS. I mean, these are obviously terms we know well from California. I mean, given, you know, you talk about being a fast follower, how quickly can some of this be implemented, right, in terms of achieving meaningful de-risking of the system here? I mean, what kind of time frame are you looking at? I mean, it seems like some fairly readily implemented kind of solutions.

So, look, I think... Quickly, and I mean that in a, we have the capability to do PSPS today. We have the capability to do EPSS today as we think, and every single day we do a wildfire risk assessment on the conditions across our system, across all eight states, and make decisions on how we position the system, how we set up breakers, and how we set up controls. I think probably the difference between where we sit and where some of our peers in California sit is the granularity with which we can do that. Our protection may come at a entire feeder level, which might be a 10 mile long stretch of distribution line. Our goal in the future is to be able to segment that distribution line into much more manageable, maybe one mile chunks instead of one 10 mile chunk so that we can be more targeted with the protections and more protective of customers. So I think the final analysis is we have great We have great sort of bulk protection systems, and we need to get, you know, I would say we're working with a sledgehammer today. We need a scalpel in the future, and that takes investment over time. But I think from a true protection mechanism, we've got a lot of the capabilities that we need. It's just a little bit blunter than we'd like.

Excellent. All right, guys. Congrats again. Nicely done.

Thank you. Our next question is from Dirkish Chopra with Evercore IFI. Please go ahead.

Hey, team. Good morning. Thank you for taking my questions. Just maybe on the good to see the equity out of the way for this year, you know, strong quarter, Brian, like you mentioned. Maybe just how should we think about the timing of the $4.5 billion that is in the plan? Is that ratable over, you know, basically same amount over a year annually or... back-end loaded, just any color there.

Yeah. Hey, good morning, Durgesh. Yeah. I mean, I think you've heard this before is we don't necessarily comment on or give guidance on the timing of our equity, but here's the way to think about it is if you look at the shape of our annual CapEx over the next five years, that's a good way to assume it kind of follows that shape as our annual CapEx is larger in the first few years. So that's how I think about it.

That's helpful. Thank you, Brian. And something that is near and dear to you, the transferability, maybe just help out what portion of the CFO in the plan is transferability. How are you doing there versus your annual target for 2024?

Yeah, we've executed all of our credit sales for 2024, working on 2025, significant demand. And really, it's kind of in and out, right, in terms of seeing, you know, we're doing Joe Trumpey, Give the customer with the offset and revenue and then we just pick it up on the tax line so from a castle perspective in and out. Joe Trumpey, You know we've had many discussions about this, I think, have you lost as leaders in this in terms of the opportunities also working with. Joe Trumpey, The large buyers of this, you know it's helpful to have you know we have 17 fortune 500 companies in our backyard here that we know extremely well. And so we're not only looking at 25, but also longer term deals and getting the pricing we expected. So I think overall, we expect we'll be monetizing 700 plus million dollars of credits annually going forward. And the market's there and it's been a great tool to have.

Thanks, Brent. How much did you do this year? Can you just remind us quickly?

Roughly four to five hundred million.

Thanks so much. Congrats.

Thank you.

Thank you. Our next question is from Ross Fowler from Bank of America. Please go ahead.

Morning, Ross. Morning. So just a couple of things. Maybe winding back to the Marshall Fire a little bit, we saw the judge's order on September 30th on the 25 trial. So obviously, you know, now we're talking a different level of multiplier from that, and we sort of bucketed it in two pieces from what I can tell. So Is there any reduction or settlement of claims related to that? Or how do we think about the calendar from here, given that that order is out?

Okay. Hey, Ross, it's Bob. Let me try and address what I think your question is. First of all, you know, in Marshall, let's start with, you know, we don't think we acted negligently. We know that the fire was started, you know, on the 12 tribes property. The first ignition occurred there. Um, we don't believe we acted negligently in the operation of our system. And we dispute the sheriff's report that we caused the second ignition. Um, not withstanding, obviously the litigation persists in the, the, the structure of the trial was architected in the judge's orders about a month ago. And so the way they've constructed it is, you know, the first trial will determine liability in the issue here. Did, did Xcel Energy's equipment start a second ignition? is part of the process of the overall fire. We'll use a second trial if necessary to determine damages, and then each individual claimant is going to have to prove up their own damages, and we're not going to have sort of a blanket claim or blanket number applied to, you know, any challenges. So yeah, we think that the trial structure was constructive. from the judge's perspective. So that's what happened in September. I'm not certain if I answered your question or not.

Yeah, and I think the other part is just that in terms of, I think you're asking a little bit about the multiplier effect where the actual jury would have to hear each award damages and can't have a multiplier across all plaintiffs. So helpful outcome in that regard.

And then next calendar steps, what should we look for as the next sort of thing to watch for here in the process?

So we're in diligence right now, heavy diligence. The trial's set for next September for a couple of weeks. So I think we've got a while before there are any real milestones in the trial going forward.

OK. And then you go through in the slides today on slide 11, you're well below the national average in most jurisdictions on bills. So maybe contextualize, there's a lot of increase in CapEx here and really good rate-based growth. Have you sort of laid out what that increase would be to customer bills over the course of the forecasts?

Yeah, look, I think that we sit in a really good starting position, as you mentioned, and it's for a host of reasons, obviously. And as we move forward through time, we actually think the bill impacts are relatively benign as well. We sit in a region that is incredibly advantaged for renewables. And so this opportunity to invest in clean generation and maybe even fractions of the cost that other parts of the country see is really what helps us keep bills low for our customers. But there's a couple other mechanisms, you know, obviously, We've been very prudent in managing our operating expenses over a decade, and that helps keep bills well below the average. I think we have very proactive and productive energy efficiency and demand management programs, which help our customers manage the size of their energy usage. And obviously the access to lower cost energy helps along the way. So these are the programs that we think help keep bills down. I think probably the best thing we've done is we filed In our Colorado just transition solicitation proceeding, we filed a 20-year plan in Colorado that incorporates all of the investment that's expected in Colorado over that period and yielded a customer bill increase of about 2.2% over that long duration. It'll be ups and downs from that number, and it won't be linear along the way, but we think it's relatively manageable, and we're always looking for ways to mitigate even those types of increases through, again, very aggressive cost management. You know, our 1X LNG way program I mentioned in my remarks has delivered real benefits and avoided costs to our operating expense line and to our fuel line.

Yeah, I just add, I think that's something we're really proud of. You mentioned slide 11, but the slide before that around residential share of wallet is something we're really proud of. Our bills on inflation adjusted are lower than they were a decade ago. And then if you look at our two biggest jurisdictions, Colorado's second lowest of the country in share of wallet, Minnesota's fifth lowest in the country in share of wallet. So we're starting from a really good place, too, as we think about the significant investment cycle. So I appreciate the question on that.

Thanks, Brian. Thanks, Bob. Great update today.

Thank you. Our next question comes from Sophie Carp from KeyBank. Please go ahead.

Hi, good morning everyone. Congrats on the great update all around here. So a couple of questions for me. You guys have a couple of settlements in front of the Minnesota Commission. One is the resource plan in the gas rate case. Any reason to kind of think that some items in those two may be controversial and will, you know, cause some delay in the settlement approval?

Hey, Sophie, good morning. No, let me take first one, Minnesota gas case, unanimous settlement, I think is very straightforward. ALJ recommended approval of our settlement this month. And so we expect the commission decision in Q1. So certainly optimistic that that'll be approved. um on the resource plan i i think again those um a resource a settlement with the major stakeholders interveners in that document uh i think it really demonstrates kind of our our work with our stakeholders to bring forward a settlement that not only addresses the resource plan in in a really an expeditious manner which is great to see, but also resolves one of our RFPs outstanding. So overall, I think we're pretty excited about the work and partnership with our stakeholders on the resource plan and hopefully the Minnesota Commission approves that, which would be a Q1 event too.

Great, great, great. Thank you. And then on wildfires, I know we've been talking for a while about legislative solutions to that. I'm just kind of curious if you have any insight into which states where you operate or other states, maybe in the West, may take that up in the upcoming legislative session. Is there any kind of data points on that right now?

So from a regulatory perspective, obviously, we think Colorado will take up and we expect a decision in our wildfire proceeding in August of this year. Sorry, August of next year. our resiliency plan in Texas. The Commission's been working through those dockets very efficiently, so we expect outcomes in Texas next year as well. On the legislative front, I think that's probably a longer burn candle, making sure we look at the legislation in all the states. I think it's topical for certainly all the western states as we move through time. I'm not certain I'd suggest there's a lot of outcomes that we expect in 2025, but a lot of dialogue around, you know, how do we protect customers and communities in those states?

Yeah, I'll just add, you know, a lot of focus on education with our stakeholders and our legislatures, particularly in Colorado, and we're also working with our peer utilities in Texas on that front in terms of talking to stakeholders on Texas. It's also one of EEI's primary topics and issues that they're looking to address. So very topical for our industry, and we'll continue to work with our states to see if there's longer-term solutions.

Thank you. Appreciate the comments.

Thank you. Our next question comes from Travis Miller with Morningstar. Please go ahead.

Good morning. Thank you.

Hey, Travis.

I know this is no longer the hot topic, but green hydrogen. I wondered if you had any update on where you all stand. I know that was a big initiative for you at least several quarters ago. Does it show up in pluses or minuses, show up in the new investment plan, hydrogen hubs? Any updates just generally on the green hydrogen initiatives?

Yeah, thanks for the question. You're right. It's sort of been a bit on the back burner for the company and probably for the country as well. You know, we're still seeing progress made in Europe around hydrogen. I saw a big energy pipeline complex get approved in Germany. This has been a big priority for the DOE, and I've been on record saying that the country needs a cleaner molecule, and hydrogen is probably the most flexible one that we've seen. And whether it's used in its pure form as green hydrogen or it's combined with CO2 to make something more like a clean fuel, like a green methane. I think that we're going to need a molecule like that in the country for industrial processes. It has slowed down in its initiatives. We were a recipient of a hydrogen grant with the DOE, and that work continues, albeit fairly slowly. And we're still really waiting on regulations coming out of Treasury final regulations on 45Q that would be on the production tax credit for hydrogen. So a little bit back burner for us. I still think I think it's a promising technology. And as you look at the increase in growth that we're seeing across the country in terms of electricity, You know firming up wind and solar is going to need to happen it's likely to happen with with gas and batteries in the short term and over the longer term. Maybe a combustion turbine fired on a cleaner fuel is the path forward and so like we're seeing the acceleration and nuclear rd you might see some acceleration in green hydrogen r&d and advancements in in the cost curve, because I think that the need is going to be higher as we move forward in time.

And nothing's included in our capital forecast for hydrogen.

Nothing. Nothing? Did I hear that right? Correct. Okay. Okay. And then, yeah, you kind of answered my question, but the resource plans, then it's too early to expect any kind of green hydrogen. Yeah, that's correct. Yep. Okay. Okay. That's all I had. Thanks so much. Thanks.

Thank you. Our next question is from Paul Patterson from Glenrock Associates. Please go ahead.

Hey, good morning. Hey, Paul. Just back to, I guess, Ross's question on the rate trajectory, I guess. I think you guys mentioned 2.2% in Colorado. Is that over the next few years? That sounds like a long-term thing. I'm just wondering, I know you guys have different in expectation in terms of sales growth and what have you, and I would assume that would offset a lot of this. Over the next few years, is that kind of the area we should be thinking about just roughly? Obviously, it's going to vary, but is that kind of roughly what we should be expecting around your service territories in the next three years or so, just in that neighborhood?

Hey, Paul, this is Brian. What Bob was mentioning was in our Colorado Resource Plan, We filed a longer-term rate trajectory that encompasses all of our expected investments over a 5, 10, 15, and 20-year period. Bob was mentioning the 20-year numbers where you had 2.2% rate growth over that time period, so right in line with inflation. And that included rate-based growth of 9%, so significant investment. And that was the retail sales growth of roughly 5% for the timeframe helped offset that, which is really a point is this large loads can help provide customer headroom and bill headroom for all their customers. So a good piece of analysis that we included in our Colorado resource plan. think over the next five years look it's going to vary uh by juror by jurisdiction over the next five years we're roughly seeing about a three percent bill impact um which you think is very manageable longer term um opportunity as we showed in the the colorado resource plan to have the large to have kind of customer bill headroom created from the significant growth we're seeing across different industries okay and then just on slide nine and uh

the sort of the potential there on data centers. Just could you just remind me what that means, these customer requests? And I guess sort of the cadence that we might see in terms of, I mean, just there's a huge delta between the two. Just if you could, I'm sorry, if you could just sort of elaborate a little bit more on that.

Sure. I mean, think of that as our pipeline of requests, like requests that we've actually taken from our economic development team. But then how we get down to the high probability, lowered is what Bob talked a little bit about is through publicly announced projects, we sign agreements. Paul Cecala, Whether they've acquired land or purchase from us and we're close to signing, maybe in the next 12 months so that's kind of how we bring that down to that 2.6% growth that we include on that slide but what this also demonstrates is. If a high probability load doesn't come to fruition, there's a significant pipeline behind it. So not only do we think it's conservative, but we also see this growth extending beyond 2029. We just give you a five-year sales growth number, and we expect that to continue to build in our opportunity where we're focused on is continuing to help serve these data center customers in the long term.

Paul, that's sort of the very specific company answer. I think what you're seeing, though, is obviously big demand across the country. And we know there's double counting in a lot of people's inbound requests as these large loads come looking for transmission and generation service. But it highlights a different need, which is we as a country, we as an industry, need to be accelerating our ability to develop both transmission and generation to serve the load that we think is on the come. And on the face of it, it's a meaningful load. It's a little more concentrated. If you divide it across the entire country, it seems manageable as you get into very specific load pockets. It comes with a lot of need and a lot of speed that's needed. And so we think about a pace and a scale of both investment to meet this need as a company and as a country and partnerships with our stakeholders and local communities, regulators, legislators coming together to make sure that we can solve this opportunity for the country as we see it. And as you mentioned, you know rising tide lifts all ships if we have a higher load factor on our system you know that brings the per unit down cost down for everybody and so today you know if you if the country has a a load factor in the 40 to 50 percent with you know high load factor customers like these with evs charging at night with other you know high high intensive energy loads i think that is an opportunity for us to mitigate cost increases across the entire country as we transition both our transmission and generation footprint for the next generation. I'm excited about it. I really am. It's an opportunity that we're going to have to step into very quickly and in partnership with a lot of people and some new people at the table, but I'm excited about all of it. Awesome. I appreciate it. Thank you.

Thank you very much. As we have no further questions in the queue, I would like to turn it back over to CFO Brian Van Abel for any closing remarks.

Yeah, thank you all for participating in our earnings call this morning. Please contact our investor relations team with any follow-up questions.

Thank you very much. That concludes today's conference. You may now disconnect.