Xcel Energy Inc.

Hello and welcome to Xcel Energy 2025 year-end earnings conference call. My name is Jordan and I'll 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 in listen-only mode. A question and answer session will follow and 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. I'd now like to turn the call over to your host today, Mr. Rupesh Argawal, Vice President, Investor Relations, to begin the conference. Please go ahead, sir.

Thank you, Jordan. Good morning, and welcome to Xcel Energy's 2025 year-end 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 2025 full year results and highlights, provide updated 2026 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 $300 million, or 38 cents per share, in 2025, Rob Leibowitz, reflecting the settlement in principle reach with plaintiffs in the Marshall wildfire as a result, our gap earnings for 2025 or $3 and 42 cents per share, while our ongoing earnings which exclude this non recurring charge $3 and 80 cents per share. Rob Leibowitz, All further discussion on our earnings call will focus on 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.

Thank you, Rupesh, and good morning, everybody. At Xcel Energy, we continue to deliver on a once-in-a-generation opportunity to meet the increasing demands of our customers as they electrify more parts of their lives, support the economic development of our communities, fuel the rapid growth of AI and data centers, and to continue to lead a clean energy transition in the country. Over the next five years, Xcel Energy expects to invest in excess of $60 billion to modernize and expand the grid, adding advanced transmission and distribution infrastructure, new natural gas and renewable generation, and smart, weather-hardened infrastructure. These upgrades will strengthen sustainability, reliability, and resiliency while keeping our customer bills as low as possible. We've also continued our decades-long track record of producing strong results for our owners. In 2025, Xcel Energy delivered ongoing earnings of $3.80 per share, marking the 21st consecutive year of meeting or exceeding our initial ongoing earnings guidance. We achieved that outcome with some of the lowest electric and natural gas bills in the country. This consistency reflects the strength of our strategy, the diversity of our business, and the dedication of our Xcel Energy team who show up every day with safety, reliability, affordability, and sustainability as their top priorities. 2025 showcased what our people are capable of as we reached several important customer and operational milestones. With our disciplined execution and geographic advantage for renewables, we continue to deliver for our customers. Our residential electric customers in Colorado have the lowest share of wallet out of all 50 states. And average electric bills in our other states occupy five of the top 11 spots in the country. Since 2020, residential electric bills in Denver and Minneapolis have grown far less than inflation and less than common expenses like groceries, gasoline, healthcare, insurance, and housing. And when compared to other national electricity providers, these bills have grown 40 and 80% less than other regions. It's a testament to our focus on affordability, our productive regulatory jurisdictions, and importantly, our integrated regulated utility model that allows for long-term asset investment. It's also a testament to our one Xcel Energy Way continuous improvement program that has realized over a billion and a half dollars in cumulative savings since 2020. while also improving customer and operating outcomes. As a result, when looking at our five-year average O&M expenses per megawatt hour, Xcel Energy ranked fourth lowest out of our peer utility companies. And even with some of the lowest energy bills in the country, we know some of our customers still struggle to make ends meet. In 2025, our energy assistance programs reached nearly 200,000 customers and provided nearly $200 million in funding, our highest ever one year total. Our focus on reliability, affordability, and customer service was recognized by J.D. Power, who ranked Xcel Energy in the top quartile for the Midwest region and had the second highest score for customer satisfaction. Across our eight states, we continue to build and maintain the critical infrastructure that supports our customers' energy needs. 2025 we invested nearly 12 billion dollars our largest one year total in september phase two of our shirko solar project started commercial operation and a third phase will come online in 2026. once complete shirko will be the largest solar facility in the upper midwest we also completed the conversion of our thousand megawatt harrington coal plant to natural gas which provides essential energy resiliency and reliability to our customers and we source and deliver that natural gas for Harrington from the Permian region, and that combination will benefit the local community for years to come. We completed 370 megawatts of wind repowerings at our border and Pleasant Valley facilities in the Upper Midwest and expect $750 million in PTC benefits, which exceeds the investment that we made into these facilities, creating more affordable energy for our customers. We placed a 325 megawatt Rocky Mountain solar project in service this year, our first utility scale solar farm in Colorado, with many more to come. And we released our updated 2026 to 2030 capital plan, which includes, relative to our previous plan, an initial 7,000 megawatts of company-owned renewables, natural gas generation and storage across our state to transition our fleet and build for growth. Speaking of enabling growth, over the past 15 years, Xcel Energy has been the leading builder of new transmission line miles in the country. Last spring, we energized our first two segments of the Colorado Power Pathway ahead of schedule, on scope, and under budget, delivering significant value to our Colorado customers. The remaining segments will be energized in 2026 and 2027. Across SPP and MISO in 25 and 26, Xcel Energy has been awarded over 760 miles of new 765 kV transmission lines. This includes the second 765 kV line in SPP that was awarded this week, which gives this line of sight to $1.5 billion in additional investment over our base five-year plan. These will be the first voltage lines of this class in SPP and constitute 20% of the approved new ultra-high voltage transmission in this country, recognizing Xcel Energy's expertise in building and operating transmission networks. We also reached several milestones as we continue to make investments to protect our customers and communities from the threats of extreme weather. In 2025, we rapidly accelerated system investments, including completing eight times as many pole inspections and 25% more pole replacements than the previous year. And we installed over 250 Pano AI cameras and weather stations. In 2025, we received approvals from both Colorado and Texas commissions for our wildfire mitigation and system resiliency plans, as well as published wildfire mitigation plans in each of our other states. Favorable wildfire legislation passed into law in Texas and North Dakota, and we're working on similar frameworks in other states. We continue to improve and refine operational measures to protect our communities, including daily wildfire risk monitoring, proactive customer communications, wildfire safety operations, and in very rare circumstances, public safety power shutoff capability. And our investments are paying off. During Winter Storm Fern this January, our electric and natural gas operations across NSP, PSCO, and SPS performed exceptionally well. Thanks to rigorous winter readiness, proactive fuel management, and strong coordination across our operations teams, we reliably served customers through periods of high demand, constrained gas supply, and challenging weather. And we were able to export our generation length when the system needed us most, providing grid stability and incremental customer benefits. Our operators and field crews executed cold weather procedures flawlessly. We maintained system reliability and manage costs responsibly despite record-setting conditions. I'm very excited about our achievements in 2025. I want to turn to our strong start to 2026. Today we are advancing our data center pipeline with a new recently signed ESA with a large data center in the upper Midwest. This brings Xcel energy to over 2 gigawatts of new contracted data center capacity. Our goal for 26 is another one gigawatt, bringing our total to three gigawatts of contracted data center service by the end of 2026. While we had length in the Upper Midwest this winter and forecast so through the end of the decade, we also know that it's critical that we have the right resources to develop new generation infrastructure to deliver on the opportunities in our 20 plus gigawatt large load pipeline. Earlier this week, Xcel Energy announced an MOU with longtime partner Nextera Energy to co-develop generation, storage, and interconnections to serve data center projects across our operating companies. By engaging early with leading developers like Nextera, we can better anticipate system needs for new data centers, streamline development timelines, advance innovative grid technologies, and continue to provide the network benefits that data centers bring to all of our customers. With this agreement, we now expect to have six gigawatts of total data center capacity contracted by the end of 2027 with electricity sales and generation investment that will ramp into the 2030s. We will deliver the benefits of two of the best development teams in the industry to meet this moment for our country and our customers. As we've talked about over the past two to three years, execution against our capital and growth plans are critical to our stakeholders. We believe that our scale and our diversity are assets that we can deliver to the benefit of our customers and our regions. We have strategic agreements in place with multiple Tier 1 EPC firms across our portfolio of renewable natural gas generation projects, as well as transmission, distribution, and natural gas systems. And earlier this week, we announced a landmark strategic alliance with GE Vernova to support our growing portfolio of wind and natural gas generation, transmission, distribution, and technology projects into the 2030s. This partnership will focus on delivering key benefits to Xcel Energy's customers and stakeholders to enhance certainty of supply, operational flexibility, and cost affordability. The key to the partnership is a mutual commitment to innovation and strategic collaboration. We will work together to explore advancements in areas such as artificial intelligence, grid modernization, and joint research and development programs. As a first step, Xcel Energy is purchasing five additional natural gas turbines from GE Vrnova, bringing our total to 24 gas CTs on order across our vendors. Additionally, we're integrating GE Vrnova into our renewable energy pipeline, getting several gigawatts of wind projects with GEV turbines in our pending and upcoming RFPs. Combined with agreements with other equipment engineering construction firms, Xcel Energy has built scalable, resilient, and flexible engine to ensure delivery of critical system investments. This engine has also enabled us to safe harbor equipment for approximately 20 gigawatts of renewable generation storage, preserving a significant volume of production and investment tax credits for the benefits of our customers. Finally, Xcel Energy's commitment is about much more than energy. The heart of what drives our people is a deep compassion, connection, and commitment to the communities that we serve. That's because these communities are not just customers who receive our energy, it's because our people live in the same neighborhoods, our children attend the same schools, and we attend the same community events. So it goes without saying that the tragic events across the Twin Cities have weighed heavily on our communities, our customers and our employees. We've engaged extensively and proactively with senior federal, state, local and community officials with a goal to deescalate and identify a sustainable path forward. I was pleased to sign on to the letter with 60 other Minnesota companies urging for a solution. And alongside other peer companies in the Twin Cities, The Xcel Energy Foundation has committed to help fund the Minneapolis Foundation to support local and small businesses impacted by recent events. I know that our Xcel Energy community will continue to do what we do best, making energy work better for our customers while supporting our teammates and caring for our neighbors. Looking at the broader community engagement in 2025, Xcel Energy initiated 15 economic development projects for our local communities. which are projected to create more than $7 billion in capital investment in nearly 1,400 jobs. Additionally, nearly 53% of our supply chain spend was local, and we spent nearly $1 billion with small and diverse suppliers. Xcel Energy employees, contractors, and retirees supported by the company's foundation provided over $14 million in over 60,000 volunteer hours to support over 400 local charitable organizations and causes in 2025. And for the 12th year, Xcel Energy was honored as one of the world's most admired companies by Fortune magazine. We ranked first in social responsibility and placed fourth among the most admired electric and natural gas companies in the country. I continue to be thankful and grateful for each of our employees and partners who shared their time, resources and talents this year to make energy work better. With that, I'll turn it over to Brian.