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Building the Core
Sustainable Growth




Ben Fowke
Vice President and CFO



                         Wall Street Utility Group
                         December 6, 2006
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; 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; 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 2005.
Delivering Value — Now and in the Future

  Building the core
  — Meeting customers’ needs
  — Environmental leadership
  — Getting the rules right
  Accomplishments
  — Regulatory
  — Legislative
  Future growth
  Financing the plan
Building the Core
     Delivering competitively priced, reliable energy
       Cents per kWh (Retail)      Source: Summer 2006 EEI Typical Bills
 21

 18

 15

 12

   9                                     7.79
                          6.64 7.01
   6

   3

   0
       uis City ines City arillo aul cago ver ukee nix n DC iami ston Yor
                                                                          k
     oe
                                         en lwa hoe gto
                                Pi
               o
 t. L Lak s M nsas Am /St. Ch                              M Bo ew
                                        Di
S lt                                            P hin             N
           e              ls              M
                a
        D
                     Mp
             K
Sa                                            as
                                             W
Building the Core
Environmental Leadership
Promoting Conservation and Load Management

                                                   8.2
Number of plants avoided
                                            7.4
                                     6.5
                              5.5
                        4.7
               3.7
       2.7
 1.6



1992   1994   1996      1998   2000  2002   2004   2006
                     1 Plant = 250 MW
Building the Core
Environmental Leadership
Leader in renewables

  Largest U.S. wind provider
  Double wind supply by
  year end 2007
  Community-based energy
  Largest U.S. solar
  photovoltaic announced
  Wood waste and
  refuse-derived fuel
Building the Core
Environmental Leadership
Reducing emissions, increasing efficiency

  Colorado Emission Reduction Program
  MERP
  Comanche 1 & 2
  Plant uprates
Building the Core
Environmental Leadership
Adopting new technology

  IGCC with sequestration
  Wind    Hydrogen      Energy




 Xcel Energy in Dow Jones Sustainability Index
Getting the Rules Right
Helping shape public policy –
One of the most important things we can do
  Credibility and leadership to achieve
  consensus on the appropriate balance:
  — Customers
  — Communities
  — Environmentalists
  — Regulators
  — Legislators
  — Investors
Constructive Regulation
Recent rate case outcomes
Dollars in millions
                         Dollar Increase           Return on Equity
                      Requested Granted          Requested Granted

Colorado Gas              $34.5       $22.0         11.0%         10.5%
Wisconsin Electric         53.1         43.4        11.9          11.0
Wisconsin Gas               7.8          3.9        11.9          11.0
Minnesota Electric          156     131/115 *       11.0          10.54
Colorado Electric           208       151 **        11.0          10.50

* $131 million for 2006 reduced to $115 million in 2007 for large customer
   coming on-line January 1, 2007
** $107 million base rates, $39.4 million PCCA and $4.6 million
   Windsource costs
Colorado Gas Rate Case Highlights

 Requested $41.5 million increase
 Gas rate base = $1.1 Billion
 11% return on common equity
 Equity ratio = 60%
 Partial decoupling
Regulatory & Legislative
Accomplishments

 MERP – Forward recovery
 Comanche 3 – Forward CWIP through rate case filing
 Transmission investment – Forward recovery – MN & SD
 Mercury reduction – Forward recovery – MN
 Environmental expenditures – Forward recovery – MN
 Renewable investments – Forward recovery – CO
 IGCC – Supportive legislation – CO
 Transmission investment:
    Recovery legislation – TX
    Recovery potential – CO, ND
 Purchased capacity cost adjustment – CO
Investment Opportunities 2006 - 2020
                                06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
                                                                   Committed
                        MERP    $700 A-MN
                                        A
                                                                   Estimated
                Comanche 3              P
                                  $900 F
                                                                   Cost
                                              $700
          CapX 2020 Group 1                           A
                                                      A
                                                                   Potential
                                     $4                    A
                                                          A
             Colorado IGCC                                         Investment
                                        $30
                      Mercury                             A-MN   A Approved
                                     $60                  A-MN     Rider
                         CAIR
                                                                   Recovery
 License Extension & Uprate:
                                      $300
            Monticello                                           F Forward
            Prairie Island                     $700                Regulatory
                                                                   Recovery
  Plant Repowering & Uprate            $100
New Generation/Gas Storage
Environmental Improvements                                              A-MN
          CapX 2020 Group 2                                                 A
          CapX 2020 Group 3                                                 A
Funding Sustainable Growth
Objectives

  5 – 7% EPS growth *
  Dividend per share
  growth 2 – 4% per year
  Improve credit rating




* Base of $1.30 per share, mid-point of 2006 guidance and
  successful COLI outcome
Capital Expenditure Forecast
Dollars in millions
                             Denotes enhanced recovery process

                      2006      2007     2008     2009     2010
Base & Other Capital
 Expenditures        $ 850      $ 850    $ 830    $ 990    $ 980
MERP                    350       270      180       40       10
Comanche 3              200       340      280       60       10
Minnesota Wind
 Transmission            60       120       10       50       20
CapX 2020                          10       20      110      240
Nuclear
 Fuel                    75        80       80      135      100
 Balance                 85       100      100      115      140
Total                 $1,620    $1,770   $1,500   $1,500   $1,500
Assumptions — Potential Sources
and Uses of Cash
 The forecast scenario is illustrative of a potential
 outcome, and does not imply guidance or a most
 likely outcome
 EPS growth of 6% per year, mid-point of the 5 – 7%
 objective range, from 2006 midpoint of $1.30
 Dividend rate increase 3% per year, mid-point of the
 2 – 4% objective range
 Dividends increase in 2007 and 2008 for expected
 conversion of convertible notes
 Depreciation growth consistent with rate base
 No change in working capital or deferred taxes
 COLI successfully resolved
Potential Sources and Uses of Cash *
Dollars in millions
                                2007        2008         2009      2010

Cash from Operations           $ 1,650 $ 1,700       $ 1,800     $ 1,900

Cash from Investing
 Capital Expenditures    (1,770)           (1,500)   (1,500)       (1,500)
 Nuclear Decommissioning    (45)              (45)      (45)          (45)

Cash from Financing
 DRIP                                 40       40           40          40
 Dividends                         (370)    (390)        (420)       (440)

Financing Needed               $    495 $     195    $     125   $     45

* This forecast scenario is illustrative of a potential outcome,
  and does not imply guidance or a most likely outcome
Financing Growth

 Current financing plan includes:
 — DRIP
 — Modest debt ($600 million)
 — Hybrid preferred ($300 million 2008)

 Financing plans to remain flexible:
 — Capital expenditure opportunities
 — Unanticipated credit events
Improving Credit Metrics *
     Percent equity capitalization
50
       Financing needed funded with:                    48.5
          Current plan                                         47.5
          100% debt                          47
                               46.5
                                                  46
                                      45.5
                      45
         43.5



40
        2006       2007 **     2008 **       2009        2010
     * This forecast scenario is illustrative of a potential outcome,
        and does not imply guidance or a most likely outcome
     ** Assuming conversion of convertible notes into equity
2006 Earnings Guidance Range *
Dollars per share

                                           2006
 Regulated Utility                    $1.25 – $1.35
 Holding Company
  and Other                               (0.10)
 COLI – Tax Benefit                        0.10
 Continuing Operations               $1.25 – $1.35 **


 * Assumptions in appendix
 ** Expectation is to end the year in the upper half of the
    guidance range
2007 Earnings Guidance Range *
Dollars per share


                                  2007
  Regulated Utility            $1.39 – $1.49
  Holding Company
   and Other                      (0.15)
  COLI – Tax Benefit               0.11
  Continuing Operations        $1.35 – $1.45


   * Assumptions in appendix
Sustainable Growth
 Collaborative process that balances various interests
 and delivers value to customers and investors
 Constructive rate case outcomes
 Forward recovery on significant incremental
 investments
 Pipeline of investments beyond 2010

   Attractive Total Return
     Sustainable 5 – 7% earnings per share growth
     Dividend yield   4%
                      
     Dividend growth of 2 – 4% per year
xcel energy  12_6XcelUtilityWeekSECwAppendix12062006
Appendix
Northern States
         Power Company-          Northern
           Minnesota           States Power
         44% Net Income         Company-
                                Wisconsin
                              5% Net Income
 Public Service
  Company of
   Colorado
39% Net Income                            5th Largest Combination
                                          Electric and Gas Utility
                                          (based on customers)
         Southwestern
         Public Service                   Traditional Regulation
        12% Net Income


      2005 EPS $1.20 continuing operations
      2006 Dividend $0.89 annualized
Xcel Energy Supply Sources
             2005                        2005 Owned
      Energy Supply Mix*              Generating Facilities

                                  Unit Type     Number        MW
Gas & Oil      Nuclear
  38%           10%               Coal            36      8,138
                                  Natural Gas     61      4,918
                     Renewables
                         7%       Nuclear          3      1,617
                                  Hydro           83        508
                                  Oil             24        492
                                  RDF              6         96
                                                             25 *
                                  Wind             -
                  Coal **
                                  Total                  15,794
                   45%
                                  * Xcel Energy supplies in
 * Includes purchases               excess of 1100 MWs of
 ** Low-sulfur western coal         wind power
Capital Expenditure Forecast
by Operating Company
Dollars in millions


                       2006     2007   2008    2009     2010

NSP – Minnesota       $ 910    $ 880 $ 680     $ 810    $ 820
NSP – Wisconsin          60       70     70       50       60
PSCo                    550      680    620      510      500
SPS                     100      140    130      130      120
Total                 $1,620   $1,770 $1,500   $1,500   $1,500
2005 Rate Base and Returns
Dollars in millions                         Return on Equity *
                            Rate                      Weather-
                                                      Weather-
                            Base        Actual       Normalized
Colorado Electric          $3,120        8.5%
Colorado Gas                1,084        7.00
Minnesota Electric          3,230       10.61           9.98%
Minnesota Gas                 422        6.30           7.42
North Dakota Electric         175       12.46          12.65
North Dakota Gas               42        5.71           6.81
South Dakota Electric         191
SPS Electric                1,422
Wisconsin Electric            613
                                         6.26 **
Wisconsin Gas                  83
* Reflects regulatory reporting requirements
** Electric and Gas
Senior Debt Ratings

                    Secured                 Unsecured
              Fitch Moody’s   S&P   Fitch    Moody’s    S&P

Holding Co.                         BBB+      Baa1      BBB-
NSPM          A+      A2      A-     A         A3       BBB-
NSPW          A+      A2      A-     A         A3       BBB
PSCo           A-     A3      A-    BBB+      Baa1      BBB-
SPS                                  A-       Baa1      BBB
Texas Electric Rate Case Highlights

 Requested $63 million increase,
 capped at $48 million
 Electric rate base = $943 million
 11.6% return on common equity
 Equity ratio = 51%
 Historical test year with adjustments for known
 and measurable
 Expect rates to be in effect second quarter 2007
Minnesota Gas Rate Case Highlights

 Requested $18.5 million increase
 Gas rate base = $440 million
 11% return on common equity
 Equity ratio = 52%
 Forward test year
 Rates under bond $15.9 million January 8, 2007
Potential Additional Rate Cases
with 2007 Impact


  North Dakota Electric   Potential
  New Mexico Electric     Potential
  South Dakota Electric   Potential
Minnesota Cost Recovery Mechanisms
 Projected electric fuel and purchased energy costs billed for
 the current month with subsequent true-up; MISO energy and
                                     true-up;
 ancillary services being recovered through FCA.
 Projected purchased gas cost billed for the current month
 with subsequent true-up
                 true-up
 Conservation Improvement Program rider which provides
 recovery of program costs plus incentives
 Metro Emission Reduction Program, Renewable Development
 Fund and State Energy Policy rider in place
 General Transmission rider authorized by law
 Mercury Reduction and Environmental Improvement rider
 authorized by law
Colorado Cost Recovery Mechanisms
 Quarterly Energy Cost Adjustment to recover electric fuel and
 purchased energy costs
 Monthly Gas Cost Adjustment recovers natural gas commodity,
 interstate pipeline and storage costs
 Annual Purchased Capacity Adjustment to recover demand
 component of purchased power contracts through the earlier
 of year-end 2010 or Comanche 3 completion
 Fuel Cost Adjustment recovers electric fuel and purchased
 energy costs from wholesale customers
 Demand-side Management Cost Adjustment rider (gas and
 electric) and Air Quality Improvement rider (recovers cost of
 emission controls on several Denver metro generation facilities)
 Recovery of Comanche 3 construction work-in-progress
 Recovery of expenditures for renewable mandate
 Rider recovery of IGCC investment
Corporate-Owned Life Insurance
Litigation (COLI)

The court’s opinion in the Dow case outlined three indicators
of potential economic benefits to be examined in a COLI case.
    Positive pre-deduction cash flows
             pre-deduction
    Mortality gains
    The buildup of cash values
In Xcel Energy’s COLI case, the plans:
    Were projected to have sizeable pre-deduction cash flows,
    based upon the relevant assumptions when purchased
    Presented the opportunity for mortality gains that were not
    eliminated either retroactively or prospectively
    Had large cash value increases that were not encumbered by
    loans during the first seven years of the policies
Hearing likely second half of 2006
2006 Key Earnings
Guidance Assumptions

 Approval of Minnesota electric rate case decision
 No material incremental accruals in SPS regulatory
 proceedings
 Normal weather patterns for remainder of year
 Weather adjusted sales growth:
 — Retail electric 1.8 – 2.1%
 — Retail gas decline 1 – 2%
 Short-term wholesale and commodity trading
 margins of $30 – $40 million
 Operating and maintenance expenses increase 4%
2006 Key Earnings
Guidance Assumptions (continued)

 Depreciation increases $45 – $55 million, excluding
 decommissioning
 Decommissioning accruals increase approximately
 $20 million
 Interest expense increases $10 – $15 million
 AFUDC equity increases $5 – $10 million
 Continue to recognize COLI tax deduction
 Effective tax rate of 24 – 26%
 Average common shares are 430 million based
 on “if converted” method
2007 Key Earnings
Guidance Assumptions

 Approval of Minnesota electric rate case decision
 Approval of Colorado electric rate case settlement
 Reasonable rate recovery is approved
 — Texas electric rate request
 — Potential Minnesota gas rate request
 — Potential Colorado gas rate request
 No material incremental accruals in SPS regulatory
 proceedings
 Normal weather patterns
 Weather adjusted sales growth:
 — Retail electric 1.7 – 2.2%
 — Retail gas decline 1 – 2%
2007 Key Earnings
Guidance Assumptions (continued)

Short-term wholesale and commodity trading margins
of $15 – $25 million
Capacity costs at NSPM and SPS increase $35 million
Operating and maintenance expenses increase 2 – 3%
Depreciation increases $45 – $55 million
Interest expense increases $35 to $40 million
AFUDC equity increases $17 – $23 million
Continue to recognize COLI tax deduction
Effective tax rate of 28 – 31%
Average common shares are 433 million based
on “if converted” method

More Related Content

xcel energy 12_6XcelUtilityWeekSECwAppendix12062006

  • 1. Building the Core Sustainable Growth Ben Fowke Vice President and CFO Wall Street Utility Group December 6, 2006
  • 2. 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; 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; 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 2005.
  • 3. Delivering Value — Now and in the Future Building the core — Meeting customers’ needs — Environmental leadership — Getting the rules right Accomplishments — Regulatory — Legislative Future growth Financing the plan
  • 4. Building the Core Delivering competitively priced, reliable energy Cents per kWh (Retail) Source: Summer 2006 EEI Typical Bills 21 18 15 12 9 7.79 6.64 7.01 6 3 0 uis City ines City arillo aul cago ver ukee nix n DC iami ston Yor k oe en lwa hoe gto Pi o t. L Lak s M nsas Am /St. Ch M Bo ew Di S lt P hin N e ls M a D Mp K Sa as W
  • 5. Building the Core Environmental Leadership Promoting Conservation and Load Management 8.2 Number of plants avoided 7.4 6.5 5.5 4.7 3.7 2.7 1.6 1992 1994 1996 1998 2000 2002 2004 2006 1 Plant = 250 MW
  • 6. Building the Core Environmental Leadership Leader in renewables Largest U.S. wind provider Double wind supply by year end 2007 Community-based energy Largest U.S. solar photovoltaic announced Wood waste and refuse-derived fuel
  • 7. Building the Core Environmental Leadership Reducing emissions, increasing efficiency Colorado Emission Reduction Program MERP Comanche 1 & 2 Plant uprates
  • 8. Building the Core Environmental Leadership Adopting new technology IGCC with sequestration Wind Hydrogen Energy Xcel Energy in Dow Jones Sustainability Index
  • 9. Getting the Rules Right Helping shape public policy – One of the most important things we can do Credibility and leadership to achieve consensus on the appropriate balance: — Customers — Communities — Environmentalists — Regulators — Legislators — Investors
  • 10. Constructive Regulation Recent rate case outcomes Dollars in millions Dollar Increase Return on Equity Requested Granted Requested Granted Colorado Gas $34.5 $22.0 11.0% 10.5% Wisconsin Electric 53.1 43.4 11.9 11.0 Wisconsin Gas 7.8 3.9 11.9 11.0 Minnesota Electric 156 131/115 * 11.0 10.54 Colorado Electric 208 151 ** 11.0 10.50 * $131 million for 2006 reduced to $115 million in 2007 for large customer coming on-line January 1, 2007 ** $107 million base rates, $39.4 million PCCA and $4.6 million Windsource costs
  • 11. Colorado Gas Rate Case Highlights Requested $41.5 million increase Gas rate base = $1.1 Billion 11% return on common equity Equity ratio = 60% Partial decoupling
  • 12. Regulatory & Legislative Accomplishments MERP – Forward recovery Comanche 3 – Forward CWIP through rate case filing Transmission investment – Forward recovery – MN & SD Mercury reduction – Forward recovery – MN Environmental expenditures – Forward recovery – MN Renewable investments – Forward recovery – CO IGCC – Supportive legislation – CO Transmission investment: Recovery legislation – TX Recovery potential – CO, ND Purchased capacity cost adjustment – CO
  • 13. Investment Opportunities 2006 - 2020 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Committed MERP $700 A-MN A Estimated Comanche 3 P $900 F Cost $700 CapX 2020 Group 1 A A Potential $4 A A Colorado IGCC Investment $30 Mercury A-MN A Approved $60 A-MN Rider CAIR Recovery License Extension & Uprate: $300 Monticello F Forward Prairie Island $700 Regulatory Recovery Plant Repowering & Uprate $100 New Generation/Gas Storage Environmental Improvements A-MN CapX 2020 Group 2 A CapX 2020 Group 3 A
  • 14. Funding Sustainable Growth Objectives 5 – 7% EPS growth * Dividend per share growth 2 – 4% per year Improve credit rating * Base of $1.30 per share, mid-point of 2006 guidance and successful COLI outcome
  • 15. Capital Expenditure Forecast Dollars in millions Denotes enhanced recovery process 2006 2007 2008 2009 2010 Base & Other Capital Expenditures $ 850 $ 850 $ 830 $ 990 $ 980 MERP 350 270 180 40 10 Comanche 3 200 340 280 60 10 Minnesota Wind Transmission 60 120 10 50 20 CapX 2020 10 20 110 240 Nuclear Fuel 75 80 80 135 100 Balance 85 100 100 115 140 Total $1,620 $1,770 $1,500 $1,500 $1,500
  • 16. Assumptions — Potential Sources and Uses of Cash The forecast scenario is illustrative of a potential outcome, and does not imply guidance or a most likely outcome EPS growth of 6% per year, mid-point of the 5 – 7% objective range, from 2006 midpoint of $1.30 Dividend rate increase 3% per year, mid-point of the 2 – 4% objective range Dividends increase in 2007 and 2008 for expected conversion of convertible notes Depreciation growth consistent with rate base No change in working capital or deferred taxes COLI successfully resolved
  • 17. Potential Sources and Uses of Cash * Dollars in millions 2007 2008 2009 2010 Cash from Operations $ 1,650 $ 1,700 $ 1,800 $ 1,900 Cash from Investing Capital Expenditures (1,770) (1,500) (1,500) (1,500) Nuclear Decommissioning (45) (45) (45) (45) Cash from Financing DRIP 40 40 40 40 Dividends (370) (390) (420) (440) Financing Needed $ 495 $ 195 $ 125 $ 45 * This forecast scenario is illustrative of a potential outcome, and does not imply guidance or a most likely outcome
  • 18. Financing Growth Current financing plan includes: — DRIP — Modest debt ($600 million) — Hybrid preferred ($300 million 2008) Financing plans to remain flexible: — Capital expenditure opportunities — Unanticipated credit events
  • 19. Improving Credit Metrics * Percent equity capitalization 50 Financing needed funded with: 48.5 Current plan 47.5 100% debt 47 46.5 46 45.5 45 43.5 40 2006 2007 ** 2008 ** 2009 2010 * This forecast scenario is illustrative of a potential outcome, and does not imply guidance or a most likely outcome ** Assuming conversion of convertible notes into equity
  • 20. 2006 Earnings Guidance Range * Dollars per share 2006 Regulated Utility $1.25 – $1.35 Holding Company and Other (0.10) COLI – Tax Benefit 0.10 Continuing Operations $1.25 – $1.35 ** * Assumptions in appendix ** Expectation is to end the year in the upper half of the guidance range
  • 21. 2007 Earnings Guidance Range * Dollars per share 2007 Regulated Utility $1.39 – $1.49 Holding Company and Other (0.15) COLI – Tax Benefit 0.11 Continuing Operations $1.35 – $1.45 * Assumptions in appendix
  • 22. Sustainable Growth Collaborative process that balances various interests and delivers value to customers and investors Constructive rate case outcomes Forward recovery on significant incremental investments Pipeline of investments beyond 2010 Attractive Total Return Sustainable 5 – 7% earnings per share growth Dividend yield 4%  Dividend growth of 2 – 4% per year
  • 25. Northern States Power Company- Northern Minnesota States Power 44% Net Income Company- Wisconsin 5% Net Income Public Service Company of Colorado 39% Net Income 5th Largest Combination Electric and Gas Utility (based on customers) Southwestern Public Service Traditional Regulation 12% Net Income 2005 EPS $1.20 continuing operations 2006 Dividend $0.89 annualized
  • 26. Xcel Energy Supply Sources 2005 2005 Owned Energy Supply Mix* Generating Facilities Unit Type Number MW Gas & Oil Nuclear 38% 10% Coal 36 8,138 Natural Gas 61 4,918 Renewables 7% Nuclear 3 1,617 Hydro 83 508 Oil 24 492 RDF 6 96 25 * Wind - Coal ** Total 15,794 45% * Xcel Energy supplies in * Includes purchases excess of 1100 MWs of ** Low-sulfur western coal wind power
  • 27. Capital Expenditure Forecast by Operating Company Dollars in millions 2006 2007 2008 2009 2010 NSP – Minnesota $ 910 $ 880 $ 680 $ 810 $ 820 NSP – Wisconsin 60 70 70 50 60 PSCo 550 680 620 510 500 SPS 100 140 130 130 120 Total $1,620 $1,770 $1,500 $1,500 $1,500
  • 28. 2005 Rate Base and Returns Dollars in millions Return on Equity * Rate Weather- Weather- Base Actual Normalized Colorado Electric $3,120 8.5% Colorado Gas 1,084 7.00 Minnesota Electric 3,230 10.61 9.98% Minnesota Gas 422 6.30 7.42 North Dakota Electric 175 12.46 12.65 North Dakota Gas 42 5.71 6.81 South Dakota Electric 191 SPS Electric 1,422 Wisconsin Electric 613 6.26 ** Wisconsin Gas 83 * Reflects regulatory reporting requirements ** Electric and Gas
  • 29. Senior Debt Ratings Secured Unsecured Fitch Moody’s S&P Fitch Moody’s S&P Holding Co. BBB+ Baa1 BBB- NSPM A+ A2 A- A A3 BBB- NSPW A+ A2 A- A A3 BBB PSCo A- A3 A- BBB+ Baa1 BBB- SPS A- Baa1 BBB
  • 30. Texas Electric Rate Case Highlights Requested $63 million increase, capped at $48 million Electric rate base = $943 million 11.6% return on common equity Equity ratio = 51% Historical test year with adjustments for known and measurable Expect rates to be in effect second quarter 2007
  • 31. Minnesota Gas Rate Case Highlights Requested $18.5 million increase Gas rate base = $440 million 11% return on common equity Equity ratio = 52% Forward test year Rates under bond $15.9 million January 8, 2007
  • 32. Potential Additional Rate Cases with 2007 Impact North Dakota Electric Potential New Mexico Electric Potential South Dakota Electric Potential
  • 33. Minnesota Cost Recovery Mechanisms Projected electric fuel and purchased energy costs billed for the current month with subsequent true-up; MISO energy and true-up; ancillary services being recovered through FCA. Projected purchased gas cost billed for the current month with subsequent true-up true-up Conservation Improvement Program rider which provides recovery of program costs plus incentives Metro Emission Reduction Program, Renewable Development Fund and State Energy Policy rider in place General Transmission rider authorized by law Mercury Reduction and Environmental Improvement rider authorized by law
  • 34. Colorado Cost Recovery Mechanisms Quarterly Energy Cost Adjustment to recover electric fuel and purchased energy costs Monthly Gas Cost Adjustment recovers natural gas commodity, interstate pipeline and storage costs Annual Purchased Capacity Adjustment to recover demand component of purchased power contracts through the earlier of year-end 2010 or Comanche 3 completion Fuel Cost Adjustment recovers electric fuel and purchased energy costs from wholesale customers Demand-side Management Cost Adjustment rider (gas and electric) and Air Quality Improvement rider (recovers cost of emission controls on several Denver metro generation facilities) Recovery of Comanche 3 construction work-in-progress Recovery of expenditures for renewable mandate Rider recovery of IGCC investment
  • 35. Corporate-Owned Life Insurance Litigation (COLI) The court’s opinion in the Dow case outlined three indicators of potential economic benefits to be examined in a COLI case. Positive pre-deduction cash flows pre-deduction Mortality gains The buildup of cash values In Xcel Energy’s COLI case, the plans: Were projected to have sizeable pre-deduction cash flows, based upon the relevant assumptions when purchased Presented the opportunity for mortality gains that were not eliminated either retroactively or prospectively Had large cash value increases that were not encumbered by loans during the first seven years of the policies Hearing likely second half of 2006
  • 36. 2006 Key Earnings Guidance Assumptions Approval of Minnesota electric rate case decision No material incremental accruals in SPS regulatory proceedings Normal weather patterns for remainder of year Weather adjusted sales growth: — Retail electric 1.8 – 2.1% — Retail gas decline 1 – 2% Short-term wholesale and commodity trading margins of $30 – $40 million Operating and maintenance expenses increase 4%
  • 37. 2006 Key Earnings Guidance Assumptions (continued) Depreciation increases $45 – $55 million, excluding decommissioning Decommissioning accruals increase approximately $20 million Interest expense increases $10 – $15 million AFUDC equity increases $5 – $10 million Continue to recognize COLI tax deduction Effective tax rate of 24 – 26% Average common shares are 430 million based on “if converted” method
  • 38. 2007 Key Earnings Guidance Assumptions Approval of Minnesota electric rate case decision Approval of Colorado electric rate case settlement Reasonable rate recovery is approved — Texas electric rate request — Potential Minnesota gas rate request — Potential Colorado gas rate request No material incremental accruals in SPS regulatory proceedings Normal weather patterns Weather adjusted sales growth: — Retail electric 1.7 – 2.2% — Retail gas decline 1 – 2%
  • 39. 2007 Key Earnings Guidance Assumptions (continued) Short-term wholesale and commodity trading margins of $15 – $25 million Capacity costs at NSPM and SPS increase $35 million Operating and maintenance expenses increase 2 – 3% Depreciation increases $45 – $55 million Interest expense increases $35 to $40 million AFUDC equity increases $17 – $23 million Continue to recognize COLI tax deduction Effective tax rate of 28 – 31% Average common shares are 433 million based on “if converted” method