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Xcel Reports Increased 3Q2006 Profits; Gas, Electric Margins Jump

Eyeing next year with increased regulatory and market certainty, Xcel Energy late last week reported increased profits for the third quarter and the nine months ended Sept. 30, posting net income of $224 million and $471 million for the two 2006 periods, respectively, compared to $196 million and $400 million for the same two periods last year.

Xcel CFO Ben Fowke said the positive results were due primarily to "stronger utility margins," and as a result, earning guidance and capital expenditures are being expanded.

Electric margins increased about $57 million for the third quarter this year and $193 million for the first nine months of 2006 and natural gas margins jumped up $13 million in the third quarter and $22 million for the nine-month period this year.

"We have put together three solid quarters this year, demonstrating overall execution of our business plan," said Xcel CEO Richard Kelly.

In a conference call with analysts, CFO Fowke reiterated that the multi-state utility holding company's strategy is to "get the rules right before investing capital" in any of the states where it operates (Minnesota, North Dakota, Wisconsin, Colorado and Texas).

Earnings guidance for 2007 was set at $1.35/share to $1.45/share, according to Fowke, and capital expenditure forecasts have been beefed up collectively to $7.8 billion over the next five years through 2010, with the bulk of the dollars centered on Minnesota ($4.1 billion) and Colorado ($2.66 billion).

And as part of a small trend in the industry, $1 billion of the cap-ex forecasted amounts is targeted for nuclear generation plant increases and lifetime license extensions.

"At the direction of the Minnesota Public Utilities Commission, Xcel is pursuing capacity increases at all three nuclear plant units in the state," according to an Xcel spokesperson. If approved, collectively some 250 MW of nuclear generating capacity will be added between 2009 and 2015. "In addition, Xcel plans to seek approval for an alternative recovery mechanism from customers for its nuclear costs," the spokesperson added.

Citing "constructive regulation in all major markets," Fowke predicted that the Colorado Public Utilities Commission will approve the recent general rate case settlement that reduces the utility's $208 million request to $151 million, but establishes a "capacity rider" in which future costs for adding capacity to the power system will automatically be flowed through into retail rates by the state regulators. Xcel has yet to gain this same feature in Texas and Minnesota, he said.

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