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Financial Crisis Crimps Xcel Earnings

In reporting decreased quarterly profits for the third quarter last Thursday, Xcel Energy CFO Ben Fowke said the global credit and liquidity crisis has begun to impact Xcel's utility operations spread across eight states. Residential and some small commercial sales are beginning to lag.

Noting that he does not see the situation as a long-term trend, Xcel now is projecting flat sales overall for next year, Fowke said.

"We're becoming concerned about the overall economy and the potential impact of the financial crisis on our customers," said Fowke during a conference call with financial analysts. The company reported third quarter earnings of $223 million, 51 cents/share, compared with $255 million, 59 cents/share, in the same period last year. Lower sales growth caused a 4 cents/share decrease in earnings, he said.

Fowke said Xcel has updated its sales forecasts and "unfortunately we expect the downward trend to continue into next year." As a result, he said that Xcel was revising its earnings guidance for all of 2008 to be in the "lower part" of the range, $1.45-1.50/share, for its utility operations in eight Western and Midwestern states.

Contending that the company has applied "conservative financial management," Fowke said Xcel has taken steps to "strengthen the balance sheet and improve liquidity," and as a result, he said the holding company's major credit facilities do not mature until the end of 2011. Xcel has liquidity of close to $2 billion.

Even with the steps it has taken ahead of the Wall Street meltdown, including selling shares of stock in September before the severe stock market drop, Fowke said the current economic situation "is having an impact on our results and probably other utilities.

"We have experienced a slowdown in electric sales growth the last quarter -- particularly in the residential sales class and particularly with our Minnesota utilities -- and we're currently projecting that this trend will continue into the fourth quarter and into 2009. In addition to the impact on sales growth, we are closely monitoring other impacts on expenses and interest rates in 2009."

Fowke said Xcel is delaying its earnings guidance for next year until the Edison Electric Institute's upcoming financial forum or until Xcel's Wall Street analyst conference on Dec. 3. "This will allow us extra time to update our forecasts for the pending rate cases and the latest economic trends," he said. "We recognize we are in uncharted waters and expect 2009 to be a challenging year. We expect the economic situation will continue to be bearish and credit markets will remain tight."

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