EUR 850.00 For Business Accounts Only

Morningstar | Support for Colorado Energy Plan secures one piece of Xcel's growth plan.

Xcel's diverse group of U.S. regulated utilities that serve gas and electric customers across eight states and own infrastructure that ranges from nuclear plants to wind farms makes it a barometer for the entire industry.On a systemwide basis, Xcel has one of the biggest investment plans among all U.S. utilities. We think Xcel could invest nearly $19 billion in 2018-22, much of it going to renewable energy and other environmentally friendly projects. This includes $1 billion for its Colorado Energy Plan and $1.6 billion for wind farms in Texas and New Mexico.Xcel's investment plan gives investors a transparent runway of 6% annual earnings and dividend growth potential. However, unfavorable regulatory decisions could slow growth, particularly in Colorado, where Xcel plans $6 billion of investment in 2018-21, including the CEP.Xcel's regulatory schedule creates more risk than peers. Investors should pay close attention to the political, regulatory, and public support for environmentally friendly projects that ultimately help Xcel's bottom line. Xcel has made substantial progress bringing earned returns closer to allowed returns through constructive regulatory negotiations across its system. Constructive outcomes in its pending rate cases would virtually lock in 2019-20 earnings growth.Regulation in its largest territories, Minnesota and Colorado, has improved. Xcel has kept customer bills mostly flat by investing in low-cost generation to offset higher infrastructure charges. Minnesota legislation and a 2016 rate case settlement support a rate plan through 2019 with more timely capital and operating cost recovery. We expect Xcel could eliminate its regulatory lag in Minnesota this year.In Colorado, Xcel faces challenging gas and electric regulatory negotiations that will be critical for investment clarity through 2021. Xcel received regulatory pushback on new gas rates but then won approval of its preferred CEP, creating significant uncertainty going into an electric rate review in 2019. In Texas and New Mexico, recent approval for new wind energy projects and continued work with regulators on base rates should improve returns.