EUR 850.00 For Business Accounts Only

Morningstar | Xcel's Clean Energy Agenda Supports Earnings and Dividend Growth

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.Xcel also aims to be one of industry's leading clean energy providers. Xcel is set to invest $20 billion in 2019-23, much of it going to renewable energy and other environmentally friendly projects. In the short run, this includes $1 billion for its Colorado Energy Plan and 3 gigawatts of new wind generation throughout its service territory.In the long run, we think Xcel could spend more than $1 billion per year on renewable energy and other clean energy initiatives. Colorado and New Mexico are working on legislation that would require 100% carbon-free generation by 2050, supporting even more growth potential.Xcel's investment plan gives investors a transparent runway of 6% annual earnings and dividend growth potential. However, Xcel must continue to receive political, regulatory, and customer support for its clean energy investments, particularly in its largest jurisdictions, Colorado and Minnesota, where it plans to invest $15 billion in 2019-23.Xcel's investment plan creates more regulatory risk than peers. Xcel has made substantial progress in recent years bringing earned returns closer to allowed returns through constructive regulatory negotiations across its system. Lower energy costs have helped keep customer bills mostly flat despite higher infrastructure charges.Xcel's multiyear rate plan in Minnesota expires in 2019, setting up critical rate negotiations. In Colorado, Xcel faces regulatory negotiations that will be critical for investment clarity through 2023. 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.