Allstate Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 6, 2025
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Operator

Hello and welcome to Xcel Energy twenty twenty four Year End Earnings Conference Call.

Operator

My name is Melissa and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of

Operator

the

Operator

presentation. This can be done by pressing star followed by one on your keypad to register your question at any time. Questions will only be taken from institutional investors. Reporters can contact media relations with inquiries and individual investors and others can reach out to investor relations. I'll now turn the call over to Rupesh Agarwal, Vice President, Investor Relations.

Operator

Please go ahead.

Roopesh Aggarwal
VP - Investor Relations at Xcel Energy

Good morning, and welcome to Xcel Energy's twenty twenty four fourth quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer and Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions if needed. This morning, we will review our 2024 full year results and highlights, provide updated 2025 assumptions and share recent business and regulatory updates. Slides that accompany today's call are available on our website.

Roopesh Aggarwal
VP - Investor Relations at Xcel Energy

Some comments during today's call may contain forward looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings. Today, we will discuss certain metrics that are non GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. As a reminder, we recorded a charge of $0.06 per share in 2024 related to the disallowance of replacement power costs associated with an extended outage at our Sherco plant in 2011.

Roopesh Aggarwal
VP - Investor Relations at Xcel Energy

Given the outage occurred thirteen years ago and non recurring nature of this item, this charge has been excluded from full year ongoing earnings. As a result, our GAAP earnings for 2024 were $3.44 per share, while our ongoing earnings, which exclude this non recurring charge, were $3.5 per share. All further discussion in our earnings call will focus on our annual ongoing earnings. For more information on this, please see the disclosure in our earnings release. I will now turn the call over to Bob.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Thank you, Rupesh, and good morning, everybody. At Xtell Energy, we know that economic growth and prosperity of our communities and country depends on our ability to deliver energy to our customers when and where they need it, while keeping their bills as low as possible. And in 2024, we delivered on another year of solid operational and financial progress to that end. Across our eight states, we invested more than $7,500,000,000 to build and maintain infrastructure that supports our customers' energy needs in areas like advanced technology for a smarter, more reliable grid, long haul and regional transmission to support customer growth and system reliability needs, and carbon free generation to continue our pursuit of a cleaner energy future. We navigated considerable headwinds during the year and posted ongoing earnings of $3.5 per share, delivering within our guidance range for the twentieth consecutive year, one of the best track records in our industry.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Our long term performance is attributable to our committed team at Xcel Energy who show up every day on behalf of our customers with safety, affordability and reliability as their top priorities. I recognize that this is the first time we've been below the midpoint of our target range in over fifteen years. We made decisions in 2024 to make investments to improve resiliency and protect our customers throughout the year. And we coupled with December weather that was considerably warmer than normal and little time to adjust, the result was earnings at the low end. But because of the operational improvements and investments we made in 2024, we remain confident in our ability to deliver on our '25 guidance range of $3.75 to $3.85 per share, the midpoint of which reflects 7% growth from the midpoint of our 2024 range.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

And over the next decade, we expect to invest significantly in our infrastructure to deliver reliable, resilient and cleaner energy for our customers as well as serve significant forecasted customer growth. Our five year base capital plan delivers rate base growth in excess of 9% and should deliver long term EPS growth in the upper half of our 6% to 8% guidance range. At Xcel Energy, our long term strategic model and value proposition is to make smart capital investments for the benefit of our customers, which improve reliability, resiliency and sustainability provide excellent customer service and to keep bills as low as possible for our customers. In 2024, we reached several important milestones towards these goals. In November, Phase one of our Sherco solar project started commercial operation.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Two additional phases will come online in 2025 and 2026. And once complete, Sherco's total capacity of of seven ten megawatts will make it the largest solar facility in the Upper Midwest. And by using existing interconnection from our retired coal unit, we saved customers money and accelerated deployment by several years, providing opportunities to serve new customers, including multiple data center projects on and around the Sure Coast site. We're also near completion of the conversion of our 1,000 megawatt Harrington coal plant to natural gas, which provides essential energy resiliency and reliability to our customers and will benefit the local community there for years to come. In 2024, our wind fleet achieved availability of 97%, marking our best performance in five years in achieving first quartile benchmarks.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

High turbine availability ensures our customers benefit from the zero fuel cost resource and provides production tax credits that keep their bills low. In line with our Minnesota resource plan, the NRC approved a twenty year license renewal for our Monticello nuclear facility. This allows customers to continue to benefit from a critical, low cost, carbon free energy resource through 02/1950.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

One of the keys

Robert Frenzel
President, CEO & Chairman at Xcel Energy

to energy resiliency and growth is expanding our electrical grid to ensure that customers have access to the generation resources needed to meet their daily requirements.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

And I'm

Robert Frenzel
President, CEO & Chairman at Xcel Energy

proud

Robert Frenzel
President, CEO & Chairman at Xcel Energy

to say that for the past fifteen years, Xcel Energy has been the leading provider of new transmission line miles in the country. In July, we began construction on the final segment of our Colorado Power Pathway project, which started construction in 2023. The Power Pathway is a six seventy five mile double circuit three forty five kV transmission loop that will enable Xcel Energy to connect more than 5,000 megawatts of essential energy resources in Eastern Colorado. And in the fourth quarter, the MISO board approved Tranche two point one of its long term transmission portfolio and the SPP board approved its 2024 ITP portfolio. These two portfolios will enhance transmission systems in our regions and inter regionally ensuring that we can meet customer growth and resiliency needs.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Our portions of these transmission projects could result in $3,000,000,000 to $4,000,000,000 of capital investment in excess of our base plan. We've also made considerable progress to protect our customers, communities and system from the increasing threats of extreme weather that we continue to see across the country. During 2024, we filed an updated wildfire mitigation plan in Colorado, a new system resiliency plan in Texas and issued wildfire mitigation plans for each of our other states. We've also accelerated a number of risk reduction efforts including operational mitigation such as enabling public safety power shutoffs and wildfire safety operations across our entire system and making investments to better sectionalize and automate these capabilities. Physical mitigations that include the repair or replacement of priority one and two distribution poles across our system in over 600 miles of vegetation management in Colorado amongst other milestones.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

We've developed foundational tools completing comprehensive wildfire risk mapping of our system and deployment of advanced risk modeling tools like TeclaSilva. And we've increased situational awareness, where in Colorado we completed installation of 42 AI equipped cameras and completed the installation of 25 utility pole mounted weather stations with many more planned across our system in 2025 and beyond. Equally importantly, our customer bills have remained amongst the lowest in the country. This is attributable to our thoughtful investments, access to some of the lowest cost renewal resources in the country and focus on continuous improvement through our lean operating principles. Since 2020, our continuous improvement programs have generated nearly $500,000,000 of sustainable savings for customers, while improving operations and reducing enterprise risk.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Since 2017, our Steel for Fuel program has saved customers nearly $5,000,000,000 in avoided fuel costs and production tax credit benefits. Our average residential electric and natural gas bills 2812% below the national average with historical growth rates well below the rate of inflation. In addition, we've reduced our residential electric customer share wallet by 13% since 2014. And with our low energy prices, customers have the further potential to reduce their energy expenditures by over 40% as they adopt electric vehicles. At the same time, we reduced carbon emissions on our electric system by 57% relative to 02/2005 levels and remain on track to meet our goal of 80% carbon reduction by 02/1930, proving that our geographic advantage for renewable resources ensures that customers don't have to sacrifice costs or reliability to achieve sustainability.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Looking forward, we are focused in 2025, working to capture the unprecedented opportunities for growth we laid out in our base capital investment plan to deliver on our incremental capital opportunities, to advance our clean energy leadership and to raise the bar on delivering a compelling experience for our customers in order to make energy work better for them and the communities we serve. Finally, I'd like to express my thanks to Paul Johnson. Earlier this year, Paul announced his retirement from Xcel Energy after forty one years of service. Over his career, his commitment, his integrity and his acumen have been critical to the success of our controller, our treasury and our investor relation programs. He has mentored countless programs inside the company and across the investment community.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

I consider Paul more than just a cherished colleague, he's become a personal friend. I know you will all miss him as will I. I want to extend my sincere appreciation to Paul, his wife, Renee, their two sons and two dogs, and wish him nothing but the best in his retirement. With that, I'll turn it over to Brian.

Brian Van Abel
EVP & CFO at Xcel Energy

Thanks, Bob. And I think everyone in this room certainly echoes your comments about Paul. So let's turn to starting with our financial results. Xcel Energy had ongoing earnings of $3.5 per share for full year 2024 compared to ongoing earnings of $3.35 per share in 2023. The most significant earnings drivers for the year include the following: outcomes from rate cases and riders increased earnings by $0.87 per share and higher other income, which increased earnings by $0.16 per share due to interest income on cash balances and the gain on debt repurchase that we proactively use to offset increased spend on our wildfire risk reduction measures.

Brian Van Abel
EVP & CFO at Xcel Energy

Offsetting these positive drivers higher depreciation and amortization decreased earnings by $0.4 per share, reflecting our capital investment programs higher interest charges net of AFUDC debt decreased earnings by $0.24 per share driven by increased debt levels upon capital investments and higher interest rates. Higher O and M decreased earnings by $0.13 per share and other smaller items combined decreased earnings by $0.11 per share. Turning to sales. Fourth quarter and full year weather adjusted electric sales increased by 31%, respectively, driven by increased C and I load in SPS and residential sales in Piesco. For 2025, we continue to expect full year weather adjusted electric sales to increase 3%.

Brian Van Abel
EVP & CFO at Xcel Energy

Shifting to expenses. O and M expenses increased $96,000,000 in 2024, reflecting actions we took to reduce future operational risk by increasing investment in wildfire mitigation. In addition, we experienced increased costs from generation maintenance, damage prevention and storm response. We also made progress on a light rate case calendar. In our Minnesota electric rate case, interim rates of $192,000,000 were approved effective January 2025.

Brian Van Abel
EVP & CFO at Xcel Energy

And in North Dakota, we filed an electric rate case and the Commission approved our settlement in our natural gas rate case. Moving to 2025, we are looking to several milestones as we make progress on adding 15,000 to 29,000 megawatts of generation to replace retiring capacity and serve load growth. In the first quarter, we anticipate a decision from the Minnesota Commission on our RFP and IRP settlement. The RFP includes seven twenty megawatts of company owned firm dispatchable resources. The IRP includes an additional 4,200 megawatts of generation needs.

Brian Van Abel
EVP & CFO at Xcel Energy

By summer twenty twenty five, we expect to file recommendations for up to 3,500 megawatts of this need across three RFPs. In the second quarter in SPS, we anticipate filing recommendations for 5,000 to 10,000 megawatts of generation from our RFP that is in flight. And finally, in the third quarter in Colorado, we anticipate a commission decision on our resource plan for the 5,000 to 14,000 megawatt resource need with RFPs to follow in late twenty twenty five or early twenty twenty six. We're excited to execute on this significant opportunity and look forward to working with our stakeholders to drive economic growth for our communities and continue our clean energy leadership. Moving to our five year sales forecast of data centers.

Brian Van Abel
EVP & CFO at Xcel Energy

We have already signed contracts for approximately half of our new data center capacity included in our five year sales forecast. These projects are under construction and will begin energization late this year. Additionally, we expect to have executed contracts for the remaining amount that is included in our five year sales forecast by this fall. We are in active discussions with several counterparties and look forward to bringing on these large customers that will drive economic development and benefit to all of our customers. Given our large backlog of additional opportunities, we are confident in our long term sales forecast.

Brian Van Abel
EVP & CFO at Xcel Energy

Additionally, we continue to see significant growth in other parts of the business, particularly in the oil and gas region and SPS. As a reminder, our data center growth represents only half of our 5% long term sales growth that we are projecting. To help fund our $45,000,000,000 5 year capital plan, we issued nearly $1,400,000,000 in forward equity in 2024. This issuance significantly reduces financing risk, helps maintain a strong balance sheet and credit metrics and funds accretive growth for our customers and investors. We also continue to make strong progress in the Smokehouse Creek wildfire claims process.

Brian Van Abel
EVP & CFO at Xcel Energy

We have resolved 113 of the 199 submitted claims, which we continue to view as constructive. We have committed $73,000,000 in settlement agreements, of which $35,000,000 had been paid. There is no change to our estimated liability of $215,000,000 as we described in our disclosure. With that, I'll wrap up with a quick summary. Xcel Energy posted ongoing 2024 earnings of $3.5 per share, navigating significant headwinds and meeting guidance for the twentieth consecutive year, one of the best track records in the industry.

Brian Van Abel
EVP & CFO at Xcel Energy

We continue to lead the clean energy transition while ensuring safe, clean and reliable service and keeping customer bills as low as possible. We are focused on reducing operating risk in our system from extreme weather, including proactive mitigations across our system, our resiliency plan filing in Texas and updated wildfire mitigation plan in Colorado. Going forward, we are excited to make significant progress on our $10,000,000,000 pipeline of additional investment opportunities. We continue to maintain a strong balance sheet and credit metrics using a balance of debt and equity to fund accretive growth. And finally, we are reaffirming our 2025 guidance of $3.75 to $3.85 per share.

Brian Van Abel
EVP & CFO at Xcel Energy

This concludes our prepared remarks. Operator, we will now take questions.

Operator

Thank you very much. Our first question is from Nick Campanella with Barclays. Please go ahead.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Hey, thanks. Thanks for all the information today.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Good morning,

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Nick.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

So I just wanted to kind of get

Nicholas Campanella
Nicholas Campanella
Director at Barclays

your general thoughts. I know there's been a lot of headlines in the new administration, but particularly around renewable permitting and siting. And are any of your projects kind of in scope from either a federal or a private permitting haul perspective? And then maybe you can kind of also just remind us what's embedded in the plan from a transferability perspective? Thank you.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Hey, Nick, it's Bob. Thanks for the question. Look, broadly speaking, when I think about the EOs, they support the energy dominance goals of the administration. We're supportive of a broad and all the above energy strategy. And Brian's comments in the prepared remarks talking about sales growth and need of our customers for our product and our electrons would suggest that we need to move and we need to be able to move very quickly on building our infrastructure and making sure that we can serve our customers.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

We know that the administration supports economic development. We know that they support low cost energy. And while many of the EOs are directed at oil and natural gas, in our focus areas is really on the electricity side of the ledger. Look, we support permitting reform broadly at a national and even state and local levels in order to be able to build the infrastructure we need to meet this era of growth. We have about 30% expected load growth over the next five years and making sure that we can deliver on that is important.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

So, any we think that any of the executive orders and any of the challenges that may be embedded in there today are things that we can always work through. As a reminder, we don't have any offshore wind. We don't have projects on federal lands. And our permitting needs are actually relatively light for wind and solar and storage assets.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

So, I think we'll be able

Robert Frenzel
President, CEO & Chairman at Xcel Energy

to work through it all. And I'm optimistic that our capital plan for 2025 and beyond are going to remain intact. And we'll be able to work with the administration and all the agencies to make progress here. I don't know, Brian, you want

Robert Frenzel
President, CEO & Chairman at Xcel Energy

anything to add?

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. Nick, I can just add a little bit of color to that. I know there was an article yesterday, around the Army Corps and our projects, we do not expect that to impact our projects in flight. And as Bob said, the other projects in flight, we feel comfortable with where we stand in the permits that we have in our continuing construction and continuing progress on all our projects in flight.

Brian Van Abel
EVP & CFO at Xcel Energy

And obviously, with the RFPs, once whether it's tariffs or regulations or EOs, we can certainly look at how that impacts RFPs. But we feel very good about the need and our overall pipeline in executing on both the stuff in flight and the pipeline. Just quickly, you asked your other questions about PTCs. We have approximately $700,000,000 a year in transferability embedded in our forecast, right? That's a reduction to revenue and then we transfer the credits.

Brian Van Abel
EVP & CFO at Xcel Energy

And so that's been pretty consistent over the past year in terms of what we've forecasted.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Hey, I appreciate the answer on that. That's really helpful. And then, the at the end of your prepared, you kind of talked about you do seem to have some line of sight to announce additional customers this year. Just how do you kind of think about the cadence of pulling in those 8.9 gigawatt customer requests? And at which point do you think you would reevaluate that sales CAGR?

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Is that more of a EEI later in the year item? Or just how much of that can actually fall into this five year time horizon and impact where you are in the six to Thank you.

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. And I think expect us in terms of updating capital plans, five year sales forecast plans, all of that generally is our Q3 earnings release, so we can talk about EI. So expect that all of that to be comprehensive update on a regular cadence. Now what I mentioned in my prepared remarks is we expect to be able to sign contracts that will fulfill the what we have in our base plan for the data centers and we expect to we're actively working in negotiations on several of those and expect to have them all executed by the fall. So pretty excited about that.

Brian Van Abel
EVP & CFO at Xcel Energy

And then, yes, as you alluded to, we have a backlog behind that, which we'll turn to working on that as we get through these. And I think that just highlights the kind of pretty significant opportunity we have. By the time we're donning expect to talk about this in greater detail in the fall is we'll have a data center in every one of our operating companies. So we have regional diversity, data center diversity that we deal with different hyperscalers. So we feel really good about the long term sales prospect.

Brian Van Abel
EVP & CFO at Xcel Energy

And as we continue much forward, we'll see if there's opportunities to add more. It's not just the demand there, but ensuring that we have the discussions with our stakeholders and commissions about being able to build those assets. I mean, you heard Bob say we need an all the above energy strategy. We need to build these. So it's really working with our stakeholders to drive economic development and benefit for all of our customers.

Nicholas Campanella
Nicholas Campanella
Director at Barclays

Thanks for all the thoughtful answers today. We'll see you soon.

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. Thanks, Nick.

Operator

Thank you. Our next question comes from Jeremy Tonet with JPMorgan. Please go ahead.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Hey, Jeremy.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Hi, good morning.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Paul, we will certainly miss working with you. Best of luck in retirement. Maybe just if we could touch on the wildfires a little bit here, just given national headlines recently, it seems like developments in other states might have impacted XL trading recently. And just wondering what thoughts you could provide here incremental as far as the outlook, the possibility for federal wildfire policy changes, any views from D. C.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Here, just in conversations within Colorado as well, just trying to get some color there.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Hey, good morning, Jeremy. It's Bob. Look, obviously, the California fires were a tragedy for that community. And it does bring both a federal and a state highlight to potential solutions there. And we're going to work at both levels, through EEI largely at the federal level, and then obviously across our states for anything we can do to continue to protect our customers in our communities from that kind of threat and that kind of risk.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

I'd say the dialogues are active across the federal government and at the state level. Obviously, at the federal side, there's a lot going on. I think a lot on TCJA, IRA and items like that. So, I think any wildfire movement in the federal level is probably a back half of the year kind of effort and focus. But California certainly put a bright light on the issue and national problems need national solutions.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

And I think there's a big role for the federal government here to help setting standards, helping with insurance backstops, getting to functional markets, both on the insurance side and on the capital market side as you alluded to. So I

Robert Frenzel
President, CEO & Chairman at Xcel Energy

think there's a big role for the federal government here.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

On the state basis, we're having great conversations, Texas, Colorado, the Dakotas, around everything from roles of the companies and roles of the states and how we're going to set standards for forestry, how we're going to set standards for building infrastructure, for operations and making sure that there's a clean line of responsibility for who's doing what to make sure that we can protect our customers and our communities. I don't have anything to talk about that's advancing right now, but we're early in legislative sessions and maybe we'll come back to you in the first quarter call.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Got it. That's helpful there. And just going to D. C. At large, is there anything else I know you talked about a bit with Nick there as far as changes you think going forward, especially

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

as

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

it relates to, I guess, transferability? Is there a need to go through the federal government in any way? Do you see anything changing there?

Brian Van Abel
EVP & CFO at Xcel Energy

Hey, Jeremy, you just broke up in the very first part of your question there. What did you say? I caught the last part.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Just about any changes out of D. C. I know you touched on that a bit there.

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. Certainly, we're working very closely with our policymakers around D. C. Obviously, one of the things we're bugging on and working is around the IRA and what happens through legislation. And certainly, as we see it now, I think what we're hearing is that they're going to attempt to do one bill, but if that slows down, they'll split it into two.

Brian Van Abel
EVP & CFO at Xcel Energy

I think you heard me speak before is we believe the key tenants of the IRA are intact. When I say that, I'm talking about tax credits and transferability. They kind of go hand in hand. And so we feel good about that. I mean, it is there's an incredible amount of jobs in manufacturing and economic benefit being driven by the array, which is primarily going into red states.

Brian Van Abel
EVP & CFO at Xcel Energy

So I think there's a recognition of that. So we feel good about where that stands overall and we'll just watch it play out and continue to be plugged in.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Got it. And just the last point there, does transferability go through the federal government or is it bilateral?

Robert Frenzel
President, CEO & Chairman at Xcel Energy

So I think the permissibility of transferability is definitely embedded within the IRA. I think the transferability themselves is a bilateral contract with us and any other taxpaying entity. Yes. And I think that persists.

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. That's exactly. We negotiate directly with our other companies. We have a number of Fortune 500 companies in our backyard here in Minneapolis that we partner with. The one caveat is co ops or municipalities that use direct pay would go directly with the government, but we don't use direct pay.

Brian Van Abel
EVP & CFO at Xcel Energy

We're using transferability.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Got it. And if I could just finish up on D. C. Real quick here. The new administration, there's more of a focus I think on gas and maybe there was in the past.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

And at the same time, resource adequacy has been very much in focus. And just wondering your thoughts on adding incremental gas fired generation to meet higher than expected load growth. Is that evolved in any way based on what's coming out of D. C? Or just higher growth expectations and have conversations with large C and I customers changed on this side as well at all?

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Yes. So, look, we I made a comment in my prepared remarks about sort of the real advantage we have across our eight state footprint and the ability to deliver low cost energy with wind and solar, and that persists. And so, we think that those are very valuable asset classes for our customers. They're very important for our hyperscaler and data center customers who are trying to have their own sustainability goals. And we think that persists.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

We've been clear that we're going to continue to focus and achieve our 80% carbon reduction by the end of the decade. But we've been clear since we made that announcement that we need dispatchable resources to support that. So gas has a real role to play in our active resource plans right now, we've got CT builds in the Upper Midwest, in Colorado, and in the Southwest, and in our resource plans that are on the come. We also have incremental gas resources in there. They're all combustion turbines.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

So, we think we need peaking resources. And we don't think we need base load gas because of our advantage in wind and solar and our ability to deploy solar and storage. But we will have new gas across our systems. They'll have low capacity factors. We talked about having them clean fuel capable at construction and other items to make sure that we can meet sustainability goals in our states.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

But we will have new gas coming and we are converting some of our coal stations to gas as well. So, increasing importance for gas in our footprint, but a maintenance of a real sustainability footprint as well given our geographic advantage.

Jeremy Tonet
Jeremy Tonet
ED - Equity Research Analyst at JPMorgan Chase

Got it. Understood. Thank you for that.

Operator

Thank you. Our next question is from Julien Dumoulin Smith with Jefferies. Please go ahead.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

Hey, good morning, team. Thank you guys very much. And Paul, it's been a real pleasure, I got to say.

Paul Johnson
Retired VP at Xcel Energy

Thanks.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

There we go. Absolutely.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

So, guys, let me talk

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

a little bit about '24 and '25 real quick. And I know we've talked about some of the bigger picture items here, but coming back to, obviously, as you say, a little bit out of the norm for you guys historically on '24, some items that, as you say, you were trying to deal with through the course of '24. But in addition here, when you look at the 25 drivers, there's a few items that net to, you know, I suppose, up to 40,000,000 negative versus the prior kind of bits and pieces here, if you will. How do you think about where you're positioned on '25 and getting back on track? And what I mean by that is back on track relative to what you guys have consistently delivered, in terms of within your mid within or at or above your midpoint level?

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. Hey, Julian, thanks for the question. I can provide a little bit of color on that. I think, on face it adds up to that, but I think you got to look at the property taxes are offset in regulatory mechanisms, so that doesn't have an impact. And I look at some of the other offsets, it's probably less than half of the impact that you quoted.

Brian Van Abel
EVP & CFO at Xcel Energy

And so when I think about 2025 we feel very comfortable with where we sit. It's early in the year. You know we always target midpoint of guidance. So I expect that we deliver this year, like you said. Last year was a little bit of an anomaly for us.

Brian Van Abel
EVP & CFO at Xcel Energy

But overall, I feel very comfortable with 2025. And there's just some other offsetting stuff in there that gives me that comfort.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

Got it. Right. So bottom line, back on track 25 onwards here. I appreciate it.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

And I don't want to

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

wordsmith you guys too much, but you guys have made several times your confidence in the sales growth outlook. You made it in the prepared remarks. You said it in the Q and A. At the same time, how do you think about the backdrop here, when I think you guys dropped the sales growth number from the slides itself. I can't discern is that was that purposeful?

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

Is there some sort of update coming at some point here? Just wanted to kind of ask you to elaborate. Maybe I'm nitpicking too much.

Brian Van Abel
EVP & CFO at Xcel Energy

I think you might be reading into that too much, Julie. And I mean, generally, we talk about our five year sales growth on the Q3 call. I mean, you just heard me reiterate it. In 2025, our 3% sales growth is unchanged. We feel good about that.

Brian Van Abel
EVP & CFO at Xcel Energy

So there has been no change. I mean, basically sitting here, what we wanted to do is give a little bit more context in the data center growth because that's about half of that 5%. And the fact that we already have three signed contracts in construction, all three of those planned to energize later this year, we expect to deliver the rest of that contracted or the capacity that's in our base sales forecast by this fall. And we're in active negotiations exchanging term sheets right now with multiple counterparties. So that's where you so I think you might be reading into it a little bit.

Brian Van Abel
EVP & CFO at Xcel Energy

But our 2025 sales growth is unchanged and our outlook five year outlook is unchanged. And I think I'd just add, I said this in the opening remarks is, plus only half of our load is from data centers in our five year sales forecast. Having this diversity of growth is also a benefit to I mean, we continue to see very strong growth out of the oil and gas sector in the Permian and Texas and New Mexico. So, overall, hopefully that helps with a little bit of additional color with how we feel.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

Yes, absolutely. Well, thank you guys very much. I'll leave it there. All right. We'll talk to you on the third quarter call on that sales update.

Brian Van Abel
EVP & CFO at Xcel Energy

Thanks, Julian. Thanks.

Julien Dumoulin-Smith
Julien Dumoulin-Smith
Research Analyst at Jefferies Financial Group

Cheers.

Operator

Thank you. Our next question comes from Steve Fleishman with Wolfe Research. Please go ahead.

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

Hi, good morning. I'll wish you a final skull for the mid shift. So, I guess, just one other thing on the data centers that I can't recall the 8,900 megawatts pipeline, is that number the same as before? Did that go up? And just maybe on that topic, just

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

a little more on the

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

tone of conversations, any shift in the last few months?

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. Steve, that number is unchanged. We just provide additional color into kind of that what's included in our base and what we have contracted already. So we didn't change that topside. We have a lot of a lot of discussions.

Brian Van Abel
EVP & CFO at Xcel Energy

But the question around tone, I guess you could you bring this back to DeepSeq, and what we're hearing. So we had discussions with a number of hyperscalers post DeepSeq. And some of the common themes is the efficiency gains were expected. It didn't catch them off guard. And DeepSeq was focused on training and not inferencing where we really think the long term growth is going to be.

Brian Van Abel
EVP & CFO at Xcel Energy

And then in all of our discussions with the data centers, these active discussions around the ESAs is there is no change in tone, there is no slowing down. So, absolutely not. I think that's why we feel really good about where we are relative to the data centers. So, as you'd expect us to be, we're in contact with a lot of them post that news and just given the reaction it had on or the impact it had on our industry. So but we feel good about the growth plans going forward.

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

Okay. And then just a quick numbers question. SPS, I think, was basically flat on the year despite all that growth. Is that just regulatory lag?

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

That's kind

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

of what you're talking about.

Brian Van Abel
EVP & CFO at Xcel Energy

You had a wholesale customer load roll off that started last year. So you saw the full annualization of it this year is one of the bigger drivers of it. So that will get captured going forward.

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

That's right. Okay.

Steve Fleishman
Stock Analyst at Wolfe Research, LLC

Thank you.

Operator

Thank you. Our next question comes from Darcy Davenport with Goldman Sachs. Please go ahead.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Hey, good morning. Thanks so much for taking the questions. Maybe just two quick follow ups on a couple of the topics we've hit on so far. First, just on the data center comments. As you sign those remaining contracts that are in the five year plan by the fall, is that something where we should expect to see any sort of announcements around those transactions or investments to support those facilities?

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Or is that something that more will happen in the background?

Brian Van Abel
EVP & CFO at Xcel Energy

Hey, Carly, good question. A little bit depends on the counterparty and potentially the regulatory filing around it. So maybe a little bit TBD whether there'll be actual formal or not or not. But we're certainly want to respect the wishes of our data center customers depending on how they want to handle this.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Got it.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Okay. I might just add, that there are times that the local economic development teams are also very happy to have supported the governor's priorities in our states. And so, sometimes the communities or the state wants to make an announcement too. So I would suggest that we may have more to say as we go through the year or it might be quiet until we give an update on the third quarter call.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Got it. Great. That's very clear. I appreciate those comments. And then maybe just circling back to the wildfire mitigation front, obviously, it's been very much in focus.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Just as you think about the two proceedings on the Colorado mitigation plan and the Texas SRP, How are you guys thinking about the prospects to reach a settlement in those proceedings? Or do you think they'll go the full way?

Brian Van Abel
EVP & CFO at Xcel Energy

I think we're certainly as we look forward, we'll take Texas first. We've seen the settlement in the SRP by some of our peers in Texas. So we're certainly hopeful that we can reach a settlement. I think it's recognized in Texas by our stakeholders the importance of wildfire mitigation, and making sure that we are protecting our communities and our customers. And so I think we're hopeful that in Texas.

Brian Van Abel
EVP & CFO at Xcel Energy

In Colorado, we'll just start to engage. We haven't received any testimony yet. We'll receive answer testimony from our stakeholders here later in February. It should be next week, I think late next week. And then there's a settlement deadline.

Brian Van Abel
EVP & CFO at Xcel Energy

So that's the deadline to watch. April mid April is a settlement deadline in Colorado. So we'll start to engage those conversations and certainly hopeful, we can reach a settlement. But certainly, we're comfortable going through this given the importance of this plan, the significance of this plan, going through hearings and a decision deadline, which we'd expect at the August from the commission.

Carly Davenport
Carly Davenport
Analyst at Goldman Sachs

Great. Thank you so much for all the color.

Operator

Thank you. Our next question comes from Durgesh Chopra from Evercore ISI. Please go ahead.

Durgesh Chopra
Analyst at Evercore

Hey, team. Good morning. Thank you for taking my questions. Just maybe Marshall Fire, that's where I want to start and then I'll go back to a big picture question. Just what's the latest there?

Durgesh Chopra
Analyst at Evercore

Obviously, the trials start in September 2025. What should we be tracking between now and 2025? Could there be sort of a settlement or some sort of resolution between the parties? Maybe just your latest thoughts there please. Thank you.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Hey, Ditesh, it's Bob. Thanks for the question. Look, there's not a lot going on, a lot of changes in the Marshall proceeding. As you indicated, the trial is set for September and the judge reaffirmed that recently. And as we indicated in the fourth quarter, we have made some decisions, the presiding judge has made some decisions around the structure of the trial.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

We'll do a liability only trial in September and if necessary subsequent trials around damages.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

And

Robert Frenzel
President, CEO & Chairman at Xcel Energy

so, not much has changed. I guess the only new news out of the judge is probably the venue decision that he made was going to keep the trial in Boulder County, as opposed to the adjacent county Jefferson, which there was a venue change request. So, not much new there. And again, back to your second question, which is really around settlement and settlement opportunities. As we've said previously, we disagree with the shares report and the source of the second ignition and are prepared to defend that in the trial in September.

Durgesh Chopra
Analyst at Evercore

Good. Thanks, Bob. And then one big picture question on tariffs. Obviously, you have a very sizable renewable investment in the plan and the China tariffs are now in effect. So if they're going to be sort of there for a prolonged period of time, how are you thinking that impacts your plan?

Durgesh Chopra
Analyst at Evercore

How are you de risking your supply chain? Your thoughts there, please. Thank you.

Brian Van Abel
EVP & CFO at Xcel Energy

Yes. Hey, good morning, Dhargesh, and thanks for the question. I mean, I think the China tariffs were probably well communicated, and it's not as though we haven't dealt with tariffs before. There was tariffs under the previous Trump administration. We had tariffs under the Biden administration, ABCVD investigation.

Brian Van Abel
EVP & CFO at Xcel Energy

So something that we've gotten pretty familiar with in working with our suppliers and the manufacturing is in terms of whether there's manufacturing capacity outside of China, or just ensuring we're making the right procurement decisions to deliver the best price to our customers. So I would say the China tariff is not unexpected and not surprising and as you would expect given our forward looking nature and all the renewable stuff we have in flight that we had planned for something like that and have taken the appropriate actions.

Durgesh Chopra
Analyst at Evercore

Awesome. Thank you. And Paul, we will miss you greatly. All the best. Thank you.

Operator

Thank you. Our next question comes from Anthony Prado from Mizuho. Please go ahead.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Hey, good morning. I don't know if we know that far, but, yes, congrats, Paul. Thanks again. Just I guess two quick questions. I wanted to follow-up on Steve's comments.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

I guess more on the tone of the data center. I'm just curious if we can contrast the tone between maybe customers associated with the data centers and non data centers. I mean, is there more of a sense of urgency with maybe data center customers to hook up? Or do you see it's the same across whatever customers are coming to you?

Brian Van Abel
EVP & CFO at Xcel Energy

Anthony, you mean like other C and I or oil and gas or just

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Exactly, yes.

Brian Van Abel
EVP & CFO at Xcel Energy

I mean, I think from the data center side, it is certainly always speed to market continues to be the one of the most important factors in terms of can we deliver the transmission generation capacity on the timeline that they're looking for. As for other customers, I mean, we continue to see significant growth out of the oil and gas industry. And I think that's probably reflect not probably it is reflected in the resource plan that we found in New Mexico in our RFP. When you look at the upside of that RFP in Texas and New Mexico, that is 14,000 megawatts of generation. That's informed by our oil and gas customers, in terms of what their electrification needs are.

Brian Van Abel
EVP & CFO at Xcel Energy

I also think what you saw out of SPP with the recent approval of this big portfolio of projects, including a seven sixty five kV that is awarded to us and will build, is that continued growth and our customers are looking to get connected. So I wouldn't differentiate we don't differentiate between among customers among customers. But overall, it hasn't changed the tone hasn't changed with data centers related to kind of their speed to market and how important it is for them.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Great. And then just on that, if I think about maybe political or regulatory support that you get with new customer hookups, I'm sure it's great for all the communities, whether it's property tax offsets or what the property tax would pay, I mean. But I think there's probably more economic development associated with the non data center customers. Is that fair to look at it that way and maybe that they get maybe greater continued regulatory support or political support than maybe the data centers are actually as you said earlier, there's no differentiation between the type of customers getting hooked up. A hook up is great for regulators.

Brian Van Abel
EVP & CFO at Xcel Energy

Well, I think, Anthony, I think it really depends. I mean, if you're talking about a data center that's going to build up to a gigawatt plus of capacity, you have years and years of construction jobs. And then they may be doing other development within the communities or the communities, significant property tax base. And it does provide benefit to all of our other customers. And when you're talking about a data center load that large, it does drive benefit for all of our customers.

Brian Van Abel
EVP & CFO at Xcel Energy

So I don't think it I wouldn't characterize it that way, because the data centers and these large load customers understand that they need to bring economic development, and benefit to all

Brian Van Abel
EVP & CFO at Xcel Energy

of our customers for us

Brian Van Abel
EVP & CFO at Xcel Energy

to get it through in front of the commission.

Anthony Crowdell
Anthony Crowdell
Managing Director at Mizuho Financial Group

Great. Thanks for taking my question guys. Thanks again.

Operator

Thank you. Our next question is from Travis Miller from Morningstar. Please go ahead.

Travis Miller
Travis Miller
Analyst at Morningstar

Good morning. I'll echo much appreciation, Paul. Enjoyed over the years and appreciate all the help over the years. The question on a high level, we're trying to figure out kind of what are some of the constraints really across the industry on some of the big CapEx numbers and the growth numbers coming out. What about labor?

Travis Miller
Travis Miller
Analyst at Morningstar

A lot of questions about equipment and tariffs, etcetera, etcetera. But what about labor availability, both for you and what you maybe see across the industry? Is that a constraint?

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Yes. Hey, Travis. This is Bob.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

Great question and certainly one that we're focused on and probably have been focused on for a number of years. We've been working actively with both national and local IBWs and other trade organizations that we work with to hire the critical talent that we need to own and operate these assets. We've been working trying to give insights into our backlog of capital projects that we need to our vendor partners to make sure that they know where our growth is coming from. And so, our job is really massively in terms of partnership with people who help provide us the human talent that we need to do this big build out. Now that gets pressured by other people also needing talent.

Robert Frenzel
President, CEO & Chairman at Xcel Energy

And so, we're in constant competition for human capital and talent, both at our vendor side and at our, and for our company talent as well. So, it's a great question. I think we started the process. There's more work to do there, everything from funding programs and developmental junior colleges and technical colleges, going into high schools and recruiting at that level, trying to get folks that may want to bypass the university and go straight into a trade or a craft. So, any and everything we can do to make sure that we've got the human capital to make sure that we can do the build out that we need.

Travis Miller
Travis Miller
Analyst at Morningstar

Okay, great. That's very helpful. And then just a specific on the data centers, apologies if I missed this in any of the comments, but do you anticipate any specific regulatory filings for any of the customers either you have signed or you're working with? Just thinking about something that might need such a big build out that you need some kind of pre approval or approval?

Brian Van Abel
EVP & CFO at Xcel Energy

Travis, yes, we would likely expect we haven't disclosed which states that we're negotiating with these customers on. But yes, we'd likely expect that we would seek regulatory approval. And that was a little bit back to my comment of the data centers understand for us to get regulatory approval, it's got to show benefit to our current customers and benefit kind of the communities.

Travis Miller
Travis Miller
Analyst at Morningstar

Okay. Great. Thanks so much. That's all I had.

Brian Van Abel
EVP & CFO at Xcel Energy

So well, with that, I just want to lastly echo Bob's comments around Paul retiring. You can tell he's in the room with us for one last time. He's been a mentor to me, a mentor to many of us in this room and a close and personal friend to me, ever since the fifteen years that I've been at the company. So thank you again, Paul. Rupesh, welcome to the first earnings call.

Brian Van Abel
EVP & CFO at Xcel Energy

We look forward to many more going forward. So with that, I'll wrap up. Thank you for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions.

Operator

Thank you very much. That concludes today's conference. You may now disconnect.

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