Xcel Energy Inc. (XEL) Earnings Call Transcript & Summary

Hello, and welcome to the Xcel Energy Second Quarter 2026 Earnings Conference Call. My name is Jordan, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] Reporters can contact Media Relations with inquiries, and investors and others can reach out to Investor Relations. I'll now turn the call over to your host today, Mr. Roopesh Aggarwal, Vice President, Investor Relations, to begin the conference. Please go ahead, sir.

Thank you, Jordan. Good morning, and welcome to Xcel Energy's 2026 Second 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 2026 second quarter results and highlights, provide updated 2026 assumptions and share recent business and regulatory updates. Slides that accompany today's call are available on our website. 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. I will now turn the call over to Bob.

Thank you, Roopesh, and good morning, everyone. I'm often reminded of the quote that we are living in interesting times. But regardless of the times, we know that access to abundant affordable energy is highly correlated to a nation's competitiveness, its security, its economic growth and its quality of life. We at Xcel Energy are here as we have been for over 100 years, ready to meet the moment and help our customers, our states and our country build the infrastructure we need to fuel economic prosperity and growth for decades to come. While this opportunity is extraordinary, we've not lost sight of what matters most to our customers, and we remain acutely focused on customer satisfaction and affordability, system reliability and resiliency. Financial discipline in meeting both the pace of needed infrastructure as well as the clean energy goals of our communities. And in '26, Xcel Energy continues to demonstrate strong execution across all aspects of these priorities. Xcel Energy remains the largest builder of new high-voltage transmission lines in the country as well as one of the largest providers of renewable generation for our utility customers. And during the second quarter, we invested $3 billion and over $6 billion year-to-date in critical generation transmission and distribution infrastructure across all 8 of our states. This includes achieving commercial operations of Group 2 of the Colorado Power pathway and beginning construction on our 150-mile 345 kV transmission project in the Upper Midwest. We also placed into service Phase 3 of our Sherco Solar facility, bringing its total capacity to 70 megawatts, making one of the largest utility scale solar facility in the country. Last week, the independent monitor for our SPS RFP filed a report on our selection of 2,600 megawatts of new company-owned generation, representing 70% of the total recommended portfolio and $6 billion of new investment needs in Texas and New Mexico. We now have line of sight to the $70-plus billion of total investments that we described in our 5-year plan from last November, all for the benefit of our customers and our communities. We received approval of our large load tariff in Minnesota and made additional large-load tariff filings in Colorado and Wisconsin. And we've advanced these critical initiatives with strong focus on our customers and a commitment to keeping their bills as low as possible. And finally, we delivered for our investors with strong second quarter earnings of $0.93 per share. We remain confident in our ability to deliver on our earnings guidance for the 22nd year in a row, continuing one of the best track records in the industry. Regulatory execution has been a focus all year for the company. I'm proud to say that we advanced settlement and/or reach decisions in 6 active rate cases, all while keeping long-term build growth at or below the rate of inflation and total energy bills among the lowest in the country. This includes commission decisions in our Minnesota electric rate case and South Dakota electric rate case settlement and proposed settlements in our Colorado electric and natural gas cases, New Mexico electric and Minnesota natural gas rate cases. At the same time, we improved and invested in programs for the most vulnerable in our community. We struggle with affordability even with our low bills. Our settlements in our Colorado rate case provide a path to nearly double the size and participation in our energy assistance programs. While in Minnesota, our recent electric rate case significantly expands both accessibility and funding for customer assistant programs. In addition, we have integrated customer program funds in Colorado and Minnesota which bundle voluntary customer programs into a single coordinated plans, making it easier for customers to compare options to find rebates and to choose solutions that best fit their needs and their budgets. This extraordinary progress reflects strong preparation, early engagement with stakeholders and disciplined execution. Our regulatory strategy is consistent. Invest in reliability and resiliency and cleaner energy while pursuing outcomes that are fair, transparent, balanced and mindful of customer bill impacts. Moving to capital delivery. We believe that Xcel Energy's approach to project execution is a differentiator in the industry and a benefit to our customers, enabling our ability to deliver a growing portfolio of capital investments on budget, on time and on scope. The first part of our formula is strategic partnerships. And as I mentioned earlier, Xcel Energy is one of the largest regulated builders of renewable and dispatchable generation and the largest builder of new transmission line miles in the country. So effective execution of projects on the scale are not new for us. Neither of the partnerships with key supply chain and EPC vendors that are needed to deliver for our customers. What is changing is the structure and the depth of these partnerships. Over the past 3 to 4 years, we have shifted our approach to ensure that we are a partner of choice with our Tier 1 suppliers and EPC partners over our 5-plus year portfolio, which includes nearly 13 gigawatts of new renewable generation and battery storage, over 3 gigawatts of new natural gas generation and nearly 2,000 high-voltage transmission line miles. These partnerships help ensure that we have access to the labor and equipment capacity that we need to deliver with certainty for our customers well into the 2030s. In addition, we've consolidated and standardized major project planning and execution under one organization ensuring consistency, accountability and visibility across our generation, transmission and distribution investments. By using repeatable designs and strong governance, we're driving greater capital efficiency, reducing execution risk and increasing schedule certainty across our portfolio. And finally, we know that our people and access to critical talent is essential to long-term success. We have an incredibly talented and tenured workforce. We're also investing in workforce development through partnerships with our EPC firms, high schools, trade programs and universities. These efforts are supporting thousands of students, apprentices and trainees, helping us build the skilled workforce needed to deliver projects safely and reliably while creating economic opportunity in the communities that we serve. Accordingly, Xcel Energy continues to demonstrate that our regulated development team is one of the best in the industry, helping build 16 gigawatts of new generation and storage and over 2,000 miles of new transmission for our communities while keeping costs low for our customers. Last week, the independent monitor filed its report on our SPS competitive RFP process that was seeking 1,500 to 3,000 megawatts of incremental nameplate capacity. SPS was selected to provide 2,400 megawatts of renewables and 200 megawatts of natural gas-fired generation, representing 70% of the overall portfolio and approximately $6 billion of investment that supports continued economic growth in Texas and New Mexico. This portfolio allocation brings line of sight in our incremental investment plan to $10-plus billion. We're 6 months into our 5-year plan, and we've already executed on the original pipeline we identified with more opportunities to come. From here, we see additional opportunities not in our base plan to invest and serve our growing customer needs, including ongoing and upcoming generation RFPs in Colorado and the Upper Midwest. Transmission investments in each of our operating companies and generation to support 3 gigawatts of data center demand that we added to our target plan on our Q4 earnings call. Our base capital plan remains anchored in the core investments needed to retire legacy cold generation assets this decade and made critical investments into our transmission and distribution systems to support reliability, resiliency and industrial growth. Capital investment and rising from future data center opportunities are generally ascribed to our upside plan, and we're taking a disciplined approach to ensure that new load growth is supported by appropriate commercial structures and regulatory frameworks. This includes large load tariffs that were recently approved in Minnesota and filed in Colorado and Wisconsin, each of which protect and lower bills for existing customers while creating long-term benefits for our communities and investors. We remain confident in our ability to deliver on our data center forecast. We have 1 gigawatt of data centers in operation or under construction, an additional gigawatt of data centers under signed ESAs and we expect to secure an additional 4 gigawatts of data center load by year-end 2027, including at least 1 gigawatt by the end of this year. Our confidence is supported by the strength and depth of our customer pipeline. Our proven ability to execute large-scale infrastructure projects and the differentiated position of our service territories, which includes geographic diversity across our high probability pipeline. Finally, I want to highlight Xcel Energy's 21st sustainability report, which we released this quarter. At Xcel Energy, we are balancing reliability and affordability while supporting safety, economic vitality and environmental stewardship. And as our customer needs evolve and expectations of the energy system continue to grow, our responsibility is to lead with transparency, purpose and disciplined execution. The report reflects meaningful progress at sale. Over the past 2 decades, Xcel Energy has reduced carbon emissions nearly 60%, reduced water consumption more than 35% and enabled nearly 14,000 megawatts of wind and solar in our system, all while maintaining a resilient grid and keeping customer bills amongst the lowest in the country. As we look ahead, the energy system will continue to change with growing demand from economic development, electrification and new large loads, but our destination has not changed. We remain committed to leading the energy transition in a way that is reliable, affordable, sustainable and grounded in customer value. And with that, I'll turn it over to Brian.

Thanks, Bob, and good morning, everyone. Starting with our financial results. Xcel Energy had strong earnings of $0.93 per share for the second quarter of 2026 compared to earnings of $0.75 per share in 2025. Most significant earnings drivers for the quarter are as follows: higher electric revenues due to nonfuel riders and sales growth increased earnings by $0.17 per share, higher AFUDC increased earnings by $0.08 per share. Lower depreciation and amortization increased earnings by $0.08 per share and other items combined to increase earnings by $0.03 per share, primarily driven by positive returns in our venture capital portfolios. For the year, these returns largely offset the negative weather that we saw first quarter of 2026. Offsetting these positive drivers, higher interest expense decreased earnings by $0.12 per share and impacts of common equity financing decreased earnings by $0.06 per share. These financing costs reflect the funding of our infrastructure investments and discipline to maintain a strong balance sheet. Turning to sales. On a weather-adjusted basis, year-to-date electric sales increased by 2.1%, driven by increased activity in the energy sector and SPS and manufacturing sector across all opcos. For 2026, we remain on track for full year weather-adjusted electric sales to increase 3%. As we look to our financing plan, Xcel Energy continuing our commitment to maintain a strong balance sheet to fund accretive growth to the balance of equity and debt. Between our equity forward and collar contracts of our ATM program and our junior sub note issuances, we are already in front of approximately $6 billion or 85% of our $7 billion equity need in our base 5-year plan. And moving to guidance. We are reaffirming our 2026 ongoing EPS guidance range of $4.04 to $4.16. We remain confident in our ability to deliver 6 to 8-plus percent long-term earnings growth. With line of sight to $10-plus billion of opportunities beyond our base plan, we expect to deliver 9-plus percent EPS growth on average through 2030. Updates to key assumptions are included in our slides and earnings release. With that, I'll wrap up with a quick summary. Xcel Energy posted strong second quarter of 2026 earnings of $0.93 per share. We continue to lead a clean energy transition while ensuring safe, affordable and reliable service. We've reached productive settlements or outcomes in 6 of our active cases while keeping long-term customer build growth at or below the rate of inflation in amongst the lowest in the country. We now have line of sight to $10-plus billion of opportunities in our incremental investment plan with additional opportunities to come. We have a formula for major project execution that combined strategic partnerships with project standardization and workforce development that will enable Xcel Energy to deliver projects on budget, on time and on scope well into the 2030s. We maintained a strong balance sheet and credit metrics and have addressed approximately 85% of our base $7 billion 5-year equity need. We are reaffirming our 20 forensics ongoing EPS guidance of $4.04 to $4.16 per share. And finally, we remain confident in our ability to deliver 6% to 8-plus percent long-term earnings growth and expect to deliver 9-plus percent EPS growth on average through 2030. This concludes our prepared remarks, operator, we will now take questions.

Our first question comes from the line of Richard Sunderland from Truist.

A lot to dig into here, and I thought I'd just start with the SGS update and the broader CapEx tailwinds you highlighted. I think if you -- if I caught that $6 billion figure correctly, it's taking line of sight CapEx to, I guess, at least $13 billion based on that $7 billion from last quarter. And so with your rate base framework, the 20 to 25 bps, that's at least a 250 basis point uplift, moving 11% growth on rate base to well into double digits. How are you thinking about that in the context of 9% plus? Is 9% plus still the way to think about growth in the context of a 3Q update? Or are the tailwinds aggregating to something that demands more?

There's a lot to unpack in the multiple questions there. So let me see if I can hit all of it. And you're right, we had $7 billion of line of sight in Q1, we added $6 billion. We just simply say $10-plus billion in terms of our line of sight. Some of that will flow into the early 2030s. So there's a timing component of it. But I think maybe I'll step back before talking about how we're thinking about roll forward is if you look at that $10-plus billion, the vast majority of that is our generation development. And we have, as Bob said, one of the best regulated generation development teams or probably the best regulated generation development teams in the business. And what that does is that it creates a value to our customers in terms of bringing forward really low-cost competitive projects. We're winning these projects through competitive RFPs wind, solar, storage, gas CPs and that's due to our execution and our development team and really delivering low-cost projects for the benefit of our customers. So we're excited about what we saw in SPS the other RFPs and really deliver on that $10-plus billion. As I think about -- I said in Q1, we talked about 9% EPS growth through 2030. You heard you picked up on the language you say 9-plus percent EPS growth through 2030. As we think about rolling forward in Q3, we'll roll forward everything in -- we'll also roll forward off of a new base, as we always do, we roll forward to a new 5-year. So we'll align everything our new capital plan, our new financing plan and kind of a 27 to 31 view. So -- but as you can hear, we're excited about it. I think we're in a really good place from an execution perspective in the first 6 months of the year.

Great. So tackling the multiparts there, I'll pick that up, the thought on the generation wins and the commentary on the ETC side as well. It clearly has been a success. How do you think about these in these recent trends and the work on the PC side positioning you on that even more upside basis highlighted in the deck? Is this sort of a structural change to what might be the resource opportunity net to Excel as we think about Colorado, Upper Midwest or other generics beyond? And is there anything else you'd highlight on the EPC front in terms of how the EPC side has enabled those wins?

Richard, it's Bob. Thanks for the question. You do great math. I think as I think about strategically where we sit, we've been in a generational investment opportunity to rethink how we power and energize our communities reliably, affordably and sustainably. And we've been tapping into the very strategic advantage that the company has to serve customers were wind blows and sun shines. And as we've done that, we've been able to drive win-win for customers with a more sustainable, more clean products with bills that are at or below the national average and some of the lowest in the country. We think that will continue. As I said in my prepared remarks, we've got more investment opportunity that we have line of sight to. We will need more large-scale transmission in the country. We're the largest provider over the last 15 years. We think we'll be a large provider of large-scale transmission going forward, and that will present long-term investment opportunities. And the partnerships with our EPCs makes us very credible whether those are direct assigned or those are competitively bid. Similarly, on the generation side, we know we have customers who value a very sustainable product. If you took our Google data center deal, it's largely a carbon-free portfolio of generation assets, serving that customer. And as we look at that, we can do carbon-free portfolios for our customers quite cost effectively. And we think that as energy-intensive industries look to find homes for their assets, whether they're data centers, whether they're new manufacturing, we think they'll selectively choose our territories as places to locate industrial businesses because of the type and the quality of the system that we have cost effectiveness of the system and the sustainable nature of the energy that we sell. So we think it's a strategic advantage. We continue to lean into it. We want to partner with our states in economic development and bring that to fruition as we look this decade, but really into next.

And I would just add, if you look at -- we talked about 15-plus gigawatts of new generation that we're building out over the next number of years. That's the pipeline that we think makes us a partner of choice with our EPCs. And if you think about, you can go from standard design projects, you go from project to project, keeping the workforce together, keeping that crew learning together, keep driving those efficiencies and then just giving your line of sight for a long-term partnership and project execution, that helps with that on scope, on time, on budget. So I think it does set us up well as we look into the future -- for the future RFPs and how we plan to execute for the benefit of our customers. So I'm pretty excited about it.

Your next question comes from the line of Nick Campanella from Barclays.

Maybe just a follow-up on merchants rate base growth outlook question. Just -- is there anything you'd like to highlight that's changed across the portfolio with the upcoming plan versus the prior, whether it's improved lag through rate case processes and trackers or sales growth visibility. Does that -- would that change at all how you're viewing the delta between rate base growth and EPS growth and how we should be thinking about that 40% financing function for equity?

Nick, as I think we've always talked about kind of long term, you see that 200, 250 bps difference between rate base growth and EPS growth and I don't think that has changed with our kind of construction of projects or opportunities. Like I said, we'll certainly roll forward everything in Q3 and including a new sales growth plan. So -- but I don't see anything that we've announced changes that we remain focused on execution. Certainly, there's -- you have a little bit more delta between rate base and EPS growth in the near part of our plan, and that closes from just given our equity financing plan, some catch-up in terms of some ROE improvements in Colorado as we think about working through the rate cases that we've talked about. So -- but overall, long term, nothing has changed in terms of that kind of construct that you asked about.

Great. And then just in the context of the $13 billion, I guess, of visibility now to the upside. Just the timing around the 4-gigawatt MSP RFP is pretty large and is a fourth quarter expected outcome. And since that's generation for 2030, can you kind of talk about how that makes it into the third quarter update or not?

Yes. So that should be a fourth quarter update by end of year. So we'll certainly -- just depending on the timing of that, whether it makes it into our Q3 plan or not, but we'll certainly provide visibility when we make that recommendation filing to the commission. So we'll work through that and just be very explicit about kind of where it sits in our Q3 plan, but it might be a little bit early in terms of the Q3 call.

Next question comes from the line of Carly Davenport from Goldman Sachs.

Update. Just to start on the regulatory side, you've executed really well on getting settlements in place across a number of your jurisdictions. Just curious, as you think about the path to final approval, how you'd characterize your confidence level there? Or any risk of intervention that you're watching?

Yes, Carly, if I just think about kind of -- we've had really good success in our operating companies and the regulatory teams have worked really hard with the parties as you think about reaching settlements across a number of our states. So we certainly appreciate the engagement of all the parties as you work through a settlement. Obviously, there's a lot of, call it, constructive give and take that goes into it. And hopefully, our commissions recognize the give and takes and what we think is we put forward for the settlement, we think it's the public interest. So we're hopeful our commissions see that and that we get constructive decisions coming out of commissions here in the next few months.

Great. And then the follow-up was just on the 2026 EPS guidance that you're reiterating here. It seems like there are a couple of assumptions that were changing in the build to earnings this year. It seems like more puts and takes there, all else equal. Just any read-through to where you'd expect to fall within the guidance range this year based on those changes?

Yes. If you think about just our guidance changes, certainly, we had a significant change in depreciation guidance. That's earnings neutral, just given the change in the nuclear depreciation lives of our nuclear plants in the Minnesota rate case. And then we had just some gives and takes in terms of lower rider revenue, but that's offset by higher AFUDC. So really not much change from a guidance perspective when I look at it from a bottom line earnings perspective. So we -- like I said, we have a good start. We feel really good about our first 6 months of the year. And our just regular cadence is we tightened guidance in Q3. So -- but just we're sitting here off to a good start for the first part of the year.

Your next question comes from the line of Jeremy Tonet from JPMorgan.

This is Diana Niles on the call for Jeremy. So you've outlined expectations to sign another gigawatt of data center load this year and an additional 3 gigawatts in 2027. I guess within this year and then in next, how are you thinking about the mix between gigawatt scale or 100-megawatt scale projects? Any color there would be appreciated.

Sure. It's Bob. Look, really excited about the portfolio we have. I would say our high probability portfolio exceeds 20 gigawatts. We are focused largely in the Upper Midwest and the Southwest in the near term. And we see projects in the backlog in the portfolio both -- in both camps, honestly. We see everything from urban data centers in the 10- to 20-megawatt range to 1,000-megawatt campuses across our portfolio. it's hard to say exactly what will happen. I think that our customers are largely aligned. We're spending a lot of time with the hyperscalers and the big data center developers. They're largely aligned to larger campuses for scale benefits, and we're equipped and prepared to move in that direction, and we see scale campuses in the regions that I mentioned. We also have people looking for maybe -- it's hard to say 200 to 300 megawatts are more modest, but those are -- we have more modest projects in our portfolio as well. And we'll bring them forward as we get to execution. We feel great about our guidance on a gig this year and 3 next.

Great. And if I may kind of go back to the topic that Rich introduced earlier in terms of the future for rate base growth moving forward. It sounds like with timing considerations to do the math of that full $13 billion math in 2030 isn't quite how to look at it. But how should we think about the horizon for rate base growth maybe in the -- how long can this double-digit rate base growth extend?

Maybe I'll just answer it a little bit higher level. Certainly, when we look at these longer-term prospects and you look at our incremental portfolio, renewables will be in service by the end of 2030. We need to make sure that we capture the production tax credits for the benefit of our customers. And so when you look at the renewables that we're moving forward with in the incremental pipeline would be before or by the end of 2030. So certainly captured in our 5-year plan. Certainly, some of the larger transmission may slip out a little bit past 2030 as we think about the size and scale of that build and just getting through all the processes. But overall, we feel really good about what's in the 5-year plan. But then also, just if I think about longer term, it's a little bit what Bob was talking about is when we look at data centers here, a gigawatt by the end of this year and 3 additional gigawatts end of next year, that's really going to drive a lot of incremental opportunities in the early 2030s as you think about -- they may energize by the end of the decade, but when they need the energy and when they ramp, it's going to be well into the 2030s. So it's how do we think about extending this growth opportunity. But that growth opportunity also comes with it affordability benefits for all of our current customers, community benefits. So when you do data center development rights, -- and so we're pretty excited about that opportunity, not only from a growth perspective for investors, but just an affordability benefit for our current customers as we think longer term.

I think just one thing to add to Brian's comment is, as we think about data center development, particularly in our resource-rich areas if you have a gigawatt of data centers, you have choices to power with 100% natural gas. I would suggest that in our regions, it's going to be largely wind, solar, storage and backup gas, which leads to for every gigawatt of a data center, you're looking at something like $5 billion to $6 billion of investments on the generation side or maybe more. So as we think about that ramp that Brian talked about, the data center ramp, the generation ramp that follows that with capital investment late this decade, but probably extending well into next decade as well as the transmission needed to support that. So there's real investment opportunities in the next decade as we see on our radar.

Your next question comes from the line of Julien Dumoulin-Smith from Jefferies.

So just kicking off, I'd love to hear your thoughts about Colorado and wildfire, right? I mean, obviously, this year, especially in the state, it's been in some tragic in some respects, but obviously, the state is focused on this in the context of just dealing with some of the issues in the Western part of the state. How do you think about your objectives when it comes to wildfire in Colorado, right? I know that historically, we've talked about kind of a 2027 session and talking about like a standard of care bill or something like this. But how do you think about the scope of what you're looking at, whether that includes expanded mitigation efforts, et cetera? I'm just thinking through some sort of refreshed view on wildfire here and tackling it at the state level, if you will.