2008 Annual Meeting: “We Are the Energy”
View the 2007 Annual Report (PDF file and video).
Xcel Energy 2008 shareholder annual meeting
“We Are the Energy”
Dick Kelly
Ben Fowke
May 21, 2008
Denver, Colorado
2008 SHAREHOLDER ANNUAL MEETING SPEECH
Dick Kelly:
That’s great. I’ve seen the video several times and each time I do, it makes me proud of this company, our employees and all of our efforts. Good things happen because we are the energy. We’re going to talk about those good things right now—and how they benefit:
- Our customers
- Our communities
- The environment
- You, our shareholders.
Let’s start with you. I’m pleased to tell you that our board of directors today increased your dividend by 3 cents effective with the July dividend.
That’s a 3% increase. And based on yesterday’s closing stock price, it equals a dividend yield of 4.4%.
Our goal is to increase the dividend each year in the range of 2 to 4% -- and we’re meeting that objective.
Including this morning’s increase, Xcel Energy’s dividend has grown almost 27% over the past 5 years. It’s an attractive yield—and in today’s market, a competitive and growing dividend is more valuable than ever.
I’m going to ask Ben Fowke to step to the podium now to share more results and describe some outstanding financial execution. Ben.
Ben Fowke:
Financial Results
Thanks, Dick, and good morning, everyone. Just like Dick, I also have good things to talk about—beginning with 2007 results.
As we told you in the annual report, we exceeded expectations last year when we delivered ongoing earnings per share of $1.43, compared with $1.30 in 2006. Rate increases, good cost recovery, sales growth and favorable temperatures all contributed to those results.
Total GAAP earnings in 2007 were $1.35 per share, compared with $1.36 in 2006. Those results reflect the impact of settling the COLI—or company-owned life insurance—dispute on what we believe were very favorable terms.
We kept the momentum going in the first quarter of this year. Ongoing earnings per share were 35 cents per share, compared with 27 cents in first quarter 2007.
Total GAAP earnings for the first quarter of this year were 35 cents per share, compared with 28 cents per share in 2007.
For a reconciliation of our ongoing earnings to our GAAP earnings for both the quarter and the year, please refer to our earnings releases for year-end 2007 and for the first quarter of 2008, which are available on our Web site.
Once again, rate increases, sales growth, good cost recovery and favorable weather contributed to a strong first quarter. Based on those results, we fully expect to deliver 2008 ongoing earnings in the range of $1.45 to $1.55 per share.
Overall, we’ve delivered earnings and are growing the company while keeping our balance sheet strong. One of our most important financial accomplishments last year was receiving a credit rating upgrade from Standard & Poor’s. S&P upgraded us by one notch—because of our strengthening business profile and supportive regulation in key states.
That upgrade was especially important because—as you saw in the video—we are tackling some ambitious projects that require significant capital and financing. Because our credit quality is strong, we are in a good position to complete those financings on favorable terms—which, as you can imagine, is challenging in today’s market.
Credit quality, a strong balance sheet and conservative financial management are important to us, and enable us to deliver on our corporate strategy.
I’d like to focus for a moment on the success of that strategy, which we call Building the Core. It strongly contributes to our financial results and the value that we are building for you.
Here’s how it works:
We start by listening to customers, who want reliable, reasonably priced energy produced in an environmentally responsible way. We make significant investments to meet those customer needs, but before we invest, we work with our regulators and legislators to ensure that the regulatory rules are in place to enable us to recover our costs and earn a fair return for you. In the end, everybody wins: our customers are satisfied, our impact on the environment is reduced and our shareholders earn a solid return.
For me, the best part of our strategy is the fact that our investments contribute to improving the environment—whether it’s a solar installation in Colorado, a wind farm in Minnesota or a transmission line in Texas to deliver renewable energy. Dick will describe our environmental leadership in just a moment. My point is that those environmental investments greatly contribute to our financial success—and they’re going to be driving earnings, cash flow and dividend opportunities for years to come.
And now I’ll turn things back to Dick.
Dick Kelly:
Xcel Energy’s environmental leadership
Thanks Ben. Let me pick up where Ben left off and talk about Xcel Energy’s environmental leadership.
As he mentioned, we’ve determined how to balance our key priorities in a way that benefits all of our stakeholders, including the environment.
It’s also important to note that Xcel Energy has the results to prove its environmental leadership. We don’t just stand around on Earth Day and talk about how much we love the planet. Environmental stewardship is fundamental to our everyday operations and part of our long-term resource plans. We can point to significant investments and solid environmental accomplishments.
Wind Power
I know you saw it in the video but I like to say it as many times as possible: Xcel Energy is the No. 1 provider of wind power in the nation, according to the American Wind Energy Association—and we’ve held that No. 1 spot for 3 years in a row. At the end of 2007, we had about 2,700 megawatts on line. By 2020, we should almost triple that amount for about 7,400 megawatts. Right here in Colorado, we plan to add 800 megawatts of wind over the next 8 years.
Because wind power is strategically important to us, we also plan to actually own more of the wind facilities, rather than merely purchase that power, because we’ll be able to get more value from the investment. As Ben likes to say, you should own your strategy, not lease it.
We’ve just started preliminary construction work on the Grand Meadow wind farm in Minnesota, which is a 100-megawatt facility that we will own. It should be producing power by the end of this year.
To deliver all of that wind power, we are making major investments in new transmission. A lot of activity is happening in southwest Minnesota, where we are constructing transmission lines and substations to move electricity from the windy plains of the Buffalo Ridge to the Twin Cities metropolitan area. In both Minnesota and Colorado, we are part of utility groups looking at long-term, regional transmission needs. Working together is the best way to tackle transmission issues.
Solar Power
In Colorado, we are buying all of the energy from a new, 8.2-megawatt solar facility near Alamosa. This is one of the largest installations of its kind in the nation. And it’s an impressive sight. By 2015, we plan to bring an additional 250 megawatts of solar power on line, including customer installations and utility-scale programs.
To reduce power plant emissions, we’ve launched some very ambitious projects. In Minnesota, we are converting two coal-fired plants to natural gas, and have completely refurbished another with state-of-the-art controls. We want to do the same kind of update at our Sherburne County facility, which is our largest coal-fired plant in the state.
In Colorado, work is progressing on Comanche 3, a 750-megawatt, coal-fired unit outside of Pueblo. As you probably remember, Comanche 3 is being built under a settlement that we reached with the environmental community. That settlement not only allowed us to begin construction on time—saving our customers hundreds of millions of dollars—but it also launched many of our Colorado clean energy initiatives.
Comanche 3 project
The Comanche 3 project is also impressive because we are more than doubling the capacity of the entire Comanche facility but reducing emissions of sulfur dioxide, nitrogen oxide and mercury.
We will own 500 megawatts of Comanche 3, and it should be operating late next year.
Again, all of these efforts add generating capacity and increase reliability. They also help us address an issue that has captured the attention of the world: global climate change.
Take our nuclear plants, for example. They are among the best in the nation for safety and reliability—and they have no greenhouse gas emissions. For those reasons, it’s critical to keep them viable—and we have some major efforts under way to increase their generating capacity.
We’ve also received the state and federal approvals we need to extend the operating life of Monticello to 2030, and we’re working to extend the operating licenses of both Prairie Island units. Although we aren’t planning any new nuclear plants, we strongly believe that nuclear energy is key to achieving long-term environmental goals.
Conservation
Conservation is another important piece of a long-term, clean-energy strategy. We’ve been collaborating with customers for decades to help them conserve energy and manage its use. Going forward, we’re stepping up that effort to meet new state requirements.
Conservation saves money for customers—but also gives them a way to demonstrate their own environmental commitment. And we offer a lot of options to do just that—whether it’s our Solar*Rewards program in which they install their own solar systems—or Windsource, which gives them a chance to support wind power. Windsource, by the way, is the largest green-pricing program in the nation, according to the National Renewable Energy Laboratory.
Technology is also critical to a clean-energy future—and we have some exciting projects in the works. In Colorado, we continue to collaborate with NREL on a project to test the viability of using wind power to create hydrogen—which can then be used to generate electricity when the wind isn’t blowing. In Minnesota, we are testing a cutting-edge technology to store wind power in large batteries.
Smart Grid City
One of the most promising areas of new technology is something we refer to as the Smart Grid. A Smart Grid is an electric grid that takes advantage of broadband communications, advanced sensors and automation to improve its efficiency, reliability and safety. It gives customers real-time information about how much energy they’re using so they can better manage that use. We’ve been working for several years with a variety of technology companies to determine our Smart Grid vision and how to bring it to life.
Earlier this year, we chose Boulder as our first Smart Grid City. That means we’re going to work with city officials and other partners to test applications and build infrastructure that will eventually support a Smart Grid. Xcel Energy’s investment will cover only a portion of the overall effort, of course, but we think it’s worth whatever we can contribute because Smart Grid represents the future of our industry.
Our commitment to the environment is reflected in the fact that Xcel Energy is once again listed on the Dow Jones Sustainability Index for North America. Companies listed on the Index are considered to be the best in class in economic, environmental and social performance.
The video did an excellent job of illustrating the genuine commitment of Xcel Energy employees to their communities.
Spirit of America Award
One of the good things about 2007 was winning the Spirit of America Award, which is United Way’s top national accolade. Of all the awards the company has received over the years, Spirit of America was the most satisfying from my perspective. I also appreciated the fact that our employees didn’t rest on their laurels after winning it. They came through with an even larger United Way contribution in our campaign this year.
We also, of course, contribute to our communities through Xcel Energy Foundation grants, in-kind donations to nonprofit organizations and matching gifts. Our employees give many hours of volunteer time and effort.
Finally, I wanted to share the interesting fact that the Xcel Energy service territory is going to play host to both national political conventions this summer. As I’m sure you know, the Democrats are gathering here in Denver and the Republicans in St. Paul, Minnesota.
Our employees in Colorado and Minnesota have been working hard to ensure that our electric and natural gas systems are safe and operationally sound when the eyes of the world are upon us. Besides thousands of delegates, we are anticipating more than 15,000 members of the media. It’s been interesting to get such a close look at what goes on behind the scenes at these conventions. It should be an exciting few days in both cities.
Of course, energy policy is on the agenda of both conventions. As far as I’m concerned, they need only look at Xcel Energy for examples of energy leadership.
Leadership Team
I’d like to wrap things up by switching from good things to good people. I’m talking, of course, about our executive team, who I would like to introduce right now. Please hold your applause until everyone has been introduced.
Tim Taylor is President and CEO of Public Service Company of Colorado.
Dave Sparby is Executive Vice President and acting President and CEO of Northern States Power Company-Minnesota.
Mike Swenson is President and CEO of Northern States Power Company-Wisconsin.
David Eves is President and CEO of Southwestern Public Service Company.
The operating companies report to:
Paul Bonavia, President-Utilities Group.
Rounding out the executive team are:
Ray Gogel, Vice President-Customer and Enterprise Solutions and Chief Administrative Officer.
David Wilks, President-Energy Supply.
Cathy Hart, Vice President-Corporate Services and Corporate Secretary.
Ben Fowke, Vice President and Chief Financial Officer.
Mike Connelly, Vice President and General Counsel.
Teresa Madden, Vice President and Controller.
And George Tyson, Vice President and Treasurer.
This is an outstanding leadership team. They are focused on the success of Xcel Energy and work especially hard to build value for you. I feel privileged to work with them.
Please acknowledge them with your applause.
It’s been my pleasure to share some of the good things with you this morning, and I hope you feel as positive about Xcel Energy as I do. Remember, our financial results are solid, our commitments are strong and our strategy is working well. Rest assured that Xcel Energy is ready for a successful future.
Thanks again for being here—and for your continued trust and confidence in us.