2007 Annual Meeting: “What Really Matters”

Note: this is not a transcript; the text below is the copy Dick Kelly and Ben Fowke spoke from at the 2007 Xcel Energy Annual Shareholders Meeting May 23 in Minneapolis.  The remarks refer to a short video presentation and do not include Corporate Secretary Cathy Hart's remarks or the question and answer session at the end. An archived Webcast of the meeting is available; it runs approximately 1 hour.
 
Xcel Energy 2007 shareholder annual meeting
“What Really Matters”
Dick Kelly
Ben Fowke
May 23, 2007
Minneapolis, Minnesota

2007 SHAREHOLDER ANNUAL MEETING SPEECH

DICK KELLY
Good morning and welcome to the 2007 Xcel Energy Shareholders Annual Meeting. I’m Dick Kelly, President, Chief Executive Officer and Chairman of your Board of Directors.
On stage with me are:

• Ben Fowke, Chief Financial Officer and 
• Cathy Hart, Secretary.

We appreciate your interest in Xcel Energy and your attendance today.  We also would like to welcome those of you listening to our Webcast.
The Web cast is available on our Web site for future reference.

Under Xcel Energy bylaws and rules of the Securities and Exchange Commission, subjects for consideration at this meeting are limited to those set forth in the notice you received.  The chair will not entertain any new items for addition to the agenda.  Cathy Hart will conduct the formal portion of the meeting this morning.

There are four items on our business agenda:

• a proposal to elect a board of directors to hold office until the next annual meeting of shareholders or until their respective successors have been elected or appointed;
• a proposal to ratify the appointment of Deloitte & Touche LLP as Xcel Energy Inc.’s principal independent accountants for 2007;
• a shareholder proposal relating to the separation of the role of Chairman of the Board and Chief Executive Officer; and
• · a shareholder proposal relating to executive compensation.

If there are any shareholders who have questions relating to the issues being voted on, we will recognize them at that time.  Our meeting will adjourn no later than 11:30 a.m.

While ballots on these matters are being collected, Ben and I will update you on our business strategy and talk about our accomplishments and challenges over the past year.

Xcel Energy Results
All of you should have received (our video) with your annual report this year.  We decided to send it to our shareholders because we wanted you to actually SEE Xcel Energy’s commitments in action.  And we wanted you to HEAR employees describe their efforts and their pride in the company.

I’ve seen the piece several times, and it always makes me feel good.  That’s the feeling I hope you take from our meeting this morning—because there are many reasons to feel good about Xcel Energy:

• We are focused on what really matters—from serving customers to protecting the environment to supporting our communities to building value for you.
• Even more important, we are delivering results that prove our strategy is working.

With that in mind, let’s look at those results - starting with one near and dear to you: the dividend.

I’m pleased to announce that our board voted today to increase your annual dividend rate by 3 cents effective with the July dividend.

That’s a 3.4% increase.  And based on yesterday’s closing stock price, it equals a dividend yield of 3.8%.

Our goal is to increase the dividend each year in the range of 2 to 4% - and we’re meeting that objective.

Over the past 4 years, in fact, Xcel Energy’s dividend has grown from 75 cents a share to 92 cents a share.  That’s an increase of almost 23%.
It’s steady, solid growth that you can depend on.

To give you more insight on how Xcel Energy is delivering on its financial strategy, I’d like to invite Ben Fowke to share more results.

BEN FOWKE

Earnings Report
Thanks, Dick.

As you saw in the annual report, we met our earnings goal in 2006 with earnings from continuing operations at $569 million, or $1.35 per share on a diluted basis.  That compares with $499 million, or $1.20 per share, in 2005.

A lot of factors contributed to those results, including retail electric sales growth and rate increases.  We also benefited from revenue generated by our investment in emission-reduction projects and the fact that we resolved some tax issues.  On the other hand, increases to operating, maintenance and depreciation expenses—as well as lower short-term wholesale margins—had a negative effect on our results.  But they weren’t unexpected—and they did not prevent us from delivering EPS at the top of our guidance range.

This year, we’re confident we can deliver earnings in the range of $1.35 to $1.45 per share.

Building the Core Plan

Part of our confidence is based on how well our strategy has worked for us in the past.  It’s a straightforward plan that we call Building the Core and it works like this:

• We start by doing an outstanding job of running our electric and natural gas businesses.  That makes customers happy and gives us credibility with regulators.
• As energy demand grows, we invest to meet customer needs.
• Before we make those investments, though, we work with policymakers to ensure that the rules are in place to enable us to recover costs on a timely basis and without regulatory lag while earning a fair return.
• All of the efforts work together to keep our balance sheet strong and our credit ratings solid.

And they build value for you.  In fact, let me explain Xcel Energy’s value proposition.

It begins with our dividend because we know just how important the dividend is to you.  That’s why Dick started things off this morning by announcing our dividend increase.  As he said, our dividend has grown steadily over the past 4 years and our goal is to continue to grow it at 2 to 4% annually.

On top of a solid dividend, we also want to grow earnings at 5 to 7%--and, again, do it in a way that doesn’t stretch the balance sheet.

In the end, we aim for a total return of 9 to 11%.

2006 Results

In 2006, Xcel Energy’s total return was 30.5%, compared with 22.6% for our utility peer group—so our plan is resonating with Wall Street.

In fact, over the past 18 months, shares of Xcel Energy have outpaced our utility peers.

Again, our 2006 financial results and the reaction of Wall Street illustrate that our strategy is working well.  Our regulatory results tell the same story.
We’ve successfully worked with a variety of stakeholders to create regulatory mechanisms that allow us to earn a fair return on major investments.
We like to call it “getting the rules right.”

In 2006, we reached constructive conclusions in electric rate cases in Colorado and Minnesota and an electric and natural gas case in Wisconsin.

We currently have natural gas cases pending in Minnesota, Colorado and North Dakota, which should be decided later this summer.

Dick is coming back now to update you on some of the investments we’re making to benefit customers—and earn a return for you.

DICK KELLY

Future Plans

Thanks,Ben.

You saw it in the video, but it’s worth repeating.

We are investing $1 billion in Minnesota to convert two coal plants to natural gas and refurbish a third with state-of-the-art equipment to control emissions.  It’s a voluntary effort that’s going to add 300 megawatts to our capacity, improve air quality and generate a solid return.  In fact, the projects are progressing so well that we recently proposed a similar effort at our Sherco plant near Becker.

In Colorado, we’re building a coal unit at our Comanche facility that will add 750 megawatts of new power.  And here’s the exciting part: even though we are more than doubling the generating capacity of the entire facility, emissions of sulfur dioxide, nitrogen oxide and mercury will decrease.  That’s because we’re adding advanced emission-reduction equipment to all three of the plant’s units.

Our investment in transmission is just as important.  In the Upper Midwest, we are making great strides on a major construction project to bring wind power from the Buffalo Ridge in western Minnesota to the Twin Cities metro area.

In both Minnesota and Colorado, we’ve teamed up with other utilities to take a proactive and regional approach to transmission needs.

The effort is further along in the Midwest, where we will soon be seeking regulatory approval to build more than 600 miles of transmission lines.
Xcel Energy’s investment is $700 million over the next 7 years.  It makes a lot more sense to tackle these issues cooperatively on a regional basis instead of each utility doing its own thing.

The projects are also possible because far-sighted legislators in Minnesota, North Dakota, South Dakota and Colorado have enhanced our ability to recover costs and earn a fair return on our transmission investments.

Environmental Leadership

Much of that transmission supports wind power - which brings me to environmental leadership.  I’m really proud of the way we are delivering on that commitment.

If you remember nothing else from this morning’s meeting, remember this: When it comes to the environment, Xcel Energy is No. 1.

We are the No. 1 provider of wind power in the nation, with more than 1,300 megawatts of wind on our system at the end of 2006 and plans for at least 2,800 megawatts by 2007.

Our Windsource program is the No. 1 customer-driven, green-pricing program, based on its number of participants - which was more than 57,000 at the end of the year.

And we’ve been instrumental in developing a central solar power plant currently under construction in Colorado that is one of the largest of its kind in the United States.

Those renewable resources will help us meet new standards passed by several states in our service territory.

In Minnesota, we will provide 30 percent of our energy from renewable sources by 2020.

In Colorado and New Mexico, the standard is 20 percent by 2020.

I hasten to add that we support those benchmarks and worked actively with stakeholders in coming up with the standards.

To increase the effectiveness of our renewable efforts, we’re investing in new technology.  Again, as you saw in the video, we’re working with the National Renewable Energy Lab in Colorado to investigate using wind energy to create hydrogen.  The hydrogen could be stored and used to generate electricity when the wind isn’t blowing.

All of our environmental efforts come together to address an issue that’s captured the attention of the world: global climate change.  We think it’s a real concern that requires action - and that’s what we’re doing on many fronts.  I’m talking about:

• Our voluntary emission-reduction efforts;
• Our renewable energy portfolio;
• Relicensing our nuclear plants because they are virtually emission free.
• And, finally, we are investigating an innovative clean-coal technology called integrated gasification combined cycle.  We’re looking at an IGCC demonstration project in Colorado that we hope will enable us to use Western coal at high altitudes and actually capture carbon dioxide emissions.

Of course, our first line of defense in reducing the impact we have on the environment is to work with customers to help them conserve energy.  It’s an effort we’ve championed for at least two decades - and it’s saved more than 2,200 megawatts of power, the equivalent of 9 medium-sized power plants.

Customers want clean energy - but they also want reliable energy.  We’ve invested a lot in reliability improvements over the past few years and it’s paying off.  In 2006, those improvements, along with the expertise of our employees, put us in the top quartile for reliability, as measured by the Edison Electric Institute.

Which brings me finally to Xcel Energy employees.  I think they’re the best in the business.  You saw a few of them in the video.  They work hard for customers, they contribute to their communities and they are focused every day on building value for you.  Employees are especially proud of our environmental leadership - and that gives me a lot of satisfaction.

You know, delivering results is our mantra this morning—and it applies to our commitment to the community, too.  I’d like to wrap things up by telling you about a very special award we received last week.

Spirit of America Award

The United Way of America recognized us with its Spirit of America Award.  It’s United Way’s highest NATIONAL tribute for corporate community involvement - and Xcel Energy is the first utility ever to win the award.  It’s a real tribute to our employees and retirees who give their time, energy and money to their communities every single day.  And it’s a tribute to Xcel Energy as a corporation because we really do deliver on our commitments.  We couldn’t be happier with this award.

It’s gratifying to be able to deliver such good news to you this morning.  Looking to the future, we will continue to execute our strategy, with every expectation that results will continue to be strong.

This is an exciting time to be in the energy business.  I feel fortunate to be part of it.  I’m also grateful to work with a strong leadership team and I’d like to introduce them to you right now, beginning with the officers of our four operating companies.  Please hold your applause until everyone has been introduced.

Leadership Team

Dave Sparby is executive vice president and acting President and CEO of Northern States Power Company-Minnesota.

Pat Vincent is President and CEO of Public Service Company of Colorado.

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.

Teresa Madden, Vice President and Controller.

And George Tyson, Vice President and Treasurer.

This is an outstanding leadership team.  They’re focused on the issues that really matter, especially building value for you.  I feel privileged to work with them.

Please acknowledge them with your applause.

Again, thank you for being here and for your continued confidence in us.