Message from the CEO

To our stakeholders:

In a changing and challenging energy marketplace, Xcel Energy is exactly where we want to be: Forging Our Path for success and a more sustainable energy future. Achieving that goal means relying on fundamental values that are more important than ever, while determining new and innovative ways to satisfy our customers, care for our communities, support our employees and create value for our investors.

Year after year, we’ve delivered on the fundamentals. For a decade, we’ve met or exceeded our earnings guidance, and our balance sheet and credit metrics stayed strong. Our customer satisfaction results are consistently high. We turn in outstanding reliability and operational performances. Our portfolio of renewable energy resources is second to none, and we’ve been the No. 1 utility provider of wind energy in the nation for more than a decade. We are a mainstay in our communities, supporting them with corporate funding and volunteer efforts.

But we recognize more than anything that our customers want us to go above and beyond—and that is where we’ve set our sights. To guide that effort, we’ve developed a dynamic strategic action plan that focuses on improving the performance of our operating companies, expanding options for customers, growing our business and ensuring we have the technology and people we need to be competitive.

Customers are looking in particular for cleaner energy options and more control over their energy use. This year alone to keep our systems safe and reliable, we are investing more than $3 billion, and we’ll invest $14.5 billion over the next five years. Beyond that, we are building an even more significant portfolio of renewable energy sources. By 2016, we plan to add 1,900 megawatts of wind energy across our service territory for a total of more than 7,000 megawatts.

Already among the top 10 utilities in the country for solar capacity, we are expanding solar energy across our service territory, but particularly in the Upper Midwest, where we recently announced a first-in-the-nation Clean Energy Partnership with the city of Minneapolis. The agreement charts a collaborative approach to enable the city to meet aggressive climate and energy goals.

In fact, Xcel Energy is on a path to reduce carbon dioxide (CO2) emissions 30 percent compared with 2005 levels by 2020. That makes us an industry leader in CO2 reduction. Beyond that, we’ve proposed a resource plan for the Upper Midwest that would double our renewable energy portfolio and reduce CO2 emissions 40 percent by 2030 in the region. With emission reductions as its driver, the plan gradually reduces our reliance on coal-fueled generating units but maintains a diversity of resources to keep costs reasonable. In the end, we would have an energy mix in the Upper Midwest that is more than 60 percent carbon free.

In Colorado, we are significantly reducing CO2 emissions by retiring six coal-fueled units and building a new natural gas-fueled plant as part of the state’s Clean Air-Clean Jobs effort. Our transformed fleet of generating units is not only cleaner but more efficient and reliable.

Those efforts put us in a strong position as the U.S. Environmental Protection Agency (EPA) prepares to issue new rules to reduce greenhouse gases. At the same time, we are working with the EPA to advocate for recognition of the early action we’ve taken to reduce emissions— again, to protect the interests of our customers.

Finally, the most important element of our environmental leadership effort is the fact that we are delivering clean energy at a competitive price, which makes me particularly proud.

Our path forward relies on strong communities, and we think of them as our energy partners who benefit from clean, safe, reliable energy. Beyond that, we support them with corporate funding from the Xcel Energy Foundation, which in 2014 contributed more than $3.6 million to promote workforce development, STEM education, environmental stewardship and access to the arts. Our United Way campaign, which has been impressive over the years, resulted in more than $5.4 million to benefit the communities we serve—with the highest level of employee participation in our campaign to date.

Employees are especially important to our success. Day after day, they demonstrate their commitment to our customers and communities, understanding that their work is vital to the quality of people’s lives. In return, we strive to provide employees a safe and welcoming workplace, give them the tools they need to do their best work, and ensure their compensation and benefits are fair.

For the past few years, our employee recruitment effort placed special emphasis on hiring military veterans because we recognize that vets are a good fit at Xcel Energy, with outstanding technical and leadership skills among other attributes. Those efforts have garnered us recognition as one of G.I. Job’s Top 100 Military Friendly Employers for six years in a row, a distinction that places us among the top 2 percent of employers dedicated to hiring veterans.

Investors round out our list of stakeholders. To build value for them, we are focused in particular on growing our business, the final piece of our strategic action plan. We look for organic growth opportunities, but beyond that we are focusing in particular on growing our transmission and natural gas businesses—areas where we already have expertise.

In 2014, we created three independent transmission companies, or transcos, to give us the flexibility to compete in a competitive transmission market. While we are in the early days of pursuing growth in natural gas, we see great opportunities for new infrastructure as our industry works to address the EPA’s proposed greenhouse gas rules. We will be building infrastructure but also considering upstream investments, which means looking at the potential of investing in a natural gas transmission pipeline or perhaps natural gas reserves.

Ours is an exciting business, and again, we are exactly where we want to be: moving forward with our customer and community partners, forging our path to success. As you read our report, you will see many more examples of how we are tackling the challenges ahead and of the success of our journey. We’re glad you are along for the ride.

Sincerely,

Ben Fowke

Ben Fowke signature

Chairman, President & CEO

Our Company