The leaders of Xcel Energy Inc. have beefed up their mid-term capital spending plans by about $5 billion since the end of March thanks to two large transmission project awards and, yes, strong demand growth from data centers.
Three months ago, Chairman, President and CEO Bob Frenzel and his team told analysts and investors that they thought their $45 billion base capital plan through 2029 had the potential to grow by about $10 billion as they catch up to load growth in their service areas. Frenzel said that strong demand from oil-and-gas customers as well as investments in the electrification of transportation, manufacturing and home heating are helping push higher growth estimates: That $10 billion has now grown to more than $15 billion.
“We believe that we’re in the early stages of an infrastructure investment cycle in the United States that will define many industries for decades,” Frenzel said on a conference call.
Year to date, Xcel’s total retail electric growth has been 2.7%, with residential load growing 2.1% and demand from commercial and industrial customers popping 3.0%. There’s much more to come from the latter group: Data center operators have requested 8.9 gigawatts of power to come online between now and the end of 2029.
Transmission work will account for a solid slice of the larger incremental capex outlook: Xcel has been awarded about $2 billion worth of work on Southwest Power Pool reliability projects as well as between $1 billion and $2 billion of work from the Midcontinent Independent System Operator. Those investments will be on top of transmission’s nearly $12.6 billion share of Xcel’s official $45 billion five-year investment plan.
In the three months that ended June 30, Xcel produced net profits of $444 million on total operating revenues of nearly $3.3 billion. Those figures were up from $302 million and $3.0 billion, respectively, in the same period of last year.
Alongside their earnings, Frenzel and his team also shared updates on the two wildfire cases Xcel is dealing with, the Smokehouse Creek Fire Complex in Texas’ Panhandle of early last year and the late-2021 Marshall Fire in Colorado’s Boulder County:
• A trial in the Marshall case, which consists of hundreds of cases a judge consolidated in 2023, is scheduled to start late next month and is expected to run into November. The key issue in the case is an assertion by the local sheriff’s office that Xcel’s equipment caused the second of two ignitions in the area and that the company is liable for some of the estimated $2 billion in damages. The company disputes that assertion and Frenzel said his team is “prepared to go to court.”
“You’re probably going to see some filings back and forth from plaintiffs and us around pre-child briefs and things like that,” Frenzel said about next step before the trial starts. “But we’re planning to go to trial. We’re always open to settlement discussions but we have to start with the idea that our equipment didn’t cause that second ignition and we maintain that.”
• In the Smokehouse case, the company has agreed to settlements with area residents that are worth a combined $176 million, up from $113 million at the end of the first quarter. Executives have set aside at least $290 million to fund claims (and have about $500 million of insurance coverage) but also say they can’t estimate how large their claims bill could grow.
Shares of Xcel (Ticker: XEL) ended Aug. 4 trading at $74.24, up about 1% on the day. Over the past six months, they have risen more than 10%, growing the company’s market capitalization to $43.9 billion.
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications T&D World, Healthcare Innovation, IndustryWeek, FleetOwner and Oil & Gas Journal. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.