MINNEAPOLIS, MN – Xcel Energy Inc. (NASDAQ:XEL) has reached a settlement agreement in its Minnesota natural gas rate case, according to a recent SEC filing. The settlement, filed with the Minnesota Public Utility Commission (MPUC) on Wednesday, includes a 7.5% rate increase, which equates to an additional $46 million in annual revenue for the company.
The original filing, dated November 1, 2023, requested a 9.6% hike, or approximately $59 million, citing the need to cover investments and maintain the reliability of its natural gas service. This request was based on a 10.2% Return on Equity (ROE), a 52.5% equity ratio, and a rate base of about $1.27 billion.
In response to the initial filing, the MPUC approved interim rates subject to refund of about $51 million starting January 1, 2024. The newly agreed terms, pending final MPUC approval expected by year-end, reflect a compromise with a slightly lower ROE of 9.6%, while maintaining the equity ratio and adjusting the rate base to $1.25 billion.
Xcel Energy has confirmed that this settlement will not affect its previously announced 2024 earnings guidance of $3.50 to $3.60 per share. The guidance assumes constructive regulatory outcomes among other key factors.
The company's forward-looking statements caution that actual results may differ materially due to various risks and uncertainties. These include operational safety, commodity risks, economic conditions, and the ability to recover costs. The full list of potential factors that could impact future results is detailed in Xcel Energy's Annual Report and other SEC filings.
The settlement is part of Xcel Energy's ongoing efforts to balance investment in infrastructure with the cost impact on customers. The agreement also includes no changes to the Commission-approved decoupling mechanism, which separates utility revenues from customer usage, promoting energy efficiency.
In other recent news, Xcel Energy Inc. has been the subject of several analyst reviews following the release of its first-quarter financial results. The company posted a higher-than-expected adjusted earnings per share (EPS) of $0.88, surpassing analyst estimates by $0.08. However, Xcel's revenue of $3.65 billion fell short of the consensus estimate of $4.16 billion.
BMO Capital Markets raised its price target on Xcel Energy shares to $65, citing the company's reaffirmed long-term growth projections. Meanwhile, BofA Securities also increased its price target to $66, maintaining a Buy rating after Xcel's first-quarter earnings exceeded estimates. On the other hand, KeyBanc Capital Markets reduced its target to $65, but sustained an Overweight rating, viewing the current dip in Xcel Energy's stock price as an overreaction to potential wildfire liabilities.
In response to recent wildfires, Xcel has implemented preventive power shutoffs during high-risk conditions and accelerated inspections and replacements of poles as part of their wildfire risk reduction initiatives. These measures are key to the company's future performance and valuation, as noted by BMO Capital and KeyBanc. These are recent developments in Xcel Energy's ongoing efforts to navigate the dynamic energy market.
InvestingPro Insights
In light of Xcel Energy's recent settlement in its Minnesota natural gas rate case, examining the company's financial health and market performance offers valuable context. According to InvestingPro data, Xcel Energy's market capitalization stands at 29.93 billion USD, with a Price/Earnings (P/E) ratio of 16.15, reflecting investor sentiment about the company's earnings potential. Notably, the company has raised its dividend for 20 consecutive years, evidencing a commitment to shareholder returns. This dedication is further underscored by the company's impressive track record of maintaining dividend payments for 53 consecutive years.
However, it's essential to consider that Xcel Energy operates with a significant debt burden and short-term obligations that exceed its liquid assets. This information, coupled with the fact that the company's stock generally trades with low price volatility, may influence investment decisions. For those considering a deeper analysis, InvestingPro offers additional insights and metrics, including the company's revenue growth and operating income margins over the last twelve months as of Q1 2024. Investors can explore these aspects further by visiting InvestingPro for more detailed analytics and to take advantage of the exclusive coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With six more InvestingPro Tips available, users can gain a comprehensive understanding of Xcel Energy's financial landscape and future outlook.
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