Q4 2024 Xcel Energy Inc Earnings Call
Hello, and welcome to XL energy 'twenty 'twenty four year end earnings Conference call. My name is Melissa and I will be your coordinator for today's event. Please note. This conference is being recorded and for the duration of the call your lines will be on listen only.
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Speaker Change: I'll now turn the call over to a patient alcohol Vice President Investor Relations. Please go ahead.
Speaker Change: Good morning, and welcome to Excel energy, it's 'twenty 'twenty four fourth quarter earnings call.
Bob Frenzel: Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer, and Brian Van Abel Executive Vice President and Chief Financial Officer and.
Bob Frenzel: In addition, we have other members of the management team in the room to answer your questions if needed.
Bob Frenzel: This morning, we will review our 2024 full year results and highlights.
Bob Frenzel: Provide updated 2025 assumptions and.
Bob Frenzel: Share recent business and regulatory updates.
Bob Frenzel: Slides that accompany today's call are available on our website.
Bob Frenzel: Some comments during todays call may contain forward looking information.
Bob Frenzel: Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings.
Bob Frenzel: Today, we will discuss certain metrics that are non-GAAP measures information on the comparable GAAP measures and reconciliations are included in our earnings release.
Bob Frenzel: As a reminder, we recorded a charge of six cents per share in 2024 related to the disallowance of replacement power costs associated with an extended outage at our share a coke plant in 2011.
Bob Frenzel: Given the outage occurred 13 years ago and nonrecurring nature of this item. This charge has been excluded from full year ongoing earnings.
Bob Frenzel: As a result, our GAAP earnings for 2024 were $3 44 per share, while our ongoing earnings which exclude this nonrecurring charge of $3.50 per share.
All further discussion on our earnings call will focus on our annual ongoing earnings for more information on this please see the disclosure in our earnings release.
Bob Frenzel: I will now turn the call over to Bob.
Bob Frenzel: Thank you have a pace and good morning, everybody.
Bob Frenzel: Excel energy, we know that economic growth and prosperity of our communities and country depends on our ability to deliver energy to our customers when and where they need it while keeping their bills as low as possible.
Bob Frenzel: And in 'twenty 'twenty four we delivered another year of solid operational and financial progress to that end.
Bob Frenzel: Across our eight states, we invested more than seven $5 billion to build and maintain infrastructure that supports our customers' energy needs.
Bob Frenzel: In areas like advanced technology for a smarter more reliable grid.
Bob Frenzel: Long haul and regional transmission to support customer growth and system reliability needs.
Bob Frenzel: And carbon free generation to continue our pursuit of a cleaner energy future.
Bob Frenzel: We navigated considerable headwinds during the year and posted ongoing earnings of $3 50 per share delivering.
Bob Frenzel: Delivering within our guidance range for the 20th consecutive year, one of the best track Records in our industry.
Bob Frenzel: Our long term performance is attributable to our committed team at XL energy, who show up every day on behalf of our customers with safety affordability and reliability of their top priorities.
Bob Frenzel: Recognize this is the first time, we've been below the midpoint of our target range and over 15 years.
Bob Frenzel: We made decisions in 2024 to make investments to improve resiliency and protect our customers throughout the year.
Bob Frenzel: And when coupled with December weather that was considerably warmer than normal and little time to adjust the result was earnings at the low end.
But.
Bob Frenzel: The operational improvements and investments we made in 2024, we remain confident in our ability to deliver on our 25 guidance range of $3 75 to $3.85 per share.
Bob Frenzel: One of which reflects 7% growth from the midpoint of our 2024 range.
Bob Frenzel: And over the next decade, we expect to invest significantly in our infrastructure to deliver reliable resilient and cleaner energy for our customers.
Bob Frenzel: As well as serve significant forecasted customer growth.
Bob Frenzel: Our five year base capital plan delivers rate base grows in excess of 9% and should deliver long term EPS growth in the upper half of our 6% to 8% guidance range.
Bob Frenzel: At XL energy, our long term strategic model and value proposition is to make smart capital investments for the benefit of our customers, which improve reliability resiliency and sustainability.
Bob Frenzel: Alright, excellent customer service and to keep bills as low as possible for our customers.
Bob Frenzel: In 2024, we reached several important milestones towards these goals.
Bob Frenzel: In November.
Bob Frenzel: Phase one of our Serco solar project started commercial operation.
Bob Frenzel: Two additional phases will come online in 2025, and 2026 and once complete share goes total capacity of 710 megawatts will make it the largest solar facility in the upper Midwest.
Bob Frenzel: And by using existing interconnection from a retired coal you know, we save customers money and accelerated deployment by several years.
Bob Frenzel: Providing opportunities to serve new customers, including multiple data center projects on and around the short go site.
Bob Frenzel: We're also near completion of the conversion of our thousand megawatt Harrington coal plant to natural gas.
Bob Frenzel: Which provides a central energy resiliency and reliability to our customers and will benefit the local community there for years to come.
Bob Frenzel: 'twenty 'twenty four our wind fleet achieved availability of 97%, marking our best performance in five years in achieving first quartile benchmarks.
Bob Frenzel: Hi turbine availability ensures our customers benefit from the zero fuel cost resource and provides production tax credits that keep their bills low.
Bob Frenzel: In line with our Minnesota Resource plan, the NRC approved a 20 year license renewal for our Monticello nuclear facility.
Bob Frenzel: This allows customers to continue to benefit from a critical low cost carbon free energy resources through 2050.
Bob Frenzel: One of the keys to energy resiliency and growth is expanding our electrical grid to ensure that customers have access to the generation resources needed to meet their daily requirements.
Bob Frenzel: And I'm proud to say that for the past 15 years XL energy has been the leading provider of new transmission line miles in the country.
Bob Frenzel: In July we began construction on the final segment of our Colorado power pathway project, which started construction in 2023.
Bob Frenzel: The power pathways of 675 mile double circuit 345 kv transmission transmission loop that will enable XL energy to connect more than 5000 megawatts of essential energy resources in eastern Colorado.
Bob Frenzel: And then the fourth quarter. The MISO Board approved <unk> 2.1 of its long term transmission portfolio in the SPP Board approved its 2020 for ITT portfolio.
Bob Frenzel: These two portfolios will enhance transmission systems in our regions and into regionally ensuring that we can meet customer growth and resiliency needs.
Bob Frenzel: Our portions of these transmission projects could result in $3 billion to $4 billion of capital investment in excess of our base plan.
Bob Frenzel: We've also made considerable progress to protect our customers communities and system from the increasing threats of extreme weather that we continue to see across the country.
Bob Frenzel: During 2024, we filed an updated wildfire mitigation plan in Colorado, a new system resiliency plan in Texas.
Bob Frenzel: And issued wildfire mitigation plans for each of our other states.
Bob Frenzel: Also accelerated a number of risk reduction efforts, including operational mitigation, such as enabling public safety power shutoff and wildfire safety operations across our entire system, and making investments to better sexualized and automate these capabilities.
Physical mitigation is that include the repair or replacement of priority wanted to distribution poles across our system.
Bob Frenzel: And over 600 miles of vegetation management, and Colorado amongst other milestones.
Bob Frenzel: We've developed foundational tools completing comprehensive wildfire risk mapping of our system and deployment of advanced risk modeling tools like checklist silver.
Bob Frenzel: And we've increased situational awareness, where in Colorado, we completed installation of 42 AI equipped cameras and completed the installation of 25 utility pole mounted weather stations with many more planned across our system in 2025 and beyond.
Bob Frenzel: Equally importantly, our customer bills have remain amongst the lowest in the country.
Bob Frenzel: This is attributable to our thoughtful investments.
Bob Frenzel: Access to some of the lowest cost renewable resources in the country.
Bob Frenzel: Focus on continuous improvement through our lean operating principles.
Bob Frenzel: Since 2020, our continuous improvement programs have generated nearly $500 million of sustainable savings for customers, while improving operations and reducing enterprise risk.
Bob Frenzel: Since 2017, our steel for fuel program and save customers nearly $5 billion and avoided fuel cost and production tax credit benefits.
Bob Frenzel: Our average residential electric and natural gas bills or 'twenty, eight and 12% below the national average.
Bob Frenzel: With historical growth rates, well below the rate of inflation.
Bob Frenzel: In addition, we've reduced our residential electric customers share of wallet by 13% since 2014.
Bob Frenzel: And with our low energy prices customers have the further potential to reduce their energy expenditures by over 40% as they adopt electric vehicles.
Bob Frenzel: At the same time, we reduced carbon emissions on our electric system by 57% relative to 2005 levels and remain on track to meet our goal of 80% carbon reduction by 2030.
Bob Frenzel: Proving that our geographic advantage for renewable resources ensures that customers don't have to sacrifice cost or reliability to achieve sustainability.
Bob Frenzel: Looking forward, we are focused in 2025 working to capture the unprecedented opportunities for growth we laid out in our base capital investment plan.
Bob Frenzel: To deliver on our incremental capital opportunities to advance our clean energy leadership and to raise the bar on delivering a compelling experience for our customers in order to make energy work better for them and the communities we serve.
Speaker Change: Finally, I'd like to express my Thanks to Paul Johnson.
Speaker Change: Earlier this year, Paul announced his retirement from XL energy after 41 years of service.
Speaker Change: Over his career his commitment his integrity and his acumen have been critical to the success.
Speaker Change: Of our controller, our treasury and our investor relation programs.
Speaker Change: He has mentored countless programs inside the company and across the investment community.
Speaker Change: I consider Paul more than just a cherished colleague he has become a personal friend.
Speaker Change: I know you will all miss him as a lie.
Speaker Change: I want to extend my sincere appreciation to Paul his wife for ne or Tucson, and two dogs and we wish him nothing but the best in his retirement.
Brian: With that I'll turn it over to Brian.
Brian: Thanks, Bob and I think every newsroom certainly echoes your comments about Paul.
Brian: So, let's turn to starting with our financial results Excel energy had ongoing earnings of $3 50 per share for full year 2024, compared to ongoing earnings of $3 35 per share in 2023.
Speaker Change: The most significant earnings drivers for the year include the following.
Speaker Change: Outcomes from rate cases, and riders increased earnings by <unk> 87 per share.
Speaker Change: And higher other income, which increased earnings by <unk> 16 per share due to interest income on cash balances and a gain on debt repurchase that we proactively used to offset increased spend on our wildfire risk reduction measures.
Speaker Change: Offsetting these positive drivers drivers.
Speaker Change: Higher depreciation and amortization decreased earnings by <unk> 40 per share, reflecting our capital investment programs.
Speaker Change: Interest charges net of F. D C debt decreased earnings by <unk> 24 per share driven by increased debt levels of fund capital investments and higher interest rates.
Speaker Change: Higher O&M decreased earnings by 13 cents per share.
Speaker Change: And other smaller items combined decreased earnings by <unk> 11 per share.
Speaker Change: Turning to sales force.
Speaker Change: <unk> fourth quarter and full year weather adjusted electric sales increased by 3% and 1% respectively.
Speaker Change: Driven by increased C&I load in Sps in residential sales and payoffs go.
Speaker Change: For 2025, we continue to expect full year weather adjusted electric sales increased 3%.
Shifting to expenses.
Speaker Change: O&M expenses increased $96 million in 2024, reflecting actions, we took to reduce future operational risk by increasing investment in wildfire mitigation.
Speaker Change: In addition, we experienced increased costs from generation maintenance damage prevention and storm response.
Speaker Change: We also made progress on a light rate case calendar.
Speaker Change: In our Minnesota electric rate case interim rates of $192 million were approved effective January 2025.
Speaker Change: And in North Dakota, We filed an electric rate case, and the commission approved our settlement in our natural gas rate case.
Speaker Change: Moving to 2025, we are looking to several milestones as we make progress on adding 15000 to 29000 megawatts of generation to replace retiring capacity and serve load growth.
Speaker Change: In the first quarter, we anticipate a decision from the Minnesota Commission on our RFP in IOP settlement.
Speaker Change: The RFP includes 720 megawatts of company owned firm dispatch for resources.
Speaker Change: The <unk> includes an additional 4200 megawatts of generation needs.
Speaker Change: By Summer 2025, we expect to file recommendations for up to 3500 megawatts of this need across three rfps.
Speaker Change: In the second quarter and Sps.
Speaker Change: We anticipate filing recommendations for 5000 10000 megawatts of generation from our RFP that is in flight.
Speaker Change: And finally in the third quarter in Colorado, We anticipate a commission decision on our resource plan for the 5000 to 14000 megawatt resource need with Rfps to follow in late 2025 or early 2026.
Speaker Change: We're excited to execute on the significant opportunity and look forward to working with our stakeholders to drive economic growth for our communities and continue our clean energy leadership.
Speaker Change: Moving to our five year sales forecast of data centers.
Speaker Change: We have already signed contracts for approximately half of our new data center capacity included in our five year sales forecast.
Speaker Change: These projects are under construction and will begin <unk> late this year.
Speaker Change: Additionally, we expect to have executed contracts for the remaining amount that is included in our five year sales forecast by this fall.
Speaker Change: We are in active discussions with several counterparties and look forward to bringing on these large customers that will drive economic development and benefit to all of our customers.
Speaker Change: Given our large backlog of additional opportunities we are confident in our long term sales forecast.
Speaker Change: Additionally, we continue to see significant growth in other parts of the business.
Speaker Change: Particularly in the oil and gas region in Sps.
Speaker Change: As a reminder, our datacenter growth represents only half of our 5% long term sales growth that we're projecting.
Speaker Change: To help fund our 45 billion five year capital plan, we issued nearly $1 4 billion and forward equity in 2020 for this issuance significantly reduces financing risk.
Speaker Change: <unk> maintain a strong balance sheet and credit metrics and funds accretive growth for our customers and investors.
Speaker Change: We also continued to make strong progress in the Smokehouse Creek wildfire claims process.
Speaker Change: We've resolved 113 of the 199 submitted claims which we continue to view is constructive.
Speaker Change: We are committed $73 million settlement agreements of which $35 million has been paid.
Speaker Change: There is no change to our estimated liability of $215 million as we described in our disclosure.
Speaker Change: With that I'll wrap up with a quick summary.
Speaker Change: Excel energy posted ongoing 'twenty to 'twenty four earnings of $3 50 per share navigating significant headwinds and meeting guidance for the 20th consecutive year one of the best track records in the industry.
Speaker Change: We continue to lead the clean energy transition, while ensuring safe clean and reliable service and keeping customer bills as low as possible.
Speaker Change: We are focused on reducing operating risk in our system from extreme weather, including proactive mitigation is across our system.
Speaker Change: Our resiliency plan filing in Texas and updated wildfire mitigation plan in Colorado.
Speaker Change: Going forward, we are excited to make significant progress on our $10 billion pipeline of additional investment opportunities.
Speaker Change: We continue to maintain a strong balance sheet credit metrics, using a balance of debt and equity to fund accretive growth.
Speaker Change: And finally, we are reaffirming our 2025 guidance of $3 75 to $3 85 per share.
Speaker Change: This concludes our prepared remarks, operator, we will now take questions.
Speaker Change: Thank you very much as a reminder, if you would like to ask a question you May Press star followed by one on your keypad.
Speaker Change: Just to your question you will be advised when to ask your question.
Speaker Change: Our first question is from Nick Campanella with Barclays. Please go ahead.
Nick Campanella: Okay, Hey, thanks, Thanks for all the information today.
Speaker Change: Our Nikko I just wanted to kind of get your general thoughts.
Speaker Change: I know theres been a lot of headlines in the new administration, but particularly around renewable permitting and sighting.
Speaker Change: Any of your projects kind of in scope from either federal or private permitting.
Speaker Change: Called perspective, and then maybe you can kind of also just remind us what's embedded in the plan from a transferability perspective. Thank you.
Bob Frenzel: Hey, Nick it's Bob Thanks for the question.
Speaker Change: Gotta look broadly speaking when I think about the E OS.
Speaker Change: Support the energy dominance goals of the administration, we're supportive of a broad and all of the above energy strategy.
Speaker Change: And Brian's comments in the prepared remarks talking about <unk>.
Speaker Change: Sales growth in need of our customers for our product and our electrons would suggest that we need to move we need to be able to move very quickly on building, our infrastructure and making sure that we can serve our customers.
Speaker Change: We know that the administration supports economic development, we know that they they support low cost energy.
Speaker Change: And while many of the E. OS are directed at oil and natural gas are in our focus areas is really on the on the electricity side of the ledger.
Speaker Change: You know look we support permitting reform broadly at a national and even state and local levels in order to be able to build the infrastructure, we need to meet this era of growth.
Speaker Change: <unk>.
Speaker Change: We have about 30% expected load growth over the next five years and.
Speaker Change: Making sure that we can deliver on that is important.
Speaker Change: So.
Speaker Change: <unk>.
Speaker Change: We think that any of the executive orders in any of the challenges that may be embedded in there today are things that we can always worked through as a reminder, we don't have.
Speaker Change: Any offshore wind, we don't have projects on federal lands and our permitting needs are actually relatively light for wind and solar and storage.
Speaker Change: <unk>.
Speaker Change: So I think we were able to work through it all and I'm optimistic that our capital plan for 'twenty five and beyond are going to remain intact.
Speaker Change: We'll be able to work with the administration and all the agencies to make progress here on O'brien you anything yes, Nick I can just add a little bit of color to that and there was an article yesterday or on the Army Corps and our projects, we do not expect that to impact our projects in flight.
Speaker Change: And as Bob said are the other projects in flight, we feel comfortable with where we stand in the permits that we that we have and are continuing our construction and continuing progress on on all our projects in flight and obviously with the Rfps once whether it's tariffs or regulations or or or E. Mails. We can certainly look at how that impacts <unk>.
Speaker Change: But we feel very good about the need and our overall pipeline and executing on both the stuff in flight and the pipeline.
Speaker Change: Just quickly you got your other question was about Ptc's, we have approximately $700 million a year in transferability embedded in our forecast right. That's a reduction to revenue and then we transferred the credits and.
Speaker Change: And so that's been pretty consistent over the past year in terms of what we forecasted.
Speaker Change: Hey, I appreciate the answer on that that's really helpful and then.
Speaker Change: You know at the end of your prepared you kind of talked about you do seem to have some line of sight to announce additional customers. This year just.
Speaker Change: How do you kind of think about the cadence of pulling in those.
$8 nine gigawatt customer requests and at which point do you think you would reevaluate that that sales CAGR is that more of a.
Speaker Change: Later in the year item or just you know how much of that can actually fall into this five year time horizon and impact where you are in the six to eight thank you.
Speaker Change: Yeah.
Speaker Change: I think you expect us in terms of updating.
Speaker Change: Capital plans five year sales forecasts plans all of that generally is our our Q3.
Speaker Change: Earnings release, so we can talk about AI. So expect that all of that the comprehensive update on a regular cadence now what I mentioned in my prepared remarks is we expect to be able to sign contracts that will fulfill the the what we have in our base plan for for the data centers and we expect to we're working actively working in negotiations on several.
Speaker Change: Those and expect to have them all executed.
Speaker Change: By the fall so pretty excited about that and then yeah. As you alluded to we have a backlog behind that which we'll turn to working on that.
Speaker Change: As we now get through these and I think that just highlights the kind of.
Speaker Change: Pretty significant opportunity we have.
Speaker Change: By the time, we're done and expect to talk about this in greater detail in the fall, we'll have a data center in every one of our operating companies. So we have regional diversity datacenter diversity it'll be dealt with different hyperscale are so we feel really good about the long term sales prospects and as we continue to March forward, we'll see if there's opportunities to add more.
Speaker Change: Just the demand there, but ensuring that we have the discussions of our stakeholders and commissions about being able to build those assets. I mean, you heard Bob say, we need them to all of the above energy strategy, we need to build these and so it's really working with our stakeholders to drive economic development and benefit for all of our customers.
Speaker Change: Thanks for all the thoughtful answers today, we'll see you soon.
Speaker Change: Yes, Thanks, Doug.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Jeremy Tonet with Jpmorgan. Please go ahead, Hey, Jay.
Speaker Change: Jeremy.
Jeremy Tonet: Hi, good morning.
Paul: Paul We will certainly Miss working with you best of best of luck in retirement.
Speaker Change: Maybe just.
Speaker Change: If I could touch on the wildfires, so a little bit here, just given national headlines recently and it seems like.
Speaker Change: Developments in other states might have impacted excel trading recently and just wondering what thoughts you could provide here incremental as far as the outlook the possibility for federal wildfire policy changes any views from from D. C. Here.
Speaker Change: And conversations within Colorado as well.
Speaker Change: Trying to get some color there.
Hey, good morning, Jeremy It's Bob look obviously the.
Speaker Change: California fires were a tragedy for that community and it does bring a both a federal and state highlight to potential solutions, there and we're going to work at both levels.
Speaker Change: Through <unk> largely at the federal level, and then obviously across our states for <unk>.
Speaker Change: Anything we can do to continue to protect our customers and our communities from that kind of threatened that kind of risk I'd say the dialogues are active across the federal government and at the state level.
Speaker Change: You know obviously at the federal side, there's a lot going on I think a lot on Tc J IRA and items like that.
Speaker Change: So I think any wildfire movement and the federal level is probably a back half of the year kind of efforts and focus.
Speaker Change: But California is certainly.
Speaker Change: Put up put a bright light on the issue and you know national problems. The National solutions, I think theres, a big role for the federal government here to help setting standards, helping with insurance backstops getting to functional markets.
Speaker Change: Both on the insurance side and on the capital market side as you alluded to.
Speaker Change: So I think there's a big role for the federal government here on a state basis, you know, we're having great conversations, Texas, Colorado the Dakotas.
Speaker Change: Around everything from roles of the company's enrolls in the states and how are we going to set standards for forestry, how are we going to set standards for building infrastructure for operations and making sure that there's a clean line of responsibility for who's doing what to make sure that we can protect our customers and our communities.
Speaker Change: I don't have anything to talk about that's advancing right now, but we're early in legislative sessions and.
Speaker Change: You know, maybe we'll come back to you in the first quarter call.
Speaker Change: Got it that's helpful there and.
Speaker Change: Just going to D. C. At large is there anything else I know you talked about a bit.
Speaker Change: With Nick there as far as changes you think going forward.
Speaker Change: Specially as it relates to I guess transfer ability is there a need to go through the federal government any way do you see any.
Speaker Change: Anything changing there.
Speaker Change: Jeremy you just broke up in the very first part of your question. There what did you say I got in the last part.
Speaker Change: Just about any changes out of D. C. I know you touched on it a bit there.
Speaker Change: Yeah, certainly you know, we're working very closely with our policymakers around D. C. Obviously, one of the things we're.
Speaker Change: Denied and working as around the IRA and what happens through legislation.
Speaker Change: And certainly as we see it now I think what we're hearing is that they're going to attempt to do one bill, but if vessels zaghlul split it into two I think you've heard me speak before is we believe the key tenants of the IRA are intact and when I say that I'm talking about a tax credits and transferability. They kind of go hand in hand.
Speaker Change: What do you feel good about that I mean, it is there's an incredible amount of jobs in manufacturing and economic benefit being driven by their array, which is primarily going into the red states.
Speaker Change: So I think there's a recognition of that so we feel good about where that stands overall and we'll just watch it play out and continue to be plugged in it.
Speaker Change: Got it and just the last point there does transferability go through the federal government or is it bilateral.
Speaker Change: So I think the Permissibility of transferability is definitely embedded within the Airasia I think the transferability of themselves as a bilateral contract with us and any other tax paying entity, yes, and I think that persists, yes, that's exactly we negotiate directly with.
Speaker Change: With our other companies you know we have a number of fortune 500 companies in our backyard here in Minneapolis that we that we partner with the.
Speaker Change: The one caveat is co op through municipalities that use direct pay would go directly with the government, but we don't do use direct pay reason transferability.
Speaker Change: Got it and if I could just finish up on DC real quick here.
Speaker Change: The New administration, there is more of a focus I think on gas and maybe there was in the past and at the same time resource adequacy has been very much in focus and just wondering your thoughts on adding incremental gas fired generation to meet higher than expected load growth has that evolved in any way based on what's coming out of D C or gesture in Ohio.
Speaker Change: Growth expectations and have conversations with the large C&I customers changed on this side as well at all.
Speaker Change: Yeah. So.
Look we I made a comment in my prepared remarks about sort of the real advantage, we have across our eight state footprint and the ability to deliver low cost energy with wind and solar and that persist and so we think that those are very valuable asset classes for our customers. They are very important for our hyperscale or datacenter customers who are trying.
Speaker Change: To have their own sustainability goals, and we think that persist we've been clear that we're going to continue to focus and achieve our 80% carbon reduction by the end of the decade.
Speaker Change: But we've been clear since we made that announcement that we need dispatch will resources to support that so gas has a real role to play in our active resource plans right now we've got Cte builds in.
Speaker Change: In the upper Midwest in Colorado, and in the southwest and in R. R.
Speaker Change: Our resource plans that are on the Com, we also have incremental gas resources and they're they're they're all combustion turbines. So we think we need peaking resources and we don't think we need baseload gas because of our advantage in wind and solar and our ability to deploy solar and storage.
Speaker Change: But we will have new gas across our systems they'll have low capacity factors, we've talked about having them you know a key.
Speaker Change: Clean fuel capable at construction and other items to make sure that we can meet sustainability goals in our states.
Speaker Change: But we will have new gas coming in we are converting some of our coal stations to gas as well so increase.
Speaker Change: Increasing our importance for gas in our footprint.
Speaker Change: But a maintenance of a real sustainability footprints as well given our geographic advantage.
Speaker Change: Got it understood. Thank you for that.
Speaker Change: Thank you. Our next question is from Julien Dumoulin Smith with Jefferies. Please go ahead.
Speaker Change: Hey, good morning, Thanks, guys very much and Paul it's been a real pleasure I got to say.
Speaker Change: Thanks.
Speaker Change: [laughter], Yeah, absolutely you got it right.
Speaker Change: So yeah. So let me talk a little bit about 24, and 25 real quickly I know, we've talked about some of the bigger picture items here, but coming back to obviously as you say a little bit out of the norm for you guys. Historically on 24, some items that as you say you were trying to deal with through the course of 'twenty four but in addition here when you look at the 25 drivers there's a few I'd.
Speaker Change: Debt net.
Speaker Change: I suppose up to 40 million negative versus the prior kind of bits and pieces here. If you will how do you think about where you're positioned on 25 and getting quote unquote back on track and what I mean by that is back on track relative to what you guys have consistently delivered in terms of within your mid within or at or above your mid point level.
Speaker Change: Yeah, Hey, Julien Thanks for the question I can provide a little bit of color there.
Speaker Change: Think on face it adds up to that but I think you've got to look at the property taxes are offset in regulatory mechanisms. So that doesn't have an impact and I look at some of the other offsets as you know it's it's.
Speaker Change: Probably less than half of the impact that you quoted.
Speaker Change: And so when I think about 2025.
Speaker Change: We feel very comfortable with where we said it's early in the year you know, we always target the midpoint of guidance. So I expect that we deliver this year like you said last year is a little bit of anomaly for us.
Speaker Change: But overall I feel very comfortable at 2025, and there's just some other offsetting stuff in there that gives me that comfort.
Got it right so bottomline back contract twenty-five dawn works here.
Speaker Change: I appreciate it.
Speaker Change: And I don't want to work with you guys too much but you guys have made several times your confidence in the sales growth outlook.
Speaker Change: You made it in the prepared remarks, you said that in the Q&A.
Speaker Change: At the same time, how do you think about the backdrop here. When you I think you guys dropped the sales growth number from the sides itself I can't discern is that is that was that purposeful is there some sort of update coming at some point here just wanted to kind of ask you to elaborate maybe I'm nitpicking too much.
Speaker Change: I think you might be reading into that that too much.
Speaker Change: Julian I mean, generally we talked about our five year sales growth on the Q3 call. I mean, you just heard me.
Speaker Change: Reiterate it and in 2025% or 3% sales growth is unchanged and we feel good about that so I. There has been no change I mean basically sitting here. What we wanted to do is give a little bit more context in the data center growth because thats about half of that 5% and the fact that where do you have three.
Speaker Change: Signed contracts in construction all three of those planned to energize later this year, we expect to deliver the rest of that contracted or the capacity. That's in our base sales forecast by this fall and we're in active negotiations exchanging term sheets right now with multiple counterparties. So that's where he is so I think you might be reading into it a little bit.
Speaker Change: But our 2025 sales growth has is unchanged and our outlook five year outlook is unchanged.
Speaker Change: And I think I'd just add I said this in the opening remarks as well its only half of our loadings from Datacenters in her five years sales forecast, having this diversity of growth. It is also a benefit to I mean, we've continued to see very strong growth out of the oil and gas sector in the Permian in Texas, and new Mexico. So overall hopefully that helps.
Speaker Change: With a little bit of additional color with how we feel.
Speaker Change: Yeah, absolutely well. Thank you guys are much I'll leave it there alright, we will talk to and we'll talk to them is there a protocol on that sales update.
Speaker Change: [laughter] Thanks Julien.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from Steve Fleishman with Wolfe Research. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Well I wish you a final scholes.
Michelle: Hi, Michelle.
Michelle: So.
Michelle: Just.
Michelle: I guess just one other thing on the day on the data centers that I can't recall, the 8900 megawatts.
Michelle: Pipeline is that.
Michelle: Did that is that number the.
Michelle: The same as before did that go up and just maybe on that topic, just a little more on the the tone of conversations any shift.
Steve Fleishman: In the last year, though Steve that number's unchanged.
Steve Fleishman: We just provide additional color into kind of that what's included in our base and what we have contracts that are already so we didn't change that top side.
Steve Fleishman: We have a lot of lot of discussions, but caution around tone and I guess, you could bring us back to deep seek.
Steve Fleishman: What we're hearing so we had discussions with a number of hyperscale or post deep seek.
Steve Fleishman: And you know some of the common themes as the efficiency gains we're expected it didn't catch them off guard and deep CECO is focused on training and not influencing where we really think the long term growth is going to be and then in all of our discussions with the data center. These active discussions around the Esa as there was no change in <unk>.
Steve Fleishman: And there is no slowing down so absolutely not I think.
Steve Fleishman: That's why we feel really good about where we are relative to the data center. So.
As you would expect us to be where we were in contact with a lot of them post that news and just given the reaction had on or the impact it had on our industry.
Steve Fleishman: So, but we feel good about the growth plans going forward.
Steve Fleishman: Okay. Thanks, and then just.
Speaker Change: Quick numbers question Sps I think it was basically flat on the year. Despite all that growth is that just regulatory lag.
Steve Fleishman: Okay.
Speaker Change: Brian I had just a wholesale customer lowered roll off that started last year. So you saw the full annual nation of it. This year is one of the bigger drivers of it so that will get captured as it going forward.
Steve Fleishman: That's right okay.
Steve Fleishman: Thank you.
Moderator: Thank you. Our next question comes from Darren Carly Davenport with Goldman Sachs. Please go ahead.
Speaker Change: Hey, good morning, Thanks, so much for taking the questions maybe.
Speaker Change: Maybe just two quick follow ups on a couple of the topics you touched on so far first just on the data center comments as you sign those remaining contracts that are in the five year plan by the fall is that something where we should expect to see any sort of announcements around those transactions or investments to support those facilities or is that something that more will happen in the background.
Speaker Change: Hey, Carly good question, a little bit depends on the counterparty and potentially the regulatory filing around it so maybe a little bit TBD or whether there'll be actual formal are not sorted out but we are certainly.
Speaker Change: Water respect the wishes of our data center customers, depending on how they want to handle this.
Speaker Change: Got it.
Speaker Change: Might just add.
Speaker Change: There are times that the local economic development teams are also very happy to have supported the governor's prior.
Priorities in our states and so sometimes the communities or the state wants to make an announcement to so I would suggest that that we may have more to say as we go through the year or it might be quiet until we give an update on the third quarter call.
Speaker Change: Got it great that's very clear I appreciate those comments and then maybe just circling back to the wildfire mitigation front, obviously, it's been very much in focus just as you think about the two proceedings on the Colorado mitigation plan and the Texas SRP. How are you guys thinking about the prospects to reach a settlement and those proceedings or do you think they'll go.
Speaker Change: <unk> got the full way.
Speaker Change: Yes.
Speaker Change: I think we're certainly as we look forward, we'll take Texas first no. We've seen the settlement of the SRP of by some of our some of our peers in Texas. So we're certainly hopeful.
That we can reach a settlement and I think it's recognized in Texas by our stakeholders the importance of wildfire mitigation.
Speaker Change: And making sure that we are protecting our communities and our customers.
Speaker Change: And so I think we're hopeful there in Texas in Colorado.
Speaker Change: We will just start to engage we haven't received any testimony yet will receive answer testimony from our stakeholders. Here later in a fab should be next week.
Speaker Change: I think late next week, and then Theres a settlement deadline. So that's the deadline to watch our April mid April is the settlement deadline in Colorado. So we will start to engage those conversations and certainly hopeful we can reach a settlement, but certainly were comfortable going through this given the importance of this plan. The significance of this plan going through hearings and a decision deadline, which you would expect at the end.
Speaker Change: The August from the Commission.
Speaker Change: Great. Thank you so much for all the color.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from <unk> Chopra from Evercore ISI. Please go ahead.
Speaker Change: Hey, Deane good morning, Thank you for taking my questions.
Speaker Change: Maybe mark so far that's where I'm going to start and then I'll go back to a big picture question.
Speaker Change: What's the latest there obviously.
Obviously the trial started in September 2025, what should we be tracking between now and 'twenty five.
Speaker Change: Could there be sort of a settlement or some.
Speaker Change: Some sort of resolution between the parties.
Speaker Change: The latest thoughts there. Please thank you.
Speaker Change: Ed Hedrick Ash, it's Bob.
Speaker Change: Thanks for the question look there's not a lot going on.
Speaker Change: Changes in the Marshall proceeding as you indicated the trial is set for September.
Speaker Change: And the judge reaffirmed that recently and as we indicated in the fourth quarter we.
Speaker Change: We have made some decisions the presiding judge has made some decisions.
Speaker Change: Around the structure of the trial will do a liability only trial in September and if necessary subsequent trials around ground damages.
Speaker Change: And so not much has changed your I guess, the only new news out of out of the judge is probably the.
Speaker Change: The venue decision that he made was going to keep the trial in Boulder County.
Speaker Change: As opposed to the adjacent counties Jefferson, which was there was a venue change requests.
Speaker Change: So not much going not much new there and again back to your second question, which is really around settlement and settlement opportunities and as we've said previously.
Speaker Change: So really with the share support and the source of the <unk>.
Speaker Change: Second ignition and are prepared prepared to defend that and the trial in September.
Speaker Change: Got it thanks, Bob and then one big picture question on tariffs, obviously, you have a very sizable renewable investment into plan.
Speaker Change: And the China tariffs are now in effect, so if they're gonna be sort of there for a prolonged period of time.
Speaker Change: How are you thinking that impacts your plan, how you Derisking your supply chain.
Speaker Change: Sir please thank you.
Speaker Change: Hey, good morning, <unk> and thanks for the question I mean, I think the China tariffs were probably well communicated.
Speaker Change: And it's not as though we haven't dealt with tariffs before there were tariffs under the previous Trump administration, we had tariffs under the Biogen administration a D. CVD investigations, so something that we've gotten pretty familiar with and working with our suppliers and our manufacturing is in terms of whether theres manufacturing capacity outside of China.
Speaker Change: Or just ensuring we're making the right procurement decisions that deliver the best possible price to our customers. So I would say that the China tariff is not unexpected and not surprising it and as you would expect given the for our forward looking nature and all the renewable cell fab in flight that we had planned for.
Speaker Change: Something like that and have taken the appropriate actions.
Speaker Change: Awesome. Thank you and Paul we will Miss you greatly all the best Thank you.
Speaker Change: Thank you. Our next question comes from Anthony crowd out from the Duval. Please go ahead.
Anthony Crout: Hey, good morning, I don't know if we go that far but yeah. Congrats Paul. Thanks, again, just I guess two quick questions I wanted to follow up on Steve's comments I guess more on the tone of the data Center I'm. Just curious if we can contrast that tone between maybe customers associated with the data centers and non data centers. I mean is there more of a sense of erg.
Anthony Crout: You can see with maybe data center customers to hook up or do you see it the same across whatever customers coming to you.
Anthony Crout: Okay.
Speaker Change: Anthony you mean, like other C&I or oil and gas or just.
Anthony Crout: Exactly yes.
Anthony Crout: Yeah.
Anthony Crout:
Anthony Crout: I mean, I think from the data center side. It is certainly always a speed to market.
Anthony Crout: Continues to be the one of the most important factors in terms of Ken can we deliver the transmission and generation capacity on the timeline that they were looking for as for other customers. I mean, we continue to see significant growth out of the oil and gas industry and I think that's probably reflects not probably it is reflected.
Anthony Crout: In the resource plan that we filed in new Mexico, and our RFP. When you look at the upside of that RFP in Texas, and New Mexico that is 14000 megawatts of generation, that's informed by our oil and gas customers in terms of what their electrification needs are I also think what you saw out of SPP.
Anthony Crout: With the recent approval of this big portfolio of projects, including a 765 kv that is awarded Georgeson will build is that continued growth and our customers are looking to get connected so I wouldn't differentiate we don't differentiate between among customers.
Anthony Crout: <unk>.
Anthony Crout: Among customers, but overall it hasnt changed the torn hasnt changed with data centers.
Anthony Crout: Related to kind of their speed to market and how important it is for them.
Anthony Crout: Great and then just on that if I think about maybe political or regulatory support that you get with new customer hookups I'm sure. It's great for all of the communities, whether it's property tax offsets what property types with pay I mean, but I think there's probably more economic development associated with the non data center customers.
Anthony Crout: Is that fair to look at it that way and maybe that they get maybe greater continued regulatory support or political support than maybe the data centers are actually as you said earlier. There is there's no differentiation between the type of cost, perhaps getting hooked up a hookup is great for our regulators.
Speaker Change: Well I think Anthony I think it really depends I mean, if you're talking about a data center, that's going to build mode to a gigawatt plus of capacity you have years and years of construction jobs and then they may be doing other development within the communities or the community significant property tax base.
Speaker Change: And it does provide benefit to all of our other customers and when you're talking about a data center load that large it does drive benefit for all of our customers. So I don't think I wouldn't characterize it that way.
Speaker Change: You know the debt data centers in these large load customers understand that they need to bring economic development.
Speaker Change: And benefit all of our customers for us to get it.
Speaker Change: Front of the commission.
Speaker Change: Great. Thanks for taking my question guys. Thanks again.
Speaker Change: Thank you. Our next question is from Travis Miller from Morningstar. Please go ahead.
Travis Miller: Good morning.
Travis Miller: I'll Echo a month's depreciation calls enjoyed over the years and I appreciate all the help over the years.
Travis Miller: The <unk>.
Speaker Change: Question of a high level, we're trying to figure out kind of what are some of the constraints really across the industry on the big Capex numbers and the growth numbers coming out what about labor and a lot of that's a lot of questions about equipment, and tariffs et cetera, et cetera, but what about labor availability. Both for you and what you may even see across the industry is that.
Speaker Change: Hey, Travis it's Bob Great question, and certainly one that we're focused on and probably have been focused on for a number of years, we've been working actively with both national and local IBEW and other trade organizations that we work with to hire the critical talent that we need to own and operate these assets.
Speaker Change: We've been working trying to give insights into our backlog of capital projects that we need to or our vendor partners to make sure that they know where our growth is coming from and so our job is really massively in terms of partnership with people, who help provide us that human talent.
Speaker Change: That we need to do this this big build out now that gets pressured by other people also needing talents.
Speaker Change: So you know where we are in and constant competition for human capital and talent.
Speaker Change: Both at our vendor side at our and for our company talent as well. So it's a great question I think we started the process. There is more work to do there everything from funding programs and developmental junior colleges and technical colleges.
Speaker Change: Going into high schools in recruiting at that level trying to get folks that may want to bypass the university and go straight into a trade or craft.
Speaker Change: Any and everything we can do to make sure that we've got the human capital to make sure that we can do the buildup that we need.
Speaker Change: Okay, Great. That's very helpful. And then just specific on the data centers.
Speaker Change: Apologies if I missed this and any other comments, but do you anticipate any specific regulatory filings.
Speaker Change: For any of the customers you have signed or you're working with there just thinking about something that might need such a big build out that you need some kind of pre approval or approval.
Speaker Change: Alright.
Speaker Change: Travis, Yes, we would likely expect we haven't disclosed which states that where we're negotiating with these customers on but.
Speaker Change: But yeah, we'd likely expect that we would seek regulatory approval and that was a little bit back to my comment of the data centers I understand for us to get regulatory approval, it's got to show a benefit.
Speaker Change: Hum too to our current customers and benefit of kind of the communities.
Okay, great. Thanks, so much.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: So well with that I just wanted to.
Speaker Change: Lastly, echo Bob's comments around Paul retiring here you can tell who's in the room with us for one last time, he's been a mentor to me a mentor to many of US in this room and a close personal friend to me ever since the the 15 years that I've been at the company. So thank you again Paul welcome.
Speaker Change: Welcome to the first earnings call, we look forward to many more going forward so with that I'll wrap up. Thank you for participating in our earnings call. This morning, Please contact our Investor relations team with any follow up questions.
Okay.
Thank you very much that concludes today's conference you may now disconnect.
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