Xcel Energy, Inc. 2026 Q3 Earnings Call

Good morning, and welcome to Xcel Energy's 2026 third quarter earnings call. Joining me today are Bob Frenzel, Chairman, President, and Chief Executive Officer, and Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions if needed. This morning, we will review our 2026 third quarter results and highlights, share recent business and regulatory updates, update our five-year capital and financing plan, and provide updated 2026 assumptions and 2027 guidance. Slides that accompany today's call are available on our website. Some comments during today's call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings. 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. I will now turn the call over to Bob.

Thank you, Roopesh, and good morning, everybody. The build-out and modernization of our U.S. energy system is well underway. The utilities across the country are investing substantial time and money to upgrade, fortify, and modernize the U.S.'s critical grid infrastructure. The power developers are working to build more than 80 gigawatts of new utility scale generating capacity in the United States this year, eclipsing last year's record build of 53 gigawatts. This growth is fueled by a number of factors, including meeting the growing and evolving power and resiliency demands of existing and new residential and business customers, serving the growing demand for power by technology companies as they build data infrastructure for cloud and AI compute needs, and advancing the nation's generation fleet to newer, more sustainable energy sources.

As one of the nation's largest builders of new generation and high voltage transmission, Xcel Energy is meeting this extraordinary moment in our nation's history and helping lead America's energy renaissance. We're investing in the infrastructure that our customers and our communities need while staying focused on what's always mattered the most, safety, reliability, affordability, and disciplined execution. We've made considerable progress on our priorities this quarter, resulting in ongoing earnings of $1.52 per share for our investors who remain on track for a strong 2026. Our updated five-year investment plan that we're sharing today gives us a clear path to extend our growth cycle and continue to deliver the affordable and reliable energy that our customers need well into the next decade. Let's start with our accomplishments.

We invested $3.5 billion this quarter, $10 billion year to date, and are on track for over $14 billion of critical infrastructure investment for our customers this year. This month, we're placing in service our 335-megawatt Arroyo II solar facility, which will be the largest solar facility in the state of Colorado. We started construction on over 1,500 megawatts of new renewable and natural gas generation and battery storage projects in the Upper Midwest. We reached constructive decisions or settlements across rate cases representing 90% of our rate base. We were selected for another Department of Energy grant. This time, it's a $250 million award under the SPARK program that supports a $1+ billion investment to modernize a critical interconnection between the Western and the Eastern grids. We continue to see steady improvements in customer satisfaction as measured by J.D.

Power, with third quarter performance scoring well within the first quartile, while we maintain a strong focus on reliability and a commitment to keeping bills as low as possible. Based on our results through the third quarter, we're narrowing our 2026 ongoing earnings guidance range to $4.10 to $4.16 per share, and remain on track to deliver on full year guidance for the 22nd year in a row. In addition, we're initiating our 2027 earnings guidance range of $4.48 to $4.62 per share. Today, we're introducing an updated $70 billion five-year investment plan designed to serve increasing energy demand to make needed investments to strengthen and modernize our transmission and distribution systems, to provide a cleaner and more sustainable energy portfolio, and to keep energy safe, reliable, and affordable for all of our customers.

In total, we expect this plan will deliver more than nine gigawatts of renewable generation, more than three gigawatts of natural gas-fired generation, and more than two gigawatts of energy storage to ensure system reliability. 2,400 new high voltage transmission line miles to support demand growth and regional delivery needs, and approximately $4 billion of investments in our distribution and transmission systems to improve resiliency and reduce future risk of wildfires. In addition to our base capital plan, we have a robust pipeline of additional investment opportunities that exceeds $10 billion and extends into the early 2030s. We see additional investments driven by multi-gigawatt RFPs in all three of our regions, future high-voltage transmission projects in each of our regions, and infrastructure needed to serve four gigawatts of new data centers that we expect to contract before the end of next year.

Our confidence in delivering this portfolio on budget, on time, and on scope is rooted in our track record as one of the nation's leading builders of energy infrastructure. Xcel Energy is the number 1 builder of new transmission line miles since 2008 and the number 2 builder of renewable and natural gas generation since 2015. Our approach to project execution, which combines strategic partnerships with key EPCs and OEMs, standardized project management, integrated system planning, and a dedicated major projects group, is a differentiator in the industry. Our ability to deliver infrastructure with excellence, combined with the access to some of the country's best wind and solar resources, allows our customers to benefit from some of the lowest energy bills in the country. Over the past 5 years, our residential electric and natural gas bills have been 29% and 11% below the national average, respectively.

Our residential electric customers in Colorado continue to have the lowest share of wallet out of all 50 states. Average bills in our other states occupy 5 of the next 11 spots. Typical residential Xcel Energy electric and natural gas bill, when adjusted for inflation, is 14% and 20% lower than it was in 2014. Our innovative Steel for Fuel program that was started in 2017 is on pace to save customers a total of approximately $18 billion from PTCs and avoided fuel costs by 2031. Since starting our RED Truck initiative in Colorado in 2023, we have more than doubled our energy assistance adoption rate. In fact, the RED Truck has been so effective, we're expanding it to the upper Midwest, Texas, and New Mexico. Importantly, our updated 2027 through 2031 investment plan does not depend on contracting any new data center customers.

It's largely anchored in investments required to serve our existing customer base, including continued oil and gas growth in SPS and broader beneficial electrification, building new and improving the resiliency of our network assets, and modernizing our generation fleet with cleaner, more sustainable energy sources. Looking forward, we remain on track to sign ESAs for an additional 1 gigawatt of data centers by the end of 2026 and another 3 gigawatts by the end of 2027. The infrastructure required to serve these new data centers is not in our base $70 billion plan and is considered part of our more than $10 billion of incremental opportunities that I described earlier. In addition to large campus-scale projects, we're seeing a significant interest in a more localized data center in advanced manufacturing projects, which add diversity to our sales mix and provide speed to market for an emerging customer class.

For example, in the upper Midwest, an existing office building has been repurposed to support a 20-megawatt data center with the potential to expand over time. This opportunity is a distribution-connected customer, which can leverage existing infrastructure, brings meaningful new load onto the system, improves utilization, and importantly, creates benefits for our existing customers. As we think about future data center growth, our contracting principles are based on our longstanding commitment to ensure that the needs of our customers and our communities are met. We believe in responsible development. We believe that existing customers should not subsidize new large loads. We have filed large load tariffs that include incremental cost tests, long-term commitments, minimum bills, credit support, and exit protections.

As you've seen in our recent contract with Google in Minnesota, we believe that data centers can be an asset to our communities and customers as they bring jobs, support local investment, provide substantial tax revenues, commit to clean energy, and provide substantial customer bill benefits. We believe that we can, in fact, protect the planet while we simultaneously propel our economies. Finally, our performance and our commitment to the communities we serve always starts with our people. This past summer made that clearer than ever. Through record-breaking temperatures across our service territory, our teams worked around the clock, keeping the lights on and energy flowing for millions of customers who depend on us. This commitment to service does not stop when the workday ends. Xcel Energy recently held our 16th annual Day of Service, which is our company's largest volunteer initiative.

Approximately 2,000 employees, retirees, and Xcel Energy family members volunteered nearly 7,500 hours to generate immeasurable impact to our local nonprofit organizations across our eight states. This year also marks the 25th anniversary of our Xcel Energy Foundation. As the charitable arm of Xcel Energy, the foundation supports local nonprofit organizations focused on community vitality, environmental sustainability, and STEM career pathways, while empowering employees to give back through volunteering, charitable giving, and community engagement. We recently completed our annual employee-led Power Your Purpose campaign, and since 2001, this campaign has raised more than $120 million from employees, retirees, and partners, with matching contributions by the foundation to power positive change across our communities. This industry is demanding, and the pace of change is not slowing.