(The following statement was released by the rating agency)
NEW YORK, May 07 (Fitch) Fitch Ratings has assigned a 'BBB+' rating to Xcel
Energy Inc.'s (XEL) new 0.75% $450 million issuance of senior unsecured notes
due May 9, 2016. The Rating Outlook is Stable. The new notes will rank pari
passu with XEL's existing senior unsecured obligations. Net proceeds will be
used to repay short-term debt borrowings and for other general corporate
purposes, including the funding and redemption, on May 31, 2013, of XEL's 7.6%
$400 million junior subordinated notes due in 2068.
KEY RATING DRIVERS
Conservative & Predictable Business Model
XEL's earnings and operating cash flows are supported by its ownership of four
low-risk regulated utilities that operate in what Fitch considers to be balanced
regulatory compacts across eight state regulatory jurisdictions. Management
strategy continues to be centered on successfully managing rate cases and on
funding capital investments towards rate-base growth projects that provide
relatively stable returns.
Solid Credit Metrics
For the latest 12 months ended March 31, 2013, , the ratios of EBITDA/interest
and debt/EBITDA were 4.8x and 3.8x, respectively. The ratios of funds from
operations (FFO)/interest and FFO/debt were 4.9x and 21.0%, respectively. Fitch
expects recurring tariff increases and rate base capital additions to continue
to support consolidated credit protection measures at levels in line with the
current rating category. Fitch estimates EBITDA/interest and FFO/debt to be
about 5.2x and 20%, respectively, through 2014.
Balanced Regulatory Treatment
Utility rate design is enhanced by the timely recovery of fuel and purchased
power costs in all jurisdictions. Implementation of a multi-year rate plan for
electric rates in Colorado in 2012 provides near-term regulatory predictability
and cash flow stability. Additionally, several of the utilities have non-fuel
rate riders that facilitate timely recovery of environmental and
transmission-related investments, mitigating regulatory lag.
Fitch will continue to monitor developments in several pending rate proceedings,
the most significant of which is in Minnesota where NSP-Minnesota is requesting
an electric retail rate increase of approximately $215.4 million, based on a
return on equity (ROE) of 10.6%, an equity ratio of 52.56%, and a 2013 forecast
test year. A rate decision is expected by September 2013. There are pending
regulatory proceedings in Colorado, Texas, New Mexico and North Dakota as well.
Fitch expects all rate outcomes to be balanced, while recognizing challenging
regulatory environments in Texas and New Mexico.
Sizeable Capital Investment Plan
Consolidated capex is expected to total a substantial $12.9 billion over the
2013-2017 forecast period. Favorably, capital spending is focused on relatively
low-risk rate base growth investments, including 30% earmarked for electric
transmission, 26% for electric generation, and 20% for electric distribution.
Timely and adequate recovery of capex will be critical to maintaining XEL's
current rating profile, in Fitch's view. Fitch expects XEL to fund capex with a
balanced mix of internally generated funds, long-term debt, and equity.
Total consolidated borrowing capacity amounts to $2.45 billion under five
separate five-year bank credit facilities. As of April 30, 2013, there was
$2.02 billion of consolidated available liquidity, including $2.9 million of
cash on hand. Fitch considers consolidated debt maturities to be manageable
with $258 million due in 2013, $281 million due in 2014, and $256 million due in
2015. Fitch expects XEL and its utility subsidiaries to continue to enjoy
unrestricted access to capital markets over the forecast years.
Funding of a large multi-year capital investment plan and the uncertain rate
outcomes of several utility pending regulatory proceedings limit prospects for a
positive rating action.
Adverse rate decisions or the inability to successfully execute and adequately
recover capital investments could weaken XEL's financial profile and have a
negative impact on ratings.
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email:
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012);
--'Rating North American Utilities, Power, Gas, and Water Companies' (May 16,
--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012).
Applicable Criteria and Related Research
Parent and Subsidiary Rating Linkage
Rating North American Utilities, Power, Gas, and Water Companies
Recovery Ratings and Notching Criteria for Utilities
Corporate Rating Methodology
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