Xcel Energy 2002 Annual Report Download - page 2

On Aug. 18, 2000, New Century Energies, Inc. (NCE) and Northern States Power Co. (NSP) merged and formed Xcel Energy Inc.
(Xcel Energy). Xcel Energy, a Minnesota corporation, is a registered holding company under the Public Utility Holding Company Act
(PUHCA). As part of the merger, NSP transferred its existing utility operations that were being conducted directly by NSP at the
parent company level to a newly formed subsidiary of Xcel Energy named Northern States Power Co. Each share of NCE common
stock was exchanged for 1.55 shares of Xcel Energy common stock. NSP shares became Xcel Energy shares on a one-for-one basis.
As a stock-for-stock exchange for shareholders of both companies, the merger was accounted for as a pooling-of-interests and, accordingly,
amounts reported for periods prior to the merger have been restated for comparability with post-merger results.
Xcel Energy directly owns six utility subsidiaries that serve electric and natural gas customers in 12 states. These six utility subsidiaries
are Northern States Power Co., a Minnesota corporation (NSP-Minnesota); Northern States Power Co., a Wisconsin corporation
(NSP-Wisconsin); Public Service Company of Colorado (PSCo); Southwestern Public Service Co. (SPS); Black Mountain Gas Co.
(BMG), which is in the process of being sold pending regulatory approval; and Cheyenne Light, Fuel and Power Co. (Cheyenne).
They serve customers in portions of Arizona, Colorado, Kansas, Michigan, Minnesota, New Mexico, North Dakota, Oklahoma,
South Dakota, Texas, Wisconsin and Wyoming. During 2002, Xcel Energy’s regulated businesses also included Viking Gas
Transmission Co. (Viking), which was sold on Jan. 17, 2003, and WestGas InterState Inc. (WGI), both interstate natural gas
pipeline companies.
Xcel Energy also owns or has an interest in a number of nonregulated businesses, the largest of which is NRG Energy, Inc. (NRG), an
independent power producer. Xcel Energy owned 100 percent of NRG at the beginning of 2000. About 18 percent of NRG was sold to
the public in an initial public offering in the second quarter of 2000, leaving Xcel Energy with an 82-percent interest at Dec. 31, 2000. In
March 2001, another 8 percent of NRG was sold to the public, leaving Xcel Energy with an interest of about 74 percent at Dec. 31, 2001.
On June 3, 2002, Xcel Energy acquired the 26 percent of NRG held by the public so that it again held 100 percent ownership at
Dec. 31, 2002. NRG is facing extreme financial difficulties. There is substantial doubt as to NRG’s ability to continue as a going
concern absent a restructuring through bankruptcy, and NRG will likely be the subject of a bankruptcy proceeding. See Notes 2, 3, 4
and 7 to the Consolidated Financial Statements.
In addition to NRG, Xcel Energy’s nonregulated subsidiaries include Utility Engineering Corp. (engineering, construction and design),
Seren Innovations, Inc. (broadband telecommunications services), e prime inc. (natural gas marketing and trading), Planergy International,
Inc. (enterprise energy management solutions), Eloigne Co. (investments in rental housing projects that qualify for low-income housing tax
credits) and Xcel Energy International Inc. (an international independent power producer).
financial review
The following discussion and analysis by management focuses on those factors that had a material effect on Xcel Energy’s financial
condition, results of operations and cash flows during the periods presented, or are expected to have a material impact in the future.
It should be read in conjunction with the accompanying Consolidated Financial Statements and Notes. All note references refer to
the Notes to Consolidated Financial Statements.
Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-
looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to
be identified in this document by the words “anticipate,” “estimate,” “expect,” “objective,” “outlook,” “project,” “possible,” “potential”
and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include,but are
not limited to: general economic conditions, including their impact on capital expenditures and the ability of Xcel Energy and its
subsidiaries to obtain financing on favorable terms; business conditions in the energy industry; actions of credit rating agencies;
competitive factors, including the extent and timing of the entry of additional competition in the markets served by Xcel Energy
and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; state, federal and foreign
legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates or have an impact on asset
operation or ownership; structures that affect the speed and degree to which competition enters the electric and natural gas markets;
the higher risk associated with Xcel Energy’s nonregulated businesses compared with its regulated businesses; currency translation
and transaction adjustments; risks associated with the California power market; the items described under Factors Affecting Results
of Operations; and the other risk factors listed from time to time by Xcel Energy in reports filed with the Securities and Exchange
Commission (SEC), including Exhibit 99.01 to Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2002.
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management’s discussion and analysis