Xcel Energy 2004 Annual Report Download - page 36

MANAGEMENT’S DISCUSSION and ANALYSIS
Xcel Energy Annual Report 2004
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Capital Requirements
Utility Capital Expenditures, Nonregulated Investments and Long-Term Debt Obligations The estimated cost of the capital expenditure programs of
Xcel Energy and its subsidiaries, excluding discontinued operations, and other capital requirements for the years 2005, 2006 and 2007 are shown in the
table below.
(Millions of dollars) 2005 2006 2007
Electric utility $ 1,039 $1,293 $1,283
Natural gas utility 114 107 120
Common utility 87 96 94
Total utility 1,240 1,496 1,497
Other nonregulated 148
Total capital expenditures 1,241 1,500 1,505
Debt maturities 224 839 341
Total capital requirements $1,465 $2,339 $1,846
The capital expenditure forecast includes the 750-megawatt Comanche 3 coal-fired plant in Colorado and the MERP project, which will reduce the
emissions of three NSP-Minnesota’s generating plants. The MERP project is expected to cost approximately $1 billion, with major construction starting
in 2005 and finishing in 2009. Xcel Energy expects to recover the costs of the emission-reduction project through customer rate increases beginning in
2006. Comanche 3 is expected to cost approximately $1.35 billion, with major construction starting in 2006 and finishing in 2010. The Colorado
commission has approved sharing one-third ownership of this plant with other parties. Consequently, Xcel Energy’s capital expenditure forecast includes
$1 billion, approximately two-thirds of the total cost.
Xcel Energy is evaluating a potential investment in a wind generation project of approximately $165 million, currently not included in the capital
expenditure forecast. A decision to move forward with this type of investment will be dependent on the extension of federal tax credits related to
wind generation, favorable regulatory recovery and other business considerations.
The capital expenditure programs of Xcel Energy are subject to continuing review and modification. Actual utility construction expenditures may vary
from the estimates due to changes in electric and natural gas projected load growth, the desired reserve margin and the availability of purchased power,
as well as alternative plans for meeting Xcel Energy’s long-term energy needs. In addition, Xcel Energy’s ongoing evaluation of restructuring requirements,
compliance with future requirements to install emission-control equipment, and merger, acquisition and divestiture opportunities to support corporate
strategies may impact actual capital requirements. For more information, see Note 16 to the Consolidated Financial Statements.
Contractual Obligations and Other Commitments Xcel Energy has contractual obligations and other commercial commitments that will need to be
funded in the future, in addition to its capital expenditure programs. The following is a summarized table of contractual obligations and other commercial
commitments at Dec. 31, 2004. See additional discussion in the Consolidated Statements of Capitalization and Notes 5, 6, 15 and 16 to the Consolidated
Financial Statements.
Payments Due by Period
(Thousands of dollars) Total Less than 1 Year 1 to 3 Years 4 to 5 Years After 5 Years
Long-term debt principal and interest payments $10,369,734 $ 631,129 $1,904,191 $1,849,040 $5,985,374
Capital lease obligations 105,356 6,672 12,734 12,123 73,827
Operating leases (a) 358,695 55,103 117,678 114,237 71,677
Unconditional purchase obligations (b) 11,608,993 2,282,749 2,564,718 1,936,891 4,824,635
Other long-term obligations 147,237 40,419 41,669 33,240 31,909
Payments to vendors in process 106,144 106,144–––
Short-term debt 312,300 312,300–––
Total contractual cash obligations (c) $23,008,459 $3,434,516 $4,640,990 $3,945,531 $10,987,422
(a) Under some leases, Xcel Energy would have to sell or purchase the property that it leases if it chose to terminate before the scheduled lease expiration date. Most of Xcel Energy’s
railcar, vehicle and equipment and aircraft leases have these terms. At Dec. 31, 2004, the amount that Xcel Energy would have to pay if it chose to terminate these leases was
approximately $130.5 million.
(b) Obligations to purchase fuel for electric generating plants, and electricity and natural gas for resale. Certain contractual purchase obligations are adjusted based on indexes.
However, the effects of price changes are mitigated through cost-of-energy adjustment mechanisms.
(c) Xcel Energy also has outstanding authority under contracts and blanket purchase orders to purchase up to approximately $500 million of goods and services through the year 2020,
in addition to the amounts disclosed in this table and in the forecasted capital expenditures.
Common Stock Dividends Future dividend levels will be dependent upon the statutory limitations discussed below, as well as Xcel Energy’s results of
operations, financial position, cash flows and other factors, and will be evaluated by the Xcel Energy board of directors. Xcel Energy’s objective is to
deliver the financial results that will enable the board of directors to grant annual dividend increases at a rate consistent with our long-term earnings
growth rate. Xcel Energy’s dividend policy balances:
– projected cash generation from utility operations;
– projected capital investment in the utility businesses;
– reasonable rate of return on shareholder investment; and
– impact on Xcel Energy’s capital structure and credit ratings.