Xcel Energy 2004 Annual Report Download - page 65

NOTES to CONSOLIDATED FINANCIAL STATEMENTS
Xcel Energy Annual Report 2004
63
Dividend and Other Capital-Related Restrictions Under the PUHCA, unless there is an order from the SEC, a holding company or any subsidiary may
declare and pay dividends only out of retained earnings. In May 2003, Xcel Energy received authorization from the SEC to pay an aggregate amount of
$152 million of common and preferred dividends out of capital and unearned surplus. Xcel Energy used this authorization to declare and pay approximately
$150 million for its first and second quarter dividends in 2003. At Dec. 31, 2004, Xcel Energy’s retained earnings were approximately $396.6 million.
The Articles of Incorporation of Xcel Energy place restrictions on the amount of common stock dividends it can pay when preferred stock is outstanding.
Under the provisions, dividend payments may be restricted if Xcel Energy’s capitalization ratio (on a holding company basis only and not on a consolidated
basis) is less than 25 percent. For these purposes, the capitalization ratio is equal to (i) common stock plus surplus divided by (ii) the sum of common
stock plus surplus plus long-term debt. Based on this definition, the capitalization ratio at Dec. 31, 2004, was 81 percent. Therefore, the restrictions do
not place any effective limit on Xcel Energy’s ability to pay dividends because the restrictions are only triggered when the capitalization ratio is less than
25 percent or will be reduced to less than 25 percent through dividends (other than dividends payable in common stock), distributions or acquisitions
of Xcel Energy common stock.
In addition, NSP-Minnesota’s first mortgage indenture places certain restrictions on the amount of cash dividends it can pay to Xcel Energy, the holder
of its common stock. Even with these restrictions, NSP-Minnesota could have paid more than $833 million in additional cash dividends on common
stock at Dec. 31, 2004.
Registered holding companies and certain of their subsidiaries, including Xcel Energy and its utility subsidiaries, are limited, under PUHCA, in their ability
to issue securities. Such registered holding companies and their subsidiaries may not issue securities unless authorized by an exemptive rule or order of the
SEC. Because Xcel Energy does not qualify for any of the main exemptive rules, it sought and received financing authority from the SEC under PUHCA
for various financing arrangements. Xcel Energy’s current financing authority permits it, subject to satisfaction of certain conditions, to issue through
June 30, 2005, up to $2.5 billion of common stock and long-term debt and $1.5 billion of short-term debt at the holding company level. Xcel Energy
has $2.2 billion of long-term debt outstanding and common stock at the holding company level, including the $600 million multi-year credit facility
that was entered into during November 2004.
On Dec. 17, 2004, Xcel Energy filed an application with the SEC requesting additional financing authorization beyond June 30, 2005. If approved, the
new financing authority would extend through June 30, 2008. The new application requests the authority for Xcel Energy to issue up to $1.8 billion of new
long-term debt, common equity and equity-linked securities and $1.0 billion of short-term debt securities during the new authorization period, provided
that the aggregate amount of long-term debt, common equity, equity-linked and short-term debt securities issued during the new authorization period
does not exceed $2.0 billion. Xcel Energy expects the SEC to issue an order prior to the expiration of the existing authorization.
Xcel Energy’s ability to issue securities under the financing authority is subject to a number of conditions. One of the conditions of the financing authority
is that Xcel Energy’s ratio of common equity to total capitalization, on a consolidated basis, be at least 30 percent. As of Dec. 31, 2004, such common
equity ratio was approximately 42 percent. Additional conditions require that a security to be issued that is rated, be rated investment grade by at least
one nationally recognized rating agency. Finally, all outstanding securities that are rated must be rated investment grade by at least one nationally recognized
rating agency. As of Dec. 31, 2004, Xcel Energy’s senior unsecured debt was considered investment grade by at least one nationally recognized rating agency.
Stockholder Protection Rights Agreement In June 2001, Xcel Energy adopted a Stockholder Protection Rights Agreement. Each share of Xcel Energy’s
common stock includes one shareholder protection right. Under the agreement’s principal provision, if any person or group acquires 15 percent or
more of Xcel Energy’s outstanding common stock, all other shareholders of Xcel Energy would be entitled to buy, for the exercise price of $95 per
right, common stock of Xcel Energy having a market value equal to twice the exercise price, thereby substantially diluting the acquiring person’s or
group’s investment. The rights may cause substantial dilution to a person or group that acquires 15 percent or more of Xcel Energy’s common stock.
The rights should not interfere with a transaction that is in the best interests of Xcel Energy and its shareholders because the rights can be redeemed
prior to a triggering event for $0.01 per right.