Xcel Energy 2008 Annual Report Download - page 62

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investments. Xcel Energy believes that the public utility commissions will provide reasonable recovery, and it is
important to note that the financial plans include this assumption. Constructive results over the last several years are
evidence of reasonable regulatory treatment and give Xcel Energy confidence that Xcel Energy is pursuing the right
strategy. With any strategic plan, there are goals and objectives. Xcel Energy feels the following financial objectives
continue to be both realistic and achievable:
• A long-term annual earnings-per-share growth rate target of 5 percent to 7 percent;
• Annual dividend increases of 2 percent to 4 percent; and
• Senior unsecured debt credit ratings in the BBB+ to A range.
Successful execution of the Building the Core strategic plan should allow Xcel Energy to achieve the outlined financial
objectives, which in turn, should provide investors with an attractive total return on a low-risk investment. However,
our operations are affected by current local, national and worldwide economic conditions. The consequences of the
current recession being prolonged may include a lower level of economic activity and uncertainty regarding energy
prices and the capital and commodity markets. A lower level of economic activity might result in a decline in energy
consumption, which may impact the financial objectives discussed above.
Optimizing the Management of a Portfolio of Operating Utilities
Optimizing the management of a portfolio of operating utilities is the third area of focus related to the Building the
Core strategy. Even though Xcel Energy ultimately manages the business based on the revenue streams provided by
electric and natural gas, Xcel Energy continues to evolve the management of the portfolio of utility investments. While
Xcel Energy has four separate operating companies, there are certain similarities and differences that require us to
effectively manage this portfolio. More specifically, Xcel Energy’s goal is to build on the similarities among the
companies, which maximizes efficiencies from centralized management and deployment of common initiatives, such as
market branding and environmental policy research. From an organizational perspective, examples of similarities include
corporate center services as well as certain operational functions, such as management of the generation fleet, asset
management, environmental compliance and safety.
At the same time, Xcel Energy realizes there are unique differences in each of our service territories such as local
community focus and priorities, regulatory environment, physical plant infrastructure and age, weather, as well as others
that require Xcel Energy to organize and align these utility specific areas to most effectively address these utility distinct
characteristics. To that end, Xcel Energy has operating presidents, each located in their respective jurisdiction. The
objective of this organizational structure is to optimize Xcel Energy’s operating efficiency while maximizing
accountability.
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 the related notes to consolidated financial statements.
Summary of Financial Results
The following table summarizes the earnings contributions of Xcel Energy’s business segments on the basis of GAAP.
Continuing operations consist of the following:
• Regulated utility subsidiaries, operating in the electric and natural gas segments; and
• Other nonregulated subsidiaries and the holding company.
Discontinued operations consist of the following:
• Quixx Corp., a major portion of which was sold in October 2006;
• UE, which was sold in April 2005;
• Seren, a portion of which was sold in November 2005 with the remainder sold in January 2006;
• Cheyenne, which was sold in January 2005;
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