Xcel Energy 2009 Annual Report Download - page 86

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, 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, Xcel Energy’s holding company capitalization ratio at
Dec. 31, 2009 and 2008 was 85 percent and 84 percent, respectively. Therefore, the restrictions do not place any
effective limit on Xcel Energy’s ability to pay dividends.
Regulation of Derivatives — On Dec. 11, 2009, the U. S. House of Representatives passed H.R. 4173, the Wall Street
Reform and Consumer Protection Act of 2009, and there are several other bills which have been introduced regarding
regulation of derivative transactions. One provision within H.R. 4173 and the other bills introduced provide the
Commodity Futures Trading Commission and SEC with expanded regulatory authority of energy derivative and swap
transactions. As passed by the House, H.R. 4173 could preclude or impede some types of over-the-counter energy
commodity transactions and/or require clearing through regulated central counterparties, which could result in extensive
margin and fee requirements. Xcel Energy will further analyze the provisions of this complex legislation to understand
potential financial impacts and risk to Xcel Energy, but based on our preliminary analysis the margin requirements
could be significant. The legislation passed by the U. S. House of Representatives appears to contain less onerous
language on hedges used by commercial participants, however, Xcel Energy is reviewing the proposal. Additionally, the
U. S. Senate is scheduled to begin debate on derivatives legislation in early 2010, but the direction of the U. S. Senate
is unknown at present.
Pension Fund — Xcel Energy’s pension assets are invested in a diversified portfolio of domestic and international equity
securities, short — term to long-duration fixed income securities, and alternative investments, including, private equity,
real estate and commodity index investments. In December 2009, Xcel Energy accelerated its planned 2010
contribution of $100 million, based on available liquidity, bringing its total 2009 pension contributions to
$200 million. Xcel Energy currently projects no additional funding obligations for 2010. At this time, pension funding
contributions for 2011, which will be dependent on several factors including realized asset performance, future discount
rate, IRS and legislative initiatives as well as other actuarial assumptions, are estimated to range between $100 million
to $150 million. The funded status and pension assumptions are summarized in the following tables:
Dec. 31, 2009 Dec. 31, 2008
(Millions of Dollars)
Fair value of pension assets ...................................... $2,449 $2,185
Projected pension obligation(a) .................................... 2,830 2,598
Funded status ............................................ $(381) $ (413)
(a) Excludes non-qualified plan of $46 million at Dec. 31, 2009 and 2008, respectively.
Pension Assumptions 2010 2009
Discount rate .............................................. 6.00% 6.75%
Expected long-term rate of return ................................. 7.79 8.50
Capital Sources
Xcel Energy expects to meet future financing requirements by periodically issuing short-term debt, long-term debt,
common stock, preferred securities and hybrid securities to maintain desired capitalization ratios.
Short-Term Funding Sources — Xcel Energy uses a number of sources to fulfill short-term funding needs, including
operating cash flow, notes payable, commercial paper and bank lines of credit. The amount and timing of short-term
funding needs depend in large part on financing needs for construction expenditures, working capital and dividend
payments.
Short-Term Investments — Xcel Energy, NSP-Minnesota, NSP-Wisconsin, PSCo and SPS maintain cash operating
accounts with Wells Fargo Bank. At Dec. 31, 2009, approximately $35.5 million of cash was held in these liquid
operating accounts.
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