Xcel Energy 2014 Annual Report Download - page 66

48
Driving operational excellence
Managing our operational performance and satisfying our customers has, and will continue to be, a fundamental priority. However,
operational excellence also includes managing costs. By building on past success, leveraging technology, managing risks and
continuously striving to improve our processes, we can bend the cost curve downward. Over the next five years, Xcel Energy is
planning to implement cost saving measures which are intended to align increases in O&M expense more closely to sales growth. Our
financial objective is to slow our annual O&M expense growth to approximately zero percent to two percent. However, we will not
sacrifice reliability or safety to meet this initiative.
In addition, 50 percent of our workforce will be eligible to retire in the next ten years. Managing this workforce transition is key to
our operational excellence objective.
Providing options and solutions to customers
Adapting to a changing environment is critical to our success. Our customers expect to be offered choices and we are committed to
providing options and solutions that are fair and satisfy their needs. Environmental leadership is a core priority and is designed to
meet customer and policy maker expectations for clean energy at a competitive price while creating shareholder value. We will
continue to offer and expand our production of renewable energy, including wind and solar alternatives, and further develop DSM,
conservation and renewable programs.
Investing for the future
Sound investments today are necessary for tomorrow’s success. Our base capital expenditures are projected to be approximately $14.5
billion from 2015 through 2019. This capital forecast will grow rate base at a compounded average annual rate of approximately 4.7
percent. Our capital investment plan includes needed investments in transmission, adding new generation, reducing emissions in our
power plants, refreshing our infrastructure, improving reliability, replacing natural gas pipelines and increasing the levels of renewable
energy on our system. In addition to our base capital investment plan, we are looking at potential incremental investments in natural
gas assets and transmission projects through our recently established independent TransCos.
Xcel Energy has a proven track record of making sound investments. We proactively made the decision to balance our generation
portfolio and expand our alternative energy production. Our customers, stakeholders and the environment are currently benefiting
from these decisions and will continue to do so in the future.
Providing an attractive total return
Successful execution of our strategic plan should allow Xcel Energy to deliver an attractive total return for our shareholders. Through
a combination of earnings growth and dividend yield, we plan to:
• Deliver long-term annual EPS growth of four percent to six percent, based on a weather-normalized 2014 EPS of $2.00;
• Deliver annual dividend increases of five percent to seven percent;
• Target a dividend payout ratio of 60 to 70 percent of annual ongoing EPS; and
• Maintain senior unsecured debt credit ratings in the BBB+ to A range.
We have successfully achieved our prior financial objectives, meeting or exceeding our earnings guidance range for ten consecutive
years and believe we are positioned to continue to achieve our value proposition. Our ongoing earnings have grown approximately
6.5 percent and our dividend has grown approximately 3.8 percent annually from 2005 through 2014. Prior to 2014, our objective was
to grow the dividend two to four percent annually. In addition, our current senior unsecured debt credit ratings for Xcel Energy and its
utility subsidiaries are in the BBB+ to A range.
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.