Xcel Energy 2011 Annual Report Download - page 59

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Obtain stakeholder alignment
Successful execution of our strategy begins with obtaining stakeholder support for long-term decisions and for large investment
initiatives, prior to taking action. To avoid excessive risk, it is critical that Xcel Energy reduce regulatory and legislative
uncertainty before making long-term critical decisions or large capital investments. Stakeholder alignment is achieved by:
• Delivering operational excellence related to reliability, outage performance and customer satisfaction;
• Proactively taking actions to ensure public and employee safety related to our power plants, natural gas pipelines, and
our transmission and distribution system;
• Pursuing environmental leadership by reducing emissions, and expanding renewable energy in a cost-effective manner;
and
• Creating value for our customers by modernizing our infrastructure and reducing our environmental impact at a
reasonable cost, while providing customers with choices like DSM, conservation and renewable energy programs.
Invest in our utility business
After obtaining stakeholder support, the next phase of our strategy is to invest in our regulated utility businesses. Xcel Energy
projects that it will invest approximately $13.4 billion in its utility businesses from 2012 through 2016. Our capital investment
plan is expected to modernize our infrastructure, improve system reliability, reduce our impact on the environment, expand the
amount of renewable energy available to our customers and meet customer demand. We work hard to make sure these
investments provide value to our customers by selecting the most cost effective projects and striving to complete these projects on
time, safely and within established budgets. As a result of these investments, Xcel Energy projects that the rate base, or the
amount on which Xcel Energy earns a return, will grow at a compounded average annual rate of 7 percent through 2016.
Earn a fair return on our utility investment
The third phase of our strategy is to earn a fair return on our utility investments. Xcel Energy’s regulatory strategy is based on
filing reasonable base rate requests designed to provide recovery of costs necessary to operate our business and a reasonable
return on investment, along with obtaining regulatory approval for rate riders and DSM programs. A rate rider is a mechanism
that allows for recovery of certain costs and returns on investments, without the costs and delays of filing a rate case.
Xcel Energy believes that our public utility commissions will provide reasonable and timely recovery, and this is a key
assumption to achieving our financial objectives. Constructive regulatory outcomes over the last several years are evidence of
reasonable regulatory treatment and provide us confidence that we are pursuing the right strategy.
Provide an attractive total return
Successful execution of the corporate strategic plan should allow Xcel Energy to deliver an attractive total return to our
shareholders. Our value proposition is to deliver an attractive total return of about 10 percent through a combination of earnings
growth and dividend yield.
Since 2005, our financial objectives have been to:
• Deliver a long-term annual earnings per share growth rate of 5 percent to 7 percent;
• Deliver an annual dividend increases of 2 percent to 4 percent; and
• Maintain senior unsecured debt credit ratings in the BBB+ to A range.
We have successfully achieved these financial objectives. Our ongoing earnings have grown approximately 7 percent and our
dividend has grown approximately 3 percent annually since 2005. In addition, our current senior unsecured debt credit ratings for
Xcel Energy and it utility subsidiaries are in the BBB+ to A range.
We believe we are positioned to continue earnings growth of 5 percent to 7 percent and dividend growth of 2 percent to 4 percent
at least through 2013. Beyond this timeframe, we anticipate that rate base and earnings growth could moderate. Should this occur,
we anticipate having flexibility to increase the dividend at a faster rate in the future, while ensuring a strong balance sheet.
Therefore, we believe we are positioned to deliver a 10 percent total return.
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.