Xcel Energy CEO Bob Frenzel tried to reassure the investment community during the company’s first-quarter earnings call that it is better prepared for the trade war that may or may not be coming and the tariffs — not the ones utilities are accustomed to — that already have arrived.
“The sentiment meter has definitely changed over the last 45 days, but I don’t think we’ve seen a lot of change in actual activity yet, either,” Frenzel told financial analysts during the April 24 call. “What you see here in this earnings season from a lot of people, whether it’s banks or industrial manufacturers … is a thoughtfulness around capital right now.”
Frenzel said Xcel is “cautiously optimistic” it will work through the months ahead as it manages more than $10 billion in its incremental investment pipeline. He said the company has taken steps to diversify its vendors and materials, noting its $45 billion base capital plan has about a 2 to 3% exposure to tariffs.
CFO Brian Van Abel said Xcel has been talking with its large oil and gas customers in the Permian Basin, where prices have been teetering at the point where the economics don’t make sense to drill. He said they are watching tariffs and their effects on companies.
“But so far, we haven’t seen that impact on us,” Van Abel said. “One month doesn’t make a trend.”
Xcel reported first-quarter earnings of $483 million ($0.84/share), compared to $488 million ($0.88/share) for the same quarter a year ago. The change was driven by higher operations and maintenance expenses and depreciation and interest charges, partly offset by increased recovery of infrastructure investments.
The Minneapolis-based company’s earnings failed to meet the Zacks consensus estimate of $0.96/share.
Frenzel made it clear that Xcel expects clean energy to be part of its fuel mix going forward. He said management sees a need for batteries and other energy storage assets, with a “relatively rapid evolution” of the battery supply chain similar to what it has seen with solar panels the past few years. At the same time, the company has been retiring a coal plant a year, he said.
Xcel also has engaged with the Trump administration and federal lawmakers about the executive orders and tariff actions and the need for policies that allow cost-effective and rapid adoption of new energy resources, Franzel said. The key is preserving “tech-neutral tax credits” for wind, solar, storage and nuclear and the credits’ associated transferability provisions in various loan and grant programs.
“Xcel Energy anticipates that we will need to deliver between [15,000] and 29,000 MW of new generation by year-end 2031,” he said.
Still, Frenzel said Xcel “remains confident” in its ability to meet its earnings guidance for the 21st year in a row. “One of the best track records in the industry,” Frenzel said.
Xcel’s share price closed the week on April 25 at $69. It has declined $2.55/share since the April 23 close, a drop of 3.6%.
