Xcel Energy (XEL)

“In late 2002 Xcel Energy, Inc. (XEL, NYSE) was on the brink of Chapter 11. That’s when management negotiated a severing of ‘cross default’ arrangements with its bankrupt power generation unit NRG Energy. Ever since, the company has been squarely focused on the core 11-state electric and gas utility, repairing relations with regulators while cutting debt and operating risk. Its success implementing energy efficiency and renewable power initiatives while boosting rate base, earnings and dividends has been particularly remarkable. That includes the past summer’s commissioning of the first U.S. combination coal-fired/solar thermal electrical generation power plant in Colorado. …

“In late June Xcel’s rating was boosted to A- by S&P, with an ‘excellent’ business risk profile. The rater cited ‘supportive’ regulation, demonstrated ability to handle large projects and strong finances. Xcel now expects to earn the upper half of its profit guidance range of $1.55 to $1.65 for full-year 2010. That’s after reporting strong third-quarter EPS of 62 cents, up from last year’s 48 cents. … Recent debt issues of 30- year bonds at just 4.85% and five-year debt at 1.95% have locked in low-cost capital and largely mitigated refinancing and equity issue needs through 2011. And with several rate cases on track for completion by early next year, the company now expects to earn $1.65 to $1.75 a share next year. That’s on target with a longer- term objective of 5% to 7% annual earnings growth and it augurs more dividend and share price growth ahead for this very steady company. Buy XEL up to 23.”

Elliott H. Gue, Personal Finance, 11/6/10


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