Xcel Energy Inc.

S&P Global Ratings' rating outlook over the next 24 months on Xcel and its subsidiaries is stable. We base the outlook on our expectation that Xcel's management will continue to reach constructive regulatory outcomes to avoid any significant rise in business risk for the regulated utilities. Specifically, our base case forecast includes adjusted funds from operations (FFO) to debt of about 16% and assumes the company will continue to fund its capital investments in a balanced manner to support its capital structure. We could lower the rating on Xcel if its financial ratios weaken and consistently reflect adjusted FFO to debt at or below 15%. This would most likely occur if rate-case outcomes are weaker than expected and capital spending

...Regulatory diversity allows for timely recovery of operating costs.In the eight jurisdictions in which Xcel Energy Inc. (Xcel) operates, most provide for forward test years, fuel recovery mechanisms, and interim rates. Eighty percent of EBITDA is derived from jurisdictions that allow for multiyear rate plans and credit-supportive cost recovery. Large customer base helps mitigate economic fluctuations on cash flows. Xcel serves about 5.5 million customers (3.5 million electric and 2 million gas) in eight states. More than 60% of customers are residential and commercial, contributing to stable cash flows. Capital spending contributes to negative discretionary cash flow. The company is investing in 12 wind-generation sites across seven states. These investments provide a low-risk path for Xcel to grow its regulated asset base as well as producing tax credits that it can use to lower the overall cost of the projects. However, the expected negative discretionary cash flow will require external...

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