Xcel Energy Q3 2026 Earnings Call Transcript

Xcel Energy (NASDAQ:XEL) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://events.q4inc.com/attendee/991162104

Summary

Xcel Energy reported strong Q3 2026 earnings of $1.52 per share, up from $1.24 per share in 2025, driven by higher electric revenues and favorable weather.

The company announced a $70 billion five-year investment plan aimed at modernizing infrastructure, including 9 GW of renewable generation and 2,400 miles of new transmission lines.

Xcel Energy narrowed its 2026 earnings guidance to $4.10-$4.16 per share and introduced 2027 guidance of $4.48-$4.62 per share, projecting 9+% EPS growth through 2031.

Significant operational milestones include a $250 million Department of Energy grant and the construction of major renewable and natural gas projects.

Management emphasized a focus on affordability, with residential bills significantly below the national average, and a strategic emphasis on data center opportunities and large load customer contracts.

Full Transcript

Tracy (Operator)

Welcome to the Xcel Energy 2026 third quarter earnings call. My name is Tracy and I’ll be your moderator for today’s event. Please note this conference is being recorded and for the duration of the call your lines will be in a listen-only mode. A question-and-answer session will follow. The prepared remarks and questions will only be taken from institutional investors and analysts. Reporters can contact Media Relations with inquiries and individual investors and others can reach out to our Investor Relations.

I’ll now turn the call over to your host today, Mr. Rupesh Agarwal, Vice President, Investor Relations, to begin the conference. Please go ahead, sir.

Rupesh Agarwal (Vice President, Investor Relations)

Thank you, Tracy. Good morning and welcome to Xcel Energy’s 2026 third quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer, and Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer your questions if needed. This morning we will review our 2026 third quarter results and highlights, share recent business and regulatory updates, update our five-year capital and financing plan, and provide updated 2026 assumptions and 2027 guidance. Slides that accompany today’s call are available on our website. Some comments during today’s call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings.

Today we will discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. I will now turn the call over to Bob.

Bob Frenzel (Chairman, President and Chief Executive Officer)

Thank you, Rupesh, and good morning, everybody. The build-out and modernization of our U.S. energy system is well underway, and utilities across the country are investing substantial time and money to upgrade, fortify, and modernize the U.S.’s critical grid infrastructure. Power developers are working to build more than 80 gigawatts of new utility-scale generating capacity in the United States this year, eclipsing last year’s record build of 53 gigawatts.

And this growth is fueled by a number of factors including meeting the growing and evolving power and resiliency demands of existing and new residential and business customers, serving the growing demand for power by technology companies as they build data infrastructure for cloud and AI compute needs, and advancing the nation’s generation fleet to newer, more sustainable energy sources. As one of the nation’s largest builders of new generation and high-voltage transmission, Xcel Energy is meeting this extraordinary moment in our nation’s history and helping lead America’s energy renaissance.

We’re investing in the infrastructure that our customers and our communities need while staying focused on what’s always mattered the most: safety, reliability, affordability, and disciplined execution. We’ve made considerable progress on our priorities this quarter, resulting in ongoing earnings of $1.52 per share, and we remain on track for a strong 2026. Our updated five-year investment plan that we’re sharing today gives us a clear path to extend our growth cycle and continue to deliver the affordable and reliable energy that our customers need well into the next decade. Let’s start with our accomplishments. We invested $3.5 billion this quarter, $10 billion year-to-date, and are on track for over $14 billion of critical infrastructure investment for our customers this year.

This month we’ll place in service our 335-megawatt Arroyo 2 solar facility, which will be the largest solar facility in the state of Colorado. We started construction of over 1,500 megawatts of new renewable and natural gas generation and battery storage projects in the Upper Midwest. We reached constructive decisions or settlements across rate cases representing 90% of our rate base. We were selected for another Department of Energy grant — a $250 million award under the SPARK program that supports a $1+ billion investment to modernize a critical interconnection between the Western and the Eastern grids.

And we continue to see steady improvements in customer satisfaction as measured by J.D. Power, with third-quarter performance well within the first quartile, while we maintain a strong focus on reliability and a commitment to keeping bills as low as possible. Based on our results through the third quarter, we’re narrowing our 2026 ongoing earnings guidance range to $4.10 to $4.16 per share and remain on track to deliver on full-year guidance for the 22nd year in a row. In addition, we’re initiating our 2027 earnings guidance range of $4.48 to $4.62 per share. Today we’re introducing an updated $70 billion five-year investment plan designed to serve increasing energy demand, make needed investments to strengthen and modernize our transmission and distribution system, provide a cleaner and more sustainable energy portfolio, and keep energy safe, reliable, and affordable for all of our customers.

In total, we expect this plan will deliver more than 9 gigawatts of renewable generation, more than 3 gigawatts of natural gas-fired generation, and more than 2 gigawatts of energy storage to ensure reliability; 2,400 new high-voltage transmission line miles to support demand growth and regional delivery needs; and approximately $4 billion of investments in our distribution and transmission systems to improve resiliency and reduce future risk of wildfires.

In addition to our base capital plan, we have a robust pipeline of additional investment opportunities that exceeds $10 billion and extends into the early 2030s. We see additional investments driven by multi-gigawatt RFPs in all three of our regions, future high-voltage transmission projects in each of our regions, and infrastructure needed to serve 4 gigawatts of new data centers that we expect to contract before the end of next year. Our confidence in delivering this portfolio on budget, on time, and on scope is rooted in our track record as one of the nation’s leading builders of energy infrastructure.

Xcel Energy is the number-one builder of new transmission line miles since 2008 and the number-two builder of renewable and natural gas generation since 2015. Our approach to project execution — which combines strategic partnerships with key EPCs and OEMs, standardized project management, integrated system planning, and a dedicated major projects group — is a differentiator in the industry. And our ability to deliver infrastructure with excellence, combined with access to some of the country’s best wind and solar resources, allows our customers to benefit from some of the lowest energy bills in the country.

Over the past five years, our residential electric and natural gas bills have been 29% and 11% below the national average, respectively. Our residential electric customers in Colorado continue to have the lowest share of wallet out of all 50 states, and average bills in our other states occupy 5 of the next 11 spots. A typical residential Xcel Energy electric and natural gas bill, when adjusted for inflation, is 14% and 20% lower than it was in 2014.

Our innovative Steel for Fuel program that was started in 2017 is on pace to save customers a total of approximately $18 billion from PTCs and avoided fuel costs by 2031. And since starting our Red Truck initiative in Colorado in 2023, we have more than doubled our energy assistance adoption rate. In fact, the Red Truck has been so effective we’re expanding it to the Upper Midwest, Texas, and New Mexico. Importantly, our updated 2027 through 2031 investment plan does not depend on contracting any new data center customers. It’s largely anchored in investments required to serve our existing customer base, including continued oil and gas growth in SPS and broader beneficial electrification; building new and improving the resiliency of our network assets; and modernizing our generation fleet with cleaner, more sustainable energy sources. Looking forward, we remain on track to sign ESAs for an additional 1 GW of data centers by the end of 2026 and another 3 GW by the end of 2027.

The infrastructure required to serve these new data centers is not in our base $70 billion plan and is considered part of our more than $10 billion of incremental opportunities that I described earlier. In addition to large campus-scale projects, we’re seeing significant interest in more localized data center and advanced manufacturing projects, which add diversity to our sales mix and provide speed to market for an emerging customer class. For example, in the Upper Midwest, an existing office building has been repurposed to support a 20-megawatt data center with the potential to expand over time. This opportunity is a distribution-connected customer which can leverage existing infrastructure, brings meaningful new load onto the system, improves utilization, and importantly creates benefits for our existing customers.

As we think about future data center growth, our contracting principles are based on our long-standing commitment to ensure that the needs of our customers and our communities are met. We believe in responsible development. We believe that existing customers should not subsidize large loads. We have filed large load tariffs that include incremental cost tests, long-term commitments, minimum bills, credit support, and exit protections. As you’ve seen in our recent contract with Google in Minnesota, we believe that data centers can be an asset to our communities and customers as they bring jobs, support local investment, provide substantial tax revenues, commit to clean energy, and provide substantial customer bill benefits. We believe that we can, in fact, protect the planet while we simultaneously propel our economies.

And finally, our performance and our commitment to the communities we serve always starts with our people. This past summer made that clearer than ever through record-breaking temperatures across our service territory. Our teams worked around the clock keeping the lights on and energy flowing for millions of customers who depend on us. This commitment to service does not stop when the workday ends. Xcel Energy recently held our 16th annual Day of Service, which is our company’s largest volunteer initiative.

Approximately 2,000 employees, retirees, and Xcel Energy family members volunteered nearly 7,500 hours to generate immeasurable impact to our local nonprofit organizations across our eight states. This year also marks the 25th anniversary of our Xcel Energy Foundation. As the charitable arm of Xcel Energy, the Foundation supports local nonprofit organizations focused on community vitality, environmental sustainability, and STEM career pathways, while empowering employees to give back through volunteering, charitable giving, and community engagement.

We recently completed our annual employee-led Power Your Purpose campaign, and since 2001 this campaign has raised more than $120 million from employees, retirees, and partners, with matching contributions by the Foundation, to power positive change across our communities. This industry is demanding and the pace of change is not slowing. The progress we’ve made and the ambitious goals ahead are only possible because of the determination, commitment, and skills our teams bring every day to make energy work better for our customers and our communities.

With that, I’ll turn it over to Brian.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Thanks, Bob. Good morning everyone. Starting with our financial results, Xcel Energy had strong earnings of $1.52 per share for the third quarter of 2026 compared to ongoing earnings of $1.24 per share in 2025. The most significant earning drivers for the quarter are as follows. Higher electric revenues increased earnings by $0.32 per share, primarily due to non-fuel riders, regulatory outcomes, sales growth, and favorable weather. Higher AFUDC increased earnings by $0.11 per share, and other items combined to increase earnings by $0.16 per share, primarily driven by returns in our venture capital portfolios and lower fuel and purchased power costs. Offsetting these positive drivers, higher interest expense decreased earnings by $0.13 per share and common equity financing decreased earnings by $0.10 per share. These financing costs reflect funding of our infrastructure investments and discipline to maintain a strong balance sheet.

The higher O&M expense, driven by increased generation maintenance, wildfire mitigation, and vegetation management, decreased earnings by $0.08 per share. Turning to sales, on a weather-adjusted basis year to date, electric sales increased 2.5% driven by increased activity in the energy sector in SPS and manufacturing across all opcos, in addition to higher residential use per customer. For 2026, we remain on track for full-year weather-adjusted electric sales to increase 3%.

Moving to recent regulatory activity, across the year we made considerable progress through a heavy rate case calendar, reaching constructive decisions or settlements across most of our active rate cases. These outcomes largely balance timely recovery of critical infrastructure investments for our customers while keeping bills low. Earlier this month in Minnesota, we filed a proposed rate stabilization plan for our electric utility that will keep customer base rates flat in 2027 and 2028 while supporting critical system investments.

The Commission decision has been requested in January 2027. In the next few months, we expect to make a recommendation filing for our 4,100 megawatt renewable and storage RFP in the Upper Midwest, and in Colorado generation, bids are due in December for our Phase 2 Just Transition RFP with the Commission decision expected mid next year. Shifting to our updated investment plan. As Bob detailed today, we are providing a revised $70 billion five-year capital forecast. This plan extends our current five-year annualized rate base growth of approximately 11% into 2031. These investments are critical to serve growing electric demand, to keep customer bills low, to deliver clean energy, and to ensure system safety and reliability. We also have more than $10 billion of incremental investment opportunities from ongoing RFPs across jurisdictions, infrastructure to serve 4 GW of additional data center demand, and transmission projects across our regions.

We’re excited about our growth opportunities and will continue to finance accretive growth in a balanced manner. Our updated 2027-2031 capital plan reflects an additional approximately $26 billion of debt and $8 billion of equity content. Of the $8 billion of equity, we’ve already contracted over 40%, which gives us considerable flexibility alongside our strong balance sheet. Moving to earnings, based on performance through the third quarter, we are narrowing our ongoing earnings guidance range to $4.10 to $4.16 per share. We’re also initiating our 2027 earnings guidance range of $4.48 to $4.62 per share. Key assumptions are detailed in our earnings release. Based on our updated forecast, we’re extending to 2031 our expectation to deliver on average 9+% growth. From 27 to 2030, we expect to deliver on average 10+% EPS growth.

We are maintaining our dividend growth objective of 4 to 6%, with the expectation to be at the low end of the range. Over our 27 to 2031 forecast period, we expect our dividend payout ratio will trend downward in our payout ratio range of 45 to 55%, which allows greater financial flexibility for the future. With that, I’ll wrap up with a quick summary. We continue to lead a clean energy transition while ensuring safe, affordable, and reliable service. We’ve announced an industry-leading $70 billion five-year capital investment program that provides strong, transparent rate base growth and significant customer value. A base capital plan is driven by investments into existing and new grid infrastructure and modernizing and transitioning our generation fleet, with new data centers fueling incremental opportunities well into the 2030s.

Our customers have and will continue to have some of the lowest energy bills in the country. We have a proven formula for major project execution that will help us and will help enable us to deliver projects on budget, on time, and on scope well into the 2030s. We maintain a strong balance sheet and credit metrics and have already addressed over 40% of our updated 27 to 2031 equity need. We delivered strong earnings of $1.52 per share in the third quarter and are narrowing our 2026 ongoing earnings guidance range to $4.10 to $4.16 per share.

We have initiated our 2027 earnings guidance range of $4.48 to $4.62 per share. And finally, we’re extending our expectation to deliver 9+% EPS growth on average to 2031. This concludes our prepared remarks. Operator, we will now take questions.

Tracy (Operator)

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you’re muted locally, please remember to unmute your device now. Please stand by for a moment while we compile our Q&A roster. Your first question comes from the line of Nicholas Campanella with Barclays.

Your line is open. Please go ahead.

Nicholas Campanella (Analyst)

Hey, good morning. Thanks for the updates. I was just hoping to maybe—hey, so I was just hoping maybe a little color on what 10+% means in the prepared remarks the next few years, especially in that 27 to 30 time frame. Just rate base growth from a shaping perspective actually seems to be substantially above the 11% rate base CAGR in the middle parts of this plan, and you did do 11% year over year into 27. So just should there be years in this plan that are maybe closer to that, or how would you frame it?

If I’m missing anything there, thanks and

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Nick, and good morning. Yeah, maybe I’ll answer it a little bit this way in terms of—you’ve heard me talk about the rule of thumb of rate base growth versus EPS growth and generally see 200 to 250 basis points delta between those two. And so if you take our current five-year plan, we have 11% rate base growth and 9+% EPS growth, so we’re on the inside of that rule of thumb, and really it’s a little bit varied from point to point. And if we look at 26 to 30, we have 14% rate base growth and I would say 10+% EPS growth there, as we talked about over this past year, bringing that incremental pipeline into our plan.

But when we think about the financing, making sure we maintain strong balance sheet, you see 14% rate base growth with 10+% EPS growth. We’re going to be probably on the outside of that rule of thumb, I guess. But then take it a six-year from 26 to 2031, we have 12% rate base growth and 9+% EPS growth. We’re basically right in line with that. So I think that can give you some color on the shaping. Obviously we’re pretty excited about this plan. We’re going to deliver over 9,000 megawatts of clean energy for our customers and we’re going to keep customer bills affordable.

And so I think that’s really important. Longer term we have incremental opportunity, particularly on the large load, which will continue to help us—customer affordability.

Nicholas Campanella (Analyst)

Thanks for laying it out like that. And then maybe just this NSP RFP, which you brought up—4 gigawatts is just a large number of capital even by 2030, even if you went half of this. So just since that falls into your five-year plan, do we get another revision in fourth quarter or first quarter to this plan, or do you hold that back to the next third quarter roll? Thanks.

Bob Frenzel (Chairman, President and Chief Executive Officer)

Hey Nick, it’s Bob. You know, I laid out a number of buckets that we think drive what I think is a robust pipeline of incremental opportunities. You hit on one of which is the Minnesota RFP, where we expect to understand what that might look like by the end of this year or early next. Historically this is our sort of annual update, but as we did last year, as we rolled through the years we were identifying and delivering projects to round that—our 10+—last year you saw us make announcements on generation RFP outcomes, transmission outcomes, and you should expect us to do the same thing.

And so if I think about the three big buckets we have here in RFPs in all three of our jurisdictions, that’s somewhere in the neighborhood of 6 to 8 gigawatts of nameplate generation needs; the data center—4 gigawatts of data centers—and the infrastructure to deliver on those, which is not included in this, is probably somewhere in the neighborhood of 10 to 12 gigawatts of generation. So right there you’re at sort of the 15 to 20 gigs of total gen over the next 5 to 6 years.

And then with regards to transmission, we probably have $2 to $4 billion of opportunity in all three of our regions—SPP, MISO, Colorado—to add to the incremental transmission that’s within this plan. I expect a decent bit of that to be in this five-year period; some might drift into out-years just because of the timeline that transmission takes. But that’s a robust pipeline of opportunities that we’ll keep this group informed of, and much like last year, I’d expect to meet or exceed that bucket by this time next year.

So you should expect that that capital trends towards, as Brian said, towards the back end of our financial plan—30, 31, maybe a little bit into 32—bolstering the back year of capital and bolstering the long-term rate base growth and earnings growth that follows.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah Nick, just expect kind of the cadence that we gave this year—really delivering line into it. But as Bob said, this is our normal cadence: five-year roll forward of capital plan, sales forecast, customer affordability—all that rolls into our normal Q3 plan.

Nicholas Campanella (Analyst)

Thanks a lot, really appreciate it.

Tracy (Operator)

Your next question comes from the line of Carly Davenport with Goldman Sachs. Your line is open. Please go ahead.

Carly Davenport (Analyst)

Hey, good morning. Thanks so much for taking the questions. Maybe just to pick up on some of the earlier comments on the data center side, recognizing this is still an upside driver to the plan. Could you talk a little bit about your confidence level in signing another gigawatt by the end of this year and

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah, thanks, Carly. Obviously we’re in active ESA negotiations right now with a large counterparty and certainly focused on delivering that significant amount of generation, but also a significant amount of customer affordability benefits with that project. So that’s kind of the focus through the balance of the year. When I look at our pipeline and where we are in the stage gate of each of our different high-probability loads, the biggest opportunities right now are in the Upper Midwest and SPS, as we talked about. When I look at project counts and gigawatts that we’re actively working on, Colorado, as we’ve always said, is going to be a little bit later cycle. We’re in the large load tariff hearings right now in Colorado, and so that’s probably a little bit longer term, but we’re really excited about our opportunity in the Upper Midwest and SPS.

And we are on track, and I feel good about what we call a total of 4 gigawatts through the end of 2027, and that’s really going to help extend into the 2030s when they’d actually energize and when we’d be building the projects, so it will really help extend the growth opportunity but also help drive customer affordability into the 2030s. I would just say one part that we probably don’t talk enough about is you’re asking about the large load side, but we focus on our generation development team, and we have, I would argue, the best regulated generation development team in the business. We have 15 gigawatts of projects in our base plan between renewables, storage, some natural gas generation. We’re working on about 25 gigawatts in our pipeline of generation in terms of how do we ensure we have the projects that we need to deliver not only to these large load customers but also all the RFPs that we’re working on to ensure we can bring low-cost projects to our current customers.

And so it’s a big focus there. Some of our partnerships on the developer side, the partnerships on the EPC side and OEM side all play into the overall strategy in terms of how do we deliver.

Carly Davenport (Analyst)

Got it. That’s super helpful. And then maybe, Brian, just going off of those comments on the development side, you’ve talked about some of the development partnerships. A little bit of a shift, it seems, in disclosure on the NextEra JDA this quarter. Anything shifting on that front or is it just a function of more development partnerships kind of coming into the fold here?

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah, it’s really just a function of what we see as our opportunity and working with additional developers. I mean with NextEra. We’re on multiple work streams underway looking at, on the generation side and on the load side, we have multiple gigawatts of projects identified both in the Upper Midwest and in the South, and we’re working on some specific load sites. So certainly very engaged with NextEra. But also, when we see the amount of generation that we need to bring, it’s how do we expand our partnerships, and that’s what you see.

Thank you so much for the time.

Tracy (Operator)

Your next question comes from the line of Jeremy Tonay with J.P. Morgan. Your line is open. Please go ahead.

Jeremy Tonay (Analyst)

Hi, good morning.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Good morning, Jeremy.

Jeremy Tonay (Analyst)

Thanks for taking my question here. Just wanted to start off on the topic of affordability as it’s very topical across the industry right now, and your materials show a lot of strong metrics there, particularly across wallet share and bill directionality from what we see as well. You know, Xcel Energy certainly screens better than most of the industry here. I just want to turn to Colorado a little bit more if we could. A lot of conversation there on what’s deemed, I guess, productive capex, and just wondering if you could share any thoughts from your point of view on this metric when you think about developing the capital plan for Colorado.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Look, Jeremy, I can start with that and Bob can chime in. I would say all of our capex is productive. I don’t think any of the capex we’re seeing on behalf of our customers is not productive. Focus on safety, reliability, enabling load growth. We see significant penetration of EVs, a lot of focus on capacity, and then also our investments in wildfire mitigation programs in Colorado to keep our customers and communities safe. Our business areas do a whole capital prioritization exercise to ensure we’re putting the money in the places where it’s going to benefit our customers.

We not only do that at the functional area but also the operating company area. So in terms of capex, I think we feel really good about how we focus where we need to invest our capital.

Bob Frenzel (Chairman, President and Chief Executive Officer)

And Jeremy, it’s Bob. I commented in my prepared remarks, but I think it’s worth re-mentioning. Our steel-for-fuel program is expected to deliver over $18 billion across the enterprise from production tax credits, and that’s in part backward looking and in part forward looking. And so as we continue to deploy renewables, we continue to drive real benefit for our customers. As I think about large loads, these hyperscaler customers can help bring down, predominantly on the transmission costs across all of our service territories, a lower transmission rate for all customers. You know, when you think about the grid as one big fixed asset, if you put more units of production through it, you’re going to see a lower rate for all people across the same fixed asset. That holds true for the distribution side as we start to see distribution-level data centers helping bring down the cost of the distribution grid to customers, and EVs are the same.

We know, and there’s some studies out, that show that every electric vehicle that’s added to the grid helps bring down the cost of the distribution grid to all customers. I think all that is cost-enhancing, productive capital. I know what you meant by that, but I agree with Brian wholeheartedly that everything we do is for the benefit of our customers, whether it’s resiliency-related, it’s risk reduction, it’s enhanced production, decarbonization — all that stuff is very valuable to our customers and to our states. And so Colorado starts as literally the lowest share of wallet in the country. So we feel like we have a great starting point.

We’ve made great investments there to help our customers.

Jeremy Tonay (Analyst)

Got it. That makes a lot of sense. We figured a very thoughtful approach to capital deployment here and just want to pivot real quick to the asset sale in Michigan there and figure it’s small overall. But just wondering if you could share any thoughts there — if that could reduce equity needs a bit or anything else.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Hey, Jeremy, I can take that one. I’ve been CFO for seven years now and I think this is the first question I’ve had on Michigan. It is 0.2% of the overall Xcel Energy company from a rate base perspective. And this is like, we’re always going to be good stewards of our portfolio. Like I said, Michigan is a very small part of our rate base. And there were two strategic buyers that already operate in the Upper Peninsula and are good buyers and will be good stewards of the 9,000 electric customers and 6,000 gas customers that we’re selling.

And look, the price is confidential. We haven’t disclosed anything, but expect that it’s comparable to precedent transactions. We’re working through the regulatory process. We’ll be making filings with FERC, the Wisconsin Commission, Michigan Commission — expected to close by end of year next year. And just assume anything from sale proceeds incorporated into our numbers.

Jeremy Tonay (Analyst)

Got it. That’s helpful. I’ll leave it there.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Thank you.

Tracy (Operator)

Your next question comes from the line of Julian Dumoulin Smith with Jefferies. Your line is open. Please go ahead.

Julian Dumoulin Smith (Analyst)

Hey team, thanks for the time. I appreciate the opportunity.

Bob Frenzel (Chairman, President and Chief Executive Officer)

Morning, Julian.

Julian Dumoulin Smith (Analyst)

Can you guys hear me? Hey, there we go. Awesome. Hey, I just wanted to come back to where Nick started earlier. Just can you rehash this real quickly on the 200, 250 basis points on equity lag there? You want to just make that a little bit clear. Are you still expecting that or is it wider here, just given the uptick here? I just want to make sure I heard you right there. And then related, just the effort of debt uptick, uptick in the outlook here. You’ve added about, I don’t know, a percent or so to a point to each year, give or take. Just what’s going on there in terms of the outlook getting better on FFO-to-debt metrics? Just is there any nuance or subtlety in customer deposits or something else going on there? I know you guys caveat that doesn’t really include the data center uplift per se. So is there anything else?

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Hey Julian, I think I understood the first question, so if I don’t answer it, please clarify. I didn’t say anything in terms of changing the rule of thumb of that delta. What I’m saying is there’s a rule of thumb, and it can be point sensitive when you pick a certain year. And so I was giving you a couple examples because our current five-year, we’re inside of that rule of thumb. When we look at the rate base to EPS delta in last year’s plan, an update of these capital numbers would be a little bit outside of it given the equity financings are more front-loaded in our capital plan.

But if you pick the six-year period, we’re right inside that rule of thumb. So that’s all I’m saying — anytime you do that analysis, it can be point-to-point sensitive. So I think it’s intact as a rule of thumb, absolutely. On your second question, we have improving credit metrics, particularly if you look at our FFO-to-debt in 2030 and 2031; in 2031, it hits 18%. Our debt to EBITDA improves over the five-year period. And so we think about that giving us some additional financial flexibility. It’s absolutely important to maintain a strong balance sheet. But when I have always talked about that, we’ve always targeted a 17% FFO-to-debt metric. So that gives us some additional flexibility for potential capital we could add in 2030 and 2031 relative to that kind of rule of thumb — 40% equity — that we’ve given for every dollar of incremental capital.

So, good question there. It’s really important to maintain a strong balance sheet. We think we have one of the best balance sheets in the industry, and we’re going to keep it that way. But we also have some financial flexibility as we look in the back part of our plan.

Julian Dumoulin Smith (Analyst)

Awesome. And then not to nitpick too much, but how are you looking at the data center opportunity? As much as some of the states are maybe pulling back here on sales and use tax exemptions, making maybe Colorado more competitive, A; and then, B, I heard your comment about distribution-level data center activity. Does that help your 75 to 100 basis point earned — are we lag that you talk about?

Brian Van Abel (Executive Vice President and Chief Financial Officer)

In Colorado, and for that matter your other jurisdictions, on the margin or is it just too small still? So I think I’ll take your last question first. Just assume some of those distribution-level opportunities are built into our plan, but they’re developing. Right. It’s nearer term. We do think it’s a good opportunity, a really good opportunity from a grid utilization perspective as you think about where these can be located. And so I think that’s a developing opportunity.

We see that we’ve seen the most interest in the Upper Midwest so far. I think Colorado, if we see it, it could be a little bit longer term, but it’s really not just distribution level; it’s advanced manufacturing in terms of what we’re seeing as some other, call it, significant load opportunities. Back to your first question around sales tax exemptions. We have that in three of our states, but I don’t think it’s necessary to be competitive by any means when we see the opportunities spread across our states not only in terms of Upper Midwest and SPS, but also PSCo. PSCo, the focus is get through the large load tariff filing now.

We think about our diversity of geography as being beneficial, operating in a number of states, whereas if you have challenges in a single state from a large load perspective, you can focus your time and attention on the other states that are looking for that economic development, also customer benefit from these large loads. So overall I think we continue to be very competitive given our low-cost renewable resources, our geographic diversity. So we’re excited about the opportunity and we’ll keep you updated on them.

Julian Dumoulin Smith (Analyst)

And by the way, to rehash that earlier point about the equity dilution, you’re basically implying, if we do the math, 10 and a half to 11 EPS for that ’28 to ’30 time period.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Right. That elevated period. Do your math, Julian.

Julian Dumoulin Smith (Analyst)

Yeah. Awesome, thanks.

Tracy (Operator)

Your next question comes from the line of Richard Sunderland with Truist Securities. Your line is open. Please go ahead.

Richard Sunderland (Analyst)

Hey, good morning. Thanks for the time today. I want to pick up a couple of these different threads here around the upside CapEx and the growth. Just thinking about some of the component pieces in the near term across, I guess, a 1 gigawatt data center ESA by year-end and that NSP RFP update in December alone. Those two components seem like, using your 6 to 8 billion for 1 gig of load and different construction costs and generation, you’re talking already sort of above 10 billion plus.

Could you kind of zoom out a little bit and speak maybe even more to the bigger quantum of what may come into the plan on a line-of-sight basis over the next 12 months and what that could do for your rate base growth versus the 11% CAGR you outline now?

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah, I can. I think what’s helpful is we give this — I guess we give a lot of rules of thumb — but every billion dollars of CapEx, at least in this five-year plan, is 15 to 20 basis points on our rate base CAGR. So that’s a really good way to think about it. When we look at the near-term opportunity, it’s significant. I think that’s one of the, maybe not — we should — one of the opportunities we have relative to our peers is every gigawatt of data center, we have more investment opportunity from a generation perspective because we bring a clean energy portfolio to serve them.

So more nameplate capacity, more investment up front from a capital perspective, but lower operating costs for our large load customers in terms of no-cost fuel from the wind and solar side. So I think as we think about our opportunity for gigawatts through 2027, you’re right, we’ve given you that kind of rule of thumb on what the investment opportunity is. But it’s also — we talked about — it’s filling in the back part of the five-year plan, but it’s also bringing visibility into ’32, ’33, ’34. If you think about these data centers and how long some of them can ramp, it’ll be ramp over time, and then we build the assets in over time.

So it’s not necessarily, you know, how do we drive it over the next five; it’s how do we continue to provide visibility into the longer term. And I also think — I talked about the capital investment side of it — but it’s also these data centers are paying for all of these assets, and we’re ensuring that they pay for these assets, and we won’t bring a data center forward if it does not provide benefits to our other customers. So I think, you know, as much as we’re talking about the capital investment opportunity, I think the affordability aspect that this brings is super important as we think about how we do data center development.

Richard Sunderland (Analyst)

Right, understood, that’s very clear. And then I guess, kind of looking forward to ’27 here, can you speak to a little bit of the policy priority, policy front as you see it today, and any opportunities or other areas of attention in the next 12 months?

Bob Frenzel (Chairman, President and Chief Executive Officer)

Yeah, hey Richard, it’s Bob. Thanks for the question. Obviously working on a number of fronts in the states and at the federal level. You saw the siting and permitting legislation that was drafted by the Senate on a very bipartisan basis across two committees of jurisdiction, and we’re buoyed by the opportunity to look at the acceleration of siting and permitting votes at the federal level and at the state levels. You can expect us to keep working at our state levels to make sure that we can build the infrastructure that we need to do across our service territories.

We’ve been active in our states and at the federal level on the wildfire front. We’ve gotten legislation; we’ve worked with counterparties to work on what we think is really sensible legislation that recognizes the benefit of wildfire mitigation. In Texas and South Dakota, North Dakota, we had proposals in Colorado and in New Mexico last year. We’re going to expect to work on those very hard and hope to get those across the goal line in 2027 with stakeholders and also at the federal level on wildfire mitigation efforts.

The Fix Our Forests Act has passed the House. We’re hopeful that it finds a vehicle that it could pass the Senate as well in lame duck or early in the next Congress. Those are, you know, really common-sense modifications to allow us and our peers to access BLM, Forest Service lands, and work on really clearing rights-of-way in what has been a tough area to work on of late. Those are sort of the big focuses, making sure that we can have timely recovery and good regulatory as we work through all the generation that I laid out and where it impacts Texas, New Mexico in particular, trying to make sure that we can build and recover in a timely manner. Those are a broad swath of priorities for the company as we roll through our states and our federal jurisdictions next year.

Richard Sunderland (Analyst)

Great. Thanks for running through that, Bob. And sorry, just one cleanup from me. That 10% plus growth commentary, is that off a ’26 guidance basis or some other base — midpoint of ’26 guidance?

Tracy (Operator)

Your next question comes from the line of Sophie Karp with KeyBanc Capital Markets. Your line is open. Please go ahead.

Sophie Karp (Analyst)

Hi, good morning. Thank you for the airtime here. Maybe I can start by asking you about SPS. You have seen significant growth there for quite some time now, and I’m wondering how much runway do you think that territory has to continue posting such gains and what’s your visibility there?

Bob Frenzel (Chairman, President and Chief Executive Officer)

Yeah, thanks for the question. We’ve — look, we serve a huge swath of the Permian and the Delaware basins, a large commercial industrial customer base, maybe the most prolific region in the United States. And we’ve seen continued uptick in interest, particularly as the basin extends further west into New Mexico. So still see very robust oil and gas growth there and the infrastructure needed to support that. As Brian mentioned earlier, the Southwest is a big area of focus for hyperscalers. We already have three contracts with hyperscalers down there. Smaller, but there’s lots of interest in large-scale campuses, given the rural nature of that service territory as well as the robust nature of the transmission grid that’s there now and that is expected to be built, and some of the growth is in the transmission sector itself, Sophie. So you’ve seen SPP be looking around corners and trying to build infrastructure in advance, building out 765 networks and bolstering 345 networks.

And we’re a big recipient of some of those construction notices to construct a lot of that. Transmission gets regionally allocated in cost, so the rate base growth doesn’t necessarily hit our customers completely and directly. And I guess the other piece on the oil and gas side is we continue to see the oil and gas companies, the majors, lean towards electrification of the oil patch. So you’re seeing electric jack-up rigs, electric compression, and things that are helping drive sales growth down there, not just the mining itself. So hopefully I gave a pretty good picture of what we’re seeing in our service territory.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah. And I would just add on to that, so if you look at our earnings release, we say 8% sales growth in SPS over a five-year CAGR. That’s actually front-loaded when we look at over the next three years, and it’s roughly half oil and gas, a little bit less than half data centers. So really diverse, as Bob was saying, diversified growth down there, and we see an opportunity longer term to continue to drive load growth there. Like I said, we see data center opportunities, and if we can land one of those, that brings significant customer benefit down there.

So I think there continue to be great investment opportunities in SPS. And we look at that, and that’s one of our kind of longer-term incremental opportunities — we expect a 2,000-megawatt generation RFP for accredited capacity as we continue to work through the generation needs down there. So significant investment opportunities that benefit our customers.

Sophie Karp (Analyst)

Terrific. Thank you. And then another question I had. Your generation plan as outlined right now is basically a mix of renewables and CTs. With all of the demand growth you’re seeing across your territories, will there be room for CCGT at some point?

Bob Frenzel (Chairman, President and Chief Executive Officer)

Yeah. Hey Sophie, we certainly look at, as we look at the incremental RFPs that are coming, combined cycle can make sense. You know, one of the things we see in the Southwest right now at least is a very depressed local gas price, and so CTs have made a lot of sense and the incremental benefits and efficiencies you see in the CC haven’t really emerged yet. But we’re looking at the forward cost curve for gas and trying to see if that makes more sense and modifying either the CTs that are there with steam turbines and HRSGs or building, you know, greenfield new.

So that’s — yeah, you’re right. Hasn’t made sense yet, but might make sense as we look forward.

Sophie Karp (Analyst)

All right, thank you so much. I’ll pass it on.

Tracy (Operator)

Your next question comes from the line of Steve d’ Ambrisi with RBC Capital Markets. Your line is open. Please go ahead.

Steve d’ Ambrisi (Analyst)

Hey, Bob and Brian, thanks very much for taking my question. Just two quick ones on the Minnesota Rate Stability Plan. Look, you’re building a lot of renewables across the entirety of the footprint. So I guess, just as you address affordability across — you know, you’ve talked about how you’re starting from a great spot — but is this something that you can replicate in other jurisdictions or extend, or just how you think about, you know, using some of these tax credits to potentially provide rate stabilization to your customers across your footprint?

Hey, Steve, good morning. You know, I think maybe just comment a little bit on the Minnesota sale. I think it’s a really creative and great way to use these clean energy tax credits and it’s really around the storage tax credit with the ITC in terms of what the opportunity is to use them to offset some rate impacts. And so we think for Minnesota, we think it’s a compelling alternative and really helps with the macro affordability conversation that’s happening.

So obviously we’ll look at it at other parts of our service territory as we continue to work through our regulatory plans in the ’27 and beyond. But just, you know, we’ve used other tools before in terms of proposing stay-outs. But having the ITCs as another lever is a great opportunity to think longer term to manage the overall bill impacts and maintain our kind of best-in-class affordability metrics. All right, that’s very helpful. And then just on growth at some of the opcos, you know, obviously PSCO was one of the faster growing utilities maybe two or three years ago as you built out a significant, you know, worked through a significant renewal build there. And in this most recent update, you know, the rate base CAGR is down to about 5%. And I guess just looking forward, two questions there: at a 5% CAGR, what type of, you know, bill impacts would you expect?

And then you have additional generation opportunities. Just what do you think growth could look like at PSCO as we kind of move into the end of this decade and the next decade?

Bob Frenzel (Chairman, President and Chief Executive Officer)

Thanks. Well, Steve, it’s Bob, and I’ll start and I’ll let Brian pick up on it. You know, appreciate you recognizing the diversity of our business and the ability to allocate capital where we see the growth happening. Obviously we talked a lot about SPS and the extraordinary growth we’re seeing down there, the data centers as we see up here in the upper Midwest. And, you know, Brian said that the data center traffic in Colorado has a lot of pent-up demand there.

But we are waiting for the large load tariff to get approved at the commission, and it’s going through hearings kind of as we speak. You know, the weather, customer class, diversity of regions, regulatory outcomes. We have a great diversity in our business. It’s probably one of the big reasons why we’ve been able to deliver for 22 years in a row on our guidance and we’re not subject to weather risk. You know, I was watching the huge negative weather in the Pacific Northwest for some of our peers, really hot in the desert Southwest for some of our peers, and so the diversity has been really great for us.

As I think about Colorado, yes, we have a PSCO RFP in process. This was originally designed to replace the retiring capacity of our Comanche III coal units. And so that has a modest amount of generation needs. We see real load growth in Colorado, particularly driven by large load, but by other either manufacturing or existing customer expansions that are on the docket. So there are real generation needs and real transmission needs in Colorado. I mentioned something that wasn’t in our plan today, but this quarter-of-a-billion-dollar spark award that we got for rebuilding the Lamar tie, which is the biggest D.C. tie between the eastern and the western interconnects, is an opportunity we see in the state as well. That’s not within our plan. So we see real growth opportunities there both on the sales side and the investment side. What you’re seeing in the plan is probably a conservative estimate of what could realize and materialize.

But we’re being cautious about how we build into that potential.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah. And Steve, I’ll just add, yes, about bill impacts. I think not just Colorado, but our focus is on affordability across all of our states. And, you know, as the previous question, how do we—what tools do we have to manage affordability? And so Colorado is number one in the country from share of wallet. So we’re in a really good starting place and expect to remain in a really good place over the long term. But not only in Colorado, but our other states too.

And look, there’s ebb and flow in terms of investment timing, investment opportunities. We think about, and like Bob said, having geographic diversity, state diversity, kind of economic development opportunity and diversity just ebbs and flows across our states.

Tracy (Operator)

Your next question comes from the line of Steve Fleischman with Wolfe Research. Your line is open. Please go ahead.

Steve Fleischman (Analyst)

Yeah, hi, good morning. Thanks. And I’m sorry if I missed this question, but just as we think, I think for this latest update you added maybe a billion of equity relative to 10 billion of capital. Just as we think about, you know, potential for further capital, capex increases, how should we think about a ratio of equity need?

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Hey Steve. Yeah, thanks for the question. And I think about, you know, as you pointed out or implied in your question, that we’ve generally set a rule of thumb around 40% equity for incremental capital. When we look at our metrics improving on the back end, particularly in 2030 and 2031, that does give us financial flexibility. So adding capital at that point in time is likely—will be less—it will be less importance in equity in those years, but we will maintain a strong balance sheet.

Like I said, we’ve targeted 17%. Having a strong balance sheet—you’ve heard me talk about it for the past seven years. I was treasurer a decade ago. That’s always been the philosophy here at this company, to have a strong balance sheet. Capital in the near term will roughly probably be the rule of thumb, but that longer term is the opportunity from a financial flexibility perspective and be less than that, less than 40% in the ’30, ’31 time frame.

Steve Fleischman (Analyst)

And is that rising cash flow? Is that kind of just less regulatory lag? Well, I guess this could be the same thing, less regulatory lag and/or getting more cash from these large load customers you already have in the plan.

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah, it’s in. So it’s really so that our cash from ops has a 13 to 14% CAGR over this time period. And that’s really driven by—we have a lot of, call these large generation long lead time projects going into service and starting cash flow. And so that’s a big part of what you’re seeing, not necessarily the data centers, but it’s just the overall project development cycle and this build cycle as we have a lot of renewables. Right, you have your 2030 cliff from an investment from a tax credit perspective.

So I know we don’t point it out in one of our slides, but overall in our five-year plan our cash from ops funds about 65% of our overall capital. And then you can just continue to see that strength from our cash from ops over the long term. So that’s really the underlying driver, is a lot of these long lead time projects going into service.

Steve Fleischman (Analyst)

Great, thank you.

Tracy (Operator)

Your next question comes from the line of Nick Amaguchi with Evercore ISI. Your line is open. Please go ahead.

Nick Amaguchi (Analyst)

Hey, good morning, guys. I just wanted to tease out a little bit, if I could. Just as we kind of think about the 2027, that load acceleration, 5% weather-normalized electricity sales growth versus kind of the 3% we’ve seen here in 2026, I guess how much of that acceleration is coming from already operating customers versus some that are committed and kind of incorporating ramps, and then—or kind of the oil and gas electrification?

Brian Van Abel (Executive Vice President and Chief Financial Officer)

Yeah, Nick, that’s a big part. So we have a significant large load energizing in SPS this quarter and then it’s a lot of the annualization of the oil and gas load that w