Xcel Energy Unit Issues Debt - Analyst Blog

Electricity and natural gas company Xcel Energy Inc. (XEL) announced that its unit Public Service Company of Colorado issued 3.2% first mortgage bonds worth $400 million due November 15, 2010.

The unit of Xcel Energy will add the proceeds to its general fund and utilize it to fund a fraction of the purchase price of $739 million, which will be needed to acquire 652 megawatt (MW) Rocky Mountain Energy Center and the 310 MW Blue Spruce Energy Center natural gas generation assets.

Previously, on May 13, 2010, Xcel Energy issued 4.7% notes worth $550 million due in November 15, 2019. The proceeds were added to the general funds, to utilize it later to repay a portion of outstanding commercial papers and fund the equity investments of its subsidiaries.

Xcel Energy ended the third quarter 2010 with a total debt of $9.3 billion and a total debt to capitalization of 55%, compared with $8.6 billion of total debt and a total debt to capitalization of 54% in the year-ago period.

One of the company's competing peers, American Electric Power Company Inc. (AEP), ended the third quarter with earnings of $1.04 per share versus 93 cents in the year-ago period. The long-term debt of the said company at the end of the quarter was $16 billion versus $15.8 billion at fiscal-end 2009.

Interest expenses of Xcel Energy at the end of third quarter 2010 increased to $138.5 million from $129.7 million in the year-ago period. We expect the interest expense of the company to increase further with the debt issue.

The adjusted earnings of Xcel Energy at the end of third-quarter 2010 were 62 cents per share compared with 48 cents per share in the year-ago comparable period. During the third quarter earnings call, the company reaffirmed its earnings expectation for 2010 of $1.55–$1.65 per share.

The Zacks Consensus Estimates for fourth quarter 2010, fiscal year 2010 and fiscal year 2011 are 33 cents per share, $1.63 per share and $1.73 per share, respectively.

Xcel Energy currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.

Based in Minneapolis, Minnesota, Xcel Energy is a U.S. electricity and natural gas company, with operations in eight Western and Midwestern states.

 
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