Good day, everyone, and welcome to the Xcel Energy 2017 Year-End Earnings Conference Call. Today's call is being recorded. And now, your host for today's conference, Mr. Paul Johnson, Vice President of Investor Relations. Mr. Johnson, please go ahead, sir.

Good morning, and welcome to Xcel Energy's 2017 year-end earnings release conference call. Joining me today are Ben Fowke, Chairman, President, and Chief Executive Officer; and Bob Frenzel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team available to answer your questions. This morning, we will review our 2017 results, discuss tax reform, and update you on recent business and regulatory developments. Slides that accompany today's call are available on our website. As a reminder, some of the comments during today's conference call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and in our filing with the SEC. In addition, on today's call, we will discuss certain ongoing earnings metrics that are non-GAAP measures. Our ongoing earnings and EPS exclude a $23 million or $0.05 earnings per share one-time charge related to the Tax Cuts and Jobs Act. The comparable GAAP measures, a reconciliation to GAAP and an explanation of these charges are included in our earnings release, which is available on our website. With that, I'll turn the call over to Ben.

Well, thank you, Paul, and good morning to everyone. I hope everybody enjoyed the Super Bowl. We certainly enjoyed hosting it in Minneapolis. Glad the lights stayed on. And while our Vikings weren't in the Super Bowl, it was a fun event. And I think at Xcel Energy, we had a Super Bowl year in 2017, performing fantastically financially, strategically, and operationally. I wanted to start with some of the key accomplishments and recognize the outstanding efforts of our employees in 2017. We successfully completed CapEx 2020, a 13-year project entailing over 800 miles of transmission lines, $2 billion of investment and working with 11 different utilities. Our nuclear operations have one of its best performance years, achieving a capacity factor of 91% while reducing refuel outage times and lowering cost. Xcel Energy was named the number one utility wind energy provider in the United States by AWEA for the 12th consecutive year. We were named a Military Times Best for Vets Employer for the fourth consecutive year, ranking 19th on a list of 82 companies that received that honor. We successfully completed our multi-year SAP implementation, which included a new general ledger and work asset management system. This is part of our productivity through technology initiative, which will drive efficiency and lower our cost structure. And not to diminish our financial results, we had another strong year with ongoing EPS of $2.30 in 2017, which is the midpoint of our guidance. This was our 13th consecutive year of meeting or exceeding our earnings guidance. Finally, we also raised our dividend by 5.9%, which represents the 14th straight year we increased our dividend. Tax reform is all over the news, and I wanted to give you our high-level overview of the key points; and Bob will provide more details later.…

Thanks, Ben, and good morning, everyone. My comments will focus on full-year 2017 results and for details of our fourth quarter results, please see our earnings release. As Ben indicated, we realized another strong year of operational and financial performance and deliver 2017 ongoing earnings of $2.30 per share compared with $2.21 per share of ongoing earnings in 2016. The most significant earnings driver for the year include a higher electric and natural gas margins, which increased earnings by $0.19 per share largely due to rate increases and non-fuel riders to recover our capital investments, lower effective income tax rate, which increased earnings by $0.12 per share. Please note the lower effective tax rate is partly due to an increase in wind production tax credits, which flow back to our customers through electric margin. Lower O&M expenses and a higher AFDC equity combined to increase earnings by $0.06 per share. Partially offsetting these positive drivers were increased depreciation expense, largely due to capital additions, which reduced earnings by $0.21 per share, and higher interest expenses, property taxes and other items netted to reduce earnings by $0.07 per share. Turning to sales, our weather and leap year-adjusted electric sales increased 0.1% for 2017. Natural gas sales increase 2.7% in 2017 on a weather and leap year-adjusted basis. Our 2017 gains in electric and natural gas sales are largely driven by the large C&I segments across our operating companies. We continue to see positive customer growth in our service territories for both the electric and the natural gas businesses, but that growth has generally been offset by lower use per customer, primarily in the residential sector, largely attributable to improvements in energy efficiency. We realized another strong year of cost management as we continue to improve efficiency across our businesses. We improved…

Operator, you there?

And for our first question, we go to Julien Dumoulin-Smith with Bank of America Merrill Lynch.

Hey, Julien.

Good morning. This is Josephine actually hopping in here for Julien. Congrats on the results.

Okay. Good morning.

Good morning. I just have a quick question. I think you said that with tax reform your new rate base growth that you're looking at is 6.5%, hitting the upper end of the 5% to 6% EPS growth rate. I was wondering, with the Colorado Clean Energy Plan, what is then the further CapEx upside from that translate into your new rate base growth?

So the question is if CEP, which is not in our base CapEx...

Exactly.

...if that's included, what will that do to rate base grow growth?

Exactly. Like how much further up can it go?

I think that really depends on what we see in ultimate and final bids from the process, which are still pending. I think a good estimate is probably 50 basis points higher in rate base CAGR.

Got it. Great. And then, just on the equity issuance. You just said $300 million in additional to the $385 million that you had announced, I think, on the third quarter. Would that then still be as part of the DRIP? Are you just expanding the DRIP?

No. I don't think the DRIP at $385 million, as we indicated in our third quarter call, was likely sort of the large size of the dividend reinvestment program. I think the $300 million we'd contemplate in a market issuance.

Got it, great. And then, one last question. Just – I think you had mentioned earlier in 8-K that you were thinking of trying to increase the equity ratio as part of the tax reform mitigation strategy. Have you had any conversations with the commissions on that subject and do you think that's a possibility?

Yeah, this is Ben. I think we've had obviously preliminary, but constructive dialogues with all of our regulators. And I think the importance of strong credit ratings is not lost on them, so higher equity ratio is a dialogue we're having at SPS. And I think there'll be other dialogues around higher equity ratios potentially, maybe increased amortization which also contributes to cash flow. And I think our regulators are going to look at tax reform. Everybody recognized the benefits to the consumer, but I think they're going to also make sure that balance sheet stay strong. So, we're encouraged by what we've heard so far.

Got it. And that's not yet like the assumptions of a higher equity ratio are not yet reflected in that 5% to 6% EPS growth rate, right?

Well, I mean that's – I think one of the things that we would hope for is that if the $400 million of revenues that we're going to stream ultimately back to the consumers if we get higher equity ratios, et cetera, that could help offset the tax yield difference that we have at the holdco.

Got it. Okay, great. Thank you very much.

And for our next question, we go to Travis Miller with Morningstar.

Good morning.

Hi, Travis.

I was wondering on the tax reform stuff again, what's the chance that incorporating those in rate and getting into the regulatory process might delay some of the decisions and some of the rate increase that you're expecting in 2018 and even maybe early 2019. Give me a sense of timing there and how regulators are approaching that?

Travis, it's Bob. We've had a lot of constructive dialogues across almost all of our jurisdictions at this point, particularly the ones where we've got pending rate cases with Texas, New Mexico and the two cases in Colorado. I think the regulators and the stakeholders in all those cases are contemplating the impacts of tax reform either as parts of those cases or as adjuncts to those cases. So, I don't think it impacts the timing or the estimate of our rate case revenues that we're expecting in either 2018 or 2019. I guess the one consideration I'd say there is our filed case or our filed testimony in South Dakota contemplates potentially we're under-earning in South Dakota and it contemplates potentially not filing a rate case as part of tax reform.

Okay. Okay. And what about Minnesota, how would you go about the regulatory process there given the...

Well, there'll be a docket in Minnesota, Travis, to discuss the effects of tax reform. We're still in the multi-year plan, but we'll figure out a way to account for that either through an accounting deferral or some actual actions. In Colorado, that's your next question, we're having dialogues right now as we're in an active rate case and we have settlements, not unanimous settlements, that we'll be presenting to the commission. And back to my earlier comment about constructive dialogue, I think our commissions appreciate that we're bringing them options. And, essentially, this is complicated, educating them on the full holistic implications of tax reform.

Okay, great. That's all I had.

Travis, one other thing I'd just say is I'd point you to the earnings release. We put an entire page of where we are in dialogue with each of our regulatory jurisdictions. That should give you a pretty good guide as to the conversations we've had to-date and where we expect those to go over the next sort of three to six months.

Okay, great. Perfect. Thanks so much.

Hey, thanks, Travis.

And for our next question, we go to Jonathan Arnold with Deutsche Bank.

Hey, Jonathan.

Hi. Good morning. It's actually Constantine Lednev on Jonathan's behalf.

Everybody's got their proxies on the call today. I guess we're the second priority.

(21:44). Actually, just a quick question on the equity issuance. The 2018 guidance doesn't assume a share count and you mentioned the $300 million of incremental issuance. Is that going to be spread over the five years or is it kind of more lumped together to the front or the back end somewhere?

We haven't actually spent a lot of time on pinpointing exact dates. It's probably more front-loaded than back-loaded, but it really will depend on the conversations with both the regulatory agencies and how we approach tax reform and credit in our operating companies, as well as the conversations we have with the rating agencies following those conversations. So I wouldn't expect it to be backdated, but we do affirm that the $2.37 to $2.47 is good for this year.

Okay. And I guess the same comment goes for the $500 million of CapEx, right?

Yeah, similar comments. Again, I'd say the capital is probably a 2019, 2020, 2021 issue. Most of the stuff in 2018 is underway and in progress, but I think that any trimming of capital is probably a little bit more backdated in the plan.

I think too, just to add to that $500 million, it's really maybe a quiet story at Xcel, but we are really improving our supply chain efficiency. You're seeing that in our results with O&M, but you're also going to see that in our ability I think to, on a per unit basis, get things done more efficiently. I can't be more pleased with how well our nuclear operations are performing both operationally and financially. And when you become more efficient, you can get more done with less capital. So we don't have any specific projects targeted to take out now. We just know there are opportunities to do that.

Okay, great. Yeah. I think the other questions are already answered both in the remarks and in Q&A, so thanks.

Thank you.

For our next question, we go to Joe Zhou with Avon Capital Advisors.

Hi, it's Andy Levi, guys. How are you doing?

Andy, hey. So you are the real deal now.

All real. Everyone is a real deal. It's just next time you schedule your call, maybe you don't want to do it when there's another company doing a call. That may be...

Maybe they don't want to schedule it when we're doing our call.

Vice versa. Yes, it goes both ways. Anyway, just two clarification questions because I've kind of been popping on and off. So just on the $300 million of incremental equity, I heard the initial comments just a moment ago. So what you're saying is – because I'm just trying to get a sense of timing – that first you kind of want to go through the regulatory process the next couple months, see where that kind of falls out and then decide the timing on – and, well, we know the amount – but the timing of the equity, is that what you are saying?

I think that's right. I mean, I'll let Bob add. But the point is, and I think you picked up on Andy. So this is a iterate process. We need to have the conversations with our regulators. They need to give us the signals on what's important to them, and I do think credit quality will be important to them. So, again, as I mentioned earlier, we're having I think good preliminary dialogues across the board in all of our eight states.

Bob, do you have any additional comment?

No, I think Ben got it all.

Okay. And then just kind of sticking with that, so you get through your discussions and you figure things out, and then Bob mentioned it will be front-end loaded. The last time you did block equity or you did a larger chunk of equity that was not ESOP or DRIP, did you do an at-the-money or did you kind of just do a block or I don't remember?

Yeah. I think the last equity issuance, and I'm looking around the room, the last equity issuance predated me, but I believe it was at-the-money issuance.

Yeah, it was.

At-the-market issuance.

Yeah.

And again, I'm not trying to put words in your mouth and I don't know what you're comfortable saying, but would that be a similar conduit that you would issue equity or could we possibly see a block at some point just to get it done?

I think, Andy, I'll consider all opportunities to get it done effectively. But an at-the-market is probably the base case and we see what the alternatives look like.

Yeah. You think about it Andy, I mentioned that essentially tax reform adds $1.3 billion to our rate base, but that's even after – that's net of the reducing CapEx by $500 million. So it's not a lot of equity to support credit ratings and we are committed to credit ratings. But that's why at the end of the day even with modest amounts of equity, assuming we have constructive dialogues with the regulators, which I think we are having, this will be accretive to our earnings growth.

No. I guess you're missing what I'm trying to get at. I mean, I think $300 million is not a relevant amount and obviously the story is more than intact if not getting better, which lead to my next question. But I'm just trying to get a sense of timing because that's kind of important too, whether it's just a block or at-the-money. Makes it just a little bit of difference as far as trading dynamics when we get to that point. So, that was what I was getting at. And then my other question, and I think it was asked earlier, but I wasn't clear on what I heard, that's my fault. So whether it's Colorado or some of the other initiatives you have out there that are pending on the regulatory side that we have not got final approval, you may have settlements in whatever it may be, but those would be incremental to the 5% to 6% growth rate? I'm not saying you'll grow more than 5% to 6%, but that those projects are not contemplated currently in that 5% to 6%. Is that correct or not?

Andy, the only thing that's outside of our capital forecast is the Colorado Energy Plan.

Okay.

So, that's the only capital that's outside of our – or things that are outside of our...

That's still pending regulatory wise?

That is correct.

Okay. Thank you. That's clear. Thanks a lot. Thank you.

You bet.

Thanks, Andy.

And with that ladies and gentleman, we have no further questions on our roster. Therefore, Mr. Frenzel, I will turn the conference over to you for any closing remarks.

Thanks, everyone, for participating in our earnings call this morning. And please contact our Investor Relations team with any follow-up questions.

Thanks a lot.

And again, ladies and gentlemen, this will conclude today's conference. Thank you for your participation. You may now disconnect.