Xcel Energy Inc. 6.25% Junior Subordinated Notes, Series due 2085 (XELLL) Q1 2024 Earnings Report, Transcript and Summary

Hello, and welcome to Xcel Energy's First Quarter 2024 Earnings Conference Call. My name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded. [Operator Instructions] Questions will only be taken from institutional investors. Reporters can contact Media Relations with inquiries, and individual investors and others can reach out to Investor Relations. [Operator Instructions] I'll now turn the call over to Paul Johnson, Vice President, Treasurer, and Investor Relations. Please go ahead.

Good morning, and welcome to Xcel Energy's 2024 First 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 questions if needed. This morning, we will review our '24 first quarter results and highlights, discuss recent wildfires and our mitigation efforts and share recent business developments. Slides accompany today's call are available on our website. Please note that we changed our presentation. As a result, we no longer refer to electric and natural gas margin. Instead, we'll discuss changes in revenue and cost of goods sold from the income statement. Please note that these most fluctuations in cost of electric fuel and natural gas are recovered through regulatory mechanisms and are generally earnings neutral. As a reminder, some of the 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'll discuss certain measures that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. With that, I'll turn it over to Bob.

Thanks Paul, and good morning, and welcome, everyone. It's been 2 months since wildfires impacted our Texas neighbors and before Brian walks through our financial results, I'd like to discuss the actions we're taking to protect the public and to strengthen our systems resiliency in the states that we serve. In February, multiple wildfires were ignited in Texas. And from the outset of those fires, our focus has been on the people, in the communities, and the Panhandle and on the safety and the well-being of our coworkers and their families there. I want to thank all of the first responders, emergency personnel, state and local employees and our own SPS employees who worked tirelessly in support of our customers and our communities during and after the event. They provided wildfire response, community assistance, relief services and work tirelessly in the field to restore essential services. I've been to the panhandle and I've witnessed the impacted areas and I can see for the entire Xcel Energy team when I say that we are saddened by the losses, and we will stand with the Panhandle community as we recover, rebuild and renew that area as we have for over 100 years. Xcel Energy has acknowledged that our distribution poles appear to have been involved in an ignition of the Smoke House Creek fires and smaller Reamer Fire, which quickly burned into the Smokehouse Creek Fire footprint. We assume claims that Xcel Energy acted negligently in maintaining an operating infrastructure. In addition, we do not believe that our facilities caused the Windy Deuce or the Grapevine Creek fires and believe that their additions are caused by distribution lines owned by other companies. In an effort to expedite relief and recovery in the community, we've established a claims processes for those who have…

Thanks, Bob, and good morning, everyone. Turning to our financial results. Xcel Energy had earnings of $0.88 per share for the first quarter of 2024 compared to $0.76 per share in 2023. The increase in earnings reflects our investment of approximately $8 billion over the last 5 quarters to improve resiliency and enable clean energy for our customers while delivering economic growth and vitality for our communities. The most significant earnings drivers for the quarter included the following: the impact of electric and natural gas rate reviews to recover our capital investments increased earnings by $0.12 per share. Lower O&M expenses increased earnings by $0.06 per share, reflecting lower labor and benefit costs, lower bad debt expenses and gains from a land sale for a data center. Non-fuel riders recover capital investment increased earnings by $0.05. Offsetting these positive drivers were higher depreciation and amortization decreased earnings by $0.05 per share, reflecting our capital investment programs. Higher interest charges decreased earnings by $0.05 per share. In addition, other items combined to decrease earnings by $0.01 per share. Coming to sales, year-to-date weather and leap year adjusted electric sales decreased by 0.3% and natural gas sales increased by 1.7% as compared to 2023. Please note that we have revised our projected electric sales growth to 1% to 2% for the year, largely due to declining use per customer and timing delays for expansions for some of our large C&I customers. However, we can certainly expect long-term electric sales to grow 3% annually. During the quarter, we also made progress on a relatively light rate [ calendar ]. In April, the Texas Commission approved our electric rate case settlement without modification. The settlement reflects a rate increase of $65 million based on the black box settlement which includes an ROE of 9.55%…

[Operator Instructions] Our first question is from Nick Campanella with Barclays.

Thanks for all the information today. I guess a couple of questions to kick it off. You have a lot of resource plan activity going on across SPS and the RFPs seeming like they're coming out this summer. Just how are you kind of thinking about competition for capital within the current CapEx plan now that you're seemingly accelerating some resiliency plans at SPS and NIPSCO maybe you can kind of remind us what's incremental [ versus not? ] And then also just touch on your financing plan and [ it needs.]

Yes, certainly, Nick. If I go touch upon all that the multiple parts of that question, just please be feel free to follow up. Absolutely we're pretty excited about the upcoming RFP and SPS. We talked about it before seeking a range of generation between 5,000 and 10,000 megawatts combination of renewables and dispatchable firm capacity. And we'll look to launch that RFP in July. It's a little bit of a longer timeline. So I'll help you understand in terms of how -- what's underlying. We do expect to file CPCNs in the summer of 2025. So summer of next year with decisions in Q1 of 2026. So that capital really will be kind of in the '27 to 2030 type of spend time frames. So I think [ it was really elongating, ] adding to the sum of the back end over 5 years but elongating our growth opportunities beyond their 5 year and what we're seeing there. So that's how I think about that capital, but really great opportunity and excited to get started on that. You touched a little bit on that. Absolutely, we're looking to continue to invest in resiliency and risk mitigation spend. Just want to note, we have about $10 billion in our current CapEx spend around distribution and transition resiliency. But as we look to file our Colorado [ WNP ] here later in this Q2, there will certainly be incremental investment needs related to reducing our real wildfire risk. So we'll evaluate all of that within our kind of current normal cadence when we come back in October of this year to provide a kind of roll forward for a '25 to '29 plan, and we think about competition for capital. I think as we sit here today, we're very [ comfortable -- comparable ] with -- I reiterated we'll be at or above the top end of the 5% to 7% range. I think just looking at all the opportunities we have in front of us with rate base of [ opportunities ] above 9%. And we'll let the finance that as we always have been. I think it's important to maintain a strong balance sheet and important to keep that going forward. And so we'll look at it financing incremental growth with accretive equity at that kind of 60%, 40% range. So I hope I touched on everything you're asking about.

I think I'll just add 1 thing on the Brian's comment. I think you asked about sort of relative competitiveness of the company. We would expect to offer in our own development projects into the SPS proposal, and we've proven that we -- with our scale and utility-owned wind and our growing expertise in solar and storage, we think we would be very competitive for some of the generation in Southwestern Public Service RFP process.

Got it. That's really helpful. And then I guess just -- and you did hit all the points. To put a finer point on the equity needs, I guess, do you just see really kind of no change to current plans, even with the multiple a little bit lower here?

Yes. So the way we think about it, obviously, like I said and reiterated where we expect to be within the growth range. And that takes into account our lower multiple impacts over the past quarter, certainly. As I mentioned, we think about the significant investment opportunities going forward. And it's important to have a strong balance sheet. We try to maintain that strong balance sheet. But obviously, you will look at what is that that's on balance sheet gives us to some timing flexibility from an equity issuance perspective. And obviously, we'll evaluate that and obviously, we'll evaluate whether there's potential timing flexibility our own capital in the near term. But I think overall, as we think fundamentally, everything is intact from a long-term perspective in terms of maintaining a strong balance sheet and funding the investment needs for the clean energy transition with equity as we need to maintain the balance sheet.

Our next question is from Steve Fleishman with Wolfe Research.

So just on the Texas fire. You mentioned the legislative report coming out in May. Just what should we expect to be coming out in that? Is that -- who caused it? Or how should we think about what's going to come out in that report, like we focus on?

Look, at a macro level, I was pretty encouraged by the process we went through with the Texas House and the committee. I think one of the tenets of good risk mitigation is involving all the stakeholders who have a hand in doing that. And I think the committee hearings were a pretty good example of getting all -- mostly all of the interested parties and participants in our [ room ] proactively talking about the issues. And on balance, I think the sessions were productive, still the committee was looking to be prospective and gathering information for future solutions. And I think that's how I'd expect to report in May to come out. I think we'll see stuff on recommendations for utilities, emergency responders, proactive things that we're doing in the counties to mitigate fire risk. I think there's already [ tend to say ] for a service report on causation. I'm not certain we see something else from the committee on that. But I think the report is going to be in line with the sessions themselves with constructive recommendations for how to proceed going forward.

Okay. And then just on the damage estimate that you took as you've noted, I think, in your release a lot of kind of what's in there, what's not in there. One clarification just is how about not punitive damages, but noneconomic damages. Is that in your estimate or not in your estimate?

I think, yes, Steve. I'll handle this one, and I'll give you [ key helpers], obviously, we'll point to our disclosures. But I'll give you a little bit more color in terms of that $215 million in the lower end of.

Yes, that was great.

And here's very large that some of our pockets it includes. Residential properties and related losses, cattle and feed, agricultural structures and fencing, noneconomic damages and then a number of other items. So obviously, this is subject to changes again additional information since we're still early in the process.

That's helpful. And then just on a follow-up on the question about equity. Just given some of the overhang that's been caused by this, how are you -- are you kind of revisiting like other options of getting equity than just issuing it? Are there asset sales or other things that you might consider? Or is that just not as attractive as just funding with equity?

Obviously, it's something you'd expect. Bob and I to evaluate in the normal course, what other options are there. I think we've been -- what you've seen from us is that we were a pretty straightforward conservative financing plan from a company perspective. So I don't -- I think right now, that's our current plan of action. I think I've been on record about not at all interested in minority interest sale in the line. So that's our fair plan of action as we sit here today.

Okay. And then last thing on the data center growth. So just on the facility at the old Sherco site, how was that being served? And then just, Bob, you mentioned talking to a lot of others. Could you just talk to kind of how they're viewing your territory and just making sure you're able to kind of do this in a way that is kind of good for the broader customer base?

That's a great question. In the conversation and Steve, and it's very topical, both inside the walls of the building as well as around the industry. On your specific questions with regard to the Sherco site, the site get powered with grid energy. And as you know, we're the first company to commit to being a 100% carbon-free electricity. So we are a significant importance in the renewable [ knowledge ] system, and they will benefit from all our system actions. More broadly, as we look across our footprint in the company, we think, depending on the operating company, we have really attractive dynamics for super scalers and other data center and high energy use customers. And whether it's very low-cost C&I energy in the Southwest or [ knowing ] weather and high renewables in Colorado or a similar footprint here in the Upper Midwest. I think that we're having conversations across our footprint. And I think we've got both access to water transition infrastructure, land and energy, and clean energy that they find attractiveness. So we've got a significant amount of interest from super scalers and others and then look forward to sharing more of that as we develop our forecast.

Steve, I just want to -- just add a little bit of color to that. I think you kind of hinted that, how do we think about it from a current customer perspective [ build ]? I think as we bring on new data centers and is something we did with Meta and the approval of Meta in Minnesota. We make sure it's a win-win for our existing customers. That's really important as we continue to move forward with this significant opportunity. And I think there's an opportunity there to work with our policymakers and regulators, to help drive economic development within the right context and then also ensuring that we can move quickly because you will need to build out infrastructure both on the generation side and the wire side that can serve some of these significant opportunities that we're seeing over the next 5 to 10 years.

Our next question is from Jeremy Tonet of JPMorgan.

Just want to continue with the data center question with one more finer point here, I guess, as it relates to SPS, just given the need for power and given the very cheap natural gas in that area, I don't -- wouldn't necessarily think of SPS as a place that would -- data centers would target, but just wondering if what you're seeing there if cheap Power is a draw? Just any thoughts in general?

Yes. Jeremy, I think -- I mean, as Bob has mentioned, we're seeing data center interest across all our service territories. And so service are preferred to have maybe a little different point of attractiveness. And then you hit SPS as on the lowest C&I rates in the country. So interest there. But I would say the other significant growth that we continue to see in SPS, and this is really what you're seeing come through our numbers now when you look at the year-over-year growth from the C&I perspective is the oil and gas expansion in the Permian Basin there and [ averaging ] they're doing from an electrification perspective. So right now, that's the near-term growth of and SPS with longer-term data center opportunity we're discussing this with some data centers down there. We also have a fantastic renewable resources down there from a wind and solar perspective, a little bit leads to that. When we talk about that RFP coming out in SPS in our resource plan, those are the reason why we have a range of 5,000 to 10,000 megawatts and I'll try the range is ensure that we enable some of the growth that we're seeing.

Got it. Certainly, New Mexico, at the low end of the cost curve for production in North America there. So maybe continuing with Texas a little bit more and following up on the wildfires. Just wondering if Texas caps noneconomic damages or just any other details you could provide there?

Yes. Right now, there is no cap on noneconomic damages in Texas. There is a cap on [ punitive damages ] this 2x economic damages falls up to [ 750k ] cap for noneconomic.

Got it. And then looking forward to the Colorado Wildfire Mitigation Plan filing, there's been some press in the state around recent deenergization in Colorado. Can you speak to the opportunity for sectionalization or other efforts to reduce customer impact? Any other nuances to the filing you could share with us?

Yes. Jeremy, it's Bob. Thanks for the question. First, I'm really proud of what the team did in Colorado in executing on behalf of public safety during a volatile weather event. As you can imagine, the -- [ because we have the second ] file on our wildfire mitigation plan, it's going to have a lot of continuation of the existing plan and probably incremental areas that we'd be looking for. But as I think about the big buckets of opportunity there, really early warning capabilities. We've already sold 21 panel cameras, but I think there's a real opportunity for increased early warning capabilities with AI-powered cameras as well as weather stations in and around our territories and our equipment. Obviously, we have opportunities to improve our operating capabilities in public safety power [ shutoffs ], as well as even the power line enhanced power line safety settings. But we're executing those today, and we're doing a pretty good job. We have more work to do there. I think about the third bucket and where your question leads to is sort of asset resilience capabilities and we can continue to expect our poles and wires, replace stuff and maybe accelerating some of that. But I think [ we've also ] system resiliency, and this gets back to [ what ] your comment on sectionalizing. We've done some of that. We have a real opportunity to do that more, both our intelligence at a granular level of weather and what's happening in weather as well as our ability to control our system at a more micro level to mitigate customer impact is a real priority for us in this plan. And lastly, given as part of the plan is the public policy opportunity that we might have to protect our customers. So big buckets there, but hopefully, I got to your sectionalizing question as well as asset [ harving ] like undergrounding, covered conductors and other pieces of both transmission and distribution systems as we think about protecting public safety is a priority for us.

Got it. Very helpful, there. And just a last one, if I could, as it relates to gas cases in Minnesota and Colorado, any updates there that we should be thinking about or conversations with stakeholders and regulators on those cases and how you feel about those cases.

Yes. And just I'll get on first, the Minnesota natural gas case because that's probably the one that spurred us along, given that we just received intervenor testimony and the Department of Commerce recommended a $44 million increase of a 9.4% ROE. We have hearings in mid-July, but we'll certainly look [ into this ] opportunity to engage with our stakeholders to see if we've reached settlement, which we did in the last Minnesota gas rate case. So we'll look to engage, like I said, here is our July. So from now until July, we'll look to engage there. On the Colorado side, we're still pretty early in the process. We haven't received intervenor testimony yet. The procedural schedule just came out. So for us, it will be that the settlement -- we get intervenor testimony in mid-July. We get opportunity, there's a settlement deadline at the end of August, and then we don't reach a settlement, we'll be hearing in mid-September for the decision in Q4.

Our next question is from Carly Davenport with Goldman Sachs.

Thanks for all the details so far. Maybe just on the resiliency plan filing at SPS that you expect in late '24. Can you just remind us of the timing to getting that ultimately approved and when that spend would come into play? And then I guess any early views on kind of the sizing of that potential filing or in addition to the wildfire mitigation piece that you flagged what other buckets of spend do you think will be important there.

Carly, it's Brian. As I said, we're just looking to put that filing together, it will be late in Q4. So from a timing perspective, you probably into Q3 of the following year for it to get approved. So I think from an overall perspective, I mean, if you look at some of our kind of just distribution spend in SPS and you look at our 5-year capital plan, and what could be [ albacore ]. Obviously, we're currently focus on the Colorado WNP and we'll take a lot of those programs and apply it to SPS, but tailored because SPS is a very different geography than call it Texas is very different geography when we think about what should we be doing to have risk mitigation from wildfire perspective, and so we'll tailor it. But I think we'll give you more color as we get further development of that resiliency plan later this year.

Got it. Okay. That's helpful. And then the follow-up is just on O&M, nice benefit during the quarter there. Is that just a function of kind of year-over-year timing? Or is there a potential downside to that annual guidance on O&M being up 1% to 2% for the year?

Yes, good question. I think from our perspective, really have, as you kind of noted, we haven't changed our guidance for the year-end even though we had a significant quarter-over-quarter change. So I look at it more from where we are from a budget perspective which you don't see. And we're slightly has our budget for the first quarter. But from where we sit, I think it's early in the year, that our goal is just to land within that 1% to 2% O&M guidance range as [ we sit here.]

Our next question is from Anthony Crowdell with Mizuho.

Just 2 quick ones. One is any major change in the company's cost to ensure the company's operations.

Anthony. Yes, that's a good question as we think about it. So I assume you're asking specifically about wildfire insurance or excess liability.

Yes, I do. Yes.

I think yes, all our other programs, I would say, are relatively stable or don't have significant challenges. As I think about wildfire insurance and just let's say for the wildfire insurance versus the overall access liability is they are 2 different things. I think this is a very key industry issue, both at the state and federal level. And if you've been following with EEI, this is one of their top priorities this year from a federal perspective. In terms of how we think about getting a focus on [ damage ] limitations? Is there insurance backstop or solution at a federal level and think about specific criteria for wildfire mitigation plans in exchange for liability protection. So those are some of the broad buckets EEI, [ you're thinking about. ] Obviously we're thinking about it from a state perspective as we look forward. Our legislation sessions are wrapping up here or have already wrapped up this year. So what we will do is we'll look to work with our policymakers in our state's kind of from here for as we think about next year's last session to see if there's any state level solutions that we think about it. Now specifically from a company perspective or a commercial insurance perspective, even prior to Smokehouse Creek, we were seeing [ clinical ] understanding that from some of the commercial carriers, they were already looking to reduce their capacity and not just for us but overall, their exposure from a wildfire insurance perspective. And so that's going into the next policy cycle. These are annual renewals. So our renewal is in [ tele ] Q4. So we'll give more visibility into it, but I'll give you some -- a little bit of a sense of where we sit today as we have above $500 million of coverage, and we're paying about a $40 million premium for that coverage, and that's total excess liability, including wildfire. But I would expect that covers that capacity to come down and I expect premiums to be pressured, absolutely. So like we -- like I said, we're still a ways away from our renewal. So again, we'll provide more color as we get close to, but that's where we sit today.

Great. And then just one last one. I think, Bob, you had mentioned pursuing some proactive legislation for wildfire risk. Would you be willing to let like hey, the maybe top 3 things? Or what are your goals in getting the legislation passed, like what's -- would you like to be included in your maybe first wave of legislation pass, whether it's limits on noneconomic liability? Or I'm just curious, any color on that you would provide.

Anthony, thanks for the question. As Brian said, this is a big and emerging national issue. And we've seen pressure both on the retail side of insurance, homeowners struggling to get homeowner insurance that protects from wildfire risk, and you're seeing it in the commercial side on the wholesale side as well. So we've been active at the federal level, particularly talking about sort of the national opportunity we might have here. I think about there are [ precedents ] at the federal level, you see something like where goods are really important for everybody like the FDIC or FEMA or for flood insurance or other type programs or even nuclear backstop insurance from the price standard [ connect ]. So there's several [ precedents ] around protecting national goods like banking access, like access to affordable electricity. So as I think about where the federal government could help, is this probably applies to the state level, too, which is having approved wildfire mitigation plan that can be reviewed by an agency of a same or federal level. And then if you're in compliance and current on that plan, then you have access to some form of backstop insurance program that provides protection and maybe access that maybe the current carriers are providing at an attractive or an affordable cost, as that group of entities comes up to speed on risk and risk mitigation. So I think those are the big parameters that I would think about. And certainly, there's state precedents, you can take [ UTA ] or Nevada or California laws and seen programs where companies along with their regulators and legislators are coming up with programs that provide more cost-effective backstop for companies to bring down the risk. And as I said in my prepared remarks, at the end of the day, we have an enormous energy transition that we need to fund and making sure that our cost of capital is attractive to fund that keeps the transition affordable for our customers and for the country. And so I think it's important that we manage this risk, we manage the financial cost of this risk, and those are some of the areas that I would think are most important for us to go after.

Yes. Just to add a little bit to that. I think as Bob talked about importance of that insurance backstop and filling a WNP, but I think there's also an aspect there is if you're following [ the plans of the WMP to the presumption of routes ] which I think is important, too, and also looking at a limit job liability or limit on damages.

Our next question is from Sophie Karp with KeyBanc.

I have a couple of questions, today. So on the Texas fire, can you clarify how, I guess, the claims system and the litigations that's been filed against you are going to well work together for [ like I have a better word ]. Like are people who are litigating, not filing claims or can they do both? Like how does it work?

Sophie, yes. I mean, so first of all, I'll talk about the claims process and still early, but we obviously encourage people to submit claims. It was [ 46 ] so far. But how it works is anyone can submit a claim, and when they submit that claim, they don't waive their right to pursue a lawsuit. But if there is a claim settlement, then that absolves or release any other potential lawsuits that they could file. So that's how it could work, but also from a -- if someone files a lawsuit, it certainly could be an opportunity to settle through that lawsuit too. So -- but like I said we are encouraging people to enter the claims process, and we've settled a couple already that are in active settlement discussions with others.

Got it. Got it. And then my other question on Colorado and next to the gas got this clarification from the commission there that they want the utilities to pursue non-pipeline alternatives, I guess, for gas in Colorado. Could you comment on that and just sort of how that will impact your investment in that state, particularly with gas?

Sophie, it's Bob. Look, we've got a number of gas proceedings in Colorado over the last year. I think you're referring to our clean heat plan. And we think that was an industry leading or very unique filing and proactive on the company and the commissions' part to move forward that. Big picture, I think they're sitting, they're looking at the gas system as an effective delivery of energy but making sure that if we've got capacity need from a growing customer base out there that we're looking at something other than pipeline alternatives. And we're actively engaged in that and something we've always as a company looked at. But I don't think it's going to affect necessarily us going forward in terms of significant changes in capital forecast for where we sit today. But maybe a more proactive approach with stakeholders and communities about finding maybe different types of solutions to solve the similar issues, whether that's more beneficial electrification, more powering of homes for home heating and other needs. And we're certainly engaged in that process with them.

So the non-pipeline alternative is basically a word for electrification? Or could that be something like increasing like compression station output or something like that? Like just kind of -- what is that?

Yes. Sophie, so actually, you bring up increasing compression station, it's certainly an opportunity. I think generally it's thought of -- what are the electrification opportunities. Say, there's going to be a new neighborhood builds. What is the alternative, it's -- okay, you saw that [indiscernible] gas and expansion of a pipeline or what are the alternatives from electrification perspective. So that's probably the best way to think about it. I think if I were a [ bucket ] out there, and it's a very important project for the governor and the geothermal whether at a district level or a residential level or community level, exploring the possibilities of geothermal in the state are something we're willing to work with or we're going to work with our customers and our stakeholders in the state. So it's not necessarily just electrification. It could be more different forms of heat for homes and communities.

Our next question is from Ryan Levine with Citi.

What role do you see PSPS having in terms of your wildfire mitigation plans? And are there any initiatives that you could take proactively to gain more stakeholder support to be able to implement that on a go-forward basis?

Ryan, it's Bob. Certainly, we think of PSPS as a kind of a tool of last resort. But public safety is our priority in making sure that our communities are protected in volatile wind events and wildfire risk case is really important to us as well. So are there opportunities for us to gain more public support, of course, there are. And the ways that we can improve our own performance as we, [ again ] more muscle here, because this is something that I don't love to do. But when we have to do it, I think there's areas of improvement that we as a company have identified and are working with our Colorado Commission to do so. And that includes early notification, excellence in outage maps, something I talked about earlier on segmentation. So all this comes as a function of our wildfire mitigation plan. If we have better early warning devices like cameras, weather stations, our ability to effect on a more localized level where the risk is and where the outage would need to can be can get better. But that's going to take some time, some effort, some partnership with our agencies and stakeholders in Colorado for sure.

And then shifting gears on the financing plan as security prices continue to move. How do you look at maybe assessing a time to come to market for capital raises. I think in earlier question, you suggested the avoidance of asset sales, but any color around response to maybe different security prices and how that can impact your financing plan?

Ryan, I think a little bit as the color I provided before is obviously, overall, we believe our growth plans from an investment perspective, a long-term EPS growth perspective impact and same in our chance of maintaining a strong balance sheet. What I talked about not necessarily in avoidance, but how do we look at the timing of equity and the timing of capital, particularly on the timing of the equity, given that we have a strong balance sheet, is we can look at being flexible there. But I would expect that when we're investing $39 billion of capital at a 9% rate base growth. That does come with the financings. And generally, our prior financing year in and year out, that's aligned with the capital spend. So that's the best way to think about it. But obviously, we'll understand what happened to the cost of equity here. And also with the cost of that we have gone off [ over ] the short term in terms of our [ churn ] rates have gone. So but that's factored into all of our plans, as I sit here today and talk about reiterating on being at or above our 5%, 7%.

Okay. And then just last question, in terms of CapEx outlook, given maybe acceleration of infrastructure build-out in North America. Are you seeing any indications that maybe costs will come higher for what's already slated to be built in the coming years. Any color you could share on that?

Yes. Ryan, it's Bob. Look, I think as we see reindustrialization, we see data center build-out. Certainly, there can be cost pressures that come from basic materials and construction materials like concrete, steel, and things like that. I think we take our best estimates when we put our capital forecast out, but something we watch pretty closely. Labor is another area of opportunity there. I think that one of the things we're very focused on as we see an energy sector transition, making sure that there's a pipeline of talent starting early on in trade schools and partnering with our labor unions and with business partners there, to make sure that the pipeline of [ linemen ] and pipe fitters and welders are capable of keeping up with the demand. So we try to send early demand signals to them, and it help them recruitment processes across our territories and really partner on a national level to make sure that we're seeing enough trade come into the business broadly that we don't see a an immense amount of labor pressure.

Our next question is from Paul Patterson with Glenrock Associates.

Just -- I apologize if you guys have gone over this. But just on the [ NUC ] life extension, could you remind me what the impact financially is. Have you guys already -- it varies from company to company how the depreciation impact is reco -- when it's recognized, et cetera. I was just wondering if you could review that for me shortly, quickly if it's not a problem.

Paul. Yes, you're referencing the resource plan that we just filed here in Q1 related to the extension of Monticello. So Monticello we already extended to 2040, and we've recognized that depreciation in terms of lower customer bills. So we're looking to extend [ Monticello] from 2040 to 2050. And then Prairie Island both units [ 20 ] years, so we'll go from the early 2030s to the early 2050s. We have not recognized those 3, call it, lower depreciation rates in the customer [indiscernible] rate case. We'll wait until we get through this proceeding to get approval and like we wrap it into our next rate case. So this proceeding is probably going to take 18 months play at the very least. So it's going to be probably [ held before ] we can plow that back into customer rates in terms of lower depreciation.

Okay. Great. But just is there any potential for regulatory -- sort of positive regulatory lag? Or does it -- are you guys planning on having immediately impact customer rates?

No, this would likely just be captured either how to defer here or likely if we're in a multiyear plan to have a [ true ] mechanism part.

Thank you. As we have no further questions in the queue, I'd like to turn it back over to CFO, Brian Van Abel for any closing remarks.

Yes. Thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions.

Thank you very much. That concludes today's conference. You may now disconnect. Hosts, you may stay on the line.