XEL - NASDAQ

Hello, and welcome to Xcel Energy Third Quarter 2025 Earnings Conference Call. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I'd like to call you over now to Roopesh Aggarwal, Vice President, Investor Relations, to begin today's conference. Please go ahead, sir.

Thank you, George, and good morning. Welcome to Xcel Energy's Third Quarter 2025 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 third quarter 2025 results and highlights, share recent business and regulatory updates, update our 5-year capital and financing plan, and provide updated 2025 assumptions and 2026 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. In the third quarter of 2025, Xcel Energy recorded a charge of $290 million or $0.36 per share, reflecting the settlement in principle reached with plaintiffs in the Marshall wildfire. Given the nonrecurring nature of this item, it has been excluded from third quarter and year-to-date ongoing earnings. As a result, our GAAP earnings for the third quarter of 2025 were $0.88 per share, while our ongoing earnings which exclude this nonrecurring charge, were $1.24 per share. All further references to earnings, drivers and variances in our discussion today will refer to ongoing earnings. For more information on this, please see the disclosure in our earnings release. I will now turn the call over to Bob.

Thank you, Roopesh, and good morning, everybody. In the third quarter of 2025, Xcel Energy continued our commitment to our customers, our investors and our communities to make energy work better. During the quarter, we delivered solid earnings of $1.24 per share. We invested over $3 billion and $8 billion year-to-date in resilient and reliable energy infrastructure for our customers. We reached a comprehensive and constructive settlement with plaintiffs in the Marshall wildfire that helped our customers and our communities to move forward. And we accelerated our wildfire risk reduction efforts to protect our communities from volatile weather. Based on our results through the third quarter, we are reaffirming our earnings guidance for 2025 and remain confident in our ability to deliver on earnings guidance for the 21st year in a row, one of the best track records in the industry. As per our usual Q3 rhythm, today, we are introducing our updated 5-year infrastructure investment plan designed to serve increased energy demand, make needed investments to strengthen our transmission and distribution systems, provide a cleaner and more sustainable energy portfolio and to keep energy safe, reliable and affordable for all of our customers. In total, we expect this plan to deliver 7,500 megawatts of zero-carbon renewable generation, 3,000 megawatts of natural gas-fired generation and almost 2,000 megawatts of energy storage to ensure system reliability, 1,500 new high-voltage transmission line miles to support demand growth in regional delivery and approximately $5 billion of investment in our distribution and transmission systems to improve resiliency and reduce future risk from wildfires. We're able to accomplish this plan because we have one of the best utility, development and supply chain teams in the industry. And in combination with our strong balance sheet, we can deliver infrastructure timely and affordably for our customers. In connection with this forecast, we have safe harbored all renewable and storage projects in our base capital plan and expect the same for the projects in our incremental plan to ensure that we can capture available tax credits and help keep customers' bills low natural gas CTs on order, which will provide over 4 gigawatts of natural gas generation to help ensure reliability and affordability. Our ability to deliver infrastructure with excellence in our strategic geographic advantage allows our customers to benefit from some of the lowest energy bills in the country. Over the past 5 years, our residential electric and natural gas bills have been 28% and 12% below the national average, respectively. Our residential electric customers in Colorado have the lowest share of wallet out of all 50 states. And the average residential bills in our other states occupy 5 of the next 11 spots. Since 2014, our residential electric and natural gas bill growth has been well under the rate of inflation. In fact, a typical residential Xcel Energy electric and natural gas bill is 14% and 20% lower than it was in 2014 when adjusted for inflation. Our Steel For Fuel program has saved customers nearly $6 billion through 2025. And our one Xcel Energy Way Continuous Improvement Program has realized over $1 billion in cumulative savings since 2020, while improving customer and operating outcomes. Our industry-leading demand side management programs have saved enough energy to avoid building 30 average-sized power plants. And as customers continue to electrify transportation in other parts of their lives that can further reduce their overall monthly energy costs with lower electric rates. We also continue to support critical programs to help our customers who may need assistance with their energy bills. Since 2024, Xcel Energy has connected over 200,000 customers with almost $300 million in financial resources. We're also exploring new opportunities to help even more customers across our jurisdictions, including proposals in our current Minnesota, Wisconsin and upcoming Colorado rate cases. Moving to the topic of artificial intelligent -- artificial intelligence, opportunities for Xcel Energy go well beyond our ability to power data centers. Of course, our load interconnection queue continues to grow even as we move some of our backlog into the contracted category. But across Xcel Energy, we are in early stages of using AI in the business to bend the cost curve and to provide improvements in both customer satisfaction and operational outcomes. We're harnessing AI to empower our people, accelerate innovation and build a smarter, more resilient energy future for our customers and communities. Automated analysis across our diverse enterprise data sources is delivering actionable insights that strengthen security, improve operations and planning and drive process improvement. We're bridging knowledge gaps in empowering faster, more informed decision-making across the organization. And we're leveraging AI built by others to advance our business, including high-resolution imagery to transform how we inspect and maintain our distribution infrastructure. Through drone-based data collection and automated image analysis, AI-enabled processes can identify defects and assess risks and enable our teams to prioritize maintenance with greater speed and accuracy. And with wildfire mitigation, AI is transforming our risk models. By leveraging internal models and tools like Technosylva, we significantly improved our model coverage and accuracy as well as reduced analytical times to a fraction. This means faster, more reliable risk assessments protecting communities and infrastructure in real time. AI is truly an engine that's driving enterprise-wide innovation and transformation in Xcel Energy, making energy work better for our employees, our customers and our communities. Moving to Marshall. On September 23, Xcel Energy, Qwest Corporation and Teleport Communications America reached settlement agreements in principle that resolve all claims asserted by the subrogation insurers, the public entity plaintiffs and individual plaintiffs. And while Xcel Energy does not admit any fault or wrongdoing and disputes that our equipment caused the second ignition, we believe this provides a positive outcome for our communities and our investors. Looking forward, Xcel Energy continues to significant progress to mitigate risk from wildfires and extreme weather with public-facing wildfire mitigation plans in each of our states. This includes investments in situational awareness tools like weather stations and Pano AI cameras, advanced meteorology, fire science and AI-enabled risk modeling tools, hardening our systems and deploying advanced wildfire safety operations and PSPS capabilities and operational actions, including daily stand-ups to address the threat from extreme weather across every part of our system and taking proactive actions as appropriate. Finally, each September, Xcel Energy employees and community members come together to honor the spirit of service. This year marked the 15th annual day of service for Xcel Energy with nearly 3,000 volunteers from across the company and the communities we serve coming together to support local nonprofit organizations. Together, volunteers dedicated almost 9,000 hours of service across more than 100 projects. This is one of my favorite days of the year and it exemplifies the spirit and dedication of our employees and partners who show up every day to provide safe, clean, reliable and affordable energy to our customers and our communities. With that, I'll turn it over to Brian.

Thanks, Bob, and good morning, everyone. Starting with our financial results, Xcel Energy delivered earnings of $1.24 per share for the third quarter of 2025 compared to earnings of $1.25 per share in the third quarter of 2024. The most significant earnings drivers for the quarter include the following: Regulatory outcomes in electric and natural gas sales growth increased earnings by $0.18 and higher AFUDC increased earnings by $0.08. Offsetting these positive drivers, higher financing costs decreased earnings by $0.15, reflecting the funding of our infrastructure investments and our financial discipline of maintaining a strong balance sheet. Higher depreciation and amortization decreased earnings by $0.09, driven by increased system investments and the higher O&M expenses decreased earnings by $0.05. Turning to sales. Weather normalized and leap year adjusted electric sales increased 2.5% through the third quarter of 2025, driven by strong residential sales growth across all OpCos and increased C&I load in SPS and PSCo. During the third quarter, we also energized Meta's new data center in Minnesota that will continue to scale in the coming years. In turn, for full year 2025, we continue to forecast 3% weather-normalized electric sales growth. In the third quarter, O&M expenses increased $37 million relative to 2024. This increase was largely driven by a $25 million increase in health and benefit costs for the quarter. For full year 2025, we now forecast that O&M expenses will increase 5%. Shifting to RFP and rate case activity. In Colorado, in partnership with Colorado Energy Office, UCA and commission staff, we issued a near-term procurement for 4,000 megawatts of renewable resources and 500 megawatts of thermal and firm dispatchable resources. This RFP is intended to accelerate the deployment of a portion of our Colorado IRP to capture production tax credits before they sunset. Bids were received this month, and we expect to file a recommendation in December 2025 with the commission decision by February of 2026. In SPS, we issued an all-source RFP to meet an 870-megawatt accredited capacity need. This represents 1,500 to 3,000 megawatts of nameplate capacity that will be online by 2032. Bids are due in January 2026 with an expected portfolio announcement by June 2026. In October, the Wisconsin commission verbally approved NSPW $725 million acquisition of the 375-megawatt Elk Creek solar storage project. Tomorrow, we expect to file a natural gas rate case in Minnesota requesting a $63 million total revenue increase based on a 10.65% ROE and a 52.5% equity ratio. Interim rates of $51 million will also be requested effective January 1, 2026. Regarding future cases, we expect to file a Colorado Electric and Natural Gas and New Mexico electric rate case later this year. Moving to data centers. We remain on track to contract the remainder of our original 2 gigawatt base plan by the end of the year. In addition, we have updated our total base plan to include approximately 3 gigawatts of data center capacity. Additional projects included in the base case, we consider high probability and expect of contracted by 2026. This will drive 3% of the 5% assumed annual sales growth in our 2026 to 2030 capital plan. We also continue to make strong progress on the Small Coast Creek wildfire claims process. We've resolved 212 of the 254 submitted claims, and we have settled or dismissed 21 of 34 lawsuits. We've updated the low end of our estimated liability to $410 million. We have made significant progress in the third quarter with the resolution of the 3 largest claims by acreage. We have committed $360 million in settlement agreements. So considering the low end estimated liability of $410 million, we're estimating approximately $50 million more on top of the $360 million that has been committed based on our current information. As a reminder, we have approximately $500 million of insurance coverage. Shifting to our investment plan. Today, we are providing an updated $60 billion 5-year capital expenditure forecast, which reflects annualized rate base growth of approximately 11%. These investments are critical to serving growing electric demand, meet clean energy goals and ensure safety and reliability of our system. We also have an additional pipeline of investments to our $60 billion plan, specifically from our recent RFPs across jurisdictions, incremental data center load and transmission projects from future MISO and SPP tranches. We're excited about our growth opportunities and will continue to finance accretive growth in a balanced manner. This year, we have issued or contracted approximately $3 billion of equity and equity-related content between our ATM program and our 2025 hybrid financing. Our updated '26 through 2030 capital plan reflects an additional $23 billion of debt and $7 billion of equity content. We anticipate that any incremental capital investments would be funded by approximately 40% equity content and 60% debt. We continue to maintain a balanced financing strategy, which includes a mix of debt and equity to fund accretive growth while maintaining a strong balance sheet and credit metrics. Moving to earnings. We're reaffirming our 2025 ongoing earnings guidance range of $3.75 to $3.85 per share. We're also initiating our 2026 earnings guidance range of $4.04 to $4.16 per share, which reflects approximately a midpoint of 8% growth from the midpoint of our 2025 guidance. Key assumptions are detailed in our earnings release. We are updating our long-term EPS growth objective to 6 to 8-plus percent with expectations to deliver 9% growth on average through 2030. This update reflects our significant investment needs to serve our customers and drive state policies along with confidence in our financial outlook. 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 '26 to 2030 forecast period, we expect our dividend payout ratio will trend towards the bottom end of our updated payout ratio range of 45% to 55%, which allows greater financial flexibility and dry powder for the future. With that, I'll wrap up with a quick summary. We continue to lead the clean energy transition, ensuring safe, clean and reliable service and keeping customer bills as low as possible. We announced an updated 5-year capital investment program that provides strong, transparent rate base growth and significant customer value. We reached a constructive settlement in the Marshall wildfire and continue to make investments to reduce risk to our system and communities from extreme weather. Our customers have and will continue to enjoy some of the lowest bills in the country with our investment plan. We maintain a strong balance sheet and credit metrics using a balance of debt and equity to fund accretive growth. We reaffirm our 2025 EPS guidance of $3.75 to $3.85 and have initiated 2026 EPS guidance of $4.04 to $4.16, which reflects a midpoint of 8% growth from the midpoint of our 2025 guidance. And finally, we expect to deliver 9% EPS growth on average through 2030. This concludes our prepared remarks. Operator, we will now take questions.

[Operator Instructions] And our first question is coming from Nicholas Campanella from Barclays.

Just wanted to be clear, '26 at the midpoint, you did about 8%, and I hear you on the 9% through 2030. Does that start beyond '26? Or is that how you're kind of viewing this year?

Nick, I'll take that. No, that includes 2026, so 9% over the next 5 years, inclusive of '26 guidance. So that 9% would be based off the midpoint of this year, so $380 million.

Okay. Great. I appreciate that. And then just one other clarification, $7 billion of equity in the plan. I know you talked about $1.3 billion already priced forward. Is that kind of net against that $7 billion? Or is it still $7 billion from here on out?

No. I think of it as we do is kind of $7 billion from here on out with our new '26 to 2030 plan. So if you kind of look at what we did this year relative to last year's plan, which had $4.5 billion in it and kind of take those 2 pieces, we're right online with kind of what we've been messaging around incremental capital that drives about 40% incremental equity content, so -- and feel really good about kind of our equity content plans and where we are in terms of manning our credit metrics and executing on the $60 billion investment plan.

Our next question is coming from Steven Fleishman calling from Wolfe Research.

So I guess first on just kind of the profile of the growth rate or growth. When you look at the CapEx plan and the rate base growth, it's very heavily front-end loaded and then CapEx actually falls right now, '29, '30, a decent amount. A lot of the other companies are kind of the opposite, where it's lower now, and it's like ramping up. Could you maybe just kind of talk to that? And is a lot of that just -- we just don't know some of these RFPs and other factors out in '29, '30.

Yes, Steve, I can take that. That one, I think you're exactly right in terms of -- we're always conservative of what we put in capital plan and our SPS portfolio [indiscernible] process in there for the projects that were approved by our Minnesota Commission in Q1 of this year. But it really gets to in that '29 and '30, we launched RFPs with Colorado SPS that we're pretty early in the process. And that sits in the kind of our additional pipeline bucket that is as we move through that process kind of into next year and even beyond that we expect there will be opportunities to fill in there, both generation to serve load growth for our customers, but also transmission that we expect to see out of SPP in the near term here. The next tranche of SPP should be a Q4 event that we get visibility in, but then also longer term on MISO Tranche 2.

Okay. And I know just maybe related, the -- at times you've given kind of some rough idea of the range of spending on the upside cases and those different things that you mentioned there. Is there anything you can share on the potential capital and the upside case, things not in here?

Yes. I would say the slide we have in our deck here for today, that's going to be a range of 6,000 to 9,000 total megawatts, we think out of those RFPs plus some transmission. We've always guided people to being competitive in our generation processes and winning about half of that plus that transmission. So I see a $10 billion-plus sitting in that pipeline, not all will be in 2030. Some of those generation processes run through '31, '32, but really good opportunity as we look at the low growth and the transmission needs in our system.

Yes, Steve, I think -- this is Bob. I think you're right in terms of shape. The earnings generally will follow the capital investment plan with some amount of lag in financing costs, and then we look to fill in the back part of our plan with some of the incremental opportunities that Brian had.

Next question will be coming from Jeremy Tonet of JPMorgan. It appears that he has just moved. We'll go to Carly Davenport. Okay, Carly, same thing. We'll go to Julien Dumoulin of Jefferies.

Can you guys hear me?

Yes, sir.

All right. Awesome, guys. Well done. Seriously. Look, if I can, just going back to where you left off with Steve, I'll just see it this way. Of those different points that you raised here, what are the more substantive pieces? I mean it seems like the SPP element could be more substantive that seems more front-loaded a; and then b, the acceleration of some of these renewable procurements in light of tax credit expirations could be more substantive and lumpy and don't seem to be in there. But again, you tell me what are the bigger pieces that are not yet in that 60%. Again, you've laid out a whole bunch of them. I'm just curious which one moves the needle more as best you see it initially.

Julien, I'll start and then Brian can chime in. So a large piece of the SPP, RFP is embedded into our base capital plan. There's a second RFP for SPP capacity and energy that is not included in the plan. And then when I think about Colorado generation, we have really 2 RFPs sitting in front of the commission out there. We have a near-term procurement portfolio that's designed to accelerate and take advantage of renewable credits and that looks like a $4.5 billion -- sorry, 4.5 gigawatt plan. And then there's the just transition solicitation that's been in progress with the commission for a while, which we expect some amount of adjudication later this year or early next, which had somewhere between 4 and 15 gigs of generation needs and it -- there's a bit of overlap between the NTP and the JTS in terms of what's needed in timing. So I wouldn't count those as additive, but there's a big piece of Colorado generation that's likely to come in the '28, '29, '30 time frame that's not included in our base capital plan. And then there's a handful of smaller RFPs in the upper Midwest for generation that are not included in our base plan as well. Secondly, with regard to transmission, we have ITP and MISO 2.1 embedded in there, although they are longer-dated capital plans and longer-dated in service spends that will result in stuff drifting through this time period and into -- later into the early 2030s. And then there are subsequent ITPs and MISO LRTPs that are coming that are not also embedded in this plan. So I think about Colorado Gen being probably the biggest driver of back-end investment in this 5-year plan. And transmission that's not announced out of the SPP, ITP process is sort of the second biggest. Brian, you got anything to add to that?

Yes. No. I think just absolutely in the Colorado side, we're working through the process, is a really good engaging with our stakeholders to accelerate procurement for these renewable resources given that we have the tax credit cliff in 2030 so we should get visibility into that portfolio in December with a commission decision in Q1. We've got the bids in, robust bid pool working through that. And so that's one of the big drivers. But also as we work through -- as we think about longer term, is incremental data center opportunities and working with our stakeholders in our states in terms of driving economic development and low growth, that can drive longer-term generation and transmission needs, which wouldn't be incorporated, but that's just a longer-term opportunity that I know the industry is seeing.

Excellent. And I don't mean to -- but let me ask you it this way. The 6% to 8% plus versus the 9% that you guys have out there, is the idea that the 9% is sort of at this point in time and the 6% to 8% plus is designed to be for any eventual roll forwards or the sort of law of large numbers kind of drive some deviation from the 9% if you roll forward a couple of years?

Yes. Julien, we think about it this way is that 6% to 8%. Well, the 6% to 8% is what would you think about a long-term view on EPS growth, when you balance the investment needs of our system, the low growth we're seeing on opportunities and also affordability. But when we look at our current 5-year plan and the $60 billion of infrastructure projects for our customers, serving the low growth and the needs of our system, derisking our communities. That plus really represents the 9% that we see over the next 5 years. If that helps us differentiate in terms of how we're thinking about it.

Next question comes from Carly Davenport of Goldman Sachs.

Maybe just on the load growth outlook, looks like continued strength in SPS, which is great to see. And then a couple of the other opcos shifting a bit lower from the prior plan. So could you just talk a little bit about what's driving those moving pieces on load growth across the regions?

Yes. I think when we look at it, really, SPS continues to be strength in our oil and gas sector. We've seen that for years. this year out in New Mexico. We're going to see teens type of growth at this large C&I sector. And we continue to see that with electrification out of that industry in New Mexico. So strong growth there. Also, Fermi America is down in Texas and New Mexico. There's some opportunities there that we've talked about. And so we're seeing that. The other one is more just kind of shifting around potentially in timing of data centers as we think about it when they're coming in. But when you look at our sales growth across all opcos, all are in the, call it, 4% -- roughly 4% to 5% with SPS at 8% when we look at it. So we're pretty excited when we see our data center opportunity is really mixed across our service territory, strong opportunities in Minnesota working through some really good opportunities in Colorado and then we talked about some opportunities in Texas and New Mexico. The one other thing is -- thing I'd like to say is that 5% sales growth that we talked about, having the diversification is not all data centers. Only 3% of that 5% is data centers. So we also have 1.5% of that 5% is driven by the SPS oil and gas electrification, then we just have customer growth, residential customer growth. We're starting to see some electrification on the residential side. So that's about 0.5%. So really kind of diversified growth, which I think is important as we look forward.

Great. That's really clear. And then maybe just a follow-up on kind of the financing and the balance sheet. Seems like you're targeting kind of now 16% to 17% FFO to debt targets. I guess can you just talk about sort of comfort level there with the cushion versus downgrade threshold levels? And how confident you are in the past to kind of squarely getting back to that 17% level on a longer-term basis?

Yes, Carly. The way I think about it is, no, we have not changed our long-term view on our credit metrics in that 17% level. That has not changed. It's -- it's important to maintain a strong balance sheet and healthy credit metrics. Just when you look at our spending over the next few years, we kind of grow into that 17%. And so it's really just we designed our equity plan and our equity content plan to get back to that 17% in the latter part of this forecast, which -- and all of that, that is our long-term view. So that has not fundamentally changed from a credit perspective, maintaining our balance sheet, protecting our metrics. Just when you have this type of elevated CapEx over the next few years, there is some pressure there.

Next question will be coming from Jeremy Tonet of JPMorgan.

I just want to step into equipment availability a little bit more, if I could, such as transformers, transmission, 2 CGPs and components there. Just wondering if you could frame for us how long the queues are there? And I guess, how you see aligning that with new data center interest or contracts?

Yes. Great question, very timely and very strategic. I said in my prepared remarks, I'm really proud of the team here at Xcel Energy. I think we have the best team working on this. We have been very, very progressive in terms of securing the assets that we need to build the infrastructure that sits in front of us. You're absolutely right. Lead times have elongated, and I'll let Brian comment on any particular components. But we think that given our scale, our scope and our approach to our major vendors, that we have access to inventory and supplies maybe that others don't have. We've taken a very progressive shift in how we work with our vendors, making sure that they see our entirety of our capital plan, they can plan for the work that they do with us. We find out who's best able to serve us both on the services side as well as the equipment side, and we backward integrate them into our capital plan in a way that is both we protect ourselves from pricing side as well as we get certainty of equipment and certainty of labor in a pretty tight market. That's been the strategic focus for the team for a year or 2 as we saw the market start to tighten, particularly with data center build. And maybe I'll let Brian just comment on what we're seeing in turbines and transformers and things like that.

Yes. I mean, I think it's absolutely no secret in terms of where the turbine market is, call it, 4 years out. As I Bob, mentioned though, we've gotten ahead of it in terms of having those 19 turbines on order and that's one of the benefits of scale is we can order a significant amount of equipment knowing that we will use it somewhere in our system and being able to deploy it throughout our system with the low growth we're seeing. Main power of transformers is another one that's taken -- that's these large-scale transformers 345 kV you outsource a few years. So it's really how do you get ahead of it and make sure that you have the right supplier relationships, working through all the potential tariffs and supply chain challenges that currently exist there. But we feel really good about where we are. And also, I think about that also within the context of our safe harbor strategy. In terms of having all the equipment for both our base plan and then the incremental projects that coming out of our incremental plan and ensuring that not only are the safe harbor, but we're compliant. So we feel really good about our overall place from a supply chain perspective. That's on the equipment side. There's also a labor side of it, too, from an EPC perspective and ensuring that we have top tier EPC firms lined up, not only for this year or next year, but for our 5-year plan and beyond and having those key partnerships is really, really important and I think, a differentiator as we go to market here in terms of executing on our plan.

Got it. Very thoughtful process there. And I was just wondering if you might be able to align that a little bit more with the demand growth. It seems like the data center pipeline, as you described in the slides, stepped up quite nicely versus before. And just wondering what you see on the type of discussions and the speed to market world and how this all fits together.

Yes. Well, obviously, very strategic and timely as we watch our industry work very progressively to bring speed to power here and making sure that we energize this very critical national asset in terms of artificial intelligence and data center development. Not surprising. We've got great interest and our pipeline continues to build, and we continue to move stuff from highly probable into the contracted categories. We have some of the most affordable energy in the country, as I mentioned in my prepared remarks, we have an incredibly good strong development team. We're working through either ESAs or large load tariffs in all of our states and making sure that we protect our existing customers from the addition of new large loads, and we've laid out in the past, our principles around this in terms of cost causation and whose funding and if we trigger a transmission investment, new generation investments, making sure that we protect our customers along the way, and there's a net benefit for the entire of the system when you bring out some of these new large loans. I think that -- it should also be noted that I mentioned sort of strategic geographic advantage. In addition to low energy bills, we have enormous high clean energy content in our systems already. That's a very attractive component to these data center developers as well as their end-use customers. So I think that between our sustainability portfolio and where we're trending as a company across all of our states and making sure that we can deliver a cleaner energy product as well as a highly reliable and highly affordable product is very strategic as we approach economic development with data center developers.

Next question will be coming from Anthony Crowdell of Mizuho.

I just have, I guess, 2 super quick cleanups. I think to Steve's question, I think you mentioned about $10 billion of incremental CapEx. That is an addition or would be on top of current 9% EPS growth. Is that accurate?

That is accurate.

Great. And then this one, and I probably should wait for EEI, but just the time is right. You're currently talking 9% growth, but you've kept the guidance at 6% to 8% plus. Just curious on why not readjusting the 6% to messaging that shows all the potential upside that you have? Like it doesn't even seem likely that you hit 6% or even 7% like I'm just curious on the thought process of keeping it 6% to 8% plus.

Yes. Anthony, look, we balance a lot of perspectives as we think through this in terms of what is the right long term. And when I say long term, 6% to 8% is beyond the 5 years about balancing affordability and anything else that goes into that. And so we thought the plus as a way to message that we do have a lot of infrastructure needs on behalf of our customers here in the next 5 years. But longer term, when you start to roll beyond 2030, we'll continue to evaluate that. And then just quick on your first question, we said $10 billion plus, but some of that could fall outside of this 5-year when you think about some of the generation procurement in some of the -- particularly the MISO transmission will be longer dated. But really excited about our overall 5-year opportunity and beyond that.

Next question will be coming from Sophie Karp calling from KeyBanc.

Congrats on the strong, I guess, guidance revision guys. A couple of questions for me. So maybe if you could talk a little bit about the trends in SPS. I know you continue to flag the electrification of Permian as one of the drivers of the volume growth there. With the oil prices like being kind of where they are, is there any reason to be concerned about that trend at all at this point?

Sophie, it's Bob. I think the growth you see in the Permian is probably a function of 2 things. One is continued strength in mining in the Permian Basin. So just more wells, more infrastructure, more fields being open. The second is the trend towards electrification of those fields and of existing field. So I think there's 2 big drivers out there. When I talk to our largest customers down in the Permian and the Delaware Basins, this continues to be their lowest cost resource around the globe. And so I think even when you start to see oil and gas prices fluctuate, I think these properties in the Southwest are still varying the money for them, and they'll continue to see mining and mining growth down in the Southwest. So I don't have a lot of concern about that load growth profile. And then as we talked about the data centers, that low growth profile, we feel very confident in and see opportunity to add to it.

Got it. That's pretty clear. And then on the renewables versus gas, right? You guys are clearly stepping into more accelerating renewables to harvested tax credits. At the same time, a lot of your peers are actually going more towards gas and they're flagging that they need -- we will need to build more gas to firm up the system for data center demand. So I guess my question is, will we see this same trend play out in your service territories at some point? Or is it just the renewables are so attractive that you feel good by, I guess, still going full speed on renewables as opposed to more dispatchable generation?

Yes. A couple of themes in there for sure. One, as I said in my prepared remarks, we sit in one of the most geographically attractive areas for both wind and solar assets. And so we see real customer benefits from continuing down a trend of investing and taking advantage of those natural resources, particularly while tax credits help make them affordable for our customers. But you also see us adding -- we've got 4.5 gigs of natural gas capability coming into the plan in the next 5 years as well as, I think, probably north of 5 gigs of energy storage as well. So we are affirming the system backing the wind and the solar with attractively priced backup energy and making sure that we are both reliable, affordable and sustainable for our customers which is sort of the holy trinity of our business.

Steve, yes, I can answer that question for you. And I think that's really why I want to provide some color with 11% rate base growth that we expect 9% rate base growth or 9% earnings growth over the next 5 years to really highlight that we don't expect significant compression in ROEs by any means that we see. If you think we've talked about some of the rate cases that we have come up in terms of driving some ROE improvement because we've delayed some rate cases for some reasons. And so when I think about it, it's really -- we've always talked about when you get to this kind of high growth, we're at 11% rate base growth, significant CapEx comes with financing needs that you would see about a 200 basis points delta between your rate base profit and your earnings growth over a 5-year period. And so I think we wanted to just highlight that, that it's as we move through the next few years, our financing is lined up with kind of our CapEx spend and we're working through some regulatory proceedings over the next couple of years, you start to catch up on that rate base versus EPS growth. But over the 5-year period, we feel really good about where we are that the long-term EPS growth, coupled with our financing plan and maintaining a strong balance sheet is we feel good about that and don't see ROE compression at all. We certainly have conservative ROEs in our plan, but we don't see ROE compression as we sit here today and look at where we are today.

Next question will be coming from Travis Miller calling from Morningstar.

Questions around the transmission spend. Obviously, this has been a big thing for you for many years. But wonder as you ramp that up and think about these large customers, how easy or difficult is it to identify specific customers who might pay for some of this transmission spend, i.e., we see contracts between generation and data centers. Can you think some of this transmission spend essentially off of residential commercial customer bills and identify specific customers to pay for it?

Yes. Great question. First, thanks for recognizing leadership and transmission. I'd like to say that we have been the leading builder of new transmission line miles over the last 15 years when you come from the state of hockey, you got to skate to where the puck is. And we feel like we've built a grid in an infrastructure system that is enabling us to energize data class. When I think about incremental people willing to spend incremental money on transmission, I think our first principle with regard to hooking up data centers is if they require a new transmission line, particularly a lateral, usually they're paying for that 100%, and we put that into sort of a kayak bucket as opposed to net rate base spend, and it's going to be attributable directly to that customer. And when you talk about can you identify those customers. Those customers are knocking on our door freely and willingly to spend the money, particularly on the transmission interconnection make sure that they can get service as quickly as possible. So this is really a management of the inbound as opposed to us having to go find people that are willing to do it. I think that's a pretty common approach that the data center developers and the hyperscalers are willing and able to do. We're protecting our customers from the transmission build. And then when you think about the net benefit, if you're taking the entirety of our system cost and adding more megawatts to it. That's a net benefit on a per kilowatt hour rate on the transmission system in totality and a benefit for all customers.

Okay. Okay. So not all of that transmission spend then is -- would go on commercial and residential bills?

So that the transmission spend that we highlighted in our plan is regional, super regional. We have stuff with connecting MISO and SPP markets. We have big regional transmission coming out of the long-range transmission planning of the MISO process that is regionally allocated, not necessarily coming directly on to our customers. Same with our SPP build out, a lot of that is regional cost allocated not coming into the -- directly 100% into retail rates.

Okay. Great. And then how much is you talked about that lateral, just to follow-up on that. Give us a scale or kind of share of how much that specific lateral type of demand you're getting relative to like what you just talked about the regional type of transmission spend.

Yes. Travis, those are really customer-specific system impact studies to just wherever that customer is locating on the transmission system, the size of that customer, the ramp of that customer. And so those are really specific, hard to put a number on it in a general sense.

Next question will be coming from Alexia Kania calling from BTIG. Alex Kania, that is.

Maybe just a question on the regulatory side. Obviously, it's great to see all this CapEx and also the transmission as well, but I'm just kind of thinking about also your comments about relative share of wallet and rates, but I'm just wondering kind of the nature of communications that you're having with regulators just on kind of expectations for where rate trends may be going over the next 5 years within this -- within this window, maybe just kind of the balance between revenue requirements and volume growth or whatnot, but I'm just kind of curious about what the reception is to those types of conversations.

Yes. Great. I think it's really fundamental and foundational for our team here to make sure that we keep our bills for our product as affordable as possible for our customers. So we wake up every day thinking about that. We have to balance that with other desires, reliability, sustainability, resiliency and safety across our system to make sure that we can meet those needs of our customers as well. I mean you don't have to look any further than Jamaica or Cuba to realize the devastating effect that communities have when our system and our product isn't available. So we are spending time and energy, as you say, with our regulators, with our legislators, making sure that we recognize all of the things that we're bringing to the system and that while affordability is a hugely important piece. We think a, we start from a very good spot. We think we've been a very good steward of our customers' money over the last decade. We'll continue to be very prudent, very focused on making sure that we can deliver the system that they need and want with the policy objectives that they need and want at a price that is as affordable as possible. So we work through that with each state and each class of customer and making sure that we keep our product very affordable and attractive.

As we have no further questions. For closing remarks, I'll turn the call back over to CFO, Brian Van Abel for closing remarks. Thank you.

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