Warmer winter brings 10% fall-off in Xcel earnings

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: April 26, 2012 - 10:45 PM

Utility says it will manage costs to offset decline in revenue.

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Unseasonably warm weather beckoned people outside on March 14 at Lake Calhoun in Minneapolis. But the balmy season chilled bottom lines at Xcel Energy Inc. and other U.S. utilities.

Photo: Jeff Wheeler, Star Tribune

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Warm weather is cooling Xcel Energy's profits.

As customers needed less heat this past winter, the Minneapolis-based utility saw its quarterly electric and natural gas sales drop, for an overall decline in revenue of 8.5 percent from a year earlier.

That helped knock 6 cents per share off earnings, or nearly 10 percent, compared with the January-March period of a year ago, although Wall Street analysts had expected worse.

"Warm weather throughout our service territory negatively impacted our first-quarter results, most notably in Minnesota, which experienced its warmest March in over 100 years," Xcel Chief Financial Officer Teresa Madden said on a conference call with analysts.

Minnesota operations, which include North Dakota and South Dakota, accounted for a big share of the lowered earnings because of the weather, a lower electric rate compared with an interim rate last year and other factors, she said.

Overall, Xcel Energy Inc.'s earnings were $184 million, or 38 cents per share, compared with $204 million, or 42 cents a share, for the same period last year. Wall Street analysts had expected earnings of 36.5 cents a share.

Xcel, which operates in eight states, wasn't alone among U.S. utilities affected by mild weather. Dominion Resources, a Virginia-based electric and gas utility, reported a similar earnings drop Thursday. Entergy, based in New Orleans, posted a loss. Both cited the historically warm winter as a factor in lower natural gas or electricity sales.

"Weather can have a huge impact on earnings from year to year," said Travis Miller, an analyst for Morningstar in Chicago. "For utilities in the Eastern United States, we are seeing particularly challenging results."

Xcel, which had lowered its earnings guidance last month, still managed to edge ahead of analysts' per-share projections. But its quarterly revenue of $2.6 billion was $100 million less than expected, according to Bloomberg.

When adjusted for the weather and this year's extra day of power use because of leap year, Xcel also saw a drop in demand for the second quarter in a row.

In January, Xcel put a brake on expenses by deferring merit pay and incentive compensation, postponing hires and cutting training, Madden said.

Xcel's stock closed at $26.95, up 2 cents.

Staff writer Janet Moore contributed to this report. David Shaffer • 612-673-7090

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