Industrial power demand is up, not only for Xcel, but for another Minnesota utility that serves the state's taconite mines.
Xcel Energy Inc.'s profits rose 15 percent in the second quarter, beating analysts' expectations despite nearly flat electricity sales.
The Minneapolis-based gas and electric company, which operates in eight states, said Thursday that rate increases, notably in Colorado, New Mexico, Texas and Wisconsin, helped its electric margins.
Warmer weather in June also boosted electric sales, which were otherwise nearly flat. The utility said it reduced operating expenses by 11 percent for the quarter ending June 30 compared with the prior year.
Travis Miller, an analyst for Morningstar, said utilities across the country have witnessed slack power demand during the weak recovery.
"There is no question we are seeing the effects from the economic downturn across gas and electric usage," Miller said. "This is a trend that is hitting all utilities."
Xcel's net earnings were $183 million, or 38 cents per share, compared with $159 million, or 33 cents for the quarter a year ago. Analysts expected 35 cents, according to Bloomberg. Revenue was $2.2 billion, down from $2.4 billion a year ago.
CEO Ben Fowke said he expects Xcel's annual earnings will be in the lower half of the range of $1.75 to $1.85.
Chief Financial Officer Teresa Madden told analysts that Xcel is facing "a challenging year marked by warm winter weather, tepid electric sales and some regulatory decisions that worked against us," including a less-than-expected rate hike in South Dakota and unfavorable accounting treatment of a $24 million Minnesota property tax increase.
Miller said Xcel is benefiting from having power-hungry customers, especially in energy industries in Colorado and North Dakota.
Fowke said commercial and industrial electric demand is up in Texas and Colorado, primarily from energy businesses, and in Wisconsin from its booming sand mining industry. The sand is in demand for oil and gas wells using a method known as fracking.
Allete beats estimates
Industrial power demand rose not only for Xcel, but also for Duluth-based Minnesota Power, whose parent Allete also reported its second-quarter earnings on Thursday.
Allete, whose earnings beat analysts' estimates despite a 15 percent drop in net income, said that industrial power demand was up 3.4 percent for the quarter ending June 30, and should remain high.
"Industrial-class customers, of which taconite producers are the largest segment, will operate at near-full production levels for the remainder of the year," Allete CEO Al Hodnik told analysts, citing power-need projections from its industrial customers.
Allete reported net income of $14 million, or 39 cents per share, from revenue of $216 million for the quarter, compared with net income of $17 million, or 48 cents, from revenue of $220 million for the 2011 period.
David Shaffer 612-673-7090