Weather, economy lower Xcel profit

Just as consumers are driving less to save money on gasoline, they've been using less electricity to save money on their power bills.

That was the message from Xcel Energy Inc. Thursday, as it posted a 12.5 percent decline in third-quarter profits that it blamed on lower electricity sales from cooler weather, conservation, and hard times for its residential customers.

The company plans to ask Minnesota regulators for an electricity rate increase.

Earnings for the quarter ending Sept. 30 were $223 million, or 51 cents a share, below analysts' consensus estimates of 59 cents a share.

The Minneapolis-based utility cautioned that 2008 earnings will be at the low end of $1.45 to $1.50 per share. Previously, it had said that earnings could be as high as $1.55 a share. CFO Ben Fowke said in a call with analysts that he was postponing customary predictions for next year, but said they would be released at industry events in November or December. Fowke added later in an interview that the company expects 2009 earnings to be only modestly above this year's.

Revenue rose 18.8 percent to $2.85 billion for the quarter. Residential electricity sales showed the steepest drop, down 7.3 percent from a year ago. A cooler summer compared with last year accounted for 2.2 percent of the decline. That weather-adjusted figure was notably higher in Minnesota, at 4.6 percent, a difference Fowke attributed partly to the state's aggressive conservation efforts.

But because of the erosion in sales, "we are becoming more concerned about the overall economy and the potential impact of the financial crisis on our customers' behavior," he said.

Fowke said Xcel expects to file an electricity rate case with the Minnesota Public Utilities Commission by the end of the year, asking for an increase he expects to be "in the single digits."

Analyst Brian Youngberg at Edward Jones Investments in St. Louis kept his "hold" position on the stock, but slightly lowered his earnings estimates for this year and next. "Everyone was aware last year was a warm summer, but the surprise here was the impact of the economy on residential usage," Youngberg said. "I think right now investors and analysts are especially waiting on more details on the rate cases Xcel is going to file this year in Minnesota and Colorado, key drivers in the growth prospects for the company in the next few years."

On the plus side, the utility stressed recent debt and equity financings that it said will see it through the economic downturn. "Right now, a lot of companies are talking more about their cash and bank lines and maturing debt, and Xcel is in very good shape, relatively," Youngberg said.

Xcel stock closed up 3.4 percent, or 56 cents, at $17, in another volatile market day.