With coronavirus shutdowns sapping commercial-power demand, Xcel Energy is expecting a "severe impact" to electricity sales in its current quarter, but not enough to change its 2020 profit forecast.
Xcel Energy expects 'severe impact' in electricity sales this quarter because of coronavirus
Minnesota's largest utility plans to cut expenses to offset declines in revenue.
May 8, 2020 at 4:09AM
"We can take actions to weather the impact of COVID-19," Xcel CEO Ben Fowke told stock analysts in a conference call Thursday.
That includes cutting operating and maintenance expenses by 4% to 5% in 2020 to offset revenue declines.
Workplace closures and production slowdowns prompted by COVID-19 have sapped commercial and industrial power sales nationwide — and Xcel is no exception.
The Minneapolis-based company reported Thursday that its preliminary electricity revenue in April was down 9.6% over a year ago, driven by a 13.7% fall in commercial and industrial sales.
Residential power sales rose 3.2%, reflecting the coronavirus-induced shift to working at home.
COVID-19's economic effects are expected to diminish in the year's second half, but not disappear, Xcel reported. Under Xcel's new "base" electric sales scenario, there will be a "severe impact through [the second quarter] with slower recovery and lingering effects."
For the year, Xcel is forecasting a 4% decline in total electricity revenue, driven by a 6% fall in commercial and industrial sales.
To counter the shortfall, Xcel plans operations and maintenance cuts that include a hiring freeze and the attrition of employees who retire or otherwise leave the company.
"In terms of earnings, there is considerable uncertainty around COVID-19 impacts," Xcel Chief Financial Officer Brian Van Abel told stock analysts. Still, "we can be confident under the base-case scenario that we will be in our earnings guidance range."
The company expects 2020 profits of $2.73 to $2.83 per share.
Xcel on Thursday reported first-quarter earnings below analysts' expectations, dinged by "adverse weather." A relatively warm winter led to lower natural gas sales. The COVID-19 crisis did not have a significant effect on first-quarter results, Xcel said.
The company reported first-quarter earnings of $295 million, or 56 cents per share, compared with $315 million, or 61 cents per share, in the same period in 2019. Stock analysts were anticipating per-share profits of 60 cents.
Xcel's first-quarter revenue tallied $2.81 billion, down from $3.14 billion a year ago. The company's stock closed Thursday at $59.96, down $1.26 or 2%.
Xcel is Minnesota's largest electric utility and second-largest natural gas provider. The company's other primary market is Colorado, and it also operates in Wisconsin, Texas, New Mexico, the Dakotas and a slice of Michigan's Upper Peninsula.
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