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Rating Action:

Moody's affirms Xcel Energy's A3 rating; rating outlook remains stable

Global Credit Research - 28 Mar 2017

Approximately $15 billion of debt securities affected

New York, March 28, 2017 -- Moody's Investors Service, ("Moody's") affirmed today the ratings of Xcel Energy Inc. (Xcel), including its A3 senior unsecured rating and Prime-2 short-term rating for commercial paper. The rating outlook for Xcel remains stable.

RATINGS RATIONALE

"Xcel's credit strength comes from its diversified portfolio of utility subsidiaries and strong balance sheet," said Natividad Martel, Vice President -- Senior Analyst "but the company will increase its leverage to finance a large capital expansion plan and grow its rate base."

Xcel's A3 senior unsecured rating reflects the overall credit supportiveness of its eight regulatory jurisdictions, and is anchored by its key subsidiaries Public Service Company of Colorado (PSCo, A3 stable) and Northern States Power Company of Minnesota (NSP-Minnesota, A2 stable), which currently comprise approximately 80% of its roughly $24 billion rate base.

The A3 rating reflects an anticipated decline in consolidated financial metrics as the company undertakes a significant ($18.4 billion) capital expenditure program (capex) to fund the growth of the subsidiaries' regulated rate base during the 2017-2021 period. This capex program is focused on renewable power, grid modernization and transmission investments, and could increase Xcel's rate base by 40%, or an incremental of approximately $9 billion. Although rate base investments are viewed as a credit positive, Xcel could be exposed to a higher level of regulatory contentiousness if customers become intolerant to absorb higher costs associated with the investments. However, this risk remains very low, as Xcel will look to group-wide cost saving initiatives to help offset on rates and the group operates in supportive and constructive regulatory environments.

Xcel's stable outlook is predicated on the assumption that the ratio of holding company debt to total consolidated debt will remain in the low 20%-range (21% at year-end 2016) and that the ratio of consolidated cash flow from operations pre-working capital (CFO pre-W/C) to debt will not drop below 18.5% during the 2017-2020 period (20% at year-end 2016). The stable outlook also assumes that annual dividend increases and the dividend payout-ratio will remain in the low-end of the targeted range of 5-7% and 60-70%, respectively.

Factors that Could Lead to a Downgrade

The rating of Xcel could be downgraded if the rating of any of its key subsidiaries, primarily NSP-MN and PSCo, are downgraded or if the anticipated deterioration of Xcel's financial performance results in consolidated CFO pre-W/C to debt to that falls below 18% for an extended period. Prospectively, the rating could be downgraded if Xcel's financial profile fails to show improvement starting around 2021, when its large capex programs is largely complete. A downgrade of Xcel's rating, where there is a widening of the notching between Xcel and its subsidiaries, could be considered if the ratio of holding company debt to total consolidated debt approaches 25%.

Factors that Could Lead to an Upgrade

The rating could be upgraded if the ratings of its utility subsidiaries are upgraded and the company's financial performance improves significantly such that, for example, the ratio of consolidated CFO pre-W/C to debt exceeds 24% on a sustained basis.

Outlook Actions:

..Issuer: Xcel Energy Inc.

....Outlook, Remains Stable

Affirmations:

..Issuer: Xcel Energy Inc.

.... Issuer Rating, Affirmed A3

....Senior Unsecured Shelf, Affirmed (P)A3

....Subordinate Shelf, Affirmed (P)Baa1

....Preferred Shelf, Affirmed (P)Baa2

....Junior Subordinated Shelf, Affirmed (P)Baa1

....Senior Unsecured Bank Credit Facility, Affirmed A3

....Senior Unsecured Commercial Paper, Affirmed P-2

....Senior Unsecured Regular Bond/Debenture, Affirmed A3

The principal methodology used in these ratings was Regulated Electric and Gas Utilities published in December 2013. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Xcel Energy Inc. (Xcel) is a holding company for vertically integrated utility subsidiaries, namely Northern States Power Company of Minnesota (NSP-Minnesota, A2 stable), Public Service Company of Colorado (PSCo, A3 stable), Southwestern Public Service Company (SPS, Baa1 stable), and Northern States Power Company of Wisconsin (NSP-Wisconsin, A2 stable). These subsidiaries serve 3.5 million electric and 2.0 million natural gas customers in eight states, but mostly in Minnesota, Colorado, New Mexico, Texas, and Wisconsin.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Natividad Martel
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Jim Hempstead
MD - Utilities
Infrastructure Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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