XCEL ENERGY INC (XEL) stock intrinsic value fair value estimate & owner earnings analysis

What the business is. Xcel Energy is a regulated electric and natural gas utility serving about 3.9 million electric and 2.2 million natural gas customers through four operating utilities (NSP-Minnesota, NSP-Wisconsin, Public Service Company of Colorado and Southwestern Public Service) in parts of Minnesota, Wisconsin, Michigan, North Dakota, South Dakota, Colorado, New Mexico and Texas. State regulators set its prices so it can recover its costs and earn a return on the plant it has built. Fuel and purchased power are passed through to customers (about a third of 2025 revenue of $14.7 billion), so revenue swings with commodity prices. What drives profit is the amount of plant in service and the return regulators allow on it. How we measured its cash earnings. We started from operating cash flow and removed working-capital swings, including a $973 million build-up of deferred costs owed to Xcel by customers in 2021 that reversed in 2022-2023. We also subtracted stock compensation. As the cost of maintaining the business we used depreciation plus nuclear fuel amortization, about $3.1 billion in 2025. Spending above that adds new plant on which regulators set a return, so we count it as growth. Total capital spending was $10.9 billion in 2025. On that basis, owner earnings were $3.34 a share in 2025 and $3.23 in 2024. We value the business before its lenders, so we add back cash interest ($1.26 billion in 2025), giving a cash stream of $5.48 a share in 2025, $5.23 in 2024 and $4.54 in 2023. We kept wildfire settlement costs, pension contributions and other recurring operating payments in the earnings rather than adding them back. Starting level and what is already paid for. We anchored on the 2023-2025 median of $5.23 a share. Capital spending rose from $4.0 billion in 2018 to $10.9 billion in 2025, and long-term debt doubled from $15.8 billion to $31.8 billion, so earlier years describe a much smaller business. This stream earned about 5.8% in 2024 and 5.9% in 2025 on the average net plant in service. That return is almost exactly our 6% discount rate. So new spending funded with new borrowing and new shares (the $60 billion base plan for 2026-2030, including $13.8 billion in 2026 and $15.1 billion in 2027) adds little value for today's owners. We give it no credit and charge none of its future financing. Plant already paid for is different. At June 30, 2026, Xcel had $59.7 billion of net plant in service plus $9.8 billion of construction work in progress. That construction is already funded, and its debt is already in the figures below. At the demonstrated ~5.85% return, once it is in service and in rates it supports about $6.23 a share. In the most recent year the cash stream grew 4.7% ($5.23 to $5.48). The base case assumes the same 4.7% in year one. Operating cash flow of $2.80 billion in the first half of 2026, against $2.11 billion a year earlier, supports this. Debt. At June 30, 2026, Xcel owed $36.9 billion of long-term debt, $2.5 billion of short-term debt and $1.3 billion of finance leases. It held $2.0 billion of cash, of which we treat about $1.8 billion as surplus. It has also signed forward share sales for 27.3 million shares, with at least $2.0 billion of committed proceeds. We count those shares (653 million in total) and that cash. Net borrowings come to about $37.0 billion, or $56.59 a share. Maturities are modest: $501 million in 2026, $501 million in 2027, $1.48 billion in 2028 and $503 million in 2029. Cash interest was about 4% of average borrowings in 2025, below our 6% rate. We made no adjustment for that because regulated rates pass Xcel's actual borrowing costs through to customers. Cheaper debt benefits customers, not shareholders. Bear case ($25.24). Construction work enters rates slowly and is partly disallowed, so the cash stream never rises above today's level and slips slightly below it. Between 2018 and 2021, despite heavy spending, the per-share cash stream rose only from $3.56 to $3.70. Wildfire costs also stay high. The Marshall Fire (Boulder County, December 2021) was settled in September 2025 for $640 million. The Smokehouse Creek Fire Complex in the Texas Panhandle (February 2024, about 1.06 million acres) was found by the Texas A&M Forest Service to have been caused by SPS power lines after wooden poles failed. Xcel has recorded $430 million of estimated losses for it. That estimate excludes penalties, punitive damages and government claims, including a December 2025 lawsuit by the Texas Attorney General, and insurance is about $500 million per policy year. We cut the stream to $5.00 a share, flat forever, and subtract another $1.0 billion for uninsured wildfire liabilities. The business is worth about $54.4 billion, it owes about $38.0 billion including that charge, and about $16.4 billion is left for shareholders. Base case ($45.84). The stream grows 4.7% a year, to $5.48, $5.73 and $6.00, as the funded construction enters service. It then holds at $6.23 a share, the return that plant in service plus construction already supports. After that it stays flat, held up by Xcel's exclusive service territories and maintenance spending equal to depreciation. The business is worth about $66.9 billion, it owes $37.0 billion and about $29.9 billion is left for shareholders. Bull case ($51.79). Construction comes into service quickly, and the return on all paid-for plant improves from 5.85% to 6.2%, closing part of the gap to the returns regulators have approved. One example is the 9.25% return on equity at a 52.5% equity ratio approved in Minnesota for 2022-2024. The stream reaches $6.60 a share by year three. The Google data center electric service agreement signed in Minnesota in early 2026, under which Google pays all costs of its new service, lowers risk but adds no value here. The business is worth about $70.8 billion, it owes $37.0 billion and about $33.8 billion is left for shareholders. What changed since our last analysis. The previous estimate ($31.30 / $61.10 / $82.90) used reported earnings per share as the cash measure and did not separately deduct Xcel's large and growing debt. It also used higher discount rates that varied by case and assumed growth continuing indefinitely. We now value the business before lenders at a single 6% rate, which on its own raises value. We then subtract about $37 billion of net borrowings and credit only growth from plant already paid for, which lowers it. The result is a lower but tighter range. Margin-of-safety price. Because Xcel earns about our discount rate on new capital, its value rests on the plant already built, less what it owes. Base and bull are close together, but the bear case is about 45% below the base. The margin-of-safety price is $30. From that price, the dividend (currently $0.59 a quarter, about $2.36 a year) plus a move toward the base value over two to three years implies about 20% a year. In the bear case, dividends would roughly offset the price decline over two years. What would make this wrong. A materially higher sustained return on plant, for example from forward test years and riders cutting regulatory lag, would raise value. A large new wildfire liability, or regulators disallowing recovery of the current spending wave, would lower it.