TEXT-Fitch affirms Xcel Energy, subsidiaries ratings

Wed Nov 14, 2012 4:31pm EST

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Nov 14 - Fitch Ratings has affirmed the ratings for Xcel Energy, Inc.
 (Xcel) and its subsidiary companies Northern States Power - Minnesota
(NSP-MN), Northern States Power - Wisconsin (NSP-WI), Public Service Co. of
Colorado (PSCo), and Southwestern Public Service Co. (SPS).

Concurrently, Fitch has downgraded the short-term/commercial paper ratings of
NSP-MN and NSP-WI to' F2' from' F1', respectively.

Fitch has also affirmed the ratings for instruments issued by La Crosse (WI) for
NSP-WI.
The Rating Outlook for each of Xcel, NSP-MN and NSP-WI is Stable. The Outlook
for PSCo has been revised to Positive from Stable. The Outlook for SPS has been
revised to Stable from Negative.

Key Rating Drivers:
--Low-risk fully regulated business profile;
--Balanced and diversified regulatory environment;
--Sizeable capital investment plan focused on low-risk regulated project;
--Concerns relate to potential for regulatory lag;
--Substantial liquidity position;
--Moderate debt re-financings

Affirmation of Xcel's Rating:
Xcel's rating and Stable Outlook is driven by a low-risk fully regulated
business profile due to the ownership of four regulated utilities that benefit
from stable underlying credit profiles. The Xcel utilities operate within a
balanced and diversified regulatory environment, across eight state regulatory
jurisdictions, plus FERC and the NRC. Fitch continues to expect reasonable
outcomes to pending and future rate case filings. Exceptions are TX and NM which
Fitch views as challenging regulatory environments. Management remains
conscientious of concerns related to regulatory recovery lags, and continues to
pursue multi-year rate plans, forward test years and rate riders to recover
capital investments as applicable.

Xcel has a low-risk growth strategy with capital investments focused on rate
base growth, including renewable energy investments. The consolidated five-year
capital investment plan is forecast to total a substantial $13.2 billion.
Several of the Xcel utilities have non-fuel rate riders that facilitate timely
recovery of costs incurred. The Colorado Public Utilities Commission (CPUC)
(PSCo), Minnesota Public Utilities Commission (MPUC) (NSP-MN), South Dakota
Public Utilities Commission (SDPUC) (NSP-MN) and the Public Utilities Commission
of Texas (PUCT) (SPS) each approved proposals to recover, through a rate rider,
costs to upgrade generation plants and lower emissions, and/or increase
transmission investment cost. Fitch views the timely execution of the capital
plan and the timely recovery of investment costs as a key driver of a Stable
Credit Profile.

Affirmation of NSP-MN and NSP-WI Ratings:
Fitch forecasts NSP-MN and NSP-WI financial metrics to remain consistent with
guidelines for the 'A-' rating category, with the rating agency forecast for
EBITDA to interest and funds from operations (FFO) to debt at NSP-MN to range
between, 5.5 times (x) and 6.3x and 23% and 27% through 2014, respectively. The
rating agency forecast for EBITDA to interest at NSP-WI to be at or near 7.0x
and FFO to debt 21% to 27% through 2014, respectively

An adverse regulatory outcome and/or significant delays in capital investment
recovery may weaken the credit profile and cash flow metrics at NSP-MN. Fitch
views controlling costs also as key to maintaining credit quality. Both
utilities have consistently delivered a solid credit profile, and the regulatory
jurisdictions are viewed by Fitch as balanced.

Management cites weather, a sluggish local economy and one-time items (including
a property tax deferral request which was not approved in the current rate
filing) as key drivers of the modest deterioration in 2012 NSP-MN financial
metrics. Fitch will evaluate the outcome of the electric rate filing at NSP-MN,
which was filed on Nov. 2, 2012, as well as financial performance over the next
fiscal year. NSP-WI has a strong credit profile.

The ST ratings for NSP-MN and NSP-WI are being revised consistent with Fitch
long-term and short-term rating linkage and centralized monetary functions.

Positive Outlook for PSCo:
The Outlook revision to Positive from Stable is driven by a strong financial
profile. Fitch forecasts PSCo's financial metrics to remain strong relative to
guidelines for the 'BBB+' rating category, with the rating agency forecast for
EBITDA to interest at or near 7x and FFO to debt to range between the current
level of 26% and 21% through 2014, respectively. Fitch would look to the utility
to sustain financial metrics consistent with current levels, as well as the
timely execution of the sizeable capital investment plan, in order to take
positive rating action.

Further supporting a revision to the Outlook is a balanced regulatory situation.
While PSCo operates within a single state regulatory jurisdiction,
implementation of a balanced multi-year electric rate plan in 2012 mitigates
concern related to regulatory diversification and establishes near-term
regulatory certainty.

Stable Outlook for SPS:
The Outlook revision to Stable from Negative is driven by the Aug. 21, 2012
decision by a panel of the U.S. Circuit Court of Appeals for the District of
Columbia to vacate CSAPR. The late inclusion of TX in the final EPA CSAPR had
presented Fitch with a significant degree of uncertainty as to the timing of,
and ultimate cost of CSAPR to SPS. This development materially reduces the
degree of uncertainty.
The utility capital budget has been updated by management to effectively strip
the spending allocated to CSAPR compliance. The capital budget still includes
some electric transmission investments. In Texas the Transmission Cost Recovery
Factor (TCRF) allows for SPS to recover incremental transmission investments
between rate cases. No similar feature in the New Mexico rate order.

Fitch forecasts SPS' financial metrics to remain consistent with guidelines for
the 'BBB' rating category, with the rating agency forecast for EBITDA to
interest above 4.5x FFO to debt at or near 22% through 2014, respectively.
Absent any adverse regulatory outcomes, Fitch views managing costs, timely
execution of capital investments and timely regulatory filings as key to
maintaining a stable credit profile. Fitch is concerned about regulatory lag in
SPS' regulatory jurisdictions. The utility will be filing a new electric rate
case in TX in November 2012, with new rates anticipated to be effective in June
2013. A new electric rate case will be filed in NM in December 2012, with new
rates anticipated to be effective in January 2014.

Substantial Liquidity Position:
The consolidated liquidity position is viewed by Fitch as substantial, with $2.4
billion in consolidated borrowing capacity at September 30, 2011. There are five
separate five-year bank credit facilities for total borrowing capacity of $2.45
billion, the purpose of which are to fund short-term funding needs including
back-up support for CP. In July 2012 pricing terms and maturity dates were
amended on each bank credit facility, with the maturity dates extended to July
2017 from March 2015. Bank credit capacity is not a credit concern for Fitch,
and no single bank has extended greater than 8% of the $2.45 billion
consolidated borrowing capacity.

Moderate Funding Needs:
Consolidated re-financing needs through 2016 are viewed by Fitch as moderate.
Fitch expects utility financing activity over the next few years to be driven by
capital investment funding needs, and considers Xcel's and its subsidiaries'
access to the debt capital markets as unrestricted.

Positive Action Triggers:
--Execution of a sizeable five-year capital plan and timely recovery of
investment costs limit positive rating action at the HoldCo, as well as
subsidiaries NSP-MN, NSP-WI and SPS.
--Fitch would look to PSCo to sustain financial metrics consistent with current
levels, as well as the timely execution of the sizeable utility capital
investment plan, in order to take positive rating action.

Negative Action Triggers:
--An adverse regulatory order that negatively impacts the financial position of
a utility could place pressure on the ratings.

Fitch has affirmed the following ratings:

XEL
--Issuer Default Rating (IDR) at 'BBB+';
--Senior Unsecured Debt at 'BBB+';
--Junior Subordinated Debentures at 'BBB-';
--Short-term IDR and Commercial Paper (CP) at 'F2'.

NSP-MN
--IDR at 'A-';
--Senior Secured Debt at 'A+';
--Short-term IDR and CP downgraded to 'F2' from 'F1'.

NSP-WI
--IDR at 'A-';
--Senior Secured Debt at 'A+';
--Senior Unsecured Debt at 'A';
--Short-term IDR and CP downgraded to 'F2' from 'F1'.

La Crosse (WI) (NSP-WI)
--Unsecured Resource Recovery Refunding Revenue Bonds at 'A'.

SPS
--IDR at 'BBB';
--Senior Secured Debt at 'A-';
--Senior Unsecured Debt at 'BBB+';
--Short-term IDR and CP at 'F2'.

The Outlook is revised to Stable from Negative.

Fitch has affirmed the following ratings:
PSCo
--IDR at 'BBB+';
--Senior Secured Debt at 'A';
--Short-term IDR and CP at 'F2'.

The Outlook is revised to Positive from Stable.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria for Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012);
--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012);
--'Rating North American Utilities, Power, Gas and Water Companies' (May 16,
2011).

Applicable Criteria and Related Research:
Corporate Rating Methodology
Recovery Ratings and Notching Criteria for Utilities
Parent and Subsidiary Rating Linkage
Rating North American Utilities, Power, Gas, and Water Companies
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