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Executives

Paul A. Johnson - Managing Director, IR and Assistant Treasurer

Benjamin G.S. Fowke III - VP and CFO

Analyst

Greg Gordon - Citi Investment Research

Angie Storozynski - Macquarie Capital

Mark Siegel - Canaccord Adams

Dan Jenkins - State of Wisconsin Investment Board

Michael Grayson –Robert W. Baird

Paul Ridzon – KeyBanc Capital Markets.

Xcel Energy Inc (XEL) Q4 2008 Earnings Call Transcript January 29, 2009 11:00 AM ET

Operator

Good morning ladies and gentlemen. Thank you for standing by. Welcome to the fourth quarter 2008 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Thursday January 29, 2009.

Now I’d like to turn the conference over to Mr. Paul Johnson, Managing Director of Investor Relations and Assistant Treasurer. Please go ahead, sir.

Paul A. Johnson

Thank you, and welcome to Xcel Energy's year end 2008 earnings release conference call. I’m Paul Johnson. With me is Ben Fowke, Executive Vice President and Chief Financial Officer of Xcel Energy, and several others who can help answer your questions.

Today we plan to cover our 2008 results and accomplishments. Please note that there are slides that accompany the conference call, which are available on our website. Let me remind you that some of the comments may contain forward-looking information. Significant factors that could cause differences from those anticipated are described in our earnings release and our filings with the SEC.

Today’s discussion will focus on ongoing results which we believe represents the fundamental earnings power of Xcel Energy. Please refer to our earnings release for a reconciliation of non-GAAP earnings.

Before I turn the call over to Ben, I will cover our overall financial results and how we calculate ongoing earnings. 2008 GAAP earnings were $646 million or $1.46 per share, compared with $577 million or $1.35 per share in 2007.

As you may recall in 2007 we reached a settlement resolving our dispute with the IRS regarding our COLI program. As a result, our 2007 GAAP earnings include an $0.08 per share charge for the resolution of this dispute. Our 2008 GAAP earnings include a $0.01 benefit from the discontinued COLI program.

This morning's discussion will focus on ongoing earnings, which exclude the impact of COLI on our results. Ongoing earnings for 2008 were $1.45 per share compared with the $1.43 per share last year.

With that, I’ll turn the call over to Ben.

Benjamin G.S. Fowke III

Thanks Paul and welcome everyone. As Paul just mentioned our 2008 ongoing earnings were $1.45 per share. This is at the low end of our guidance range and compares with earnings of $1.43 per share in 2007. The increase is primarily due to higher natural gas margins, which increased earnings by $0.06 per share higher AFUDC earnings, which increased earnings by $0.06 per share.

Higher electric margins, which increased earnings by $0.03 per share and lower O&M expense, which increased earnings by $0.02 per share. These positive factors were offset by higher financing cost, which decreased earnings by $0.05 per share. Higher depreciation, which decreased earnings by $0.03 per share.

Higher conservation and DSM program expense, which is generally offset by higher margins, reduced earnings by $0.02 per share. Dilution from our September equity issuance, DRIP and benefit plans reduced earnings by $0.03 per share, and other items, which reduced earnings by $0.02 per share.

That summarizes the year-end results, now let me walk you through some of the details starting with margin. Our electric utility margins increased by $24 million or $0.03 per share for the year largely driven by rate increases and rider revenues. Electric margin grew by $99 million from rate increases in rider revenue including $48 million from rate increases in Wisconsin, North Dakota, Texas and New Mexico.

Conservation in non-fuel riders contributed $28 million and the MERP rider added $23 million. These drivers were partially offset by a couple of key items, most notably cool weather during this summer reduced electric margin by $49 million.

In addition, purchase capacity cost reduced electric margin by $30 million. We are also experiencing slower sales growth in 2008. On a weather-adjusted basis, retail sales grew by about 1.7%. However, weather-adjusted residential sales were flat for the year. As many of you know, residential sales provide higher margin than the C&I class.

The combination of lower sales growth and the change in sales mix resulted in only $22 million or about $0.03 per share of electric margin for the year. Normally, we would have expected sales growth to contribute $0.08 to $0.10 of earnings per share. So this represents an opportunity cost of $0.05 to $0.07 per share for the year and was an important factor in pushing earnings to the low end of our guidance range.

The 2009 earnings guidance assumption assumes relatively flat sales growth. This is a key assumption and we will need to monitor sales trends closely throughout the year. For more information, please refer to the electric margin table in our earnings release.

Higher natural gas margins, which increased $46 million or $0.06 per share also had a positive impact. The most significant drivers for rate increases in Colorado and Wisconsin, which increased margin by $24 million, in addition, colder winter temperatures increased gas margins by $10 million compared with 2007. Sales growth and other miscellaneous items increased natural gas margins by a total of $12 million.

Although, I have discussed the whether impacts on both electric and gas margins, it might be helpful to talk about the overall impact on our results.

In 2008, actual temperatures were fairly close to normal. However, in 2007, we did experience favorable temperatures, which increased earnings by about $0.06 per share compared to normal. As a result, we have an unfavorable variance of $0.06 per share between the two years.

Now turning to operating expenses, our 2008 O&M expenses were down $11 million compared with 2007. You might remember at the beginning of 2008, we were projecting an O&M increase of 2 to 3%. However, as the year unfolded and it was evident that sales growth would not meet our expectations. We began making necessary adjustments to our O&M budgets.

The most notable move was the decision to eliminate our annual incentive compensation, which reduced 2008 O&M expense by $50 million, that reduction was partially offset by increases in other employee benefits. In total, employee benefits decreased $39 million for the year. Offsetting these reductions were higher labor costs, plant generation costs, and bad debt expense.

In 2009, we expect our O&M expenses to increase more than usual for a number of reasons. We expect benefit costs will rise because we have reestablished our annual incentive compensation, in addition to increased medical and pension expense.

We are also expecting increases in nuclear cost. This is largely driven by the Commission approved change in accounting, resulting in a deferral and amortization of nuclear outage cost and increased staffing due to NRC requirements.

Moving on, depreciation and amortization expense increased $23 million or approximately 2.8% reflecting growth in our capital investment program. Conservation and demand side management expenses increase $16 million or 15.7% as the programs expanded, which was consistent with public policy in our major jurisdictions. These costs are generally recovered dollar-for-dollar through various riders and rate cases.

Turning to allowance for funds during the construction, AFUDC increased $31 million compared with 2007 due primarily to the construction of Comanche 3, Fort St. Vrain and other projects. We expected AFUDC will decline at some of these large projects come online in 2009. That’s a more detailed look at our financial results. I’d like to take a moment now to summarize some of the last year’s significant accomplishments and events.

During 2008, we successfully navigated a challenging financing environment and raised $2.3 billion through a variety of transactions. This funding will enable us to continue to execute our building the core strategy, despite continued challenges in the capital markets.

In 2008, we achieved an improved credit rating. In November, S&P raised its senior unsecured debt rating of NSP-Minnesota and Public Service Company of Colorado to BBB plus and raised NSP Wisconsin to A minus. As you know, credit quality of strong balance sheet and conservative financial management have always been important to us, so it is encouraging to see the one notch upgrade from S&P.

As a result of the market melt down many companies are grappling with the issue of pension funding. Early in 2008, we were in great shape compared with most of our peers, because our qualified pension plans were 120% funded on a PBO basis.

However, with market deterioration, and our consolidated pension plans were funded at 84% at the end of 2008. Our current plan is to invest within a range of $70 to $130 million in our pension plans in 2009. All these estimates are subject to change, pension contributions in 2010 could be in the range of $150 to $250 million, based on conservative assumptions. We anticipate that contributions in 2011 and beyond will decline from these levels. Ultimately, funding will depend on realized asset performance, due discount rates, actuarial assumptions, IRS and legislative initiatives.

On the regulatory front we had a very busy year, including the completion of a couple smaller electric rate cases in December. First, in our electric limited reopen on Wisconsin, the Commission approved the stipulation agreement entered into by NSP-Wisconsin and various interveners authorizing a $5.6 million rate increase for base costs and fuel expense.

This increase will be offset by a refund rather from declining fuel cost so, customer bills will not increase in 2009. In our North Dakota electric rate case, the Commission approved a settlement agreement that calls for a $12.8 million rate increase, based on an authorized ROE of 10.75%. In our Texas case, we’ve been actively negotiating with various parties since November and we are hopeful and have a settlement in the near future that will allow us to improve the regulatory returns at SPS.

In the fourth quarter, we filed a couple of cases that will make an impact in 2009. In Minnesota, we filed a case to increase electric rates by a $156 million or about 6%. Interim rates of a $132 million went into effect in January. We expect the decision later this fall. In Colorado, we filed a case to increase electric rates by about a $175 million or 7%. In this case, we are seeking a forward test year and expect a decision later this summer.

Finally in New Mexico, we filed a case to increase electric rates by about $25 million or 5%. We are also seeking interim rates for a portion of the overall request related to a capacity contract. Our regulatory strategy has always been to file straightforward no-frills cases. This is especially true given the current economic downturn. We focus our request on the value we provide to customers. As always, our guidance range for 2009 assumes we will receive reasonable regulatory outcomes from our pending filings.

A list of accomplishments also includes several noteworthy capital projects. As we mentioned in the past, one of our goals is to own more renewable energy assets. In 2008 we made significant progress on this front by completing our Grand Meadow Wind farms, a 100 megawatt facility in Minnesota. Grand Meadow which began operating in December was completed on time and on budget.

In addition, we signed contracts for two additional wind generation projects in Minnesota and North Dakota, which will add 351 megawatt to our system by the end of 2011. We estimate the cost of these projects at about $900 million, which is included in our capital forecast. Regulatory approval is pending and once construction is underway, these projects will qualify for rider recovery in Minnesota.

You may remember that the original RFP was for 500 to 700 megawatts of incremental wind generation. However, we decided to scale back the projects in light of the current economic climate. Nevertheless, we remain on track to meet the renewable portfolio standards in our jurisdictions and continue to expect to have more than 7000 megawatts of renewable generation online by 2020.

We are also very pleased with the progress we made in 2008 on our major construction projects. Those include the Metro Emission Reduction Project in Minnesota, also known as MARP, as well as our Comanche 3 and Fort St. Vrain projects in Colorado.

In 2009, we expect to complete the MARP effort with the repowering at our Riverside plant. In Colorado, Comanche 3 and Fort St. Vrain are also scheduled to come online in 2009. With these projects complete, we will have added about 1100 megawatts of capacity to our system at very competitive cost for our customers. We expect them to be finished on time and very close to their original budget.

Finally, we recognize that a competitive dividend yield is an important component of the value proposition we offer our investors, especially in a turbulent market. In May we increased our dividend by $0.03 per share or little over 3%. This is consistent with our long-term objective of annual increases in the 2% to 4% range, which we don’t plan to change.

To wrap things up it’s clear from our 2008 results that we weren’t immune to the current macroeconomic environment. We believe those conditions will affect our near-term sales growth, which is reflected in our 2009 earnings guidance. As a result, the mid-point of our earnings guidance range of a $1.45 to a $1.55, offers modest growth relative to our long-term objective of 5 to 7% When things improve we will be in good position to resume our long-term earnings growth trajectory.

Given our strong credit quality, and relatively modest near-term financing needs, we are well positioned to continue to execute our overall growth strategy in 2009 and beyond. But with that, lets open it up for questions.

Question-and-Answer Session

Operator

Thank you sir. We will now begin the question- and-answer session. (Operator Instructions). First question is from the line of Greg Gordon with Citi Investment Research. Please go ahead.

Greg Gordon - Citi Investment Research

Thanks good – good morning.

Paul A. Johnson

Hi Greg.

Greg Gordon - Citi Investment Research

Yeah, you guys just got the interim rates in Minnesota, and that was the earlier in the year than I would have expected, so that’s positive. So when I look at the guidance range that you have outlined for us, I know that there is a baseline assumption vis-à-vis sales expectations in terms of kilowatt hour sales growth or lack here off. Could you tell us what if your, the baseline you’ve given us in the sort of summary of drivers represent to the mid-point and what the high and the low, all things equal, might represent in terms of sensitivities and then in the context that what you are actually seeing vis-à-vis demand? I know it’s early in a year.

Paul A. Johnson

Yeah, Greg. I mean, good question. We typically put our assumptions and we add it all up and take the expected values that would put us about in the middle of the range. A penny either way. That’s where we typically try to set guidance and this year has been no exception. And I mean I think the key things for us to track were obviously the regulatory outcomes, that’s a big part of our success next year, but we need to monitor sales trends. We saw, as you know flat sales full year for 2008. The fourth quarter, we actually saw some improvement on the residential side here in Minnesota and so a little bit of weakness in PSCO. So, we continue to really look at this closely. We think our assumptions are right. We’re prepared to react if it’s not. Love to see sales improve, but at this point I think assuming flat sales is probably the right way to go.

Greg Gordon - Citi Investment Research

Okay. Thank you.

Operator

Thank you sir. And our next question comes from the line of Angie Storozynski with Macquarie Capital. Please go ahead.

Angie Storozynski - Macquarie Capital.

Thank you. I’m going to go back to the assumptions for 2009 guidance and then I have a question about pensions, when you look at your 2008 electric sales growth for retail they are actually up 1.7% to either flat sales only for residential. And then gas was up on an weather normalized basis, well, almost 2%, 1.9%, which is kind of surprising at least for me. If you assume flat year-over-year electric sales and gas sales you simply assume that the pattern from ’09, for ’08 will be retained, which would be surprising for me given the weakness in industrials and commercials and that’s what drove your growth in electric demand in 2008. So how could you reconcile these numbers? And secondly, if you could talk me through your pension accounting, I understand the funding requirement for ’09 and ’10 but if you could tell me what the earnings impact is going to be and why I was seeing higher impacts for 2010 from the funding perspective then for ’09 and what kind of assumption do you have for returns for the pension plans in ’09.

Paul A. Johnson

All right. Iif I forget one the questions, remind me. I think you wanted to talk about funding, the pension assumption, the pension expense, and why basically don’t see more of a reduction in the C&I class next year?

Angie Storozynski - Macquarie Capital

That’s correct. I mean it’s surprisingly strong. I mean, the results for the annualized results for ’08.

Paul A. Johnson

Yeah

Angie Storozynski - Macquarie Capital

On a whether normalized basis seems very strong compared to..

Paul A. Johnson

Yeah let me shed some light on that for you. I mean, if you break it up by jurisdiction by far the biggest positive increase in C&I was at SPS, which it was largely driven by the energy service field and I would say also that that is largely driven by the large C&I customers which is I reported to you before. We typically don’t have the same margin of profitability, particularly with large C&I. Its not as energy megawatt sensitive as it is more capacity type charges. So while you see the sales pick up, we didn’t see a lot of margin for it, which is why the sales mix didn’t come in as it usually does. So if you look at our other jurisdictions, NSP Min for full year just under 1%, PSCO was about 1.8%. So, I mean, we looked at those trends and assess the economies that we are operating in which while they have been impacted by, what’s happening in the general economy, they have faired a little bit better than the actual average. And so we remain comfortable with that.

Angie Storozynski - Macquarie Capital

How about gas, how about gas?

Paul A. Johnson

You know gas, yeah, you asked that question and gas we really saw, a pick up at PSCO, not so much NSP Min and as you probably know PSCO is the by far the largest gas operation that we have. I don’t have a really good answer why it pick up so much, it surprised us too, other than I would say, gas prices did modulate particularly in the Rockies this year and perhaps our customers were little less price sensitive. Does that answer your sales questions?

Angie Storozynski - Macquarie Capital

Yeah, that’s okay. Lets move on to pension plans.

Paul A. Johnson

Yeah, lets move on to pension. Lets start with the funding assumptions. I said in my prepared remarks that I think we are using conservative assumption let’s shed some light on that. I mean, we are making, our actuarial assumptions long-term or that the assets perform at 8.75% and we have a discount rate on the liabilities side of 6.75% what we did for our funding calculation is assume that this year we have basically flat assets performance. So I think that’s hopefully a big conservative. We also if you get into the details of pension, not so much accounting but the PPA rules, there are elections you can make to either keep assets at market or smooth them. Currently, we are at market we like that, we're contemplating and will probably make the election to smooth assets, that will give us quite a lot of relief and with all things equal, pushes on the low-end of that $150 to $250 range that I mentioned for 2010. Think I misspoke before the asset assumption is 8.5%, not 8.75% by the way, but we brought it down from where it was in ’07. So, no asset return basically in 2009. And a range that assumes the difference between the assets smoothing election or not for 2010. And, I think that should put us I hope in a conservative light for 2010. Post 2010 the funding requirements will decline. So that’s the funding side. I think you had a question about expense too.

Angie Storozynski - Macquarie Capital.

That’s true. On the expense side.

Paul A. Johnson

Okay on the expense side, we did see an increase in pension expense this year, in the $12 to $14 million range. Last year we actually had a negative pension expense. This year I think it’s a $12 million, is that right Teresa? Well, so, that would give about a $14 million swing. We will see that kind of expense increase over the next couple of years about at that same range as you know pension accounting is very much has a smoothing impact. So pension expense will tick up a little bit over the next three years it’s not going to it will be gradual and in this kind of ranges that I’ve described to you.

Angie Storozynski – Macquarie Capital

And it is accounted for in your O&M projections, right? So, you will be basically able to offset any pension increase, pension cost increase by reductions in O&M expenses and other O&Million?

Paul A. Johnson

Yeah well, Let me answer the question, between pension and medical we are assuming a $25 million increase in 2009 over 2008. Part of that is the pension expenses that I mentioned, part of it’s medical, part of it’s retiree medical for the other piece.

Angie Storozynski – Macquarie Capital

This is for 2010?

Unidentified Company Representative

In 2010, you’d probably see that I can’t speak to the medical side at this point. I don’t have it in front of me, but on the pension side, you’d probably see that increased about $12 million all for that. And that clearly is baked into our guidance.

Angie Storozynski -Macquarie Capital

Okay. Thank you.

Paul A. Johnson

Thank you.

Operator

Thank you ma’am. And our next question comes from the line of Mark Siegel with Canaccord Adams. Please go ahead

Mark Siegel - Canaccord Adams

Yeah, hi good morning. I was wondering if you could just provide a brief update on your smart grid programs where that the status of those might be in your anticipated plans in the future?

Benjamin G.S. Fowke III

The project is well underway. As you know that’s a pilot program in Boulder where we are taking all Boulder and really we call it smart grid city where we are not only putting in two-way metering, but monitoring devices at the customer’s election behind the meter. So they can monitor energy consumption or they can do it remotely. And then what we are also doing is even before you get to the meter, putting in software and basically digitizing an analog system, so that we get a better read of transformers and can be more proactive in anticipating failures. I think we are little more than halfway through, probably little more than that, the rollout and what our plan is to, finish the project, assess the various technologies that we are researching, and come up with conclusions on what makes sense to perhaps rollout more deeply within our jurisdictions. Obviously, share that with our Commissions and the learnings and then take it forward from there.

Mark Siegel - Canaccord Adams

Okay, any sense on the timing if you do decide to move forward on any of those initiatives what timeframe you might be looking at?

Benjamin G.S. Fowke III

No I mean, the first step is to get the results and the second step is to share it with our Commissions. And then we’ll take it from there.

Mark Siegel - Canaccord Adams

Okay, thanks very much.

Benjamin G.S. Fowke III

Thanks.

Operator

Thank you. And our next question comes from the line of Dan Jenkins with the State of Wisconsin Investment Board. Please go ahead.

Benjamin G.S. Fowke III

Hey Dan.

Dan Jenkins - State of Wisconsin Investment Board

Hi good morning. First of all, I was wondering, have you made any revisions to your CapEx budget that you presented at EEI given the economic changes since then?

Benjamin G.S. Fowke III

Well, I think you might have been at the Analyst Day. We haven't changed our CapEx forecast since then. That CapEx forecast reflected a reduction and how much wind ownership we were going to pursue as I mentioned. Originally we thought we’d get ahead of the RPS standards. Now we are pretty much staying on track with those RPS standards.

Dan Jenkins - State of Wisconsin Investment Board

Okay. You mentioned in the release your debt financing plans $400 million of FMBs for both NSP-Minnesota.

Paul A. Johnson

Dan, can you speak up a little bit?

Dan Jenkins - State of Wisconsin Investment Board

Yeah in your press release you mentioned your financing plans of $400 million for both NSP-Minnesota and Public Service Colorado. I was wondering do you have any sense of the timing of those?

Benjamin G.S. Fowke III

George, when are we going to do that? Second and third quarter Dan and, that represents a I think that’s about $350 million of incremental debt, it’s some of which is to retire maturing debt.

Dan Jenkins - State of Wisconsin Investment Board

Okay and then I want to get a little more feel for your for C&I sales. They seem a little bit higher than what we are seeing in other parts of the country. Just, can you give me like a sense of what the distribution is industrial-wise that would make maybe your sales look a little better than the national average or are you hearing anything about any layoffs or plant closures or whatever in any of you service territories that might impact that?

Benjamin G.S. Fowke III

You listen, our territories I think are fairing better than the national average, but they are not immune. I mean, we just heard that Target for example was having layoffs here just yesterday. I mean, so yeah there are layoffs that are happening. And again as I said before I think the results of our C&I sales results are little bit skewed by what happened at SPS where for full year the C&I class grew by 6.7%. Again, that’s largely with big C&I customers, which we really don’t make much of a margin on the energy sales, the margins typically made on the demand charge.

Paul A. Johnson

Dan, the other thing I might add is as, we look in 2009 we expect to see in our numbers as we expect to see a quite a bit softness in small C&I class, which obviously the retail is going to be affected there. So, that is reflected, so while did have strong C&I sales in 2008 we do expect some moderation of that as we move forward into 2009.

Dan Jenkins - State of Wisconsin Investment Board

Okay, thank you.

Operator

Thank you. And our next question comes from the line of Michael Runay with Robert W. Baird. Please go ahead.

Michael Grayson –Robert W. Baird

Good morning it’s Michael Grayson that is.

Unidentified Company Representative

Hi.

Michael Grayson –Robert W. Baird

In relation to the rate cases for Minnesota and in Colorado, just wondering what your assumptions within those rate filings were relative to some of the key items that you talked about like for lower weather-adjusted sales growth than the higher pension expenses in terms of competition and alike?

Paul A. Johnson

Well, basically, all of those assumptions are embedded in those rate cases.

Michael Grayson –Robert W. Baird

Okay, so there has been no, let’s say deterioration in your outlook since then that would cause those rate cases not to fully reflect your current expectations?

Paul A. Johnson

There has been a bit of deterioration for example in the pension expense and those sorts of things and a couple of things I’d say about that. We will have an opportunity to introduce any changes positive and negative in rebuttal. So we can do that, and I would also point out that just like we did it last year in 2008, we certainly have contingency plans to adapt to the economy, to adapt to whatever comes our way. One of the things we did at the very beginning of this year is decided that we would give no raises to the executive for senior managers of the company and that we would defer merit raises to later this year. So, I think we are certainly reacting to what’s happening in the economy, since we filed the rate case. So, I don’t know if I got to answered your question but…

Michael Grayson –Robert W. Baird

Yeah that helps, thank you.

Operator

Thank you sir. And our next question is from the line of Danielle Sykes with Sykes Research. Please go ahead

Unidentified Company Representative

Hi, Danielle how are you.

Danielle Sykes - Sykes Research

My questions have been answered. Thanks.

Unidentified Company Representative

Good.

Operator

Thanks ma’am. And our next question is from the line of Paul Ridzon with KeyBanc. Please go ahead.

Benjamin G.S. Fowke III

Hi Paul.

Paul Ridzon – KeyBanc Capital Markets.

Hey Ben, how are you?

Benjamin G.S. Fowke III

Good.

Paul Ridzon – KeyBanc Capital Markets.

What you are seeing in Washington and what your expectations about the timing of Carbon legislation?

Benjamin G.S. Fowke III

Climate legislation?

Paul Ridzon - Keybanc Capital Markets

Carbon, climate same things yes?

Benjamin G.S. Fowke III

Yeah well, obviously it's front and center and we are seeing some of that addressed with some of the energy policies addressed through this stimulus bill that was passed by the House yesterday and we certainly like seeing the PDCs extended. As for as climate goes, that’s hard to say when we’ll get Climate legislation. I think the over under is beyond ’09. Although we believe that certainly its realistic to think we might see something on a national RPS standard in 2009. So that’s kind of how I would handicap it Paul.

Paul Ridzon - Keybanc Capital Markets

If you built and are continuing to build a pretty decent footprint from the renewable standard and given the way to world is changing in the direction its going into, I mean and are you getting approached by any companies who might marry that type of a footprint just a diversified what might be a large carbon concentration?

Benjamin G.S. Fowke III

Well, I mean as you know, we don’t really comment on M&A. And I think that’s what you are referring to. I think what we are seeing is people wanting to partner with us to build renewable plants and look at other technologies and what the renewable leadership position we have has helped us help shape the rules. Not only in the state but increasingly, I think we are getting recognized at the Federal level. So, I guess people envy that, but we are in a unique position Paul, that the renewable generation that we have right in our backyard is reasonably economical. We have solar resources in the South and people should envy us. I think we are in pretty good shape to address what’s coming.

Paul Ridzon - Keybanc Capital Markets

Okay, that's fair enough. Thank you.

Operator

Thank you sir. And I have no further questions in the queue. I would like to turn the call back over to management for any closing remarks.

Benjamin G.S. Fowke III

Thanks everyone for participating today. If you have any further questions, please don’t hesitate to give Paul Johnson and rest of the IR team a call. Thank you

Operator

Ladies and gentleman, this concludes the Xcel Energy fourth quarter 2008 earnings conference call. This conference will be available for replay after 1o’ clock central time today through Saturday, January 31 at midnight. You may access the replay systems at anytime by dialing 303-590-3000 or 800-405-2236 and entering the access code number of 11123303. Thank you for your participation. You may now disconnect.

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