Xcel Energy’s plan to double the amount of renewable resources on its Colorado system sets the stage for years of rate base growth and could lead to more than 14% upside in its stock price over the next 12 months, analysts at Bank of America said Friday.
Xcel in September filed a proposal with the Colorado Public Utilities Commission that includes investment of up to $15 billion by 2030 by its Public Service Co. of Colorado subsidiary. The plan “lays the foundation for an upward inflection in rate base growth to the end of the decade, with additional upside potentially beyond,” according to a note from Bank of America Global Research.
BOA downgraded Xcel to neutral in August, but now says the utility’s growth plan stands out “in a sector with companies largely playing defense given interest rate and inflationary pressures.” Xcel’s stock closed Monday at $57.65/share but analysts say it could reach $66/share in the next year.
Xcel’s Colorado proposal would add 3,400 MW of wind resources, almost 2,000 MW of solar, and 1,170 MW of storage, and would reduce carbon emissions more than 80% by 2030, relative to 2005 levels. It also includes 628 MW of new gas capacity.
Colorado has set a goal for utilities to be deliver 100% renewable energy by 2040. Xcel’s plan has support from the state’s governor.
The utility told regulators the new Colorado resources are necessary to replace more than 1,800 MW of dispatchable capacity that is retiring, “and does it in a way that capitalizes on the new financial federal support for renewable generation for the benefit of our customers.”
BOA analysts said the decision to upgrade Xcel shares is a result of “greater confidence on underlying renewable trends not just in Colorado ... but also for further procurements ahead to drive a new, sustained level of spend.” The utility should be a “key beneficiary” of clean energy incentives in the Inflation Reduction Act, they said.
Xcel operates in eight states. BOA analysts say they are also watching resource procurement by the utility’s Southwestern Public Service subsidiary in Texas to provide further potential growth.