Electricity and natural gas company
Xcel Energy Inc.
) decided to redeem all of its 7.60% Junior Subordinated Notes,
due 2068, on May 31, 2013. The company has submitted a notice to
the trustee to that effect and presently $400 million is
outstanding from that series.
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Xcel Energy intends to finance the redemption through short-term
borrowings from the market and also utilize a portion of its cash
balance. The redemption price will be 100% of the face value plus
interest accrued up to the redemption date.
The financial strategy of Xcel Energy includes issuance of debt
and equity securities to refinance retiring maturities, reduce
short-term debt, fund construction programs, fund asset
acquisitions and for other general corporate purposes. In 2013,
the company intends to issue $1 billion in first mortgage bonds
to fulfill the aforesaid objectives.
Xcel Energy's debt-to-capital ratio at the end of 2012 was 56%
versus 55% at the end of 2011. Xcel Energy issued bonds of
different series during 2012 totaling $1.8 billion, which
increased the debt-to-capital ratio.
Besides issuing new notes to generate funds, the company and its
subsidiaries also enter into credit agreements with banks to meet
their financial requirements. These credit facilities have
financial covenant requiring that the debt-to-total
capitalization ratio of each entity be less than or equal to 65%.
The time to time redemption of outstanding notes enables the
company to fulfill this financial covenant.
We believe the redemption of these notes and decision to issue
shares in Mar 2013 will definitely aid the company to improve its
Xcel Energy carries a Zacks Rank #2 (Buy). Besides Xcel Energy
other utilities like
Brookfield Infrastructure Partners L.P.
Huaneng Power International, Inc.
Empresa Nacional de Electricidad S.A.
) are also performing well and currently have a Zacks Rank #1(
Based in Minneapolis, Minn., Xcel Energy is a U.S. electricity
and natural gas company, with operations in eight Western and