Fitch Ratings has assigned a 'BBB+' rating to Xcel Energy Inc.'s (Xcel) $500 million issuance of senior notes, composed of two $250 million tranches. The 1.2%, two-year notes maturing June 1, 2017 and the 3.3%, 10-year notes maturing June 1, 2025 are both unsecured and will rank pari passu with Xcel's existing unsecured notes.

The Rating Outlook is Stable.

Net proceeds will be used for the repayment of short-term debt and other general corporate purposes.

KEY RATING DRIVERS

Conservative Business Model: XEL's ratings reflect the relatively stable operating cash flows of its operating subsidiaries and the financial support it receives from them in the form of dividends for the payment of corporate expenses, debt service obligations, and dividends to common shareholders. For the most part, XEL's low-risk regulated utility subsidiaries benefit from relatively constructive regulatory frameworks across multiple jurisdictions and exhibit limited fuel and commodity price risk due to the ability to recover fuel and purchased power via separate cost trackers. XEL provides equity funding to its subsidiaries to support their long-term growth and to optimize their capital mix within a target range. XEL's strategy continues to be focused on successfully managing rate cases and reducing regulatory lag.

Recent Rate Order in Minnesota: Fitch's rating concerns for XEL include the recent rate order for Northern States Power-Minnesota (NSP-M). The Minnesota Public Utilities Commission's (MPUC) May 8 order was based on a 9.72% return on equity, which is slightly below the nationwide average authorized return for electric utilities. The MPUC also disallowed a return on significant cost overruns ($333 million) for an uprate and life extension project at NSP-M's Monticello nuclear plant. Although these regulatory actions will somewhat weaken NSP-M's credit metrics, Fitch does not expect a material impact on XEL's consolidated credit metrics.

Generally Constructive Rate Outcomes: With the exception of NSP-M's recent Minnesota rate order, XEL's utility subsidiaries have received relatively constructive regulatory decisions in the latest series of rate cases. Of note, in February 2015 the Colorado Public Utilities Commission (CPUC) approved a settlement with Public Service Company of Colorado (PSCo), including the implementation of a forward-looking Clean Air Clean Jobs Act (CACJA) rider of $97 million for 2015, with step increases of $17.7 million and $14.5 million in 2016 and 2017, respectively. In addition, PSCo received a forward-looking transmission cost adjustment rider of $15.6 million and tracking mechanisms for pension expense and property taxes.

Elevated Capex: Consolidated capex remains elevated over the forecast period. Capex is projected to amount to approximately $14.5 billion over 2015-2019. Management expects about 68% to be allocated to NSP-M and PSCo, earmarked primarily for transmission and generation, representing approximately 31% and 23% of consolidated capex, respectively. The projected $14.5 billion of consolidated capex spending does not include any Transco-related investments.

Stable Credit Metrics: For the last 12 months ended March 31, 2015, FFO-fixed charge coverage was 5.9x, FFO lease-adjusted leverage was 3.5x, and adjusted debt/EBITDAR was 4.4x. Fitch forecasts credit metrics to remain supportive of credit quality, with FFO-fixed charge coverage averaging 5x, FFO-lease adjusted leverage 4.2x, and adjusted debt/EBITDAR 4.3x, through 2017. FFO metrics are bolstered by tax benefits stemming from the utilization of net operating losses (NOLs) at XEL.

Standard Notching: There is a moderate-to-strong linkage between the Issuer Default Ratings (IDRs) of XEL and each of its subsidiaries. The linkages originate primarily from strategic drivers. Each subsidiary is important to XEL, and the parent financially supports its subsidiaries when warranted via equity infusions and funding the inter-company money pool. Fitch considers a one- to two-notch differential between the IDRs of XEL and its subsidiaries to be appropriate.

KEY ASSUMPTIONS

--Electricity sales growth averaging 0.5%-1.0%;

--O&M expense growing at 2%-3%;

--Rate case outcomes consistent with historical rate orders.

RATING SENSITIVITIES

Positive: The negative impacts from the recent Minnesota rate order and disallowance of costs at the Monticello plant, and funding of a large multi-year capital investment plan limit the prospects for a positive rating action in the near term.

Negative: Future developments that may, individually or collectively, lead to a negative rating action include:

--A further deterioration in the regulatory compact of Minnesota that results in an inability to successfully execute and adequately recover large capital investments;

--Adjusted debt/EBITDAR weakening to 4.6x on a sustained basis;

--A more aggressive dividend policy adopted by management that results in parent-level incremental leverage or a reduction in parental equity support to the utilities in the midst of heavy capex. Fitch notes that XEL's dividend payout ratio is below industry average.

Date of Relevant Rating Committee: April 21, 2015

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Recovery Ratings and Notching Criteria for Utilities (pub. 05 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863298

Additional Disclosures

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Fitch RatingsMedia RelationsAlyssa Castelli, New YorkTel: +1 (212) 908 0540Email: alyssa.castelli@fitchratings.comorFitch RatingsMedia RelationsElizabeth Fogerty, New YorkTel: +1 (212) 908 0526Email: elizabeth.fogerty@fitchratings.comorPrimary AnalystKevin L. Beicke, CFADirectorFitch Ratings, Inc.+1-212-908-061833 Whitehall St.New York, NY 10004orSecondary AnalystPhilippe BeardDirector+1-212-908-0242orCommittee ChairpersonMichael WeaverManaging Director+1-312-368-3156