SPS Revenue Jumps 13.8%, Net Income Flat Amid Rising Costs

TL;DR

**SPS is spending big on infrastructure, but flat net income despite revenue growth means investors should watch for margin compression.**

AI Summary

Southwestern Public Service Company (SPS) reported a mixed financial performance for the nine months ended September 30, 2025. Operating revenues increased significantly to $1,684 million, up from $1,480 million in the prior year, a 13.8% increase, primarily driven by a substantial rise in Commercial and Industrial (C&I) revenue to $936 million from $744 million. Despite this revenue growth, net income slightly decreased to $320 million from $322 million in the same period last year. Operating expenses also rose, with electric fuel and purchased power increasing to $582 million from $426 million, and operating and maintenance expenses reaching $257 million, up from $237 million. The company's cash provided by operating activities decreased to $515 million from $784 million, largely due to changes in operating assets and liabilities, including a $66 million decrease in accounts receivable. SPS significantly increased its utility capital/construction expenditures to $1,106 million from $665 million, indicating substantial investment in infrastructure. Long-term debt increased to $4,046 million from $3,551 million, reflecting new issuances like $500 million of 5.30% First Mortgage Bonds due May 15, 2035. The effective income tax rate was a negative 5.6%, primarily due to production tax credits (PTCs) and plant regulatory differences.

Why It Matters

For investors, SPS's robust revenue growth, particularly in the C&I segment, signals strong demand for its utility services, which is a positive indicator for future stability. However, the flat net income despite higher revenues, coupled with a significant increase in operating expenses and capital expenditures, suggests potential margin pressures and substantial investment needs. This could impact dividend sustainability or require further debt financing, affecting shareholder returns. The competitive landscape for utilities often involves significant capital outlays for infrastructure upgrades and regulatory compliance, which SPS is clearly undertaking. Employees and customers may see continued investment in reliable service, but also potential rate adjustments to cover rising costs and capital investments.

Risk Assessment

Risk Level: medium — The risk level is medium due to significant capital expenditures of $1,106 million, a substantial increase from $665 million, which could strain liquidity if not managed effectively. While operating revenues increased by 13.8% to $1,684 million, net income remained flat at $320 million, indicating potential challenges in cost control or pricing power. The decrease in cash provided by operating activities from $784 million to $515 million also suggests reduced operational cash generation.

Analyst Insight

Investors should monitor SPS's ability to translate revenue growth into net income growth and evaluate the return on its increased capital expenditures. Given the flat net income and rising costs, a deeper dive into the efficiency of new investments and potential future rate cases is warranted to assess long-term profitability and dividend prospects.

Financial Highlights

revenue

$1,684M

operating Margin

24.2%

total Debt

$4,046M

net Income

$320M

cash Position

$56M

revenue Growth

+13.8%

Revenue Breakdown

Key Numbers

• $1.68B — Operating Revenues (Increased from $1.48B in 2024 for the nine months ended Sept. 30, 2025, a 13.8% increase.)
• $320M — Net Income (Slightly decreased from $322M in 2024 for the nine months ended Sept. 30, 2025.)
• $1.11B — Utility Capital/Construction Expenditures (Increased significantly from $665M in 2024 for the nine months ended Sept. 30, 2025.)
• $515M — Net Cash Provided by Operating Activities (Decreased from $784M in 2024 for the nine months ended Sept. 30, 2025.)
• $4.05B — Long-Term Debt (Increased from $3.55B at Dec. 31, 2024, reflecting new debt issuances.)
• -5.6% — Effective Income Tax Rate (Primarily due to production tax credits and plant regulatory differences for the nine months ended Sept. 30, 2025.)
• 9.3% — Revenue from one C&I customer (Represents a significant portion of total revenues for the nine months ended Sept. 30, 2025.)
• $500M — First Mortgage Bonds Issued (Issued during the nine months ended Sept. 30, 2025, due May 15, 2035.)

Key Players & Entities

• SOUTHWESTERN PUBLIC SERVICE CO (company) — Registrant
• Xcel Energy Inc. (company) — Parent company of SPS
• SEC (regulator) — Securities and Exchange Commission
• FASB (regulator) — Financial Accounting Standards Board
• $1,684 million (dollar_amount) — Total operating revenues for nine months ended Sept. 30, 2025
• $320 million (dollar_amount) — Net income for nine months ended Sept. 30, 2025
• $1,106 million (dollar_amount) — Utility capital/construction expenditures for nine months ended Sept. 30, 2025
• $4,046 million (dollar_amount) — Long-term debt as of Sept. 30, 2025
• $500 million (dollar_amount) — Amount of 5.30% First Mortgage Bonds issued
• New Mexico Public Regulation Commission (regulator) — NMPRC

FAQ

Risk Factors

• Changes in Tax Laws and Regulations [medium — regulatory]: The company's effective income tax rate was a negative 5.6% for the nine months ended Sept. 30, 2025, primarily due to production tax credits (PTCs) and plant regulatory differences. Changes in tax laws or the expiration of tax credits could materially impact future tax expenses and net income.
• Increased Debt Levels [medium — financial]: Long-term debt increased to $4,046 million from $3,551 million, with a new $500 million issuance of 5.30% First Mortgage Bonds. Higher debt levels increase financial leverage and interest expense, potentially impacting profitability and financial flexibility.
• Fluctuations in Fuel and Purchased Power Costs [medium — operational]: Electric fuel and purchased power expenses increased significantly to $582 million from $426 million for the nine months ended Sept. 30, 2025. Volatility in energy commodity prices can directly impact operating expenses and margins.
• Customer Concentration [low — market]: Revenue from one C&I customer represents 9.3% of total revenues for the nine months ended Sept. 30, 2025. The loss of this customer or a significant reduction in their business could materially impact operating revenues.
• Capital Expenditure Execution [medium — operational]: Utility capital/construction expenditures increased substantially to $1,106 million from $665 million. Delays or cost overruns in these significant infrastructure investments could negatively affect financial performance and operational efficiency.

Industry Context

Southwestern Public Service Company operates in the regulated electric utility sector, facing trends of increasing demand for electricity, particularly from commercial and industrial sectors, and a growing emphasis on renewable energy sources. The industry is capital-intensive, requiring continuous investment in infrastructure and technology to ensure reliability and meet environmental standards. Competition exists from other energy providers and the increasing adoption of distributed generation, though regulated monopolies provide a degree of market stability.

Regulatory Implications

As a regulated utility, SPS is subject to oversight by state public utility commissions and federal agencies, which approve rates, service standards, and capital investments. The company's significant increase in capital expenditures to $1,106 million will require regulatory approval and will be a key focus for rate-making decisions. The negative effective tax rate, driven by tax credits, may also be scrutinized by regulators regarding its impact on customer rates.

What Investors Should Do

1. Monitor capital expenditure execution and its impact on future rates.
2. Analyze the sustainability of the negative effective tax rate.
3. Assess the impact of increased debt on financial leverage and interest coverage.
4. Evaluate the drivers of the decrease in net cash provided by operating activities.

Key Dates

• 2025-09-30: Nine Months Ended — Reporting period for the 10-Q, showing significant revenue growth but a slight decrease in net income and a large increase in capital expenditures.
• 2025-05-15: Maturity Date for $500M First Mortgage Bonds — Indicates a significant debt issuance that impacts the company's capital structure and future interest payments.
• 2024-12-31: End of Prior Fiscal Year — Balance sheet figures for this date are used as a comparison point for the current period's debt levels.
• 2025-02-27: Filing of 2024 Annual Report on Form 10-K — Provides audited financial statements and notes for the prior year, referenced for comparative analysis.

Glossary

Allowance for funds used during construction (AFUDC)

A component of the cost of a utility plant during the period of construction, representing the cost of funds used to finance construction. It is typically comprised of an equity component and a debt component. (AFUDC-equity is included in other income, and AFUDC-debt is netted against interest charges, impacting reported income. The equity component increased to $20 million from $12 million.)

Production Tax Credits (PTCs)

Tax credits provided by the government to encourage the production of renewable energy, such as wind and solar power. (PTCs are a primary driver for the negative effective income tax rate of -5.6%, significantly reducing the company's tax burden.)

Operating Revenues

The total amount of money generated from the company's primary business activities, which for a utility includes electricity sales to various customer classes. (A key indicator of business activity and market demand, showing a strong 13.8% increase to $1,684 million.)

Utility Capital/Construction Expenditures

Investments made by a utility company in its infrastructure, such as power plants, transmission lines, and distribution networks. (A significant increase to $1,106 million indicates substantial investment in future capacity and modernization, impacting cash flow from investing activities.)

Net Cash Provided by Operating Activities

The amount of cash generated from the normal day-to-day business operations of the company. (A decrease to $515 million from $784 million, largely due to changes in working capital, signals a potential tightening of operational cash generation despite revenue growth.)

Year-Over-Year Comparison

Southwestern Public Service Company (SPS) reported a mixed financial performance compared to the prior year. Operating revenues saw a robust increase of 13.8% to $1,684 million, primarily driven by higher Commercial and Industrial (C&I) revenue. However, net income experienced a slight decrease to $320 million from $322 million. A significant shift is observed in capital expenditures, which more than doubled to $1,106 million, indicating a substantial investment in infrastructure. Conversely, net cash provided by operating activities declined from $784 million to $515 million, largely due to working capital changes. Long-term debt also increased to $4,046 million, reflecting new debt issuances.

Key Financial Figures

• $1.00 — tanding at Oct. 30, 2025 Common Stock, $1.00 par value 100 shares Southwestern Pub

Filing Documents

• sps-20250930.htm (10-Q) — 902KB
• spsex3101q32025.htm (EX-31.01) — 10KB
• spsex3102q32025.htm (EX-31.02) — 10KB
• spsex3201q32025.htm (EX-32.01) — 8KB
• 0000092521-25-000020.txt ( ) — 5893KB
• sps-20250930.xsd (EX-101.SCH) — 40KB
• sps-20250930_cal.xml (EX-101.CAL) — 66KB
• sps-20250930_def.xml (EX-101.DEF) — 201KB
• sps-20250930_lab.xml (EX-101.LAB) — 532KB
• sps-20250930_pre.xml (EX-101.PRE) — 362KB
• sps-20250930_htm.xml (XML) — 982KB

— Financial Statements (unaudited)

Item 1 — Financial Statements (unaudited) 4 4 5 Balance Sheets 6 7

Notes to Financial Statements

Notes to Financial Statements 8

— Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations 15

— Controls and Procedures

Item 4 — Controls and Procedures 17

OTHER INFORMATION

PART II OTHER INFORMATION

— Legal Proceedings

Item 1 — Legal Proceedings 17

— Risk Factors

Item 1A — Risk Factors 17

— Other Information

Item 5 — Other Information 17

— Exhibits

Item 6 — Exhibits 18

SIGNATURES

SIGNATURES 19 This Form 10-Q is filed by SPS, a New Mexico corporation. SPS is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the SEC. This report should be read in its entirety. Table of Contents Definitions of Abbreviations Xcel Energy Inc.'s Subsidiaries and Affiliates (current and former) NSP-Minnesota Northern States Power Company, a Minnesota corporation NSP-Wisconsin Northern States Power Company, a Wisconsin corporation PSCo Public Service Company of Colorado SPS Southwestern Public Service Company Utility subsidiaries NSP-Minnesota, NSP-Wisconsin, PSCo and SPS Xcel Energy Xcel Energy Inc. and its subsidiaries Federal and State Regulatory Agencies EPA United States Environmental Protection Agency FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission IRS Internal Revenue Service NMPRC New Mexico Public Regulation Commission PUCT Public Utility Commission of Texas SEC Securities and Exchange Commission Other ARO Asset retirement obligation ASU Accounting standards update CEO Chief executive officer CERCLA Comprehensive Environmental Response, Compensation, and Liability Act C&I Commercial and Industrial CFO Chief financial officer CCR Coal combustion residuals DSM Demand side management ETR Effective tax rate FTR Financial transmission right GAAP United States generally accepted accounting principles GHG Greenhouse gas IPP Independent power producing entity IRP Integrated Resource Plan MGP Manufactured Gas Plant NOx Nitrogen Oxides O&M Operating and maintenance OATT Open access transmission tariff OBBB One Big Beautiful Bill Act PFAS Per- and Polyfluoroalkyl Substances PPA Power purchase agreement PTC Production tax credit RFP Request for proposal ROE Return on equity RTO Regional Transmission Organization SPP Southwest Power Pool, Inc. VIE Variable interest entity Measurements MW Megawatts

Forward-Looking Statements

Forward-Looking Statements Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases or refunds to customers, expectations and intentions regarding regulatory proceedings, expected pension contributions, and expected impact on our results of operations, financial condition and cash flows of legal proceeding outcomes, as well as assumptions and other statements are intended to be identified in this document by the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should," "will," "would" and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed in SPS' Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2024 and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee workforce and third-party contractor factors; violations of our Codes of Conduct; our ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, includ

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

— FINANCIAL STATEMENTS

ITEM 1 — FINANCIAL STATEMENTS SOUTHWESTERN PUBLIC SERVICE COMPANY (amounts in millions) Three Months Ended Sept. 30 Nine Months Ended Sept. 30 2025 2024 2025 2024 Operating revenues $ 655 $ 594 $ 1,684 $ 1,480 Operating expenses Electric fuel and purchased power 208 163 582 426 Operating and maintenance expenses 86 82 257 237 Demand side management expenses 6 4 17 15 Depreciation and amortization 118 109 345 344 Taxes (other than income taxes) 25 26 75 76 Total operating expenses 443 384 1,276 1,098 Operating income 212 210 408 382 Other income, net 4 5 8 10 Allowance for funds used during construction — equity 9 6 20 12 Interest charges and financing costs Interest charges and other financing costs 50 42 144 120 Allowance for funds used during construction — debt ( 5 ) ( 2 ) ( 11 ) ( 6 ) Total interest charges and financing costs 45 40 133 114 Income before income taxes 180 181 303 290 Income tax expense (benefit) 20 5 ( 17 ) ( 32 ) Net income $ 160 $ 176 $ 320 $ 322 See Notes to Financial Statements 4 Table of Contents SOUTHWESTERN PUBLIC SERVICE COMPANY (amounts in millions) Nine Months Ended Sept. 30 2025 2024 Operating activities Net income $ 320 $ 322 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 348 346 Deferred income taxes 24 119 Allowance for equity funds used during construction ( 20 ) ( 12 ) Provision for bad debts 6 6 Changes in operating assets and liabilities: Accounts receivable ( 66 ) 49 Accrued unbilled revenues ( 45 ) ( 16 ) Inventories ( 51 ) ( 44 ) Prepayments and other 98 ( 9 ) Accounts payable 40 13 Net regulatory assets and liabilities ( 16 ) 20 Other current liabilities ( 125 ) 8 Pension and other employee benefit obligations ( 2 ) ( 1 ) Other, net 4 ( 17 ) Net cash provided by operating activities 515 784 Investing activities Utility capital/constr

Notes to Financial Statements (UNAUDITED)

Notes to Financial Statements (UNAUDITED) In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of SPS as of Sept. 30, 2025 and Dec. 31, 2024; the results of SPS' operations, including the components of net income and changes in stockholder's equity for the three and nine months ended Sept. 30, 2025 and 2024; and SPS' cash flows for the nine months ended Sept. 30, 2025 and 2024. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, 2025 up to the date of issuance of these financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 2024 balance sheet information has been derived from the audited 2024 financial statements included in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2024. Notes to the financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the financial statements and notes thereto included in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2024, filed with the SEC on Feb. 27, 2025. Due to the seasonality of SPS' electric sales, interim results are not necessarily an appropriate base from which to project annual results. 1. Summary of Significant Accounting Policies The significant accounting policies set forth in Note 1 to the financial statements in the SPS Annual Report on Form 10-K for the year ended Dec. 31, 2024 appropriately represent, in all material respects, the current status of accounting policies and a

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