Borrowings and Other Financing Instruments

Short-Term Borrowings

Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. Money pool borrowings for SPS were as follows:



(Amounts in Millions, Except Interest Rates)	Three Months Ended Dec. 31, 2014
Borrowing limit	$	100
Amount outstanding at period end	16
Average amount outstanding	—
Maximum amount outstanding	16
Weighted average interest rate, computed on a daily basis	0.35		%
Weighted average interest rate at period end	0.45



(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2014			Twelve Months Ended Dec. 31, 2013			Twelve Months Ended Dec. 31, 2012
Borrowing limit	$	100		$	100		$	100
Amount outstanding at period end	16			38			—
Average amount outstanding	9			46			10
Maximum amount outstanding	100			100			63
Weighted average interest rate, computed on a daily basis	0.22		%	0.29		%	0.33		%
Weighted average interest rate at end of period	0.45			0.25			N/A

Commercial Paper — SPS meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility. Commercial paper outstanding for SPS was as follows:



(Amounts in Millions, Except Interest Rates)	Three Months Ended Dec. 31, 2014
Borrowing limit	$	400
Amount outstanding at period end	37
Average amount outstanding	22
Maximum amount outstanding	54
Weighted average interest rate, computed on a daily basis	0.31		%
Weighted average interest rate at period end	0.47



(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2014			Twelve Months Ended Dec. 31, 2013			Twelve Months Ended Dec. 31, 2012
Borrowing limit	$	400		$	300		$	300
Amount outstanding at period end	37			84			9
Average amount outstanding	83			32			18
Maximum amount outstanding	241			140			106
Weighted average interest rate, computed on a daily basis	0.26		%	0.30		%	0.39		%
Weighted average interest rate at end of period	0.47			0.27			0.36

Letters of Credit — SPS may use letters of credit, generally with terms of one-year, to provide financial guarantees for certain operating obligations. At Dec. 31, 2014, there were $30.0 million of letters of credit outstanding under the credit facility. At Dec. 31, 2013, there were $25.5 million letters of credit outstanding under the credit facility. The contract amounts of these letters of credit approximate their fair value and are subject to fees.

Credit Facility — In order to use its commercial paper program to fulfill short-term funding needs, SPS must have a revolving credit facility in place at least equal to the amount of its commercial paper borrowing limit and cannot issue commercial paper in an aggregate amount exceeding available capacity under this credit facility. The line of credit provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.

Amended Credit Agreement — In October 2014, SPS entered into an amended five-year credit agreement with a syndicate of banks. The amended credit agreement has substantially the same terms and conditions as the prior credit agreement with an increased borrowing limit and an extension of maturity from July 2017 to October 2019. The borrowing limit for SPS has been increased to $400 million from $300 million.

SPS has the right to request an extension of the revolving termination date for two additional one-year periods. All extension requests are subject to majority bank group approval.

Other features of SPS’ credit facility include:


•	The credit facility may be increased by up to $50 million.

•

The credit facility has a financial covenant requiring that SPS’ debt-to-total capitalization ratio be less than or equal to 65 percent. SPS was in compliance as its debt-to-total capitalization ratio was 47 percent and 49 percent at Dec. 31, 2014 and 2013, respectively. If SPS does not comply with the covenant, an event of default may be declared, and if not remedied, any outstanding amounts due under the facility can be declared due by the lender.


•	The credit facility has a cross-default provision that provides SPS will be in default on its borrowings under the facility if SPS or any of its future significant subsidiaries whose total assets exceed 15 percent of SPS’ total assets, default on certain indebtedness in an aggregate principal amount exceeding $75 million.


•	The interest rates under the line of credit are based on Eurodollar borrowing margins ranging from 87.5 to 175 basis points per year based on the applicable long-term credit ratings.


•	The commitment fees, also based on applicable long-term credit ratings, are calculated on the unused portion of the lines of credit at a range of 7.5 to 27.5 basis points per year.

At Dec. 31, 2014, SPS had the following committed credit facility available (in millions):



Credit Facility ^(a)		Drawn ^(b)		Available
$	400.0	$	67.0	$	333.0


^(a)	These credit facilities have been amended to extend the maturity to October 2019.


^(b)	Includes outstanding commercial paper and letters of credit.

All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. SPS had no direct advances on the credit facility outstanding at Dec. 31, 2014 and 2013.

Long-Term Borrowings and Other Financing Instruments

Generally, all real and personal property of SPS is subject to the lien of its first mortgage indenture. Debt premiums, discounts and expenses are amortized over the life of the related debt. The premiums, discounts and expenses associated with refinanced debt are deferred and amortized over the life of the related new issuance, in accordance with regulatory guidelines.

In June 2014, SPS issued $150 million of 3.30 percent first mortgage bonds due June 15, 2024. In August 2013, SPS issued $100 million of 4.50 percent first mortgage bonds due Aug. 15, 2041. Including the $300 million of this series previously issued, total principal outstanding for this series is $400 million.

In connection with SPS’ issuance of $150 million of 3.30 percent first mortgage bonds due June 15, 2024, SPS concurrently took certain actions to secure its previously issued Series G Senior Notes due Dec. 1, 2018 equally and ratably with SPS’ first mortgage bonds as required pursuant to the terms of the Series G notes.

To provide the required collateralization, SPS issued $250 million of collateral 8.75 percent first mortgage bonds due Dec. 1, 2018 to the trustee under its senior unsecured indenture which secured the previously issued Series G Senior Notes, 8.75 percent due Dec. 1, 2018, equally and ratably with SPS’ first mortgage bonds.

During the next five years, SPS has long-term debt maturities of $200 million and $250 million due in 2016 and 2018, respectively.

Deferred Financing Costs — Other assets included deferred financing costs of approximately $10.9 million and $10.3 million, net of amortization, at Dec. 31, 2014 and 2013, respectively. SPS is amortizing these financing costs over the remaining maturity periods of the related debt.

Dividend Restrictions — SPS’ dividends are subject to the FERC’s jurisdiction under the Federal Power Act, which prohibits the payment of dividends out of capital accounts; payment of dividends is allowed out of retained earnings only.

The most restrictive dividend limitation for SPS is imposed by its state regulatory commissions. SPS’ state regulatory commissions indirectly limit the amount of dividends that SPS can pay Xcel Energy Inc. by requiring an equity-to-total capitalization ratio (excluding short-term debt) between 45.0 percent and 55.0 percent. In addition, SPS may not pay a dividend that would cause it to lose its investment grade bond rating. SPS’ equity-to-total capitalization ratio (excluding short-term debt) was 53.6 percent at Dec. 31, 2014 and $396 million in retained earnings was not restricted.