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. SPS had no money pool borrowings outstanding during the three months ended Dec. 31, 2017. Money pool borrowings for SPS were as follows:



(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2017			Twelve Months Ended Dec. 31, 2016			Twelve Months Ended Dec. 31, 2015
Borrowing limit	$	100		$	100		$	100
Amount outstanding at period end	—			—			—
Average amount outstanding	13			28			21
Maximum amount outstanding	100			100			100
Weighted average interest rate, computed on a daily basis	1.12		%	0.67		%	0.40		%
Weighted average interest rate at end of period	N/A			N/A			N/A

Commercial Paper — SPS meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility. SPS had no commercial paper borrowings outstanding during the three months ended Dec. 31, 2017. Commercial paper outstanding for SPS was as follows:



(Amounts in Millions, Except Interest Rates)	Twelve Months Ended Dec. 31, 2017			Twelve Months Ended Dec. 31, 2016			Twelve Months Ended Dec. 31, 2015
Borrowing limit	$	400		$	400		$	400
Amount outstanding at period end	—			50			15
Average amount outstanding	69			43			100
Maximum amount outstanding	176			140			246
Weighted average interest rate, computed on a daily basis	1.13		%	0.67		%	0.46		%
Weighted average interest rate at end of period	NA			0.95			0.60

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, 2017 and 2016, there were $3 million and $5 million of letters of credit outstanding, respectively, 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.

SPS has the right to request an extension of the June 2021 termination date for two additional one-year periods. The 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 46 percent and 47 percent at Dec. 31, 2017 and 2016, 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.


•	SPS was in compliance with all financial covenants on its debt agreements as of Dec. 31, 2017 and 2016.

At Dec. 31, 2017, SPS had the following committed credit facility available (in millions):



Credit Facility ^(a)		Drawn ^(b)		Available
$	400	$	3	$	397


^(a)	This credit facility matures in June 2021.


^(b)	Includes 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, 2017 and 2016.

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 2017, SPS issued $450 million of 3.70 percent first mortgage bonds due Aug. 15, 2047. In 2016, SPS issued $300 million of 3.40 percent first mortgage bonds due Aug. 15, 2046.

During the next five years, SPS has no long-term debt maturities.

Deferred Financing Costs — Deferred financing costs of approximately $18 million and $15 million, net of amortization, are presented as a deduction from the carrying amount of long-term debt at Dec. 31, 2017 and 2016, 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, 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 ratio (excluding short-term debt) was 53.8 percent at Dec. 31, 2017 and $542 million in retained earnings was not restricted.