IBM to Power Xcel Energy's Technology Infrastructure

Strategic Relationship, Now Valued at More Than $1.2 Billion, Expected to Generate Savings in Xcel's Post-Merger IT Operations

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Somers, NY & Minneapolis, MN - 26 Sep 2000: -- IBM and Xcel Energy, one of the nation's 10 largest utilities, have announced an 11-year strategic relationship aimed at strengthening Xcel Energy's technology infrastructure while cutting information technology costs in the 12 states the company serves.

IBM Global Services and Xcel Energy, a new company created last month by the merger of Minneapolis-based Northern States Power and Denver-based New Century Energies, have forged a "second generation" services relationship in which IBM will partner with Xcel Energy to build its technology infrastructure into an engine that can support and foster corporate re-engineering and future business growth.

Xcel Energy will maintain a small but critical core staff within its corporate IT area. Together with IBM, they will help the company develop business cases for a variety of e-business and technology projects aimed at cutting Xcel Energy's IT and operating costs and generating new sources of revenue. IBM will have the opportunity to share in the savings or profits the company attains as a result of implementing these technologies. Executives from both companies will sit on a joint committee to confirm the business proposals and monitor the progress of the projects underway.

The new contract, valued at $440 million, builds on an existing agreement signed in 1999 between IBM and New Century Energies as an extension of a 1995 contract between IBM and Public Service Company of Colorado. The total value of the relationship now exceeds $1.2 billion. Under the new agreement, IBM will work with Xcel Energy to help it achieve the "synergy savings" -- or post-merger cost savings -- that New Century Energies and Northern States Power promised state regulators as a condition of their merger.

The services IBM will provide to Xcel Energy will include data center operations, disaster recovery, networking, help desk, PC and LAN support, distributed services support, and application development and maintenance.

All services will be provided within IBM's second generation service delivery framework, which places significant emphasis on business strategy in addition to IT operations. To this end, utility industry experts from IBM Consulting will join IBM's service delivery team to work within Xcel Energy's new I/T organizational model. In addition, the IBM Global Services team at Xcel Energy will be closely linked to IBM Research -- which spends approximately $6 billion per year on research and development -- in order to determine how new technology breakthroughs can be leveraged for competitive advantage.

"Through the many changes we have made in our business during the past five years -- including a major corporate restructuring and two important mergers -- IBM has been the backbone of our IT function at New Century Energies," said Wayne Brunetti, president and CEO of Xcel Energy. "Working with our partners at IBM, we expect to be even more effective at continuing to drive cost from our IT operations and to achieve the savings our shareholders expect."

Tom Cotney, general manager, communications sector, IBM Global Services, said: "The implementation of this new model for IT outsourcing -- which far surpasses the usual provision of commodity services -- is the first among utilities and energy services companies. It's a great opportunity for both companies. Xcel Energy's visionary use of technology will push it ahead of the competition and help the company deliver the synergy savings it promised to industry regulators. And for IBM, this is a chance to demonstrate the unique value we can deliver as an IT services provider to leaders in utilities and energy industries, such as Xcel Energy."

Through this agreement, Xcel Energy has awarded IBM preferred provider status, making IBM the vendor of choice for any IT products and services the company may purchase for the duration of their contract.

About IBM Global Services
IBM Global Services is the world's largest information technology services provider, with 1999 revenues of more than $32 billion. Services is the fastest growing part of IBM, with more than 140,000 professionals serving customers in 160 countries. IBM Global Services integrates IBM's broad range of capabilities -- services, hardware, software and research -- to help companies of all sizes realize the full value of information technology. For more information, visit

About Xcel Energy Inc.
Xcel Energy is a prominent U.S. electric and natural gas utility with annual revenues of $8 billion and operations in 12 Western and Midwestern states. Formed in August 2000 by the merger of New Century Energies and Northern States Power Company, Xcel Energy provides a complete portfolio of energy-related products and services to 3 million electricity customers and 1.5 million natural gas customers. One of the company's nonregulated subsidiaries, NRG Energy, Inc., has projects or offices in 25 U.S. states and 10 countries worldwide.

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