Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (July 2019)
36 slides from Txnm Energy's investor presentation, July 2019
Slide 1: Investor Meetings July 2019
| y Investor Meetings July 2019
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 U.S. 1-505-241-2227 Lisa.Goodman@pnmresources.com Jimmie.Blotter
Slide 3: Company Overview
Company Overview
Slide 4: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and above industry average earnings and dividend growth to shareholders • Energy holding company • Based in Albuquer
Slide 5: PNM Resources Strategic Direction and Financial Goals
PNM Resources Strategic Direction and Financial Goals • Plans to be coal-free by 2031 Transform to • Goal to be emissions-free by 2040 Cleaner Energy • Retire and replace coal-fired generation with Portfolio cleaner energy portfolio • Invest to maintain system reliability • Provide reliable, afforda
Slide 6: Consolidated Earnings Guidance (Ongoing)
Consolidated Earnings Guidance (Ongoing) Revised 2019 Earnings Guidance $2.05 Consolidated EPS $2.11 Ongoing EPS Previous Consolidated Ongoing • 2019 Guidance revised July 12, as Earnings Guidance $2.10-$2.20 weather significantly impacted Previous Q2 Ongoing Earnings 27% of FY 2019 expected Q2 resu
Slide 7: Earnings Growth 2018 – 2023: Targeting 5-6% Ongoing EPS CAGR
Earnings Growth 2018 – 2023: Targeting 5 - 6% Ongoing EPS CAGR • 2014 - 2018: Achieved 7.6% Ongoing EPS CAGR • 2014 - 2023: Reflects 6-7% Ongoing EPS CAGR Target: $2.58-$2.69 $2.53 $2.39 $2.20 $2.08 $1.94 $2.00 $1.64 $1.65 $1.49 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actual Ongoing EPS Mi
Slide 8: Dividend Growth
Dividend Growth Consistent Delivery of Dividend Growth At or Above Industry Average Expect future dividend growth to mirror 9% earnings growth 9% (approximately 5-6%) 10% 10% $1.16 8% $1.06 Dec ‘18 $0.97 Dec ‘17 $0.88 $0.80 Dec ‘16 Dec’ 15 Dec ‘14 $0.74 Dec ‘13 Indicative annual dividend rate • Expe
Slide 9: 2019 – 2023 Investment Plan
2019 – 2023 Investment Plan $3.6B investment plan updated to incorporate $298M replacement power; $278M generation investment and $20M transmission investment $1,012 $26 $208 $698 $634 $25 $665 $34 $20 $21 $30 $47 $285 $570 $70 $37 $20 $60 $88 $43 $128 $88 $79 $82 (in millions) $98 $142 $171 $169 $1
Slide 10: 2019 - 2023 Potential Earnings Power
2019 - 2023 Potential Earnings Power Earnings Growth Target 5-6% Updates incorporate recommended replacement power scenario, adds 2023 • Partial year of San Juan rate base in 2022, no remaining rate base in 2023 • Interim financing supports replacement power until securitization proceeds received mi
Slide 11: Generation Portfolio Transformation
Generation Portfolio Transformation
Slide 12: New Mexico Energy Policy: 100% Carbon-Free
New Mexico Energy Policy Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019 2045 100% Carbon-Free • Renewable Portfolio Standards and Carbon-Free Goal 2040 80% Renewables • Current: 20% renewables by 20
Slide 13: Consolidated Application
Consolidated Application PNM filed a consolidated application for San Juan Generating Station on July 1, 2019: • Abandonment of remaining capacity in San Juan coal plant (Units 1 and 4) • Securitization of approximately $361 million includes estimated undepreciated investment of $283 million • Appro
Slide 14: Abandonment and Securitization Details
Abandonment and Securitization Details Abandonment: • Requests abandonment of San Juan coal plant after participation agreement and coal supply contracts end June 30, 2022 Securitization: • Requests securitization treatment of approximately $361 million: undepreciated investment in San Juan Generati
Slide 15: Recommended Replacement Power Scenario Details
Recommended Replacement Power Scenario Details • Competitive RFP processes resulted in a cost-effective mix of resources owned by PNM and third-party providers • To manage the risks of integrating new battery storage technology, total storage capacity does not exceed 5% of peak load and the capacity
Slide 16: Replacement Power Scenarios Considered
Replacement Power Scenarios Considered Recommended Scenario 2 Scenario 3 Scenario 4 Scenario 1 - Hybrid San Juan Location No Fossil Fuel All Renewable • 280 MW gas(1) • 476 MW gas(1) • 40 MW battery(1) PNM Owned Resources - • 70 MW battery • 110 MW battery PNM Capex $298M $331M $243M $37M • 350 MW s
Slide 17: Exit from Coal Generation, Emission Reductions
Exit from Coal Generation, Emission Reductions • The shutdown of Units 2 and 3 at PNM San Juan Generating Station in December 2017 reduced CO₂ emissions at this plant by 54% below 2005 levels • The 2017 Integrated Resource Plan called for a complete exit from coal generation by the end of 2031 • New
Slide 18: Integration of Renewable Generation
Integration of Renewable Generation Integration of renewable generation requires T&D investment and addition of supporting backup capacity Growing Solar and Wind Capacity Based on Recommended San Juan Replacement Scenario (MW) 1,955 1,402 889 854 681 493 521 1,066 356 721 333 137 2018 2020 2025 2035
Slide 19: Transmission and Renewable Expansion in New Mexico
Transmission and Renewable Expansion in New Mexico Third-party renewable development increases demand for transmission capacity across our system New Mexico added wind capacity at a faster rate than any other state in 2017 • 1,682 MW installed capacity, 51% Broadview increase over 2016 • El Cabo Win
Slide 20: PNM
PNM
Slide 21: PNM Load and Economic Conditions
PNM Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized) • Total PNM Retail Load guidance Q1 2019 2018 trended upwards throughout 2018 2019 vs. vs. and Q1 2019 Guidance Q1 2018 2017 Residential & Commercial 0.3% - 0.5% 0.6% 0.7% • In Q2, the PNM service terri
Slide 22: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas District Name Party Ends District 1 Cynthia Hall 2020(1) Democrat District 2 Jefferson Byrd 2022(1) Republican Valerie Espinoza, District 3 2020 Democrat Vice-Chairman Theresa Becenti-Aguilar, District 4 2022(1) Democrat Ch
Slide 23: PNM Regulatory Agenda
PNM Regulatory Agenda Filing Action Timing Docket No. NMPRC decision on Consolidated Application for San abandonment/securitization Juan Generating Station PNM filed July 1, 2019; NMPRC bifurcated 19-00018-UT expected by April 2020, decision on (Abandonment, Securitization application on July 10, 20
Slide 24: PNM New Mexico Supreme Court Appeal
PNM New Mexico Supreme Court Appeal • September 30, 2016: PNM filed Notice of Appeal with New Mexico Supreme Court • May 16, 2019: New Mexico Supreme Court affirmed the disallowance on each of the items below, but did not affirm the disallowance of future Palo Verde Nuclear Decommission Costs Appeal
Slide 25: PNM Bills Remain Below National and Regional Averages
PNM Bills Remain Below National and Regional Averages Comparison of Average Residential Bills(1) Western Region Average Bills by Utility Arizona Public Service Co (AZ) $140.90 Customer bill impacts of Salt River Project (AZ) Imperial Irrigation District (CA) increased investments are Entergy Texas I
Slide 26: TNMP
TNMP
Slide 27: TNMP Load and Economic Conditions
TNMP Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized) Q1 2019 2018 • Oil and gas customer requests for 2019 vs. vs. new service trending ~33% higher Guidance Q1 2018 2017 than prior year levels; residential Total Volumetric Load(1) 2% – 3% (1.9%) 3.2% and
Slide 28: PUCT Commissioners and TNMP Regulatory Agenda
PUCT Commissioners and TNMP Regulatory Agenda PUCT Commissioners Name Term Began Term Ends Party DeAnn Walker (Chair) Sept. 2017 Aug. 2021 Republican Arthur D’Andrea Nov. 2017 Aug. 2023 Republican Shelly Botkin June 2018 Sept. 2019 Republican Commissioners are appointed by the Governor of Texas and
Slide 29: TNMP General Rate Review Settlement
TNMP General Rate Review Settlement • Settlement approved December 20, 2018 • Rates implemented January 2019 Key Components of Approved Settlement Annual revenue increase $10.0M ROE (prior authorized 10.125%) 9.65% Capital structure 45% Equity (prior authorized 45% equity) Cost of debt 6.4% Increase
Slide 30: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh Rates expected to be comparable to other IOUs after upcoming rate filings $60 Expected Expected to File by Expected to File by $50 May 2019 New Rates1 to File by May 2019 Expected May 2019 $40 to File by Oct 2021 $30
Slide 31: Appendix
Appendix
Slide 32: Potential Earnings Power
Potential Earnings Power 2023 Earnings Allowed 2020 Earnings Potential 2021 Earnings Potential 2022 Earnings Potential Potential Return / Equity Ratio Avg Rate Avg Rate Avg Rate Avg Rate EPS EPS EPS EPS Base Base Base Base 9.575% / PNM Retail(1) $2.4 B $1.44 $2.5 B $1.52 $2.4 B $1.48 $2.4 B $1.48 50
Slide 33: Liquidity and Debt Maturity Outlook
Liquidity and Debt Maturity Outlook Long-term Debt Maturities Maintain appropriate (in millions) $658 credit metrics $35 $140 $300 $1,003 $350 $57 Remain a solid $306 investment grade 2020 2021 2022 2023 and Beyond PNM TNMP Corporate rated company • Extended $700M revolving credit facilities through
Slide 34: Liquidity as of May 3, 2019
Liquidity as of May 3, 2019 PNMR PNMR PNM Develop- Corporate Resources PNM TNMP ment /Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $440.0 $75.0 $25.0 $300.0 $840.0 As of 5/3/19: Short-term debt and LOC balances $2.5 $29.3 $15.1 $60.6 $107.5 Remaining availabili
Slide 35: San Juan Generating Station Ownership and Participants
San Juan Generating Station Ownership and Participants Total PNM PNM Unit Other Participants/Ownership MW MW Ownership 1 340 170 50% Tucson Electric 50% (170 MW) City of Farmington 8.5% (43 MW) 4 507 392 77.3% Los Alamos County 7.2% (36.5 MW) Utah Associated Municipal Power Systems (UAMPS) 7.0% (35.
Slide 36: Palo Verde Nuclear Generating Station Ownership and Leases
Palo Verde Nuclear Generating Station Ownership and Leases MW Owned vs. Leased Unit 1 Unit 2 Unit 3 Owned 2.3% 30 MW Owned 9.5% 124 MW Owned 10.2% 134 MW Leased 7.9% 104 MW Leased 0.7% 10 MW Leased 0% 0 MW Total 10.2% 134 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: January 15