Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (March 2016)
46 slides from Txnm Energy's roadshow presentation, March 2016
Slide 1: Investor Meetings
Investor Meetings February/March 2016
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Director, Investor Relations Lisa Goodman, Manager, Investor Relations U.S. 1-505-241-2227 U.S. 1-505-241-2160 Jimmie.Blotter@pnmresources.com Lisa.Goodman@pnmresources.com Safe Harbor Statement Stat
Slide 3: Strategic Overview
Strategic Overview
Slide 4: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility holding company NYSE Ticker PNM Market Cap $2.6B focused on providing a top quartile total return to shareholders Generation Resources and Service Territories • Energy holding company • Based in Albuquerque, New Mexico • Located in
Slide 5: 2015 Accomplishments and Highlights
2015 Accomplishments and Highlights • PNM BART plan approved by FERC and NMPRC • PNM Future Test Year definition resolved Regulatory • PNM Transmission formula rate case settled Accomplishments • TNMP implemented two TCOS increases • TNMP AMS Reconciliation filing recommended for approval without ex
Slide 6: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Goals Earn Authorized Return on Regulated Businesses Maintain Solid Investment Grade Credit Ratings Above Industry Average Earnings and Dividend Growth Earnings • Investing in core capital, Growth • Sustaining and growing environmental control • Realizing
Slide 7: Capital Forecast
Capital Forecast 2016 – 2019 Total Capital Plan: $1.7B PNM 2015-2019 Rate Base CAGR: 5 - 7%(1) TNMP 2015-2019 Rate Base CAGR: 7 - 9% (In millions) $547 $36 Palo Verde Unit 3 added to rate base $115 $415 $398 $19 $14 $352 $99 $101 $15 $114 $117 $132 $102 $298 $127 $213 $239 $238 $232 $163 $167 $93 20
Slide 8: Rate Base Growth: BART Implementation
Rate Base Growth: BART Implementation Rate Base Growth Approved December 16, 2015 (in millions) CCN with an initial book PVNGS Unit 3 $113 Additional 132 MW value of zero plus SNCR and of San Juan Unit 4 other capital investments SNCR and Balanced Draft $63 on San Juan Units 1 and 4 Retirement of Sa
Slide 9: Earnings Growth: 2016 - 2019 Potential Earnings Power
Earnings Growth: 2016 - 2019 Potential Earnings Power 2016 Earnings Guidance 2019 Earnings Potential Allowed EPS Growth Avg Rate Avg Rate Return EPS Return / EPS Base Base Equity Ratio PNM Retail (1) $2.4 B 7.3% - 8.4% $1.08 - $1.24 $2.5 B 10% / 50% $1.58 $0.50 - $0.34 PNM Renewables (2) $100 M 10.0
Slide 10: Earnings Growth: PNM General Rate Case
Earnings Growth: PNM General Rate Case Requested revenue increase of $123.5 million • Based on Oct. 2015 – Sept. 2016 test year and 10.5% ROE • Average system impact of 5.4%, including the new coal contract and other changes Rate Base • New Generation: Timeline • 40 MW Solar • 40 MW La Luz Gas Pea
Slide 11: Earnings and Dividend Growth: Above Industry Average
Earnings and Dividend Growth: Above Industry Average The annual common stock dividend was raised by 10% in Dividend rate: December 2015 to $0.88 per share $0.88 (1) Expect above industry average dividend growth in the future Payout ratio: while targeting the 50% - 60% payout ratio range 53% (2)
Slide 12: PNM Overview
PNM Overview
Slide 13: PNM: Recent Accomplishments
PNM: Recent Accomplishments Progressing regulatory environment • Retail Renewable Rider implemented in August of 2012 with rates reset annually; 2015 revenue was $43M • Filed settlement on FERC Transmission formula rate case with 10% ROE; rates in effect, subject to refund • Approval of San Juan G
Slide 14: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales (weather-normalized) PNM % of 2015 Q4 2015 vs. 2015 vs. Sales Q4 2014 2014 Average Customer Growth Residential 39% 0.0% 0.0% Q4 2015 vs. 2015 vs. 2016 Q4 2014 2014 Forecast Commercial 46% (1.9%) (2.2%) Industrial 12% (4.0%) (2.7%)
Slide 15: PNM Rate Affordability
PNM Rate Affordability PNM's Residential Affordability Continues to be Among the Best in the Nation 5.0% 4.5% 4.0% Est. Average 2014 Residential Electric Bill 3.5% Est. 2014 Median Household Income 3.0% U.S. Average: 2.5% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Sources: EIA Form 826, US Census Bureau PNM rate
Slide 16: PNM Regulatory Accomplishments
PNM Regulatory Accomplishments Subject Matter Accomplishments • NMPRC approved plan to retire San Juan Units 2 and 3 at December 31, 2017 and install BART SNCR on San Juan Units 1 and 4 2011 General Rate Case • NMPRC approved $72.1 million rate increase; 10.0% ROE (Aug. 2011) • NMPRC approved Renewa
Slide 17: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success Earn allowed return • Minimize regulatory lag through timely rate case filings • Synchronize revenues and expenses • Use future test year Continue to maintain strong investment grade credit metrics Continue to control costs 17
Slide 18: TNMP Overview
TNMP Overview
Slide 19: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments TCOS and DCOS filings provide the ability to recover transmission and distribution cost of service investments on a timely basis • TCOS filing requesting additional revenue of $1.4M was approved with rates effective September 10, 2015 Energy efficiency program costs
Slide 20: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales (weather-normalized) TNMP % of 2015 Q4 2015 vs. 2015 vs. Sales Q4 2014 2014 Average Customer Growth Residential 51% 6.8% 4.2% Q4 2015 vs. 2015 vs. 2016 Commercial 46% (1.0%) 1.4% Q4 2014 2014 Forecast Total Retail 2.4% 2.6% TNMP
Slide 21: TNMP Regulatory Accomplishments
TNMP Regulatory Accomplishments Subject Matter Accomplishments PUCT: 2016 • Filed $4.3M increase in January, expected to be effective March 2016 2015 • PUCT approved $1.4M increase, effective September 2015 • PUCT approved $4.4M increase, effective March 2015 Transmission Cost of Service 2014 (TCOS)
Slide 22: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return through timely execution of transmission cost of service and general rate case filings • Additional investments in the business to support strong growth Continue to maintain strong investment grade credit metrics Contin
Slide 23: Financial Overview
Financial Overview
Slide 24: FY 2015 Financial Summary
FY 2015 Financial Summary Ongoing EPS $0.02 $1.64 $0.08 $0.05 $1.49 TNMP Corporate PNM 2014 2015 24
Slide 25: PNM and TNMP: 2015 vs 2014 EPS (Ongoing)
PNM and TNMP: 2015 vs 2014 EPS (Ongoing) PNM 2015 Key Performance Drivers Palo Verde Unit 1 leases at half price ∆ EPS $0.12 AFUDC $0.09 Palo Verde Nuclear Decommissioning Trust gains $0.05 Refined coal $0.03 $1.10 $1.18 El Paso natural gas tariff $0.03 Renewable rate relief $0.02 Weather $0.02 2003
Slide 26: 2015 Ongoing EPS vs Guidance
2015 Ongoing EPS PNM Resources 2015 Guidance: $1.56 – $1.61 2015 Actual: $1.64 PNM Guidance: $1.13 - $1.16 Actual: $1.18 TNMP Guidance: $0.51 - $0.52 Actual: $0.52 Corp/Other Guidance: ($0.08) – ($0.07) Actual: ($0.06) 26
Slide 27: Liquidity and Capital Structure
Liquidity and Capital Structure Target cap structures: 50/50 at PNM, 55/45 at TNMP Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity as of February 19, 2016 (In millions) Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short-term debt(1) and LOC balances 99.4 15.1 112.3 226.8
Slide 28: Credit Ratings
Credit Ratings Rate relief, cost control, and tax benefits keep FFO to Debt well within Moody’s Baa investment grade target range of 13% to 22% Credit Ratings Moody’s S&P 2008 2016 2008 2016 PNM Resources Ba2(2) Baa3(1) PNM Resources BB-(2) BBB+(1) PNM(2) Baa3 Baa2 PNM(2) BB+ BBB+(2) TNMP Baa3(2) A1
Slide 29: PNM Resources Summary
PNM Resources Summary Continued earnings and dividend growth make PNM Resources an attractive investment Potential earnings growth of 7% - 9% through 2019 Expected rate base CAGR: • PNM: 5% - 7% through 2019 • TNMP: 7% - 9% through 2019 Other potential investments: • Renewable resources • Tran
Slide 30: Appendix
Appendix
Slide 31: 2017 and 2018 Potential Earnings Power
2017 and 2018 Potential Earnings Power Allowed 2017 Earnings Potential 2018 Earnings Potential Return / Equity Ratio Avg Rate EPS Avg Rate EPS Base Base PNM Retail (1) 10% / 50% $2.4 B $1.50 $2.6 B $1.59 PNM Renewables (2) 10% / 50% $95 M $0.06 $90 M $0.06 PNM FERC Transmission (3) 10% / ~50% $180 M
Slide 32: PNM General Rate Case Drivers and Other Impacts to Customer Rates
PNM General Rate Case Drivers and Other Impacts to Customer Rates Revenue requirement driven by rate base additions and energy sales Amount (in millions) Rate Base $95 Energy Sales 31 Other: 50% Reduction of Remaining Palo Verde Lease Payments (17) Change in ROE from 10% to 10.5% 6 Re-allocation of
Slide 33: PNM General Rate Case Drivers: Rate Base
PNM General Rate Case Drivers: Rate Base Rate Incremental Base Revenue Additions Requirement (Retail share, in millions) Solar (40 MW) $65 $11 La Luz Gas Peaker (40 MW) 50 8 Rio Bravo Generating Station (138 MW)(1) 32 - San Juan SNCR Equipment & Balanced Draft 58 9 Palo Verde Unit 2 Lease Purchase (
Slide 34: PNM Customer Rate Impact as of July 1, 2016
PNM Customer Rate Impact as of July 1, 2016 Rate % Increase Rate % Increase per Major Customer Class Including Fuel and Request Other Changes (1) Residential 15.8% 7.9% Small Power 14.4% 7.0% General Power 14.5% 5.2% Large Power 14.2% 2.8% Large Power >= 8,000kW 9.4% (2.6)% Universities 9.3% (2.4)%
Slide 35: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Karen Montoya, District 1 2016 Democrat Vice Chair District 2 Patrick Lyons 2018 Republican Valerie Espinoza, District 3 2016 Democrat Chairman District 4 Lynda Lovejoy 2018 Democrat District 5 Sand
Slide 36: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends Donna Nelson Aug. 2008 Sep. 2021 Republican Chairman Kenneth Anderson Sept. 2008 Aug. 2017 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Commissioners are appointed by the Governor of Texas. Length of term is determined by the Gover
Slide 37: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $60 $50 $40 $30 $20 $10 $- Oncor TNMP AEP North Centerpoint AEP Central Source: TDU tariffs for retail delivery service expected March 1, 2016 37
Slide 38: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,787 MW 2018 Forecasted As of 12/31/2015 Generation Mix Renewables Renewables 15% 16% Coal Coal 27% 35% Natural Gas Natural Gas 35% 37% Nuclear Nuclear 20% 15% 38
Slide 39: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 10,763 GWh 2018 Forecasted Based on 12 months ending 12/31/15 Generation Mix Renewables 7% Renewables 10% Natural Gas 12% Coal Natural Gas 50% Coal 17% 42% Nuclear 31% Nuclear 31% 39
Slide 40: Investment in Renewable Energy
Investment in Renewable Energy New Mexico Renewable Energy Act Renewable Rider Collection Portfolio Standard as a % of Retail Sales Streamlined proceedings for approval of Methodology utilities’ renewable energy procurement Recovery of renewable investments 15% 20% plans and REC purchases permitted
Slide 41: PNM Plant EAF and Outages
PNM Plant EAF and Outages 2016 - 2017 Outage Schedule Duration Time Unit in Days Period 91.8% 92.4% San Juan 76.5% 78.1% 1 7 Q1 2016 65.8% 66.8% 3 13 Q1 2016 2 16 Q1 2016 4 15 Q2 2016 Four Corners 72 Q1-Q2 2016 5 94 Q4 2017 4 21 Q1-Q2 2016 Palo Verde 34 Q2 2016 1 San Juan Four Corners Palo Verde 34
Slide 42: PNM San Juan Generating Station Ownership and Participants
PNM 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) 2 340 170 50% Tucson Electric 50% (170 MW) Southern California Power Authority 41.8% (208 MW) 3 497 248 50% Tri-State 8.2% (41 MW) M-S
Slide 43: PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases
PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases MW Owned vs. Leased Unit 1 Unit 2 Owned 2.3% 30 MW Owned 9.5% 124 MW(1) Leased 7.9% 104 MW Leased 0.7% 10 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: January 15, 2015; exercised option to extend leases to 2023 • Un
Slide 44: Environmental Control Equipment at Coal Units
Environmental Control Equipment at Coal Units PNM Share Low NOx Activated Coal Unit Capacity Burners/ Carbon SNCR (3) SCR (3) Baghouse (4) Scrubbers (MW) Overfired Air Injection (2) San Juan Unit 1 170 X X X X X San Juan Unit 2 (1) 170 X X X X San Juan Unit 3 (1) 248 X X X X San Juan Unit 4 195 X X
Slide 45: Impact of Environmental Regulation- SJGS
Impact of Environmental Regulation- SJGS Estimated Compliance Costs San Juan Generating Station Comments (PNM Share) Clean Air Act – Regional Haze(1) $78M SNCR technology on 2 units; Retire 2 units. (State Alternative) – SNCR Balanced draft will assist with NAAQS compliance. On October 1, 2015, EPA
Slide 46: Impact of Environmental Regulation- Four Corners
Impact of Environmental Regulation- Four Corners Estimated Compliance Costs Four Corners (Units 4 and 5) Comments (PNM Share) Final BART determination filed with EPA on December 30, 2013. Impact to PNM: Clean Air Act – Regional Haze – SCR $94M SCR controls for NOx on Units 4 & 5 by July 31, 2018. On