Slide 1: Investor Meetings
Investor Meetings September 2012
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Investor Relations Manager Deanna Armijo, Investor Relations Analyst U.S. 1-505-241-2227 U.S. 1-505-241-4873 Jimmie.Blotter@pnmresources.com Deanna.Armijo@pnmresources.com Safe Harbor Statement State
Slide 3: Strategic Overview
Strategic Overview
Slide 4: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility focused NYSE Ticker PNM on providing a top quartile total return to shareholders Market Cap $1.65B Service Territories •Energy holding company •Based in Albuquerque, New Mexico, USA •Located in New Mexico •504,700 customers •14,562
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Goals Former hybrid business model with competitive entities in Texas Earn Authorized Return on our Regulated Businesses Strengthened financial Management able to position as result of strategic efficiently execute strategic shift redirection of business C
Slide 6: Ongoing Earnings Per Share and Returns Improvement
Ongoing Earnings Per Share and Returns Improvement Guidance Range Ongoing Earnings Per Share $1.20 - $1.32 $1.26 Midpoint PNM TNMP $0.28 - $0.32 $1.05 $0.29 $0.75 $0.63 $0.17 $0.47 $0.13 $1.08 - $1.15 $0.28 $0.76 $0.50 $0.58 $0.19 2008 2009 2010 2011 2012E Returns 2009 2012E PNM Retail 3.7% Expected
Slide 7: Market Reaction to Management Actions
Market Reaction to Management Actions PNM Stock Price has improved 60% since 2010 70% 60% 60% 50% 40% % Change 30% 22% 20% 10% 17% 0% 10% -10% -20% 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12 6/30/12 PNM S&P 500 Dow Jones Utility S&P 400 Mid-Cap Utilities Credit Ratings Moody’s S&P 2008 2012 2
Slide 8: Top Quartile Total Return
Top Quartile Total Return Long-term goal: Provide top quartile total return to shareholders Total return is 5-year ongoing EPS growth + 5-year average dividend yield Top quartile total return currently equal to an average annual rate of 10% - 13% over a 5 year period (1) Earnings growth driven
Slide 9: Total Return Levers: Strong Dividend Growth Potential
Total Return Levers: Strong Dividend Growth Potential 2012 Dividend: The annual common stock $0.58 dividend was raised by $0.08 Payout ratio: on February 29, 2012 46% (1) Long-term target: 50% - 60% Dividend yield: payout ratio 2.7% (2) The Board will continue to (1) Assumes mid-point of the 2
Slide 10: Total Return Levers: Today's Base Potential Earnings Power
Total Return Levers: Today’s Base Potential Earnings Power Reducing regulatory lag, improving market prices, and reducing Corporate debt could improve current EPS by $0.26 to $0.31 without growing rate base % of Mid Point Guidance Potential Earnings Power Rate Range Growth Potential Base Potential E
Slide 11: Total Return Levers: Sources of Core Rate Base Growth
Total Return Levers: Sources of Core Rate Base Growth 2012 – 2016 Total Capital Plan: $1.3B PNM Rate Base CAGR: 2% - 3% 2012 Expected Depreciation: $161M TNMP Rate Base CAGR: 8% Capital Spending (In millions) $286 $286 $24 $12 $255 $251 $11 $12 $219 $92 $98 $12 $83 $89 $60 $170 $157 $175 $153 $148 2
Slide 12: Total Return Levers: Sources of Potential Rate Base Growth
Total Return Levers: Sources of Potential Rate Base Growth 2012 – 2016 PNM Potential Rate Base CAGR: Up To 5% Total Potential Capital(1): $0.7B Potential Capital Spending (In millions) $237 $45 $193 $166 $22 $46 $53 $193 $80 $27 $120 $118 $27 $27 $52 2012 2013 2014 2015 2016 (2) Environmental Additi
Slide 13: Investment in Renewable Energy
Investment in Renewable Energy New Mexico Renewable Energy Act •Streamlined proceedings for approval of Wind utilities renewable energy procurement • New Mexico Wind Energy Center plans • 136 turbines •Provides for recovery of program costs • 200MW under approved procurement plan • Purchase power ag
Slide 14: Environmental Control Investment
Environmental Control Investment Clean Air Act • Law that defines EPA’s responsibilities for protecting and improving the nation’s air quality • Requires reduction in regional haze Federal Implementation Plan (FIP) • Selective Catalytic Reduction (SCR) • Potential Capital Investment o Total Plan
Slide 15: Leadership Team
Leadership Team Pat Vincent-Collawn Chairman, President, and CEO Xcel Energy Arizona Public Service Patrick Apodaca Chuck Eldred Ron Talbot Ron Darnell SVP, General Counsel EVP and CFO SVP and COO SVP, Public Policy Indianapolis Power and Light University of New Mexico Omaha Public Power District Co
Slide 16: PNM Overview
PNM Overview
Slide 17: PNM: Recent Accomplishments
PNM: Recent Accomplishments Significant progress has been made to improve PNM’s financial health Renewable energy rider, rates $182M from effective Aug. 20 Substantially three rate improved credit • 2012: $6.7M increases in the expected revenue metrics past four years • 2013: $22.7M expected revenue
Slide 18: PNM Rates Compare Favorably in the United States
PNM Rates Compare Favorably in the United States 4.5% 4.0% 3.5% Es.t 2011 Median Household Income Est. Average 2011 Electric Bill 3.0% US Average 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% UT WY VT AK MN DC MI NY NM VA KS PA KY WA PNM TN AL RI IA CO MD SD NC AZ AR LA NH WI MT ME CT OR TX OH OK FL IN MO SC MA CA
Slide 19: PNM Energy Efficiency
PNM Energy Efficiency NM Efficient Use of Energy Act requires cumulative savings of 5% of load (based on 2005) by 2014 • 411 GWh is PNM’s required cumulative energy efficiency savings Energy Efficiency Program • Residential Lighting 41% • Refrigerator Recycling 12% • Commercial Small Business 9% • C
Slide 20: San Juan Generating Station Major Environmental Upgrade
Significant Strides with Historical Environmental Upgrades San Juan Generating Station Environmental Upgrade Results Major Environmental Upgrade Reduction Since 2006 PNM completed a four-year, $320M NOX Emissions: 44% environmental upgrade to install environmental controls in 2009 SO2 Emissions: 71%
Slide 21: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success Earn allowed return • Synchronize revenues and expenses • Use of future test year • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders Continue to strengthen investment grade credit metrics Continue
Slide 22: PNM Regulatory Update
PNM Regulatory Update Item Action Timing Docket No. PNM 2013 renewable energy plan PNM to file a proposed Oct. 2 12-00131-UT recommended decision Decoupling rulemaking Workshops scheduled Sept. 21 12-00144-UT Future-test-year rulemaking Hearing held June 13; 12-00029-UT NMPRC General Counsel TBD to
Slide 23: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions (2) Regulated Retail Energy Sales Growth (1) Unemployment Rate (weather-normalized) Q2 YTD 2012 vs. 12-Month 8.1% Q2 YTD 2011 Moving Average 6.6% Residential 0.0% 0.6% Commercial 0.7% (0.1%) Industrial 1.7% 4.5% NM U.S. Total Retail 0.4% 0.8% YTD Residential a
Slide 24: TNMP Overview
TNMP Overview
Slide 25: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments Constructive Texas regulatory framework provides solid earnings potential Smart Meters • Approved July 2011 $41M from three cases over • $12M surcharge the past three years 25
Slide 26: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $- Oncor TNMP AEP North Centerpoint AEP Central Source: TDU tariffs for retail delivery service, as of May 1, 2012 26
Slide 27: TNMP Energy Efficiency
TNMP Energy Efficiency Public Utility Regulatory Act establishes annual demand savings goals for electric utilities 2012 goal is 25% reduction of peak demand growth, subject to customer rate caps • TNMP 2012 goal is 4.8 MW 2012 Energy Efficiency Program • Residential Programs 24% • Commercial Progra
Slide 28: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return Retain solid credit metrics Invest in the business Continue to control costs Use transmission and distribution cost of service filings to minimize regulatory lag 28
Slide 29: TNMP Regulatory Update
TNMP Regulatory Update TCOS Filing • Ability to recover transmission cost of service investments on a bi-annual basis DCOS Filing • Ability to recover distribution cost of service investments on an annual basis TCOS Filing Made August 23, 2012 • Requested recovery for $26.5M of transmission investme
Slide 30: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions (2) Regulated Retail Energy Sales Growth (1) Unemployment Rate (weather-normalized) Q2 YTD 2012 vs. 12-Month 8.1% Q2 YTD 2011 Moving Average 7.2% Residential 7.1% 3.6% Commercial 1.4% 0.8% Total Retail 4.4% 2.8% TX U.S. YTD Residential and Commercial Average
Slide 31: Financial Overview
Financial Overview
Slide 32: Ongoing Earnings Per Share and Returns Improvement
Ongoing Earnings Per Share and Returns Improvement $1.20 - $1.32 Ongoing Earnings Per Share Guidance Range $1.26 midpoint PNM TNMP $0.28 - $0.32 $1.05 $0.29 $0.75 $0.63 $0.17 $0.47 $0.13 $1.08 - $1.15 $0.28 $0.76 $0.50 $0.58 $0.19 2008 2009 2010 2011 2012E Returns 2009 2012E PNM Retail 3.7% Expected
Slide 33: Ongoing EBITDA Improvement
Ongoing EBITDA Improvement (In millions) PNM TNMP $441 $397 $349 $116 $321 $116 $271 $99 $85 $94 $325 $281 $236 $250 $177 (1) 2008 2009 2010 2011 2012E (1) Mid-point of guidance range 33
Slide 34: Market Reaction to Management Actions
Market Reaction to Management Actions PNM Stock Price has improved 60% since 2010 70% 60% 60% 50% 40% % Change 30% 22% 20% 10% 17% 0% 10% -10% -20% 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12 6/30/12 PNM S&P 500 Dow Jones Utility S&P 400 Mid-Cap Utilities Credit Ratings Moody’s S&P 2008 2012 2
Slide 35: 2012 Checklist
2012 Checklist 2012 Checklist Achieve successful outcomes in: PNM future test year rulemaking PNM FERC transmission rate case PNM FERC generation rate case PNM renewable rider Maintain strong electric reliability and power plant availability Control O&M and capital costs 35
Slide 36: Appendix
Appendix
Slide 37: Utility Rate Base and Return
Utility Rate Base and Return Projected Allowed Rate Base % of Rate PNM Test Period (1) 2012 Avg. Equity ROE Increase in Filing Base Rate Base Ratio Retail Current Rates June 30, 2010 $1.8B $1.8B 86% 51.28% 10.00% $72.1M Renewables (2) Dec. 31, 2011 $68M $74M 4% 50.61% (2) 10.00% (2) $18.0M (2) FERC
Slide 38: Historical Rate Cases
Historical Rate Cases PNM Rate Cases • 8% base rate increase • 6% base rate • Renewable Energy increase • $77M rate Rider • 9% base rate 2008 2009 2011 2012 increase • $33M rate increase • $6.7M expected increase • Permanent fuel revenue in 2012 • $72.1M rate clause • Temporary fuel increase • $22.7
Slide 39: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Jason Marks(1) District 1 2012 Democrat Patrick Lyons District 2 2014 Republican Chairman Douglas Howe(2) District 3 2012 Independent Theresa Becenti-Aguilar District 4 2014 Democrat Vice Chair Ben
Slide 40: Public Utility Commission of Texas Commissioners
Public Utility Commission of Texas Commissioners Term Term Name Party Began Ends Donna Nelson Aug. 2008 Aug. 2015 Republican Chairman Kenneth Anderson Sept. 2008 Aug. 2017 Republican Rolando Pablos Sept. 2011 Aug. 2013 Republican Commissioners are appointed by Governor of Texas. Length of term is de
Slide 41: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Generation (1) 2,548MW 11,507 GWh Based on last 12 months ending 12/31/11 Renewables Renewables 8% 5% Natural Gas 9% Nuclear Coal 16% 38% Nuclear Coal 28% 58% Natural Gas 38% (1) Includes PNM generation and PPAs 41
Slide 42: PNM Plant EAF and Outages
PNM Plant EAF and Outages 91.6% 2012 and 2013 Outage Schedule 82.4% 85.7% 85.6% Duration Time Unit 73.9% 73.1% in Days Period San Juan 2 47 Q1 – Q2 2012 3 54 Q3 – Q4 2012 4 47 Q1 – Q2 2013 1 40 Q4 2013 Four Corners 5 17 Q2 2012 4 21 Q2 2013 San Juan Four Corners Palo Verde Palo Verde 3 32 Q1 - Q2 20
Slide 43: Palo Verde Nuclear Generating Station Unit and Leases
Palo Verde Nuclear Generating Station Unit 1 and 2 Leases Lease Expiration •Unit 1: January 15, 2015 •Unit 2: January 15, 2016 •Optional renewal lease periods extend to: •2023 for 4 leases of Unit 1 •2018 for 3 leases of Unit 2 •2024 for 1 lease of Unit 2 Notice Dates Unit 1 Unit 2 1st Notice Januar
Slide 44: Affirming 2012 EPS Guidance
Affirming 2012 EPS Guidance (Ongoing) $1.20 Consolidated EPS $1.32 Utilities Corp/Other $1.36 - $1.47 ($0.16) – ($0.15) PNM TNMP $1.08 - $1.15 $0.28 - $0.32 44
Slide 45: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2011 Jun 30, 2012 Long-Term Debt (incl. current portion) PNM $1,215.5 $1,215.6 TNMP 311.0 311.3 PNM Resources 147.5 147.5 Consolidated $1,674.0 $1,674.3 Total Debt (incl. short-term) (1) PNM $1,281.5 $1,302.0 TNMP 311.0 311.3 PNM Resources 164
Slide 46: Liquidity/Capital Structure
Liquidity/Capital Structure In October 2011, refinanced PNM Resources and PNM revolvers ($700M) Targeting cap structure of • 50/50 at PNM • 55/45 at TNMP PNM Resources PNM TNMP Total Financing Capacity as of July 27, 2012 Total Capacity $305.0 $400.0 $75.0 $780.0 Less short-term debt and LOC bal
Slide 47: Upcoming Debt Maturities
Upcoming Debt Maturities Long-term Debt Maturities (In millions) $266 $690 $487 $50 $39 $143 2012 - 2013 2014 - 2016 2017 - 2019 Beyond 2019 PNM Resources PNM TNMP 47
Slide 48: Environmental Compliance
Environmental Compliance
Slide 49: San Juan Generating Station BART
San Juan Generating Station BART The U.S. Environmental Protection Agency’s (EPA) Clean Air Act requires regional haze reduction near national parks Compliance should be achieved through Best Available Retrofit Technology (BART) San Juan Generating Station’s alternatives for BART compliance (mus
Slide 50: Environmental Control Equipment at Coal Units
Environmental Control Equipment at Coal Units PNM Share Low NOx Activated Coal Unit Capacity Burners/ Carbon SNCR (2) SCR (2) Baghouse (3) Scrubbers (MW) Overfired Air Injection (1) San Juan Unit 1 170 X X X X San Juan Unit 2 170 X X X X San Juan Unit 3 249 X X X X San Juan Unit 4 194 X X X X Four C
Slide 51: Impact of Proposed Environmental Regulation
Impact of Proposed Environmental Regulation Estimated Compliance Costs Comments (PNM Share) San Juan Generating Station Clean Air Act – Regional Haze (FIP) – SCR ~$340M - $460M See “San Juan – BART Timeline” slide State of NM submitted with EPA in Clean Air Act – Regional Haze (SIP) – SNCR ~$36M ear