Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — EEI Financial Conference 2016
39 slides from Txnm Energy's conference presentation, November 2016
Slide 1: EEI Financial Conference
EEI Financial Conference November 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 Strategic Direction
PNM Resources Strategic Direction 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
Slide 5: PNM Resources Strategic Direction: Strategic Financial Goals
PNM Resources Strategic Direction Strategic Financial • Investing in core capital, Goals Rate Base environmental control Growth equipment and replacement power Earn authorized return on regulated businesses Above industry average Earnings • Realizing earnings potential in business earnings growth Gr
Slide 6: Rate Base Growth
Rate Base Growth 2016 – 2019 Total Capital Plan: $1.9B PNM 2015-2019 Rate Base CAGR: 4 - 6%(1) TNMP 2015-2019 Rate Base CAGR: 8 - 10% $573 (In millions) $36 $516 Palo Verde Unit 3 added to $57 rate base $125 $435 $395 $15 $151 $30 $120 $137 $134 $170 $163 $119 $292 $221 $238 $243 $198 $138 $112 $119
Slide 7: Earnings Growth
Earnings Growth Potential Earnings Power supports 2015 – 2019 earnings growth target of 7% - 8% • PNM growth achieved through new retail rates implemented October 2016 and upcoming 2018 Future Test Year filing • Palo Verde Unit 3 added to rate base in 2018 • 2019 reflects potential recovery of NMP
Slide 8: Dividend Growth
Dividend Growth 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 55% (2) Dividend yield: The Board will cont
Slide 9: PNM Overview
PNM Overview
Slide 10: PNM: Recent Accomplishments
PNM: Recent Accomplishments Progressing regulatory environment • Received Commission approval of the future test year definition to be used be used in upcoming general rate case filing • Filed settlement on FERC Transmission rate case with 10%; implemented formula rate methodology for annual filin
Slide 11: PNM: General Rate Case Final Order
PNM: General Rate Case Final Order • NMPRC approved final order Sept. 28, 2016: • Non-fuel revenue increase of $61.2M versus $121.5M request • Retail rate base of $2,263M versus $2,458M request Key Rate Case Elements Commission Original Impact to (PNM Retail Share, net of ADIT) Order Request Rate In
Slide 12: PNM: New Mexico Supreme Court Appeal
PNM: New Mexico Supreme Court Appeal • PNM filed Notice of Appeal with New Mexico Supreme Court on September 30, 2016 • PNM filed Statement of Issues on October 26, 2016 detailing items for appeal: Appealed Item Conclusion Resulting Impact Palo Verde Nuclear Generating Station: 64MW Unit 2 Capacity
Slide 13: PNM: Upcoming General Rate Case
PNM: Upcoming General Rate Case • Expected to be filed December 2016 • Test period: 2018 future test year Key Elements Palo Verde Unit 3 added to rate base (~$1,118/kW) San Juan Generating Station Units 2 and 3 retirement and recovery of half Included in of the undepreciated investment (estimated to
Slide 14: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2015 Q3 2016 vs. YTD 2016 vs. PNM Sales Volumes Q3 2015 YTD 2015 Retail Load: Residential 39% 0.2% (0.2%) Commercial 46% 1.8% 1.0% Industrial 12% (12.1%) (8.9%) Total Retail Lo
Slide 15: PNM: Rate Affordability
PNM: Rate Affordability PNM's Residential Affordability Continues to be Among the Best in the Nation 4.5% 4.0% 3.5% 3.0% Est. Average 2015 Residential Electric Bill Es.t 2015 Median Household Income 2.5% U.S. Average: 2.4% 2.0% 1.5% 1.0% 0.5% 0.0% Sources: EIA Form 826, US Census Bureau PNM rates re
Slide 16: PNM: NMPRC Commissioners and Districts
PNM: NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Karen Montoya, District 1 2016(1) Democrat Vice Chair District 2 Patrick Lyons 2018 Republican Valerie Espinoza, District 3 2016(1) Democrat Chairman District 4 Lynda Lovejoy 2018 Democrat Dist
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 $1.8M was approved with rates effective September 8, 2016 Energy efficiency program costs c
Slide 20: TNMP: Upcoming General Rate Case
TNMP: Upcoming General Rate Case Key Elements True-up Transmission vs. Distribution Recovery • TCOS filings update for transmission investments, but distribution assets and other rate base items have not been updated since last rate case filing (test period ending March 2010) True-up Operating Costs
Slide 21: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and End Users (weather-normalized, leap-year adjusted) % of 2015 % of 2015 Q3 2016 YTD 2016 TNMP Sales Sales vs. vs. Volumes Revenues Q3 2015 YTD 2015 Volumetric Load(1): Residential 51% 4.1% 3.5% Commercial 46% 3.7% 3.0% Total Volumet
Slide 22: TNMP: PUCT Commissioners
TNMP: PUCT Commissioners Term Name Term Began Party Ends Donna Nelson Aug. 2008 Sept. 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 th
Slide 23: 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 24: Financial Overview
Financial Overview
Slide 25: Financial Overview: 2016 EPS Guidance (Ongoing)
Financial Overview: 2016 EPS Guidance (Ongoing) 2016 Guidance $1.55 Consolidated EPS $1.65 PNM TNMP Corp/Other $1.08 - $1.16 $0.50 - $0.51 ($0.03) – ($0.02) 25
Slide 26: Financial Overview: Credit Ratings
Financial Overview: 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% No equity issuance required through 2019 PNM Resources FFO to Debt Credit Ratings 22% Moody’s S&P 19% 19% PNM Resources Baa3(1) BBB+(1)
Slide 27: Financial Overview: Liquidity and Capital Structure
Financial Overview: 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 October 21, 2016: (In millions) Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short-term debt(1) and LOC balances $
Slide 28: Financial Overview: PNM Resources Summary
Financial Overview: PNM Resources Summary Continued earnings and dividend growth make PNM Resources an attractive investment Expected rate base CAGR: • PNM: 4% - 6% through 2019 • TNMP: 8% - 10% through 2019 Key drivers for potential investments: • Economic development activities in New Mexico •
Slide 29: Appendix
Appendix
Slide 30: 2017 - 2019 Potential Earnings Power
2017 - 2019 Potential Earnings Power Allowed 2017 Earnings Potential 2018 Earnings Potential 2019 Earnings Potential Return / Equity Ratio Avg Rate Avg Rate Avg Rate EPS EPS EPS Base Base Base PNM Retail (1) 9.575% / 50% $2.3 B $1.36 $2.4 B $1.42 $2.4 B $1.41 Supreme Court Appeal (2) $0 - $150 M $0.
Slide 31: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $70 $60 $50 $40 $30 $20 $10 $- Oncor TNMP Centerpoint AEP North AEP Central Source: TDU tariffs for retail delivery service effective September 1, 2016 31
Slide 32: 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 35% 29% Natural Gas Natural Gas 35% 40% Nuclear Nuclear 15% 15% 32
Slide 33: 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% 17% Coal 44% Nuclear 31% Nuclear 29% 33
Slide 34: PNM Investment in Renewable Energy
PNM 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 permit
Slide 35: PNM Plant Outages
PNM Plant Outages 2016 - 2017 Planned Outage Schedule Four Corners Palo Verde Duration in Time Duration in Time Unit Unit Days Period Days Period 4 10 Q2 2017 3 34 Q4 2016 5 10 Q2 2017 2 34 Q2 2017 5 95 Q3-Q4 2017 1 34 Q4 2017 Scheduled Unit Retirements San Juan Duration in Time Unit Days Period 2 R
Slide 36: 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 37: 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 38: 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 Installation of SNCR technology on Units 1 and 4 completed in 2016; retirement of Units 2 and 3 Minimal remaining costs (State Alternative) – SNCR schedu
Slide 39: Impact of Environmental Regulation- Four Corners
Impact of Environmental Regulation- Four Corners Estimated Compliance Costs Four Corners (Units 4 and 5) Comments (PNM Share) Clean Air Act – Regional Haze – Final BART determination filed with EPA on Dec. 30, 2013. Impact to PNM: SCR controls $94M SCR for NOx on Units 4 & 5 by July 31, 2018. On Oct