Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — FY2023 Earnings Presentation
36 slides from Txnm Energy's earnings presentation, Feb 6, 2024
Slide 1: 2023 Earnings Review and 2024 Earnings Guidance
2023 Earnings Review and 2024 Earnings Guidance February 6, 2024 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement Preliminary Unaudited Financial Results The preliminary unaudited financial results for the fiscal year ended December 31, 2023, included in this presentation represent the most current information available to management and are not a comprehensive statement of the financial r
Slide 3: Overview and Highlights
Overview and Highlights ee. > wae tes ——— a = “y : r+ +—+ t-—-\ am « ¥ \ 4 \ a VED. AER. Wa SEE, TS ED eee," CANE, SA RA, WEE = ee
Slide 4: PNM Resources Standalone Profile - Strategic Growth
PNM Resources Standalone Profile - Strategic Growth Sound basis for growth • Driven by need for investments supporting grid reliability and modernization • Enables clean energy goals and economic expansion Increased diversification of rate base • Consistent, measured approach to growth among regulat
Slide 5: PNM Resources Standalone Profile - Execution of Financial Plans
PNM Resources Standalone Profile - Execution of Financial Plans Strong track record of achieving financial targets • Consistent execution on plans • Delivering results on invested capital to $2.69 $2.82 meet customer needs $2.28 $2.45 $2.16 $1.31 $1.39 $1.47 $1.16 $1.23 Dec ‘20 Feb ‘22 Dec ‘22 Dec ‘
Slide 6: Financial Overview and Strategic Updates
Financial Overview and Strategic Updates 2023 Financial Results Clean Energy2023 2022 Strong $1.97 Financial 2023 earnings results GAAP EPS $1.02 above expectations Focus Ongoing EPS $2.82 $2.69Profile 2024-2028 Financial Targets Long-term targets • 6% - 7% earnings growth refreshed • 10% rate base
Slide 7: Operational and Regulatory Highlights
Operational and Regulatory Highlights
Slide 8: TNMP Investment Strategy
TNMP Investment Strategy Grid reliability and resilience TNMP System Peak • Continued high growth drives need for (MWs) increased infrastructure • New system peak set in January 2024, 2,545 surpassing 2023 all-time summer peak 2,240 2,030 • Constructive legislative and regulatory 1,804 environment s
Slide 9: TNMP Regulated Rate Recovery
TNMP Regulated Rate Recovery Recovery Framework • Historical test year supplemented by capital recovery TNMP Capital Spending (millions) mechanisms: $641 • Transmission cost of service mechanism (TCOS) allows for semi-annual filings for recovery of transmission investments $325 • Distribution cost r
Slide 10: PNM Investment Strategy
PNM Investment Strategy Growing need for T&D investments PNM Capital Spending (millions) • New system peaks in 2022 and 2023 reflect growing $415 $397 $2,978 demand on system after period of stagnant growth 31% • Expansion of transmission system needed to enable $127 New Mexico clean energy mandates
Slide 11: PNM Regulated Rate Recovery
PNM Regulated Rate Recovery Recovery Framework Recent/Current Filings Transmission Distribution Generation • Allows for future test year filings and utilizes specific rate rider mechanisms (fuel clause, renewables, energy efficiency) • Transmission investments allocated 12 MW Distribution Battery St
Slide 12: PNM Customer Affordability
PNM Customer Affordability Customer impacts of increased Avg Residential Bill(1) infrastructure investments are mitigated by: $132.15 $121.57 • Energy Transition Act is achieving the goals for the clean energy transition with customer benefits, as the exit $73.95 from coal and securitization results
Slide 13: Financial Updates
Financial Updates
Slide 14: Highlights of 2023 Ongoing Earnings Results
Highlights of 2023 Ongoing Earnings Results Key changes in year-over-year 2023 Earnings Summary earnings: $2.69 Clean Energy $0.32 $0.04 ($0.23) $2.82 • Lower costs associated with Strong Financial PNM generation portfolio changes Focus PNM TNMP Profile Corporate • TNMP Transmission and Distribution
Slide 15: Financial Outlook
Financial Outlook Ongoing Earnings and Guidance 2024 Earnings Guidance • 2024 ongoing earnings guidance $2.65 - $2.75 $2.65 - $2.75 Clean Energy Strong Financial Long-term EPSFocus Growth Profile • Targeting 6% - 7% EPS growth 2024 - 2028(1) Growth in capital • Rate base growth driven by need for T&
Slide 16: 2024 Earnings Guidance (Ongoing)
2024 Earnings Guidance (Ongoing) Earnings guidance includes: 2024 Earnings Guidance • PNM 2024 Rate Change outcome • TNMP Transmission and Distribution riders recover $2.65 Consolidated EPS $2.75 additional capital investments • Increased PNM transmission margins PNM TNMP Corp/Other • Improved perfo
Slide 17: Investment Plan 2024 – 2028
Investment Plan 2024 – 2028 5-year investment plan of $6.1 billion $1,273 $1,273 $1,176 $48 $1,153 $1,178 $49 $44 $45 $47 $508 $524 $641 $557 $610 $84 (in millions) $89 $120 $69 $78 $18 $73 $69 $506 $441 $372 $513 $407 $460 $437 $452 $463 $514 2024 2025 2026 2027 2028 PNM T&D PNM Battery Storage PNM
Slide 18: Financing Plans
Financing Plans 2023 Financings Long-term Debt Maturities in millions(1) • $200M equity (4.4M shares issued Dec. 2023) • $115M NMRD sales proceeds expected in Feb 2024 $1,113 • $343M Securitization bonds issued Nov. 2023, providing low-cost financing for customers • $600M of variable rate hedges in
Slide 19: 2024 - 2028 Potential Earnings Power
2024 - 2028 Potential Earnings Power 6% - 7% Earnings Growth 2024-2028 2024 2025 Earnings 2026 Earnings 2027 Earnings 2028 Earnings Allowed Guidance Equity Potential Potential Potential Potential Midpoint Return / Avg Avg Avg Avg Avg Ratio Rate EPS Rate EPS Rate EPS Rate EPS Rate EPS Base Base Base
Slide 20: Dividend Increase and Payout Ratio
Dividend Increase and Payout Ratio Annual dividend targets middle of • Continued dividend a 50% - 60% payout ratio range growth targeting 50% - 60% payout ratio $1.55 $1.39 $1.47 • Board of Directors $1.31 $1.23 increased the common dividend by $0.08 to $0.3875 per quarter 54% 53% 52% 52% 57% payout
Slide 21: Appendix
Appendix
Slide 22: Commitment to ESG Strategy
Commitment to ESG Strategy Environmental Social Governance Industry-leading goals: Hiring, training, retention and 8 of 9 Board members are • Emissions-free by 2040 engagement programs for our independent, 9 years average reflects full elimination of diverse workforce with a focus tenure carbon from
Slide 23: PNM and TNMP Key Regulatory Proceedings
PNM and TNMP Key Regulatory Proceedings Filing Action Timing Docket No. NMPRC Order issued Jan. 3, 2024, PNM filed for re- 2024 Rate Change Filing 20-day timeframe for decision on re-hearing 22-00270-UT hearing Jan. 29, 2024 12MW Battery Energy NMPRC approved application Dec. 21, 2023 Rate recovery
Slide 24: PNM 2024 Rate Change Outcome
PNM 2024 Rate Change Outcome NMPRC Order Jan 3, 2024: 2024 Rate Change Outcome Revenue • Recovery of $2.4B incremental rate base (Reflects changes since 2018) Req ($m) and six years of O&M cost increases Reduction in ROE to 9.26% ($6.1) • Disappointing ROE and reductions to No return on leasehold im
Slide 25: Q4 and FY 2023 vs 2022 EPS (Ongoing): PNM
Q4 and FY 2023 vs 2022 EPS (Ongoing): PNM PNM $2.22 • Lower costs associated with the $1.90 retirement of the San Juan Generating Station and return of Palo Verde leased capacity • Higher customer usage driven by hotter summer temperatures $0.05 $0.10 • Higher transmission margins due to higher syst
Slide 26: Q4 and FY 2023 vs 2022 EPS (Ongoing): TNMP
Q4 and FY 2023 vs 2022 EPS (Ongoing): TNMP TNMP $1.07 $1.11 • New rate relief from 2022 and 2023 $0.23 $0.25 TCOS and DCRF filings • Higher demand-based load growth, Q4 2022 Q4 2023 FY 2022 FY 2023 partially offset by lower weather impacts Q4 2023 FY 2023 2023 Key Performance Drivers vs vs • Planned
Slide 27: Q4 and FY 2023 vs 2022 EPS (Ongoing): Corporate
Q4 and FY 2023 vs 2022 EPS (Ongoing): Corporate Corporate ($0.13) ($0.17) ($0.28) ($0.51) • Higher variable debt interest, net of hedges Q4 2022 Q4 2023 FY 2022 FY 2023 Q4 2023 FY 2023 2023 Key Performance Drivers vs vs Q4 2022 FY 2022 Other ($0.01) $- Interest expense ($0.03) ($0.23) 27
Slide 28: Load and Economic Conditions
Load and Economic Conditions TNMP Continued growth at TNMP TNMP 2023 2024E Volumetric growth expected to return to 2022 levels, as 2023 was impacted by extreme weather events Volumetric Load(1) 0% 2.5% - 3.5% Demand-based load increases in 2023 reflect incremental Demand-Based Load(2) 14.1% 1.5%
Slide 29: Weather Impacts
Weather Impacts Q4 Q4 Q4 FY FY FY PNM: PNM 2023 2022 Normal(1) 2023 2022 Normal(1) • Q4 2023 heating degree-days Heating Degree Days 795 962 860 2,147 2,255 2,047 below normal and prior year Cooling Degree Days 22 4 14 1,753 1,555 1,486 • FY heating degree-days above normal and below Net EPS Impact
Slide 30: PNM EPS Guidance (Ongoing)
PNM EPS Guidance (Ongoing) PNM $2.22 $1.98 - $2.03 2023 2024E 2024 Key Performance Drivers 2024E vs 2023 Rate relief: Incremental recovery $0.17 Lower ROE ($0.05) Decommissioning / reclamation trust performance $0.16 - $0.18 Transmission margins $0.10 - $0.13 AFUDC $0.08 - $0.10 Load growth $0.03 –
Slide 31: TNMP EPS Guidance (Ongoing)
TNMP EPS Guidance (Ongoing) TNMP $1.11 $1.17 - $1.20 2023 2024E 2024 Key Performance Drivers 2024E vs 2023 Distribution rate relief (DCRF) $0.16 - $0.18 Transmission rate relief (TCOS) $0.15 - $0.16 Retail load $0.04 - $0.07 AFUDC $0.00 - $0.02 Weather ($0.02) O&M increases ($0.03) – ($0.01) Dilutio
Slide 32: Corporate and Other EPS Guidance (Ongoing)
Corporate and Other EPS Guidance (Ongoing) Corporate and Other ($0.51) ($0.50) – ($0.48) 2023 2024E 2024 Key Performance Drivers 2024E vs 2023 Dilution $0.02 Interest expense ($0.01) – $0.01 NMRD income ($0.01) 32
Slide 33: 2024 Assumptions
2024 Assumptions Amounts shown are before tax, unless otherwise noted 2024E PNM Residential/Commercial Load Growth 1% = $0.06 EPS Industrial Load Growth 1% = $0.01 EPS Anticipated Ongoing effective tax rate (Statutory rate = 25.4%) ~24% before amortization of excess deferred income taxes Amortizatio
Slide 34: 2024 - 2028 Potential Earnings Power
2024 - 2028 Potential Earnings Power 2024 2025 Earnings 2026 Earnings 2027 Earnings 2028 Earnings Allowed Guidance Equity Potential Potential Potential Potential Midpoint Return / Avg Avg Avg Avg Avg Ratio Rate EPS Rate EPS Rate EPS Rate EPS Rate EPS Base Base Base Base Base 9.26% / PNM Retail 50% $
Slide 35: Liquidity as of December 29, 2023
Liquidity as of December 29, 2023 Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $440.0 $100.0 $300.0 $840.0 As of 12/29/23: Short-term debt and LOC balances 137.5 55.1 72.4 265.0 Remaining availability 302.5 44.9 227.6 575.0 Inv
Slide 36: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec. 31, 2022 Dec. 31, 2023 Long-Term Debt (incl. current portion) (1) PNM $2,000.9 $2,261.8 TNMP 1,076.9 1,260.9 Corporate/Other 999.6 999.1 Consolidated $4,077.4 $4,521.8 Total Debt (incl. short-term) (1,2) PNM $2,186.8 $2,399.3 TNMP 1,113.6 1,316.0