Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (June 2013)
45 slides from Txnm Energy's investor presentation, June 2013
Slide 1: Investor Meetings
Investor Meetings PN MOResources June 2013
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Investor Relations Manager Allyson Beck, Investor Relations Analyst (505) 241-2227 (505) 241-4612 Jimmie.Blotter@pnmresources.com Allyson.Beck@pnmresources.com Safe Harbor Statement Statements made i
Slide 3: Strategic Overview
Strategic Overview
Slide 4: PNM Resources Overview
PNM Resources Overview NYSE Ticker PNM PNM Resources is a regulated electric utility holding company Market Cap $1.7B 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 Ne
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Repositioned PNM Resources as a pure- play electric utility through competitive business exit in 2011 Strategic Goals Earn Authorized Return on our Regulated Businesses Management able to efficiently execute strategic redirection of business Continue to Improve Cred
Slide 6: Ongoing Earnings Per Share Improvement
Ongoing Earnings Per Share Improvement Ongoing Earnings Per Share Guidance Range $1.32 - $1.42 $1.31 $1.37 Midpoint $0.33 $0.32 - $0.34 $0.91 $0.55 $0.29 $0.43 $0.17 $1.16 - $1.23 $0.13 $1.14 $0.76 $0.50 $0.58 ($0.20) ($0.20) ($0.14) ($0.16) ($0.16 - $0.15) 2009 2010 2011 2012 2013E PNM TNMP Corpora
Slide 7: Delivering Top Quartile Returns
Delivering Top Quartile Returns Earnings Growth •Sustaining and growing the dividend •Investing in core capital, •Providing above-average environmental control •Realizing earnings potential in dividend growth expected near- equipment, replacement power business term and renewables •Continuing to ear
Slide 8: Core Capital Spending
Core Capital Spending 2013 – 2017 Core Capital Plan: $1.8B (In millions) PNM Rate Base CAGR: 2% - 3% 2013 Expected Depreciation: $153M TNMP Rate Base CAGR: 7% - 9% $429 $390 $14 $399 $14 $15 $128 $75 $84 $301 $13 $280 $13 $91 $92 $291 $310 $287 $197 $175 2013 2014 2015 2016 2017 PNM TNMP Other $1.3B
Slide 9: Capital Spending Under Revised State Plan
Capital Spending Under Revised State Plan Estimated incremental SIP(1) capital: $344M(2) PNM rate base CAGR with SIP(2): 3% - 5% Revised State Plan (In millions) • Shut down units 2 and 3 $478 o By year-end 2017 $462 • Install SNCRs on units 1 and 4 $33 $426 $400 $20 o By early 2016 $10 $7 $377 $1
Slide 10: San Juan BART Timeline and Update
San Juan BART Timeline and Update Revised State Plan Expected Expected Action Item Start Completion PNM submits BART analysis to State Q2 2013 April 1, 2013 NMED submits State’s draft of BART analysis to EIB Q2 2013 May 21, 2013 EIB approval of new SIP submitted by NMED Q2 2013 Q4 2013 EPA approva
Slide 11: Earnings Growth: Potential Earnings Power
Earnings Growth: Potential Earnings Power Minimizing regulatory lag, improving market prices, and reducing Corporate debt could improve current EPS by $0.15 to $0.24 without rate base growth Mid Point Guidance Potential Earnings Power Growth 2013 % of Range Potential Rate Rate Potential Allowed Resu
Slide 12: Dividend Growth
Dividend Growth 2013 Dividend: The annual common stock dividend was raised by 14% on February 28, 2013 $0.66 Payout ratio: Long-term target: 50% - 60% payout ratio 48% (1) • Above average dividend growth expected Dividend yield: The Board will continue to evaluate the 2.9% (2) dividend conside
Slide 13: Regulatory Update
Regulatory Update Recent Approvals Action Approval Date Docket No. TNMP TCOS filing Approved with rates in place March 19, 2013 41176 FERC generation case Settlement approved April 5, 2013 ER11-4535-000 and (Navopache Electric Cooperative, Inc.) ER12-72-000 FERC generation contract extension Filed M
Slide 14: 2013 Checklist
2013 Checklist Continue progress toward: Implementing San Juan BART agreement Improving FERC earnings Optimizing the value of TX TCOS filings Maintain strong electric reliability and power plant availability Control O&M and capital costs Continue execution of plan to achieve top quartile tota
Slide 15: PNM Overview
PNM Overview
Slide 16: PNM: Recent Accomplishments
PNM: Recent Accomplishments Significant progress has been made to improve PNM’s financial health Increasing credit rating • PNM S&P credit rating increased to BBB; Moody’s outlook increased to positive Earning our allowed return at PNM Retail Improving regulatory outcomes • PNM Retail rates in
Slide 17: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales Growth Q1 2013 vs Q1 2012 (weather-normalized and leap-year adjusted) PNM(1) (2) Residential (0.8%) Unemployment Rate Commercial (1.8%) Industrial (6.2%) 7.5% 6.7% Total Retail (1.9%) NM U.S. 2013 YTD Average Customer Growth 0.5%
Slide 18: PNM Rates Compare Favorably in U.S.
PNM Rates Compare Favorably in U.S. 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% HI TN TX OK OR OH AK VA PA DE AZ RI VT AR AL UT WY WA DC PNM WI KY GA LA FL SC MA CA KS WV CO NJ NH IA MN IL ID MT MD MI SD CT ND NY NM M
Slide 19: PNM Renewables
PNM Renewables 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 • 204MW under approved procurement plan • Purchase power agreement with FP
Slide 20: PNM: Path to Continued Success
PNM: Path to Continued Success Continue to earn allowed return • Minimize regulatory lag through timely rate case filings • Synchronize revenues and expenses • Use future test year • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders
Slide 21: TNMP Overview
TNMP Overview
Slide 22: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments Constructive Texas regulatory framework provides solid earnings potential • Consolidated Tax Savings Adjustment policy reform approved • S&P Credit rating increased to A-; Moody’s outlook increased to positive • General rate case settlement resulting in a rate increase o
Slide 23: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales Growth Q1 2013 vs Q1 2012 (weather-normalized and leap-year adjusted) TNMP(1) (2) Unemployment Rate Residential 4.0% Commercial 0.8% 7.5% Industrial 0.3% 6.4% Total Retail 2.2% TX U.S. YTD 2013 Average Customer Growth 0.9% (1) Ex
Slide 24: 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 24
Slide 25: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return through timely execution of general rate case filings and use of transmission and distribution cost of service filings Invest in the business Retain solid credit metrics Continue to control costs 25
Slide 26: Q1 2013 Results
Q1 2013 Results
Slide 27: Q1 2013 Financial Results and Company Updates
Q1 2013 Financial Results and Company Updates Q1 2013 Q1 2012 Ongoing EPS(1) $0.18 $0.17 GAAP EPS(1) $0.13 $0.21 S&P credit ratings upgrade PNM Resources has moved to investment grade Affirmed 2013 ongoing earnings guidance at $1.32 - $1.42 (1) On a diluted basis 27
Slide 28: Q1 2013 Financial Summary
Q1 2013 Financial Summary Ongoing EPS $0.01 $0.01 $0.01 $0.18 $0.17 Corp/Other PNM TNMP Q1 2012 Q1 2013 28
Slide 29: PNM and TNMP: Q1 2013 vs Q1 2012 EPS (Ongoing)
PNM and TNMP: Q1 2013 vs Q1 2012 EPS (Ongoing) PNM Q1 2013 Key Performance Drivers ∆ EPS Outage costs $0.02 Rate relief $0.02 $0.18 $0.17 Weather $0.02 PV3 market price $0.01 AFUDC ($0.01) Depreciation ($0.01) Load ($0.04) Other ($0.02) Q1 2012 Q1 2013 TNMP Q1 2013 Key Performance Drivers ∆ EPS Load
Slide 30: Liquidity, Capital Structure and Credit Ratings
Liquidity, Capital Structure and Credit Ratings S&P credit ratings upgraded for all companies; PNM Resources now investment grade Moody’s outlook increased to positive Targeting cap structure of: 50/50 at PNM and 55/45 at TNMP PNM Resources PNM TNMP Total Financing Capacity as of May 1, 2013 T
Slide 31: 2013 Guidance (Ongoing)
2013 Guidance (Ongoing) $1.32 Consolidated EPS $1.42 PNM TNMP Corp/Other $1.16 - $1.23 $0.32 - $0.34 ($0.16) – ($0.15) 31
Slide 32: Appendix
Appendix
Slide 33: PNM Historical Rate Cases
PNM Historical Rate Cases PNM Retail Rate Cases • 8% base rate increase • 6% base rate • Renewable Energy increase • $77M rate Rider • 9% base rate increase 2008 • $33M rate increase • Temporary fuel 2009 • Permanent fuel clause 2011 increase • $72.1M rate increase 2012 • $6.7M expected revenue in 2
Slide 34: TNMP Historical Rate Cases
TNMP Historical Rate Cases TNMP Rate Cases •7% rate •6% base rate •4% base rate increase increase increase •General rate •General rate 2009 case 2010 •TCOS case •$6M rate 2011 case •$13M rate •$10M rate increase increase increase •TCOS Case •TCOS Case •AMS Case •$2.5M •$2.9M 2011 •$12M 2012 rate 201
Slide 35: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Karen Montoya District 1 2016 Democrat Patrick Lyons District 2 2014 Republican Valerie Espinoza District 3 2016 Democrat Vice Chair Theresa Becenti-Aguilar District 4 2014 Democrat Ben Hall Distric
Slide 36: 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 Awaiting appointment(1) Commissioners are appointed by Governor of Texas. Length of term is determined by the Governo
Slide 37: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Energy (1) 2,538 MW 10,947 GWh Based on 12 months ending 12/31/12 Based on 12 months ending 12/31/12 Renewables 5% Renewables 8% Natural Gas 9% Coal Nuclear 38% 16% Coal Nuclear 56% 30% Natural Gas 38% (1) Includes PNM generation and PPAs 37
Slide 38: PNM Plant EAF and Outages
PNM Plant EAF and Outages 97.2% 2013 - 2014 Outage Schedule 89.6% 92.4% 85.5% 84.8% Duration Time 81.5% Unit in Days Period San Juan 4 54 Q1 – Q2 2013 1 12 Q1 2014 2 28 Q1 2014 Four Corners 4 21 Q2 2013 5 13 Q2 2014 4 13 Q4 2014 San Juan Four Corners Palo Verde Palo Verde 1 30 Q1 – Q2 2013 Q1 2012 Q
Slide 39: Palo Verde Leases
Palo Verde 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 1 Decision Unit 2 Unit 2 Decision 1st January 2012 Retai
Slide 40: San Juan Ownership and Participants
San Juan 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% 3 497 249 50% (208 MW) Tri-State 8.2% (41 MW) M-S-R Public Power Agency
Slide 41: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2012 Mar 31, 2013 Long-Term Debt (incl. current portion) PNM $1,215.6 $1,215.6 TNMP 311.6 311.7 PNMR 145.1 145.2 Consolidated $1,672.3 $1,672.5 Total Debt (incl. short-term) (1) PNM $1,236.7 $1,304.5 TNMP 311.6 336.7 PNMR 282.7 274.6 Consolida
Slide 42: Upcoming Debt Maturities
Upcoming Debt Maturities Long-term Debt Maturities (In millions) $266 $690 $487 $50 $39 $143 2014 - 2016 2017 - 2019 Beyond 2019 PNM Resources PNM TNMP 42
Slide 43: Environmental Compliance
Environmental Compliance
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 (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 4 195 X X X X Four C
Slide 45: Impact of Proposed Environmental Regulation
Impact of Proposed Environmental Regulation Estimated Compliance Costs Comments (PNM Share) San Juan Generating Station SNCR technology on 2 units; Retire 2 units Clean Air Act – Regional Haze(1) (State Alternative) – SNCR ~$62M - $64M See “Capital Spending Under Revised State Plan” slide Included i