Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (March 2020)
46 slides from Txnm Energy's investor presentation, March 2020
Slide 1: Investor Meetings and COVID-19 Considerations
November 1, 2019 Investor Meetings and COVID-19 Considerations March 2020
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 Lisa.Goodman@pnmresources.com Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements made i
Slide 3: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and delivering 5%-6% earnings and dividend growth • Energy holding company • Based in Albuquerque, New Mexico NYSE T
Slide 4: Current State of the Company: COVID-19 Considerations
Current State of the Company COVID-19 Considerations
Slide 5: COVID-19 Considerations: NM and TX Status, Assistance Measures
COVID-19 Considerations: NM and TX Status, Assistance Measures Assistance Measures New Mexico Status • First presumptive positive • NM State Investment Council created case reported on March 11th $100 million New Mexico Recovery and Public Health Emergency Fund with discounted, short‐term declared t
Slide 6: COVID-19 Considerations: PNM and TNMP Response
COVID-19 Considerations: PNM and TNMP Response • Identification of critical workforce, staging of backups, limited access to control rooms and critical assets Safety of • Minimize critical employee exposure, inter-crew our Team exposures and exposures with the public: eliminate group gatherings, dep
Slide 7: COVID-19 Considerations: Business Impacts
COVID-19 Considerations: Business Impacts • Our business under 3 different stages, with sensitivities to margin and capital: Stage 1 Stage 2 Stage 3 Duration / Up to 60 day-impact (through 60 - 120 day-impact (through >120 day-impact, duration of Economic Conditions May) with closure of non- July),
Slide 8: COVID-19 Considerations: Financial Impacts Stage 1
COVID-19 Considerations: Financial Impacts Stage 1 • 2020 Ongoing Earnings Impacts: Managed within ongoing earnings guidance range, load declines are offset through cost control management • 2021 – 2023 Earnings Power Impacts: No significant changes Stage 1: Financial Impacts 5% increase in PNM Resi
Slide 9: COVID-19 Considerations: Stage 1 Customer Class Attributes
COVID-19 Considerations: Stage 1 Customer Class Attributes PNM • New Mexico load is less business-heavy than other PNM Resources customer non-fuel states, low percentage of Industrial volumes/revenues revenues are predominantly from • March/April are not heavy usage months due to mild New Mexico, an
Slide 10: COVID-19 Considerations: Financial Impacts Stage 2
COVID-19 Considerations: Financial Impacts Stage 2 • 2020 Ongoing Earnings Impacts: Risk of falling below ongoing earnings guidance range, as load declines at summer rates can only be partially offset by cost control management • 2021 – 2023 Earnings Power Impacts: No significant changes Stage 2: Fi
Slide 11: COVID-19 Considerations: Financial Impacts Stage 3
COVID-19 Considerations: Financial Impacts Stage 3 • 2020 Ongoing Earnings Impacts: Cannot manage within ongoing earnings guidance range, as continuing load declines cannot be offset by cost control management • 2021 – 2023 Earnings Power Impacts: Investment plans will need to be re-assessed Stage 3
Slide 12: Investment Plan – Load Growth vs Reliability/System Upgrades
Investment Plan – Load Growth vs Reliability/System Upgrades 90% of capital plan driven by reliability/system upgrades needs at existing demand, not based on load growth assumptions $27 $839 $27 Capital plans remain intact through Stage II $48 $109 $401M (90%) PNM Capital • Any delays to capital pro
Slide 13: Liquidity as of February 21, 2020
Liquidity as of February 21, 2020 PNMR PNMR PNM Develop- Corporate Resources PNM TNMP ment /Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $440.0 $75.0 $40.0 $300.0 $855.0 As of 02/21/20: Short-term debt and LOC balances $67.9 $43.2 - $148.5 $259.6 Remaining avai
Slide 14: Guidance Affirmed at Current Stage
Guidance Affirmed at Current Stage 2020 Ongoing Earnings Guidance Stage 1 - Current $2.16 - $2.26 Manage within Guidance Stage 2 • Margin: up to 60 day-impact Guidance at Risk Stage 3 (through May) with closure of Outside of Guidance non-essential businesses, • Margin: 60 - 120 day-impact restrictio
Slide 15: PNM and TNMP Regulatory Considerations
PNM and TNMP Regulatory Considerations Regulatory considerations pertaining to COVID-19 impacts • Regulatory mechanisms related to load: • PNM Renewable: annual true-up • PNM FERC Wholesale Transmission: annual formula rate true-up • TNMP TCOS: recovery includes load factor trued up annually • TNMP
Slide 16: Long Term Business Fundamentals Remain Intact through 2023
Long Term Business Fundamentals Remain Intact through 2023 Adequate liquidity, immediate equity needs met through January 2020 forward offering Dividend increases consistent with earnings growth 5% - 6% earnings growth target 8.9% rate base growth 16
Slide 17: Strategic Direction and Financial Goals
Strategic Direction and Financial Goals
Slide 18: PNM Resources Strategic Direction and Financial Goals
PNM Resources Strategic Direction and Financial Goals Vision: Create a clean and bright energy future Strategic Focus: • Transform PNM Generation Portfolio: • New Mexico Energy Policy (ETA): RPS and 2045 carbon-free mandate • PNM plans to be coal-free by 2031, emissions-free by 2040 • Enhance PNM tr
Slide 19: PNM Resources Strategic Direction and Financial Goals
PNM Resources Strategic Direction and Financial Goals • Exit coal, eliminate gas emissions, actively pursue carbon- free alternatives Transform PNM generation portfolio to emissions-free • 2019 Progress: Passage of New Mexico’s Energy Transition Act, PNM announces emissions-free by 2040 goal, San Ju
Slide 20: 2020 – 2023 Investment Plan
2020 – 2023 Investment Plan $3.3B investment plan results in 8.9% rate base growth Authorized returns: Equity ratio ROE $992 PNM Retail/Renewables 50% 9.575% $21 PNM FERC Transmission ~50% 10.0% $177 TNMP 45% 9.65% $27 $839 $27 $25 $771 $48 $695 $109 $21 $68 $268 $72 $128 $94 $77 $82 $196 $182 $202
Slide 21: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power Earnings Growth Target 5-6% Incorporates impact of January 2020 forward equity offering dilution beginning 2021 2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings Allowed Return / Guidance Midpoint Potential Potential Potential Equity Avg Rate Avg Ra
Slide 22: Earnings Growth 2018 - 2023: Targeting 5 - 6% Ongoing EPS CAGR
Earnings Growth 2018 - 2023: Targeting 5 - 6% Ongoing EPS CAGR 2014 - 2019: Achieved 7.7% Ongoing EPS CAGR $2.68 5-6% Target: $2.51 $2.55-$2.68 $2.37 $2.16 $2.21 $1.94 $2.00 $1.64 $1.65 $1.49 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actual Ongoing EPS Midpoint Guidance / Earnings Potential
Slide 23: Dividend Growth
Dividend Growth Consistent Delivery of Dividend Growth At or Above Industry Average Expect future dividend growth in line with earnings growth (approximately 5-6%) $1.42- $1.36- $1.46 6% $1.29- $1.38 9% $1.23 $1.30 9% $1.16 Dec ‘19 10% $1.06 Dec ‘18 10% 8% $0.97 Dec ‘17 $0.88 Dec ‘16 $0.80 Dec’ 15 $
Slide 24: Liquidity and Debt Maturity Outlook
Liquidity and Debt Maturity Outlook Long-term Debt Maturities (in millions) $658 $450 $1,003 $140 Maintain appropriate $350 $346 $57 credit metrics and 2020 2021 2022 2023 and Beyond investment grade ratings PNM TNMP Corporate • Completed: • $290 million forward equity offering in January 2020 Targe
Slide 25: PNM
PNM
Slide 26: 100% Carbon-Free: New Mexico Energy Policy
Transform PNM Generation Portfolio: New Mexico Energy Policy Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019 • Renewable Portfolio Standards and Carbon-Free Requirement 2045 100% Carbon-Free • Previo
Slide 27: Transform PNM Generation Portfolio: Executing the Energy Transition Act
Transform PNM Generation Portfolio: Executing the Energy Transition Act Our Goal: Transform PNM Generation to 100% Carbon-Free by 2040 Step 1: Exit Coal Generation by 2031 Reduction of MW Coal Capacity • San Juan Generating Station: 983 22% reduction • Retired Units 2 and 3 in 2017 (221 MWs); Retire
Slide 28: San Juan Abandonment, Securitization and Replacement Power
Transform PNM Generation Portfolio: San Juan Abandonment, Securitization and Replacement Power ● Requests ● $283M undepreciated ● Recommended Abandonment Replacement Power Securitization abandonment of San investment in San Juan, scenario balances Juan coal plant after proceeds available to environm
Slide 29: San Juan Abandonment and Securitization
Transform PNM Generation Portfolio: San Juan Abandonment and Securitization Recommended Decision received Securitization next steps: February 2020: By April 1, 2020: Irrevocable Recommends approval to abandon Units NMPRC financing order 1 and 4 States it is not in the public interest to Early 20
Slide 30: San Juan Recommended Replacement Power Scenario Details
Transform PNM Generation Portfolio: San Juan Recommended Replacement Power Scenario Details • Competitive RFP processes resulted in a cost-effective mix of resources owned by PNM and third-party providers • To manage the risks of integrating new battery storage technology, total storage capacity doe
Slide 31: Enhance PNM Transmission Grid: Integration of Renewable Generation and Battery Storage
Enhance PNM Transmission Grid: Integration of Renewable Generation and Battery Storage • Transmission service to portions of New Mexico’s grid is fully committed • The integration of new renewable generation and battery storage will require additional T&D investment Cumulative Capacity Additions 202
Slide 32: Enhance PNM Transmission Grid: Transmission and Renewable Expansion in New Mexico
Enhance PNM Transmission Grid: Transmission and Renewable Expansion in New Mexico New Mexico has abundant solar and wind resources Third-party development increases demand for transmission capacity New Mexico added wind capacity at a higher growth rate than any other state in 2017 and currently has
Slide 33: PNM Load and Economic Conditions
PNM Load and Economic Conditions Regulated Retail Energy Sales and Customers Continued customer growth partially offset by Commercial energy efficiency impacts Year-over-Year 2019 2020 Growth Actuals Projection Load and weather: • Positive Q4 2019 growth brings annual results in Total Retail Load 0.
Slide 34: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts Term District Name Party NMPRC Districts and Ends PNM Service Areas District 1 Cynthia Hall 2020(1) Democrat District 2 Jefferson Byrd 2022(1) Republican Valerie Espinoza, District 3 2020 Democrat Vice-Chairman Theresa Becenti-Aguilar, District 4 2022(1) Democrat Ch
Slide 35: PNM Regulatory Agenda
PNM Regulatory Agenda Filing Action Timing Docket No. PNM: PNM filed July 1, 2019; NMPRC bifurcated case; New Mexico Supreme Court ruled January 29, 2020 that Energy Transition Act applies to both dockets Consolidated Application Abandonment/securitization: NMPRC for San Juan Generating Abandonment/
Slide 36: PNM Bills Remain Below National and Regional Averages
PNM Bills Remain Below National and Regional Averages Comparison of Average Residential Bills(1) Western Region Average Bills by Utility Arizona Public Service Co (AZ) $137.51 Customer bill impacts of LADWP (CA) Imperial Irrigation District (CA) increased investments are Salt River Project (AZ) Ente
Slide 37: TNMP
TNMP
Slide 38: TNMP Demand and Infrastructure Investment
TNMP Demand and Infrastructure Investment Texas growth drives infrastructure needs • TNMP has seen consistent consumer growth driven by strong Texas economy Year-over Year-Growth 2017 2018 2019 • Rapid demand-based load growth over recent years in the Commercial and Industrial classes driven by ener
Slide 39: TNMP Load and Economic Conditions
TNMP Load and Economic Conditions Regulated Retail Energy Sales and Customers Texas economy continues to grow Year-over-Year 2019 2020 • Economic growth up at year-end; early 2020 Growth Actuals Projection data shows manufacturing expansion, increased home sales and construction permits Demand-Based
Slide 40: PUCT Commissioners and TNMP Regulatory Agenda
PUCT Commissioners and TNMP Regulatory Agenda PUCT Commissioners Name Term Began Term Ends Party DeAnn Walker (Chair) Sept. 2017 Sept. 2021 Republican Arthur D’Andrea Nov. 2017 Sept. 2023 Republican Shelly Botkin June 2018 Sept. 2025 Republican Commissioners are appointed by the Governor of Texas an
Slide 41: TNMP Rates Comparable in Texas
TNMP Rates Comparable in Texas Rates expected to be comparable to other IOUs after pending rate filings Residential Total Wires Charge for 1,000 kWh Current $60 Current rate filing Current rate filing pending Current rate filing New pending $50 rate filing pending Rates(1) pending $40 $30 $20 $10 $-
Slide 42: Appendix
Appendix
Slide 43: 2020 Consolidated Ongoing Earnings Guidance
2020 Consolidated Ongoing Earnings Guidance 2020 Earnings Guidance $2.16 Consolidated EPS $2.26 PNM TNMP Corp/Other $1.67 – $1.73 $0.72 – $0.74 ($0.23) – ($0.21) 43
Slide 44: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power 2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings Allowed Return / Guidance Midpoint Potential Potential Potential Equity Avg Rate Avg Rate Avg Rate Avg Rate Ratio Return EPS EPS EPS EPS Base Base Base Base 9.575% / PNM Retail(1) $2.5 B 9.5% $1.47 $
Slide 45: San Juan and Four Corners Generating Stations Ownership and Participants
San Juan and Four Corners Generating Stations Ownership and Participants San Juan Generating Station Total PNM PNM Unit Other Participants/Ownership MW MW Ownership 1 340 170 50% Tucson Electric 50% (170 MW) City of Farmington 8.5% (43 MW) 4 507 392 77.3% Los Alamos County 7.2% (36.5 MW) Utah Associ
Slide 46: Palo Verde Nuclear Generating Station Ownership and Leases
Palo Verde Nuclear Generating Station Ownership and Leases MW Owned vs. Leased Unit 1 Unit 2 Unit 3 Owned 2.3% 30 MW Owned 9.5% 124 MW Owned 10.2% 134 MW Leased 7.9% 104 MW Leased 0.7% 10 MW Leased 0% 0 MW Total 10.2% 134 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: January 15