Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Williams Capital Group West Coast Seminar (March 2013)
50 slides from Txnm Energy's conference presentation, March 2013
Slide 1: Williams Capital Group West Coast Seminar
Williams Capital Group West Coast Seminar Terry Horn, Vice President and Treasurer March 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 PNM Rate Base CAGR: 2% - 3% 2013 Expected Depreciation: $156M (In millions) TNMP Rate Base CAGR: 7% - 9% $430 $399 $373 $6 $50 $14 $15 $14 $33 $17 $50 $301 $98 $106 $13 $7 $281 $6 $13 $84 $91 $93 $248 $244 $224 $184 $175 2013 2014 2015 2016
Slide 9: San Juan BART Update
San Juan BART Update State alternative plan • Shut down units 2 and 3 by year-end 2017 • Install SNCRs on units 1 and 4 by early 2016(1) • Reduce greenhouse gases and fresh water consumption • Diversify generation portfolio with replacement power 10th Circuit Litigation • Provided report on Feb.
Slide 10: Capital Spending Under Revised State Plan
Capital Spending Under Revised State Plan PNM’s share of SNCR Estimated incremental SIP(1) capital: $343M capital costs are PNM rate base CAGR with SIP(2): 3% - 5% approximately $63M (In millions) $457 $478 $432 $20 $7 $383 Potential replacement $10 $33 $377 $197 power options: $76 • Peaking cap
Slide 11: Potential Earnings Power
Potential Earnings Power Minimizing regulatory lag, improving market prices, and reducing Corporate debt could improve current EPS by $0.16 to $0.25 without rate base growth Mid Point Guidance Potential Earnings Power Growth 2013 % of Range Potential Rate Rate Potential Allowed Resulting Achievement
Slide 12: 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 13: Regulatory Update
Regulatory Update Item Action Timing Docket No. FERC generation case Settlement filed December 7 Awaiting FERC final ER11-4535-000 and (Navopache Electric Cooperative, Inc.) approval ER12-72-000 FERC transmission formula rates case Filed December 31 2014 ER13-685-000 and ER13-690-000 NMPRC Delta Per
Slide 14: Dividend Increase
Dividend Increase 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 3.0% (2) dividend consi
Slide 15: Key Strategic Goals and Checklist
Key Strategic Goals and Checklist 2013 Checklist Achieve successful outcomes in: NM filings for revised SIP FERC transmission formula rates FERC Gallup power sale agreement TX TCOS filing Maintain strong electric reliability and power plant availability Control O&M and capital costs
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 Earning our allowed return at PNM Retail Improving regulatory outcomes • PNM Retail rates increased $72M in August of 2011 • PNM Retail Renewable Rider implemented in August of 2012 • Expected 2013 r
Slide 18: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales Growth (weather-normalized) GWh PNM 9,000 (2) 2013 Load Growth 0% - 1% Unemployment Rate 8,800 8,600 7.9% 6.4% 8,400 8,200 (1) 2008 2009 2010 2011 2012 2013E NM U.S. 2012 Average Customer Growth 0.3% (1) Excludes Economy Service c
Slide 19: 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% UT VT NY WY PNM AK TN MI PA OK AL MN WA DC NM VA KS OH KY AZ AR LA SD NC FL CO MA RI IA WI MD CT OR TX MO NH MT ME IN ND HI MS CA NV DE W
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 • General rate case settlement resulting in a rate increase of $10.25M in February 2011 • Smart meter rider approval in July 2011 led to implementation of $12M surcharge • Energy efficiency program
Slide 23: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales Growth (weather-normalized) GWh TNMP 5,600 2013 Load Growth 1% - 3% (2) 5,500 5,400 Unemployment Rate 5,300 5,200 7.9% 5,100 5,000 6.1% 4,900 (1) 2008 2009 2010 2011 2012 2013E TX U.S. 2012 Average Customer Growth 0.7% (1) Exclud
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: 2012 Results
2012 Results
Slide 27: 2012 Financial Results and Company Updates
2012 Financial Results and Company Updates Q4 2012 Q4 2011 YE 2012 YE 2011 Ongoing EPS(1) $0.13 $0.22 $1.31 $1.08 GAAP EPS(1) $0.11 $1.35(2) $1.31 $1.96(3) Increased dividend payment 14% for 2013 Annual dividend review moved to December Affirmed 2013 ongoing earnings guidance at $1.32 - $1.42
Slide 28: 2012 Financial Summary
2012 Financial Summary Ongoing EPS $0.04 ($0.02) ($0.17) $0.38 $1.31 TNMP Corp/Other $1.08 First Choice PNM Power/Optim Energy (1) 2011 2012 (1) After August 31, 2011 Optim Energy’s financial results were not included in PNM Resources’ ongoing earnings. Sale of First Choice Power was completed on No
Slide 29: PNM and TNMP: FY 2012 vs FY 2011 EPS (Ongoing)
PNM and TNMP: FY 2012 vs FY 2011 EPS (Ongoing) PNM 2012 Key Performance Drivers ∆ EPS Retail rate relief and renewable rider $0.29 $1.14 AFUDC $0.07 O&M reductions $0.06 $0.76 FERC rate relief $0.03 Outage costs ($0.03) Interest expense ($0.03) Load ($0.05) Palo Verde 3 market price ($0.05) Other ($
Slide 30: Q4 2012 Financial Summary
Q4 2012 Financial Summary Ongoing EPS $0.01 ($0.06) $0.22 TNMP ($0.02) ($0.02) PNM $0.13 Corp/Other First Choice Power (1) Q4 2011 Q4 2012 (1) Sale of First Choice Power was completed on November 1, 2011. 30
Slide 31: PNM and TNMP: Q4 2012 vs Q4 2011 EPS (Ongoing)
PNM and TNMP: Q4 2012 vs Q4 2011 EPS (Ongoing) PNM Q4 2012 Key Performance Drivers ∆ EPS Palo Verde Nuclear Decommissioning Trust $0.04 $0.15 AFUDC $0.03 $0.09 Load ($0.04) Outage costs ($0.06) Other ($0.03) Q4 2011 Q4 2012 TNMP Q4 2012 Key Performance Drivers ∆ EPS $0.07 $0.08 Load $0.01 Q4 2011 Q4
Slide 32: Liquidity, Capital Structure and Credit Ratings
Liquidity, Capital Structure and Credit Ratings In October 2012, extended PNM and PNM Resources revolver credit facilities one year Targeting cap structure of: 50/50 at PNM and 55/45 at TNMP PNM Resources PNM TNMP Total Financing Capacity as of February 22, 2013 Total Capacity(1) $300.0 $400.0 $
Slide 33: 2013 Guidance Information
2013 Guidance Information
Slide 34: Consolidated EPS
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) 34
Slide 35: PNM Guidance (Ongoing)
PNM Guidance (Ongoing) PNM EPS $1.14 $1.16 - $1.23 $0.76 2011 2012 2013E Year-over-Year 2012E – 2013E Key Performance Drivers ∆ EPS Outage costs $0.05 Renewable rider $0.02 Load growth $0.00 - $0.05 FERC Transmission rate relief (1) $0.00 - $0.02 FERC Generation rate relief (2) $0.01 - $0.05 Palo Ve
Slide 36: TNMP Guidance (Ongoing)
TNMP Guidance (Ongoing) TNMP EPS $0.33 $0.32 - $0.34 $0.29 2011 2012 2013E Year-over-Year 2012E – 2013E Key Performance Drivers ∆ EPS TCOS rate relief $0.04 Load growth $0.01 - $0.03 CTC ($0.01) Depreciation and property tax ($0.02) 36
Slide 37: Appendix
Appendix
Slide 38: 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 39: 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 •Estimated •$2.5M 2011 •$12M 2012 rate
Slide 40: 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 41: 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(1) Sept. 2011 Aug. 2013 Republican Commissioners are appointed by Governor of Texas. Length of term is
Slide 42: 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 42
Slide 43: PNM Plant EAF and Outages
PNM Plant EAF and Outages 90.9% 2013 - 2014 Outage Schedule 90.6% 81.7% 83.1% 83.5% 85.4% Duration Time Unit in Days Period San Juan 4 54 Q1 – Q2 2013 1 9 Q1 2014 2 50 Q1 2014 Four Corners 4 21 Q2 2013 5 73 Q1 – Q2 2014 4 13 Q4 2014 San Juan Four Corners Palo Verde Palo Verde 1 40 Q1 – Q2 2013 2012
Slide 44: 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 Retain c
Slide 45: 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 46: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2011 Dec 31, 2012 Long-Term Debt (incl. current portion) PNM $1,215.5 $1,215.6 TNMP 311.0 311.6 PNMR 147.5 145.1 Consolidated $1,674.0 $1,672.3 Total Debt (incl. short-term) (1) PNM $1,281.5 $1,236.7 TNMP 311.0 311.6 PNMR 164.2 282.7 Consolida
Slide 47: 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 47
Slide 48: Environmental Compliance
Environmental Compliance
Slide 49: 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 50: 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 ~$385M - $425M SCR contract with Flour suspended See “Capital Spending Under Revised Clean Air Act – Regional Haze (SIP) – SNCR ~$62M - $6
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