Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (September 2013)
46 slides from Txnm Energy's investor presentation, September 2013
Slide 1: Investor Meetings
Investor Meetings September 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 U.S. 1-505-241-2227 U.S. 1-505-241-4612 Jimmie.Blotter@pnmresources.com Allyson.Beck@pnmresources.com Safe Harbor Statement Stateme
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 Service Territories •Energy holding company •Based in Albuquerque, New Mexico, USA •Located in New Mexico •505,600 cu
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Goals Earn Authorized Return on Continue to Improve Credit Provide Top Quartile Total our Regulated Businesses Ratings Return Future Well positioned for 2012 - 2013 above average EPS Strategic shift and and dividend growth regulatory successes 2012 - 2013
Slide 6: Ongoing Earnings Per Share Improvement
Ongoing Earnings Per Share Improvement Ongoing Earnings Per Share PNM TNMP Corporate 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 201
Slide 7: Market Reaction to Management Actions
Market Reaction to Management Actions PNM Stock Price has improved 79%(1) since 2009 100% 79% 80% 60% 55% % Change 40% 51% 20% 24% 0% -20% 12/31/09 6/30/10 12/31/10 6/30/11 12/31/11 6/30/12 12/31/12 6/30/13 PNM S&P 500 Dow Jones Utility S&P 400 Mid-Cap Utilities Credit Ratings Moody’s S&P 2008 2013
Slide 8: Delivering Top Quartile Returns
Delivering Top Quartile Returns Long-term goal: Provide top quartile total return to shareholders Total return is 5-year ongoing EPS growth + 5-year average dividend yield Top quartile total return currently equal (1) to an average annual rate of 10% - 13% over a 5 year period Earnings Growth •S
Slide 9: Sources of Core Rate Base Growth
Rate Base Growth: Sources of Core Rate Base Growth 2013 – 2017 Core Capital Plan: $1.8B PNM Rate Base CAGR: 2% - 3% 2013 Expected Depreciation: $154M (In millions) TNMP Rate Base CAGR: 7% - 9% $445 $14 $390 $383 $22 $14 $130 $91 $76 $292 $13 $280 $13 $88 $93 $301 $293 $277 $191 $175 2013 2014 2015 2
Slide 10: Investment in Renewable Energy
Rate Base Growth: Investment in Renewable Energy New Mexico Renewable Energy Act • Streamlined proceedings for New Mexico Wind Energy Center approval of utilities’ renewable • 204 MW energy procurement plans Wind • 136 turbines • Provides for recovery of program • Purchase power agreement with NextE
Slide 11: Environmental Control Investment
Rate Base Growth: Environmental Control Investment The U.S. Environmental Protection Agency’s (EPA) Clean Air Act requires regional haze reduction near national parks Compliance should be achieved through Best Available Retrofit Technology (BART) San Juan Generating Station’s alternative for BAR
Slide 12: Sources of Potential BART Rate Base Growth
Rate Base Growth: Sources of Potential BART Rate Base Growth Estimated incremental RSIP capital: $344M(1) PNM rate base CAGR with RSIP(1): 3% - 5% (In millions) Potential options to replace $478 $478 340 MW: $33 $400 $411 $20 $368 • Peaking capacity $10 $7 $198 o 150-200 MW gas peaker $76 o 40 MW
Slide 13: Today's Base Potential Earnings Power
Earnings Growth: Today’s Base 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 Potential Earnings Power Growth 2013 Guidance Range Potential Rate Potential Allowed A
Slide 14: Strong Dividend Growth Potential
Dividend Growth: Strong Dividend Growth Potential 2013 Dividend: The annual common stock dividend was raised by 14% on February 28, 2013 $0.66 Long-term target: 50% - 60% payout ratio Payout ratio: • Above average dividend growth expected 48% (1) Dividend yield: The Board will continue to eval
Slide 15: Leadership Team
Leadership Team Pat Vincent-Collawn Chairman, President, and CEO Xcel Energy Public Service Company of Colorado Arizona Public Service Utility Experience: 21 years Chuck Eldred Ron Talbot Ron Darnell Patrick Apodaca EVP and CFO SVP and COO SVP, Public Policy SVP, General Counsel Indianapolis Power a
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 Increasing credit rating • S&P credit rating raised to BBB; Moody’s outlook moved to positive Earning our allowed return at PNM Retail Retail rates increased $72M in August of 2011 Retail Renewab
Slide 18: PNM Rates Compare Favorably in the United States
PNM Rates Compare Favorably in the United States 5.0% 4.5% 4.0% Est. Average 2012 Residential Electric Bill Es.t 2012 Median Household Income 3.5% 3.0% 2.5% US Average: 2.37% 2.0% 1.5% 1.0% 0.5% 0.0% TX HI TN OR PNM (2012) OK DC OH DE AK UT RI VA AZ AR AL CT VT PA WI WA CA SD KS CO WY MI GA KY LA ME
Slide 19: PNM Energy Efficiency
PNM Energy Efficiency NM Efficient Use of Energy Act • Requires cumulative savings of 5% of load (based on 2005) by 2014 • 411 GWh is PNM’s required cumulative energy efficiency savings • 271 GWh in savings has been achieved through the end of 2012 Energy Efficiency Rider • Recovery of approved prog
Slide 20: Significant Strides with Historical Environmental Upgrades
Significant Strides with Historical Environmental Upgrades San Juan Generating Environmental Additional Estimated Station Major Upgrade Results Reduction Results Environmental Following RSIP Upgrade Reduction Since 2006 Implementation PNM completed a four-year, NOX Emissions: 44% NOX Emissions: 62%
Slide 21: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales Comparison of 2013 vs. 2012 Unemployment Rate (weather-normalized and leap-year adjusted) Q2 2013 vs. YTD 2013 vs. 7.3% PNM Q2 2012 YTD 2012 6.9% Residential (2.9%) (1.8%) (2) Commercial 2.0% 0.3% NM (1) U.S. Industrial (4.1%) (5.
Slide 22: PNM: Pathway to Continued Success
PNM: Pathway 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 23: TNMP Overview
TNMP Overview
Slide 24: 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 25: 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 March 31, 2013. 25
Slide 26: TNMP Energy Efficiency
TNMP Energy Efficiency Public Utility Regulatory Act • Establishes annual demand savings goals for electric utilities • 30% reduction of peak demand growth, subject to customer rate caps, is TNMP’s 2013 goal • 5.1 MW targeted savings to achieve in 2013 Energy Efficiency Cost Recovery Factor (EECRF)
Slide 27: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales Comparison of 2013 vs. 2012 (weather-normalized and leap-year adjusted) Unemployment Rate Q2 2013 vs. YTD 2013 vs. TNMP 7.3% Q2 2012 YTD 2012 6.5% Residential (8.2%) (2.8%) Commercial 12.8% 7.5% (3) (2) Total Retail (0.1%) 0.9% T
Slide 28: 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 28
Slide 29: Financial Overview
Financial Overview
Slide 30: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2012 Jun 30, 2013 Long-Term Debt (incl. current portion) PNM $1,215.6 $1,290.6 TNMP 311.6 336.2 Corporate/Other 145.1 136.9 Consolidated $1,672.3 $1,763.7 Total Debt (incl. short-term) (1) PNM $1,236.7 $1,290.6 TNMP 311.6 361.2 Corporate/Other
Slide 31: Liquidity and Capital Structure
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 July 26, 2013 Total Capacity(1) $400.0 $75.0 $300.0 $775.0 Less short-term debt(1) and LOC balances 3.2 22.3 38.6 64.1 Plus invested cash 6.
Slide 32: Upcoming Debt Maturities
Upcoming Debt Maturities Long-term Debt Maturities (In millions) $93 $172 $670 $50 $507 $114 $120 2014 - 2016 2017 - 2019 Beyond 2019 PNM Resources PNM TNMP 32
Slide 33: Ongoing EBITDA Improvement
Ongoing EBITDA Improvement (In millions) PNM TNMP $434 $450 $397 $349 $121 $321 $120 $116 $99 $85 $314 $329 $281 $236 $250 (1) 2009 2010 2011 2012 2013E (1) Mid-point of guidance range 33
Slide 34: PNM Resources Summary
PNM Resources Summary Rate Base Earnings Dividend Growth Growth Growth • Core capital $1.8 B • Environmental capital • Earnings potential of • Above average dividend $343 K $0.15-$0.24 without growth expected additional rate base • Opportunity to add PV3 • Next dividend review to rate base December
Slide 35: Appendix
Appendix
Slide 36: 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 37: 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 Brandy Marty Aug. 2013 Aug. 2019(1) Republican Commissioners are appointed by Governor of Texas. Length of term is de
Slide 38: PNM Regulatory Update
PNM Regulatory Update Filing Action Timing Docket No. NMPRC Energy Efficiency Plan Filed October 5, 2012 Q4 2013 12-00317-UT NMPRC Delta Person CCN (peaking capacity) Filed January 3, 2013 Approved June 26, 2013 13-00004-UT Close expected by year-end NMPRC La Luz CCN (peaking capacity) Filed May 17,
Slide 39: 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 • $6.4M revenue in 2012 • $23
Slide 40: 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 •AMS Case •TCOS Case •TCOS Case •$12M •TCOS Case •$2.9M rate •$2.8M ra
Slide 41: 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 9% Natural Gas Coal 9% Nuclear 39% 16% Revised SIP will Coal reduce coal to Nuclear ~27%. 30% 56% Natural Gas 36% (1) Includes PNM generatio
Slide 42: PNM Plant EAF and Outages
PNM Plant EAF and Outages 2013 - 2014 Outage Schedule 88.6% 89.5% 90.9% 80.8% 80.2% Duration Time 77.0% 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 12 months
Slide 43: 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% (208 MW) 3 497 249 50% Tri-State 8.2% (41 MW) M-S-R Public Power Agency
Slide 44: Palo Verde Nuclear Generating Station Unit and Leases
Palo Verde Nuclear Generating Station Unit 1 and 2 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
Slide 45: PNM Environmental Control Equipment at Coal Units
PNM 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 Fo
Slide 46: Impact of Proposed Environmental Regulation
PNM 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 ~$63M See “Capital Spending Under Revised State Plan” slide Included in S
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