Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — EEI Financial Conference 2013
45 slides from Txnm Energy's conference presentation, November 2013
Slide 1: EEI Financial Conference
EEI Financial Conference November 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 $1.9B 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 Strategic Goals Earn Authorized Return on Continue to Improve Credit Provide Top Quartile Total our Regulated Businesses Ratings Return Future Well positioned for 2013 - 2014 above average EPS Strategic shift and and dividend growth regulatory successes Efficient ex
Slide 6: 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 7: Sources of Core Rate Base Growth
Rate Base Growth: Sources of Core Rate Base Growth 2013 – 2017 Core Capital Plan: $1.8B PNM Core Capital: $1.2B 2013 Expected Depreciation: $153M TNMP Core Capital: $477M Other Core Capital: $76M $483 (In millions) $14 PNM Rate Base CAGR: 3% - 5% TNMP Rate Base CAGR: 7% - 9% $130 $383 $352 $14 $22 $
Slide 8: Investment in Renewable Energy
Rate Base Growth: Investment in Renewable Energy 2011 – 2012 $94M of renewable investments were placed in service. New Mexico Wind Energy Center • 204 MW 2013 – 2014 Additional renewable investments will Wind • 136 turbines • Purchase power agreement with NextEra Energy make up 8% of PNM’s 5-year co
Slide 9: 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 10: Sources of Potential BART Rate Base Growth
Rate Base Growth: Sources of Potential BART Rate Base Growth Estimated incremental RSIP(1) capital: $362M(2) PNM rate base CAGR with RSIP(2): 4% - 6% Revised State Plan (In millions) • Shut down units 2 and 3 $517 By year-end 2017 $33 $491 $1 $20 • Install SNCRs on units 1 and 4 $428 $87 By ea
Slide 11: Expected NMPRC BART Filing Process
Expected NMPRC BART Filing Process Timeline Components December 2013: Retirement San Juan Units 2 and 3 PNM submits filing to NMPRC and recovery of undepreciated December 2013 – September 2014: amounts NMPRC review period CCNs for Palo Verde Unit 3 and October 2014 – March 2015: proposed o
Slide 12: 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 Potential Earnings Power 2013 Guidance Range(1) Growth Rate Potential Allowed Potential Base Allowe
Slide 13: 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 14: PNM Overview
PNM Overview
Slide 15: 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 16: 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 17: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales (weather-normalized and leap-year adjusted) Unemployment Rate % of Q3 2013 vs. YTD 2013 vs. PNM(1) Sales Q3 2012 YTD 2012 Residential ~35% 2.0% (0.4%) 6.8% 7.2% Commercial ~45% (1.3%) (0.9%) (3) Industrial ~15% (9.4%) (6.6%) (2) U
Slide 18: PNM Regulatory Update
PNM Regulatory Update Filing Action Timing Docket No. NMPRC Energy Efficiency Plan Filed October 5, 2012 Approved 12-00317-UT November 6, 2013 NMPRC Delta Person CCN (peaking capacity) Filed January 3, 2013 Approved June 26, 2013 13-00004-UT Close expected Q1 2014 NMPRC La Luz CCN (peaking capacity)
Slide 19: 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 20: TNMP Overview
TNMP Overview
Slide 21: 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 22: 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. 22
Slide 23: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales (weather-normalized and leap-year adjusted) Unemployment Rate % of Q3 2013 vs. YTD 2013 vs. TNMP(1) Sales Q3 2012 YTD 2012 7.2% 6.4% Residential ~50% 4.6% 0.3% Commercial ~45% 3.7% 6.0% (2) (3) TX U.S. Total Retail 3.3% 1.9% 2013
Slide 24: 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 24
Slide 25: Financial Overview
Financial Overview
Slide 26: Consolidated EPS
2013 Guidance (Ongoing) Narrowed 2013 Guidance Range: $1.35 Consolidated EPS $1.41 PNM TNMP Corp/Other $1.15 - $1.18 $0.33 - $0.35 ($0.13) – ($0.12) 26
Slide 27: Liquidity, Capital Structure, and Credit Ratings
Liquidity, Capital Structure, and Credit Ratings Target cap structures: 50/50 at PNM, 55/45 at TNMP Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity as of October 25, 2013 Total Capacity(1) $400.0 $75.0 $300.0 $775.0 Less short-term debt(1) and LOC balances 3.2 7.3 8.6 19.1 Pl
Slide 28: Upcoming Debt Maturities
Upcoming Debt Maturities Long-term Debt Maturities (In millions) Total Debt(1) (in millions) Dec 31, 2012 Sep 30, 2013 $93 PNM $1,236.7 $1,290.6 TNMP 311.6 348.1 Corporate/Other 282.7 222.1 $172 Consolidated $1,831.0 $1,860.8 $670 $50 $507 $114 $120 2014 - 2016 2017 - 2019 Beyond 2019 PNM Resources
Slide 29: 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 29
Slide 30: Top Quartile Total Return Expected
PNM Resources Summary Top Quartile Total Return Expected 2012 - 2016 Earnings Growth Dividend Growth Rate Base Growth Earnings Potential Above average dividend growth expected Core capital $1.8 B Earnings potential of Environmental capital $0.15-$0.24 without Next dividend review additiona
Slide 31: Appendix
Appendix
Slide 32: Q3 2013 Financial Summary
Q3 2013 Financial Summary Ongoing EPS $0.02 ($0.07) $0.69 $0.64 TNMP PNM Q3 2012 Q3 2013 32
Slide 33: PNM and TNMP: Q3 2013 vs Q3 2012 EPS
PNM and TNMP: Q3 2013 vs Q3 2012 EPS (Ongoing) PNM Q3 2013 Key Performance Drivers ∆ EPS $0.61 $0.54 PV3 Pricing $0.01 Navajo Workforce Training Initiative ($0.01) Transmission ($0.01) Load ($0.02) Weather ($0.04) Q3 2012 Q3 2013 TNMP Q3 2013 Key Performance Drivers ∆ EPS $0.11 $0.13 Rate Relief $0.
Slide 34: 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 35: 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 36: 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 37: 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 38: 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 39: 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 40: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Energy Energy 2,538 MW 10,947 GWh BART w/ PV3(1) Based on 12 months ending 12/31/12 Based on 12 months ending 12/31/12 Renew Renew Renew ables ables ables Renewables Renewables Renewables 9% 5% 9% 10% 5% 10% Natural Gas 9% Natural Coal Gas Natural 39% Coal 20% Coal
Slide 41: PNM Plant EAF and Outages
PNM Plant EAF and Outages 87.3% 89.9% 91.3% 80.9% 2013 - 2014 Outage Schedule 75.2% 77.4% Duration Time Unit in Days Period San Juan 1 12 Q1 2014 2 28 Q1 2014 Four Corners 5 13 Q2 2014 4 13 Q4 2014 Palo Verde San Juan Four Corners Palo Verde 3 49 Q4 2013 12 months ended 9/30/12 2 34 Q2 2014 12 month
Slide 42: 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) 3 497 248 50% Tri-State 8.2% (41 MW) M-S-R Public Power Agency
Slide 43: 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 44: 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 3 248 X X X X San Juan Unit 4 195 X X X X Fo
Slide 45: 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