Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (September 2012)
38 slides from Txnm Energy's roadshow presentation, September 2012
Slide 1: Investor Meetings
Investor Meetings September 2012
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Investor Relations Manager Deanna Armijo, Investor Relations Analyst (505) 241-2227 (505) 241-4873 Jimmie.Blotter@pnmresources.com Deanna.Armijo@pnmresources.com Safe Harbor Statement Statements made
Slide 3: Strategic Overview
Strategic Overview
Slide 4: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility focused NYSE Ticker PNM on providing a top quartile total return to shareholders Market Cap $1.6B Service Territories •Energy holding company •Based in Albuquerque, New Mexico •Located in New Mexico •504,700 customers •14,562 miles
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Goals Former hybrid business model with competitive entities in Texas Earn Authorized Return on our Regulated Businesses Strengthened financial Management able to position as result of strategic efficiently execute strategic shift redirection of business C
Slide 6: Ongoing Earnings Per Share and Returns Improvement
Ongoing Earnings Per Share and Returns Improvement Ongoing Earnings Per Share $1.26 midpoint PNM TNMP $0.28 - $0.32 $1.05 $0.29 $0.75 $0.63 $0.17 $0.47 $0.13 $1.08 - $1.15 $0.28 $0.76 $0.50 $0.58 $0.19 2008 2009 2010 2011 2012E Returns 2009 2012E PNM Retail 3.7% Expected to 10.0% Return on Rate Base
Slide 7: Market Reaction to Management Actions
Market Reaction to Management Actions PNM Stock Price has improved 60% since 2012 70% 60% 60% 50% 40% % Change 30% 22% 20% 10% 17% 0% 10% -10% -20% 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 3/31/12 6/30/12 PNM S&P 500 Dow Jones Utility S&P 400 Mid-Cap Utilities Credit Ratings Moody’s S&P 2008 2012 2
Slide 8: Affirming 2012 EPS Guidance (Ongoing)
Affirming 2012 EPS Guidance (Ongoing) $1.20 Consolidated EPS $1.32 Utilities Corp/Other $1.36 - $1.47 ($0.16) – ($0.15) PNM TNMP $1.08 - $1.15 $0.28 - $0.32 8
Slide 9: Long-term goal: Top Quartile Total Return
Top Quartile Total Return 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 to an average annual rate of 10% - 13% over a 5 year period(1) Earnings growth driven
Slide 10: Potential Base Earnings Power
Potential Base Earnings Power Reducing regulatory lag and improving market prices could improve EPS by $0.15 to $0.20 without growing rate base Mid Point Guidance Range Potential Earnings Power Growth Potential Allowed Potential EPS Achievement Return EPS Resulting EPS Return PNM PNM Retail 10% $1.1
Slide 11: Sources of Core Rate Base Growth
Sources of Core Rate Base Growth 2012 - 2016 Amounts do not include potential capital spending in Total Capital Plan: $1.3B 2013 – 2016 at PNM for SCRs, renewables and additional 2012 Depreciation: $161M peaking capacity (In millions) $286 $286 $24 $12 $255 $251 $11 $12 $219 $92 $98 $12 $83 $89 $60
Slide 12: Sources of Potential Rate Base Growth
Sources of Potential Rate Base Growth 2012 – 2016 Total Potential Capital(1): $0.7B (In millions) $237 $27 $193 $166 $45 $15 $16 $22 $46 $53 $166 $80 $3 $104 $103 $27 $27 $4 $49 $23 2012 2013 2014 2015 2016 (2) (3) SCRs Additional peaking capacity Renewables Other environmental compliance (1) Not al
Slide 13: Common Stock Dividend
Common Stock Dividend 2012 Dividend: The annual common stock $0.58 dividend was raised by $0.08 Payout ratio: on February 29, 2012 46% (1) Long-term target: 50% - 60% Dividend yield: payout ratio 2.8% (2) The Board will continue to (1) Assumes mid-point of the 2012 guidance range evaluate the
Slide 14: Company Overview
Company Overview
Slide 15: PNM: Recent Accomplishments
PNM: Recent Accomplishments Significant progress has been made to improve PNM’s financial health Renewable energy rider, rates effective Aug. 20 $182M from three Substantially rate increases in the improved credit • 2012: $6.7M past four years metrics expected revenue • 2013: $22.7M expected revenue
Slide 16: PNM Rates Compare Favorably
PNM Rates Compare Favorably 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 WY VT AK MN DC MI NY NM VA KS PA KY WA PNM TN AL RI IA CO MD SD NC AZ AR LA NH WI MT ME CT OR TX OH OK FL IN MO SC MA CA IL HI MS NJ ID ND NV
Slide 17: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success Earn allowed return • Synchronize revenues and expenses • Use of future test year • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders Continue to get positive regulatory outcomes Continue to streng
Slide 18: PNM Regulatory Update
PNM Regulatory Update Item Action Timing Docket No. PNM 2013 renewable energy plan Hearing scheduled Sept. 4 12-00131-UT Decoupling rulemaking Workshops scheduled Aug. 24 12-00144-UT Future-test-year rulemaking Hearing held June 13; 12-00029-UT NMPRC General Counsel TBD to present draft order FERC t
Slide 19: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Jason Marks(1) District 1 2012 Democrat Patrick Lyons District 2 2014 Republican Chairman Douglas Howe(2) District 3 2012 Independent Theresa Becenti-Aguilar District 4 2014 Democrat Vice Chair Ben
Slide 20: San Juan BART Update
San Juan BART Update EPA granted 90-day “stay” • No extension of compliance date N.M. Environment Department process designed to identify potential alternatives to FIP and SIP through: • Series of public comment meetings (July 24 through approximately mid-September) • Working group sessions to b
Slide 21: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions (2) Regulated Retail Energy Sales Growth (1) Unemployment Rate (weather-normalized) Q2 YTD 2012 vs. 12-Month 8.3% Q2 YTD 2011 Moving Average 6.6% Residential 0.0% 0.6% Commercial 0.7% (0.1%) Industrial 1.7% 4.5% NM U.S. Total Retail 0.4% 0.8% YTD Residential a
Slide 22: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments Constructive Texas regulatory framework provides solid earnings potential TCOS filing Aug. 20 Smart Meters $41M from three • $2.5M additional • Approved July cases over the past revenue 2011 three years • Rates to be • $12M surcharge effective in late October 22
Slide 23: TNMP Rates Compare Favorably
TNMP Rates Compare Favorably 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 23
Slide 24: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return Use transmission and distribution cost of service filings to minimize regulatory lag Retain solid credit metrics Invest in the business Continue to control costs 24
Slide 25: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions (2) Regulated Retail Energy Sales Growth (1) Unemployment Rate (weather-normalized) Q2 YTD 2012 vs. 12-Month 8.3% Q2 YTD 2011 Moving Average 7.2% Residential 7.1% 3.6% Commercial 1.4% 0.8% Industrial 9.1% N/A TX U.S. Total Retail 4.4% 2.8% YTD Residential and
Slide 26: 2012 Checklist
2012 Checklist 2012 Checklist Achieve successful outcomes in: PNM future test year rulemaking PNM FERC transmission rate case PNM FERC generation rate case PNM renewable rider Maintain strong electric reliability and power plant availability Control O&M and capital costs 26
Slide 27: Appendix
Appendix
Slide 28: Utility Rate Base and Return
Utility Rate Base and Return Projected Allowed Rate Base % of Rate PNM Test Period (1) 2012 Avg. Equity ROE Increase in Filing Base Rate Base Ratio Retail Current Rates June 30, 2010 $1.8B $1.8B 86% 51.28% 10.00% $72.1M Renewables (2) Dec. 31, 2011 $68M $74M 4% 50.61% (2) 10.00% (2) $18.0M (2) FERC
Slide 29: Historical Rate Cases
Historical Rate Cases PNM Rate Cases • 8% base rate increase • 6% base rate • Renewable Energy increase • $77M rate Rider • 9% base rate 2008 2009 2011 2012 increase • $33M rate increase • $6.7M expected increase • Permanent fuel revenue in 2012 • $72.1M rate clause • Temporary fuel increase • $22.7
Slide 30: Palo Verde Nuclear Generating Station Unit 1 and 2 Leases
Palo Verde Nuclear Generating Station Unit 1 and 2 Leases Lease Expiration • Unit 1: January 15, 2015 • Unit 2: January 15, 2016 Notice Dates Unit 1 Unit 2 1st Notice January 2012 January 2013 2nd Notice January 2013 January 2014 • 1st Notice: Indicate whether or not control of the generation will b
Slide 31: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Energy (2) 2,548MW (1) 11,507 GWh (1) Renewables Renewables 8% 5% Natural Gas 9% Nuclear Coal 16% 38% Nuclear Coal 28% 58% Natural Gas 38% (1) Includes PNM generation and PPAs (2) Based on last 12 months ending 12/31/11 31
Slide 32: PNM Plant EAF and Outages
PNM Plant EAF and Outages 91.6% 2012 and 2013 Outage Schedule 82.4% 85.7% 85.6% Duration Time Unit 73.9% 73.1% in Days Period San Juan 2 47 Q1 – Q2 2012 3 54 Q3 – Q4 2012 4 47 Q1 – Q2 2013 1 40 Q4 2013 Four Corners 5 17 Q2 2012 4 21 Q2 2013 San Juan Four Corners Palo Verde Palo Verde 3 32 Q1 - Q2 20
Slide 33: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2011 Jun 30, 2012 Long-Term Debt (incl. current portion) PNM $1,215.5 $1,215.6 TNMP 311.0 311.3 PNM Resources 147.5 147.5 Consolidated $1,674.0 $1,674.3 Total Debt (incl. short-term) (1) PNM $1,281.5 $1,302.0 TNMP 311.0 311.3 PNM Resources 164
Slide 34: Liquidity/Capital Structure
Liquidity/Capital Structure In October 2011, refinanced PNM Resources and PNM revolvers ($700M) Targeting cap structure of • 50/50 at PNM • 55/45 at TNMP PNM Resources PNM TNMP Total Financing Capacity as of July 27, 2012 Total Capacity $305.0 $400.0 $75.0 $780.0 Less short-term debt and LOC bal
Slide 35: Environmental Compliance
Environmental Compliance
Slide 36: San Juan – BART Timeline
San Juan – BART Timeline Proposed State Implementation Plan revisions filed with EPA in July 2011 Called for SNCR technology estimated to cost ~$77M (total plant cost) EPA issued its proposed action on the SIP, including approval of all components of the SIP, except for the SJGS BART determina
Slide 37: 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 38: 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 ~$340M - $460M See “San Juan – BART Timeline” slide State of NM submitted with EPA in Clean Air Act – Regional Haze (SIP) – SNCR ~$36M ear