Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — EEI Financial Conference 2017
44 slides from Txnm Energy's conference presentation, November 2017
Slide 1: EEI Financial Conference
EEI Financial Conference November 2017
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 U.S. 1-505-241-2227 Lisa.Goodman@pnmresources.com Jimmie.Blotter
Slide 3: Company Overview
Company Overview
Slide 4: 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 above industry average earnings and dividend growth to shareholders • Energy holding company • Based in Albuquer
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Financial • Investing aligned to policy directives, evolving customer Goals Rate Base needs and transforming Growth industry opportunities while ensuring reliability, resulting in Earn authorized return on cleaner generation fleet regulated businesses Abov
Slide 6: Staying Focused and Flexible in a Changing Environment
Staying Focused and Flexible in a Changing Environment • PNM 2018 General Rate Case • PNM 2018 Renewable Plan • NMPRC Proposed • Plans to be Coal-Free in Rulemaking Workshops 2031; New Generation Mix Navigating • TNMP Upcoming General of Natural Gas, Renewables the Regulatory Rate Case Transforming
Slide 7: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast Targeted Consolidated 2017-2021 Rate Base CAGR(1): 4.5-5.5% 2018–2022 Total Capital Plan: $2.7B $681 Palo Verde $17 Unit 3 added to (In millions) rate base $170 $527 $515 $527 $58 $17 $500 $504 $34 $17 $17 $170 $116 $158 $186 $170 $170 $192 $146 $297 $173 $164 $238
Slide 8: Earnings Growth: Proposed PNM 2018 General Rate Case Settlement Agreement
Earnings Growth: Proposed PNM 2018 General Rate Case Settlement Agreement Recommended Decision Key Terms of Proposed Settlement Agreement(1) • ROE unchanged at 9.575% • Current allowed ROE of 9.575% • $62.3M increased revenue requirement • $62.3M increased revenue requirement • $7.5M financial impac
Slide 9: Earnings Growth: Proposed PNM 2018 General Rate Case Procedural Schedule
Earnings Growth: Proposed PNM 2018 General Rate Case Procedural Schedule Procedural Schedule Exceptions to Recommended Decision November 10, 2017 Responses to Exceptions November 20, 2017 Suspension period January 6, 2018 Potential extension of suspension period March 6, 2018 9
Slide 10: Tax Reform Considerations
Tax Reform Considerations PNM Resources well-positioned for tax reform, customers benefit Key Tax Reform Considerations Reduction of Business Segments Reduced Tax Rate Interest Non- 100% Bonus Production Tax deductibility Depreciation Credits Decreases the tax expense flowing through rates; 30% EBIT
Slide 11: Earnings Growth: Potential Earnings Power
Earnings Growth: Potential Earnings Power Potential Earnings Power reflects 8% earnings growth through 2019(1) Targeted earnings growth of 6% through 2021(1) • PNM growth achieved through recovery of 4.5%-5.5% rate base growth in addition to recovery of existing Palo Verde Unit 3 costs Phased-in r
Slide 12: Dividend Growth
Dividend Growth Expect above industry average dividend growth in the future while targeting the 50% - 60% payout ratio range $1.87 $1.64 $1.65 $1.77 $1.49 $1.31 $1.41 $0.88 $0.97 53%(1) $0.74 $0.80 Dec ‘16 $0.58 $0.66 Dec ‘15 payout Dec ‘13 Dec ‘14 Feb ‘12 Feb ‘13 ratio 2012 2013 2014 2015 2016 2017
Slide 13: Credit Metrics: Liquidity and Debt Maturity Outlook
Credit Metrics: Liquidity and Debt Maturity Outlook Long-term Debt Maturities(1) (in millions) $293 Maintain appropriate $1,060 credit metrics $172 Remain a solid $250 $200 $100 $306 investment grade 2018 2019 2020 2021 2022 and rated company Beyond PNM TNMP Corporate Target regulatory • Extended TN
Slide 14: Credit Metrics: Rating Agency Perspectives
Credit Metrics: Rating Agency Perspectives Moody’s S&P Rating/Outlook Rating/Outlook PNM Resources Baa3(2) / Positive BBB+(2) / Stable PNM Baa2(3) / Positive BBB+(3) / Stable TNMP A1(4) / Stable A(4) / Stable PNM Resources FFO-to-Debt is maintained well within Moody’s Baa investment grade target ran
Slide 15: PNM Overview
PNM Overview
Slide 16: PNM: Regulatory Update
PNM: Regulatory Update Filing Action Timing Docket No. NMPRC: Suspension period currently ends Recommended decision PNM 2018 General Rate Case January 6, 2018; NMPRC has ability 16-00276-UT issued October 31, 2017 to extend to March 6, 2018 Briefings and responses on scope of Procedural order issued
Slide 17: PNM: 2017 Integrated Resource Plan Plans for Coal-Free Generation Portfolio by 2031
PNM: 2017 Integrated Resource Plan Plans for Coal-Free Generation Portfolio by 2031 Roadmap for meeting customer demand over 20-year horizon, provides foundation for the selection of future resources Filed with Solicits and Revisited every NMPRC for incorporates three years review and public input a
Slide 18: PNM: New Mexico Supreme Court Appeal
PNM: New Mexico Supreme Court Appeal • PNM filed Notice of Appeal with New Mexico Supreme Court on September 30, 2016 • PNM filed Statement of Issues on October 26, 2016 detailing items for appeal: Appealed Item Conclusion Resulting Impact Palo Verde Nuclear Generating Station: 64 MW Unit 2 capacity
Slide 19: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2016 Q3 2017 YTD 2017 PNM Sales vs. vs. Volumes Q3 2016 YTD 2016 Retail Load: Residential 40% 0.0% 0.3% Commercial 47% (1.5%) (1.2%) Industrial 11% (2.4%) (2.4%) Total Retail L
Slide 20: PNM: Sustainability Portal
PNM: Sustainability Portal http://www.pnmresources.com/about-us/sustainability-portal.aspx 20
Slide 21: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success • Continue to efficiently manage the business with a customer- centered focus, delivering reliable and affordable energy • Earn allowed return Minimize regulatory lag through timely rate case filings Synchronize revenues and expenses Use future test year • Con
Slide 22: TNMP Overview
TNMP Overview
Slide 23: TNMP: Regulatory Update
TNMP: Regulatory Update Filing Action Timing Docket No. TNMP TCOS Filed July 19, 2017 Approved September 13, 2017 47422 TNMP General Rate Case N/A Expected to be filed May 2018 N/A 23
Slide 24: TNMP: Upcoming General Rate Case Key Elements
TNMP: Upcoming General Rate Case Key Elements True-up Transmission and Distribution Recovery • TCOS filings update for transmission investments, but distribution assets and other rate base items have not been updated since last rate case filing (test period ending March 2010) True-up Operating Costs
Slide 25: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and End Users (weather-normalized, leap-year adjusted) % of 2016 Q3 2017 YTD 2017 vs. TNMP Sales vs. YTD 2016 Revenues Q3 2016 Volumetric Load(1): Residential 0.2% 2.0% Total Volumetric Load 52% 0.0% 1.7% Demand-Based Load(2) 48% 3.3%
Slide 26: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success • Continue to efficiently manage the business with an end user- centered focus, delivering reliable and affordable energy • Continue to earn allowed rate of return through timely execution of transmission cost of service and general rate case filings Additional i
Slide 27: Financial Overview
Financial Overview
Slide 28: Financial Overview: Consolidated Earnings Guidance (Ongoing)
Financial Overview: Consolidated Earnings Guidance (Ongoing) Actual results for the first half of the year support full- year performance at upper end of range. 2017 Guidance $1.77 Consolidated EPS $1.87 PNM TNMP Corp/Other $1.30 - $1.37 $0.51 - $0.53 ($0.04) – ($0.03) 28
Slide 29: Liquidity as of October 20, 2017
Liquidity as of October 20, 2017 PNM Corporate/ Resources PNM TNMP Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $450.0 $75.0 $300.0 $825.0 As of 10/20/17: Short-term debt and LOC balances $2.5 $6.0 $181.5 $190.0 Remaining availability 447.5 69.0 118.5 635.0 Inv
Slide 30: Appendix
Appendix
Slide 31: 2017 - 2019 Potential Earnings Power
2017 - 2019 Potential Earnings Power 2017 Guidance Midpoint 2018 Earnings Potential 2019 Earnings Potential Allowed Return Avg Rate Avg Rate Return EPS EPS Avg Rate Base EPS / Equity Ratio Base Base PNM Retail (1) 9.575% / 50% $2.3 B 9.3% $1.33 $2.3 B $1.38 $2.3 B $1.37 PNM Rate Case Phase-In (2) ($
Slide 32: Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement
Earnings Growth: Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement Proposed Settlement Agreement Financial View Phase I - 2018 Phase II - 2019 (in millions, except EPS) Settlement increase (net revenue increase) $32.3 $62.3 (1) Accelerated amortization of excess deferred s
Slide 33: PNM: 2018 General Rate Case Drivers (as Filed)
PNM: 2018 General Rate Case Drivers (as Filed) Incremental Revenue Rate Base Requirement (in millions) (in millions) Compliance Items: BART Items: Palo Verde Unit 3 $96 $45 Retirement of San Juan Units 2 and 3 (95) (29) 132 MW of San Juan Unit 4 11 16 Accelerated Depreciation on San Juan SNCRs - 3 S
Slide 34: PNM: 2018 General Rate Case Proposed Settlement Bill Impact
PNM: 2018 General Rate Case Proposed Settlement Bill Impact Comparison of Average Residential Bills(2) • Forecasted PNM customer bills remain Western Region Average Bills by Utility below current national and regional Imperial Irrigation District (CA) Arizona Public Service Co (AZ) $138.93 averages
Slide 35: PNM 2016 General Rate Case Final Order
PNM 2016 General Rate Case Final Order • NMPRC approved final order Sept. 28, 2016: Non-fuel revenue increase of $61.2M versus $121.5M request Retail rate base of $2,263M versus $2,458M request Key Rate Case Elements Commission Original Impact to (PNM Retail Share, net of ADIT) Order Request Rat
Slide 36: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Cynthia Hall, District 1 2020(1) Democrat Vice Chairman District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovejoy 2018(1) Democrat Sandy Jones, Dist
Slide 37: NMPRC Rulemaking on Utility Ratemaking Policies
NMPRC Rulemaking on Utility Ratemaking Policies NMPRC opened an investigation and rulemaking to consider: • Developing a standardized method for determining ROE • After a baseline ROE is determined, should the ROE be adjusted under an incentive/disincentive mechanism? • Limitation of utility recover
Slide 38: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends DeAnn Walker (Chair) Sept. 2017 Aug. 2021 Republican Kenneth Anderson Sept. 2008 Aug. 2017 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Commissioners are appointed by the Governor of Texas and confirmed by the Senate. Length of ter
Slide 39: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- AEP Central Centerpoint Oncor TNMP AEP North Sharyland Source: TDU tariffs for retail delivery service effective September 1, 2017 and PUCT Filings Interchange. 39
Slide 40: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,791 MW 2018 Forecasted As of 12/31/2016 Generation Mix (includes renewables related to Facebook data center) Renewables Renewables 15% 18% Coal Coal (1) 29% 35% Natural Gas 35% Natural Gas Nuclear 38% Nuclear 15% 15% (1) The potentia
Slide 41: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 11,147 GWh 2018 Forecasted Based on 12 months ending 12/31/16 Generation Mix (includes renewables related to Facebook data center) Renewables 9% Renewables 11% Coal Natural Gas 41% (1) 11% Coal 51% Natural Gas 20% Nuclear 29% Nuclear 28% (1)
Slide 42: PNM Investment in Renewable Energy
PNM Investment in Renewable Energy New Mexico Renewable Energy Act Renewable Rider Collection Portfolio Standard as a % of Retail Sales Streamlined proceedings for approval of Methodology utilities’ renewable energy procurement Recovery of renewable investments 15% 20% plans and REC purchases permit
Slide 43: PNM San Juan Generating Station Ownership and Participants
PNM San Juan Generating Station 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
Slide 44: PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases
PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases MW Owned vs. Leased Unit 1 Unit 2 Owned 2.3% 30 MW Owned 9.5% 124 MW Leased 7.9% 104 MW Leased 0.7% 10 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: January 15, 2015; exercised option to extend leases to 2023 • Unit