Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (August 2015)
28 slides from Txnm Energy's investor presentation, Aug 28, 2015
Slide 1: August 2015 General Rate Case
August 2015 General Rate Case August 28, 2015
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements made in this presentation that relate to future events or PNM Resources’ (“PNMR”), Public Service Company of New Mexico’s (“PNM”), or Texas‐New Mexico Power Company’s (“TNMP”) (collectively, the “Company”) expectations, projections, estimates, intentions, goals, targ
Slide 3: Opening Remarks & Overview
Opening Remarks & Overview Pat Vincent‐Collawn Chairman, President and CEO
Slide 4: Agenda
Agenda Opening Remarks & Pat Vincent‐Collawn Overview Chairman, President, and CEO General Rate Case Gerard Ortiz Filing Vice President, PNM Regulatory Affairs PNM Financial Don Tarry Overview Vice President, Corporate Controller and CIO Earnings Growth Chuck Eldred Potential Executive Vice Presiden
Slide 5: Regulatory Update
Regulatory Update Filing Action Timing Docket No. PNM: August 2015 General Rate Filed August 27, 2015 Rates expected to be implemented Q3 15‐00261‐UT Case Filing 2016 BART Filing Filed December 20, 2013 Final approval expected Q4 2015 13‐00390‐UT NMPRC 2016 Renewable Plan Filed June 1, 2015 Final ap
Slide 6: Strategic Objectives of Rate Filing
Strategic Objectives of Rate Filing Improve pricing structure and rate design; advance regulatory approach Receive Improve timely fixed cost recovery of recovery Decrease investments revenue volatility 6
Slide 7: PNM General Rate Case
PNM General Rate Case Gerard Ortiz Vice President, PNM Regulatory Affairs
Slide 8: PNM 2015 General Rate Case
PNM 2015 General Rate Case • Requested revenue increase of $123.5 million • Based on Oct. 2015 – Sept. 2016 test year and 10.5% ROE • Average system impact of 5.4%, including the new coal contract and other changes Rate Base Operations Rate Design New Generation: • 40 MW Solar 50% Reduction of Remai
Slide 9: Drivers and Other Impacts to Customer Rates
General Rate Case Drivers and Other Impacts to Customer Rates Revenue requirement driven by rate base additions and energy sales Amount (in millions) Rate Base $95 Energy Sales 31 Other: 50% Reduction of Remaining Palo Verde Lease Payments (17) Change in ROE from 10% to 10.5% 6 Re‐allocation of Gall
Slide 10: Drivers: Rate Base
General Rate Case Drivers: Rate Base Rate Incremental Base Revenue Additions Requirement (Retail share, in millions) Solar (40 MW) $65 $11 La Luz Gas Peaker (40 MW) 50 8 Rio Bravo Generating Station (138 MW)(1) 32 ‐ San Juan SNCR Equipment & Balanced Draft 58 9 Palo Verde Unit 2 Lease Purchase (64 M
Slide 11: Drivers: Energy Sales
General Rate Case Drivers: Energy Sales Compared to the load forecast embedded in current rates, load decline has contributed to a $31 million revenue requirement deficiency • 11% decrease in number of largest customers • 8% decrease in average usage among Commercial customers • 5% decrease in ave
Slide 12: Structural Rate Design Changes
Rate Design Structural Rate Design Changes Customer Class Higher Fixed and Decoupling Allocations Demand Charges • Reduces class • Better alignment of • 4 year pilot (Revenue subsidization fixed charges with Balancing Account) • Inclusion of Economic fixed costs • Addresses energy Development Rate e
Slide 13: Customer Rate Impact as of July 1, 2016
Customer Rate Impact as of July 1, 2016 Rate % Increase Rate % Increase per Major Customer Class Including Fuel and Request Other Changes (1) Residential 15.8% 7.9% Small Power 14.4% 7.0% General Power 14.5% 5.2% Large Power 14.2% 2.8% Large Power >= 8,000kW 9.4% (2.6)% Universities 9.3% (2.4)% Manu
Slide 14: Rate Affordability
Rate Affordability PNM’s Residential Affordability Continues to be Among the Best in the Nation 4.5% 4.0% 3.5% Est. Average 2014 Residential Electric Bill Es.t 2013 Median Household Income 3.0% U.S. Average: 2.6% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Sources: EIA Form 826, US Census Bureau PNM rates reflect
Slide 15: General Rate Case Timeline
General Rate Case Timeline 8/27/2015 Rate Case Filed 9/26/2015 30‐Day Notice Period to Suspend Expires 9/26/2015 thru 6/23/2016 Statutory 9‐Month Suspension Period 6/23/2016 ‐ 9/21/2016 Allowance for Additional Consideration by Commission Q3 2016 Effective Date 15
Slide 16: Financial Overview
Financial Overview Don Tarry Vice President, Corporate Controller and CIO
Slide 17: Rate Base Increased Compared to Previous Filing
Rate Base Increased Compared to Previous Filing PNM Rate Base Drivers Current Previous Filing Filing 14‐00332‐UT (in millions) Amount Case Change Solar (40 MW) $65 $66 $(1) La Luz Gas Peaker (40 MW) 50 50 ‐ Rio Bravo Generating Station (138 MW) 32 33 (1) San Juan SNCR Equipment & Balanced Draft 58 5
Slide 18: Rate Design: Decoupling
Rate Design: Decoupling Rate classes • Residential and Small Power (<50kW/Month) affected: • Represents ~50% of sales • Use‐per‐customer changes Removes • Energy efficiency the risk of: • Weather Keeps the • Customer count changes risk of: 18
Slide 19: PNM Financial Impact
PNM Financial Impact 2015 Mid‐Point 2016 Earnings 2017 Earnings of Guidance Potential Potential PNM Retail (1) $1.02 $1.49 $1.49 PNM Retail‐Timing (2) ($0.38) ‐ ($0.22) PNM Renewables $0.07 $0.06 $0.06 PNM FERC (3) $0.08 $0.07 ‐ $0.09 $0.07 ‐ $0.09 PV3 (4) ($0.01) ($0.11) ($0.10) Items not in rates
Slide 20: Financial Overview
Financial Overview Chuck Eldred Executive Vice President and CFO
Slide 21: Earnings Growth: 2017 Potential Earnings Power
Earnings Growth: 2017 Potential Earnings Power Allowed 2015 Guidance Mid Point 2017 Earnings Potential Return / Avg Rate Avg Rate Equity Ratio Return EPS Growth EPS Base Base PNM Retail (1) 10% / 50% $2.0 B 8.4% $1.02 $2.4 B $0.47 $1.49 PNM Renewables 10% / 50% $105 M 10.0% $0.07 $95 M ($0.01) $0.06
Slide 22: PNM Resources: Earnings and Dividend Growth
PNM Resources: Earnings and Dividend Growth 7%‐9% Earnings Growth Expect above industry 2015‐2019 average dividend growth while targeting the 50%‐60% payout ratio range $1.62 $1.49 $1.50 $1.31 $1.41 $0.74 $0.80 $0.66 Dec ‘14 $0.58 Dec ‘13 Feb ‘12 Feb ‘13 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
Slide 23: Questions & Answers
Questions & Answers
Slide 24: Appendix
Appendix
Slide 25: Consolidated EPS
2015 Guidance (Ongoing) 2015 Guidance Range: $1.50 Consolidated EPS $1.62 PNM TNMP Corp/Other $1.14 ‐ $1.21 $0.45 ‐ $0.48 ($0.09) – ($0.07) 25
Slide 26: Earnings Growth: 2016 and 2019 Potential Earnings Power
Earnings Growth: 2016 and 2019 Potential Earnings Power 2016 Earnings Potential 2019 Earnings Potential Avg Rate Base EPS Avg Rate Base EPS PNM Retail (1) $2.4 B $1.49 $2.5 B $1.58 PNM Retail – Timing (2) ($0.38)‐($0.22) $0.00 PNM Renewables $100 M $0.06 $85 M $0.05 PNM FERC (3) $235 M $0.07‐$0.09 $
Slide 27: 5-Year Capital Forecast
5‐Year Capital Forecast 2015 – 2019 Total Capital Plan: $2.2B PNM 2014‐2019 Rate Base CAGR: 5 ‐ 7%(1) $577 TNMP 2014‐2019 Rate Base CAGR: 5 ‐ 7% $34 $527 (In millions) $32 $121 $448 $93 $19 Palo Verde Unit 3 added to $382 $79 $93 rate base(1) $15 $72 $302 $105 $14 $144 $126 $106 $43 $330 $121 $68 $1
Slide 28: Rate Design: Decoupling for Residential and Small Power
Rate Design: Decoupling for Residential and Small Power Proposed decoupling assumes two key factors: 1. The amount of fixed costs to be recovered from each customer, or Fixed Cost per Customer (FCC) 2. The volumetric energy portion of the fixed costs for the customer class, or Fixed Cost per Energ