Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — EEI Financial Conference 2020
51 slides from Txnm Energy's conference presentation, November 2020
Slide 1: EEI Financial Conference
November 1, 2019 EEI Financial Conference November 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Beilen Middleton Director, Investor Relations and Shareholder Services Senior Investor Relations Specialist U.S. 1-505-241-2160 U.S. 1-505-241-2135 Lisa.Goodman@pnmresources.com Beilen.Middleton@pnmresources.com Safe Harbor St
Slide 3: PNM Resources Overview
PNM Resources Overview Energy holding company based in Albuquerque, New Mexico with two fully regulated electric utility subsidiaries • Vertically integrated utility in NYSE: PNM $3.9B market cap New Mexico focused on clean Service Territories and Generation Resources energy transformation • $3.0B r
Slide 4: AVANGRID - PNM Resources Strategic Merger Transaction
AVANGRID - PNM Resources Strategic Merger Transaction Leading, sustainable Regulated electric utility with U.S. energy company strong financial track record Avangrid Networks Avangrid Renewables Announced October 21, 2020
Slide 5: Strategic Merger Transaction: Strategic Rationale
AVANGRID and PNM Resources Strategic Merger Transaction: Strategic Rationale AVANGRID and PNM Resources to combine in strategic merger transaction Alignment in transition to clean energy and commitment to ESG strategy creates a leading U.S. regulated utility and renewable energy platform Combination
Slide 6: Strategic Merger Transaction: Alignment in Strategy
AVANGRID and PNM Resources Strategic Merger Transaction: Alignment in Strategy Alignment in the transition to clean energy and ESG strategy maintains PNM Resources stakeholder commitments Clean Energy Strong Financial Focus Profile Growth in regulated business (transmission and distribution) 2 singl
Slide 7: Shareholder and Regulatory Approvals
AVANGRID and PNM Resources Strategic Merger Transaction: Shareholder and Regulatory Approvals Filings and approvals expected within ~12 months Shareholder Approval • Proxy expected December 2020 • Meeting/vote expected February 2021 Regulatory Approvals and Estimated Timelines • New Mexico Public Re
Slide 8: PNM Resources Overview
PNM Resources Overview
Slide 9: Strategic Focus
Strategic Focus Create shareholder value through a clean and bright energy future Clean Energy Critical Electricity Strong Financial Portfolio Infrastructure Profile Aggressive transition of Reliably support growth Transparent growth plan PNM resource portfolio, and integration of clean driven by ra
Slide 10: Commitment to ESG Strategy
Commitment to ESG Strategy Environmental Social Governance Industry-leadings goals: Hiring, training, retention Diverse (40% women / • Exiting coal by 2024 and engagement programs 20% minorities), • Emissions-free by 2040 for our diverse workforce engaged Board with reflects full elimination of (50%
Slide 11: Strong Financial Profile
Strong Financial Profile • $4.1B investment plan 2020 - 2024 Rate Base • Emphasis on grid infrastructure investments Investments • Reflects investment opportunities balanced with long-term customer value • Earn authorized return on rate base investments Earnings • Proven history of building flexible
Slide 12: 2020 – 2024 Investment Plan
2020 – 2024 Investment Plan $4.1B investment plan focused on T&D infrastructure investments $1,016 117 $807 34 30 $766 $761 27 $712 277 120 125 123 27 31 123 26 197 201 (in millions) 185 202 201 337 320 342 348 $337 298 $361 $273 $289 $316 93 83 76 55 64 2020 2021 2022 2023 2024 PNM Generation TNMP
Slide 13: Potential Earnings Power through Close of Acquisition
Potential Earnings Power through Close of Acquisition 2020 Ongoing Earnings Allowed 2021 Earnings Potential Guidance Midpoint Return / Avg Rate Avg Rate Equity Ratio Return EPS EPS Base Base PNM Retail(1) 9.575% / 50% $2.5 B 9.575% $1.51 $2.5 B $1.41 PNM Renewable Rider 9.575% / 50% $150 M 9.575% $0
Slide 14: Dividend Growth
Dividend Growth Dividend growth targets middle of a 50%-60% payout ratio range • Dividend continued through the close of the $2.35 $2.27 merger transaction $2.16 $1.94 $2.00 • Next dividend review by $1.29- Board of Directors in $1.16 $1.23 $1.30 $0.97 $1.06 Dec ‘19 December 2020 Dec ‘17 Dec ‘18 Dec
Slide 15: Liquidity and Debt Maturity Outlook
Liquidity and Debt Maturity Outlook Long-term Debt Maturities (in millions) $843 $450 $1,255 ~$1B available liquidity $140 $496 $105 2020 2021 2022 2023 and Beyond Maintain appropriate PNM TNMP Corporate credit metrics and investment grade • Corporate financing needs to be addressed through merger r
Slide 16: Credit Ratings
Credit Ratings Investment grade credit PNMR Consolidated S&P Moody’s ratings at PNM Resources, Issuer rating BBB Baa3 PNM and TNMP Outlook Positive Stable Senior unsecured rating BBB- Baa3 Acquisition considered credit positive by S&P and PNM S&P Moody’s Moody’s Issuer rating BBB Baa2 • S&P: PNM Res
Slide 17: Key Takeaways
Key Takeaways Providing critical electricity infrastructure to support the transition to clean energy in New Mexico and growing markets in Texas Maintaining commitment to strong ESG practices, including the full exit from coal by 2024 and transition to emissions-free energy by 2040, and continuing t
Slide 18: PNM Resources' PNM
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Slide 19: New Mexico Energy Policy: Energy Transition Act
New Mexico Energy Policy: Energy Transition Act Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019 • Renewable Portfolio Standards and Carbon-Free Requirement 2045 100% Carbon-Free • Previous: 20% renew
Slide 20: Executing the Energy Transition Act, Exiting Coal by 2024
Executing the Energy Transition Act, Exiting Coal by 2024 Our Goal: Transform to 100% Emissions-Free Energy by 2040 Step 1: Exit Coal Generation by 2031 NOW 2024 Reduction of MW Coal Capacity 983 22% reduction • San Juan Generating Station: • Retired Units 2 and 3 in 2017 (221 MWs); 80% Retirement o
Slide 21: Transform PNM Generation Portfolio
Transform PNM Generation Portfolio Balance appropriate level of baseload resources to be emissions-free by 2040 and shift towards additional low-cost renewables and flexible resources San Juan abandonment, securitization and replacement power San Juan abandonment/ Announced plans to exit Four Corn
Slide 22: Renewable and Battery Storage Portfolio Growth
Renewable and Battery Storage Portfolio Growth in Renewable and Battery Storage Capacity Reflects Aggressive Clean Energy Transition 2,015 MW 2022 300.5 +650MW solar 15 2021 +50MW solar +300MW battery 662 2020 609 MW +50MW solar storage +50MW solar 0.5 15 +140MW wind 1037 356 +166MW wind 237 Solar W
Slide 23: Infrastructure Investments: Wired for the Future
Infrastructure Investments: Wired for the Future Investments in grid resilience provide the foundation for a system that can respond and adapt to integrate evolving technology and provide long-term customer value Long-term investment strategy includes $485M Investment 2020 - 2024 Total Investment by
Slide 24: PNM Retail Transmission Opportunities
PNM Retail Transmission Opportunities • Transmission capacity within New Mexico’s grid is constrained • The integration of new renewable resources to meet growing Renewable Portfolio Standards and replacement of coal retirements will likely require additional T&D expansion Renewable Portfolio Standa
Slide 25: FERC Transmission Opportunities
FERC Transmission Opportunities New Mexico’s abundant solar and wind resources also attract third-party development, increasing the demand for transmission capacity and creating rate base growth opportunities: • PNM acquisition of Western Spirit transmission line: $285M in 2021 • New Mexico added wi
Slide 26: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts PASSED NOV. 4, 2020 NMPRC Districts and Constitutional Amendment: Appointed vs Elected: PNM Service Areas • Moves the Commission from 5 elected officials to 3 appointed officials beginning January 1, 2023 • Legislature-defined Nominating Committee and requirements f
Slide 27: PNM Regulatory Agenda
PNM Regulatory Agenda Filing Action Timing Docket No. PNM: Decoupling Filing Petition for Declaratory Order filed Oct. (Petition for Approval of Rate Procedural schedule has been stayed to clarify 30, 2020; expected to include 20-00121-UT Adjustment Mechanism to Remove the legal application of Effic
Slide 28: PNM Load and Economic Conditions
PNM Load and Economic Conditions Reduced load impacts of Retail Load Growth COVID-19 in 2020 have been Year-over-Year offset by increased weather 2020 YTD 2019 2018 Growth impacts Total Retail Load(1) (0.8%) 0.3% 0.6% PNM Avg. Consumers 1.0% 0.7% 0.8% • 2019 and 2018 load growth reflects customer gr
Slide 29: PNM COVID-19 Considerations
PNM COVID-19 Considerations PNM Resources • PNM comprises the majority of customer Non-Fuel Revenues non-fuel revenues • New Mexico’s largest employers include government and health care, with a larger New number of small/medium businesses Mexico 74% PNM 2019 Revenues by Region Central Customer Clas
Slide 30: TNMP
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Slide 31: TNMP Low-Risk Revenue Profile
TNMP Low-Risk Revenue Profile 2019 TNMP Revenues $295M Retail Revenues $67M Wholesale Revenues Includes $94M of pass-through transmission Fixed transmission investment recovery; can expense recovery, trued up twice annually be adjusted twice annually through TCOS filings, $83M approved October 2020
Slide 32: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – Gulf Coast Region provided 50% of 2019 retail revenues • Regional economy driven largely by oil refining TNMP 2019 Revenues by Region and petrochemical industries, supplemented by North/ the aerospace and medical industries Central TX ~35% • Sprawl from Houston has led
Slide 33: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – North/Central TX Region provided 35% of 2019 retail revenues TNMP 2019 Revenues by Region • Dallas region is home to 250 corporate North/ headquarters that each employ more than Central TX ~35% 1,000 people globally, 22 Fortune 500 companies and 8 of Forbes’ largest pr
Slide 34: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – West Texas Region provided 15% of 2019 retail revenues TNMP 2019 Revenues by Region • ~50% of 2019 revenues derived from retail North/ transmission customers with recovery trued Central TX ~35% up twice per year • ~25% of 2019 revenues demand derived from West Texas hi
Slide 35: TNMP Load and Economic Conditions
TNMP Load and Economic Conditions Load Growth Resilient Texas economy has shown a shift in load YTD 2020 vs. Year-over Year-Growth YTD 2019 between customer classes resulting from COVID-19 with Volumetric-Based Load(1) 3.8% Demand-Based Load(1) (0.7%) no significant overall impacts Avg. Consumers 1.
Slide 36: TNMP COVID-19 Considerations
TNMP COVID-19 Considerations • TNMP is a smaller portion of customer non-fuel revenues and is less impacted by changes in load/demand: PNM Resources Non- • Transmission recovery (45% of revenues), Dallas/ Fuel Revenues trued up twice per year North TX Area • Majority of demand-based bills based on 9
Slide 37: TNMP Demand and Infrastructure Investment
TNMP Demand and Infrastructure Investment Texas growth drives infrastructure needs Year-over Year- • TNMP has seen consistent consumer growth driven by 2017 2018 2019 strong Texas economy Growth • Rapid demand-based load growth over recent years in Demand-Based Load 4.0% 6.8% 4.9% the Commercial and
Slide 38: PUCT Commissioners and TNMP Regulatory Agenda
PUCT Commissioners and TNMP Regulatory Agenda PUCT Commissioners Name Term Began Term Ends Party DeAnn Walker (Chair) Sept. 2017 Sept. 2021 Republican Arthur D’Andrea Nov. 2017 Sept. 2023 Republican Shelly Botkin June 2018 Sept. 2025 Republican Commissioners are appointed by the Governor of Texas an
Slide 39: TNMP Rate Recovery Framework
TNMP Rate Recovery Framework DCOS (Distribution TCOS (Transmission General Rate Review Cost of Service) Cost of Service) Standard rate review involving Pre-defined schedules limited to comprehensive filing, distribution investments with discovery, interveners, discovery, interveners, hearings; Pre-d
Slide 40: COVID-19 Updates and 2020 Earnings Guidance
COVID-19 Updates and 2020 Earnings Guidance
Slide 41: Our Response to COVID-19
Our Response to COVID-19 • Identification of critical workforce, staging of backups, limited access to control rooms and critical assets Safety of • Minimize critical employee exposure, inter-crew our Team exposures and exposures with the public: eliminate group gatherings, deploy additional fleet v
Slide 42: COVID-19 Update
COVID-19 Update Restrictions ongoing in New Mexico and Texas in response to rising case numbers, continue to prioritize the safety of our team, caring for our customers and communities Phased re-openings in May and June; restrictions re-instated during July – October in response to rising case numbe
Slide 43: Continued COVID-19 Load Impacts
Continued COVID-19 Load Impacts Expected impacts reflect continued increases from Residential customers and decreases from Commercial and Industrial customers due to business restrictions PNM COVID load trends TNMP COVID load trends • Residential: +5% increase • Volumetric: +5% increase • Commercial
Slide 44: 2020 Consolidated Ongoing Earnings Guidance
2020 Consolidated Ongoing Earnings Guidance Clean Energy Strong Financial 2020 Earnings Guidance Focus Profile $2.23 - $2.31 $2.23 Consolidated EPS $2.31 guidance affirmed, targeting midpoint of $2.27 PNM TNMP Corp/Other $1.72 – $1.77 $0.72 – $0.74 ($0.21) – ($0.20) 44
Slide 45: Appendix
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Slide 46: San Juan Abandonment, Securitization and Replacement Power
San Juan Abandonment, Securitization and Replacement Power ● Requests ● $283M undepreciated Prioritizes environmental Abandonment Replacement Power Securitization abandonment of San investment in San Juan, benefits and location Juan coal plant after proceeds available to preferences consistent parti
Slide 47: San Juan Securitization Next Steps
San Juan Securitization Next Steps Securitization Order issued Securitization next steps: April 1, 2020 grants irrevocable financing order April 1, 2020: Irrevocable NMPRC authorizing the issuance of financing order securitization bonds up to $361 million, to include: Early 2022: PNM forms a Special
Slide 48: San Juan and Four Corners Generating Stations Ownership and Participants
San Juan and Four Corners Generating Stations Ownership and Participants San Juan Generating Station Total PNM PNM Unit Other Participants/Ownership MW MW Ownership 1 340 170 50% Tucson Electric 50% (170 MW) City of Farmington 8.5% (43 MW) 4 507 392 77.3% Los Alamos County 7.2% (36.5 MW) Utah Associ
Slide 49: Palo Verde Nuclear Generating Station Ownership and Leases
Palo Verde Nuclear Generating Station Ownership and Leases MW Owned vs. Leased Unit 1 Unit 2 Unit 3 Owned 2.3% 30 MW Owned 9.5% 124 MW Owned 10.2% 134 MW Leased 7.9% 104 MW Leased 0.7% 10 MW Leased 0% 0 MW Total 10.2% 134 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: June 11, 2
Slide 50: COVID-19 Load: Assumptions and EPS Sensitivities
COVID-19 Load: Assumptions and EPS Sensitivities PNM TNMP COVID-19 Planning Assumptions: CleanCOVID-19 Energy PlanningStrong Assumptions: Financial Current Expectation Focus Current Expectation Profile Residential + 5% Volumetric + 5% Commercial -10% Demand-Based - 5% Industrial No significant impac
Slide 51: Liquidity as of October 27, 2020
Liquidity as of October 27, 2020 PNM Corporate/ Resources PNM TNMP Other Consolidated Financing Capacity(1): (In millions) • Available liquidity Revolving credit strengthened by the $440.0 $75.0 $340.0 $855.0 facilities issuance of long-term As of 10/27/20: debt at PNM and TNMP Short-term debt and i