Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Q1 2020 Earnings Presentation
38 slides from Txnm Energy's earnings presentation, May 1, 2020
Slide 1: COVID-19 Update and Q1 2020 Earnings Review
November 1, 2019 COVID-19 Update and Q1 2020 Earnings Review May 1, 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements made in this presentation for PNM Resources, Inc. (“PNMR”), Public Service Company of New Mexico (“PNM”) and Texas-New Mexico Power Company (“TNMP”) (collectively, the “Company”) that re
Slide 3: Opening Remarks and Overview
Opening Remarks and Overview Pat Vincent-Collawn Chairman, President and CEO
Slide 4: Opening Remarks
Opening Remarks COVID-19 reminds us of our purpose, values and culture • We are responsible for providing an essential service • Our communities rely on us for more than electricity • Our team is our most valuable asset, supported by our values and culture Top priorities in COVID-19 environment: • S
Slide 5: Regulatory Strategies
Regulatory Strategies Regulatory strategies have been modified to consider the current environment and reflect our focus on benefitting customers and communities Deferring plans to file general rate review due to COVID-19, filing instead for full decoupling for residential and small commercial custo
Slide 6: Executing Strategic Plans
Executing Strategic Plans Transform the 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/ Dev
Slide 7: Financial Overview and COVID-19 Updates
Financial Overview and COVID-19 Updates Chuck Eldred Executive Vice President, Corporate Development and Finance
Slide 8: COVID-19 Scenario Analysis
COVID-19 Scenario Analysis • Continued scenario analysis and planning under 3 different stages: Stage 1 Stage 2 Stage 3 Up to 60 day-impact 60 - 120 day-impact Duration / >120 day-impact, duration (through May) with closure (through July), with closure Economic of 4-6 months before of non-essential
Slide 9: COVID-19 Financial Considerations: Continued Transparency
COVID-19 Financial Considerations: Continued Transparency • Continued transparency into our scenario analysis as we progress through stages and evaluate continued impacts: March Stage 1 • Developed planning scenarios April Manage within • Q1 results in line with assumptions Guidance • April results
Slide 10: Business Fundamentals Remain Intact Amidst COVID-19
Business Fundamentals Remain Intact Amidst COVID-19 • 8.9% rate base growth 2019 - 2023 Rate Base • PNM and TNMP T&D continues to support critical Growth infrastructure and reliability projects • Balancing replacement power with additional opportunities for PNM T&D Earnings • 5% - 6% earnings growth
Slide 11: Liquidity / Financings
Liquidity / Financings Available liquidity remains adequate at $1 billion to finance business needs • $855 million capacity under multi-year revolving credit projected May 1, 2020 Capacity Borrowed Available facilities (in millions) • $287 million under January Revolvers $855 $179 $676 2020 forward
Slide 12: COVID-19 Financial Considerations and Updates
COVID-19 Financial Considerations and Updates Ongoing Earnings Guidance Considerations • Load impacts, mitigating impacts COVID-19 Load Impacts • Updated assumptions: PNM greater impacts, TNMP lesser impacts Bad Debt Considerations • TNMP relief program in effect; PNM filed for regulatory asset trea
Slide 13: COVID-19 Financial Considerations and Updates
COVID-19 Financial Considerations and Updates Don Tarry Senior Vice President and CFO
Slide 14: Ongoing Earnings Guidance Affirmed Based on COVID-19 Stage
Ongoing Earnings Guidance Affirmed Based on COVID-19 Stage 1 2020 Earnings Guidance affirmed based on Stage 1 COVID-19 Considerations $2.16 Consolidated EPS $2.26 COVID-19 Load Impacts Mitigating Impacts March $0.00 Stage 1: Manage within Lower interest and financing April ($0.02) Guidance costs, we
Slide 15: COVID-19 Load Impacts: Updated Assumptions
COVID-19 Load Impacts: Updated Assumptions April results provide additional clarity, updated assumptions PNM: reduced load projection as Commercial experiences greater COVID-19 impacts • Residential COVID-19 increase remains +5% • Commercial COVID-19 reduction updated to -15% (from -10%) TNMP: incre
Slide 16: PNM / New Mexico COVID-19 Update
PNM / New Mexico COVID-19 Update • New Mexico’s largest employers include government and health care, with a larger number of small/medium businesses • New Mexico Governor and Economic Recovery Council begin multi-phased plan for “gradual and safe reopening” PNM 2019 Revenues by Region Customer Clas
Slide 17: TNMP / Texas COVID-19 Update
TNMP / Texas COVID-19 Update • TNMP EPS is less impacted by changes in load/demand: • Transmission recovery (45% of revenues), trued up twice per year • Majority of demand-based bills based on greater of peak monthly usage, or 80% of previous 11 months peak; ERCOT set new April system peaks in 2020
Slide 18: 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 19: 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 20: 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 21: Bad Debt Considerations
Bad Debt Considerations PNM • PNM joint filing on April 27, 2020 with NMPRC to request deferral of utility’s uncollectible payments and incremental costs in response to COVID-19 to regulatory asset, with recovery determined in next rate review • Proactive outreach to customers with outstanding balan
Slide 22: PNM Decoupling Filing
PNM Decoupling Filing PNM filing decoupling in lieu of its planned general rate review due to challenges created for customers by COVID-19 Stand-alone full decoupling filing Customer bills more accurately reflect the To be filed May 2020 fixed, non-fuel costs of the service provided Disassociates ut
Slide 23: Questions and Answers
Questions and Answers
Slide 24: Appendix
Appendix
Slide 25: PNM and TNMP Regulatory Agenda
PNM and TNMP Regulatory Agenda Filing Action Timing Docket No. PNM: Deferral of Incremental PNM and other utilities filed joint motion April 27, 2020 Pending 20-00069-UT costs related to COVID-19 PNM filed July 1, 2019; NMPRC bifurcated case; New Consolidated Application Mexico Supreme Court ruled J
Slide 26: COVID-19 Load: Assumptions and EPS Rules of Thumb
COVID-19 Load: Assumptions and EPS Rules of Thumb PNM Updated Assumption RULE OF THUMB Monthly EPS • +5% Residential impact 10% change in load = Impact April – May +/- $0.02 • -15% Commercial impact June – September +/- $0.03 - $0.04 • No significant Industrial impacts August – December +/- $0.02 TN
Slide 27: 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, $81M approved March 2020 3%
Slide 28: Consolidated EPS
2020 Consolidated Ongoing Earnings Guidance $2.16 Consolidated EPS $2.26 2020 Annual EPS Distribution by Quarter 55% 22% 15% 8% Q1 Q2 Q3 Q4 28
Slide 29: Appendix Q1 Earnings Review
Appendix Q1 Earnings Review
Slide 30: Q1 2020 Ongoing EPS Financial Summary
Q1 2020 Ongoing EPS Financial Summary $0.04 ($0.01) $0.18 $0.04 Corporate TNMP $0.11 PNM Q1 2019 Q1 2020 30 Note: Segment drivers included in appendix
Slide 31: Q1 2020 vs Q1 2019 EPS (Ongoing): PNM
Q1 2020 vs Q1 2019 EPS (Ongoing): PNM PNM $0.16 Q1 2020 Key Performance Drivers ∆ EPS $0.12 O&M decreases $0.03 Outage cost decreases $0.02 Renewable rider $0.01 Retail load $0.01 Leap year $0.01 Q1 2019 Q1 2020 FERC transmission margin $0.01 Weather ($0.02) Decommissioning/reclamation trust income,
Slide 32: Q1 2020 vs Q1 2019 EPS (Ongoing): TNMP and Corporate
Q1 2020 vs Q1 2019 EPS (Ongoing): TNMP and Corporate TNMP Q1 2020 Key Performance Drivers ∆ EPS $0.09 Rate relief (TCOS) $0.03 $0.05 Interest rate savings $0.02 Load $0.01 Other $0.01 Q1 2019 Q1 2020 Depreciation and property tax ($0.02) Weather ($0.01) Corporate ($0.06) ($0.07) Q1 2020 Key Performa
Slide 33: Weather Impact
Weather Impact PNM Q1 2020 Q1 2019 2020 Normal(1) Heating Degree Days 1,089 1,222 1,119 Cooling Degree Days 0 1 0 Net EPS Impact $0.00 $0.02 compared to normal TNMP Q1 2020 Q1 2019 2020 Normal(1) Heating Degree Days 711 927 907 Cooling Degree Days 196 75 97 Net EPS Impact ($0.01) $0.00 compared to n
Slide 34: PNM Scheduled Plant Outages
PNM Scheduled Plant Outages San Juan Four Corners Palo Verde Duration Time Duration Time Duration Time Unit Unit Unit in Days Period in Days Period in Days Period No planned outages in 2020 5 75 Q1-Q2 2020 2 30 Q2 2020 4 23 Q2 2020 1 44 Q4 2020 4,5 13 Q4 2020 34
Slide 35: 2020 – 2023 Investment Plan
2020 – 2023 Investment Plan $3.3B investment plan results in 8.9% rate base growth $15M added to PNM T&D in 2020 to support customer growth, incremental to $20M added in February $993 $21 $27 $853 $177 $27 $48 $25 $771 $695 $68 $109 $21 $268 $72 $94 $128 $77 $82 $211 $182 $202 (in millions) $174 $34
Slide 36: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power Earnings Growth Target 5-6% Allowed 2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings Return / Guidance Midpoint Potential Potential Potential Equity Avg Rate Avg Rate Avg Rate Avg Rate Ratio Return EPS EPS EPS EPS Base Base Base Base 9.575% / PNM R
Slide 37: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2019 Mar 31, 2020 Long-Term Debt (incl. current portion) (1) PNM $1,748.0 $1,748.4 TNMP 670.7 670.6 Corporate/Other 589.0 589.2 Consolidated $3,007.7 $3,008.3 Total Debt (incl. short-term) (1,2) PNM $1,806.0 $1,808.4 TNMP 685.7 740.6 Corporate
Slide 38: Credit Ratings
Credit Ratings PNMR Consolidated S&P Moody’s Issuer rating BBB Baa3 Outlook Stable Stable Senior unsecured rating BBB- Baa3 PNM S&P Moody’s Issuer rating BBB Baa2 Outlook Stable Stable Senior unsecured rating BBB Baa2 TNMP S&P Moody’s Issuer rating BBB+ A3 Issuer outlook Stable Stable Senior secured