Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (March 2018)
43 slides from Txnm Energy's roadshow presentation, March 2018
Slide 1: UBS European Tour
UBS European Tour March 2018 PN MOResources
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 NYSE Ticker: PNM Market Cap: $2.9B 4
Slide 5: PNM Resources Strategic Direction and Financial Goals
PNM Resources Strategic Direction and Financial Goals • Reduce carbon emissions by 87% from 2012 levels Transform to • Retire and replace coal‐fired generation with Cleaner Energy cleaner energy portfolio Portfolio • Invest to maintain system reliability • Provide reliable, affordable energy while e
Slide 6: Have you heard…PNM plans to be coal free by 2031
Have you heard…PNM plans to be coal free by 2031 Climate Change Report Climate change continues to pose risk and demand answers. We hear our stakeholders, from investors and businesses to our customers and employees who are conscientious about reducing their own impact on the environment and are con
Slide 7: Transforming PNM's Generation Supply Model
Transforming PNM’s Generation Supply Model Old Model: increase baseload New Model: invest in flexible generation generation to meet expected and transmission system to facilitate more load growth renewable energy and meet peak demand Total Supply Peak MW Generation Supply Retire / Replace Demand Bui
Slide 8: PNM's Cleaner Energy Portfolio
PNM’s Cleaner Energy Portfolio • Coal‐free generation portfolio by 2031; develop new generation portfolio that moves to increased renewable resources • Invest in storage or backup power resources to maintain system reliability • Transparency through Sustainability Portal 1 Energy Mix in 2017 Integra
Slide 9: Scaling Our System to Integrate 55% Renewables
Scaling Our System to Integrate 55% Renewables Renewable Capacity Growth 2,064 11 55% of 2000 205 total 1,384 system 11 capacity 1500 170 MW Capacity 1251 861 1000 11 142 786 466 246 4 500 49 521 20 306 597 417 204 107 187 22 0 2012 2015 2020 2025 2035 Solar Wind Solar (DG) Geothermal Current Renewa
Slide 10: Capital Forecast
Capital Forecast Targeted Consolidated 2018‐2021 Rate Base CAGR(1): 6% ‐ 7% 2018–2022 Total Capital Plan: $2.7B $681 $17 Palo Verde Unit 3 added to (In millions) rate base $170 $527 $500 $17 $500 $504 $19 $17 $17 $170 $116 $186 $170 $170 $51 $35 $81 $146 $297 $141 $129 $157 $20 $53 $96 $111 $94 $80
Slide 11: Potential Earnings Power
Potential Earnings Power Targeted earnings growth of 6% for 2018 ‐ 2021(1) • PNM growth results from the implementation of retail rates beginning in 2018, the additional investments to add 50 MW of solar to meet the 20% by 2020 RPS requirement and increased FERC Transmission business to support thir
Slide 12: Earnings Growth
Earnings Growth Achieved 8% Ongoing EPS CAGR 2012‐2017 Targeting 6% Ongoing EPS CAGR 2018‐2021 $2.21 $2.28 $2.10 $1.94 $1.87 $1.64 $1.65 $1.41 $1.49 $1.31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Actual Ongoing EPS Midpoint Guidance / Earnings Potential 12
Slide 13: Earnings Growth: Achieving Targets
Earnings Growth: Achieving Targets Strong track record of meeting/beating annual expectations Actual Ongoing EPS vs Consensus $2.00 $1.75 $1.50 $1.25 Actual Consensus $1.00 2012 2013 2014 2015 2016 2017 Actuals $1.31 $1.41 $1.49 $1.64 $1.65 $1.94 Consensus $1.27 $1.38 $1.48 $1.57 $1.63 $1.82 (beginn
Slide 14: Dividend Growth
Dividend Growth Consistent Delivery of Above Industry Average Dividend Growth 9% Expect future dividend 10% 10% $1.06 growth to mirror 8% $0.97 Dec ‘17 earnings growth 12% $0.88 Dec ‘16 (approximately 6%) 14% $0.80 Dec ‘15 $0.74 Dec ‘14 $0.66 $0.58 Dec ‘13 Feb ‘13 Feb ‘12 Indicative annual dividend
Slide 15: PNM Overview
PNM Overview
Slide 16: PNM: Overview
PNM: Overview • Largest vertically integrated utility (generation, transmission, distribution) located in New Mexico • 523,812 customer accounts • 15,091 miles transmission and distribution lines • 2,580 MW generation capacity • Top quartile reliability • Affordable rates 16
Slide 17: PNM: 2017 Integrated Resource Plan Additions/Retirements
PNM: 2017 Integrated Resource Plan Additions/Retirements 2,400 2,000 1,600 Geothermal 1,200 Solar MW Capacity 800 Wind Natural Gas 400 Cost‐effective proposals for storage Nuclear options will also be considered 0 Coal Retirement of remaining San Juan ‐400 Generating Station capacity after 2022, 22%
Slide 18: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather‐normalized, leap‐year adjusted) Q4 2017 2017 PNM vs. vs. 2018E 2019E Q4 2016 2016 PNM Residential & Commercial (1.3%) (0.7%) ~(0.3%) ~(0.3%) Total PNM Retail Load (1.5%) (0.9%) (0.7%) – 0% (0.5%) – 0.5% PNM Avg. C
Slide 19: PNM: NMPRC Commissioners and Districts
PNM: 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,
Slide 20: PNM: Regulatory Update
PNM: Regulatory Update Filing Action Timing Docket No. PNM Appeal of 2015 General Rate Case to New Mexico Oral arguments held October 30, 2017 No statutory timeline S‐1‐SC‐36115 Supreme Court PNM Advanced Metering Hearings held October 25‐26, 2017; Decision expected Q2 2018 15‐00312‐UT Infrastructur
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: Overview
TNMP: Overview • Transmission and Distribution utility located in Texas • 249,632 end‐user accounts • 9,338 miles transmission and distribution lines • Top quartile reliability • Affordable rates 23
Slide 24: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather‐normalized, leap‐year adjusted) Q4 2017 2017 TNMP vs. vs. 2018E 2019E Q4 2016 2016 TNMP Total Volumetric Load(1) (1.0%) 1.2% 2% – 3% per year TNMP Demand‐Based Load(2) 2.9% 4.0% 2% – 3% 7% – 8% TNMP Avg. End User
Slide 25: TNMP: PUCT Commissioners and Regulatory Update
TNMP: PUCT Commissioners and Regulatory Update PUCT Commissioners Name Term Began Term Ends Party DeAnn Walker (Chair) Sept. 2017 Aug. 2021 Republican Brandy Marty Marquez(1) Aug. 2013 Aug. 2019 Republican Arthur D’Andrea Nov. 2017 Aug. 2023 Republican Commissioners are appointed by the Governor of
Slide 26: 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 27: 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 28: Financial Overview
Financial Overview
Slide 29: Financial Overview: Consolidated Earnings Guidance (Ongoing)
Financial Overview: Consolidated Earnings Guidance (Ongoing) 2018 Earnings Guidance $1.82 Consolidated EPS $1.92 PNM TNMP Corp/Other $1.39 ‐ $1.46 $0.54 ‐ $0.56 ($0.11) – ($0.10) 2019 Earnings Guidance $2.04 Consolidated EPS $2.16 PNM TNMP Corp/Other $1.54 ‐ $1.61 $0.63 ‐ $0.66 ($0.13) – ($0.11) 29
Slide 30: Financial Overview: Impacts of Tax Reform
Financial Overview: Impacts of Tax Reform Provision Summary Effect on PNM & TNMP Effect on Holding Company Tax Rate 21% Reduced tax expense • Reduces tax benefit from holding beginning 2018 • Results in lower costs and revenues as tax company losses by ($0.02) savings are passed on to customers begi
Slide 31: Financial Overview: Liquidity and Debt Maturity Outlook
Financial Overview: Liquidity and Debt Maturity Outlook Long‐term Debt Maturities(1) $293 Maintain appropriate (in millions) $1,060 credit metrics $300 $172 Remain a solid $200 $100 $306 $100 investment grade 2018 2019 2020 2021 2022 and rated company PNM TNMP Corporate Beyond • Extended all revolvi
Slide 32: Financial Overview: Liquidity as of February 20, 2018
Financial Overview: Liquidity as of February 20, 2018 PNM Corporate/ Resources PNM TNMP Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $440.0 $75.0 $300.0 $815.0 As of 2/20/18: Short‐term debt and LOC balances(2) $79.9 $24.0 $188.8 $292.7 Remaining availability 3
Slide 33: Appendix
Appendix
Slide 34: PNM Resources' Strong Corporate Governance
PNM Resources’ Strong Corporate Governance Our well‐qualified, diverse mix of eight Directors enables the Board to provide effective strategic direction • 50% female or minority • Significant risks overseen by the entire Board include: • Climate Change • Safety • Stakeholder Relationships • Physical
Slide 35: Emissions Reductions and Conservation Efforts
Emissions Reductions and Conservation Efforts NOx SO2 PM10 Mercury Energy Efficiency Year MWh (tons) (tons) (tons) (pounds) PNM began its energy efficiency programs in 2007. 2017 9,876 2,727 10.2 7,551,094 Since then, the programs have provided more than $67 million in customer rebates and helped sa
Slide 36: Potential Earnings Power
Potential Earnings Power Allowed 2018 Ongoing Earnings 2019 Ongoing Earnings 2020 Earnings 2021 Earnings Return / Guidance Midpoint Guidance Midpoint Potential Potential Equity Avg Rate Avg Rate Avg Rate Avg Rate Return EPS Return EPS EPS EPS Ratio Base Base Base Base 9.575% / PNM Retail(1) $2.3 B 8
Slide 37: 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 Coal Capacity Roadmap for meeting customer demand over 20‐year horizon, 2017: 983 MW provides foundation for the selection of future resources Solicits and Filed with NMPRC 2018: 762 MW Revisited every 22% reduction i
Slide 38: Financial Impact of PNM 2018 General Rate Review
Financial Impact of PNM 2018 General Rate Review Phase I – Phase II – Financial impact under retail rate phase‐in February 1, January 1, (includes federal and accelerated state tax amortization) 2018 2019 (in millions, except EPS) Revenue increase (net of tax reform give‐back) $4.7 $10.3 (1) Acceler
Slide 39: PNM Bills Remain Below National and Regional Averages
PNM Bills Remain Below National and Regional Averages Comparison of Average Residential Bills(1) Western Region Average Bills by Utility Imperial Irrigation District (CA) $144.23 Salt River Project (AZ) Modesto Irrigation District (CA) Arizona Public Service Co (AZ) Entergy Texas Inc. (TX) PacifiCor
Slide 40: 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 41: 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. 41
Slide 42: 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) City of Farmington 8.5% (43 MW) Los Alamos County 7.2% (36.5 MW) 4 507 327 64.5% Utah Associated Municipal Power Systems (UAMPS) 7.0%
Slide 43: 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