Slide 1: Q4 2017 Earnings Review
Q4 2017 Earnings Review February 27, 2018
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements made in this presentation that relate to future events or PNM Resources, Inc.’s (“PNMR”), Public Service Company of New Mexico’s (“PNM”), or Texas‐New Mexico Power Company’s (“TNMP”) (collectively, the “Company”) expectations, projections, estimates, intentions, goal
Slide 3: Opening Remarks and Overview
Opening Remarks and Overview Pat Vincent‐Collawn Chairman, President and CEO
Slide 4: Q4 2017 Financial Results and Key Highlights
Q4 2017 Financial Results and Key Highlights Financial Results: Q4 2017 Q4 2016 2017 2016 GAAP EPS ($0.68) $0.31 $1.00 $1.46 Ongoing EPS $0.24 $0.34 $1.94 $1.65 • Tax reform impacted Q4 and full year 2017 EPS by ($0.72) • 2018 Ongoing EPS Guidance of $1.82 ‐ $1.92 affirmed • 2019 Ongoing EPS Guidanc
Slide 5: Regulatory Update
Regulatory Update Filing Action Timing Docket No. Final order modifying revised Phased‐in (50% each year) settlement agreement includes $57.9M PNM 2018 General Rate Review with February 2018 16‐00276‐UT increase, before the impacts of tax implementation reform and cost of debt true‐up PNM Appeal of
Slide 6: Financial Overview
Financial Overview Chuck Eldred Executive Vice President and CFO
Slide 7: Impacts of Tax Reform
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 beginning • Excess defer
Slide 8: Q4 and FY 2017 Ongoing EPS Financial Summary
Q4 and FY 2017 Ongoing EPS Financial Summary $0.34 ($0.07) ($0.01) ($0.02) $0.24 PNM TNMP Corporate Q4 2016 Q4 2017 $0.34 $0.01 ($0.06) $1.94 $1.65 TNMP Corporate PNM FY 2016 FY 2017 8
Slide 9: Load and Economic Conditions
Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather‐normalized, leap‐year adjusted) Q4 2017 2017 PNM / TNMP 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.
Slide 10: Consolidated Earnings Guidance (Ongoing)
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) 10
Slide 11: 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 12: 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 13: Questions and Answers
Questions and Answers
Slide 14: Appendix: Q4 and FY 2017 Earnings
Appendix Q4 and FY 2017 Earnings
Slide 15: Q4 2017 vs Q4 2016 EPS (Ongoing): PNM
Q4 2017 vs Q4 2016 EPS (Ongoing): PNM PNM Q4 2017 Key Performance Drivers ∆ EPS Transmission $0.03 AFUDC $0.02 Restructuring cost savings $0.02 Palo Verde Unit 3 market prices $0.01 $0.23 $0.16 Outage costs ($0.05) O&M increases ($0.02) Depreciation and property tax ($0.02) Load ($0.02) Q4 2016 Q4 2
Slide 16: Q4 2017 vs Q4 2016 EPS (Ongoing): TNMP and Corporate
Q4 2017 vs Q4 2016 EPS (Ongoing): TNMP and Corporate TNMP Q4 2017 Key Performance Drivers ∆ EPS $0.12 $0.11 TCOS rate relief $0.02 Load and weather $0.01 O&M increases ($0.02) Depreciation and property tax ($0.01) Q4 2016 Q4 2017 Other ($0.01) Corporate Q4 2017 Key Performance Drivers ∆ EPS ($0.01)
Slide 17: 2017 vs 2016 EPS (Ongoing): PNM
2017 vs 2016 EPS (Ongoing): PNM PNM 2017 Key Performance Drivers ∆ EPS Retail rate relief $0.27 Transmission $0.09 $1.48 Restructuring cost savings $0.09 AFUDC $0.06 $1.14 Palo Verde Unit 3 market prices $0.03 Interest expense savings $0.03 Palo Verde Nuclear Decommissioning Trust gains $0.02 Lower
Slide 18: 2017 vs 2016 EPS (Ongoing): TNMP and Corporate
2017 vs 2016 EPS (Ongoing): TNMP and Corporate TNMP 2017 Key Performance Drivers ∆ EPS TCOS rate relief $0.05 Load $0.04 $0.53 $0.54 Other $0.01 Depreciation and property tax ($0.05) O&M increases ($0.02) Weather ($0.01) 2016 2017 Interest expense ($0.01) Corporate 2017 Key Performance Drivers ∆ EPS
Slide 19: Weather Impact
Weather Impact PNM Q4 2017 Q4 2016 2017 Normal(1) Heating Degree Days 1,306 1,354 1,601 Cooling Degree Days 28 21 18 Net EPS Impact ($0.03) ($0.02) compared to normal TNMP Q4 2017 Q4 2016 2017 Normal(1) Heating Degree Days 631 491 676 Cooling Degree Days 337 405 262 Net EPS Impact $0.00 $0.00 compar
Slide 20: PNM Scheduled Plant Outages and Retirements
PNM Scheduled Plant Outages and Retirements 2018‐2019 Planned Outage Schedule San Juan Four Corners Palo Verde Duration Time Duration Time Duration Time Unit Unit Unit in Days Period in Days Period in Days Period 1 45 Q4 2018 4 95 Q1‐Q2 2018 3 30 Q2 2018 4 43 Q1‐Q2 2019 4 12 Q2 2019 2 44 Q4 2018 5 1
Slide 21: Appendix: Ongoing Earnings Guidance
Appendix Ongoing Earnings Guidance
Slide 22: 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 23: PNM Guidance (Ongoing)
PNM Guidance (Ongoing) PNM Ongoing EPS $1.48 $1.39 ‐ $1.46 $1.54 ‐ $1.61 $1.14 2016 2017 2018E 2019E 2017 vs 2018 2018 vs 2019 Cumulative 2017 Key Year‐over‐Year EPS Performance Drivers Changes Changes vs 2019 Changes Adjust starting point for tax reform $0.25 – $0.25 Retail rate phase‐in (includes
Slide 24: PNM Guidance (Ongoing) Additional Details
PNM Guidance (Ongoing) Additional Details Financial impact under retail rate phase‐in Phase I – Phase II – (includes federal and accelerated state tax amortization) February 1, 2018 January 1, 2019 (in millions, except EPS) Revenue increase (net of tax reform give‐back) $4.7 $10.3 (1) Accelerated am
Slide 25: TNMP Guidance (Ongoing)
TNMP Guidance (Ongoing) TNMP Ongoing EPS $0.63 ‐ $0.66 $0.53 $0.54 $0.54 ‐ $0.56 2016 2017 2018E 2019E 2017 vs 2018 2018 vs 2019 Cumulative 2017 Key Year‐over‐Year EPS Performance Drivers Changes Changes vs 2019 Changes Base rate increase – TBD TBD TCOS rate relief $0.04 – $0.05 $0.03 – $0.04 $0.08
Slide 26: Corporate and Other Guidance (Ongoing)
Corporate and Other Guidance (Ongoing) Corporate and Other Ongoing EPS ($0.02) ($0.08) ($0.11) – ($0.10) ($0.13) – ($0.11) 2016 2017 2018E 2019E 2017 vs 2018 2018 vs 2019 Cumulative 2017 Key Year‐over‐Year EPS Performance Drivers Changes Changes vs 2019 Changes Westmoreland loan agreement paydown –
Slide 27: EBITDA and Quarterly Earnings Distribution Guidance (Ongoing)
EBITDA and Quarterly Earnings Distribution Guidance (Ongoing) Ongoing EBITDA (In millions) 2018E Midpoint 2019E Midpoint Consolidated PNM Resources $540 $574 PNM $354 $370 TNMP $154 $174 2018‐2019 Quarterly Ongoing Earnings Distribution 56% 53% 27% 25% 11% 17% 5% 6% 2018 2019 2018 2019 2018 2019 201
Slide 28: 2018 and 2019 Assumptions
2018 and 2019 Assumptions amounts shown are before tax 2018E 2019E PNM Weather $0 (normal) $0 (normal) Residential and Commercial Load 1% = $0.04 1% = $0.04 Outage costs $18M ‐ $20M $21M ‐ $23M Decommissioning/reclamation trust income, net of fees $11M ‐ $14M $11M ‐ $15M Anticipated effective tax ra
Slide 29: Appendix: Balance Sheet and Credit Metrics
Appendix Balance Sheet and Credit Metrics
Slide 30: Liquidity as of February 20, 2018
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 $79.9 $24.0 $188.8 $292.7 Remaining availability 360.1 51.0 111.2 522.3 I
Slide 31: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2016 Dec 31, 2017 Long‐Term Debt (incl. current portion) (1) PNM $1,631.4 $1,657.9 TNMP 420.9 480.6 Corporate/Other 340.5 299.1 Consolidated $2,392.7 $2,437.6 Total Debt (incl. short‐term) (2) PNM $1,692.4 $1,697.7 TNMP 420.9 480.6 Corporate/O
Slide 32: Credit Ratings
Credit Ratings PNMR S&P Moody’s Credit rating BBB+(1) Baa3(1) Issuer outlook Negative Positive PNM S&P Moody’s Credit rating BBB+(2) Baa2(2) Issuer outlook Negative Positive TNMP S&P Moody’s Credit rating A(3) A1(3) Issuer outlook Negative Stable (1) Issuer/Corporate rating (2) Senior unsecured (3)