Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — EEI Financial Conference 2012
48 slides from Txnm Energy's conference presentation, November 2012
Slide 1: EEI Financial Conference
EEI Financial Conference November 2012
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and 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, p
Slide 3: Strategic Overview
Strategic Overview
Slide 4: PNM Resources Overview
PNM Resources Overview NYSE Ticker PNM PNM Resources is a regulated electric utility holding company Market Cap $1.7B focused on providing a top quartile total return to shareholders Generation Resources and Service Territories •Energy holding company •Based in Albuquerque, New Mexico •Located in Ne
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Goals Former hybrid business model with competitive entities in Texas Earn Authorized Return on our Regulated Businesses Strengthened financial Management able to position as result of strategic efficiently execute strategic shift redirection of business C
Slide 6: Long-term goal: Top Quartile Total Return
Top Quartile Total Return Long-term goal: Provide top quartile total return to shareholders Total return is 5-year ongoing EPS growth + 5-year average dividend yield Top quartile total return currently equal to an average annual rate of 10% - 13% over a 5 year period (1) Earnings Growth •Sustain
Slide 7: Core Capital Spending
Path to Achieve Total Return: Core Rate Base Growth 2012 – 2016 Total Capital Plan: $1.3B PNM Rate Base CAGR: 2% 2012 Expected Depreciation: $146M TNMP Rate Base CAGR: 8% Core Capital Spending (In millions) $284 $286 $23 $12 $255 $251 $11 $12 $219 $98 $93 $12 $83 $89 $60 $63 $64 $58 $63 $52 (1) $104
Slide 8: Rate Base Growth - Environmental, Peaking Units, and Renewable Investments
Path to Achieve Total Return: Rate Base Growth - Environmental, Peaking Units, and Renewable Investments 2013 – 2016 PNM Potential Rate Base CAGR: Up To 7% Total Potential Capital(1): $0.7B (In millions) $198 $210 $22 $152 $48 $59 $50 $102 $21 $150 $129 $102 $81 2013 2014 2015 2016 (2) (3) SCRs Addi
Slide 9: Rate Base Growth - Environmental Control Investment
Path to Achieve Total Return: Rate Base Growth - Environmental Control Investment PNM is simultaneously moving forward on three paths to address BART State Alternative Install SCRs Litigation Plan • Compliance with • Retire Units 1 • 10th Circuit existing FIP and 2 by year- litigation • Estimated to
Slide 10: Rate Base Growth - Investment in Renewable Energy
Path to Achieve Total Return: Rate Base Growth - Investment in Renewable Energy New Mexico Renewable Energy Act •Streamlined proceedings for approval of Wind utilities renewable energy procurement • New Mexico Wind Energy Center plans • 136 turbines •Provides for recovery of program costs • 200MW un
Slide 11: Path to Achieve Total Return: Earnings Growth
Path to Achieve Total Return: Earnings Growth Reducing regulatory lag, improving market prices, and reducing Corporate debt could improve current EPS by $0.30 to $0.35 without growing rate base % of Mid Point Guidance Potential Earnings Power Rate Range Growth Potential Base Potential EPS Achievemen
Slide 12: Path to Achieve Total Return: Strong Dividend Growth
Path to Achieve Total Return: Strong Dividend Growth 2012 Dividend: The annual common stock dividend was raised by 16% on February 29, 2012 $0.58 Payout ratio: Long-term target: 50% - 60% payout ratio 46% (1) • Above average dividend growth expected near- term Dividend yield: 2.8% (2) The Boar
Slide 13: Demonstrated Performance in Improving Earnings and Returns
Demonstrated Performance in Improving Earnings and Returns Guidance Range(1) Ongoing Earnings Per Share $1.26 - $1.32 $1.29 Midpoint PNM TNMP $0.30 - $0.32 $1.05 $0.29 $0.75 $0.63 $0.17 $0.47 $0.13 $1.12 - $1.15 $0.28 $0.76 $0.50 $0.58 $0.19 2008 2009 2010 2011 2012E Returns 2009 2012E PNM Retail 3.
Slide 14: PNM Overview
PNM Overview
Slide 15: PNM: Recent Accomplishments
PNM: Recent Accomplishments Significant progress has been made to improve PNM’s financial health Regulatory outcomes Substantially Renewable energy improving improved credit rider metrics • $182M from three rate • Moody’s affirmed • Rates effective Aug. 20 increases in the past four Baa3 rating on N
Slide 16: PNM Rates Compare Favorably in U.S.
PNM Rates Compare Favorably in U.S. 4.5% 4.0% 3.5% Es.t 2011 Median Household Income Est. Average 2011 Electric Bill 3.0% US Average 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% UT WY VT AK MN DC MI NY NM VA KS PA KY WA PNM TN AL RI IA CO MD SD NC AZ AR LA NH WI MT ME CT OR TX OH OK FL IN MO SC MA CA IL HI MS NJ I
Slide 17: PNM Regulatory Update
PNM Regulatory Update Expected Item Action Docket No. Timing PNM renewable energy rider Rider approved; rates August 20, 2012 12-00007-UT implemented PNM 2013 renewable energy plan Awaiting NMPRC final November 30, 2012 12-00131-UT decision Future-test-year rulemaking Awaiting draft order and Year-e
Slide 18: NM Election Results
NM Election Results Elected PRC Commissioners • District 1 • Karen Montoya (D) won the seat by 55% • Seat has been held by Jason Marks • District 3 • Valerie Espinoza (D) ran unopposed • Seat has been held by Doug Howe (appointed to replace Jerome Block) Passed Constitutional Amendments • Amendment
Slide 19: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales Growth (weather-normalized) Q3 2012 vs. Q3 YTD 2012 vs. 12-Month Q3 2011(1) Q3 YTD 2011(1) Rolling Average(1) Residential 0.0% 0.0% 0.6% (2) Commercial (0.4%) 0.3% 0.4% Unemployment Rate Industrial (0.6%) 0.9% 2.0% 7.9% Total Reta
Slide 20: PNM: Path to Continued Success
PNM: Path to Continued Success Continue to minimize regulatory lag through timely rate case filings Earn allowed return • Synchronize revenues and expenses • Use future test year • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders
Slide 21: TNMP Overview
TNMP Overview
Slide 22: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments Constructive Texas regulatory framework provides solid earnings potential General Rate TCOS Filing DCOS Filing Energy Efficiency Cases 2012 reduction of Ability to recover Ability to recover peak demand growth $41M from three transmission cost of distribution cost of goa
Slide 23: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $- Oncor TNMP AEP North Centerpoint AEP Central Source: TDU tariffs for retail delivery service, as of May 1, 2012 23
Slide 24: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales Growth (weather-normalized) Q3 2012 vs. Q3 YTD 2012 vs. 12-Month Q3 2011(1) Q3 YTD 2011(1) Rolling Average(1) Residential 4.6% 6.0% 5.1% (2) Commercial 6.3% 3.2% 2.2% Unemployment Rate Industrial N/A N/A N/A 7.9% Total Retail 3.7
Slide 25: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return through timely execution of general rate case filings Use transmission and distribution cost of service filings to minimize regulatory lag Invest in the business Retain solid credit metrics Continue to control costs
Slide 26: 2012 Checklist
2012 Checklist 2012 Checklist Achieve successful outcomes in: PNM future test year rulemaking PNM FERC transmission rate case PNM FERC generation rate case PNM renewable rider Maintain strong electric reliability and power plant availability Control O&M and capital costs 26
Slide 27: Q3 2012 Earnings
Q3 2012 Earnings
Slide 28: PNM and TNMP: Q3 2012 EPS (Ongoing)
PNM and TNMP: Q3 2012 EPS (Ongoing) $0.16 $0.01 ($0.01) ($0.08) TNMP Corp/Other $0.69 $0.61 First Choice PNM Power/Optim Energy (1) Q3 2011 Q3 2012 (1) After August 31, 2011 Optim Energy’s financial results were not included in PNM Resources’ ongoing earnings results. Sale of First Choice Power was
Slide 29: PNM and TNMP: Q3 2012 vs Q3 2011 EPS (Ongoing)
PNM and TNMP: Q3 2012 vs Q3 2011 EPS (Ongoing) PNM Q3 2012 Key Performance Drivers ∆ EPS Retail rate relief and renewable rider $0.04 $0.61 O&M reductions $0.03 FERC generation rate relief $0.01 $0.45 Palo Verde Nuclear Decommissioning Trust $0.01 AFUDC $0.01 Other $0.02 Palo Verde 3 market price ($
Slide 30: PNM and TNMP: YTD September 2012 EPS (Ongoing)
PNM and TNMP: YTD September 2012 EPS (Ongoing) $0.45 $0.03 ($0.15) $1.18 TNMP First Choice Power/Optim $0.85 Energy (1) PNM YTD 2011 YTD 2012 (1) After August 31, 2011 Optim Energy’s financial results were not included in PNM Resources’ ongoing earnings results. Sale of First Choice Power was comple
Slide 31: PNM and TNMP: YTD September 2012 EPS (Ongoing)
PNM and TNMP: YTD September 2012 EPS (Ongoing) PNM 2012 Key Performance Drivers ∆ EPS Retail rate relief and renewable rider $0.28 $1.05 O&M reductions $0.06 AFUDC $0.04 Outage costs $0.02 $0.60 Other $0.02 FERC generation rate relief $0.01 FERC transmission rate relief $0.01 Interest expense ($0.03
Slide 32: Consolidated EPS
2012 EPS Guidance Range (Ongoing) $1.26 Consolidated EPS(1) $1.32 Utilities Corp/Other $1.42 - $1.47 ($0.16) – ($0.15) PNM TNMP $1.12 - $1.15 $0.30 - $0.32 PNM Retail expected to earn allowed return in 2012 TNMP expected to earn close to allowed return in 2012 (1) Q4 2012 guidance is $0.08 - $0.14 2
Slide 33: Liquidity, Capital Structure and Credit Ratings
Liquidity, Capital Structure and Credit Ratings In October 2012, extended PNM and PNM Resources revolver credit facilities one year Targeting cap structure of: 50/50 at PNM and 55/45 at TNMP PNM Resources PNM TNMP Total Financing Capacity as of October 26, 2012 Total Capacity $300.0 $400.0 $75.0
Slide 34: Appendix
Appendix
Slide 35: Utility Rate Base and Return
Utility Rate Base and Return Projected Allowed Rate Base % of Rate PNM Test Period (1) 2012 Avg. Equity ROE Increase in Filing Base Rate Base Ratio Retail Current Rates June 30, 2010 $1.8B $1.8B 86% 51.28% 10.00% $72.1M Renewables (2) Dec. 31, 2011 $68M $74M 4% 50.61% (2) 10.00% (2) $18.0M (2) FERC
Slide 36: Historical Rate Cases
Historical Rate Cases PNM Rate Cases • 8% base rate increase • 6% base rate • Renewable Energy increase • $77M rate Rider • 9% base rate 2008 2009 2011 2012 increase • $33M rate increase • $6.7M expected increase • Permanent fuel revenue in 2012 • $72.1M rate clause • Temporary fuel increase • $22.7
Slide 37: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Jason Marks(1) District 1 2012 Democrat Patrick Lyons District 2 2014 Republican Chairman Douglas Howe(2) District 3 2012 Independent Theresa Becenti-Aguilar District 4 2014 Democrat Vice Chair Ben
Slide 38: Public Utility Commission of Texas Commissioners
Public Utility Commission of Texas Commissioners Term Term Name Party Began Ends Donna Nelson Aug. 2008 Aug. 2015 Republican Chairman Kenneth Anderson Sept. 2008 Aug. 2017 Republican Rolando Pablos Sept. 2011 Aug. 2013 Republican Commissioners are appointed by Governor of Texas. Length of term is de
Slide 39: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Generation (1) 2,548MW 11,507 GWh Based on 12 months ending 12/31/11 Renewables Renewables 8% 5% Natural Gas 9% Nuclear Coal 16% 38% Nuclear Coal 28% 58% Natural Gas 38% (1) Includes PNM generation and PPAs 39
Slide 40: PNM Plant EAF and Outages
PNM Plant EAF and Outages 92.4% 93.4% 2012 and 2013 Outage Schedule 85.7% 86.7% 83.7% 82.6% Duration Time Unit in Days Period San Juan 2 47 Q1 – Q2 2012 3 57 Q3 – Q4 2012 4 54 Q1 – Q2 2013 1 40 Q4 2013 Four Corners 5 17 Q2 2012 4 21 Q2 2013 San Juan Four Corners Palo Verde Palo Verde 3 32 Q1 - Q2 20
Slide 41: PNM: Critical Dates Related to PVNGS Leases
PNM: Critical Dates Related to PVNGS Leases Lease Expiration •Unit 1: January 15, 2015 •Unit 2: January 15, 2016 •Optional renewal lease periods extend to: •2023 for 4 leases of Unit 1 •2018 for 3 leases of Unit 2 •2024 for 1 lease of Unit 2 Notice Dates Unit 1 Unit 2 1st Notice January 2012 January
Slide 42: PNM Energy Efficiency Plans
PNM Energy Efficiency Plans NM Efficient Use of Energy Act requires cumulative savings of 5% of load (based on 2005) by 2014 • 411 GWh is PNM’s required cumulative energy efficiency savings Energy Efficiency Program • Residential Lighting 41% • Refrigerator Recycling 12% • Commercial Small Business
Slide 43: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2011 Sep 30, 2012 Long-Term Debt (incl. current portion) PNM $1,215.5 $1,215.6 TNMP 311.0 311.4 PNMR 147.5 147.5 Consolidated $1,674.0 $1,674.5 Total Debt (incl. short-term) (1) PNM $1,281.5 $1,215.6 TNMP 311.0 311.4 PNMR 164.2 260.9 Consolida
Slide 44: Upcoming Debt Maturities
Upcoming Debt Maturities Long-term Debt Maturities (In millions) $266 $690 $487 $50 $39 $143 2014 - 2016 2017 - 2019 Beyond 2019 PNM Resources PNM TNMP 44
Slide 45: Environmental Compliance
Environmental Compliance
Slide 46: San Juan Generating Station BART
San Juan Generating Station BART The U.S. Environmental Protection Agency’s (EPA) Clean Air Act requires regional haze reduction at national parks and wilderness areas Compliance should be achieved through Best Available Retrofit Technology (BART) San Juan Generating Station’s alternatives for B
Slide 47: Environmental Control Equipment at Coal Units
Environmental Control Equipment at Coal Units PNM Share Low NOx Activated Coal Unit Capacity Burners/ Carbon SNCR (2) SCR (2) Baghouse (3) Scrubbers (MW) Overfired Air Injection (1) San Juan Unit 1 170 X X X X San Juan Unit 2 170 X X X X San Juan Unit 3 249 X X X X San Juan Unit 4 194 X X X X Four C
Slide 48: Impact of Proposed Environmental Regulation
Impact of Proposed Environmental Regulation Estimated Compliance Costs Comments (PNM Share) San Juan Generating Station Clean Air Act – Regional Haze (FIP) – SCR ~$385M - $425M See “San Juan – BART Timeline” slide State of NM submitted with EPA in Clean Air Act – Regional Haze (SIP) – SNCR ~$40M - $