Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (January 2018)
43 slides from Txnm Energy's investor presentation, January 2018
Slide 1: Investor Meetings
Investor Meetings January 2018
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 • Energy holding company earnings and dividend growth to shareholders • Based in Albuquer
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Financial • Investing aligned to policy directives, evolving customer Goals Rate Base needs and transforming industry opportunities while Growth ensuring reliability, resulting in Earn authorized return on cleaner generation fleet regulated businesses Abov
Slide 6: Staying Focused and Flexible in a Changing Environment
Staying Focused and Flexible in a Changing Environment • PNM 2018 General Rate Case • PNM 2018 Renewable Plan • NMPRC Proposed • Plans to be Coal‐Free in Rulemaking Workshops 2031; New Generation Mix Navigating • TNMP Upcoming General of Natural Gas, Renewables the Regulatory Rate Case Transforming
Slide 7: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast Targeted Consolidated 2017‐2021 Rate Base CAGR(1): 4.5% ‐ 5.5% 2018–2022 Total Capital Plan: $2.7B $681 Palo Verde $17 Unit 3 added to (In millions) rate base $170 $527 $515 $527 $58 $17 $500 $504 $34 $17 $17 $170 $116 $158 $186 $170 $170 $192 $146 $297 $173 $164 $
Slide 8: Earnings Growth: PNM 2018 General Rate Case Considerations
Earnings Growth: PNM 2018 General Rate Case Considerations Commission Proposed Modifications to Revised Settlement Agreement: • Reduces $62.3M settlement agreement by $47.6M of tax savings and cost of debt true‐ up and additional $9.1M related to the return on Four Corners Power Plant investments •
Slide 9: Tax Reform Considerations
Tax Reform Considerations PNM Resources well‐positioned for tax reform, customers benefit Provision Summary Effect on PNM & TNMP Effect on Holding Company Tax Rate 21% Reduced tax expense Reduced tax benefit from holding beginning 2018 • Under revised rate settlement, PNM company losses by ($0.02)
Slide 10: Dividend Growth
Dividend Growth $2.16 $1.90 $1.80 $2.00 $1.65 $1.85 $1.70 $1.49 $1.64 $1.06 $0.88 $0.97 $0.74 $0.80 Dec ‘17 Dec ‘15 Dec ‘16 Dec ‘13 Dec ‘14 2014 2015 2016 2017E 2018E 2019E 2020E 2021E Ongoing EPS Indicated Annual Dividends • Annual common stock dividend raised by 9.3% to $1.06(1) per share in Decem
Slide 11: Credit Metrics: Liquidity and Debt Maturity Outlook
Credit Metrics: Liquidity and Debt Maturity Outlook Long‐term Debt Maturities(1) (in millions) $293 Maintain appropriate $1,060 credit metrics $172 $250 $306 Remain a solid $200 $100 investment grade 2018 2019 2020 2021 2022 and Beyond rated company PNM TNMP Corporate • Extended TNMP’s $75M revolvin
Slide 12: Credit Metrics: Rating Agency Perspectives
Credit Metrics: Rating Agency Perspectives Moody’s S&P Rating/Outlook Rating/Outlook PNM Resources Baa3(2) / Positive BBB+(2) / Stable PNM Baa2(3) / Positive BBB+(3) / Stable TNMP A1(4) / Stable A(4) / Stable PNM Resources FFO‐to‐Debt is maintained well within Moody’s Baa investment grade target ran
Slide 13: PNM Overview
PNM Overview
Slide 14: PNM: Regulatory Update
PNM: Regulatory Update Filing Action Timing Docket No. NMPRC: Commission issued order with proposed modifications Suspension period ends March 6, PNM 2018 General Rate Case 16‐00276‐UT to revised rate settlement 2018 January 10, 2018 Briefings and responses on scope of PNM 2017 Integrated Procedural
Slide 15: PNM: 2017 Integrated Resource Plan
PNM: 2017 Integrated Resource Plan Plans for Coal‐Free Generation Portfolio by 2031 Roadmap for meeting customer demand over 20‐year horizon, provides foundation for the selection of future resources Filed with Solicits and Revisited every NMPRC for incorporates three years review and public input a
Slide 16: 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 17: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather‐normalized, leap‐year adjusted) % of 2016 Q3 2017 YTD 2017 PNM Sales vs. vs. 2017E 2018E 2019E Volumes Q3 2016 YTD 2016 Retail Load: Residential 40% 0.0% 0.3% Commercial 47% (1.5%) (1.2%) Residential & Commercial
Slide 18: PNM: Sustainability Portal
PNM: Sustainability Portal http://www.pnmresources.com/about‐us/sustainability‐portal.aspx 18
Slide 19: 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 20: TNMP Overview
TNMP Overview
Slide 21: TNMP: Regulatory Update
TNMP: Regulatory Update Filing Action Timing Docket No. TNMP TCOS Filed July 19, 2017 Approved September 13, 2017 47422 TNMP General Rate Case N/A Expected to be filed May 2018 N/A 21
Slide 22: 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 23: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and End Users (weather‐normalized, leap‐year adjusted) % of 2016 Q3 2017 YTD 2017 TNMP Sales vs. vs. 2017E 2018E 2019E Revenues Q3 2016 YTD 2016 Volumetric Load(1): Residential 0.2% 2.0% Total Volumetric Load 52% 0.0% 1.7% ~2.0% 2% – 3
Slide 24: 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 25: Financial Overview
Financial Overview
Slide 26: Financial Overview: Consolidated Earnings Guidance
Financial Overview: Consolidated Earnings Guidance (Ongoing) 2017 PNM Resources Ongoing Earnings Guidance: $1.85 to $1.90 PNM: $1.41‐$1.44 TNMP: $0.52‐$0.53 Corp/Other: ($0.08)‐($0.07) 2018 Earnings Guidance $1.70 Consolidated EPS $1.80 PNM TNMP Corp/Other $1.25‐ $1.32 $0.53 ‐ $0.55 ($0.08) – ($0.07
Slide 27: Financial Overview: Potential Earnings Power
Financial Overview: Potential Earnings Power Targeted earnings growth of 6% for 2017 ‐ 2021(1) • PNM growth results from the full implementation of retail rates in 2019, the additional investments to add 50 MW of solar to meet the 20% by 2020 RPS requirement and increased FERC Transmission business
Slide 28: Financial Overview: Liquidity as of October 20, 2017
Financial Overview: Liquidity as of October 20, 2017 PNM Corporate/ Resources PNM TNMP Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $450.0 $75.0 $300.0 $825.0 As of 10/20/17: Short‐term debt and LOC balances $2.5 $6.0 $181.5 $190.0 Remaining availability 447.5
Slide 29: Appendix
Appendix
Slide 30: Potential Earnings Power
Potential Earnings Power Allowed 2018 Ongoing Earnings 2019 Ongoing Earnings 2020 Earnings 2021 Earnings Return / Guidance Midpoint(9) Guidance Midpoint(9) 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 $2.3
Slide 31: Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement
Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement Proposed Settlement Agreement Financial View Phase I – Phase II – March 6, 2018 January 1, 2019 (in millions, except EPS) Settlement increase (net revenue increase) $26.9 $62.3 (1) Accelerated amortization of excess deferre
Slide 32: 2018 General Rate Case Drivers
2018 General Rate Case Drivers (as Filed) Incremental Revenue Rate Base Requirement (in millions) (in millions) Compliance Items: BART Items: Palo Verde Unit 3 $96 $45 Retirement of San Juan Units 2 and 3 (95) (29) 132 MW of San Juan Unit 4 11 16 Accelerated Depreciation on San Juan SNCRs ‐ 3 Subtot
Slide 33: PNM: 2018 General Rate Case Proposed Settlement Bill Impact
PNM: 2018 General Rate Case Proposed Settlement Bill Impact Comparison of Average Residential Bills(2) • Forecasted PNM customer bills remain Western Region Average Bills by Utility below current national and regional Imperial Irrigation District (CA) Arizona Public Service Co (AZ) $138.93 averages
Slide 34: PNM 2016 General Rate Case Final Order
PNM 2016 General Rate Case Final Order • NMPRC approved final order Sept. 28, 2016: Non‐fuel revenue increase of $61.2M versus $121.5M request Retail rate base of $2,263M versus $2,458M request Key Rate Case Elements Commission Original Impact to (PNM Retail Share, net of ADIT) Order Request Rat
Slide 35: NMPRC Commissioners and Districts
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, Dist
Slide 36: NMPRC Rulemaking on Utility Ratemaking Policies
NMPRC Rulemaking on Utility Ratemaking Policies NMPRC opened an investigation and rulemaking to consider: • Developing a standardized method for determining ROE • After a baseline ROE is determined, should the ROE be adjusted under an incentive/disincentive mechanism? • Limitation of utility recover
Slide 37: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends DeAnn Walker (Chair) Sept. 2017 Aug. 2021 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Arthur D’Andrea Nov. 2017 Aug. 2023 Republican Commissioners are appointed by the Governor of Texas and confirmed by the Senate. Length of term
Slide 38: 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. 38
Slide 39: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,791 MW 2018 Forecasted As of 12/31/2016 Generation Mix (includes renewables related to Facebook data center) Renewables Renewables 15% 18% Coal Coal (1) 29% 35% Natural Gas 35% Natural Gas Nuclear 38% Nuclear 15% 15% (1) The potentia
Slide 40: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 11,147 GWh 2018 Forecasted Based on 12 months ending 12/31/16 Generation Mix (includes renewables related to Facebook data center) Renewables 9% Renewables 11% Coal Natural Gas 41% (1) 11% Coal 51% Natural Gas 20% Nuclear 29% Nuclear 28% (1)
Slide 41: PNM Investment in Renewable Energy
PNM Investment in Renewable Energy New Mexico Renewable Energy Act Renewable Rider Collection Portfolio Standard as a % of Retail Sales Streamlined proceedings for approval of Methodology utilities’ renewable energy procurement Recovery of renewable investments 15% 20% plans and REC purchases permit
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) 2 340 170 50% Tucson Electric 50% (170 MW) Southern California Power Authority 41.8% (208 MW) 3 497 248 50% Tri‐State 8.2% (41 MW) M‐S
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