Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (March 2017)
43 slides from Txnm Energy's investor presentation, March 2017
Slide 1: Investor Meetings
Investor Meetings March 2017
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Assistant Treasurer Lisa Goodman Director, Investor Relations and Shareholder Services Manager, Investor Relations U.S. 1-505-241-2227 U.S. 1-505-241-2160 Jimmie.Blotter@pnmresources.com Lisa.Goodman
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 • Energy holding company • Based in Albuquer
Slide 5: Staying Focused in a Changing Environment
Staying Focused in a Changing Environment • PNM 2018 General Rate Case • PNM AMI Filing • TNMP Upcoming General • 2017 Integrated Rate Case Improving Resource Plan • Tax Reform Regulatory • San Juan Generating Transforming Environment Station Scenarios PNM’s • Sustainability Portal Generation Portfo
Slide 6: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Financial • Investing aligned to policy Goals Rate Base directives, reliability, evolving customer needs and Growth transforming industry opportunities Earn authorized return on regulated businesses Above industry average Earnings • Realizing earnings pote
Slide 7: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast 2017 – 2020 Total Capital Plan: $1.7B PNM 2016-2020 Rate Base CAGR: 4 - 6%(1) TNMP 2016-2020 Rate Base CAGR: 8 - 10% (In millions) $517 Expect future Future Palo Verde Unit 3 added refinements refinements $58 to rate base include: $435 $395 $15 $404 $15 • Outcome o
Slide 8: Earnings Growth: Potential Earnings Power
Earnings Growth: Potential Earnings Power Potential Earnings Power supports 2015 – 2019 earnings growth target of 7% - 8% • PNM growth achieved through recovery of capital investments: Rates implemented October 2016 bring rates forward from levels set in previous 2010 filing, accounting for signif
Slide 9: Earnings Growth: PNM 2018 General Rate Case
Earnings Growth: PNM 2018 General Rate Case • Requested revenue increase of $99 million Based on calendar year 2018 test period and 10.125% ROE 44% of request relates to Compliance Items for BART and Four Corners Revenue Requirement Rate Design • BART items • Increase fixed charge Palo Verde U
Slide 10: Earnings Growth: Tax Reform Considerations
Earnings Growth: Tax Reform Considerations PNM Resources well-positioned for tax reform, customers benefit Business Key Tax Reform Considerations Segments Reduced Tax Rate Interest Non-deductibility 100% Bonus Depreciation Decreases the tax In rate base, decreases from expense flowing higher ADIT li
Slide 11: Dividend Growth
Dividend Growth $1.87 $1.64 $1.65 $1.77 $1.49 7% - 8% $1.31 $1.41 Earnings Growth 2015 - 2019 $0.88 $0.97 53%(1) $0.74 $0.80 Dec ‘16 $0.58 $0.66 Dec ‘15 payout Dec ‘13 Dec ‘14 Feb ‘12 Feb ‘13 ratio 2012 2013 2014 2015 2016 2017E 2018E 2019E Ongoing EPS Indicated Annual Dividends • Annual common stoc
Slide 12: PNM Overview
PNM Overview
Slide 13: PNM: Recent Accomplishments
PNM: Recent Accomplishments • Progressing regulatory environment Received Commission approval of the future test year definition Implemented FERC Transmission formula rate methodology for annual filings based on approved 10% ROE Approval of San Juan Generation Station Plan (BART) by FERC and N
Slide 14: PNM: 2018 General Rate Case Timeline
PNM: 2018 General Rate Case Timeline 10/8/2017 thru 12/7/2016 thru 1/5/2018 10/8/2017 1/1/2018 12/7/2016 3 Month Allowance Statutory 9+1 Expected Effective Rate Case Filed for Additional Month Suspension Date Consideration by Period NMPRC Procedural Schedule Settlement conference March 7, 2017 Speci
Slide 15: PNM: 2018 General Rate Case Bill Impact
PNM: 2018 General Rate Case 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) Modesto Irrigation District (CA) $142.36 averages APS (AZ) SRP (AZ)
Slide 16: PNM: 2017 Integrated Resource Plan
PNM: 2017 Integrated Resource Plan Additional Requirements Roadmap for meeting customer demand over 20-year from BART Agreement horizon, provides foundation for the selection of future resources • Two potential resource portfolios to be included in 2017 IRP Filed with Solicits and One with and one
Slide 17: 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 64MW Unit 2 Capacity P
Slide 18: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2016 Q4 2016 vs. 2016 vs. PNM Sales Volumes Q4 2015 2015 Retail Load: Residential 40% 1.3% 0.1% Commercial 47% (1.0%) 0.5% Industrial 11% (8.7%) (8.8%) Total Retail Load (1.1%)
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: Recent Accomplishments
TNMP: Recent Accomplishments • Predictable regulatory environment TCOS and DCOS filings provide the ability to recover transmission and distribution cost of service investments on a timely basis o TCOS filing requesting additional annual revenue of $4.8M expected to be approved with rates effectiv
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 % of 2016 Q4 2016 2016 TNMP Sales Sales vs. vs. Volumes Revenues Q4 2015 2015 Volumetric Load(1): Residential 51% 3.0% 3.4% Commercial 46% 2.7% 2.9% Total Volumetric Load
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: Consolidated Earnings Guidance Range and Quarterly Distribution
Financial Overview: Consolidated Earnings Guidance Range and Quarterly Distribution Guidance (Ongoing) 2017 Guidance $1.77 Consolidated EPS $1.87 PNM TNMP Corp/Other $1.30 - $1.37 $0.51 - $0.53 ($0.04) – ($0.03) 2017 Quarterly Ongoing Earnings Distribution 47% 24% 16% 13% Q1 2017E Q2 2017E Q3 2017E
Slide 27: Liquidity, Capital Structure and Credit Ratings
Financial Overview: Liquidity, Capital Structure and Credit Ratings Strong liquidity and balanced capital structure supports investment grade credit metrics at Moody’s and S&P Available Liquidity Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity as of February 21, 2017: (In mil
Slide 28: PNM Resources Summary Long-term Growth Potential
Financial Overview: PNM Resources Summary Long-term Growth Potential • Expected rate base CAGR: PNM: 4% - 6% through 2020 TNMP: 8% - 10% through 2020 • Key drivers for potential investments: Economic development activities in New Mexico Advanced Metering Infrastructure (AMI) at PNM San Jua
Slide 29: Appendix
Appendix
Slide 30: 2017 - 2019 Potential Earnings Power
2017 - 2019 Potential Earnings Power Allowed 2017 Guidance Midpoint 2018 Earnings Potential 2019 Earnings Potential Return / Avg Rate Avg Rate Avg Rate Equity Ratio Return EPS EPS EPS Base Base Base PNM Retail (1) 9.575% / 50% $2.3 B 9.3% $1.33 $2.4 B $1.42 $2.4 B $1.41 Supreme Court Appeal (2) $0 -
Slide 31: 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 32: PNM 2018 General Rate Case Drivers
PNM 2018 General Rate Case Drivers 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 Subtotal BART
Slide 33: PNM 2018 General Rate Case Energy Sales and LCFC
PNM 2018 General Rate Case Energy Sales and LCFC Energy Sales • Compared to the last filed retail load forecast, load decline has contributed to a $11 million revenue requirement deficiency Customer growth is offset by declining usage driven by energy efficiency, changes to codes and standards, an
Slide 34: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Cynthia Hall, District 1 2020 Democrat Vice Chairman District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovejoy 2018 Democrat Sandy Jones, District 5
Slide 35: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends Donna Nelson Aug. 2008 Sept. 2021 Republican Chairman Kenneth Anderson Sept. 2008 Aug. 2017 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Commissioners are appointed by the Governor of Texas. Length of term is determined by the Gove
Slide 36: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $70 $60 $50 $40 $30 $20 $10 $- Oncor TNMP Centerpoint AEP North AEP Central Source: TDU tariffs for retail delivery service effective September 1, 2016 36
Slide 37: 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 contract) Renewables Renewables 15% 18% Coal Coal 29% 35% Natural Gas 35% Natural Gas Nuclear 38% Nuclear 15% 15% 37
Slide 38: 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 contract) Renewables 9% Renewables 11% Coal Natural Gas 41% 11% Coal 51% Natural Gas 20% Nuclear 29% Nuclear 28% 38
Slide 39: 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 40: 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 41: 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
Slide 42: PNM Impact of Environmental Regulation- SJGS
PNM Impact of Environmental Regulation- SJGS Estimated Compliance Costs San Juan Generating Station Comments (PNM Share) Clean Air Act – Regional Haze Installation of SNCR technology on Units 1 and 4 completed in 2016; retirement of Units 2 and 3 Minimal remaining costs (State Alternative) – SNCR sc
Slide 43: PNM Impact of Environmental Regulation- Four Corners
PNM Impact of Environmental Regulation- Four Corners Estimated Compliance Costs Four Corners (Units 4 and 5) Comments (PNM Share) Clean Air Act – Regional Haze – Final BART determination filed with EPA on Dec. 30, 2013. Impact to PNM: SCR controls for $94M SCR NOx on Units 4 & 5 by July 31, 2018. On