Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (September 2020)
50 slides from Txnm Energy's roadshow presentation, September 2020
Slide 1: Investor Meetings
November 1, 2019 Investor Meetings September 2020
Slide 2: Safe Harbor Statement
Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Beilen Middleton Director, Investor Relations and Shareholder Services Senior Investor Relations Specialist U.S. 1-505-241-2160 U.S. 1-505-241-2135 Lisa.Goodman@pnmresources.com Beilen.Middleton@pnmresources.com Safe Harbor St
Slide 3: PNM Resources Overview
PNM Resources Overview
Slide 4: PNM Resources Overview
PNM Resources Overview Energy holding company based in Albuquerque, New Mexico with two fully regulated electric utility subsidiaries • Vertically integrated utility in NYSE: PNM $3.3B market cap New Mexico focused on clean Service Territories and Generation Resources energy transformation • $3.0B r
Slide 5: Strategic Focus
Strategic Focus Create shareholder value through a clean and bright energy future Clean Energy Critical Electricity Strong Financial Portfolio Infrastructure Profile Aggressive transition of Reliably support growth Transparent growth plan PNM resource portfolio, and integration of clean driven by ra
Slide 6: Commitment to ESG Strategy
Commitment to ESG Strategy Environmental Social Governance Industry-leadings goals: Hiring, training, retention Diverse (40% women / • Emissions-free by 2040 and engagement programs 20% minorities), reflects full elimination of for our diverse workforce engaged Board with carbon from generation (50%
Slide 7: Strong Financial Profile
Strong Financial Profile • $3.3B investment plan 2020 - 2023 Rate Base • Emphasis on grid infrastructure investments Investments • Reflects investment opportunities balanced with long-term customer value • 5%-6% earnings growth target through 2023 Earnings • Dilution of rate base growth resulting fr
Slide 8: 2020 – 2023 Investment Plan
2020 – 2023 Investment Plan $3.3B investment plan supports 5-6% earnings growth target Wired for the Future investments focused on delivering clean energy future $976 $117 $806 $25 $27 $760 $753 $27 $134 $268 $120 $125 $21 $25 $187 $200 $202 $194 (in millions) $337 $342 $290 $348 $303 $319 $336 $275
Slide 9: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power Earnings Growth Target 5-6% through 2023 2020 Ongoing Allowed 2021 Earnings 2022 Earnings 2023 Earnings Earnings Return / Potential Potential Potential Equity Guidance Midpoint Ratio Avg Rate Return EPS Avg Rate EPS Avg Rate EPS Avg Rate EPS Base Base Base Base 9
Slide 10: Dividend Growth
Dividend Growth Dividend Growth Consistent with Earnings Growth at 5%-6% $2.68 $2.55 • Expect dividend $2.36 growth consistent $2.16 $2.21 with earnings growth $1.94 $2.00 targeting the middle of a 50% - 60% payout $1.36- $1.42- ratio range $1.29- $1.38 $1.46 $1.23 $1.30 $1.06 $1.16 $0.97 Dec ‘19 De
Slide 11: Liquidity and Debt Maturity Outlook
Liquidity and Debt Maturity Outlook Long-term Debt Maturities (in millions) $843 ~$1B available liquidity $450 $1,255 Maintain appropriate $140 $496 $105 credit metrics and 2020 2021 2022 2023 and Beyond investment grade PNM TNMP Corporate • Completed: ratings • $290 million forward equity offering
Slide 12: Key Takeaways
Key Takeaways Providing critical electricity infrastructure to support the transition to clean energy in New Mexico and growing markets in Texas Maintaining commitment to strong ESG practices, including the full exit from coal and transition to emissions-free energy by 2040, and continuing to suppor
Slide 13: COVID-19 Updates and 2020 Earnings Guidance
COVID-19 Updates and 2020 Earnings Guidance
Slide 14: Our Response to COVID-19
Our Response to COVID-19 • Identification of critical workforce, staging of backups, limited access to control rooms and critical assets Safety of • Minimize critical employee exposure, inter-crew our Team exposures and exposures with the public: eliminate group gatherings, deploy additional fleet v
Slide 15: COVID-19 Update
COVID-19 Update Restrictions eased in New Mexico and continue in Texas in response to rising case numbers during phased re-openings, continue to prioritize the safety of our team, caring for our customers and communities Phased re-opening began in May and expanded in June; restrictions that were re-
Slide 16: Continued COVID-19 Load Impacts
Continued COVID-19 Load Impacts Expected impacts reflect continued increases from Residential customers and decreases from Commercial and Industrial customers due to business restrictions PNM COVID load trends TNMP COVID load trends • Residential: +5% increase • Volumetric: +5% increase • Commercial
Slide 17: 2020 Consolidated Ongoing Earnings Guidance
2020 Consolidated Ongoing Earnings Guidance 2020 Earnings Guidance Clean Energy $2.16 Strong Consolidated EPS Financial $2.26 $2.16 - $2.26 Focus guidance affirmed, Profile PNM TNMP Corp/Other targeting midpoint $1.67 – $1.73 $0.72 – $0.74 ($0.23) – ($0.21) 2020 Annual EPS Distribution by Quarter 54
Slide 18: PNM Resources
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Slide 19: New Mexico Energy Policy: Energy Transition Act
New Mexico Energy Policy: Energy Transition Act Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019 • Renewable Portfolio Standards and Carbon-Free Requirement 2045 100% Carbon-Free • Previous: 20% renew
Slide 20: Executing the Energy Transition Act
Executing the Energy Transition Act Our Goal: Transform to 100% Emissions-Free Energy by 2040 Step 1: Exit Coal Generation by 2031 Reduction of MW Coal Capacity 983 22% reduction • San Juan Generating Station: • Retired Units 2 and 3 in 2017 (221 MWs); 80% Retirement of Units 1 and 4 in 2022 (562 MW
Slide 21: Transform PNM Generation Portfolio
Transform PNM Generation Portfolio Balance appropriate level of baseload resources to be emissions-free by 2040 and shift towards additional low-cost renewables and flexible resources San Juan abandonment, securitization and replacement power San Juan abandonment/ Developing plans to exit Four Cor
Slide 22: Renewable and Battery Storage Portfolio Growth
Renewable and Battery Storage Portfolio Growth in Renewable and Battery Storage Capacity Reflects Aggressive Clean Energy Transition 2,015 MW 2022 300.5 +650MW solar 15 2021 +50MW solar +300MW battery 662 2020 609 MW +50MW solar storage +50MW solar 0.5 15 +140MW wind 1037 356 +166MW wind 237 Solar W
Slide 23: PNM Investment: Wired for the Future
PNM Investment: Wired for the Future New Mexico’s clean energy future depends on a reliable, resilient, secure grid to deliver an evolving mix Energy Clean of energy resources to customers Strong Financial Focus Profile Delivering Clean Energy • Infrastructure expansions to accommodate clean energy
Slide 24: Infrastructure Investments: Wired for the Future
Infrastructure Investments: Wired for the Future Investments in grid resilience provide the foundation for a system that can respond and adapt to integrate evolving technology and provide long-term customer value Accelerates $450M Investment 55% Transmission / 45% Distribution Total Investment by Ca
Slide 25: PNM Retail Transmission Opportunities
PNM Retail Transmission Opportunities • Transmission capacity within New Mexico’s grid is constrained • The integration of new renewable resources to meet growing Renewable Portfolio Standards and replacement of coal retirements will likely require additional T&D expansion Renewable Portfolio Standa
Slide 26: FERC Transmission Opportunities
FERC Transmission Opportunities New Mexico’s abundant solar and wind resources also attract third-party development, increasing the demand for transmission capacity and creating rate base growth opportunities: • PNM acquisition of Western Spirit transmission line: $285M in 2021 • New Mexico added wi
Slide 27: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts Term District Name Party NMPRC Districts and Ends PNM Service Areas District 1 Cynthia Hall 2020(1) Democrat District 2 Jefferson Byrd 2022(1) Republican Valerie Espinoza, District 3 2020 Democrat Vice-Chairman Theresa Becenti-Aguilar, District 4 2022(1) Democrat Ch
Slide 28: PNM Regulatory Agenda
PNM Regulatory Agenda Filing Action Timing Docket No. PNM: Decoupling Filing (Petition for Approval of Rate Hearings scheduled for October Filed with the NMPRC on May 28, 2020 20-00121-UT Adjustment Mechanism to 2020 Remove Regulatory Disincentives) Deferral of Incremental costs PNM and other utilit
Slide 29: PNM Load and Economic Conditions
PNM Load and Economic Conditions Reduced load impacts of Retail Load Growth COVID-19 in 2020 have been Year-over-Year offset by increased weather 2020 YTD 2019 2018 Growth impacts Total Retail Load(1) (0.3%) 0.3% 0.6% PNM Avg. Consumers 0.8% 0.7% 0.8% • 2019 and 2018 load growth reflects customer gr
Slide 30: PNM COVID-19 Considerations
PNM COVID-19 Considerations PNM Resources • PNM comprises the majority of customer Non-Fuel Revenues non-fuel revenues • New Mexico’s largest employers include government and health care, with a larger New number of small/medium businesses Mexico 74% PNM 2019 Revenues by Region Central Customer Clas
Slide 31: PNM Decoupling Filing
PNM Decoupling Filing Full decoupling filing seeks to recover previously authorized fixed costs, current rate design attempts to recover fixed costs through volumetric rates Stand-alone full decoupling filing Customer bills more accurately reflect the Filed May 28, 2020 fixed, non-fuel costs of the
Slide 32: Decoupling Financial Impacts – 2020 / 2021 / 2022
Decoupling Financial Impacts – 2020 / 2021 / 2022 2020 2021 2022 Rates adjusted to Customer Bills No Impact No impact reflect prior year under/over recovery Revenues adjusted for Includes recovery under/over true- recovery up foroncustomer Revenues adjusted for Earnings No based use Includes recover
Slide 33: TNMP
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Slide 34: TNMP Low-Risk Revenue Profile
TNMP Low-Risk Revenue Profile 2019 TNMP Revenues $295M Retail Revenues $67M Wholesale Revenues Includes $94M of pass-through transmission Fixed transmission investment recovery; can expense recovery, trued up twice annually be adjusted twice annually through TCOS filings, $81M approved March 2020 3%
Slide 35: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – Gulf Coast Region provided 50% of 2019 retail revenues • Regional economy driven largely by oil refining TNMP 2019 Revenues by Region and petrochemical industries, supplemented by North/ the aerospace and medical industries Central TX ~35% • Sprawl from Houston has led
Slide 36: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – North/Central TX Region provided 35% of 2019 retail revenues TNMP 2019 Revenues by Region • Dallas region is home to 250 corporate North/ headquarters that each employ more than Central TX ~35% 1,000 people globally, 22 Fortune 500 companies and 8 of Forbes’ largest pr
Slide 37: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – West Texas Region provided 15% of 2019 retail revenues TNMP 2019 Revenues by Region • ~50% of 2019 revenues derived from retail North/ transmission customers with recovery trued Central TX ~35% up twice per year • ~25% of 2019 revenues demand derived from West Texas hi
Slide 38: TNMP Load and Economic Conditions
TNMP Load and Economic Conditions Load Growth Resilient Texas economy has shown a shift in load Q2 2020 vs. YTD 2020 vs. Year-over Year-Growth Q2 2019 YTD 2019 between customer classes resulting from COVID-19 with Volumetric-Based Load(1) 2.9% 1.5% Demand-Based Load(1) (2.8%) 0.0% no significant ove
Slide 39: TNMP COVID-19 Considerations
TNMP COVID-19 Considerations • TNMP is a smaller portion of customer non-fuel revenues and is less impacted by changes in load/demand: PNM Resources Non- • Transmission recovery (45% of revenues), Dallas/ Fuel Revenues trued up twice per year North TX Area • Majority of demand-based bills based on 9
Slide 40: TNMP Demand and Infrastructure Investment
TNMP Demand and Infrastructure Investment Texas growth drives infrastructure needs Year-over Year- • TNMP has seen consistent consumer growth driven by 2017 2018 2019 strong Texas economy Growth • Rapid demand-based load growth over recent years in Demand-Based Load 4.0% 6.8% 4.9% the Commercial and
Slide 41: PUCT Commissioners and TNMP Regulatory Agenda
PUCT Commissioners and TNMP Regulatory Agenda PUCT Commissioners Name Term Began Term Ends Party DeAnn Walker (Chair) Sept. 2017 Sept. 2021 Republican Arthur D’Andrea Nov. 2017 Sept. 2023 Republican Shelly Botkin June 2018 Sept. 2025 Republican Commissioners are appointed by the Governor of Texas an
Slide 42: TNMP Rate Recovery Framework
TNMP Rate Recovery Framework DCOS (Distribution TCOS (Transmission General Rate Review Cost of Service) Cost of Service) Standard rate review involving Pre-defined schedules limited to comprehensive filing, distribution investments with discovery, interveners, discovery, interveners, hearings; Pre-d
Slide 43: Appendix
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Slide 44: San Juan Abandonment, Securitization and Replacement Power
San Juan Abandonment, Securitization and Replacement Power ● Requests ● $283M undepreciated Prioritizes environmental Abandonment Replacement Power Securitization abandonment of San investment in San Juan, benefits and location Juan coal plant after proceeds available to preferences consistent parti
Slide 45: San Juan Securitization Next Steps
San Juan Securitization Next Steps Securitization Order issued Securitization next steps: April 1, 2020 grants irrevocable financing order April 1, 2020: Irrevocable NMPRC authorizing the issuance of financing order securitization bonds up to $361 million, to include: Early 2022: PNM forms a Special
Slide 46: San Juan and Four Corners Generating Stations Ownership and Participants
San Juan and Four Corners Generating Stations Ownership and Participants San Juan Generating Station 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) 4 507 392 77.3% Los Alamos County 7.2% (36.5 MW) Utah Associ
Slide 47: Palo Verde Nuclear Generating Station Ownership and Leases
Palo Verde Nuclear Generating Station Ownership and Leases MW Owned vs. Leased Unit 1 Unit 2 Unit 3 Owned 2.3% 30 MW Owned 9.5% 124 MW Owned 10.2% 134 MW Leased 7.9% 104 MW Leased 0.7% 10 MW Leased 0% 0 MW Total 10.2% 134 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: June 11, 2
Slide 48: COVID-19 Load: Assumptions and EPS Sensitivities
COVID-19 Load: Assumptions and EPS Sensitivities PNM TNMP COVID-19 Planning Assumptions: CleanCOVID-19 Energy PlanningStrong Assumptions: Financial Current Expectation Focus Current Expectation Profile Residential + 5% Volumetric + 5% Commercial -10% Demand-Based - 5% Industrial No significant impac
Slide 49: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power 2020 Ongoing 2021 Earnings 2022 Earnings 2023 Earnings Allowed Earnings Potential Potential Potential Return / Guidance Midpoint Equity Avg Avg Avg Avg Ratio Rate Return EPS Rate EPS Rate EPS Rate EPS Base Base Base Base 9.575% / PNM Retail(1) 50% $2.5 B 9.5% $1.
Slide 50: Liquidity as of July 24, 2020
Liquidity as of July 24, 2020 PNM Corporate/ Resources PNM TNMP Other Consolidated • Available liquidity Financing Capacity(1): (In millions) strengthened by the Revolving credit $440.0 $75.0 $340.0 $855.0 issuance of long-term facilities debt at PNM and TNMP As of 7/24/20: in Q2 2020, freeing up Sh