Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (May 2012)
36 slides from Txnm Energy's investor presentation, May 2012
Slide 1: Investor Meetings
Investor Meetings PN MOResources
Slide 2: 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, projections, estimates, intentions, goals, targ
Slide 3: Company Overview
Company Overview
Slide 4: Repositioned as Strong Regulated Utility
Strategic Direction Repositioned as Strong Regulated Utility Strategic Goals Earn Authorized Return on our Exit Hybrid Regulated Regulated Businesses Competitive Utility Utility Business Continue to Improve Credit Ratings Provide Top Quartile Total Return 4
Slide 5: PNM Resources Overview
PNM Resources Overview Focus: Provide top quartile total return Continue to improve credit ratings By: Located in New Mexico Earning our allowed returns 504,700 customers Controlling our costs 14,562 miles transmission and distribution lines New Mexico and Texas 2,548MW generation ca
Slide 6: Exit of Competitive Business
Exit of Competitive Business Strengthened PNM Resources’ financial position Eliminated financial and business risks associated with competitive entities Focused strategic direction on regulated utilities Recapitalized business using $329M proceeds Equity – repurchased $73.5M 4.8M shares Closed
Slide 7: PNM: Recent Accomplishments
PNM: Recent Accomplishments Significant progress has 2008 been made to improve 6% base rate increase PNM’s financial health $33M rate increase Temporary fuel clause • Three rate increases in the past four years • Exited gas operations, 2009 8% base rate increase used 100% of the Permanent Merchant
Slide 8: 2011 Electric Affordability by State
2011 Electric Affordability by State 4.5% 4.0% 3.5% Est. 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 DC AK KY MN WA NM MI NY AL IA VA KS PA OH AZ NC AR LA FL TN CO RI ME WI MD SD TX OK NH MT CT OR MO MA CA SC HI IN DE GA WV MS N
Slide 9: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success Earn allowed return • Synchronize revenues and expenses • Use of future test year • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders Continue to get positive regulatory outcomes Continue to streng
Slide 10: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments Restored earnings potential 2009 working with a constructive 7% rate increase General rate case Texas regulatory framework $13M rate increase • Achieved successful outcomes in four cases over 2010 the past three years 4% base rate increase • No current plans to file TC
Slide 11: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return Use transmission and distribution cost of service filings to • Minimize regulatory lag Retain solid credit metrics Invest in the business Continue to control costs 11
Slide 12: 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 driven
Slide 13: Common Stock Dividend
Common Stock Dividend 2012 Dividend: The annual common stock $0.58 dividend was raised by $0.08 Payout ratio: on February 29, 2012 46% (1) Long-term target: 50% - 60% Dividend yield: payout ratio 3.2% (2) The Board will continue to (1) Assumes mid-point of the 2012 guidance range evaluate the
Slide 14: Recent Credit Rating Accomplishments
Recent Credit Rating Accomplishments Ratings upgraded Sept. 26, Nov. 1, Apr. 13 Strength, stability and predictability recognized Moody’s S&P PNMR PNM TNMP PNMR PNM TNMP Debt rating Ba1(1) Baa3(1) A3(2) Debt rating BB+ (1) BBB- (1) BBB+ (2) Outlook Stable Stable Stable Outlook Stable Stable Stab
Slide 15: Environmental Compliance
Environmental Compliance
Slide 16: San Juan – BART Timeline
San Juan – BART Timeline Proposed State Implementation Plan revisions filed with EPA in July 2011 Called for SNCR technology PNM estimate of costs @ ~$77M (total plant costs) Final BART determination issued Aug. 5, 2011 Calls for installation of SCR technology on all four units within five
Slide 17: 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 18: Impact of Proposed Environmental Regulation
Impact of Proposed Environmental Regulation Estimated Compliance Costs Comments (PNM Share) San Juan Generating Station See “San Juan – BART Timeline” Clean Air Act – Regional Haze (FIP) – SCR ~$340M - $460M slide State of NM submitted with EPA in Clean Air Act – Regional Haze (SIP) – SNCR ~$36M ear
Slide 19: First Quarter Earnings
First Quarter Earnings
Slide 20: Q1 2012 Financial Results and Company Updates
Q1 2012 Financial Results and Company Updates Q1 2012 Q1 2011 Ongoing EPS $0.17 $0.04 GAAP EPS $0.21 $0.18 Rate relief and structure, cost control improve PNM results Mild winter offsets benefit of full-quarter rate increase for TNMP S&P upgraded debt ratings for PNM Resources and TNMP • Corpo
Slide 21: Economic Conditions
Economic Conditions Regulated Retail Energy Sales Growth Q1 2012 vs Q1 2011 (3) (weather-normalized) Unemployment Rate Leap Year Included PNM(1) TNMP(2) Residential (0.3%) 5.4% 8.2% Commercial 1.6% (3.5%) 7.2% 7.0% Industrial 2.2% (7.8%) Total Retail 0.8% 0.6% Leap Year Excluded PNM(1) TNMP(2) NM TX
Slide 22: New Mexico Regulatory Update
New Mexico Regulatory Update Item Docket No. Action Timing FERC transmission case ER11-1915-002, et. al Settlement discussions June 1, 2012 FERC generation case ER11-4535-000 and Appearance before FERC May 16, 2012 ER12-72-000 settlement judge 2013 renewable energy plan 12-00131-UT Filing made April
Slide 23: Q1 2012 Financial Summary
Q1 2012 Financial Summary Ongoing EPS $0.17 ($0.03) ($0.01) $0.17 First Choice Power/ TNMP Optim Energy (1) $0.04 PNM 2011 2012 (1) After August 31, 2011 Optim Energy’s financial results have not been included in PNM Resources’ ongoing earnings results. Sale of First Choice Power was completed on No
Slide 24: PNM and TNMP: Q1 2012 vs Q1 2011 EPS (Ongoing)
PNM and TNMP: Q1 2012 vs Q1 2011 EPS (Ongoing) $0.18 PNM Q1 2012 Key Performance Drivers ∆ EPS Rate relief $0.12 O&M reductions $0.02 PNM Resources share repurchase $0.02 Lower outage costs $0.01 $0.01 PV3 market price ($0.02) Other $0.02 2011 2012 TNMP Q1 2012 Key Performance Drivers ∆ EPS Rate rel
Slide 25: Consolidated EPS: Affirming 2012 Guidance
Affirming 2012 Guidance (Ongoing) $1.20 Consolidated EPS $1.32 PNM TNMP Corp/Other $1.08 - $1.15 $0.28 - $0.32 ($0.16) – ($0.15) 25
Slide 26: Key Strategic Goals and 2012 Checklist
Key Strategic Goals and 2012 Checklist 2012 Checklist Strategic Goals Earn Authorized Return on Achieve successful outcomes in: our Regulated Businesses PNM future test year rulemaking PNM FERC transmission rate case Continue to Improve Credit Ratings PNM FERC generation rate case PNM rene
Slide 27: Appendix
Appendix
Slide 28: Utility Rate Base and Return
Utility Rate Base and Return Rate Projected Allowed % of Rate PNM Test Period (1) Base in 2012 Avg. Equity ROE Increase Base Filing Rate Base Ratio Retail Current Rates June 30, 2010 $1.8B $1.8B 86% 51.28% 10.00% $72.1M Renewables Dec. 31, 2011 $68M $74M 4% 50.61% 10.00% $18.0M FERC Transmission Cur
Slide 29: Assumptions for Potential Earnings Power
Assumptions for Potential Earnings Power Reducing regulatory lag and improving market prices could improve EPS by $0.15 to $0.20 without growing rate base Mid Point Guidance Range Potential Earnings Power Growth Potential Allowed Potential EPS Achievement Return EPS Resulting EPS Return PNM PNM Reta
Slide 30: PNM Resources 5-Year Capital Plan
PNM Resources 5-Year Capital Plan 2012 - 2016 Amounts do not include Total Capital Plan: $1.3B potential capital spending at PNM including SCRs, renewables and additional peaking capacity (In millions) $283 $286 $23 $12 $255 $251 $11 $12 $219 $89 $98 $12 $83 $89 $60 $64 $64 $58 $63 $52 $107 $99 $111
Slide 31: PNM Resources 5-Year Potential Capital Additions
PNM Resources 5-Year Potential Capital Additions 2012 – 2016 Total Potential Capital(1): $0.7B (In millions) $237 $27 $193 $166 $45 $15 $16 $22 $46 $53 $166 $80 $3 $104 $103 $27 $27 $4 $49 $23 2012 2013 2014 2015 2016 (2) (3) SCRs Additional peaking capacity Renewables Other environmental compliance
Slide 32: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Generation (1) 2,548MW 11,507 GWh Based on last 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 A-5
Slide 33: PNM Plant EAF and Outages
PNM Plant EAF and Outages 97.0% 2012 and 2013 Outage Schedule 90.7% 92.4% 89.6% 83.2% 85.5% Duration Time Unit in Days Period San Juan 2 47 Q1 – Q2 2012 3 54 Q3 – Q4 2012 4 47 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 34: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Jason Marks District 1 2012 Democrat Patrick Lyons District 2 2014 Republican Chairman Douglas Howe District 3 2012 Independent Theresa Becenti-Aguilar District 4 2014 Democrat Vice Chair Ben Hall D
Slide 35: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2011 Mar 31, 2012 Long-Term Debt (incl. current portion) PNM $1,215.5 1,215.6 TNMP 311.0 311.1 PNMR 147.5 147.5 Consolidated $1,674.0 $1,674.2 Total Debt (incl. short-term) (1) PNM $1,281.5 $1,259.7 TNMP 311.0 311.1 PNMR 164.2 253.2 Consolidat
Slide 36: Liquidity/Capital Structure
Liquidity/Capital Structure In October 2011, refinanced PNMR and PNM revolvers ($700M) Targeting cap structure of • 50/50 at PNM • 55/45 at TNMP PNMR PNM TNMP Total Financing Capacity as of Apr. 27, 2011 Total Capacity $305.0 $400.0 $75.0 $780.0 Less short-term debt and LOC balances (123.3) (68.