Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (June 2014)
47 slides from Txnm Energy's investor presentation, June 2014
Slide 1: Investor Presentation
Investor Presentation June 2014
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Investor Relations Director Allyson Beck, Investor Relations Analyst U.S. 1-505-241-2227 U.S. 1-505-241-4612 Jimmie.Blotter@pnmresources.com Allyson.Beck@pnmresources.com Safe Harbor Statement Statem
Slide 3: Strategic Overview
Strategic Overview
Slide 4: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility holding company NYSE Ticker PNM Market Cap $2.2B 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 Earn Authorized Continue to Improve Provide Top Quartile Return on our Credit Ratings Total Return Regulated Businesses Future Well positioned for 2013 - 2015 above average EPS Strategic shift and and dividend growth regulatory successes Efficient ex
Slide 6: Delivering Top Quartile Returns
Delivering Top Quartile Returns 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 (1) to an average annual rate of 10% - 13% over a 5 year period Earnings Growth •S
Slide 7: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast 2014 – 2018 Total Capital Plan: $2.3B PNM Rate Base CAGR: 6 - 8%(1) TNMP Rate Base CAGR: 5 - 7% 5 Year Capital Forecast $524 (In millions) $509 $14 $489 $18 $14 $76 $443 $88 $14 $130 $78 $94 $71 $48 $302 $136 $72 $14 $154 $106 $316 $65 $263 $220 $194 $201 $209 $159
Slide 8: Investment in Renewable Energy
Rate Base Growth: Investment in Renewable Energy 2011 – 2013 $140M of renewable investments were placed in service. Owned Renewable Facilities • 44 MW PNM-owned facilities currently in service 2014 – 2015 • Solar battery storage facility Additional renewable investments will make up 6% of PNM’s 5-ye
Slide 9: BART Agreement Update
BART Agreement Update EPA Review of RSIP RSIP and BART Filing December 17, 2013: Components Application deemed complete April 30, 2014: Retirement of San Juan Units 2 EPA proposed approval and 3 and recovery of expected 12/31/17 undepreciated By ~September 29, 2014: investments ($205M) EPA f
Slide 10: Potential Earnings Power
Potential Earnings Power 2014 2014 Mid Point 2016 Allowed Allowed Average of Guidance Expected Potential Earnings 2016 Potential Equity Return Rate Average Growth Earnings Power Ratio Return EPS Base Rate Base PNM retail 10% 50% $1.9 B 9.5% $1.09 $2.2 B $0.28(1) $1.37 PNM renewables 10% 50% $120 M 1
Slide 11: Strong Dividend Growth
Strong Dividend Growth Dividend rate: The annual common stock dividend raised by 12% in December 2013 to $0.74 (1) $0.74 per share Payout ratio: Long-term target: 50% - 60% payout ratio 50% (2) Dividend yield: • Expect above industry average dividend growth while staying in the target payout 2.6
Slide 12: PNM Overview
PNM Overview
Slide 13: PNM: Recent Accomplishments
PNM: Recent Accomplishments Significant progress has been made to improve PNM’s financial health Increasing credit ratings • Credit ratings raised by Moody’s to Baa2 with a positive outlook and S&P to BBB with a positive outlook Earning our allowed return at PNM Retail Retail rates increased $
Slide 14: PNM Rates Compare Favorably in the United States
PNM Rates Compare Favorably in the United States 5.0% 4.5% 4.0% Est. Average 2012 Residential Electric Bill Es.t 2012 Median Household Income 3.5% 3.0% 2.5% US Average: 2.37% 2.0% 1.5% 1.0% 0.5% 0.0% NM AK DC UT MN WY VT NY MI KS KY AL PA OH VA AZ AR FL LA TN WA WI IA NC CO MD ME RI OR SD OK WV TX M
Slide 15: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales (weather-normalized) Unemployment Rate % of FY Q1 2014 vs. PNM 2013 Sales Q1 2013 6.8% 6.3% Residential 39% (4.1%) Commercial 46% (0.9%) Industrial 12% (5.0%) NM(1) U.S.(2) Total Retail (2.9%) 2014 Load Forecast Positive Economic
Slide 16: PNM Load Including Impact of EE and DG
PNM Load Including Impact of EE and DG o The economy in New Mexico has been sluggish with customer growth through Q1 2014 at 0.6%. PNM Retail Energy Sales by Component PNM supports state and local economic development efforts to make New Mexico more business-friendly, which has resulted in an incr
Slide 17: PNM Regulatory Update
PNM Regulatory Update Filing Action Timing Docket No. NMPRC Delta Person CCN (peaking capacity) Filed January 3, 2013 Approved June 26, 2013 13-00004-UT Expected closing Q2 2014 NMPRC La Luz CCN (peaking capacity) Filed May 17, 2013 Approved June 18, 2014 13-00175-UT NMPRC Fuel Clause Continuation F
Slide 18: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success Continue to earn allowed return • Minimize regulatory lag through timely rate case filings • 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 19: TNMP Overview
TNMP Overview
Slide 20: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments Constructive Texas regulatory framework provides solid earnings potential • Consolidated Tax Savings Adjustment policy reform approved • Credit ratings increased by Moody’s to A2 with a positive outlook and S&P to A- with a positive outlook • General rate case settlement
Slide 21: TNMP Rates Compare Favorably in Texas
TNMP Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $60 $50 $40 $30 $20 $10 $- Oncor TNMP AEP North Centerpoint AEP Central Source: TDU tariffs for retail delivery service, as of March 1, 2014. 21
Slide 22: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales (weather-normalized) Unemployment Rate % of FY Q1 2014 vs. PNM 2013 Sales Q1 2013 6.3% Residential 51% 2.5% 5.2% Commercial 44% 15.8% Total Retail 8.1% U.S.(2) TX(1) 2014 Load Forecast 1.0% - 3.0% Positive Economic Indicators D
Slide 23: TNMP Load Including Impact of EE and DG
TNMP Load Including Impact of EE and DG o The economy in Texas continues to be strong with TNMP Energy Sales by Component 6,000 customer growth through Q1 2014 at 1.1%. o Programs supporting energy efficiency and solar 5,000 distributed generation initiatives have negligible sales growth impacts at
Slide 24: 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 and use of transmission and distribution cost of service filings Invest in the business Retain solid credit metrics Continue to control costs 24
Slide 25: Financials
Financials
Slide 26: 2014 Guidance (Ongoing)
2014 Guidance (Ongoing) 2013 Ongoing EPS $1.41 PNM Retail and TNMP earned their allowed returns in 2013 2014 Guidance Range: $1.42 Consolidated EPS $1.52 PNM TNMP Corp/Other $1.15 - $1.21 $0.38 - $0.40 ($0.11) – ($0.09) 26
Slide 27: Liquidity and Capital Structure
Liquidity and Capital Structure Target cap structures: 50/50 at PNM, 55/45 at TNMP Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity as of April 25, 2014 Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short-term debt(1) and LOC balances 3.2 6.3 8.6 18.1 Plus invested cash 9.
Slide 28: Credit Ratings
Credit Ratings Rate relief, cost control, and tax benefits keep FFO to Debt within Moody’s Baa investment grade target range of 13% to 22% FFO to Debt 22% 13% 17% 19% 20% 2012 2013 2014E Credit Ratings Moody’s S&P 2008 2014 2008 2014 PNM Resources(1) Ba2 Baa3 PNM Resources(1) BB- BBB- PNM(1) Baa3 Ba
Slide 29: Ongoing EBITDA Improvement
Ongoing EBITDA Improvement EBITDA Growth Primarily Driven by Rate Relief (In millions) PNM TNMP 2013 – 2014 EBITDA Drivers PNM Delta $5 M $434 $450 $463 FERC Transmission & Generation $5 M PV3 pricing $4 M $397 $349 $124 $129 Renewable rider $3 M $120 $116 AFUDC $2 M $99 Nuclear Decommissioning Trus
Slide 30: PNM Resources Summary
PNM Resources Summary Remain on track for 10 – 13% total return by 2016 2016 Potential Earnings Power $1.81 - $1.89 Guidance Midpoint $1.47 $1.41 $1.31 2012 2013 2014E Continue to expect above industry average increases o Dividend increased 12% to $0.74 in December 2013 o Next dividend increase ex
Slide 31: Appendix
Appendix
Slide 32: Q1 2014 Financial Summary
Q1 2014 Financial Summary Ongoing EPS $0.02 ($0.06) $0.04 $0.18 Corporate $0.18 TNMP PNM Q1 2013 Q1 2014 32
Slide 33: PNM and TNMP: Q1 2014 vs Q1 2013 EPS
PNM and TNMP: Q1 2014 vs Q1 2013 EPS (Ongoing) PNM $0.17 Q1 2014 Key Performance Drivers ∆ EPS Rate Relief $0.01 $0.11 PV3 Market Prices $0.01 PV Nuclear Decommissioning Trust $0.01 Depreciation & Property Taxes ($0.01) Outage Costs ($0.02) Weather ($0.02) Load ($0.03) Other ($0.01) Q1 2013 Q1 2014
Slide 34: 2015 Earnings Drivers
2015 Earnings Drivers Earnings Impact PNM Renewable rider rate increase + PV1 half-priced lease payments + Outage expenses - Expiration of Gallup contract - TNMP TCOS rate increase + Corporate/Other Retirement of holding company 9¼% debt + Increase in short-term debt - 34
Slide 35: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Karen Montoya District 1 2016 Democrat Patrick Lyons District 2 2014 Republican Valerie Espinoza District 3 2016 Democrat Vice Chair Theresa Becenti-Aguilar District 4 2014 Democrat Chairman Ben Hal
Slide 36: 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 Brandy Marty(1) Aug. 2013 Aug. 2019 Republican Commissioners are appointed by Governor of Texas. Length of term is de
Slide 37: Elections
Elections NM Governor’s Race TX Governor’s Race Candidate Party Current Office Candidate Party Current Office Susana Martinez Republican Governor (NM) Attorney General Incumbent Greg Abbott Republican (TX) Attorney General Gary King Democrat Wendy Davis Democrat State Senator (TX) (NM) NMPRC Race Di
Slide 38: PNM Historical Rate Cases
PNM Historical Rate Cases PNM Retail Rate Cases • 8% base rate • Renewable Energy increase • 6% base rate Rider increase • $77M rate • 9% base rate • $6.4M revenue in increase 2008 • $33M rate increase • Temporary fuel 2009 • Permanent fuel clause 2011 increase • $72.1M rate increase 2012 2012 • $22
Slide 39: TNMP Historical Rate Cases
TNMP Historical Rate Cases TNMP Rate Cases •7% rate •6% base rate •4% base rate increase increase •AMS Case increase •General rate •General rate 2009 case 2010 •TCOS case •$6M rate 2011 case 2011 •$12M annual revenue •$13M rate •$10M rate increase increase increase increase •TCOS Case •TCOS Case •TC
Slide 40: PNM Energy Efficiency
PNM Energy Efficiency NM Efficient Use of Energy Act • Requires cumulative savings of 5% of load (based on 2005) by 2014 and 8% by 2020 • 411 GWh is PNM’s required cumulative energy efficiency savings in 2014 and 658 GWh by 2020 • Approximately 347 GWh in savings has been achieved through the end of
Slide 41: TNMP Energy Efficiency
TNMP Energy Efficiency Public Utility Regulatory Act • Establishes annual demand savings goals for electric utilities • TNMP’s goal is to achieve: • a 30% reduction in peak demand growth, subject to customer rate caps • energy savings using a 20% conservation load factor • TNMP’s 2014 goals are to a
Slide 42: PNM Diversified Fuel Mix
PNM Diversified Fuel Mix Capacity Energy Energy 2,572 MW 10,947 GWh RSIP w/ PV3(1) Based on 12 months ending 12/31/13 Based on 12 months ending 12/31/13 Renew Renew Renew ables ables ables Renewables Renewables Renewables 9% 5% 9% 10% 5% 10% Natural Gas 9% Natural Coal Gas Natural 38% Coal 20% Coal
Slide 43: PNM Plant EAF and Outages
PNM Plant EAF and Outages 2014 - 2015 Outage Schedule Duration Time Unit 91.8% 89.9% in Days Period 80.7% 82.3% San Juan 76.3% 1 46 Q1 2015 66.8% 4 46 Q4 2015 Four Corners 4 13 Q4 2014 5 73 Q1 – Q2 2015 Palo Verde 2 34 Q2 2014 1 34 Q4 2014 3 34 Q2 2015 San Juan Four Corners Palo Verde 2 34 Q4 2015 1
Slide 44: San Juan Ownership and Participants
San Juan 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-R Public Power Agency
Slide 45: Palo Verde Nuclear Generating Station Unit 1 and 2 Leases
Palo Verde Nuclear Generating Station Unit 1 and 2 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 • 2024 for 1 lease of Unit 2 Notice Dates Unit 1 Unit 1 Decision Unit 2 Unit 2 Decision 1st January
Slide 46: 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 Expected X X 2016 San Juan Unit 2 170 X X X X San Juan Unit 3 248 X X X X Expected San Juan Un
Slide 47: 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(1) (State Alternative) – SNCR $82M SNCR technology on 2 units; Retire 2 units Included in SNCR and Balanced Draft , which has been included in the Reg