Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — 2011 EEI Financial Conference
41 slides from Txnm Energy's conference presentation, November 2011
Slide 1: 2011 EEI Financial Conference Company Overview
2011 EEI Financial Conference Company Overview November 2011
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements made in this presentation that relate to future events or PNM Resources’, Public Service Company of New Mexico’s (“PNM”), or Texas-New Mexico Power Company’s (“TNMP”) (collectively, the “Company”) expectations, projections, estimates, intentions, goals, targets, and
Slide 3: EEI Presentation
EEI Presentation
Slide 4: New Strategic Direction: Repositioning as Strong Regulated Utility
New Strategic Direction Repositioning as Strong Regulated Utility Strategic Goals Earn Authorized Return on our Regulated Businesses Exit Hybrid Regulated Return to Solid Competitive Utility Utility Investment Grade Business Ratings Provide an attractive total return proposition to our shareholders
Slide 5: PNM Resources Overview
PNM Resources Overview Focus: Earn our allowed returns Achieve solid investment grade credit ratings Located in New Mexico 501,700 customers Provide stable long-term earnings and dividend growth 14,529 miles transmission and distribution lines New Mexico and Texas 2,530MW generation ca
Slide 6: 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 7: Electric Affordability by State
Electric Affordability by State 4.0% 3.5% 3.0% Est. 2012 Median Household Income 2.5% US Average Average 2012 Est. Electric Bill 2.0% 1.5% 1.0% 0.5% 0.0% AL WA WI AR FL WY NH IL CA MO GA LA CO PNM-South NV CT HI NC SC RI DC VA SD ID NJ VT IN AZ PA OK TN MN NM PNM-North TX WV IA AK KS ND KY MD UT MI
Slide 8: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success Earn allowed return • Synchronize revenues and expenses • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders Continue to get positive regulatory outcomes Continue to strengthen investment grade cred
Slide 9: NM Regulatory Environment
NM Regulatory Environment NM recognized as a challenging regulatory framework Current effort in the state to reform the New Mexico Public Regulation Commission (NMPRC) • An independent results-oriented advocacy group • Has demonstrated success through several policy changes • Advocating legislat
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 • On track to achieve its TCO
Slide 11: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return Use transmission cost of service filings to • Reduce regulatory lag • Grow rate base Employ distribution cost of service filings, when available Retain solid credit metrics Invest in the business 11
Slide 12: Financial Direction
Financial Direction
Slide 13: Exit of Competitive Business
Exit of Competitive Business Strengthens PNM Resources’ financial position Eliminates financial and business risks associated with competitive entities Focuses strategic direction on regulated utilities Sale proceeds of $329 million including working capital used to recapitalize the business
Slide 14: Recent Credit Rating Accomplishments
Recent Credit Rating Accomplishments Utilities at investment grade Strength, stability and predictability recognized Ratings upgraded Sept. 26 and Nov. 1 Moody’s S&P PNMR PNM TNMP PNMR PNM TNMP Debt Ba1(1) Baa3(1) A3(2) Debt BB (1) BBB- (1) BBB (2) rating rating Outlook Stable Stable Stable Ou
Slide 15: Liquidity/Dividend
Liquidity/Dividend Recently refinanced PNMR and PNM revolvers ($700M) Targeting cap structure of • 50/50 at PNM • 55/45 at TNMP Dividend will be reviewed by the Board in February PNMR PNM TNMP Total Financing Capacity as of Nov. 1, 2011 Total Capacity $305 $400 $75 $780 Less LCs (1) (70) (2) (
Slide 16: Key Strategic Goals and Checklist
Key Strategic Goals and Checklist Earn Authorized Return on Our Maximize the Value of Our Regulated Businesses Competitive Businesses Achieve successful outcomes in: Maintain profitability of First Choice Power by PNM retail rate case achieving customer growth and increasing Achieved by mone
Slide 17: Third Quarter Earnings
Third Quarter Earnings
Slide 18: Third Quarter Financial Highlights
Third Quarter Financial Highlights Q3 2011 Q3 2010 YTD 2011 YTD 2010 Ongoing EPS (1) $0.61 $0.63 $0.85 $0.90 GAAP EPS (1) $0.48 $0.53 $0.70 $0.69 Closed the sale of First Choice Power on Nov. 1 • Exit from competitive businesses and return to regulated utility model Aligning utility costs with r
Slide 19: Load Growth Continues Positive Trend
Load Growth Continues Positive Trend Regulated Retail Energy Sales Growth (weather-normalized KWh) Q3 2011 vs Q3 2010 YTD 2011 vs YTD 2010 PNM ∆ (1) TNMP ∆ (2) PNM ∆ (1) TNMP ∆ (2) Residential 0.2% -0.1% 0.9% 2.1% Commercial -2.0% 0.1% -0.1% 0.2% Industrial 8.8% 8.1% 5.4% 0.5% Total Retail 0.3% 0.3%
Slide 20: San Juan - BART Update
San Juan - BART Update EPA BART determination: SCR technology • Total estimated costs: $750M or more • PNM’s share of estimated costs (46%): minimum of $345M PNM appealed EPA mandate, requesting stay Petitioned EPA for reconsideration of state plan calling for SNCR technology N.M. Gov. Marti
Slide 21: Q3 2011 Financial Summary
Q3 2011 Financial Summary Ongoing EPS $0.02 $0.01 ($0.11) $0.03 $0.03 $0.63 TNMP Other Optim $0.61 PNM First Choice Energy (1) Power Q3 2010 Q3 2011 (1) Includes PNM Resources’ share of Optim Energy’s ongoing EPS through August 2011 21
Slide 22: Regulated Businesses: Q3 2011 EPS
Regulated Businesses: Q3 2011 EPS (Ongoing) PNM $0.42 $0.45 Q3 Key Performance Drivers ∆ EPS Rate relief $0.07 Weather $0.03 Lower outage costs $0.01 PV3 toll expiration ($0.07) Other ($0.01) Q3 2010 Q3 2011 TNMP Q3 Key Performance Drivers ∆ EPS $0.10 Rate relief $0.01 $0.08 Weather $0.01 Q3 2010 Q3
Slide 23: First Choice Power Sale Update
First Choice Power Sale Update First Choice Power Sale • Received $329M in cash which includes $59M working capital Repurchased Series A convertible Preferred Stock • Finalized on Oct. 5 • Purchased from Cascade for $73.5M, share price $15.38 • Reduces EPS share count by 4.8 million shares begin
Slide 24: Credit Rating Agency Actions
Credit Rating Agency Actions Moody’s Upgraded PNMR and TNMP credit ratings one notch on Nov. 1, 2011 and affirmed PNM rating on Sept. 23, 2011 PNMR PNM TNMP Debt rating Ba1(1) Baa3(1) A3(2) Outlook Stable Stable Stable S&P Upgraded ratings one notch on Sept. 26, 2011 and placed all entities on p
Slide 25: Recent Financing Transactions
Recent Financing Transactions TNMP • Refinanced $50 million term loan • Reduced interest rate by approximately 1.5% PNM • Issued $160 million 10-year notes • 5.35% interest rate PNM and PNM Resources • Renewed credit facilities • Total capacity of $700 million 25
Slide 26: 2011 Guidance (Ongoing)
2011 Guidance (Ongoing) $1.00 Consolidated EPS(1) $1.05 Corp/Other Regulated Competitive ($0.17 - $0.15) $1.00 - $1.05 $0.16 - $0.18 PNM TNMP $0.72 - $0.75 $0.28 - $0.30 (1) Segments are not additive 26
Slide 27: Key Strategic Goals and Checklist
Key Strategic Goals and Checklist Earn Authorized Return on Our Maximize the Value of Our Regulated Businesses Competitive Businesses Achieve successful outcomes in: Maintain profitability of First Choice Power by PNM retail rate case achieving customer growth and increasing Achieved by mone
Slide 28: Appendix
Appendix
Slide 29: PNM Plant EAF and Outages
PNM Plant EAF and Outages 98.1% Time 94.6% Unit Duration 91.3% Period 86.8% 85.0% San Juan 77.9% 2 47 Q1 – Q2 2012 3 54 Q3 – Q4 2012 Four Corners 4 10 Q4 2011 5 13 Q1 2012 Palo Verde 1 37 Q4 2011 3 34 Q1 - Q2 2012 2 36 Q4 2012 San Juan Four Corners Palo Verde Q3 2010 Q3 2011 Annual Top Quartile Numb
Slide 30: PNM Resources 5-Year Capital Plan
PNM Resources 5-Year Capital Plan(1) as of Q3 2011 (In millions) $362 $16 $88 $261 $250 $248 $252 $14 $16 $15 $16 $73 $59 $57 $63 $62 $74 $77 $71 $68 $67 $111 $111 $107 $101 $106 2011 2012 2013 2014 2015 PNM Generation PNM T&D TNMP T&D PNM Renewables Other (Primarily IT) (1) Excludes BART capital ex
Slide 31: Guidance (ongoing): First Choice Power & Optim Energy
Guidance (ongoing): First Choice Power & Optim Energy First Choice Power Optim Energy Prior Guidance (Jan – Dec 2011) (Jan – Dec 2011) Earnings (Loss) per Share $0.28 – $0.35 $(0.22)-$(0.19) EBITDA $43M-$53M $20M-$30M (1) First Choice Power Optim Energy Current Guidance (Jan – Oct 2011) (Jan – Aug 2
Slide 32: Regulatory Information
Regulatory Information
Slide 33: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Services Areas Name District Party Ends Jason Marks District 1 2012 Democrat Patrick Lyons District 2 2014 Republican Chairman Vacant (1) District 3 2012 N/A Theresa Becenti-Aguilar District 4 2014 Democrat Vice Chair Ben Hall District 5
Slide 34: Utility Rate Base and Return
Utility Rate Base and Return % of Rate Allowed Equity Test Period (1) Rate Base ROE Increase Base Ratio PNM Retail Current Rates June 30, 2010 $1.8B 89% 51.28% 10.00% $72.1M PNM FERC Transmission Current Rates (2) Dec. 31, 2011 $156.2M 8% 49.40% 12.25% $11.1M PNM FERC Generation (3) Current Rates De
Slide 35: Balance Sheet and Credit Metrics
Balance Sheet and Credit Metrics
Slide 36: Selected Balance Sheet Information
Selected Balance Sheet Information Dec 31, 2010 Sep 30, 2011 Long-Term Debt (incl. current portion) PNM $1,055.7 $1,055.8 TNMP 310.3 $310.8 PNMR 199.8 $199.8 Consolidated $1,565.8 $1,566.3 Total Debt (incl. short-term) (1) PNM $1,245.7 $1,312.8 TNMP 310.3 310.8 PNMR 231.8 231.8 Consolidated $1,787.8
Slide 37: Liquidity as of Nov. 1, 2011
Liquidity as of Nov. 1, 2011 PNM PNM Resources Resources PNM TNMP Consolidated Financing Capacity: (in millions) Revolving Credit Facility $300.0 $400.0 $75.0 $775.0 Local lines of credit (LOC) 5.0 - - 5.0 Total Capacity $305.0 $400.0 $75.0 $780.0 As of 11/1/11: LOC balances (1) 69.6 (2) 5.2 0.3 75.
Slide 38: Environmental Compliance
Environmental Compliance
Slide 39: San Juan – BART Timeline
San Juan – BART Timeline Proposed Federal Implementation Plan issued in January Called for SCR technology PNM estimated costs @ between $750M - $1B (total plant costs) on all four units within three years Proposed State Implementation Plan revisions filed with EPA in July Called for SNCR t
Slide 40: Environmental Control Equipment at Coal Units
Environmental Control Equipment at Coal Units Activated PNM Share Scrubbers Coal Unit Carbon SNCR (2) SCR (2) Baghouse (3) Capacity (MW) Injection (1) San Juan Unit 1 170 X X X San Juan Unit 2 170 X X X San Juan Unit 3 249 X X X San Juan Unit 4 194 X X X Four Corners Unit 4 97.5 X X Four Corners Uni
Slide 41: Impact of Proposed Environmental Regulation
Impact of Proposed Environmental Regulation Estimated Compliance Costs Comments (PNM Share) San Juan Generating Station EPA approved plan on Aug. 5, Filed petition for review with 10th Circuit and filed request for stay with EPA Clean Air Act – Regional Haze (FIP) – SCR ~$340M - $460M on Sep 16., Fi