Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (June 2015)
49 slides from Txnm Energy's investor presentation, June 2015
Slide 1: June Investor Meetings
June Investor Meetings June 2015
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Director, Investor Relations Lisa Goodman, Manager, Investor Relations U.S. 1‐505‐241‐2227 U.S. 1‐505‐241‐2160 Jimmie.Blotter@pnmresources.com Lisa.Goodman@pnmresources.com Safe Harbor Statement Stat
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 $2.1B 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
Slide 5: Delivering on Strategic Goals
Delivering on Strategic Goals Strategic Goals Earn Authorized Return on Regulated Businesses Maintain Strong Credit Ratings Provide Top Quartile Total Return Well positioned for 7 ‐ 9% earnings growth 2015 – 2019 and above average dividend growth 5
Slide 6: Invest in the Business
Invest in the Business Strong focus on customers and positive regulatory outcomes allow for earnings and dividend growth through rate base investment Earnings Growth • Investing in core capital, • Sustaining and growing the renewables, environmental • Realizing earnings potential in dividend control
Slide 7: 5-Year Capital Forecast
5‐Year Capital Forecast 2015 – 2019 Total Capital Plan: $2.2B PNM 2014‐2019 Rate Base CAGR: 5 ‐ 7%(1) $577 TNMP 2014‐2019 Rate Base CAGR: 5 ‐ 7% $33 $515 (In millions) $20 $121 $444 Palo Verde $93 $16 Unit 3 added to rate base $382 $79 $93 $17 $89 $302 $105 $70 $15 $134 $106 $43 $313 $65 $121 $265 $
Slide 8: Rate Base Growth: Investment in Renewable Energy
Rate Base Growth: Investment in Renewable Energy New Mexico Renewable Energy Act Renewable Rider Collection Portfolio Standards as a % of Retail Sales Streamlined proceedings for approval of Methodology utilities’ renewable energy procurement Recovery of renewable investments 15% 20% plans and REC p
Slide 9: Rate Base Growth: BART Regulatory Process Update
Rate Base Growth: BART Regulatory Process Update Hearing Examiner BART Component Settlement Terms Recommendation Denial of CCN with ability to re‐ Additional 132 MW Approval of CCN at $26M file when coal supply and of San Juan Unit 4 participant restructuring agreements are final Approval of CCN at
Slide 10: BART: San Juan Generating Station Agreements
BART: San Juan Generating Station Agreements Ownership Restructuring Changes 2018 Next Steps Expected Date Unit Owner MW Provide executed August 1 1 PNM 170 agreements Tucson Electric Power Company 170 Hearings ~September 4 PNM 327 City of Farmington 43 Final order ~October/November Los Alamos Count
Slide 11: Earnings Growth
Earnings Growth Targeted earnings growth 7% ‐ 9% Earnings Growth continues the progress made to 2015 ‐ 2019 date and seeks to maximize the earnings potential of the business $1.62 $1.49 $1.50 $1.31 $1.41 2012 2013 2014 2015E 2016E 2017E 2018E 2019E Ongoing EPS 2012 – 2014 actual results represent on
Slide 12: Earnings Growth: 2016 Potential Earnings Power
Earnings Growth: 2016 Potential Earnings Power Allowed 2015 Guidance Mid Point 2016 Earnings Potential Return / Avg Rate Avg Rate Equity Ratio Return EPS Growth EPS Base Base PNM Retail 10% / 50% $2.0 B 8.4% $1.02 $2.4 B $0.47 $1.49(1) PNM Retail‐Timing(2) ($0.35)‐($0.21) ($0.35)‐($0.21) PNM Renewab
Slide 13: Earnings Growth: 2019 Potential Earnings Power
Earnings Growth: 2019 Potential Earnings Power 2016 Earnings Potential 2019 Earnings Potential Avg Rate Base EPS Avg Rate Base Growth EPS PNM Retail $2.4 B $1.49(1) $2.6 B $0.11 $1.60 PNM Retail‐Timing(2) ($0.35)‐($0.21) $0.35 ‐ $0.21 $0.00 PNM Renewables $100 M $0.06 $85 M ($0.01) $0.05 PNM FERC (3
Slide 14: Dividend Growth: Continued Dividend Increases
Dividend Growth: Continued Dividend Increases The annual common stock dividend $0.74 $0.80 raised by 8% in December 2014 to $0.80 $0.58 $0.66 12% 8% increase per share 14% increase 16% increase increase Expect above industry average dividend growth while targeting the 50% ‐ 60% payout ratio rang
Slide 15: PNM Overview
PNM Overview
Slide 16: PNM: Recent Accomplishments
PNM: Recent Accomplishments Progressing regulatory environment Retail Renewable Rider implemented in August of 2012 with rates reset annually • 2014 revenue was $33 M; 2015 expected revenue is ~$45M Filed settlement on FERC Transmission formula rate case with 10% ROE • Rates in effect subject
Slide 17: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales (weather‐normalized) Unemployment Rate(1) PNM % of FY 2014 Q1 2015 vs. Sales Q1 2014 6.2% 5.5% Residential 39% 2.0% Commercial 47% (4.0%) NM U.S. Industrial 12% (2.9%) Total Retail (1.3%) 2015 Load Forecast: (2%) – 0% PNM Average
Slide 18: PNM Rates Continue to Compare Favorably in the U.S.
PNM Rates Continue to Compare Favorably in the U.S. Residential Electric Affordability Estimate by State (Including PNM) US Average Indicated by Dashed Line 4.5% 4.0% Est. Average 2014 Residential Electric Bill 3.5% Es.t 2013 Median Household Income 3.0% US Average: 2.62% 2.5% 2.0% 1.5% 1.0% 0.5% 0.
Slide 19: PNM Regulatory Update
PNM Regulatory Update Filing Action Timing Docket No. NMPRC: BART Filing Filed December 20, 2013 Final approval expected by year‐end 2015 13‐00390‐UT General Rate Case Dismissed May 13, 2015 Expect to re‐file September 1, 2015 with rates TBD expected to be effective Q3 2016 FERC: Transmission Formul
Slide 20: PNM General Rate Case
PNM General Rate Case Future Test Year Upcoming Filing Defined by New Mexico statute and NMPRC Rule as: twelve‐ month period beginning no later than the date a proposed File by September 1, 2015 rate change is expected to take effect • Test year ~October 2015 NMPRC Order: future test period be
Slide 21: PNM Regulatory Accomplishments - NMPRC
PNM Regulatory Accomplishments ‐ NMPRC Subject Matter Accomplishments 2011 General Rate Case • NMPRC approved $72.1 million rate increase; 10.0% ROE (Aug. 2011) • NMPRC approved Renewable Energy Rider; rates reset annually to recover projected and true‐up procurement costs (Aug. 2012) Renewable Ride
Slide 22: PNM Regulatory Accomplishments - FERC
PNM Regulatory Accomplishments ‐ FERC Subject Matter Accomplishments 2010 Transmission • Settlement filed (July 2012) Rate Case • FERC approved Settlement (Jan. 2013) • Application filed to serve Navopache Electric Cooperative (Sept. 2011) Generation Rate Case • Settlement filed; imputed ROE is 10.0
Slide 23: 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 Continue to maintain strong investment grade credit metrics Continue to control costs 23
Slide 24: TNMP Overview
TNMP Overview
Slide 25: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments TCOS and DCOS filings provide the ability to recover transmission and distribution cost of service investments on a timely basis • TNMP’s latest TCOS filing requesting additional revenue of $4.4M was approved with rates effective March 16, 2015 Energy efficiency prog
Slide 26: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales (weather‐normalized) TNMP Unemployment Rate(1) % of FY 2014 Q1 2015 vs. Sales Q1 2014 5.5% Residential 50% 2.1% 4.3% Commercial 46% 1.6% Total Retail 1.7% TX U.S. 2015 Load Forecast: 2% – 3% TNMP Average Customer Growth Positive
Slide 27: TNMP Regulatory Update
TNMP Regulatory Update Docket Filing Action Timing No. TNMP TCOS Approved March Rates effective March 16, 2015 44340 16, 2015 TNMP TCOS Expected to file Rates expected to be effective TBD July 2015 September 2015 27
Slide 28: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success Continue to earn allowed rate of return through timely execution of transmission cost of service and general rate case filings Invest in the business Continue to maintain strong investment grade credit metrics Continue to control costs 28
Slide 29: Financial Overview
Financial Overview
Slide 30: Q1 2015 Financial Summary
Q1 2015 Financial Summary Ongoing EPS $0.01 ($0.01) $0.03 $0.21 $0.18 TNMP Corporate PNM Q1 2014 Q1 2015 30
Slide 31: PNM and TNMP: Q1 2015 vs Q1 2014 EPS (Ongoing)
PNM and TNMP: Q1 2015 vs Q1 2014 EPS (Ongoing) PNM Q1 2015 Key Performance Drivers ∆ EPS Palo Verde Unit 1 leases at half price $0.03 $0.14 Palo Verde spent fuel reimbursement $0.01 $0.11 AFUDC $0.01 Refined coal $0.01 Palo Verde Nuclear Decommissioning Trust gains $0.01 Load ($0.01) Depreciation an
Slide 32: Consolidated EPS 2015 Guidance (Ongoing)
2015 Guidance (Ongoing) 2015 Guidance Range: $1.50 Consolidated EPS $1.62 PNM TNMP Corp/Other $1.14 ‐ $1.21 $0.45 ‐ $0.48 ($0.09) – ($0.07) 32
Slide 33: 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 24, 2015 Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short‐term debt(1) and LOC balances 3.2 0.1 7.7 11.0 Plus invested cash ‐
Slide 34: Debt Ratings
Debt Ratings Rate relief, cost control, and tax benefits keep FFO to Debt solidly in Moody’s Baa investment grade target range of 13% to 22% Debt Ratings Moody’s S&P 2008 2015 2008 2015 PNM Resources Ba2(2) Baa3(1) PNM Resources BB‐(2) BBB(1) PNM(2) Baa3 Baa2 PNM(2) BB+ BBB TNMP Baa3(2) A1(3) TNMP B
Slide 35: PNM Resources Summary
PNM Resources Summary Continued earnings and dividend growth make PNM Resources an attractive investment Potential earnings growth of 7% ‐ 9% through 2019 Expected rate base CAGR of 5% ‐ 7% through 2019 Potential investments beyond 2018: • Renewable resources • Transmission investments • Grid
Slide 36: Appendix
Appendix
Slide 37: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Karen Montoya, District 1 2016 Democrat Chairman District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2016 Democrat Lynda Lovejoy, District 4 2018 Democrat Vice Chair District 5 Sand
Slide 38: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends Donna Nelson Aug. 2008 Aug. 2015 Republican Chairman Kenneth Anderson Sept. 2008 Aug. 2017 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Commissioners are appointed by Governor of Texas. Length of term is determined by the Governor.
Slide 39: 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, 2015 39
Slide 40: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,707 MW 2018 Generation Mix As of 1/1/2015 based on RSIP Renewables Renewables 14% 16% Coal Coal 26% 36% Natural Gas Natural Gas 35% 43% Nuclear 15% Nuclear 15% 40
Slide 41: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 10,791 GWh 2018 Generation Mix based on RSIP Based on 12 months ending 12/31/14 Renewables Renewables 5% 5% Renewables Natural Gas 12% 9% Natural Gas Coal 11% 54% Coal Nuclear 46% 31% Nuclear 33% 41
Slide 42: PNM Service Territory and Generation Facilities
PNM Service Territory and Generation Facilities 42
Slide 43: PNM Plant EAF and Outages
PNM Plant EAF and Outages 2015 ‐ 2016 Outage Schedule Duration Time Unit in Days Period 89.9% 91.8% San Juan 76.3% 73.0% 4 51 Q4 2015 66.8% 68.1% 3 12 Q4 2015 Four Corners 5 75 Q4 2015 5 25 Q1 2016 4 30 Q1‐Q2 2016 Palo Verde 3 30 Q2 2015 2 30 Q4 2015 1 34 Q2 2016 San Juan Four Corners Palo Verde 3 3
Slide 44: 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 45: 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 4.6% 60 MW Leased 7.9% 104 MW Leased 5.6% 74 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 2
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 X X X San Juan Unit 2 170 X X X X San Juan Unit 3 248 X X X X Expected San Juan Unit 4 195 X X
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 $81M SNCR technology on 2 units; Retire 2 units. Alternative) – SNCR On November 25, 2014, EPA released a proposed rule that would revise th
Slide 48: Impact of Proposed Environmental Regulation
Impact of Proposed Environmental Regulation Estimated Compliance Costs Comments (PNM Share) Four Corners (Units 4 and 5) Final BART determination filed with EPA on December 30, 2013. Impact to Clean Air Act – Regional Haze ‐ SCR $80M PNM: SCR controls for NOx on Units 4 & 5. On November 25, 2014, EP
Slide 49: EPA’s Proposed Clean Power Plan
EPA’s Proposed Clean Power Plan The goal of the plan is an estimated 30% reduction in CO2 emissions from the U.S. electric power sector in 2030, 10 New Mexico Facilities Affected relative to 2005 levels. Coal Plants Requires each state to develop and implement a state plan to reduce its CO2 San Ju