Slide 1: Investor Meetings August 2012
Investor Meetings August 2012
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 Rates Compare Favorably
TNMP Rates Compare Favorably Residential Total Wires Charge for 1,000 kWh $50 $45 $40 $35 $30 $25 $20 $15 $10 $5 $- Oncor TNMP AEP North Centerpoint AEP Central Source: TDU tariffs for retail delivery service, as of May 1, 2012 11
Slide 12: 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 12
Slide 13: 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 14: 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 2.8% (2) The Board will continue to (1) Assumes mid-point of the 2012 guidance range evaluate the
Slide 15: 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 16: 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 17: PNM Resources 5-Year Capital Plan
PNM Resources 5-Year Capital Plan 2012 - 2016 Amounts do not include potential capital spending in Total Capital Plan: $1.3B 2013 – 2016 at PNM for SCRs, renewables and additional peaking capacity (In millions) $286 $286 $24 $12 $255 $251 $11 $12 $219 $92 $98 $12 $83 $89 $60 $63 $64 $58 $63 $52 $107
Slide 18: 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 19: 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 19
Slide 20: Second Quarter Earnings
Second Quarter Earnings
Slide 21: Q2 2012 Financial Results
Q2 2012 Financial Results Q2 2012 Q2 2011 YTD 2012 YTD 2011 Ongoing EPS $0.33 $0.20 $0.50 $0.24 GAAP EPS $0.27 $0.04 $0.48 $0.22 Increased retail rates implemented in 2011, warmer June weather, and cost control improves PNM Strong TNMP load growth tempered by cooler weather in Texas Progress c
Slide 22: Load Growth and Economic Conditions
Load Growth and Economic Conditions (3) Regulated Retail Energy Sales Growth Unemployment Rate (weather-normalized) Q2 2012 vs. Q2 2011 Q2 YTD 2012 vs. Q2 YTD 2011 8.2% PNM(1) TNMP(2) PNM(1) TNMP(2) 6.7% 7.0% Residential 0.4% 8.5% 0.0% 7.1% Commercial -0.2% 4.2% 0.7% 1.4% NM TX U.S. Industrial 1.3%
Slide 23: Regulatory Update
Regulatory Update Item Action Timing Docket No. FERC transmission case Settlement filed July 3; Awaiting FERC final ER11-1915-002, et. al FERC Staff supports approval settlement FERC generation case Confidential settlement TBD ER11-4535-000 and (Navopache Electric Cooperative, Inc.) in principle rea
Slide 24: San Juan BART Update
San Juan BART Update EPA granted 90-day “stay” • No extension of compliance date N.M. Environment Department process designed to identify potential alternatives to FIP and SIP through: • Series of public comment meetings (July 24 through approximately mid-September) • Working group sessions to b
Slide 25: Q2 2012 Financial Summary
Q2 2012 Financial Summary Ongoing EPS $0.02 ($0.04) $0.02 $0.13 $0.33 Corp/Other (1) TNMP First Choice Power/Optim Energy (2) $0.20 PNM Q2 2011 Q2 2012 (1) $0.01 is added due to rounding (2) After August 31, 2011 Optim Energy’s financial results were not included in PNM Resources’ ongoing earnings r
Slide 26: PNM and TNMP: Q2 2012 vs Q2 2011 EPS
PNM and TNMP: Q2 2012 vs Q2 2011 EPS (Ongoing) PNM Q2 2012 Key Performance Drivers ∆ EPS Rate relief $0.12 $0.27 Weather $0.03 PNM Resources share repurchase $0.03 O&M reductions $0.01 $0.14 Lower outage costs $0.01 Palo Verde 3 market price ($0.01) Interest expense ($0.01) Palo Verde Nuclear Decomm
Slide 27: Affirming 2012 EPS Guidance
Affirming 2012 EPS Guidance (Ongoing) $1.20 Consolidated EPS $1.32 Utilities Corp/Other $1.36 - $1.47 ($0.16) – ($0.15) PNM TNMP $1.08 - $1.15 $0.28 - $0.32 27
Slide 28: 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 29: Appendix
Appendix
Slide 30: PNM Plant EAF and Outages
PNM Plant EAF and Outages 91.6% 2012 and 2013 Outage Schedule 82.4% 85.7% 85.6% Duration Time Unit 73.9% 73.1% 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 31: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and Term PNM Service Areas Name District Party Ends Jason Marks(1) District 1 2012 Democrat Patrick Lyons District 2 2014 Republican Chairman Douglas Howe(2) District 3 2012 Independent Theresa Becenti-Aguilar District 4 2014 Democrat Vice Chair Ben
Slide 32: Utility Rate Base and Return
Utility Rate Base and Return Projected Allowed Rate Base % of Rate PNM Test Period (1) 2012 Avg. Equity ROE Increase in Filing Base 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 33: 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 Notice Dates Unit 1 Unit 2 1st Notice January 2012 January 2013 2nd Notice January 2013 January 2014 • 1st Notice: Indicate whether or not control of the generation will b
Slide 34: Selected Balance Sheet Information
Selected Balance Sheet Information (In millions) Dec 31, 2011 Jun 30, 2012 Long-Term Debt (incl. current portion) PNM $1,215.5 $1,215.6 TNMP 311.0 311.3 PNMR 147.5 147.5 Consolidated $1,674.0 $1,674.3 Total Debt (incl. short-term) (1) PNM $1,281.5 $1,302.0 TNMP 311.0 311.3 PNMR 164.2 268.1 Consolida
Slide 35: 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 July 27, 2011 Total Capacity $305.0 $400.0 $75.0 $780.0 Less short-term debt and LOC balances (126.2) (83.
Slide 36: Environmental Compliance
Environmental Compliance
Slide 37: San Juan – BART Timeline
San Juan – BART Timeline Proposed State Implementation Plan revisions filed with EPA in July 2011 Called for SNCR technology estimated to cost ~$77M (total plant cost) EPA issued its proposed action on the SIP, including approval of all components of the SIP, except for the SJGS BART determina
Slide 38: 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 39: 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 (FIP) – SCR ~$340M - $460M See “San Juan – BART Timeline” slide State of NM submitted with EPA in Clean Air Act – Regional Haze (SIP) – SNCR ~$36M ear