Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (June 2017)
46 slides from Txnm Energy's roadshow presentation, June 2017
Slide 1: Investor Meetings
Investor Meetings June 2017 PNIM(Resources
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 U.S. 1-505-241-2227 Lisa.Goodman@pnmresources.com Jimmie.Blotter
Slide 3: Company Overview
Company Overview
Slide 4: PNM Resources Overview
PNM Resources Overview PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and above industry average earnings and dividend growth to shareholders • Energy holding company • Based in Albuquer
Slide 5: Staying Focused in a Changing Environment
Staying Focused in a Changing Environment • PNM 2018 General Rate Case • PNM AMI Filing • NMPRC Proposed Rulemaking Workshops • 2017 Integrated Improving • TNMP Upcoming General Resource Plan Regulatory Rate Case • San Juan Generating Transforming Environment Station Scenarios PNM’s • Sustainability
Slide 6: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Financial • Investing aligned to policy directives, evolving customer Goals Rate Base needs and transforming Growth industry opportunities while ensuring reliability, resulting in Earn authorized return on cleaner generation fleet regulated businesses Abov
Slide 7: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast 2017 – 2020 Total Capital Plan: $1.7B PNM 2016-2020 Rate Base CAGR: 4 - 6%(1) TNMP 2016-2020 Rate Base CAGR: 8 - 10% (In millions) $524 Expect future Future Palo Verde $58 Unit 3 added refinements refinements to rate base include: $435 $388 $15 $404 $15 • Outcome o
Slide 8: Earnings Growth: Proposed PNM 2018 General Rate Case Settlement Agreement
Earnings Growth: Proposed PNM 2018 General Rate Case Settlement Agreement Key Terms of Proposed Settlement Agreement(1) Request As Filed • ROE unchanged at 9.575% • ROE increase to 10.125% • $62.3M increased revenue requirement • $99.2M increased revenue requirement • $7.5M financial impact from the
Slide 9: Earnings Growth: Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement
Earnings Growth: Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement Proposed Settlement Agreement Financial View Phase I - 2018 Phase II - 2019 (in millions, except EPS) Settlement increase (net revenue increase) $32.3 $62.3 (1) Accelerated amortization of excess deferred s
Slide 10: Earnings Growth: PNM 2018 General Rate Case Timeline
Earnings Growth: PNM 2018 General Rate Case Timeline Procedural Schedule Testimony in support of stipulation June 16, 2017 Responses to statements opposing stipulation June 16, 2017 Testimony in opposition to stipulation July 7, 2017 Stipulation rebuttal testimony July 21, 2017 Pre-hearing conferenc
Slide 11: Earnings Growth: Potential Earnings Power
Earnings Growth: Potential Earnings Power Potential Earnings Power reflects 8% earnings growth through 2019(1) • PNM growth achieved through recovery of capital investments: 2018 General Rate Case filing aligns rates with lower-carbon resource portfolio agreed to in BART settlement, including repl
Slide 12: Dividend Growth
Dividend Growth Expect above industry average dividend growth in the future while targeting the 50% - 60% payout ratio range $1.87 $1.64 $1.65 $1.77 $1.49 $1.31 $1.41 $0.88 $0.97 53%(1) $0.74 $0.80 Dec ‘16 $0.58 $0.66 Dec ‘15 payout Dec ‘13 Dec ‘14 Feb ‘12 Feb ‘13 ratio 2012 2013 2014 2015 2016 2017
Slide 13: PNM Overview
PNM Overview
Slide 14: PNM: Recent Accomplishments
PNM: Recent Accomplishments • Progressing regulatory environment Received Commission approval of the future test year definition Implemented FERC Transmission formula rate methodology for annual filings based on approved 10% ROE Approval of San Juan Generation Station Plan (BART) by FERC and N
Slide 15: PNM: Regulatory Update
PNM: Regulatory Update Filing Action Timing Docket No. PNM 2018 General Rate Revised settlement agreement Suspension period currently 16-00276-UT Case Filing filed May 23, 2017 ends January 6, 2018 PNM Integrated Resource To be filed no later than July Draft issued April 20, 2017 N/A Plan 3, 2017 Or
Slide 16: PNM: 2018 General Rate Case Drivers (as Filed)
PNM: 2018 General Rate Case Drivers (as Filed) Incremental Revenue Rate Base Requirement (in millions) (in millions) Compliance Items: BART Items: Palo Verde Unit 3 $96 $45 Retirement of San Juan Units 2 and 3 (95) (29) 132 MW of San Juan Unit 4 11 16 Accelerated Depreciation on San Juan SNCRs - 3 S
Slide 17: PNM: 2018 General Rate Case Proposed Settlement Bill Impact
PNM: 2018 General Rate Case Proposed Settlement Bill Impact Comparison of Average Residential Bills(2) • Forecasted PNM customer bills remain Western Region Average Bills by Utility below current national and regional Imperial Irrigation District (CA) Arizona Public Service Co (AZ) $138.93 averages
Slide 18: PNM: 2017 Integrated Resource Plan
PNM: 2017 Integrated Resource Plan Additional Requirements Roadmap for meeting customer demand over 20-year from BART Agreement horizon, provides foundation for the selection of future resources • Two potential resource portfolios to be included in 2017 IRP Filed with Solicits and One with and one
Slide 19: PNM: New Mexico Supreme Court Appeal
PNM: New Mexico Supreme Court Appeal • PNM filed Notice of Appeal with New Mexico Supreme Court on September 30, 2016 • PNM filed Statement of Issues on October 26, 2016 detailing items for appeal: Appealed Item Conclusion Resulting Impact Palo Verde Nuclear Generating Station 64 MW Unit 2 capacity
Slide 20: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2016 Q1 2017 vs. PNM Sales Volumes Q1 2016 Retail Load: Residential 40% 1.6% Commercial 47% (2.6%) Industrial 11% (3.8%) Total Retail Load (0.8%) 2017 Load Growth Forecast: (1%
Slide 21: PNM: Sustainability Portal
PNM: Sustainability Portal http://www.pnmresources.com/about-us/sustainability-portal.aspx 21
Slide 22: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success • Continue to efficiently manage the business with a customer- centered focus, delivering reliable and affordable energy • Earn allowed return Minimize regulatory lag through timely rate case filings Synchronize revenues and expenses Use future test year • Con
Slide 23: TNMP Overview
TNMP Overview
Slide 24: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments • Predictable regulatory environment TCOS and DCOS filings provide the ability to recover transmission and distribution cost of service investments on a timely basis o TCOS filing requesting additional annual revenue of $4.8M approved with rates effective March 14, 201
Slide 25: TNMP: Regulatory Update
TNMP: Regulatory Update Filing Action Timing Docket No. TNMP TCOS Filed January 20, 2017 Rates effective March 14, 2017 46786 TNMP General Rate Case N/A Expected to be filed May 2018 N/A 25
Slide 26: TNMP: Upcoming General Rate Case Key Elements
TNMP: Upcoming General Rate Case Key Elements True-up Transmission and Distribution Recovery • TCOS filings update for transmission investments, but distribution assets and other rate base items have not been updated since last rate case filing (test period ending March 2010) True-up Operating Costs
Slide 27: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and End Users (weather-normalized, leap-year adjusted) % of 2016 Q1 2017 vs. TNMP Sales Revenues Q1 2016 Volumetric Load(1): Residential 3.0% Commercial 2.7% Total Volumetric Load 52% 2.6% 2017 Load Growth Forecast: 2% – 3% Avg. End Us
Slide 28: TNMP: Pathway to Continued Success
TNMP: Pathway to Continued Success • Continue to efficiently manage the business with an end user- centered focus, delivering reliable and affordable energy • Continue to earn allowed rate of return through timely execution of transmission cost of service and general rate case filings Additional i
Slide 29: Financial Overview
Financial Overview
Slide 30: Financial Overview: Consolidated Earnings Guidance (Ongoing)
Financial Overview: Consolidated Earnings Guidance (Ongoing) 2017 Guidance $1.77 Consolidated EPS $1.87 PNM TNMP Corp/Other $1.30 - $1.37 $0.51 - $0.53 ($0.04) – ($0.03) 30
Slide 31: Tax Reform Considerations
Tax Reform Considerations PNM Resources well-positioned for tax reform, customers benefit Business Key Tax Reform Considerations Segments Reduced Tax Rate Interest Non-deductibility 100% Bonus Depreciation Decreases the tax In rate base, decreases from expense flowing higher ADIT liability are offse
Slide 32: Financial Overview: Liquidity, Capital Structure and Credit Ratings
Financial Overview: Liquidity, Capital Structure and Credit Ratings Strong liquidity and balanced capital structure supports investment grade credit metrics at Moody’s and S&P Available Liquidity Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity as of April 24, 2017: (In millio
Slide 33: Financial Overview: PNM Resources Summary Long-term Growth Potential
Financial Overview: PNM Resources Summary Long-term Growth Potential • Expected rate base CAGR: PNM: 4% - 6% through 2020 TNMP: 8% - 10% through 2020 • Key drivers for potential investments: Economic development activities in New Mexico Advanced Metering Infrastructure (AMI) at PNM San Jua
Slide 34: Appendix
Appendix
Slide 35: 2017 - 2019 Potential Earnings Power
2017 - 2019 Potential Earnings Power Allowed 2017 Guidance Midpoint 2018 Earnings Potential 2019 Earnings Potential Return / Avg Rate Avg Rate Avg Rate Equity Ratio Return EPS EPS EPS Base Base Base PNM Retail (1) 9.575% / 50% $2.3 B 9.3% $1.33 $2.3 B $1.38 $2.3 B $1.37 PNM Rate Case Phase-In (2) ($
Slide 36: PNM 2016 General Rate Case Final Order
PNM 2016 General Rate Case Final Order • NMPRC approved final order Sept. 28, 2016: Non-fuel revenue increase of $61.2M versus $121.5M request Retail rate base of $2,263M versus $2,458M request Key Rate Case Elements Commission Original Impact to (PNM Retail Share, net of ADIT) Order Request Rat
Slide 37: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Cynthia Hall, District 1 2020(1) Democrat Vice Chairman District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovejoy 2018(1) Democrat Sandy Jones, Dist
Slide 38: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends Vacant(1) N/A N/A N/A Kenneth Anderson Sept. 2008 Aug. 2017 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Commissioners are appointed by the Governor of Texas and confirmed by the Senate. 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 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- AEP Central Centerpoint Oncor TNMP AEP North Sharyland Source: TDU tariffs for retail delivery service effective March 1, 2017 and PUCT Filings Interchange. 39
Slide 40: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,791 MW 2018 Forecasted As of 12/31/2016 Generation Mix(1) (includes renewables related to Facebook data center) Renewables Renewables 15% 18% Coal Coal 29% 35% Natural Gas 35% Natural Gas Nuclear 38% Nuclear 15% 15% (1) The potential
Slide 41: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 11,147 GWh 2018 Forecasted Based on 12 months ending 12/31/16 Generation Mix(1) (includes renewables related to Facebook data center) Renewables 9% Renewables 11% Coal Natural Gas 41% 11% Coal 51% Natural Gas 20% Nuclear 29% Nuclear 28% (1)
Slide 42: PNM Investment in Renewable Energy
PNM Investment in Renewable Energy New Mexico Renewable Energy Act Renewable Rider Collection Portfolio Standard as a % of Retail Sales Streamlined proceedings for approval of Methodology utilities’ renewable energy procurement Recovery of renewable investments 15% 20% plans and REC purchases permit
Slide 43: 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 44: 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 9.5% 124 MW Leased 7.9% 104 MW Leased 0.7% 10 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
Slide 45: PNM Impact of Environmental Regulation- SJGS
PNM Impact of Environmental Regulation- SJGS Estimated San Juan Generating Compliance Costs Comments Station (PNM Share) Clean Air Act – Regional Installation of SNCR technology on Units 1 and 4 completed in 2016; retirement of Units 2 and 3 scheduled for Dec. Minimal remaining Haze (State Alternati
Slide 46: PNM Impact of Environmental Regulation- Four Corners
PNM Impact of Environmental Regulation- Four Corners Estimated Four Corners Compliance Costs Comments (Units 4 and 5) (PNM Share) Clean Air Act – Regional Final BART determination filed with EPA on Dec. 30, 2013. Impact to PNM: SCR controls for NOx on Units 4 & 5 by July $94M Haze – SCR 31, 2018. Re