Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — EEI Financial Conference 2015
49 slides from Txnm Energy's conference presentation, November 2015
Slide 1: EEI Financial Conference
EEI Financial Conference November 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 $2.2B 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
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Goals Earn Authorized Return on Regulated Businesses Maintain Strong Credit Ratings Above Average Earnings and Dividend Growth Earnings • Investing in core capital, Growth • Sustaining and growing renewables, • Realizing earnings the dividend environmental
Slide 6: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast 2015 – 2019 Total Capital Plan: $2.3B PNM 2014‐2019 Rate Base CAGR: 5 ‐ 7%(1) TNMP 2014‐2019 Rate Base CAGR: 7 ‐ 9% $577 $34 $542 (In millions) Palo Verde $34 Unit 3 added to $126 rate base $113 $415 $19 $398 $14 $78 $351 $97 $103 $15 $113 $141 $117 $132 $100 $298
Slide 7: Rate Base Growth: BART Regulatory Process Update
Rate Base Growth: BART Regulatory Process Update Terms of Settlement Regulatory Schedule Approval of an unconditional Hearings Concluded October 20 Additional 132 MW CCN with an initial book value of San Juan Unit 4 of zero plus SNCR and other Hearing Examiner capital investments Recommended Decisio
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 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 pu
Slide 9: 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 (1) 10% / 50% $2.0 B 7.5% $0.97 $2.4 B $0.52 $1.49 PNM Retail – Timing (2) ($0.38)‐($0.22) ($0.38)‐($0.22) PNM Ren
Slide 10: Earnings Growth: 2017 and 2019 Potential Earnings Power
Earnings Growth: 2017 and 2019 Potential Earnings Power 2017 Earnings Potential 2019 Earnings Potential Avg Rate Base EPS Avg Rate Base EPS PNM Retail (1) $2.4 B $1.49 $2.5 B $1.59 PNM Renewables (2) $95 M $0.06 $85 M $0.05 PNM FERC (3) $185 M $0.08‐$0.10 $275 M $0.12‐$0.15 PV3 (4) ($0.10) Included
Slide 11: Earnings Growth: Above Average Growth Through 2019
Earnings Growth: Above Average Growth Through 2019 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 $1.61 $1.49 $1.56 $1.31 $1.41 2012 2013 2014 2015E 2016E 2017E 2018E 2019E Ongoing EPS 2012
Slide 12: Dividend Growth: Continued Dividend Increases
Dividend Growth: Continued Dividend Increases The annual common stock dividend raised by 8% in December Dividend rate: 2014 to $0.80 per share $0.80 (1) Expect above industry average dividend growth while targeting Payout ratio: the 50% ‐ 60% payout ratio range 51% (2) Dividend yield: The Boar
Slide 13: PNM Overview
PNM Overview
Slide 14: PNM: Recent Accomplishments
PNM: Recent Accomplishments Progressing regulatory environment • Retail Renewable Rider implemented in August of 2012 with rates reset annually 2014 revenue was $33.5M; 2015 expected revenue is ~$43M • Filed settlement on FERC Transmission formula rate case with 10% ROE Rates in effect, subjec
Slide 15: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales (weather‐normalized) PNM % of FY Q3 2015 vs. YTD 2015 vs. 2014 Sales Q3 2014 YTD 2014 Average Customer Growth Residential 39% (1.1%) 0.0% Q3 2015 vs. YTD 2015 vs. 2015 Q3 2014 YTD 2014 Forecast Commercial 47% (2.6%) (2.2%) Industr
Slide 16: PNM Regulatory Update
PNM Regulatory Update Filing Action Timing Docket No. NMPRC: BART Filing Filed December 20, 2013 Final approval expected Q4 2015 13‐00390‐UT NMPRC 2016 Renewable Plan Filed June 1, 2015 Final approval expected November 2015 15‐00166‐UT San Juan Generating Station Filed June 30, 2015 Filed November 3
Slide 17: PNM 2015 General Rate Case
PNM 2015 General Rate Case Requested revenue increase of $123.5 million • Based on Oct. 2015 – Sept. 2016 test year and 10.5% ROE • Average system impact of 5.4%, including the new coal contract and other changes Rate Base • New Generation: Timeline • 40 MW Solar Rate case filed August 27, • 40
Slide 18: PNM Rate Affordability
PNM Rate Affordability PNM's Residential Affordability Continues to be Among the Best in the Nation 5.0% 4.5% 4.0% Est. Average 2014 Residential Electric Bill 3.5% Est. 2014 Median Household Income 3.0% U.S. Average: 2.5% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Sources: EIA Form 826, US Census Bureau PNM rate
Slide 19: PNM Future Test Year Definition
PNM Future Test Year Definition Defined by New Mexico statute and NMPRC Rule as: twelve‐month period beginning no later than the date a proposed rate change is expected to take effect NMPRC Order: future test period begins no later than 45 days after rate application is made • PNM appealed this
Slide 20: PNM Regulatory Accomplishments
PNM Regulatory Accomplishments Subject Matter Accomplishments NMPRC: 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 Rider
Slide 21: 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 21
Slide 22: TNMP Overview
TNMP Overview
Slide 23: 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 $1.4M was approved with rates effective September 10, 2015 Energy efficiency
Slide 24: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales (weather‐normalized) TNMP % of FY Q3 2015 vs. YTD 2015 vs. 2014 Sales Q3 2014 YTD 2014 Average Customer Growth Residential 50% 1.7% 3.5% Q3 2015 vs. YTD 2015 vs. 2015 Commercial 46% 1.6% 2.1% Q3 2014 YTD 2014 Forecast Total Retai
Slide 25: TNMP Regulatory Accomplishments
TNMP Regulatory Accomplishments Subject Matter Accomplishments PUCT: 2015 • PUCT approved $1.4M increase, effective September 2015 • PUCT approved $4.4M increase, effective March 2015 2014 Transmission Cost of Service • PUCT approved $4.2M increase, effective September 2014 (TCOS) • PUCT approved $2
Slide 26: 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 • Additional investments in the business to support strong growth Continue to maintain strong investment grade credit metrics Contin
Slide 27: Financial Overview
Financial Overview
Slide 28: 2015 Guidance (Ongoing)
2015 Guidance (Ongoing) Original 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) (1) Narrowed 2015 Guidance Range: $1.56 Consolidated EPS $1.61 PNM TNMP Corp/Other $1.13 ‐ $1.16 $0.51 ‐ $0.52 ($0.08) – ($0.07) (1) Narrowed range on
Slide 29: 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 October 23, 2015 (In millions) Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short‐term debt(1) and LOC balances 3.2 20.1 6.2 29.5 Plus
Slide 30: Credit Ratings
Credit 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% Credit 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(2) TNMP Baa3(2) A1(3)
Slide 31: Q3 YTD 2015 Financial Summary
Q3 YTD 2015 Financial Summary Ongoing EPS $1.41 $0.11 $0.05 $1.25 TNMP PNM Q3 YTD 2014 Q3 YTD 2015 31
Slide 32: 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: • PNM: 5% ‐ 7% through 2019 • TNMP: 7% ‐ 9% through 2019 Potential investments beyond 2019: • Renewable resources
Slide 33: Appendix
Appendix
Slide 34: Q3 2015 Financial Summary
Q3 2015 Financial Summary Ongoing EPS $0.02 $0.01 $0.76 $0.05 $0.68 TNMP Corporate PNM Q3 2014 Q3 2015 34
Slide 35: PNM General Rate Case Drivers and Other Impacts to Customer Rates
PNM General Rate Case Drivers and Other Impacts to Customer Rates Revenue requirement driven by rate base additions and energy sales Amount (in millions) Rate Base $95 Energy Sales 31 Other: 50% Reduction of Remaining Palo Verde Lease Payments (17) Change in ROE from 10% to 10.5% 6 Re‐allocation of
Slide 36: PNM General Rate Case Drivers: Rate Base
PNM General Rate Case Drivers: Rate Base Rate Incremental Base Revenue Additions Requirement (Retail share, in millions) Solar (40 MW) $65 $11 La Luz Gas Peaker (40 MW) 50 8 Rio Bravo Generating Station (138 MW)(1) 32 ‐ San Juan SNCR Equipment & Balanced Draft 58 9 Palo Verde Unit 2 Lease Purchase (
Slide 37: PNM Customer Rate Impact as of July 1, 2016
PNM Customer Rate Impact as of July 1, 2016 Rate % Increase Rate % Increase per Major Customer Class Including Fuel and Request Other Changes (1) Residential 15.8% 7.9% Small Power 14.4% 7.0% General Power 14.5% 5.2% Large Power 14.2% 2.8% Large Power >= 8,000kW 9.4% (2.6)% Universities 9.3% (2.4)%
Slide 38: 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 39: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends Donna Nelson Aug. 2008 Sep. 2021 Republican Chairman Kenneth Anderson Sept. 2008 Aug. 2017 Republican Brandy Marty Marquez Aug. 2013 Aug. 2019 Republican Commissioners are appointed by the Governor of Texas. Length of term is determined by the Gover
Slide 40: 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 40
Slide 41: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,707 MW 2018 Forecasted As of 1/1/2015 Generation Mix Renewables Renewables 14% 16% Coal Coal 29% 36% Natural Gas Natural Gas 35% 40% Nuclear Nuclear 15% 15% 41
Slide 42: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 10,791 GWh 2018 Forecasted Based on 12 months ending 12/31/14 Generation Mix Renewables Renewables 5% 5% Renewables Natural Gas 12% 9% Natural Gas Coal 11% 54% Coal Nuclear 46% 31% Nuclear 33% 42
Slide 43: PNM Plant EAF and Outages
PNM Plant EAF and Outages 2015 ‐ 2017 Outage Schedule Duration Time Unit in Days Period 89.5% 92.1% San Juan 77.0% 4 50 Q4 2015 69.1% 72.2% 67.3% 3 11 Q1 2016 1 28 Q1‐Q2 2017 Four Corners 81 Q1 2016 5 94 Q4 2017 4 20 Q1‐Q2 2016 Palo Verde 29 Q4 2015 2 33 Q2 2017 San Juan Four Corners Palo Verde 1 33
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 ‐ current Unit 2 after 2016 purchases(1) Owned 2.3% 30 MW Owned 4.6% 60 MW Owned 9.5% 124 MW Leased 7.9% 104 MW Leased 5.6% 74 MW Leased 0.7% 10 MW Total 10.2% 134 MW Total 10.2% 134 MW Total 10.2% 134 MW
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) Expected San Juan Unit 1 170 X X 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 Environmental Regulation- SJGS
Impact of Environmental Regulation‐ SJGS Estimated Compliance Costs San Juan Generating Station Comments (PNM Share) Clean Air Act – Regional Haze(1) $78M SNCR technology on 2 units; Retire 2 units. (State Alternative) – SNCR Balanced draft will assist with NAAQS compliance. On October 1, 2015, EPA
Slide 48: Impact of Environmental Regulation- Four Corners
Impact of Environmental Regulation‐ Four Corners Estimated Compliance Costs Four Corners (Units 4 and 5) Comments (PNM Share) Final BART determination filed with EPA on December 30, 2013. Impact to PNM: Clean Air Act – Regional Haze – SCR $91M SCR controls for NOx on Units 4 & 5. On October 1, 2015,
Slide 49: Clean Power Plan
Clean Power Plan On October 23, 2015, EPA published in the Federal Register the final Clean Power Plan (CPP) under section 111(d) of the Clean Air Act. Projected outcome = 32% reduction in CO2 in the U.S. from 2005 levels by 2030 10 New Mexico Facilities Affected Final guidelines require state