Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (March 2015)
54 slides from Txnm Energy's investor presentation, March 2015
Slide 1: Investor Presentation
Investor Presentation March 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 $2.4B 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 our Regulated Businesses TNMP continues to earn its allowed return PNM is expected to earn its allowed return in 2016 Continue to Improve Credit Ratings PNM Resources is on positive outlook at both S&P and Moody’s Provide Top Qu
Slide 6: Invest in the Business
Invest in the Business 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 dividend control equipment, and potential in business • Pro
Slide 7: Rate Base Growth: 5 Year Capital Forecast
Rate Base Growth: 5 Year Capital Forecast 2015 – 2019 Total Capital Plan: $2.2B PNM Rate Base CAGR: 5 ‐ 7%(1) TNMP Rate Base CAGR: 5 ‐ 7% $569 (In millions) $24 $514 $19 $121 $444 Palo Verde $93 $15 Unit 3 added to rate base $380 $79 $93 $165 $15 $95 $300 $105 $63 $14 $122 $106 $43 $308 $65 $121 $27
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 10% 15% 20% plans and R
Slide 9: Rate Base Growth: BART Settlement Update
Rate Base Growth: BART Settlement Update RSIP and Proposed BART Settlement Key Components Next Steps: Recovery in: March/April 2015: Installation of SNCR technology on San Juan 2016 Hearing Examiner Units 1 and 4 ($81M) Recommended Retirement of San Juan Units 2 and 3 and 2018 Decision expected re
Slide 10: Earnings Growth (Ongoing EPS)
Earnings Growth (Ongoing EPS) 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 result
Slide 11: Earnings Growth: 2016 Potential Earnings Power
Earnings Growth: 2016 Potential Earnings Power 2015 Guidance Mid Point 2016 Earnings Potential Allowed Return / Equity Ratio Avg Rate Avg Rate Return EPS Growth EPS Base Base PNM Retail (1) 10% / 50% $2.0 B 8.4% $1.02 $2.4 B $0.47 $1.49 PNM Renewables 10% / 50% $105 M 10.0% $0.07 $100 M ($0.01) $0.0
Slide 12: 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 (1) $2.4 B $1.49 $2.6 B $0.11 $1.60 PNM Renewables $100 M $0.06 $85 M ($0.01) $0.05 PNM FERC (2) $235 M $0.07‐$0.09 $270 M $0.01 $0.08‐$0.10 PV3 (3) ($
Slide 13: Dividend Growth: Continued Dividend Increases
Dividend Growth: Continued Dividend Increases Dividend rate: The annual common stock dividend raised by 8% in December 2014 to $0.80 $0.80 (1) per share Payout ratio: Expect above industry average dividend 51% (2) growth while targeting the 50% ‐ 60% Dividend yield: payout ratio range 2.8% (3)
Slide 14: PNM Overview
PNM Overview
Slide 15: PNM: Recent Accomplishments
PNM: Recent Accomplishments Increasing credit ratings • Credit ratings raised by Moody’s to Baa2 with a positive outlook and S&P to BBB with a positive outlook Retail Renewable Rider implemented in August of 2012 with rates reset annually • 2014 revenue was $33 M; 2015 expected revenue is ~$45 M
Slide 16: PNM Load Growth and Economic Conditions
PNM Load Growth and Economic Conditions Regulated Retail Energy Sales (weather‐normalized) Unemployment Rate PNM % of FY Q4 2014 vs. YE 2014 vs. 2014 Sales Q4 2013 YE 2013 Residential 39% (1.0%) (0.7%) 6.1%(1) 5.7%(2) Commercial 47% (1.7%) (1.3%) Industrial 12% 1.9% (5.5%) NM U.S. Total Retail (0.9%
Slide 17: PNM Regulatory Update
PNM Regulatory Update Filing Action Timing Docket No. Filing Action Timing Docket No. NMPRC: BART Filing Filed December 20, Proposed settlement filed October 1, 13‐00390‐UT BART Filing 2013 20, 2013 Proposed Filed December 2014settlement filed October 1, 2014 13‐00390‐UT Final approval Final approva
Slide 18: PNM 2016 Future Test Year General Rate Case
PNM 2016 Future Test Year General Rate Case • Requested revenue increase of $107 million • Based on 2016 future test year and 10.5% ROE • Reflects $585 million increase in rate base from 2010 filing • Customer bill impact of 7.7% Rate Base Operations Rate Design New Generation: 50% Reduction of • 40
Slide 19: PNM 2016 Future Test Year General Rate Case Schedule
PNM 2016 Future Test Year General Rate Case Schedule 2016 General Rate Case Filing – Tentative Procedural Schedule May 6, 2015 Intervention deadline June 5, 2015 Staff and Intervenor testimony due June 29, 2015 Rebuttal testimony due July 9, 2015 Pre‐hearing Conference July 20 – August 7, 2015 Heari
Slide 20: PNM Rates Continue to Compare Favorably in the U.S.
PNM Rates Continue to Compare Favorably in the U.S. Residential Electric Affordability by State for 2013 (Including PNM) US Average Indicated by Dashed Line 4.0% 3.5% 3.0% Est. Average 2013 Residential Electric Bill Es.t 2013 Median Household Income US Average: 2.55% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% PN
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 • Balance future rate increases for customers while ensuring the appropriate return is earned for our shareholders
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 $4.4M is expected to be approved with rates in place March 2015 • Energy effici
Slide 24: TNMP Load Growth and Economic Conditions
TNMP Load Growth and Economic Conditions Regulated Retail Energy Sales (weather‐normalized) TNMP Unemployment Rate % of FY Q4 2014 vs. YE 2014 vs. 2014 Sales Q4 2013 YE 2013 5.7%(2) Residential 50% (1.1%) 1.0% 4.6%(1) Commercial 46% 9.0% 6.3% U.S. Total Retail 3.2% 3.2% TX 2014 Load Forecast: 1% – 3
Slide 25: TNMP Regulatory Update
TNMP Regulatory Update Docket Filing Action Timing No. TNMP TCOS Filed January 16, Rates expected to be effective 44340 2015 March 2015 TNMP TCOS Expected to file Rates expected to be effective TBD July 2015 September 2015 25
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 Invest in the business Continue to strengthen investment grade credit metrics Continue to control costs 26
Slide 27: Financial Overview
Financial Overview
Slide 28: Q4 2014 Financial Summary
Q4 2014 Financial Summary TS Ongoing EPS $0.02 ($0.01) $0.24 $0.21 Cor — porate TNMP Q4 2013 Q4 2014 PNVOResources 28
Slide 29: PNM and TNMP: Q4 2014 vs Q4 2013 EPS (Ongoing)
PNM and TNMP: Q4 2014 vs Q4 2013 EPS (Ongoing) PNM Q4 2014 Key Performance Drivers ∆ EPS Rate Relief $0.02 PNM Resources Foundation Contribution in 2013 $0.02 AFUDC $0.01 PV3 Market Prices $0.01 Gallup Contract ($0.01) Outage Costs ($0.01) Load ($0.01) Weather ($0.02) Other $0.01 TNMP Q4 2014 Key Pe
Slide 30: 2014 Financial Summary
2014 Financial Summary TS Ongoing EPS 1.49 EEE PNM TNMP Corporate 2013 2014 PNOResources 30
Slide 31: PNM and TNMP: 2014 vs 2013 EPS (Ongoing)
PNM and TNMP: 2014 vs 2013 EPS (Ongoing) YE 2014 Key Performance Drivers ∆ EPS PNM Rate Relief and Off System Sales Sharing $0.05 PV3 Market Prices $0.03 $1.16 $1.10 Nuclear Decommissioning Trust $0.02 PNM Resources Foundation Contribution in 2013 $0.02 Rio Bravo (Formerly Delta) Purchase $0.01 Nava
Slide 32: 2015 Guidance (Ongoing)
2015 Guidance (Ongoing) 2014 Ongoing EPS $1.49 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 February 20, 2015 Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short‐term debt(1) and LOC balances 28.2 20.1 8.5 56.8 Plus invested ca
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 2014 2008 2014 PNM Resources(1) Ba2 Baa3 PNM Resources(1) BB‐ BBB‐ PNM(1) Baa3 Baa2 PNM(1) BB+ BBB TNMP Baa3(1) A2(2) TNMP BB+(1)
Slide 35: PNM Resources Summary
PNM Resources Summary Continued earnings and dividend growth make PNM Resources an attractive investment • On target to meet 2016 total return target of 10% ‐ 13% • Potential earnings growth of 7% ‐ 9% through 2019 • Expected rate base CAGR of 5% ‐ 7% through 2019 • Potential investments beyond 2018
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(1) Aug. 2013 Aug. 2019 Republican Commissioners are appointed by Governor of Texas. Length of term is determined by the Govern
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 July 1, 2014. 39
Slide 40: PNM Load Including Impact of EE and DG
PNM Load Including Impact of EE and DG The economy in New Mexico has been sluggish with PNM Retail Energy Sales by Component customer growth during 2014 of 0.6%. PNM supports state and local economic development 8,000 efforts to make New Mexico more business‐friendly, which has resulted in an in
Slide 41: TNMP Load Including Impact of EE and DG
TNMP Load Including Impact of EE and DG The economy in Texas continues to be strong with TNMP Energy Sales by Component 6,000 customer growth during 2014 of 1.3%. Programs supporting energy efficiency and solar 5,000 distributed generation initiatives have negligible sales growth impacts at TNMP
Slide 42: PNM Energy Efficiency
PNM Energy Efficiency NM Efficient Use of Energy Act • Requires cumulative savings of 5% of load (based on 2005) by 2014 and 8% by 2020 • 411 GWh is PNM’s required cumulative energy efficiency savings in 2014 and 658 GWh by 2020 • Approximately 347 GWh in savings has been achieved through the end of
Slide 43: TNMP Energy Efficiency
TNMP Energy Efficiency Public Utility Regulatory Act • Establishes annual demand savings goals for electric utilities • TNMP’s goal is to achieve: • a 30% reduction in peak demand growth, subject to customer rate caps • energy savings using a 20% conservation load factor • TNMP’s 2015 goals are to a
Slide 44: 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% 44
Slide 45: 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 11% 9% Natural Gas 10% Coal 54% Coal Nuclear 46% 31% Nuclear 33% 45
Slide 46: PNM Service Territory and Generation Facilities
PNM Service Territory and Generation Facilities 46
Slide 47: PNM Plant EAF and Outages
PNM Plant EAF and Outages 2015 ‐ 2016 Outage Schedule Duration Time Unit in Days Period San Juan 1 46 Q1 2015 4 44 Q4 2015 3 14 Q4 2015 Four Corners 5 75 Q4 2015 4 21 Q1‐Q2 2016 5 10 Q4 2016 Palo Verde 3 30 Q2 2015 2 30 Q4 2015 1 30 Q2 2016 3 30 Q4 2016 47
Slide 48: 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 49: 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 50: San Juan BART Timeline
San Juan BART Timeline Expected Actual Action Item Completion Completion EIB approval of RSIP submitted by NMED September 5, 2013 Submitted RSIP to EPA for approval October 18, 2013 EPA review and approval of RSIP Application deemed complete by EPA December 17, 2013 Preliminary approval by EPA A
Slide 51: 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 Expected 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 52: 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 53: 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 54: 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