Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (June 2020)
55 slides from Txnm Energy's roadshow presentation, June 2020
Slide 1: Investor Meetings
November 1, 2019 Investor Meetings June 2020
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 Lisa.Goodman@pnmresources.com Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements made i
Slide 3: COVID-19, 2020 Guidance and Regulatory Updates
COVID-19, 2020 Guidance and Regulatory Updates
Slide 4: COVID-19 Scenario Analysis: Current Status
COVID-19 Scenario Analysis: Current Status • Continued scenario analysis and planning under 3 different stages: • Duration / Economic Conditions are entering Stage 2 with some restrictions lifted, monthly impacts will continue to be evaluated during phased re-openings • No Workforce and Supply Chain
Slide 5: COVID-19 Load Impacts
COVID-19 Load Impacts May trends are in line with planning assumptions, impacts of phased state re-openings to be evaluated in June PNM Stage 1 and 2 load projections TNMP Stage 1 and 2 load projections • Residential COVID-19 increase +5% • Volumetric COVID-19 increase +5% • Commercial COVID-19 redu
Slide 6: 2020 Ongoing Earnings Guidance Affirmed
2020 Ongoing Earnings Guidance Affirmed Based on strong May weather impacts, Stage 2 can be managed within guidance $2.16 Consolidated EPS $2.26 March Reduced load impacts were offset by warmer Stage 1: April Manage within than normal May temperatures at PNM, lower May Guidance interest and financ
Slide 7: Regulatory Updates
Regulatory Updates PNM Decoupling Filing • Filed Petition for Approval of Rate Adjustment Mechanism to Remove Regulatory Disincentives on May 28, 2020 • Full decoupling focuses on recovery of fixed costs for residential and small commercial customers • Current rate design recovers these fixed costs
Slide 8: PNM Resources Overview
PNM Resources Overview
Slide 9: PNM Resources Overview
PNM Resources Overview Energy holding company based in Albuquerque, New Mexico • Vertically integrated utility in with two fully regulated electric utility subsidiaries New Mexico focused on clean NYSE: PNM $3.2B market cap energy transformation • $3.0B rate base • 500k retail customers Service Terr
Slide 10: Key Investment Themes
Key Investment Themes Create shareholder value through a clean and bright energy future Clean Energy Critical Electricity Strong Financial Focus Infrastructure Profile Reliably support Transparent growth Transformation of PNM growth and integration plan driven by rate generation portfolio of clean e
Slide 11: Focused on Sustainability
Focused on Sustainability Environment Social Governance Eliminating emissions Fostering tribal relationships Executing strong governance • Carbon-free transition aligns with • Active outreach with numerous • 9 of 10 directors independent Paris Climate Agreement and is tribes in New Mexico • 40% fema
Slide 12: Strategic Direction
Strategic Direction • Transform PNM generation portfolio to exit coal and be 100% emissions-free by 2040 • Enhance PNM transmission grid to facilitate the integration of renewable generation and battery storage • Invest in TNMP infrastructure to reliably support customer demand across high-growth se
Slide 13: Strong Financial Profile
Strong Financial Profile • Expect 8.9% rate base growth 2019-2023 Rate Base • PNM and TNMP T&D investment continues to Growth support critical infrastructure and reliability projects • Generation replacement power investments are balanced with additional opportunities for PNM T&D Earnings • Target:
Slide 14: 2020 - 2023 Investment Plan
2020 – 2023 Investment Plan $3.3B investment plan results in 8.9% rate base growth $35M of incremental PNM T&D added in 2020 to support new customer additions $993 $21 $27 $853 $177 $27 $48 $25 $771 $695 $68 $109 $21 $268 $72 $94 $128 $77 $82 $211 $182 $202 (in millions) $174 $337 $306 $342 $322 $34
Slide 15: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power Earnings Growth Target 5%-6% Incorporates impact of January 2020 forward equity offering dilution beginning 2021 2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings Allowed Return / Guidance Midpoint Potential Potential Potential Equity Avg Rate Avg R
Slide 16: Dividend Growth
Dividend Growth Dividend Growth to Mirror Earnings Growth at 5%-6% $2.68 $2.51 $2.37 $2.16 $2.21 $1.94 $2.00 $1.42- $1.36- $1.46 $1.23 $1.29- $1.16 $1.38 $0.97 $1.06 $1.30 Dec ‘19 Dec ‘17 Dec ‘18 Dec ‘16 56% payout 2017 2018 2019 2020E 2021E 2022E 2023E Actual Ongoing EPS Midpoint Earnings Guidance/
Slide 17: Liquidity and Debt Maturity Outlook
Liquidity and Debt Maturity Outlook Long-term Debt Maturities (in millions) $843 $1B available liquidity $450 $1,203 Maintain appropriate $140 $496 $57 credit metrics and 2020 2021 2022 2023 and Beyond investment grade PNM TNMP Corporate • Completed: ratings • $290 million forward equity offering in
Slide 18: Key Takeaways
Key Takeaways Providing environmentally responsible, affordable and reliable electricity to key markets in New Mexico and growing markets in Texas Executing clear growth strategy to deliver 5%-6% earnings and dividend growth Maintaining commitment to strong ESG practices, including transitioning awa
Slide 19: PNM
PNM
Slide 20: PNM Load and Economic Development
PNM Load and Economic Development Retail Load Growth • Steady customer growth has been offset Year-over Year- Q1 2020 2019 2018 by growing impacts of energy efficiency Growth • Decoupling filing aims to mitigate Total Retail Load 1.1% 0.3% 0.6% the under-recovery of fixed costs PNM Avg. Consumers 0.
Slide 21: New Mexico Energy Policy: Energy Transition Act
New Mexico Energy Policy: Energy Transition Act Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019 • Renewable Portfolio Standards and Carbon-Free Requirement 2045 100% Carbon-Free 80% Renewables • Prev
Slide 22: Executing the Energy Transition Act
Executing the Energy Transition Act Our Goal: Transform PNM Generation to 100% Carbon-Free by 2040 Step 1: Exit Coal Generation by 2031 Reduction of MW Coal Capacity • San Juan Generating Station: 983 22% reduction • Retired Units 2 and 3 in 2017 (221 MWs); Retirement of Units 1 and 4 in 2022 (562 M
Slide 23: Transform PNM Generation Portfolio
Transform PNM Generation Portfolio Balance appropriate level of baseload resources to be emissions-free by 2040 and shift towards additional low-cost renewables and flexible resources San Juan abandonment, securitization and replacement power l San Juan abandonment/ Developing plans to exit Four Cor
Slide 24: San Juan Recommended Replacement Power Scenario Details
San Juan Recommended Replacement Power Scenario Details • Competitive RFP processes resulted in a cost-effective mix of resources owned by PNM and third-party providers • To manage the risks of integrating new battery storage technology, total storage capacity does not exceed 5% of peak load and the
Slide 25: Renewable and Battery Storage Portfolio
Renewable and Battery Storage Portfolio PNM Renewable and Battery Storage Capacity 1445 MW 130.5 2022 15 2021 +350MW(1) solar 2020 +50MW solar +130MW(1) battery 662 609 MW +50MW solar +50MW solar storage 0.5 15 +140MW wind 356 +166MW wind 530 237 2019 Solar Wind Geothermal Battery Storage 2022 157 M
Slide 26: PNM Retail Transmission Opportunities
PNM Retail Transmission Opportunities • Transmission service to portions of New Mexico’s grid is fully committed • The integration of new renewable generation and battery storage will require additional T&D investment Cumulative Capacity Additions 2023 – 2038 (MW) Included in Recommended San Juan Re
Slide 27: FERC Transmission Opportunities
FERC Transmission Opportunities New Mexico’s abundant solar and wind resources also attract third-party development, increasing the demand for transmission capacity and creating rate base growth opportunities: • PNM acquisition of Western Spirit transmission line: $285M in 2021 • New Mexico added wi
Slide 28: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts Term District Name Party NMPRC Districts and Ends PNM Service Areas District 1 Cynthia Hall 2020(1) Democrat District 2 Jefferson Byrd 2022(1) Republican Valerie Espinoza, District 3 2020 Democrat Vice-Chairman Theresa Becenti-Aguilar, District 4 2022(1) Democrat Ch
Slide 29: PNM Regulatory Agenda
PNM Regulatory Agenda Filing Action Timing Docket No. PNM: Decoupling Filing (Petition for Approval of Rate Filed with the NMPRC on May 28, 2020 Pending 20-00121-UT Adjustment Mechanism to Remove Regulatory Disincentives) Deferral of Incremental costs PNM and other utilities filed joint motion April
Slide 30: PNM Decoupling Filing
PNM Decoupling Filing Full decoupling filing seeks to recover previously authorized fixed costs, current rate design attempts to recover fixed costs through volumetric rates Stand-alone full decoupling filing Customer bills more accurately reflect the Filed May fixed, non-fuel costs of the service p
Slide 31: Decoupling Financial Impacts – 2020 / 2021 / 2022
Decoupling Financial Impacts – 2020 / 2021 / 2022 2020 2021 2022 Rates adjusted to Customer Bills No Impact No impact reflect prior year under/over recovery Revenues adjusted for Includes recovery under/over true- recovery up foroncustomer Revenues adjusted for Earnings No based customeruse use Incl
Slide 32: PNM Bills Remain Below National and Regional Averages
PNM Bills Remain Below National and Regional Averages Comparison of Average Residential Bills(1) Western Region Average Bills by Utility Arizona Public Service Co (AZ) $137.51 LADWP (CA) Customer bill impacts of Imperial Irrigation District (CA) Salt River Project (AZ) increased investments are Ente
Slide 33: TNMP
TNMP
Slide 34: TNMP Demand and Infrastructure Investment
TNMP Demand and Infrastructure Investment Texas growth drives infrastructure needs • TNMP has seen consistent consumer growth driven by strong Texas economy Year-over Year-Growth 2017 2018 2019 • Rapid demand-based load growth over recent years in the Commercial and Industrial classes driven by ener
Slide 35: TNMP Low-Risk Revenue Profile
TNMP Low-Risk Revenue Profile 2019 TNMP Revenues $295M Retail Revenues $67M Wholesale Revenues Includes $94M of pass-through transmission Fixed transmission investment recovery; can expense recovery, trued up twice annually be adjusted twice annually through TCOS filings, $81M approved March 2020 3%
Slide 36: PUCT Commissioners and TNMP Regulatory Agenda
PUCT Commissioners and TNMP Regulatory Agenda PUCT Commissioners Name Term Began Term Ends Party DeAnn Walker (Chair) Sept. 2017 Sept. 2021 Republican Arthur D’Andrea Nov. 2017 Sept. 2023 Republican Shelly Botkin June 2018 Sept. 2025 Republican Commissioners are appointed by the Governor of Texas an
Slide 37: TNMP Rate Recovery Framework
TNMP Rate Recovery Framework DCOS (Distribution TCOS (Transmission General Rate Review Cost of Service) Cost of Service) Standard rate review involving Pre-defined schedules limited to comprehensive filing, distribution investments with discovery, interveners, discovery, interveners, hearings; Pre-d
Slide 38: Appendix
Appendix
Slide 39: Our Response to COVID-19
Our Response to COVID-19 • Identification of critical workforce, staging of backups, limited access to control rooms and critical assets Safety of • Minimize critical employee exposure, inter-crew our Team exposures and exposures with the public: eliminate group gatherings, deploy additional fleet v
Slide 40: New Mexico and Texas Status Updates
New Mexico and Texas Status Updates New Mexico Status • New Mexico Governor and Economic Recovery Council begin multi-phased plan for “gradual and safe reopening”: limited re-openings began May 16th with capacity restrictions, additional openings beginning June 1st, some areas of state remain restri
Slide 41: Continued Transparency into COVID-19 Financial Impacts
Continued Transparency into COVID-19 Financial Impacts March • Q1 results in line with assumptions Stage 1 • April and May results in line with planning April Manage within assumptions, positive offsets from warmer Guidance weather at PNM May Summer Stage 2 • Continue to evaluate June temperatures M
Slide 42: Mitigating Effects of COVID-19 on Customer Collections
Mitigating Effects of COVID-19 on Customer Collections Regulatory strategies reflect our focus on benefitting customers and communities PNM joint filing on April 27, 2020 with requests deferral of uncollectible payments and incremental costs in response to COVID-19 to regulatory asset, recovery dete
Slide 43: PNM COVID-19 Considerations
PNM COVID-19 Considerations PNM Resources • PNM comprises the majority of customer Non-Fuel Revenues non-fuel revenues • New Mexico’s largest employers include government and health care, with a larger New number of small/medium businesses Mexico 74% PNM 2019 Revenues by Region Central Customer Clas
Slide 44: TNMP COVID-19 Considerations
TNMP COVID-19 Considerations • TNMP is a smaller portion of customer non-fuel revenues PNM Resources Non- Dallas/ Fuel Revenues and is less impacted by changes in load/demand: North TX • Transmission recovery (45% of revenues), Area trued up twice per year 9% • Majority of demand-based bills based o
Slide 45: COVID-19 Load: Assumptions and EPS Rules of Thumb
COVID-19 Load: Assumptions and EPS Rules of Thumb PNM Planning Assumptions: RULE OF THUMB Monthly EPS Impact 10% change in load Residential Commercial Stage 1 and 2 Stage 3 = Residential + 5% - 5% April – May +/- $0.02 +/- $0.02 Commercial -15% - 5% +/- $0.03- +/- $0.03- June – September Industrial
Slide 46: San Juan Abandonment, Securitization and Replacement Power
San Juan Abandonment, Securitization and Replacement Power Approved Approved Pending Approval Abandonment Replacement Power Securitization ● Requests ● $283M undepreciated ● Recommended abandonment of San investment in San Juan, scenario balances Juan coal plant after proceeds available to environme
Slide 47: San Juan Securitization Next Steps
San Juan Securitization Next Steps Abandonment and Securitization Securitization next steps: Orders approved April 1, 2020: April 1, 2020: Irrevocable NMPRC ▪ Approval to abandon Units 1 and 4 financing order ▪ Grants irrevocable financing order authorizing the issuance of securitization Early 2022:
Slide 48: San Juan and Four Corners Generating Stations Ownership and Participants
San Juan and Four Corners Generating Stations Ownership and Participants San Juan Generating Station Total PNM PNM Unit Other Participants/Ownership MW MW Ownership 1 340 170 50% Tucson Electric 50% (170 MW) City of Farmington 8.5% (43 MW) 4 507 392 77.3% Los Alamos County 7.2% (36.5 MW) Utah Associ
Slide 49: Palo Verde Nuclear Generating Station Ownership and Leases
Palo Verde Nuclear Generating Station Ownership and Leases MW Owned vs. Leased Unit 1 Unit 2 Unit 3 Owned 2.3% 30 MW Owned 9.5% 124 MW Owned 10.2% 134 MW Leased 7.9% 104 MW Leased 0.7% 10 MW Leased 0% 0 MW Total 10.2% 134 MW Total 10.2% 134 MW Total 10.2% 134 MW Lease Expiration • Unit 1: January 15
Slide 50: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – Gulf Coast Region provided 50% of 2019 retail revenues • Regional economy driven largely by oil refining TNMP 2019 Revenues by Region and petrochemical industries, supplemented by North/ the aerospace and medical industries Central TX ~35% • Sprawl from Houston has led
Slide 51: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – North/Central TX Region provided 35% of 2019 retail revenues TNMP 2019 Revenues by Region • Dallas region is home to 250 corporate North/ headquarters that each employ more than Central TX ~35% 1,000 people globally, 22 Fortune 500 companies and 8 of Forbes’ largest pr
Slide 52: TNMP Regional Breakdown
TNMP Regional Breakdown TNMP – West Texas Region provided 15% of 2019 retail revenues TNMP 2019 Revenues by Region • ~50% of 2019 revenues derived from retail North/ transmission customers with recovery trued Central TX ~35% up twice per year • ~25% of 2019 revenues demand derived from West Texas hi
Slide 53: 2020 Consolidated Ongoing Earnings Guidance
2020 Consolidated Ongoing Earnings Guidance 2020 Earnings Guidance $2.16 Consolidated EPS $2.26 2020 Annual EPS Distribution by Quarter 55% 22% 15% 8% Q1 Q2 Q3 Q4 53
Slide 54: 2020 - 2023 Potential Earnings Power
2020 - 2023 Potential Earnings Power 2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings Allowed Return / Guidance Midpoint Potential Potential Potential Equity Avg Rate Avg Rate Avg Rate Avg Rate Ratio Return EPS EPS EPS EPS Base Base Base Base 9.575% / PNM Retail(1) $2.5 B 9.5% $1.47 $
Slide 55: Liquidity as of May 1, 2020
Liquidity as of May 1, 2020 PNM Corporate/ Resources PNM TNMP Other Consolidated Financing Capacity(1): Revolving credit facilities $440.0 $75.0 $340.0 $855.0 As of 05/01/20: Short-term debt and LOC balances $47.5 $0.1 $137.4 $185.0 Remaining availability 392.5 74.9 202.6 670.0 Invested cash 1.9 21.