Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (September 2016)
45 slides from Txnm Energy's investor presentation, Sep 14, 2016
Slide 1: Investor Meetings
Investor Meetings September 14-15, 2016
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 NYSE Ticker PNM PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and Market Cap $2.6B reliable electricity to customers and above industry average earnings and dividend growth to shareholders Generation
Slide 5: PNM Resources Strategic Direction
PNM Resources Strategic Direction Strategic Financial Goals Earn authorized return on regulated businesses Above industry average earnings growth Maintain solid investment grade credit ratings Above industry average dividend growth • Sustaining and • Investing in core growing the dividend capital, E
Slide 6: Earn Authorized Return on Regulated Businesses
Earn Authorized Return on Regulated Businesses PNM: Received Commission approval of the future test year definition to be used in general rate case filings Obtained approval of Clean Air Act Revised State Implementation Plan for Best Available Retrofit Technology (BART) on San Juan Generating St
Slide 7: Above Industry Average Earnings Growth: Rate Base Growth
Above Industry Average Earnings Growth: Rate Base Growth 2016 – 2019 Total Capital Plan: $1.7B PNM 2015-2019 Rate Base CAGR: 5 - 7%(1) TNMP 2015-2019 Rate Base CAGR: 7 - 9% $568 (In millions) $37 Palo Verde Unit 3 added to rate base $125 $415 $398 $19 $14 $353 $113 $101 $15 $114 $117 $132 $102 $293
Slide 8: Current PNM General Rate Case Status
Current PNM General Rate Case Status • Hearing Examiner Recommended Decision: • Non-fuel revenue increase of $41.3M versus $121.5M request • Retail rate base of $2,223M versus $2,458M request Impact to Timeline Key Rate Case Elements Recommended Original Rate (PNM Retail Share, net of ADIT) Decision
Slide 9: Upcoming PNM General Rate Case Key Elements
Upcoming PNM General Rate Case • Expected to be filed December 2016 • Test period: 2018 future test year Key Elements Palo Verde Unit 3 added to rate base (~$1,118/kW) San Juan Generating Station Units 2 and 3 retirement and recovery of half Included in of the undepreciated investment (estimated to
Slide 10: Maintain Solid Investment Grade Credit Ratings
Maintain Solid Investment Grade Credit Ratings Rate relief, cost control, and tax benefits keep FFO to Debt well within Moody’s Baa investment grade target range of 13% to 22% No equity issuance required through 2019 PNM Resources FFO to Debt Credit Ratings 22% Moody’s S&P 19% 19% PNM Resources Baa3
Slide 11: Above Industry Average Dividend Growth
Above Industry Average Dividend Growth The annual common stock dividend was raised by 10% in Dividend rate: December 2015 to $0.88 per share $0.88 (1) Expect above industry average dividend growth in the future Payout ratio: while targeting the 50% - 60% payout ratio range 55% (2) Dividend yield
Slide 12: PNM Overview
PNM Overview
Slide 13: PNM: Recent Accomplishments
PNM: Recent Accomplishments Progressing regulatory environment • Retail Renewable Rider implemented in August of 2012 with rates reset annually; 2015 revenue was $43M • Filed settlement on FERC Transmission formula rate case with 10% ROE • Approval of San Juan Generation Station Plan (BART) by FER
Slide 14: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2015 Q2 2016 vs. YTD 2016 vs. PNM Sales Volumes Q2 2015 YTD 2015 Retail Load: Residential 39% 1.9% (0.4%) Commercial 46% (0.9%) 0.5% Industrial 12% (7.0%) (7.1%) Total Retail (
Slide 15: 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 rat
Slide 16: PNM: Regulatory Accomplishments
PNM: Regulatory Accomplishments Subject Matter Accomplishments • NMPRC approved plan to retire San Juan Units 2 and 3 at December 31, 2017 and install BART SNCR on San Juan Units 1 and 4 2011 General Rate Case • NMPRC approved $72.1 million rate increase; 10.0% ROE (Aug. 2011) • NMPRC approved Renew
Slide 17: PNM: Pathway to Continued Success
PNM: Pathway to Continued Success 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 17
Slide 18: TNMP Overview
TNMP Overview
Slide 19: 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 • TCOS filing requesting additional revenue of $1.8M was approved with rates effective September 8, 2016 Energy efficiency program costs c
Slide 20: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and End Users (weather-normalized, leap-year adjusted) % of 2015 % of 2015 Q2 2016 YTD 2016 TNMP Sales Sales vs. vs. Volumes Revenues Q2 2015 YTD 2015 Volumetric Load(1): Residential 51% 8.0% 3.0% Commercial 46% 4.5% 2.6% Total Volumet
Slide 21: TNMP: Regulatory Accomplishments
TNMP: Regulatory Accomplishments Subject Matter Accomplishments PUCT: 2016 • PUCT approved $1.8M increase, effective September 2016 • PUCT approved $4.3M increase, effective March 2016 2015 • PUCT approved $1.4M increase, effective September 2015 • PUCT approved $4.4M increase, effective March 2015
Slide 22: 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 23: Financial Overview
Financial Overview
Slide 24: 2016 Guidance and Quarterly Distribution
Financial Overview: 2016 Guidance and Quarterly Distribution (Ongoing) 2016 Guidance $1.55 Consolidated EPS $1.65 PNM TNMP Corp/Other $1.08 - $1.16 $0.50 - $0.51 ($0.03) – ($0.02) 2016 Quarterly Distribution Q3 2016E Q4 2016E 46% 21% 24
Slide 25: Liquidity and Capital Structure
Financial Overview: 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 August 5, 2016: (In millions) Total Capacity(1) $450.0 $75.0 $300.0 $825.0 Less short-term debt(1) and LOC balances 105
Slide 26: PNM Resources Summary
Financial Overview: PNM Resources Summary Continued earnings and dividend growth make PNM Resources an attractive investment Expected rate base CAGR: • PNM: 5% - 7% through 2019 • TNMP: 7% - 9% through 2019 Other potential investments: • Renewable resources • Transmission investments • Grid enha
Slide 27: Appendix
Appendix
Slide 28: 2017 - 2019 Potential Earnings Power
2017 - 2019 Potential Earnings Power Last updated February 26, 2016 Allowed 2017 Earnings Potential 2018 Earnings Potential 2019 Earnings Potential Return / Equity Ratio Avg Rate EPS Avg Rate EPS Avg Rate EPS Base Base Base PNM Retail (1) 10% / 50% $2.4 B $1.50 $2.6 B $1.59 $2.5 B $1.58 PNM Renewabl
Slide 29: 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 30: 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 31: 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 32: Regulatory Update
Regulatory Update Filing Action Timing Docket No. NMPRC: General Rate Case Filing Filed August 27, 2015 Recommended decision issued August 4, 2016; 15-00261-UT decision expected September 2016; rates expected to be implemented October 2016 San Juan Generating Station Filed April 26, 2016 Hearing sch
Slide 33: NMPRC Commissioners and Districts
NMPRC Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Karen Montoya, District 1 2016(1) Democrat Vice Chair District 2 Patrick Lyons 2018 Republican Valerie Espinoza, District 3 2016(1) Democrat Chairman District 4 Lynda Lovejoy 2018 Democrat District
Slide 34: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends Donna Nelson Aug. 2008 Sept. 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 Gove
Slide 35: 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 Centerpoint AEP North AEP Central Source: TDU tariffs for retail delivery service effective March 1, 2016 35
Slide 36: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,787 MW 2018 Forecasted As of 12/31/2015 Generation Mix Renewables Renewables 15% 16% Coal Coal 35% 29% Natural Gas Natural Gas 35% 40% Nuclear Nuclear 15% 15% 36
Slide 37: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 10,763 GWh 2018 Forecasted Based on 12 months ending 12/31/15 Generation Mix Renewables 7% Renewables 10% Natural Gas 12% Coal Natural Gas 50% 17% Coal 44% Nuclear 31% Nuclear 29% 37
Slide 38: 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 39: PNM Plant EAF and Outages
PNM Plant EAF and Outages 100.0% 2016 - 2017 Outage Schedule 92.0% 91.8% Duration Time Unit in Days Period 80.0% 72.3% 70.4% 71.8% Four Corners 60.7% 5 95 Q3-Q4 2017 60.0% Palo Verde 3 34 Q4 2016 40.0% 2 34 Q2 2017 1 34 Q4 2017 20.0% 0.0% San Juan Four Corners Palo Verde 12 months ending 6/30/15 12
Slide 40: 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 41: PNM Palo Verde Nuclear Generating Station Unit and 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(1) 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 • Un
Slide 42: PNM Environmental Control Equipment at Coal Units
PNM Environmental Control Equipment at Coal Units PNM Share Low NOx Activated Coal Unit Capacity Burners/ Carbon SNCR (3) SCR (3) Baghouse (4) Scrubbers (MW) Overfired Air Injection (2) San Juan Unit 1 170 X X X X X San Juan Unit 2 (1) 170 X X X X San Juan Unit 3 (1) 248 X X X X San Juan Unit 4 195
Slide 43: 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 (State Installation of SNCR technology on Units 1 and 4 completed in 2016; retirement of Minimal remaining costs Alternative) – SNCR Units 2 and 3 schedu
Slide 44: 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 $94M SCR controls for NOx on Units 4 & 5 by July 31, 2018. On
Slide 45: Clean Power Plan
Clean Power Plan Summary of Clean Power Plan • On October 23, 2015, EPA published in the Federal Register the Clean Power Plan (CPP) under section 111(d) of the Clean Air Act to regulate GHGs from fossil fuel generation. The CPP is projected to reduce CO2 emissions by 32% in the U.S. from 2005 lev
PNM Resources — Investor Presentation (September 2016) on 6ix