Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Investor Presentation (March 2018)
41 slides from Txnm Energy's investor presentation, March 2018
Slide 1: Investor Meetings
Investor Meetings March 2018
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: 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 6: Staying Focused and Flexible in a Changing Environment
Staying Focused and Flexible in a Changing Environment • TNMP Upcoming General Rate Review, continued TCOS filings • PNM Integrated Resource Plan • Coal-free generation • NMPRC Proposed Rulemaking Navigating portfolio by 2031; develop Workshops the Regulatory new generation portfolio Transforming En
Slide 7: Environment, Social and Corporate Governance
Environment, Social and Corporate Governance Have you heard… PNM plans to be coal free by 2031 Climate Change Report Strong Corporate Governance Climate change continues to pose risk and demand answers. We hear the Proxy Access Adopted October 2017 voices of our stakeholders, from investors and busi
Slide 8: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast Targeted Consolidated 2018-2021 Rate Base CAGR(1): 6% - 7% 2018–2022 Total Capital Plan: $2.7B $681 $17 Palo Verde Unit 3 added to (In millions) rate base $170 $527 $500 $17 $500 $504 $19 $17 $17 $170 $116 $186 $170 $170 $51 $35 $81 $146 $297 $141 $129 $157 $284 $2
Slide 9: Financial Overview: Potential Earnings Power
Financial Overview: Potential Earnings Power Targeted earnings growth of 6% for 2018 - 2021(1) • PNM growth results from the implementation of retail rates beginning in 2018, the additional investments to add 50 MW of solar to meet the 20% by 2020 RPS requirement and increased FERC Transmission busi
Slide 10: Earnings Growth: Achieving Targets
Earnings Growth: Achieving Targets Strong track record of meeting/beating annual expectations Actual Ongoing EPS vs Consensus Consensus Actual $2.00 $1.75 $1.50 $1.25 $1.00 2012 2013 2014 2015 2016 2017 Actuals $1.31 $1.41 $1.49 $1.64 $1.65 $1.94 Consensus $1.29 $1.38 $1.48 $1.59 $1.62 $1.88 % Diffe
Slide 11: Dividend Growth
Dividend Growth $2.16 $1.94 $1.92 $1.82 $2.04 $1.65 $1.49 $1.64 $1.06 $0.88 $0.97 $0.74 $0.80 Dec ‘17 Dec ‘15 Dec ‘16 Dec ‘13 Dec ‘14 2014 2015 2016 2017 2018E 2019E 2020E 2021E Ongoing EPS Indicated Annual Dividends • Annual common stock dividend raised by 9.3% to $1.06(1) per share in December 201
Slide 12: Credit Metrics: Liquidity and Debt Maturity Outlook
Credit Metrics: Liquidity and Debt Maturity Outlook Long-term Debt Maturities(1) $293 (in millions) $1,060 Maintain appropriate credit metrics $300 $172 $200 $100 $306 $100 Remain a solid 2018 2019 2020 2021 2022 and PNM TNMP Corporate Beyond investment grade rated company • Extended TNMP’s $75M rev
Slide 13: Credit Metrics: Rating Agency Perspectives
Credit Metrics: Rating Agency Perspectives Moody’s S&P Rating/Outlook Rating/Outlook PNM Resources Baa3(2) / Positive BBB+(2) / Negative PNM Baa2(3) / Positive BBB+(3) / Negative TNMP A1(4) / Stable A(4) / Negative PNM Resources FFO-to-Debt is maintained well within Moody’s Baa investment grade targ
Slide 14: PNM Overview
PNM Overview
Slide 15: PNM: Regulatory Update
PNM: Regulatory Update Filing Action Timing Docket No. Final order modifying revised settlement Phased-in (50% each year) agreement includes $57.9M increase, PNM 2018 General Rate Case with February 2018 16-00276-UT before the impacts of tax reform and cost implementation of debt true-up PNM Appeal
Slide 16: PNM: 2017 Integrated Resource Plan
PNM: 2017 Integrated Resource Plan Plans for Coal-Free Generation Portfolio by 2031 Roadmap for meeting customer demand over 20-year horizon, provides foundation for the selection of future resources Filed with Solicits and Revisited every NMPRC for incorporates three years review and public input a
Slide 17: 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 18: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) Q4 2017 2017 PNM vs. vs. 2018E 2019E Q4 2016 2016 PNM Residential & Commercial (1.3%) (0.7%) ~(0.3%) ~(0.3%) Total PNM Retail Load (1.5%) (0.9%) (0.7%) – 0% (0.5%) – 0.5% PNM Avg. C
Slide 19: 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 20: TNMP Overview
TNMP Overview
Slide 21: TNMP: Regulatory Update
TNMP: Regulatory Update Filing Action Timing Docket No. Expected to be approved TNMP TCOS Filed January 30, 2018 47802 March 2018 TNMP General Rate Case N/A Expected to be filed May 2018 N/A 21
Slide 22: TNMP: Upcoming General Rate Case
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 23: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) Q4 2017 2017 TNMP vs. vs. 2018E 2019E Q4 2016 2016 TNMP Total Volumetric Load(1) (1.0%) 1.2% 2% – 3% per year TNMP Demand-Based Load(2) 2.9% 4.0% 2% – 3% 7% – 8% TNMP Avg. End User
Slide 24: 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 25: Financial Overview
Financial Overview
Slide 26: Financial Overview: Consolidated Earnings Guidance (Ongoing)
Financial Overview: Consolidated Earnings Guidance (Ongoing) 2018 Earnings Guidance $1.82 Consolidated EPS $1.92 PNM TNMP Corp/Other $1.39 - $1.46 $0.54 - $0.56 ($0.11) – ($0.10) 2019 Earnings Guidance $2.04 Consolidated EPS $2.16 PNM TNMP Corp/Other $1.54 - $1.61 $0.63 - $0.66 ($0.13) – ($0.11) 26
Slide 27: Earnings Growth: Impacts of Tax Reform
Earnings Growth: Impacts of Tax Reform Provision Summary Effect on PNM & TNMP Effect on Holding Company Tax Rate 21% Reduced tax expense • Reduces tax benefit from holding beginning 2018 • Results in lower costs and revenues as tax company losses by ($0.02) savings are passed on to customers beginni
Slide 28: Financial Overview: Liquidity as of February 20, 2018
Financial Overview: Liquidity as of February 20, 2018 PNM Corporate/ Resources PNM TNMP Other Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $440.0 $75.0 $300.0 $815.0 As of 2/20/18: Short-term debt and LOC balances(2) $79.9 $24.0 $188.8 $292.7 Remaining availability 3
Slide 29: Appendix
Appendix
Slide 30: Potential Earnings Power
Potential Earnings Power Allowed 2018 Ongoing Earnings 2019 Ongoing Earnings 2020 Earnings 2021 Earnings Return / Guidance Midpoint Guidance Midpoint Potential Potential Equity Avg Rate Avg Rate Avg Rate Avg Rate Return EPS Return EPS EPS EPS Ratio Base Base Base Base 9.575% / PNM Retail(1) $2.3 B 8
Slide 31: Financial Impact of PNM 2018 General Rate Review
Financial Impact of PNM 2018 General Rate Review Phase I – Phase II – Financial impact under retail rate phase-in February 1, January 1, (includes federal and accelerated state tax amortization) 2018 2019 (in millions, except EPS) Revenue increase (net of tax reform give-back) $4.7 $10.3 (1) Acceler
Slide 32: PNM 2018 General Rate Case Bill Impact
PNM 2018 General Rate Case 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) Salt River Project (AZ) $144.23 averages Modesto Irrigation District
Slide 33: 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 34: NMPRC Rulemaking on Utility Ratemaking Policies
NMPRC Rulemaking on Utility Ratemaking Policies NMPRC opened an investigation and rulemaking to consider: • Developing a standardized method for determining ROE • After a baseline ROE is determined, should the ROE be adjusted under an incentive/disincentive mechanism? • Limitation of utility recover
Slide 35: PUCT Commissioners
PUCT Commissioners Term Name Term Began Party Ends DeAnn Walker (Chair) Sept. 2017 Aug. 2021 Republican Brandy Marty Marquez(1) Aug. 2013 Aug. 2019 Republican Arthur D’Andrea Nov. 2017 Aug. 2023 Republican Commissioners are appointed by the Governor of Texas and confirmed by the Senate. Length of te
Slide 36: 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 September 1, 2017 and PUCT Filings Interchange. 36
Slide 37: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,801 MW 2018 Forecasted As of 12/31/2017 Generation Mix (includes renewables related to Facebook data center) Renewables Renewables 15% Coal (1) 17% Coal 29% 35% Natural Gas Natural Gas 35% Nuclear 38% Nuclear 15% 16% (1) The potentia
Slide 38: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 12,774 GWh 2018 Forecasted Based on 12 months ending 12/31/17 Generation Mix (includes renewables related to Facebook data center) Renewables Renewables 9% 9% Natural Gas 9% Coal(1) 41% Coal Natural Gas 52% 22% Nuclear 30% Nuclear 28% (1) Th
Slide 39: 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 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) City of Farmington 8.5% (43 MW) Los Alamos County 7.2% (36.5 MW) 4 507 327 64.5% Utah Associated Municipal Power Systems (UAMPS) 7.0%
Slide 41: 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