Txnm Energy, Inc. · NYSE:TXNM
Txnm Energy — PNM Resources — Non-Deal Roadshow (March 2017)
51 slides from Txnm Energy's roadshow presentation, March 2017
Slide 1: Investor Meetings Europe March 2017
Investor Meetings Europe March 2017
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 NYSE Ticker PNM providing environmentally responsible, affordable and reliable electricity to Market Cap $2.9B customers and above industry average earnings and dividend growth to Enterprise Value $5.6B s
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 in a Changing Environment
Staying Focused in a Changing Environment • PNM 2018 General Rate Case • PNM AMI Filing • TNMP Upcoming General • 2017 Integrated Rate Case Improving Resource Plan • Tax Reform Regulatory • San Juan Generating Transforming Environment Station Scenarios PNM’s • Sustainability Portal Generation Portfo
Slide 7: Transforming to a Cleaner Energy Profile
Transforming to a Cleaner Energy Profile Investments Existing resource portfolio includes 107 MW of utility-scale solar capacity, 306 MW of wind in Renewable capacity, 4 MW geothermal capacity and solar battery storage project Generation New Mexico Renewable Portfolio Standard requires 20% of retail
Slide 8: Emissions Reductions
Emissions Reductions Carbon Emissions The shutdown of two units at San Juan Generating Station at the end of 2017 reduces PNM’s owned greenhouse gas emissions by 40%. PNM continues to reduce and avoid GHG emissions from its operations by expanding generation capacity from solar, wind and geother
Slide 9: PNM 2017 Integrated Resource Plan
PNM 2017 Integrated Resource Plan Additional Requirements Roadmap for meeting customer demand over 20-year from BART Agreement horizon, provides foundation for the selection of future resources • Two potential resource portfolios to be included in 2017 IRP Filed with Solicits and One with and one
Slide 10: Rate Base Growth: Capital Forecast
Rate Base Growth: Capital Forecast 2017 – 2020 Total Capital Plan: $1.7B PNM 2016-2020 Rate Base CAGR: 4 - 6%(1) TNMP 2016-2020 Rate Base CAGR: 8 - 10% (In millions) $517 Expect future Future Palo Verde Unit 3 added refinements refinements $58 to rate base include: $435 $395 $15 $404 $15 • Outcome o
Slide 11: Earnings Growth: PNM 2018 General Rate Case Timeline
Earnings Growth: PNM 2018 General Rate Case Timeline 10/8/2017 thru 12/7/2016 thru 1/5/2018 10/8/2017 1/1/2018 12/7/2016 3 Month Allowance Statutory 9+1 Expected Effective Rate Case Filed for Additional Month Suspension Date Consideration by Period NMPRC Procedural Schedule Settlement discussions Ma
Slide 12: Earnings Growth: PNM 2018 General Rate Case
Earnings Growth: PNM 2018 General Rate Case • Requested revenue increase of $99 million Based on calendar year 2018 test period and 10.125% ROE 44% of request relates to Compliance Items for BART and Four Corners Revenue Requirement Rate Design • BART items • Increase fixed charge Palo Verde U
Slide 13: Earnings Growth: Potential Earnings Power
Earnings Growth: Potential Earnings Power Potential Earnings Power supports 2015 – 2019 earnings growth target of 7% - 8%(1) • PNM growth achieved through recovery of capital investments: Rates implemented October 2016 bring rates forward from levels set in previous 2010 filing, accounting for sig
Slide 14: Earnings Growth: New Mexico Supreme Court Appeal
Earnings Growth: 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 64MW Unit
Slide 15: Earnings Growth: Tax Reform Considerations
Earnings Growth: Tax Reform Considerations PNM Resources well-positioned for tax reform, customers benefit Business Key Tax Reform Considerations Segments Reduced Tax Rate Interest Non-deductibility 100% Bonus Depreciation Decreases the tax In rate base, decreases from expense flowing higher ADIT li
Slide 16: Maintain Solid Investment Grade Credit Ratings
Maintain Solid Investment Grade Credit Ratings Strong liquidity and balanced capital structure supports investment grade credit metrics at Moody’s and S&P Available Liquidity Corporate/ PNM Resources PNM TNMP Other Consolidated Financing Capacity as of February 21, 2017: (In millions) Total Capacity
Slide 17: Dividend Growth
Dividend Growth $1.87 $1.64 $1.65 $1.77 $1.49 7% - 8% $1.31 $1.41 Earnings Growth 2015 – 2019(2) $0.88 $0.97 53%(1) $0.74 $0.80 Dec ‘16 $0.58 $0.66 Dec ‘15 payout Dec ‘13 Dec ‘14 Feb ‘12 Feb ‘13 ratio 2012 2013 2014 2015 2016 2017E 2018E 2019E Ongoing EPS Indicated Annual Dividends • Annual common s
Slide 18: PNM Overview
PNM Overview
Slide 19: PNM: Recent Accomplishments
PNM: Recent Accomplishments • Progressing regulatory environment Received Commission approval of the future test year definition Implemented FERC Transmission formula rate methodology for annual filings based on approved 10% ROE Approval of San Juan Generation Station Plan (BART) by FERC and N
Slide 20: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2016 Q4 2016 vs. 2016 vs. PNM Sales Volumes Q4 2015 2015 Retail Load: Residential 40% 1.3% 0.1% Commercial 47% (1.0%) 0.5% Industrial 11% (8.7%) (8.8%) Total Retail Load (1.1%)
Slide 21: PNM: 2018 General Rate Case Drivers
PNM: 2018 General Rate Case Drivers Incremental Revenue Rate Base Requirement (in millions) (in millions) Compliance Items: BART Items: Palo Verde Unit 3 $96 $45 Retirement of San Juan Units 2 and 3 (95) (29) 132 MW of San Juan Unit 4 11 16 Accelerated Depreciation on San Juan SNCRs - 3 Subtotal BAR
Slide 22: 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) Modesto Irrigation District (CA) $142.36 averages APS (AZ) SRP (AZ)
Slide 23: PNM: Investment in Renewable Energy
PNM: Investment in Renewable Energy • The New Mexico Renewables Portfolio Standard requires a percentage of retail sales to be generated from renewable resources 15% by 2015, 20% by 2020 New Mexico renewable energy profile(1) • Solar: Among top 10 states in per-capita solar capacity New Mexico • W
Slide 24: 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 501 GWh in savings has been achieved through the end o
Slide 25: PNM: Palo Verde Nuclear Generating Station
PNM: Palo Verde Nuclear Generating Station • Largest nuclear generating plant in the United States , operated by Arizona Public Service Company (subsidiary of Pinnacle West) • PNM has 10.2% ownership interest (402 MW) three-unit nuclear generation station Unit In Service License Unit 1 1985 2045 Uni
Slide 26: PNM: New Mexico Public Regulation Commission: Commissioners and Districts
PNM: New Mexico Public Regulation Commission: Commissioners and Districts NMPRC Districts and PNM Service Areas District Name Term Ends Party Cynthia Hall, District 1 2020 Democrat Vice Chairman District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovej
Slide 27: PNM: Regulatory Accomplishments
PNM: Regulatory Accomplishments • NMPRC Approvals: • General Rate Cases: • August 2015 Filing: $61.2 million rate increase; 9.575% ROE (Sep. 2016); certain disallowed items under appeal with New Mexico Supreme Court • 2011 Filing: $72.1 million rate increase; 10.0% ROE (Aug. 2011) • Rate Riders • Re
Slide 28: 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 29: TNMP Overview
TNMP Overview
Slide 30: TNMP: Recent Accomplishments
TNMP: Recent Accomplishments • Predictable regulatory environment TCOS and DCOS filings provide the ability to recover transmission and distribution cost of service investments on a timely basis o TCOS filing requesting additional annual revenue of $4.8M expected to be approved with rates effectiv
Slide 31: TNMP: Load and Economic Conditions
TNMP: Load and Economic Conditions Regulated Retail Energy Sales and End Users (weather-normalized, leap-year adjusted) % of 2016 % of 2016 Q4 2016 2016 TNMP Sales Sales vs. vs. Volumes Revenues Q4 2015 2015 Volumetric Load(1): Residential 51% 3.0% 3.4% Commercial 46% 2.7% 2.9% Total Volumetric Load
Slide 32: TNMP: Upcoming General Rate Case Key Elements
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 33: TNMP: Rates Compare Favorably in Texas
TNMP: Rates Compare Favorably in Texas Residential Total Wires Charge for 1,000 kWh $70 $60 $50 $40 $30 $20 $10 $- Oncor TNMP Centerpoint AEP North AEP Central Source: TDU tariffs for retail delivery service effective September 1, 2016 33
Slide 34: TNMP: Energy Efficiency
TNMP: Energy Efficiency Public Utility Regulatory Act • Establishes annual demand and energy savings goals for electric utilities • TNMP’s goal is to achieve: • 0.4% of its summer weather-adjusted peak demand savings, subject to customer rate caps • energy savings using a 20% conservation load facto
Slide 35: TNMP: PUCT Commissioners
TNMP: 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 th
Slide 36: TNMP: Regulatory Accomplishments
TNMP: Regulatory Accomplishments Approved TCOS Date • Utilization of semi-annual Transmission Increase (Annual) Effective Cost of Service (TCOS) filing mechanism to Expected $4.8M Mar. 2017 update rates based on transmission $1.8 M Sept. 2016 investments $4.3 M Mar. 2016 • Advanced Metering System r
Slide 37: 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 38: Financial Overview
Financial Overview
Slide 39: Consolidated Earnings Guidance Range and Quarterly Distribution Guidance
Financial Overview: Consolidated Earnings Guidance Range and Quarterly Distribution Guidance (Ongoing) 2017 Guidance $1.77 Consolidated EPS $1.87 PNM TNMP Corp/Other $1.30 - $1.37 $0.51 - $0.53 ($0.04) – ($0.03) 2017 Quarterly Ongoing Earnings Distribution 47% 24% 16% 13% Q1 2017E Q2 2017E Q3 2017E
Slide 40: Financial Overview: PNM Resources Summary Long-term Growth Potential
Financial Overview: PNM Resources Summary Long-term Growth Potential • Expected rate base CAGR: PNM: 4% - 6% through 2020 TNMP: 8% - 10% through 2020 • Key drivers for potential investments: Economic development activities in New Mexico Advanced Metering Infrastructure (AMI) at PNM San Jua
Slide 41: Appendix
Appendix
Slide 42: PNM Resources Leadership Team: Proven Experience
PNM Resources Leadership Team: Proven Experience Pat Vincent-Collawn Chairman, President, and CEO Previous Experience: Xcel Energy Public Service Company of Colorado Arizona Public Service Chuck Eldred Ron Darnell Patrick Apodaca Chris Olson EVP and CFO SVP, Public Policy SVP, General Counsel VP Uti
Slide 43: 2017 - 2019 Potential Earnings Power
2017 - 2019 Potential Earnings Power Allowed 2017 Guidance Midpoint 2018 Earnings Potential 2019 Earnings Potential Return / Avg Rate Avg Rate Avg Rate Equity Ratio Return EPS EPS EPS Base Base Base PNM Retail (1) 9.575% / 50% $2.3 B 9.3% $1.33 $2.4 B $1.42 $2.4 B $1.41 Supreme Court Appeal (2) $0 -
Slide 44: PNM 2016 General Rate Case Final Order
PNM 2016 General Rate Case Final Order • NMPRC approved final order Sept. 28, 2016: Non-fuel revenue increase of $61.2M versus $121.5M request Retail rate base of $2,263M versus $2,458M request Key Rate Case Elements Commission Original Impact to (PNM Retail Share, net of ADIT) Order Request Rat
Slide 45: PNM 2018 General Rate Case Energy Sales and LCFC
PNM 2018 General Rate Case Energy Sales and LCFC Energy Sales • Compared to the last filed retail load forecast, load decline has contributed to a $11 million revenue requirement deficiency Customer growth is offset by declining usage driven by energy efficiency, changes to codes and standards, an
Slide 46: PNM Diversified Generation Portfolio: Capacity
PNM Diversified Generation Portfolio: Capacity Capacity Capacity 2,791 MW 2018 Forecasted As of 12/31/2016 Generation Mix (includes renewables related to Facebook contract) Renewables Renewables 15% 18% Coal Coal 29% 35% Natural Gas 35% Natural Gas Nuclear 38% Nuclear 15% 15% 46
Slide 47: PNM Diversified Generation Portfolio: Energy
PNM Diversified Generation Portfolio: Energy Energy Energy 11,147 GWh 2018 Forecasted Based on 12 months ending 12/31/16 Generation Mix (includes renewables related to Facebook contract) Renewables 9% Renewables 11% Coal Natural Gas 41% 11% Coal 51% Natural Gas 20% Nuclear 29% Nuclear 28% 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 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
Slide 50: PNM Impact of Environmental Regulation- SJGS
PNM Impact of Environmental Regulation- SJGS Estimated Compliance Costs San Juan Generating Station Comments (PNM Share) Clean Air Act – Regional Haze Installation of SNCR technology on Units 1 and 4 completed in 2016; retirement of Units 2 and 3 Minimal remaining costs (State Alternative) – SNCR sc
Slide 51: PNM Impact of Environmental Regulation- Four Corners
PNM Impact of Environmental Regulation- Four Corners Estimated Compliance Costs Four Corners (Units 4 and 5) Comments (PNM Share) Clean Air Act – Regional Haze – Final BART determination filed with EPA on Dec. 30, 2013. Impact to PNM: SCR controls for $94M SCR NOx on Units 4 & 5 by July 31, 2018. On