TXNM Energy, Inc. · NYSE:TXNM
TXNM Energy — PNM Resources — Non-Deal Roadshow (January 2017)
43 slides from TXNM Energy's roadshow presentation, Jan 12, 2017
Slide 1: Investor Meetings
Investor Meetings January 12-13, 2017
Slide 2: Contact Information and Safe Harbor Statement
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Assistant Treasurer Lisa Goodman Director, Investor Relations and Shareholder Services Manager, Investor Relations U.S. 1-505-241-2227 U.S. 1-505-241-2160 [email protected] Lisa.Goodman
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 Goals Rate Base directives, reliability, evolving customer needs and Growth transforming industry opportunities Earn authorized return on regulated businesses Above industry average Earnings • Realizing earnings pote
Slide 6: 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) $516 Expect future Future Palo Verde Unit 3 added refinements refinements $57 to rate base include: $435 $15 $404 $395 $15 • Outcome o
Slide 7: Earnings Growth: Potential Earnings Power
Earnings Growth: Potential Earnings Power Potential Earnings Power supports 2015 – 2019 earnings growth target of 7% - 8% PNM: growth achieved through new retail rates implemented October 2016 and 2018 General Rate Case filing • Palo Verde Unit 3 added to rate base in 2018 • 2019 reflects potential
Slide 8: 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 9: Dividend Growth
Dividend Growth $1.87 $1.65 $1.64 $1.60 $1.77 $1.49 7% - 8% $1.31 $1.41 Earnings Growth 2015 - 2019 $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 2016E 2017E 2018E 2019E Ongoing EPS Indicated Annual Dividends • Annual comm
Slide 10: 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 Improving Rate Case Resource Plan Regulatory • San Juan Generating Transforming Environment Station Scenarios PNM’s • Sustainability Portal Generation Portfolio Supportin
Slide 11: PNM Overview
PNM Overview
Slide 12: 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 13: PNM: 2018 General Rate Case Timeline
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 conference March 7, 2017 Speci
Slide 14: 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 15: 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 16: 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 64MW Unit 2 Capacity P
Slide 17: PNM: Load and Economic Conditions
PNM: Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) % of 2015 Q3 2016 vs. YTD 2016 vs. PNM Sales Volumes Q3 2015 YTD 2015 Retail Load: Residential 39% 0.2% (0.2%) Commercial 46% 1.8% 1.0% Industrial 12% (12.1%) (8.9%) Total Retail Lo
Slide 18: 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 19: TNMP Overview
TNMP Overview
Slide 20: 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 revenue of $1.8M was approved with rates effective September 8, 201
Slide 21: 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 22: 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 Q3 2016 YTD 2016 TNMP Sales Sales vs. vs. Volumes Revenues Q3 2015 YTD 2015 Volumetric Load(1): Residential 51% 4.1% 3.5% Commercial 46% 3.7% 3.0% Total Volumet
Slide 23: 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 24: Financial Overview
Financial Overview
Slide 25: Consolidated Earnings Guidance Range
Financial Overview: Consolidated Earnings Guidance Range (Ongoing) 2016 Narrowed Earnings Guidance(1) $1.60 Consolidated EPS $1.65 2017 Earnings Guidance $1.77 Consolidated EPS $1.87 PNM TNMP Corp/Other $1.30- $1.37 $0.51 - $0.53 ($0.04) – ($0.03) (1) 2016 Ongoing earnings guidance originally $1.55
Slide 26: Liquidity, Capital Structure and Credit Ratings
Financial Overview: Liquidity, Capital Structure and 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 November 30, 2016: (In mil
Slide 27: 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 28: Appendix
Appendix
Slide 29: 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% $1.32 $2.4 B $1.42 $2.4 B $1.41 Supreme Court Appeal (2) $0 -
Slide 30: 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 31: 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 BART
Slide 32: 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 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 Democrat Vice Chairman District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovejoy 2018 Democrat Sandy Jones, District 5
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 $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 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 (includes renewables related to Facebook contract) Renewables Renewables 15% 18% Coal Coal 35% 29% Natural Gas 35% Natural Gas Nuclear 38% 15% Nuclear 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 (includes renewables related to Facebook contract) Renewables 7% Renewables 11% Natural Gas 12% Coal 50% Coal Natural Gas 41% 20% Nuclear 31% Nuclear 28% 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 Outages and Retirement Schedule
PNM Plant Outages and Retirement Schedule 2016 - 2017 Planned Outage Schedule Four Corners Palo Verde Duration in Time Duration in Time Unit Unit Days Period Days Period 4 10 Q2 2017 3 34 Q4 2016 5 10 Q2 2017 2 34 Q2 2017 5 95 Q3-Q4 2017 1 34 Q4 2017 2017 Scheduled Unit Retirements San Juan Unit Tim
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 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(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 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 43: 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 $94M SCR for NOx on Units 4 & 5 by July 31, 2018. On