Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
2012 Earnings Guidance Presentation
December 9, 2011
Safe Harbor Statement
Statements made in this news release that relate to future events or PNM Resources’, Public Service Company of New Mexico’s (“PNM”), or Texas-New Mexico Power Company’s (“TNMP”) (collectively, the “Company”) expectations, projections, estimates, intentions, goals, targets, and strategies, are made pursuant to the Private Securities Litigation Reform Act of 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates and PNM Resources, PNM, and TNMP assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, PNM Resources, PNM, and TNMP caution readers not to place undue reliance on these statements. PNM Resources’, PNM’s, and TNMP’s business, financial condition, cash flow, and operating results are influenced by many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. These factors include: the ability of PNM and TNMP to recover their costs and earn their allowed returns in their regulated jurisdictions; the ability of the Company to successfully forecast and manage its operating and capital expenditures, particularly in the context of a future test year rate case with respect to PNM; the performance of state, regional, and national economies and the resulting impacts on the electricity usage of the Company’s customers; the performance of generating units, including the Palo Verde Nuclear Generating Station (“PVNGS”), the San Juan Generating Station (“SJGS”), and the Four Corners Plant, transmission systems, and distribution systems, which could be negatively affected by major equipment failures, major weather disruptions, disruptions in fuel supply, cyber and physical security breaches, and other significant operational issues; state and federal regulation or legislation relating to climate change, reduction of greenhouse gas emissions, coal combustion byproducts, nitrogen oxides, and other power plant emissions, including the risk that the Company may have to commit to substantial capital investments and additional operating costs to comply with new environmental requirements, including possible future requirements to address regional haze regulations and related best available retrofit technology requirements and concerns about global climate change, and the resultant impacts on the operations and economic viability of generating plants in which PNM has interests; uncertainties surrounding the mine fire incident at the mine supplying coal to SJGS, including potential impacts on the operations of SJGS, the costs of fuel, and the cap on the annual amounts recoverable through PNM's fuel and purchase power adjustment clause (“FPPAC”); state and federal regulatory, legislative, and judicial decisions and actions, including the outcomes of PNM’s pending transmission and firm requirements power rate cases and appeals of prior regulatory proceedings; uncertainty surrounding the status of PNM’s participation in jointly-owned generation projects resulting from the scheduled expiration of the operational documents for the projects beginning in 2016 and potential changes in the objectives of the participants in the projects; uncertainty regarding the requirements and related costs of decommissioning power plants owned or partially owned by PNM and coal mines supplying certain PNM power plants, as well as the ability to recover decommissioning costs from customers; financial and operational risks at PVNGS relating to any increased regulatory review and actions in response to the events at the Fukushima Daiichi Nuclear Power Plant in Japan; the risk that recently enacted reliability standards regarding available transmission capacity may reduce certain PNM transmission rights used to transmit its generation resources and provide access to transmission customers resulting in a need to purchase additional transmission capacity, reduce sales of transmission capacity, or operate generation facilities less economically; the risks associated with completion of generation, transmission, distribution, and other projects, including construction delays and unanticipated cost overruns; the ability of PNM to successfully defend the utilization of a future test year in its electric rate filings with the New Mexico Public Regulation Commission (“NMPRC”), including PNM’s ability to withstand challenges by regulators and intervenors; the ability of PNM to meet the renewable energy requirements established by the NMPRC, including the resource diversity requirement, within the specified cost parameters; the risk that replacement power costs incurred by PNM related to not meeting the specified capacity factor for its generating units under its Emergency FPPAC will not be approved by the NMPRC; the risk that PNM may not be able to recover a portion of the increased costs of rights-of-way renewals on Native American lands through rates charged to transmission customers; conditions affecting the Company’s ability to access the financial markets, including disruptions in the credit markets and actions by ratings agencies affecting the Company’s credit ratings; the potential unavailability of cash from PNM Resources’ subsidiaries due to regulatory, statutory, or contractual restrictions; the impacts of decreases in the values of marketable equity securities on the trust funds maintained to provide nuclear decommissioning funding and pension and other postretirement benefits, including the levels of funding and expense; the impacts of the true-up of the purchase price for the sale of First Choice Power to the actual amounts of certain components of working capital at closing; changes in the Electric Reliability Council Of Texas protocols; collections experience; fluctuations in interest rates; weather; water supply; changes in fuel costs; availability of fuel supplies; the effectiveness of risk management and commodity risk transactions; seasonality and other changes in supply and demand in the market for electric power; the impact of mandatory energy efficiency measures on customer energy usage; variability of wholesale power prices and natural gas prices; volatility and liquidity in the wholesale power markets and the natural gas markets; uncertainty regarding the ongoing validity of government programs for emission allowances; changes in the competitive environment in the electric industry; the outcome of legal proceedings; the extent of insurance coverage available for claims made in litigation; and changes in applicable accounting principles.
Non-GAAP Financial Measures
For an explanation of the non-GAAP financial measures that appear on certain slides in this presentation (ongoing earnings, ongoing earnings per diluted share, and ongoing EBITDA), as well as a reconciliation to GAAP measures, please refer to the Company's website as follows: http://www.pnmresources.com/investors/results.cfm
2
Opening Remarks & Overview Pat Vincent-Collawn
President and CEO
Strategic Direction
Hybrid Utility
Exit Competitive
Business
Regulated Utility
Strategic Goals
Earn Authorized Return on our
Regulated Businesses
Continue to Improve Credit Ratings
Provide Top Quartile
Total Return
Repositioned as Strong Regulated Utility
4
Regulatory Environment
New Mexico Current effort in the state to reform the New Mexico Public
Regulation Commission (NMPRC) Douglas Howe appointed to the NMPRC by Gov. Martinez in
November to serve the remainder of Jerome Block’s term Texas Rolando Pablos appointed to the Public Utility Commission
of Texas (PUCT) by Gov. Perry in September Distribution Cost of Service rule approved by PUCT in
September 2011 Rulemaking is pending
5
Regulatory Case Update
PNM FERC transmission case • Implemented rates June 1, subject to refund • Filed supplemental testimony on September 12 • Expect administrative law judge opinion by July 2012
PNM FERC generation case • Amended sale agreement with Navopache Electric Cooperative filed with FERC
on September 15 proposing cost of service rates • Proposed rates to be implemented April 14, 2012, subject to refund
PNM Renewable rate rider case • Plan to file with NMPRC in December 2011 • Seek recovery on 22MWs solar, solar power/battery-storage project and RECs
Future-Test-Year rulemaking • Working with key parties • Planning to file proposal by the end of January 2012
TNMP TCOS Filings • Plan to file twice in 2012
6
Economic Conditions
Employment growth continues in both TX and NM • Unemployment rates remain below
national levels
2012 retail load at PNM and TNMP is expected to continue to grow
(1)
8,200
8,400
8,600
8,800
9,000
2008 2009 2010 2011E 2012E
GWh PNM 2012 Load Growth .5% - 1.5%
(2)
4,900
5,000
5,100
5,200
5,300
2008 2009 2010 2011E 2012E
GWh TNMP
(2)
2012 Load Growth .5% - 1.5%
(1) Weather-normalized and adjusted for leap year (2) Assumes mid-point of range
7 -5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11
Employment Growth Rates (year over year)
New Mexico Texas
2012 Guidance Chuck Eldred
Executive Vice President and CFO
Guidance (Ongoing)
$1.20 Consolidated EPS $1.32
PNM
$1.08 - $1.15
TNMP
$0.28 - $0.32
Corp/Other
($0.16) – ($0.15)
$1.00 Consolidated EPS $1.05
2011 Guidance Range
2012 Guidance Range
9
EPS growth of 20% - 26%
2011E – 2012E Key Performance Drivers Year-over-Year
∆ EPS
Retail rate relief $0.29
O&M Reductions $0.09
Load growth $0.03 - $0.07
FERC generation rate relief (1) $0.00 - $0.05
FERC transmission rate relief (1) $0.00 - $0.02
Outage Costs ($0.03)
Palo Verde Unit 3 market price $(0.04) - $(0.03)
Interest $(0.03) - $(0.02)
2011 weather ($0.06)
2011 PV Nuclear Decommissioning Trust ($0.07)
Share repurchase $0.11 - $0.12
2010 2011E 2012E
$0.58 $0.72 - $0.75 $1.08 - $1.15 PNM EPS
2012 EPS Guidance (Ongoing)
(1) Range is based on pending rate increases, where the lower end of the range reflects 0% rate relief and the upper end of the range reflects 100% rate relief for the Navopache contract (partial year April implementation) and FERC Transmission 10
$0.17
2010 2011E 2012E
$0.28 - $0.32 $0.28 - $0.30
TNMP EPS
2011E – 2012E Key Performance Drivers Year-over-Year
∆ EPS
Load growth $0.01 - $0.02
Rate relief $0.02
2011 weather ($0.06)
Share repurchase $0.03 - $0.04
2012 EPS Guidance (Ongoing)
11
2012 Rate Base Mid Point Projections
% of Rate Base
Projected 2012 Avg. Rate Base
(In millions) Equity
2012 Rate Base Return to Achieve Mid Point of
Guidance Range
Mid Point Guidance
Range (EPS)
PNM
PNM Retail 86% $1,820 50% 10% $1.13
Renewables(1) 4% $74 50% 7% $0.03
FERC Transmission(2) 7% $153 50% 8% $0.08
FERC Generation(3) 3% $68 50% (5%) $(0.02)
Costs not included in rate base(4) $(0.05)
PV3 $(0.06)
TNMP
T&D 100% $482 45% 9.6% $0.26
Competitive transition charge (CTC) $0.03
Automated meter system (AMS) $0.01
Corporate/Other(5) $(0.15)
TOTAL $2,597 $1.26
(1) Partial year: 8 months carrying charges plus 4 months of allowed return
(2) Rates implemented June 1, 2011, subject to refund pending final order by FERC (3) FERC Generation is comprised of three individual wholesale customer contracts under the jurisdiction of FERC: Navopache Electric Cooperative, City of Gallup, and City of Aztec. Navopache Electric Cooperative represents 62% of the FERC Generation rate base. Range reflects partial year (9 months) implementation of the $8.7 million rate increase filed with FERC for the Navopache contract effective April 2012, subject to refund. (4) Consists primarily of certain incentive compensation and retained costs from the sale of PNM Gas (5) Reflects costs at the PNM Resources holding company, mainly comprised of interest expense related to debt
12
Assumptions for Potential Earnings Power
(1) FERC Generation’s potential achievement would occur with the filing and resolution of new rates for the Gallup contract, which is expected in 2014 (2) PV3 generation is currently sold at market. The range assumes a market price of $39 to $42
13
Reducing regulatory lag and improving market prices could improve EPS by $0.15 to $0.20 without growing rate base
Mid Point Guidance Range Potential Earnings Power Growth
Potential EPS Potential
Achievement Return EPS Allowed Return
Resulting EPS
PNM
PNM Retail 10% $1.13 10% $1.13
Renewables 7% $0.03 10% $0.05 $0.02 2013
FERC Transmission 8% $0.08 9% - 11% $0.09 - $0.10 $0.01 - $0.02 2012
FERC Generation -5% ($0.02) 9% - 11% $0.04 - $0.05 $0.06 - $0.07 2014(1)
Costs not included in rate base ($0.05) ($0.03) $0.02 2014
PV3 ($0.06) ($0.03) - $0.00 $0.03 - $0.06 See Note 2
TNMP
T&D 9.6% $0.26 10.125% $0.27 $0.01 2013
Competitive transition charge (CTC) $0.03 $0.03
Automated meter system (AMS) $0.01 $0.01
Corporate/Other ($0.15) ($0.15)
Total $1.26 $1.41 - $1.46 $0.15 - $0.20
PNM Resources 5-Year Capital Plan
$107 $110 $104 $90 $98
$64 $58 $64 $63 $52
$95 $86 $96 $90
$61
$21 $11
$12 $12
$12
2012 2013 2014 2015 2016
(In millions)
PNM Generation PNM T&D TNMP T&D Other (Primarily IT)
Amounts may not visually add due to rounding
2012 - 2016 Total Capital Plan: $1.3B
$287 $266 $276
$256
$223
Amounts do not include potential capital spending at
PNM including SCRs, renewables and additional peaking capacity
14
PNM Rate Base
Rate base CAGR is 2% Growth in rate base is
offset by tax benefits of bonus depreciation and utilization of NOLs • NOLs are expected to last
through 2013
Focus is on closing rate base return gap for FERC
Potential capital investment could provide additional rate base growth in the future
$0
$500
$1,000
$1,500
$2,000
$2,500
2011E 2012E 2013E
Avg. Rate Base (In millions)
Retail Renewables
FERC Generation FERC Transmission
Total $2,047
Total $2,137
Total $2,115
15
PNM 5-Year Potential Capital Additions
$20 $96
$151 $122 $55
$58
$58 $3 $28
$53
$28
2012 2013 2014 2015 2016
(In millions)
SCRs Renewables Additional peaking capacity
Amounts may not visually add due to rounding (1) Not all potential capital expenditures will be realized. Amounts are representative of the middle of the potential range. (2) PNM’s portion of SCRs for San Juan and Four Corners
2012 – 2016 Total Potential Capital(1): $0.7B
(2)
Adding ½ of the potential capital to PNM’s rate base
would result in an additional 2% of CAGR
16
TNMP Rate Base
Rate base CAGR is 8%
$125M of additional investments over the next four years in Texas under favorable regulatory construct
• Rebuild, replace and upgrade existing transmission
• Install and upgrade substations
$454 $482 $534
$0
$100
$200
$300
$400
$500
$600
2011E 2012E 2013E
Avg. Rate Base (In millions)
17
Key Strategic Goals and 2012 Checklist
Achieve successful outcomes in:
PNM future test year rulemaking
PNM FERC transmission rate case
PNM FERC generation rate case
PNM renewable rider
Maintain strong electric reliability and power plant availability
Control O&M and capital costs
18
2012 Checklist Strategic Goals
Earn Authorized Return on our Regulated Businesses
Continue to Improve
Credit Ratings
Provide Top Quartile Total Return
Questions & Answers
Appendix
PNM Assumptions
amounts shown are before tax
2011 Assumptions
2012 Assumptions
Retail rate increase (effective August 21, 2011) $31M $72M
FERC Transmission rate increase $0 - $5.5M $0 – $9.6M
FERC Generation rate increase – Navopache contract - $0 - $6.5M(1)
Weather $9.6M -
2011 PV Nuclear Decommissioning Trust Gains $10.2M -
Incremental Load Growth 1% - 2%
0.5% - 1.5%
1% = $6.8M
Palo Verde Unit 3 sales price ($/MWh)
40% hedged; 60% unhedged (2012) ~$36
~$34
+/- $5 = $3.3M
Outage costs $17M $22M
Pension expense $6.3M $7.0M
Pension contributions $41.5M $77.7M
Average PNM Resources diluted shares outstanding 89.7M 80.3M
21
(1) Reflects partial year (9 months) implementation of the rate increase filed with FERC for the Navopache contract effective April 2012, subject to refund. The annual amount of the filed increase is $8.7M.
TNMP Assumptions
amounts shown are before tax
2011 Assumptions
2012 Assumptions
Retail rate increase $9.7M $10.2M
Incremental TCOS increases $0.1M $1.0M
Weather $9.0M -
Incremental load growth 1.5% - 2.5%
0.5% - 1.5%
1% = $1.8M
Pension expense/(income) $(1.3)M $(0.7)M
Pension contribution $1.6M $5.3M
Average diluted shares outstanding 89.7M 80.3M
22
Corp and Other Key Drivers and Assumptions (Ongoing)
$(0.20)
2010 2011E 2012E
$(0.16) - $(0.15) $(0.17) - $(0.15)
Corporate and Other(1)
2011E – 2012E Key Performance Drivers Year-over-Year ∆ EPS
Interest $0.03
Share repurchase(2) $(0.02)
23
(1) Reflects costs at the PNM Resources holding company, mainly comprised of interest expense related to debt
(2) Using a loss at corporate of ($12.5) million divided by 89.7M shares gives EPS of ($0.14) and ($12.5M) divided by 80.3M shares is ($0.16), resulting in a ($0.02) impact of share repurchase at Corporate
EBITDA and Quarterly Earnings Distribution Guidance (Ongoing)
Ongoing EBITDA (In millions)
2011E 2012E
Consolidated PNMR $420 - $427 $439 - $458
Regulated Businesses
PNM $274 - $278 $320 - $330
TNMP $113 - $116 $114 - $119
Competitive Businesses
First Choice Power $34 - $37 N/A
Optim Energy(1) $40.6(2) N/A
24
(1) 100% of Optim Energy (2) Actual results
13% 25%
47%
15%
Q1 2012 Q2 2012 Q3 2012 Q4 2012
2012 Quarterly Earnings Distribution
2011 and 2012 Outage Schedule
84.2%
80.8%
88.6%
77.8%(1)
79.5%
90.1%
San Juan Four Corners Palo Verde
2011E 2012E
PNM Plant EAF and Outages
Unit Duration Time
Period
San Juan
2 47 Q1 – Q2 2012
3 54 Q3 – Q4 2012
Four Corners
4 10 Q4 2011
5 13 Q1 2012
Palo Verde
1 37 Q4 2011
3 40 Q1 - Q2 2012
2 40 Q4 2012
(1) San Juan has an additional plant outage scheduled in 2012
(2)Annual top quartile number from the North American Electricity Reliability Council as of August 2011
Annual Top Quartile Numbers(2)
Coal 91% Nuclear 93%
25
2012 Financing Assumptions
Renewed PNM and PNM Resources revolvers on October 31, 2011
Closed $160M of PNM SUNs on October 12, 2011
• Coupon: 5.35%
• Tenor: 10yr
Repurchased $50M 9.25% PNM Resources’ SUNs on November 22, 2011
No new financing anticipated in 2012
Old Pricing New Pricing Old Capacity New Capacity
PNM Libor + 0.65% Libor + 1.50% $368M $400M
PNMR Libor + 1.25% Libor + 1.75% $517M $300M
26
PNM Resources
PNM TNMP
Avg. 2012 Short-term debt balances including LCs
$90M $26M $35M
Think New Mexico
An independent results-oriented advocacy group
Demonstrated success through several policy changes
Advocating legislation to place the NMPRC reforms on the 2012 ballot
Refocus and narrow the jurisdiction to regulating utilities and telecommunications
Increase qualifications of commissioners
27
San Juan - BART Update
EPA BART determination: SCR technology • Total estimated costs: $750M or more
• PNM’s share of estimated costs (~46%): minimum of $345M
PNM petitioned EPA to reconsider its determination and to issue a stay of its rule
PNM also appealed EPA’s decision in court (US Court of Appeals for the Tenth Circuit)
N.M. Gov. Martinez and the N.M. Environment Dept. have also challenged EPA’s decision in the 10th Circuit and have petitioned EPA for reconsideration and requested a stay
PNM, Gov. Martinez and NMED have also asked the 10th Circuit to stay the rule
PNM is evaluating timeline for regulatory recovery
• PNM to issue RFP for SCR installation in late 2011 28