-
November 1, 2019
Investor Meetings August 2020
-
Safe Harbor Statement
Investor Relations Contact Information
Lisa Goodman Director, Investor Relations and Shareholder
Services U.S. [email protected]
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995Statements made in this presentation for PNM
Resources, Inc. (“PNMR”), Public Service Company of New Mexico
(“PNM”) and Texas-New Mexico Power Company (“TNMP”) (collectively,
the “Company”) that relate to future events or 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. The Company
assumes no obligation to update this information. Because actual
results may differ materially from those expressed or implied by
these forward-looking statements, the Company cautions readers not
to place undue reliance on these statements. The Company’s
business, financial condition, cash flow, and operating results are
influenced by many factors, which are often beyond its control,
that can cause actual results to differ from those expressed or
implied by the forward-looking statements. For a discussion of risk
factors and other important factors affecting forward-looking
statements, please see the Company’s Form 10-K and Form 10-Q
filings and the information filed on the Company’s Forms 8-K with
the Securities and Exchange Commission, which factors are
specifically incorporated by reference herein.
Non-GAAP Financial MeasuresFor 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 earnings guidance measures), 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
Beilen MiddletonSenior Investor Relations SpecialistU.S.
[email protected]
http://www.pnmresources.com/investors/results.cfm
-
PNM Resources Overview
-
PNM Resources Overview
4
Energy holding company based in Albuquerque, New Mexico with two
fully regulated electric utility subsidiaries
NYSE: PNM $3.5B market cap• Vertically integrated utility in New
Mexico focused on clean energy transformation
• $3.0B rate base • 500k retail customers• 2,811 MW resource
portfolio• 15k miles transmission and
distribution lines
• T&D utility operating within the ERCOT market in Texas
• $1.3B rate base• 250k consumers• 10k miles transmission
and
distribution lines
Service Territories and Generation Resources
-
Strategic Focus
5
Aggressive transition of PNM resource portfolio,
with support from New Mexico policy
Reliably support growth and integration of clean
energy
Transparent growth plan driven by rate base
investment
Create shareholder value through a clean and bright energy
future
Clean Energy Portfolio
Critical Electricity Infrastructure
Strong Financial Profile
-
Commitment to ESG Strategy
6
SocialEnvironmental Governance
Industry-leadings goals:• Emissions-free by 2040
reflects full elimination of carbon from generation
• 90% reduction in freshwater usage by 2040
• Significant reductions in emissions and freshwater usage
achieved 2005-2020 through investments and retirements
Infrastructure investment to support rapid growth in owned and
purchased renewable resources delivered to customers
Hiring, training, retention and engagement programs for our
diverse workforce (50% minority), focus on safety and company
culture
Diversity and inclusion supported in communities, tribal
relationships fostered through meaningful partnerships
Transition to clean energy includes support for employees and
communities
Diverse (40% women / 20% minorities), engaged Board with
extensive experience
Robust top-down ethics program with organization-wide
commitment
-
Strong Financial Profile
7
Rate Base Investments
Earnings Growth
Dividend Growth
Liquidity
• $3.3B investment plan 2020 - 2023• Emphasis on grid
infrastructure investments• Reflects investment opportunities
balanced with
long-term customer value
• 5%-6% earnings growth target through 2023• Dilution of rate
base growth resulting from equity is
partially offset by savings from debt refinancings
• Dividend growth to mirror earnings growth• Quarterly
declarations by Board of Directors• Annual dividend evaluated in
December
• Maintain investment grade credit ratings• Immediate equity
needs met through January
2020 forward offering• Adequate liquidity remains available
to
finance business needs
-
$275 $303 $319$336
$94 $82 $77 $53
$337 $290 $342 $348
$187 $194
$200 $202
$134 $268 $27 $27 $25
$21 $25
$117
$120 $125
2020 2021 2022 2023
(in m
illio
ns)
PNM Existing Generation TNMP PNM T&DPNM Transmission
Expansion 50% NMRD Renewable Additions Business Technology
Services/General ServicesPNM Wired for the Future Depreciation
$976
$806$760 $753
$3.3B investment plan supports 5-6% earnings growth targetWired
for the Future investments focused on delivering clean energy
future
2020 – 2023 Investment Plan
8(1) Western Spirit acquisition of $285M reflects assumed
purchase price of $360M, net of $75M customer funding(2)
Depreciation does not include amounts associated with NMRD
(2)
(1)
https://www.snl.com/InteractiveX/file.aspx?DoNotRedirectTo3=1&id=389372287&KeyFileFormat=26&reqFrom=SNL3&KeyProductLinkType=2&web=1Chart1
2020
2021
2022
2023
Depreciation
275
303
319
336
Sheet1
20202021202220232024
PNM Generation
PNM T&D
PNM Renewables
TNMP
Other
Total
Depreciation$275$303$319$336$358
Check
-
2020 - 2023 Potential Earnings Power
9This table is not intended to represent a forward-looking
projection of 2021 - 2023 earnings guidance.
Refer to Slide 49 for additional details and disclosures.
Earnings Growth Target 5-6% through 2023
Note: 5-6% targeted earnings growth CAGR measured from 2019
Ongoing EPS of $2.16. The number of shares outstanding increases
from 80M to 86M in December 2020 resulting from the January 2020
forward equity offering(1) Items not in rates has been updated to
reflect interest savings, lower decommissioning costs related to
Palo Verde and the retirement of 65 MW of unregulated generation at
San Juan
Allowed Return / Equity Ratio
2020 Ongoing Earnings
Guidance Midpoint
2021 Earnings Potential
2022 Earnings Potential
2023 Earnings Potential
Avg Rate Base Return EPS
Avg Rate Base EPS
Avg Rate Base EPS
Avg Rate Base EPS
PNM Retail 9.575% / 50% $2.5 B 9.5% $1.47 $2.5 B $1.41 $2.5 B
$1.43 $2.5 B $1.44
PNM Renewable Rider
9.575% / 50% $150 M 9.575% $0.09 $145 M $0.08 $140 M $0.08 $130
M $0.07
PNM FERC 10% / ~50% $0.3 B 7.5% $0.15 $0.5 B $0.20 - $0.23 $0.7
B $0.35 - $0.39 $0.8 B $0.37 - $0.42
Items not in Rates(1) ($0.01) ($0.01) - $0.02 $0.01 - $0.03
$0.03 - $0.06Total PNM $3.0 B $1.70 $3.1 B $1.68 - $1.74 $3.4 B
$1.87 - $1.93 $3.5 B $1.91 - $1.99
TNMP 9.65% / 45% $1.3 B 9.65% $0.73 $1.5 B $0.79 $1.6 B $0.87
$1.9 B $0.97
Corporate/Other ($0.22) ($0.13) - ($0.11) ($0.13)-($0.11)
($0.15) - ($0.13)Equity Financing Plans ($0.03) - ($0.01)
($0.11)-($0.09) ($0.11) - ($0.09)
Total PNM Resources $4.3 B $2.21 $4.6 B $2.31- $2.41 $5.0 B
$2.50 - $2.60 $5.4 B $2.62 - $2.74
2019-2023 Rate Base CAGR (2019 base): Total 7.8% / PNM 4.2% /
TNMP 16.1%
-
$1.94 $2.00 $2.16 $2.21
$2.36 $2.55
$2.68
2017 2018 2019 2020E 2021E 2022E 2023E
Indicated Annual DividendMidpoint Earnings
Guidance/Potential
$0.97Dec ‘16
$1.06Dec ‘17
$1.16Dec ‘18
$1.23Dec ‘19
$1.29-$1.30
$1.36-$1.38
$1.42-$1.46
Dividend Growth
10
Dividend Growth Consistent with Earnings Growth at 5%-6%
56% payout
• Expect dividend growth consistent with earnings growth
targeting the middle of a 50% - 60% payout ratio range
• Next dividend review in December 2020
-
Liquidity and Debt Maturity Outlook
11
PNM Resources FFO-to-Debt is maintained within Moody’s Baa
investment grade
target range of 13% to 22%
(1) Senior unsecured rating (2) Senior secured rating
$496 $105$1,255
$843
$140$450
2020 2021 2022 2023 and Beyond
Long-term Debt Maturities(in millions)
PNM TNMP Corporate• Completed:
• $290 million forward equity offering in January 2020• PNM and
TNMP issued ~$400M of new debt in 2020 and PNM
addressed its 2020 debt maturities• Planned:
• $250-$300 million mandatory convertibles issuance expected in
late 2021 to fund Western Spirit acquisition and strengthen credit
metrics
• New debt issuances projected at utilities through 2023 of
~$1.0 billion and $361 million securitization bonds
~$1B available liquidity
Maintain appropriate credit metrics and investment grade
ratings
Target regulatory capital structures at
PNM and TNMP
Moody’s Rating/Outlook
S&P Rating/Outlook
PNM Resources Baa3(1) / Stable BBB-(1) / Stable
PNM Baa2(1) / Stable BBB(1) / Stable
TNMP A1(2) / Stable A(2) / Stable
-
Key Takeaways
12
Providing critical electricity infrastructure to support the
transition to clean energy in New Mexico and growing markets in
Texas
Maintaining commitment to strong ESG practices, including the
full exit from coal and transition to emissions-free energy by
2040, and continuing to support our customers and communities
Executing on transparent growth strategy to deliver 5% - 6%
earnings and dividend growth
-
COVID-19 Updates and 2020 Earnings Guidance
-
Our Response to COVID-19
14
Safety of our Team
Caring for Customers and Communities
Managing our Business
• Identification of critical workforce, staging of backups,
limited access to control rooms and critical assets
• Minimize critical employee exposure, inter-crew exposures and
exposures with the public: eliminate group gatherings, deploy
additional fleet vehicles
• Mandatory work-from-home and flexible arrangements for all
applicable job functions
• Residential customer disconnects temporarily suspended, late
fees waived
• TNMP helped create COVID-19 Electricity Relief Program• PNM
Resources Foundation community safety grant
opportunity for PNM and TNMP service territories• PNM and TNMP
supporting local businesses• Business continuity plans implemented,
daily crisis
team meetings• Coordination with key vendors and suppliers•
Close contact with neighboring utilities, regional
operators CAISO and ERCOT, reliability entities WECC and Texas
RE, EEI, EPRI and North American Transmission Forum
-
Phased re-opening began in May and expanded in June; plans
suspended in July with some restrictions re-instated
Customer disconnects and late fees suspended, regulatory
treatment for COVID-19 expenses supports expanded customer payment
plans
No significant workforce or supply chain disruptions
Phased re-opening began May 1st throughout early June; plans
suspended and restrictions re-instated in late June following
continued growth in case numbers
COVID-19 Electricity Relief Program remains in place
No significant workforce or supply chain disruptions
COVID-19 Update
15
Restrictions continue in New Mexico and Texas in response to
rising case numbers during phased re-openings, continue to
prioritize the safety of our team, caring for
our customers and communities
-
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2020 Actuals 2020
Original Guidance 2019 Actuals
Continued COVID-19 Load Impacts
16
Expected impacts reflect continued increases from Residential
customers and decreases from Commercial and Industrial customers
due to business restrictions
PNM COVID load trends• Residential: +5% increase• Commercial:
-10% reduction
TNMPDemand-Based
TNMPVolumetric
PNM Volumes
TNMP COVID load trends• Volumetric: +5% increase• Demand-based:
-5% reduction
Note: Refer to Slide 48 for EPS sensitivities of load impacts
under planning assumptions
Weather-normalized load:
-
2020 Consolidated Ongoing Earnings Guidance
17
Clean Energy Focus
Strong Financial Profile
$2.16 Consolidated EPS $2.26
PNM$1.67 – $1.73
TNMP$0.72 – $0.74
Corp/Other($0.23) – ($0.21)
2020 Earnings Guidance
8%
25%
54%
13%
Q1 Q2 Q3 Q4
2020 Annual EPS Distribution by Quarter
$2.16 - $2.26guidance affirmed, targeting midpoint
Q3 reflects the peak load season (cooling season) at
both PNM and TNMP
-
PNM
-
New Mexico Energy Policy: Energy Transition Act
19
Nuclear 30%
Senate Bill 489 (Energy Transition Act): passed in 2019
legislative session and signed by New Mexico Governor Lujan
Grisham; effective June 14, 2019
• Renewable Portfolio Standards and Carbon-Free Requirement•
Previous: 20% renewables by 2020• Current:
• 40% renewables by 2025• 50% renewables by 2030• 80% renewables
by 2040• 100% carbon-free by 2045
• Securitization measure for abandonment of coal-fired
generating facilities reduces customer bills
• Economic development funds provide needed financial assistance
to workers and the communities impacted by retirement of coal-fired
generating facilities
50%
Ren
ewab
les
80%
Ren
ewab
les
40%
Ren
ewab
les
100%
Car
bon-
Free2045
20402030
2025
-
Executing the Energy Transition Act
20
Nuclear 30%
Our Goal: Transform to 100% Emissions-Free Energy by 2040
Step 1: Exit Coal Generation by 2031• San Juan Generating
Station:
•Retired Units 2 and 3 in 2017 (221 MWs); Retirement of Units 1
and 4 in 2022 (562 MWs)
• Four Corners Coal Plant: •Exit from ownership participation no
later than expiration of
agreements in 2031 (200 MWs)
Step 2: Eliminate emissions from natural gas generation by 2040•
Exit from Valencia gas plant in 2028 (158 MWs)• Transform existing
and transitional gas plants to carbon-
free capacity resources such as battery storage and pumped
storage by 2040
Step 3: Actively pursue the development of carbon-free
replacement power alternatives
• Current options: renewable + storage combinations, short-term
natural gas peaking units to facilitate transition to
emissions-free
983
762
200
2015 2020 2025 2031
80%reduction
Coal-free
22% reduction
Reduction of MW Coal Capacity
• Future options: Regional market participation, next-generation
battery, pumped hydro, emissions-free combustion turbines through
hydrogen or other clean fuels, emerging technologies
PNM-owned facilities, as reported to EPA, compared to 2005
levels
Emission Reduction Goals:
Freshwater Reduction Goals:
2025 2035 2040CO2 60% 80% 100%NOX 70% 90% 100%SO2 90% 100%
100%
2025 2035 2040Freshwater 70% 80% 90%
-
Transform PNM Generation Portfolio
21
San Juan abandonment, securitization and replacement power
San Juan abandonment/ securitization unanimously approved on
April 1, 2020
San Juan replacement power portfolio issued July 29, 2020
Developing plans to exit Four Corners
200 MW ownership Contracts expire 2031,
PNM looking to exit sooner
Replace Palo Verde leased capacity
104 MW expires 2023 10 MW expires 2024
Balance appropriate level of baseload resources to be
emissions-free by 2040 and shift towards additional low-cost
renewables and flexible resources
-
Renewable and Battery Storage Portfolio
22
2019 2022
237
1037356
662
15
15
0.5
300.5
Solar Wind Geothermal Battery Storage
609 MW2020+50MW solar+140MW wind+166MW wind
2021+50MW solar+50MW solar
2022+650MW solar+300MW battery storage
157 MW Solar (Owned)80 MW Solar (PPA)
356 MW Wind (PPA)15 MW Geothermal (PPA)
0.5 MW Battery Storage (Owned)
207 MW Solar (Owned)830 MW Solar (PPA)662 MW Wind (PPA)
15 MW Geothermal (PPA)0.5 MW Battery Storage (Owned)
300 MW Battery Storage (PPA)
2,015 MW
Growth in Renewable and Battery Storage Capacity Reflects
Aggressive Clean Energy Transition
Note: represent additions that have been approved by the
NMPRC
-
PNM Investment: Wired for the Future
23
Clean Energy Focus
Strong Financial ProfileDelivering Clean Energy
• Infrastructure expansions to accommodate clean energy
resources• Grid reconfigurations that provide enhanced flexibility•
Sustainable platforms for distributed resources and electric
vehicles
Enhancing Customer Satisfaction• Customer reliability
improvements and quality of service enhancement• Customer products
and communication that match expectations• Infrastructure expansion
for emerging new customer growth
Increasing Grid Resilience• Stabilization of aging asset base
through consistent investment• Grid modernization and
enterprise-wide technology improvements• Enhanced infrastructure
and controls to address security, wildfire risks
New Mexico’s clean energy future depends on a reliable,
resilient, secure grid to deliver an evolving mix of energy
resources to customers
-
Infrastructure Investments: Wired for the Future
24
30%
17%53%
Total Investment by Category
Delivering Clean EnergyEnhancing Customer SatisfactionIncreasing
Grid Resilience
Investments in grid resilience provide the foundation for a
system that can respond and adapt to integrate evolving
technology and provide long-term customer value
Delivering Clean Energy• Reconfiguring substations and lines
beyond the original architecture to accommodate growing amounts
of intermittent and distributed generation resources
Enhancing Customer Satisfaction• Strengthening infrastructure
that directly
serves customers, focus on reliability and outage
restoration
Increasing Grid Resilience• Expanding transmission substations
and
lines operating at maximum capacity
Accelerates $450M Investment55% Transmission / 45%
Distribution
-
PNM Retail Transmission Opportunities
25
• Transmission capacity within New Mexico’s grid is constrained•
The integration of new renewable resources to meet growing
Renewable
Portfolio Standards and replacement of coal retirements will
likely require additional T&D expansion
2020 2025 2030 2040
762MW
200 MW 200 MW 0 MW
20%
40%50%
80%
Coal Capacity Renewable Portfolio Standard
Renewable Portfolio Standards GrowthCoal Capacity
Retirements
2020 - 2040
-
FERC Transmission Opportunities
26
Source: American Wind Energy Association, Oct. 2019
New Mexico ranks:
Wind
Solar
Source: NREL
New Mexico’s abundant solar and wind resources also attract
third-party development, increasing the demand for transmission
capacity and
creating rate base growth opportunities:
Source: WINDExchange.energy.gov, Q3 2019in US wind capacity
potential
Source: Nebraska Department of Environment & Energy Sun
Index developed for NREL measuring direct sunlight received in each
state, accounting for latitude and cloud cover
in US energy potential from solar power
• PNM acquisition of Western Spirit transmission line: $285M in
2021
• New Mexico added wind capacity at a higher growth rate than
any other state in 2017 and currently has projects under
construction or in advanced development that will more than double
current installed capacity
• 1,953 MW installed capacity• 1,227 MW under construction•
1,328 MW in advanced
development
-
NMPRC Commissioners and Districts
27
District Name Term Ends Party
District 1 Cynthia Hall 2020(1) Democrat
District 2 Jefferson Byrd 2022(1) Republican
District 3 Valerie Espinoza,Vice-Chairman 2020 Democrat
District 4 Theresa Becenti-Aguilar,Chairman 2022(1) Democrat
District 5 Stephen Fischmann 2022(1) Democrat
NMPRC Districts and PNM Service Areas
(1) Eligible for re-election to a second four-year term
2019 Legislative Update – Appointed vs Elected:• A Senate Joint
Resolution was passed in the New Mexico legislature to
include a state constitutional amendment on the ballot in the
next general election (2020) to move to a 3-member, appointed
Commission
• If the amendment is passed by a simple majority:• The
legislature defines the nominating committee and the
requirements for Commissioners• The terms for Commissioners
elected in Districts 1 and 3 in 2020 will
be for a two-year term ending in 2022; the terms for
Commissioners in Districts 2, 4 and 5 already expire in 2022
• Three appointed Commissioners would begin terms January 1,
2023
-
PNM Regulatory Agenda
28
Filing Action Timing Docket No.PNM:Decoupling Filing (Petition
for Approval of Rate Adjustment Mechanism to Remove Regulatory
Disincentives)
Filed with the NMPRC on May 28, 2020 Hearings scheduled for
October 2020 20-00121-UT
Deferral of Incremental costs related to COVID-19 PNM and other
utilities filed joint motion April 27, 2020 Approved June 24, 2020
20-00069-UT
Consolidated Application for San Juan Generating
Station(Abandonment, Securitization and Replacement)
PNM filed July 1, 2019; NMPRC bifurcated case; New Mexico
Supreme Court ruled January 29, 2020 that Energy Transition Act
applies to both dockets.
NMPRC order approving abandonment/securitization issued April 1,
2020
NMPRC replacement power order issued July 29, 2020
Completed 19-00018-UT
19-00195-UT
PNM 2020 Renewable Plan Filing Filed June 1, 2020 Hearings
scheduled for September 24-25, 2020 20-00124-UT
FERC Transmission Formula Rate Annual Update Filed June 1,
2020
Informational filing submitted; rates effective June 1, 2020
N/A
Solar Direct ProgramFiled May 31, 2019 for approval of voluntary
renewable program expected to begin March 31, 2021; Hearings
completed January 2020
Approved March 25, 2020 19-00158-UT
-
PNM Load and Economic Conditions
29
20-y
r Avg
20-y
r Avg
20-y
r Avg
20-y
r Avg
2015
2015
2015
2015
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
2020
2020
Q1 HeatingDegree-Days
Q2 CoolingDegree-Days
Q3 CoolingDegree-Days
Q4 HeatingDegree-Days
Weather Volatility
(1) Load growth is weather normalized and leap year adjusted
Year-over-Year Growth 2020 YTD 2019 2018
Total Retail Load(1) (0.3%) 0.3% 0.6%PNM Avg. Consumers 0.8%
0.7% 0.8%
Retail Load GrowthReduced load impacts of COVID-19 in 2020 have
been offset by increased weather impacts
• 2019 and 2018 load growth reflects customer growth partially
offset by Commercial energy efficiency impacts
• Increased cooling-degree days in Q2 2020 increased overall
usage, offsetting the impacts of COVID-19 during the same
period
• Announcement of an Amazon fulfillment center under development
in Albuquerque is the latest result of the continued focus of
economic development efforts in New Mexico, expected to bring 1,000
jobs and increase load in 2021
-
PNM COVID-19 Considerations
30
• PNM comprises the majority of customer non-fuel revenues
• New Mexico’s largest employers include government and health
care, with a larger number of small/medium businesses
Customer Class Considerations• Residential: increased volumes
during the Stay-at-Home order• Commercial: weighted towards small
businesses that are most
impacted by the Stay-at-Home order• Industrial: no significant
impacts expectedPNM Sales by Customer Class % Volumes %
Revenues
Residential 36% 46%Commercial 41% 42%Industrial 20% 10%
PNM 2019 Revenues by Region
Southern ~15%
Central~85%
New Mexico
74%
PNM Resources Non-Fuel Revenues
-
PNM Decoupling Filing
31
Stand-alone full decoupling filing
Filed May 28, 2020
Requested 2021
implement-ation
Customer bills more accurately reflect the fixed, non-fuel costs
of the service provided
Residential
Small Commercial
Disassociates utility profits from sales volumes
Removes utility disincentives to promote
energy efficiency or conservation programs
Eliminates the upside/ downside risks of
weather for the non-fuel portion of customer bills
Full decoupling filing seeks to recover previously authorized
fixed costs,current rate design attempts to recover fixed costs
through volumetric rates
-
Decoupling Financial Impacts – 2020 / 2021 / 2022
32
2020 2021 2022
Customer Bills No Impact No impactRates adjusted to reflect
prior year
under/over recovery
Earnings No Impact
Includes recovery true-up for customer use
Current estimate: ~$16M
Includes recovery true-up for customer use
FFO No Impact No Impact No Impact
2020 2021 2022
Customer Bills No Impact No impactRates adjusted to reflect
prior year
under/over recovery
Revenues No Impact
Revenues adjusted for under/over recovery
based on customer useCurrent estimate: ~$16M increase in
revenues
Revenues adjusted for under/over recovery
based on customer use
FFO No Impact Includes adjusted revenuesIncludes adjusted
revenues
Cash Flow No Impact No Impact Collect prior year’s under/over
recovery
-
TNMP
-
TNMP Low-Risk Revenue Profile
34
30%Gulf Coast
3% West Texas
19%North/Central
16%North/Central
12%WestTexas
20%Gulf Coast
• 52% Volumetric Revenues: billed on kWh usage• Residential
customers (97%)• Primarily in the Gulf Coast, North/Central
regions
• 48% Demand-Based Revenues: billed on the peak hour of kW
demand during the month
• Majority of customers subject to billing ratchet, meaning
billing is the greater of the current month peak or 80% of prior 11
months peak
2019 Retail Revenues 50% Gulf Coast 35% North/Central Texas 15%
West Texas
2019 TNMP Revenues$295M Retail Revenues
Includes $94M of pass-through transmission expense recovery,
trued up twice annually
$67M Wholesale RevenuesFixed transmission investment recovery;
can
be adjusted twice annually through TCOS filings, $81M approved
March 2020
-
TNMP Regional Breakdown
35
TNMP – Gulf Coast
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
TNMP 2019 Revenues by RegionRegion provided 50% of 2019 retail
revenues• Regional economy driven largely by oil refining
and petrochemical industries, supplemented by the aerospace and
medical industries
• Sprawl from Houston has led to TNMP’s greatest portion of
residential customers in this region, combined with supporting
commercial businesses (retail, restaurants, entertainment, schools
health care facilities) and the marine and tourism industry native
to the coast
• ~60% of 2019 revenues from residential customers, who have
increased usage during COVID-19
• Petrochemical companies boosting production of chemicals used
in medical personal protective equipment and hand sanitizer during
COVID-19
• Largest cities: League City ~100,000 residents and Texas City
~50,000 residents
-
TNMP Regional Breakdown
36
TNMP – North/Central TX
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
TNMP 2019 Revenues by RegionRegion provided 35% of 2019 retail
revenues• Dallas region is home to 250 corporate
headquarters that each employ more than 1,000 people globally,
22 Fortune 500 companies and 8 of Forbes’ largest privately held
companies
• The sprawl from Dallas-Ft Worth into the TNMP service
territory has resulted in a load profile that is evenly split
between residential customers and the commercial businesses
supporting these communities (retail, restaurants, entertainment,
schools, health care facilities)
• COVID-19 Trends: Increases in residential customer usage are
offset by reduced demand-based business usage
• Largest city: Lewisville ~100,000 residents
-
TNMP Regional Breakdown
37
TNMP – West Texas
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
Region provided 15% of 2019 retail revenues• ~50% of 2019
revenues derived from retail
transmission customers with recovery trued up twice per year
• ~25% of 2019 revenues demand derived from higher-voltage
customers that continue to trend above 2019 levels during
COVID-19
• Diversification of customers within the oil & gas industry
between upstream (production, separation and water handling
activities) and downstream (processing and transportation of oil
and gas prior to market) activities
• Delaware Basin has one of the lowest break-even price for oil
and gas production in the Permian Basin and the entire US, area is
only partially served by utility power
• Largest city: Pecos ~10,000 residents
TNMP 2019 Revenues by Region
Permian Basin
Delaware Basin
-
TNMP Load and Economic Conditions
38
Resilient Texas economy has shown a shift in load between
customer classes resulting from COVID-19 with no significant
overall impacts
• Customer transmission interconnection requests continue in
line with expectations
• Diversified service territory results in minimal impact on
overall revenues resulting from fluctuations in West Texas oil and
gas industry
(1)Load growth is weather normalized and leap year adjusted
Year-over Year-Growth Q2 2020 vs. Q2 2019YTD 2020 vs.
YTD 2019Volumetric-Based Load(1) 2.9% 1.5%Demand-Based Load(1)
(2.8%) 0.0%Avg. Consumers 1.3% 1.3%
Load Growth
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
TNMP 2019 Revenues by Region
-
TNMP COVID-19 Considerations
39
• TNMP is a smaller portion of customer non-fuel revenues and is
less impacted by changes in load/demand:
TNMP Sales by Tariff Class % Volumes % RevenuesVolumetric 28%
52%Demand-Based 72% 48%
Customer Class Considerations• Volumetric: 97% Residential
customers, increased
volumes during the Stay-at-Home order• Demand-Based: Commercial
and Industrial customers,
some impacted by the Stay-at-Home order
West Texas4%
Houston/ Bay Area
13%
Dallas/ North TX
Area9%
PNM Resources Non-Fuel Revenues• Transmission recovery (45% of
revenues),
trued up twice per year• Majority of demand-based bills based
on
greater of peak monthly usage, or 80% of previous 11 months
peak
-
TNMP Demand and Infrastructure Investment
40
• ERCOT summer peak demand projected to grow by ~20% over next
ten years(1), extensive regional studies call for increased
transmission infrastructure to support reliability and growth,
particularly in West Texas region
(1) Source: ERCOT 2019-2028 forecast
Year-over Year-Growth 2017 2018 2019
Demand-Based Load 4.0% 6.8% 4.9%TNMP Avg. Consumers 1.2% 1.3%
1.4%
Texas growth drives infrastructure needs• TNMP has seen
consistent consumer growth driven by
strong Texas economy• Rapid demand-based load growth over recent
years in
the Commercial and Industrial classes drives need for increased
electrification and reliability / system upgrade investments
Load growth is weather normalized and leap year adjusted
2020 Key Capital Projects:• In the Gulf Coast, a 138kV
transmission line upgrade will
be completed to help with transmission contingency issues and
support the interconnection of a new gas-fired power plant;
• A group of transmission lines and substations in northern West
Texas will be upgraded from 69kv to 138kv to support regional
growth;
• Begin the replacement of our AMI meters to be compatible with
current network capabilities
$337$290
$342 $348
2020 2021 2022 2023
2020 – 2023 Investments
Consistent investment plan reflects system-wide investments
coordinated within ERCOT
-
PUCT Commissioners and TNMP Regulatory Agenda
41
Commissioners are appointed by the Governor of Texas and
confirmed by the Senate.
Name Term Began Term Ends Party
DeAnn Walker (Chair) Sept. 2017 Sept. 2021 Republican
Arthur D’Andrea Nov. 2017 Sept. 2023 Republican
Shelly Botkin June 2018 Sept. 2025 Republican
PUCT Commissioners
Filing Action Timing Docket No.TCOS Filing(second 2020 filing)
TNMP filed July 14, 2020
Rates expected to be implemented September 2020 51107
DCOS Filing TNMP filed April 6, 2020; Settlement filed June 26,
2020Rates expected to be implemented September 1, 2020 50731
TNMP Regulatory Agenda
-
TNMP Rate Recovery Framework
42
General Rate ReviewDCOS (Distribution
Cost of Service)TCOS (Transmission
Cost of Service)
Process
Standard rate review involving comprehensive filing, discovery,
interveners,
hearings, etc.;Staff recommendation and
PUCT approval; 180-day clock (potential for settlement)
Pre-defined schedules limited to distribution investments
with
discovery, interveners, hearings;Staff recommendation and PUCT
approval; filed 1st week of April with rates implemented Sept 1
(potential for settlement)
Pre-defined schedules; Staff recommendation and PUCT
approval, 60-day clock
Capital Structure / ROE / Cost of Debt Yes No No
Rate Base / Property Tax / Depreciation Yes Distribution only
Transmission only
Other expenses Yes No NoTiming (allowed) PUCT defined (1) Once
per year Twice per year
Current TNMP Filings
Historical: filed May 2018 (test year of FY 2017), approved
December 2018, rates implemented January 2019:
9.65% ROE, 45% Equity
2020 Filings: Filed April 6, 2020Settlement filed June 26, 2020,
rates expected to be implemented September 1, 2020
2020 Filings: 1) Jan 2020 filing, approved/
implemented in Mar 20202) July 24, 2020 filing, rates
expected to be implemented Sept 2020
(1) PUCT rule calls for general rate review within 48 months of
most recent order setting rates (TNMP order issued December 2018),
unless earning less than 50 basis points over the average
authorized ROE of ERCOT investor-owned utilities (based on year-end
rate base, weather-normalized)
-
Appendix
-
San Juan Abandonment, Securitization and Replacement Power
44
Aban
donm
ent ● Requests
abandonment of San Juan coal plant after participation agreement
and coal supply contracts end June 30, 2022 Se
curit
izatio
n ● $283M undepreciated investment in San Juan, proceeds
available to fund replacement power
● $29M decommissioning and reclamation costs
● $20M job training and severance costs
● $20M economic development funds
● $9M financing costs
Total $361M securitization
Repl
acem
ent P
ower Prioritizes environmental
benefits and location preferences consistent with the Energy
Transition Act
● 650 MW solar PPA● 300 MW battery
storage PPA
● 430 MW located in the Central Consolidated School District and
470 MW in nearby communities
Timing• Filed July 1, 2019• NM Supreme Court ruled January 2020
that the ETA
applies to PNM’s application for abandonment, securitization and
replacement power
• NMPRC approved abandonment and securitization on April 1,
2020; replacement resources approved June 29, 2020
-
San Juan Securitization Next Steps
Securitization next steps:
45
April 1, 2020: Irrevocable NMPRC financing order
Early 2022: PNM forms a Special Purpose Entity (SPE) that will
issue the bonds
July 2022: SPE issues securitization bonds
Within 30 days of issuance: PNM files a report with the NMPRC,
to include bond pricing and structure
Semi-annually after issuance: PNM files to true up the customer
charge for under- or over-collection
Securitization Order issued April 1, 2020 grants irrevocable
financing order authorizing the issuance of securitization bonds up
to $361 million, to include:
• Abandonment costs, including undepreciated investment in San
Juan, decommissioning and reclamation costs, and job training and
severance costs
• Financing costs
• Economic development funds
-
San Juan and Four Corners Generating StationsOwnership and
Participants
46
Unit TotalMWPNM MW
PNM Ownership Other Participants/Ownership
1 340 170 50% Tucson Electric 50% (170 MW)
4 507 392 77.3%City of Farmington 8.5% (43 MW)Los Alamos County
7.2% (36.5 MW)Utah Associated Municipal Power Systems (UAMPS) 7.0%
(35.5 MW)
Total 847 562
Unit TotalMWPNM MW
PNM Ownership Other Participants/Ownership
4 770 100 13%
Arizona Public Service Company 63% (485 MW)Navajo Transitional
Energy Company 7% (54 MW)Salt River Project 10% (77 MW)Tucson
Electric Power 7% (54 MW)
5 770 100 13%
Arizona Public Service Company 63% (485 MW)Navajo Transitional
Energy Company 7% (54 MW)Salt River Project 10% (77 MW)Tucson
Electric Power 7% (54 MW)
Total 1,540 200
San Juan Generating Station
Four Corners Generating Station
-
Palo Verde Nuclear Generating Station Ownership and Leases
47
MW Owned vs. Leased
Lease Expiration• Unit 1: June 11, 2020; notice given to return
leased assets upon expiration of the extended lease on January 15,
2023• Unit 2: June 11, 2020; notice given to return leased assets
upon expiration of the extended lease on January 15, 2024• PNM has
issued an RFP in order to replace the capacity from the leases by
mid-2023. the replacement of this leased capacity allows PNM to
integrate more renewable resources that provide the best value to
customers and support the path to emissions-free energy by 2040
Yearly Payment Amounts Total PV Unit 1 - $16.5M Total PV Unit 2
- $1.6M
Unit 1
Owned 2.3% 30 MW
Leased 7.9% 104 MW
Total 10.2% 134 MW
Unit 2
Owned 9.5% 124 MW
Leased 0.7% 10 MW
Total 10.2% 134 MW
Unit 3
Owned 10.2% 134 MW
Leased 0% 0 MW
Total 10.2% 134 MW
-
COVID-19 Load: Assumptions and EPS Sensitivities
48
Clean Energy Focus
Strong Financial Profile
PNM TNMP
COVID-19 Planning Assumptions:Current Expectation
Residential + 5%Commercial -10%
Industrial No significant impacts
10% change in load Monthly EPS Impact
Residential CommercialJuly – September +/- $0.03-$0.04+/-
$0.03-$0.04October – December +/- $0.02 +/- $0.02
Monthly rule of thumb:
COVID-19 Planning Assumptions:
Monthly rule of thumb:
10% change in loadMonthly EPS Impact
Volumetric Demand-BasedJuly – September +/- $0.02 +/-
$0.01October – December +/- $0.01 +/- $0.01
Current ExpectationVolumetric + 5%
Demand-Based - 5%
-
2020 - 2023 Potential Earnings Power
49
(1) Average rate base has been reduced by approximately $130M to
represent ($0.05) of Earnings Potential for the lost equity return
on Four Corners investment determined in the 2018 general rate
review. 2022 and 2023 rate base also reflects the removal of $283M
undepreciated SJGS investment upon its retirement in mid-2022 to be
recovered through securitization.
(2) PNM Renewables reflect assets collected through the
Renewable Rate Rider. (3) PNM FERC in 2021-2023 reflects a return
of 8%-9% to account for Western Spirit investment recovered through
incremental rates.(4) Consists primarily of
decommissioning/reclamation trust costs and income (net of
fees/taxes), AFUDC, certain incentive compensation, and the 65MW
ownership of San Juan Unit 4 (prior
to retirement).(5) TNMP earnings include additional recovery for
Energy Efficiency, along with items excluded from rates (primarily
AFUDC) and interest savings from the refinancing of existing debt.
(6) Corporate/Other includes the earnings impacts associated with
short and intermediate term bank debt and the 50% equity interest
in NMRD.(7) Equity Financing Plans to fund capital growth reflects
debt costs for assumed $250M-$300M mandatory convertibles issued in
Q4 2021 that
convert in 2024
This table is not intended to represent a forward-looking
projection of 2021 - 2023 earnings guidance.
Allowed Return / Equity Ratio
2020 Ongoing Earnings
Guidance Midpoint
2021 Earnings Potential
2022 Earnings Potential
2023 Earnings Potential
Avg Rate Base
Return EPSAvgRate Base
EPSAvgRate Base
EPSAvgRate Base
EPS
PNM Retail(1) 9.575% / 50% $2.5 B 9.5% $1.47 $2.5 B $1.41 $2.5 B
$1.43 $2.5 B $1.44
PNM Renewables(2) 9.575% / 50% $150 M 9.575% $0.09 $145 M $0.08
$140 M $0.08 $130 M $0.07
PNM FERC(3) 10% / ~50% $0.3 B 7.5% $0.15 $0.5 B $0.20 - $0.23
$0.7 B $0.35 - $0.39 $0.8 B $0.37 - $0.42
Items not in Rates(4) ($0.01) ($0.01) - $0.02 $0.01 - $0.03
$0.03 - $0.06Total PNM $3.0 B $1.70 $3.1 B $1.68 - $1.74 $3.4 B
$1.87 - $1.93 $3.5 B $1.91 - $1.99
TNMP(5) 9.65% / 45% $1.3 B 9.65% $0.73 $1.5 B $0.79 $1.6 B $0.87
$1.9 B $0.97
Corporate/Other(6) ($0.22) ($0.13) - ($0.11) ($0.13)-($0.11)
($0.15) - ($0.13)Equity Financing Plans(7) ($0.03) - ($0.01)
($0.11)-($0.09) ($0.11) - ($0.09)Total PNM Resources $4.3 B $2.21
$4.6 B $2.31- $2.41 $5.0 B $2.50 - $2.60 $5.4 B $2.62 - $2.74
-
Liquidity as of July 24, 2020
50
PNM TNMPCorporate/
Other
PNM Resources
ConsolidatedFinancing Capacity(1): (In millions)
Revolving credit facilities $440.0 $75.0 $340.0 $855.0
As of 7/24/20:Short-term debt and LOC balances 96.1 0.1 149.5
245.7
Remaining availability 343.9 74.9 190.5 609.3
Invested cash - 63.5 0.9 64.4
January 2020 Forward Equity Offering 287.1 287.1
Total Available Liquidity $343.9 $138.4 $478.5 $960.8(1)
Excludes intercompany debt and term loans(2) Availability does not
reflect $100.3M reserved to provide liquidity support for pollution
control revenue
refunding bonds remarketed in weekly mode on July 1, 2020
• Available liquidity strengthened by the issuance of long-term
debt at PNM and TNMP in Q2 2020, freeing up capacity on revolving
credit facilities
(2)
Slide Number 1Safe Harbor StatementSlide Number 3PNM Resources
OverviewStrategic FocusCommitment to ESG StrategyStrong Financial
Profile2020 – 2023 Investment Plan2020 - 2023 Potential Earnings
Power Dividend GrowthLiquidity and Debt Maturity OutlookKey
TakeawaysSlide Number 13Our Response to COVID-19COVID-19
UpdateContinued COVID-19 Load Impacts2020 Consolidated Ongoing
Earnings GuidanceSlide Number 18New Mexico Energy Policy: Energy
Transition ActExecuting the Energy Transition ActTransform PNM
Generation PortfolioRenewable and Battery Storage PortfolioPNM
Investment: Wired for the FutureInfrastructure Investments: Wired
for the FuturePNM Retail Transmission OpportunitiesFERC
Transmission OpportunitiesNMPRC Commissioners and DistrictsPNM
Regulatory AgendaPNM Load and Economic Conditions PNM COVID-19
ConsiderationsPNM Decoupling FilingDecoupling Financial Impacts –
2020 / 2021 / 2022Slide Number 33TNMP Low-Risk Revenue ProfileTNMP
Regional BreakdownTNMP Regional BreakdownTNMP Regional
BreakdownTNMP Load and Economic ConditionsTNMP COVID-19
ConsiderationsTNMP Demand and Infrastructure InvestmentPUCT
Commissioners and TNMP Regulatory AgendaTNMP Rate Recovery
FrameworkSlide Number 43San Juan Abandonment, Securitization and
Replacement PowerSan Juan Securitization Next StepsSan Juan and
Four Corners Generating Stations�Ownership and ParticipantsPalo
Verde Nuclear Generating Station Ownership and LeasesCOVID-19 Load:
Assumptions and EPS Sensitivities2020 - 2023 Potential Earnings
PowerLiquidity as of July 24, 2020
