Q Earnings Review August 9, 2016

Transcription

1 Q Earnings Review August 9, 2016

2 Safe Harbor Statement Statements made in this presentation that relate to future events or PNM Resources, Inc. s ( PNMR ), 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 Readers are cautioned that all forward-looking statements are based upon current expectations and estimates. PNMR, PNM, and TNMP assume no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forwardlooking statements, PNMR, PNM, and TNMP caution readers not to place undue reliance on these statements. PNMR's, 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. For a discussion of risk factors and other important factors affecting forward-looking statements, please see the Company s Form 10-K and 10-Q filings with the Securities and Exchange Commission, which factors are specifically incorporated by reference herein. Non-GAAP Financial Measures For an explanation of the non-gaap financial measures that appear on certain slides in this presentation (ongoing earnings and ongoing earnings per diluted share), as well as a reconciliation to GAAP measures, please refer to the Company s website as follows: 2

3 Opening Remarks and Overview Pat Vincent-Collawn Chairman, President and CEO

4 Q Financial Results and Company Updates Financial Results: Q Q YTD 2016 YTD 2015 GAAP EPS $0.34 $0.40 $0.47 $0.57 Ongoing EPS $0.40 $0.44 $0.53 $0.65 EPS shown on a diluted basis 2016 Ongoing EPS Guidance narrowed to $ $1.65 Company Updates: General Rate Case update Hearing Examiner Recommended Decision 4

5 Regulatory Update NMPRC: Filing Action Timing Docket No. General Rate Case Filing Filed August 27, 2015 Recommended decision issued August 4, 2016; Rates expected to be implemented September 1, 2016 San Juan Generating Station Natural Gas Plant CCN Application (80 MW) Filed April 26, 2016 Hearing scheduled for November 7-10, 2016; decision expected by end of UT UT AMI Filed February 26, 2016 PNM requested suspension on August 5, UT FERC: Transmission Formula Rates Filed June 1, 2016 TNMP: Informational filing submitted; rates effective June 1, 2016 N/A TNMP TCOS Filed July 19, 2016 Rates expected to be effective September

6 Financial Overview Chuck Eldred Executive Vice President and CFO

7 Q Financial Summary Ongoing EPS $0.44 ($0.05) ($0.02) $0.03 $0.40 PNM TNMP Corporate/ Other Q Q

8 Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather-normalized, leap-year adjusted) PNM Retail Load: % of 2015 Sales Volumes Q vs. Q YTD 2016 vs. YTD 2015 Residential 39% 1.9% (0.4%) Commercial 46% (0.9%) 0.5% Industrial 12% (7.0%) (7.1%) Total Retail (0.4%) (0.7%) 2016 Load Growth Forecast: (2%) 0% Avg. Customers 0.7% 0.7% 2016 Customer Growth Forecast: 0.5% TNMP Volumetric Load (1) : % of 2015 Sales Volumes % of 2015 Sales Revenues Q vs. Q YTD 2016 vs. YTD 2015 Residential 51% 8.0% 3.0% Commercial 46% 4.5% 2.6% Total Volumetric Load 53% 6.2% 2.6% Demand-Based Load (2) 47% 2.8% 2.2% 2016 Load Growth Forecast: 2% 3% Avg. End Users 1.5% 1.5% 2016 End User Growth Forecast: 1.0% 6.0% 4.0% Employment Growth (3) 12-Month Rolling Average 3.7% % Change 2.0% 0.0% % 1.3% 0.8% -2.0% Albuquerque Dallas Houston U.S. (1) Volumetric load is billed on per-kwh usage (2) Demand-based load is billed on monthly kw peak (3) U.S. Bureau of Labor Statistics, June

9 2016 Guidance and Quarterly Distribution (Ongoing) Original 2016 Guidance Range: $1.55 Consolidated EPS $1.76 PNM $ $1.30 TNMP $ $0.51 Corp/Other ($0.06) ($0.05) Narrowed 2016 Guidance Range: $1.55 Consolidated EPS $1.65 PNM $ $1.16 TNMP $ $0.51 Corp/Other ($0.03) ($0.02) Revised 2016 Quarterly Distribution Q3 2016E Q4 2016E 46% 21% 9

10 Hearing Examiner General Rate Case Recommended Decision Key Rate Case Elements (PNM Retail Share, net of ADIT) Recommended Decision Original Request Impact to Rate Increase ROE 9.575% 10.5% ($17) M Rate Base: Non-fuel revenue increase of $41.3M versus $121.5M request Retail rate base of $2,223M versus $2,458M request Palo Verde Unit 2 Lease Purchase (64 MW) Disallowed $153 M ($24) M Balanced Draft Technology Disallowed $39 M ($5) M Five Months of CWIP $55 M $55 M No adjustment Pre-Paid Pension Asset $82 M (1) $83 M No adjustment Other Revenue Requirements: Palo Verde Lease and Property Tax Expense (remaining 114 MW of leased capacity) Disallowed $19.5 M ($19.5) M (1) The recommendation did not disallow any amounts associated with pre-paid pension; other changes resulted in a slight variation of the amount allocated to Retail rate base 10

11 Questions and Answers

12 Appendix

13 Q vs Q EPS (Ongoing): PNM PNM $0.31 $0.26 Q Key Performance Drivers EPS Elimination of Palo Verde Unit 2 lease costs, net of depreciation $0.03 Weather $0.02 Interest income from IRS, net of fees $0.02 Outage costs $0.01 Q Q El Paso Natural Gas FERC tariff refund in 2015 ($0.03) Depreciation and property tax ($0.02) Palo Verde Unit 3 market prices ($0.02) Interest expense ($0.02) AFUDC ($0.01) FERC Generation Navopache contract ($0.01) Palo Verde Nuclear Decommissioning Trust gains ($0.01) Other ($0.01) 13

14 Q vs Q EPS (Ongoing): TNMP and Corporate $0.15 $0.13 TNMP Q Key Performance Drivers EPS Load $0.02 TCOS rate relief $0.01 Q Q O&M increases ($0.02) Weather ($0.01) Depreciation and property tax ($0.01) Other ($0.01) Corporate ($0.02) $0.01 Q Q Q Key Performance Drivers EPS Westmoreland financing agreements $0.02 Interest savings on repayment of 9.25% debt $

15 Weather Impact PNM Q Q Normal (1) Heating Degree Days Cooling Degree Days Net EPS Impact compared to normal $0.00 ($0.03) TNMP Q Q Normal (1) Heating Degree Days Cooling Degree Days ,083 Net EPS Impact compared to normal ($0.02) ($0.01) (1) 2016 normal weather assumption reflects the 10-year average for the period

16 Potential Earnings Power Last updated February 26, 2016 Allowed Return / Equity Ratio 2017 Earnings Potential 2018 Earnings Potential 2019 Earnings Potential Avg Rate Base EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail (1) 10% / 50% $2.4 B $1.50 $2.6 B $1.59 $2.5 B $1.58 PNM Renewables (2) 10% / 50% $95 M $0.06 $90 M $0.06 $85 M $0.05 PNM FERC Transmission (3) 10% / ~50% $180 M $0.08-$0.10 $245 M $0.11-$0.14 $270 M $0.12-$0.15 PV3 (4) ($0.13) Included in PNM Retail Included in PNM Retail Items not in rates (5) $0.01-$0.04 ($0.02)-$0.01 ($0.01)-$0.05 Total PNM $2.7 B $ $1.57 $2.9 B $ $1.80 $2.9 B $ $1.83 TNMP (6) % / 45% $770 M $0.46 $810 M $0.48 $860 M $0.52 Corporate/Other (7) ($0.06)-($0.04) ($0.06)-($0.04) ($0.06)-($0.04) Total PNM Resources $3.4 B $ $1.99 $3.7 B $ $2.24 $3.8 B $ $2.31 (1) The currently authorized 10% ROE has been used for this presentation. (2) PNM Renewables reflect assets collected through the Renewable Rate Rider. (3) Transmission is recovered under the FERC formula rate methodology, which uses prior year average rate base and assumes mid-year rate increases, at a 10% ROE. To reflect this inherent lag in the methodology, earnings potential represents the prior year average rate base and uses an ROE range of 7 9%. (4) 2017 Earnings Potential assumes a forward market price of $29/MWh; a price of $44/MWh is required to break even. PV3 is included in PNM rates beginning in (5) Consists primarily of Palo Verde Nuclear Decommissioning Trust gains and losses, AFUDC, refined coal, certain incentive compensation, earnings in 2017 associated with the assets previously allocated to the Navopache contract, and the 65MW ownership of San Juan Unit 4 beginning in (6) TNMP Earnings Potential includes $0.02 of CTC in 2017 and 2018 and $0.01 in TNMP allowed returns are based on the most recently filed general rate case. Changes in certain factors, including load growth and lower debt costs, present opportunities for further earnings potential Earnings Potential includes $0.02 for the refinancing of $172M of 9.5% debt. (7) Corporate/Other includes the capital expenditures and restructuring fees associated with the 65MW ownership of San Juan Unit 4 before 2018 and short and intermediate term bank debt. This table is not intended to represent a forward-looking projection of GAAP or ongoing earnings guidance. 16

17 Capital Forecast Total Capital Plan: $1.7B PNM Rate Base CAGR: 5-7% (1) $568 (In millions) TNMP Rate Base CAGR: 7-9% $37 $125 $113 $415 $19 $101 Palo Verde Unit 3 added to rate base $398 $14 $114 $132 $102 $353 $15 $117 $293 $203 $127 $239 $240 $237 $163 $168 $ (2) (2) PNM Generation PNM T&D TNMP Corporate/Other Depreciation (1) Includes the addition of PV3 to rate base in 2018, which does not have associated capital spending. (2) The additional 65 MW ownership of San Juan Unit 4 included in the December BART approval is part of Corporate/Other for and PNM beginning in Does not include PNM s application for Advanced Metering Infrastructure Project; suspension was requested August 5, Beginning in September 2016, depreciation rates reflect the full rate change proposed in the August 2015 General Rate Case filing. Amounts may not add due to rounding. 17

18 PNM Plant EAF and Outages 70.4% 71.8% 72.3% 60.7% 92.0% 91.8% Unit Outage Schedule Duration in Days Four Corners Time Period 5 95 Q3-Q Palo Verde 3 34 Q Q Q San Juan Four Corners Palo Verde 12 months ending 6/30/15 12 months ending 6/30/16 18

19 Balance Sheet and Credit Metrics

20 Liquidity as of August 5, 2016 Financing Capacity (1) : PNM TNMP Corporate/ Other (In millions) PNM Resources Consolidated Revolving credit facilities $450.0 $75.0 $300.0 $825.0 As of 8/5/16: Short-term debt and LOC balances $105.4 $0.1 $184.7 $290.2 Remaining availability Invested cash Total Available Liquidity $344.6 $74.9 $116.8 $536.3 (1) Excludes intercompany debt and term loans 20

21 Selected Balance Sheet Information (In millions) Dec 31, 2015 June 30, 2016 Long-Term Debt (incl. current portion) (1) PNM $1,580.7 $1,631.6 TNMP Corporate/Other Consolidated $2,091.9 $2,324.0 Total Debt (incl. short-term) (2) PNM $1,580.7 $1,757.6 TNMP Corporate/Other Consolidated $2,342.5 $2,725.4 (1) Net of unamortized debt issuance costs (2) Excludes intercompany debt Amounts may not add due to rounding 21

22 Credit Ratings PNMR S&P Moody s Credit rating BBB+ (1) Baa3 (1) Issuer outlook Stable Stable PNM S&P Moody s Credit rating BBB+ (2) Baa2 (2) Issuer outlook Stable Stable TNMP S&P Moody s Credit rating A (3) A1 (3) Issuer outlook Stable Stable (1) Issuer/Corporate rating (2) Senior unsecured (3) Senior secured 22