2020 Earnings Guidance - December 18, 2019 - November 1, 2019 - PNM Resources
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November 1, 2019 2020 Earnings Guidance December 18, 2019
Safe Harbor Statement
Statements made in this presentation for PNM Resources, Inc. (“PNMR”), Public Service Company of New Mexico
(“PNM”), or 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. PNMR, 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, 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, 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
Opening Remarks and Overview
Pat Vincent-Collawn
Chairman, President and CEO
Earnings Guidance and Dividend Increase
Ongoing Earnings Guidance:
• Revised 2019 Ongoing EPS Guidance to $2.13 - $2.16
• 2020 Ongoing EPS Guidance of $2.16 - $2.26
Dividend Increase:
• Board increased common dividend by $0.07, a 6% increase, to
indicated annual rate of $1.23 per share
• 10th consecutive increase since 2012
• 56% payout ratio based on 2020 guidance midpoint
4
Regulatory Agenda
Filing Action Timing Docket No.
PNM:
PNM filed July 1, 2019; NMPRC bifurcated
NMPRC decision on abandonment/
Consolidated Application for San application on July 10, 2019;
securitization expected by April 1, 19-00018-UT
Juan (Abandonment, Abandonment/Securitization hearings scheduled
2020, decision on replacement power 19-00195-UT
Securitization and Replacement) December 10-19, 2019; Replacement Power
expected by October 1, 2020
hearings scheduled January 22-29, 2020
PNM filed June 3, 2019; Hearings held October 24-
2020 Renewable Plan 25, 2019; Recommended Decision to approve plan NMPRC decision expected in Q1 2020 19-00159-UT
issued on December 2, 2019
PNM filed May 31, 2019 for approval of voluntary
renewable program expected to begin March 31,
Solar Direct Program NMPRC decision expected in Q1 2020 19-00158-UT
2021; Hearing held November 20, 2019, will
continue January 9, 2020
New Mexico Supreme Court issued opinion May 16,
Appeal of 2015 General Rate Case 2019 affirming NMPRC decision but denying the No statutory timeline; oral arguments 15-00261-UT
to New Mexico Supreme Court disallowance of future Palo Verde decommissioning on remand held July 17, 2019 S-1-SC-36115
costs; full order was remanded back to the NMPRC
Upcoming activities:
• PNM General Rate Review filing expected in Q2 2020
• PNM annual FERC formula rate and PNM annual Renewable filing filed in Q2 2020
• PNM 2020 IRP filing due July 1st
• TNMP TCOS filings in Q1 and Q3 2020
• TNMP DCOS filing expected in April 2020
• New Mexico ballot initiative to move to appointed Commission
in November 2020 5
2020 Guidance
Chuck Eldred
Executive Vice President and CFO
Don Tarry
Vice President, Controller and Treasurer
Consolidated Earnings Guidance (Ongoing)
2019 Revised Earnings Guidance
$2.13 Consolidated EPS $2.16
PNM TNMP Corp/Other
$1.64 – $1.65 $0.70 – $0.71 ($0.21) – ($0.20)
2020 Earnings Guidance
$2.16 Consolidated EPS $2.26
PNM TNMP Corp/Other
$1.67 – $1.73 $0.72 – $0.74 ($0.23) – ($0.21)
7
Load and Economic Conditions
PNM
Economic indicators continue to be positive Q3 YTD 2019
Customer growth driven by economic development PNM vs. 2019E 2020E
Higher data center load partially offset by Commercial Q3 YTD 2018
customer energy efficiency efforts Total Retail Load(1) 0.0% 0.0% – 1.0% 0.5% – 1.5%
PNM Avg. Customers 0.8% 0.8% – 1.0% 0.8% – 1.2%
(1) Weather normalized and leap year adjusted, excludes Economy customers
TNMP
Q3 YTD 2019 Texas growth drives infrastructure needs
TNMP vs. 2019E 2020E
Residential customer growth driven by strong Texas
Q3 YTD 2018
economy across TNMP service territory
Demand-Based Load(2) 4.3% 4.0% – 5.0% 4.0% – 5.0% Demand-based load growth in Commercial and
TNMP Avg. End Users 1.5% ~1.5% ~1.5% Industrial classes driven by energy sector in West
(2) Commercial and Industrial per-kw monthly peak billings; excludes retail Texas and Gulf Coast regions; drives need for
Transmission customers
infrastructure investment
8
PNM Guidance (Ongoing)
PNM Ongoing EPS
$1.67 - $1.73
$1.64 - $1.65
$1.54
2018 2019E 2020E
• Load growth and increased rate recovery from the retail renewable rider and the
FERC formula rate more than offset increased depreciation expense from new
investments:
• PNM’s first new transmission line constructed since 1985 to be completed in 2020 (BB2)
• Western Spirit interconnection projects begin; expected in-service mid-2021
• Overall reduction in O&M costs driven by lower outage costs
• San Juan completed its final planned outage in 2019
• Non-outage O&M returns to normal levels in 2020
9
TNMP Guidance (Ongoing)
TNMP Ongoing EPS
$0.70 - $0.71 $0.72 - $0.74
$0.65
2018 2019E 2020E
• 2019 EPS includes $0.04 of weather benefit
• Continued TCOS filings to recover transmission investments twice per year; first
utilization of annual DCOS filing to recover distribution investments
• Continued growth across service territory drives additional investments, resulting
in higher depreciation expense, property tax and interest expense from new long-
term debt
102020 - 2023 Potential Earnings Power
Earnings Growth Target 5-6%
Equity financing plans continue to be optimized; 2020 impacts within guidance range
2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings
Allowed
Return /
Guidance Midpoint Potential Potential Potential
Equity
Avg Rate Avg Rate Avg Rate Avg Rate
Ratio Return EPS EPS EPS EPS
Base Base Base Base
9.575% /
PNM Retail $2.5 B 9.5% $1.47 $2.5 B $1.52 $2.4 B $1.48 $2.4 B $1.48
50%
San Juan 9.575% /
$150 M $0.09 $280 M $0.17
Replacement(1) 50%
9.575% /
PNM Renewables $150 M 9.575% $0.09 $145 M $0.09 $140 M $0.08 $130 M $0.07
50%
10% /
PNM FERC $340 M 7.5% $0.15 $530 M $0.26-$0.30 $740 M $0.37-$0.42 $780 M $0.39-$0.44
~50%
Items not in Rates ($0.01) ($0.03)-($0.01) ($0.03)-($0.01) ($0.03)-($0.01)
Total PNM $3.0 B $1.70 $3.2 B $1.84-$1.90 $3.5 B $1.99-$2.06 $3.6 B $2.08-$2.15
9.65% /
TNMP $1.3 B 9.65% $0.73 $1.5 B $0.84 $1.6 B $0.89 $1.9 B $1.02
45%
Corporate/Other ($0.22) ($0.21)-($0.19) ($0.19) - ($0.17) ($0.23)-($0.21)
Equity Financing Plans ($0.01)-$0.00 ($0.10)-($0.09) ($0.20) - ($0.19) ($0.24)-($0.23)
Total PNM Resources $4.3 B $2.20 - $2.21 $4.7 B $2.37 - $2.46 $5.1 B $2.49 - $2.59 $5.6 B $2.63 - $2.73
Note: 2018-2023 CAGR measured from 2018 Ongoing EPS of $2.00
(1) Assumes 2022 mid-year implementation
This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance.
11
Refer to Slide 25 for additional details and disclosures.Dividend Increase
$2.68
$2.42 $2.54
$2.14 $2.21
$1.94 $2.00
$1.64 $1.65
$1.49 $1.23
$1.16
$1.06 Dec ‘19
$0.88 $0.97 Dec ‘18
$0.80 Dec ‘17
$0.74 Dec ‘15 Dec ‘16
Dec ‘13 Dec ‘14 54% 56%
payout payout
2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E
(1)
Ongoing EPS Indicated Annual Dividends
• Board increased common dividend by $0.07 to indicated annual rate of
$1.23 per share
• Represents 6% increase, consistent with earnings growth target
• Continue to target midpoint of 50% – 60% payout ratio
• 10th consecutive increase since 2012
• Next dividend review in December 2020
• Expect future increases to be in alignment with targeted
earnings growth (5-6%)
12
(1) 2014 – 2018 Ongoing EPS reflects actual results; 2019-2020 reflects ongoing earnings guidance, 2021-2023 reflects midpoint of earnings potentialQuestions & Answers
Appendix
San Juan Abandonment, Securitization and Replacement Power
● Requests ● $283M undepreciated ● Recommended
Abandonment
Replacement Power
Securitization
abandonment of San investment in San Juan, scenario balances
Juan coal plant after proceeds available to environment, cost and
participation fund replacement reliability
agreement and coal power ● 350MW solar drives
supply contracts end ● $29M decommissioning 62% reduction in
June 30, 2022 and reclamation costs carbon emissions
● $20M job training and ● 130MW battery
severance costs storage capacity
● $20M economic responsibly integrates
development funds new technology
● $9M financing costs ● 280MW natural gas
peaking plants(1)
Total $361M securitization ensure reliability
during energy
transition, provides
San Juan property tax
base
Total $298M investment
15
(1) The natural gas peaking plants are proposed with a useful life through 2040, consistent with PNM’s 2040 goal of zero carbon emissionsNMPRC Commissioners and Districts
Term
District Name Party NMPRC Districts and
Ends
PNM Service Areas
District 1 Cynthia Hall 2020(1) Democrat
District 2 Jefferson Byrd 2022(1) Republican
Valerie Espinoza,
District 3 2020 Democrat
Vice-Chairman
Theresa Becenti-Aguilar,
District 4 2022(1) Democrat
Chairman
District 5 Stephen Fischmann 2022(1) Democrat
(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 new staggered terms 16
on January 1, 2023PNM Guidance (Ongoing)
PNM Ongoing EPS
$1.63 - $1.65 $1.67 - $1.73
$1.54
2018 2019E 2020E
2019 vs 2020
Key Year-over-Year EPS Performance Drivers
Changes
Retail load $0.02 – $0.05
2020 leap year impact $0.01
FERC transmission margin $0.03 – $0.05
Renewable rider $0.02
AFUDC $0.00 – $0.01
Outage cost decreases $0.06 – $0.08
Decommissioning/reclamation trust income, net of fees ($0.02) – $0.00
Interest expense increases ($0.02) – $0.00
2019 weather ($0.02)
O&M increases ($0.04) – ($0.02)
Depreciation and property tax ($0.09) – ($0.06)
17TNMP Guidance (Ongoing)
TNMP Ongoing EPS
$0.70 - $0.71 $0.72 - $0.74
$0.65
2018 2019E 2020E
2019 vs 2020
Key Year-over-Year EPS Performance Drivers
Changes
Rate relief (TCOS/DCOS) $0.15 – $0.20
Load $0.05 – $0.06
2019 weather ($0.04)
O&M increases ($0.04) – ($0.02)
Interest expense increases ($0.02) – ($0.01)
Depreciation and property tax ($0.12) – ($0.08)
18Corporate and Other Guidance (Ongoing)
Corporate and Other Ongoing EPS
($0.19) ($0.21) – ($0.20) ($0.23) – ($0.21)
2018 2019E 2020E
2019 vs 2020
Key Year-over-Year EPS Performance Drivers
Changes
Interest expense ($0.02) – ($0.01)
192020 Assumptions
amounts shown are before tax 2020E
PNM
Weather $0 (normal)
Retail Load 1% = $0.03
Outage costs $11M - $13M
Decommissioning/reclamation trust income, net of fees $15M - $17M
Anticipated Ongoing effective tax rate (Statutory rate = 25.4%)
25.3%
before amortization of excess deferred income taxes
Amortization of excess deferred income taxes $21.4M
TNMP
Weather $0 (normal)
1% = $700k
Demand-Based Load
($0.01 rounded)
Anticipated Ongoing effective tax rate (Statutory rate = 21.0%)
23.6%
before amortization of excess deferred income taxes
Amortization of excess deferred income taxes $9.2M
Consolidated PNM Resources
Anticipated Ongoing effective tax rate(1)
before amortization of excess deferred income taxes 24.4%
(Corporate/Other statutory rate = 25.4%)
Average PNM Resources diluted shares outstanding 80M
20
(1) Reflects effective tax rate for consolidated taxpayer, consolidating tax adjustments reflected in Corporate and Other segmentPNM Scheduled Plant Outages
San Juan Four Corners Palo Verde
Duration Time Duration Time Duration Time
Unit Unit Unit
in Days Period in Days Period in Days Period
No planned outages in 2020 5 76 Q1-Q2 2020 2 30 Q2 2020
4 12 Q2 2020 1 44 Q3 2020
21EBITDA and Quarterly Earnings Distribution Guidance (Ongoing)
Ongoing EBITDA
(In millions)
2019E Midpoint 2020E Midpoint
Consolidated PNM Resources $573 $603
PNM $377 $390
TNMP $176 $189
2020 Quarterly Ongoing Earnings Distribution
58%
21% 14%
7%
Q1 Q2 Q3 Q4
222019 – 2023 Investment Plan
$3.9B investment plan results in 9.6% rate base growth
$991
$21
$818 $177
$27
$27
$771
$25
$48 $694 $68
$22
$641 $109 $268
$21
$37
$72 $128
$53 $94 $77
$60 $82
$176 $182 $202
(in millions)
$99
$173
$125
$345
$306 $342 $322
$337 $275 $348
$245 $255 $270
2019 2020 2021 2022 2023
TNMP PNM T&D PV Lease Purchases/Other Replacement Power (3)
PNM Existing Generation PNM Renewable Additions PNM Transmission Expansion(2)
SJGS Replacement Power 50% NMRD Renewable Additions Business Technology Services/General Services
Depreciation (1)
Targeted 2018-2023 Rate Base CAGR (2018 base): Total 9.6% / PNM 6.6% / TNMP 17.3%
(1) Depreciation does not include amounts associated with NMRD
(2) Western Spirit acquisition of $285M reflects assumed purchase price of $360M, net of $75M customer funding 23
(3) For Palo Verde leases that expire in 2023, capex assumes either the purchase of the leases or replacement of the power through new resourcesTNMP Investment Plan
2020 Key Capital Projects
• A group of transmission lines and substations in
northern West Texas will be upgraded from 69kv to
138kv to support growth in that region;
• In the Gulf Coast, a 138kV transmission line upgrade TNMP Investment Plan by Region
will be completed to help with transmission
contingency issues and support the interconnection North/
Central TX ~31%
of a new gas-fired power plant; West Texas
• Begin the replacement of our AMI meters to be ~44%
compatible with current network capabilities
TNMP Demand
• Texas is the largest energy-producing state and the
largest energy-consuming state in the nation(1) Gulf Coast
~25%
• ERCOT summer peak demand projected to grow by ● TNMP Service Area
~20% over next 10 years(2), extensive regional
studies call for increased transmission infrastructure
to support reliability and growth, particularly in
West Texas
(1) Source: Energy Information Administration (EIA)
24
(2) Source: ERCOT 2019-2028 forecast2020 - 2023 Potential Earnings Power
2020 Ongoing Earnings 2021 Earnings 2022 Earnings 2023 Earnings
Allowed
Return / Guidance Midpoint Potential Potential Potential
Equity Avg Rate Avg Rate Avg Rate Avg Rate
Ratio Return EPS EPS EPS EPS
Base Base Base Base
9.575% /
PNM Retail(1) $2.5 B 9.5% $1.47 $2.5 B $1.52 $2.4 B $1.48 $2.4 B $1.48
50%
San Juan 9.575% /
$150 M $0.09 $280 M $0.17
Replacement(2) 50%
9.575% /
PNM Renewables(3) $150 M 9.575% $0.09 $145 M $0.09 $140 M $0.08 $130 M $0.07
50%
PNM FERC(4) 10% / ~50% $340 M 7.5% $0.15 $530 M $0.26-$0.30 $740 M $0.37-$0.42 $780 M $0.39-$0.44
Items not in Rates(5) ($0.01) ($0.03)-($0.01) ($0.03)-($0.01) ($0.03)-($0.01)
Total PNM $3.0 B $1.70 $3.2 B $1.84-$1.90 $3.5 B $1.99-$2.06 $3.6 B $2.08-$2.15
9.65% /
TNMP(6) $1.3 B 9.65% $0.73 $1.5 B $0.84 $1.6 B $0.89 $1.9 B $1.02
45%
Corporate/Other(7) ($0.22) ($0.21)-($0.19) ($0.19)-($0.17) ($0.23)-($0.21)
Equity Financing Plans(8) ($0.01)-$0.00 ($0.10)-($0.09) ($0.20)-($0.19) ($0.24)-($0.23)
Total PNM Resources $4.3 B $2.20 - $2.21 $4.7 B $2.37 - $2.46 $5.1 B $2.49 - $2.59 $5.6 B $2.63 - $2.73
(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) Replacement Power includes $298M investment implemented mid-2022; $278M of generation investment and $20M of transmission investment.
(3) PNM Renewables reflect assets collected through the Renewable Rate Rider.
(4) PNM FERC in 2021-2023 reflects a return of 8%-9% to account for Western Spirit investment recovered through incremental rates.
(5) Consists primarily of decommissioning/reclamation trust income (net of fees/taxes), AFUDC, certain incentive compensation, and the 65MW ownership of San Juan Unit 4 (prior to retirement).
(6) 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.
(7) Corporate/Other includes the earnings impacts associated with short and intermediate term bank debt and the 50% equity interest in NMRD.
(8) Equity Financing Plans to fund capital growth reflect financing alternatives, including block sale of up to $290M (dilution impacts assume
$50M issued in 2020, $90M to $140M in 2021, $50M in 2022 and $50M in 2023), and $300M mandatory convertibles beginning mid-2021.
25
This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance.Liquidity and Debt Maturity Outlook
Long-term Debt Maturities
Maintain appropriate (in millions) $658
credit metrics
$140 $450 $1,003
$35
$350 $346 $57
Remain a solid
investment grade 2020 2021 2022 2023 and Beyond
PNM TNMP Corporate
rated company
• Equity issuances of up to $590 million through forward block
Target regulatory capital and/or mandatory convertibles are projected to fund 2020 -
2023 expenditures
structures at PNM • New debt issuances projected at utilities through 2023 of
and TNMP ~$800 million and $361 million securitization bonds
Moody’s S&P
Rating/Outlook Rating/Outlook PNM Resources FFO-to-Debt is maintained
PNM Resources Baa3(1) / Stable BBB+(1) / Negative within Moody’s Baa investment grade
target range of 13% to 22%
PNM Baa2(2) / Stable BBB+(2) / Negative
TNMP A1(3) / Stable A(3) / Negative
(1) Issuer
26
rating (2) Senior unsecured rating (3) Senior secured ratingYou can also read
