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 • 10 th 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 1 st • TNMP TCOS filings in Q1 and Q3 2020 • TNMP DCOS filing expected in April 2020 • New Mexico ballot initiative to move to appointed Commission 5 in November 2020
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 TNMP PNM Corp/Other $0.70 – $0.71 ($0.21) – ($0.20) $1.64 – $1.65 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 Q3 YTD 2019 Economic indicators continue to be positive PNM 2019E 2020E vs. Customer growth driven by economic development Q3 YTD 2018 Higher data center load partially offset by Commercial 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 Texas growth drives infrastructure needs Q3 YTD 2019 TNMP 2019E 2020E vs. 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 $0.72 - $0.74 $0.70 - $0.71 $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 10
2020 - 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 Guidance Midpoint Potential Potential Potential Return / 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 11 This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance. Refer to Slide 25 for additional details and disclosures.
Dividend Increase $2.68 $2.54 $2.42 $2.21 $2.14 $2.00 $1.94 $1.65 $1.64 $1.49 $1.23 $1.16 $1.06 Dec ‘19 $0.97 Dec ‘18 $0.88 Dec ‘17 $0.80 $0.74 Dec ‘16 Dec ‘15 Dec ‘14 54% 56% Dec ‘13 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 • 10 th 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 potential
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