EEI Financial Conference November 2019
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 Lisa.Goodman@pnmresources.com 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
Company Overview
PNM Resources Overview PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and above industry average • Energy holding company earnings and dividend growth to shareholders • Based in Albuquerque, New Mexico NYSE Ticker: PNM Market Cap: $4B Generation Resources and Service Territories • Located in New Mexico • 530,977 customers • 15,158 miles transmission and distribution lines • 2,701 MW generation capacity • Located in Texas • 255,879 end-users • 9,408 miles transmission and distribution lines 4
PNM Resources Strategic Direction and Financial Goals • Plans to be coal-free by 2031 • Goal to be emissions-free by 2040 Transform to • Retire and replace coal-fired generation with Cleaner Energy cleaner energy portfolio Portfolio • Invest to maintain system reliability • Provide reliable, affordable energy while enhancing Meet customer experience Customer • Integrate technologies and customer insights to new Expectations products and services • Enhance grid to facilitate evolving customer needs Provide • Deliver earnings and dividend growth at or above Earnings and industry-average Dividend • Earn allowed returns Growth • Maintain investment grade credit ratings 5
2019 – 2023 Investment Plan $3.9B investment plan results in 9.6% rate base growth $317M increase in TNMP investments $991 $21 $177 $818 $27 $771 $27 $25 $694 $48 $68 $641 $21 $109 $268 $22 $72 $128 $37 $94 $77 $53 $60 $82 $202 (in millions) $182 $176 $99 $173 $125 $345 $322 $342 $306 $348 $337 $275 $270 $255 $245 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 (1) Depreciation 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 6 (3) For Palo Verde leases that expire in 2023, capex assumes either the purchase of the leases or replacement of the power through new resources
2019 - 2023 Potential Earnings Power Earnings Growth Target 5-6%; reflects updated investment plan • Additional earnings potential at TNMP strengthens target • Equity financing plans continue to reflect modeling assumptions that will be optimized 2019 Ongoing 2020 Earnings 2021 Earnings 2022 Earnings 2023 Earnings Earnings Allowed Potential Potential Potential Potential Guidance Midpoint Return / Equity Avg Avg Avg Avg Avg Rate Ratio Return EPS Rate EPS Rate EPS Rate EPS Rate EPS Base Base Base Base Base 9.575% / PNM Retail $2.4 B 8.9% $1.37 $2.4 B $1.44 $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 $115 M 9.575% $0.07 $150 M $0.09 $145 M $0.09 $140 M $0.08 $130 M $0.07 50% 10% / PNM FERC $275 M 6.9% $0.12 $330 M $0.15-$0.20 $530 M $0.26-$0.30 $740 M $0.37-$0.42 $780 M $0.39-$0.44 ~50% Items not in Rates $0.04 ($0.04)-($0.02) ($0.03)-($0.01) ($0.03)-($0.01) ($0.03)-($0.01) Total PNM $2.7 B $1.60 $2.9 B $1.64-$1.71 $3.2 B $1.84-$1.90 $3.5 B $1.99-$2.06 $3.6 B $2.08-$2.15 9.65% / TNMP $1.1 B 9.65% $0.67 $1.3 B $0.73 $1.5 B $0.84 $1.6 B $0.89 $1.9 B $1.02 45% Corporate/Other ($0.19) ($0.21)-($0.19) ($0.21)-($0.19) ($0.19) - ($0.17) ($0.23)-($0.21) Equity Financing Plans (2) ($0.01)-$0.00 ($0.10)-($0.09) ($0.20) - ($0.19) ($0.24)-($0.23) Total PNM Resources $3.8 B $2.08 $4.2 B $2.15 - $2.25 $4.7 B $2.37 - $2.46 $5.1 B $2.49 - $2.59 $5.6 B $2.63 - $2.73 (1) Assumes mid-year implementation (2) Optimization of timing/size not definitive, total equity need of $590M focused on forward block sale and/or mandatory convertibles Note: 2018-2023 CAGR measured from 2018 Ongoing EPS of $2.00 7 This table is not intended to represent a forward-looking projection of 2020 - 2023 earnings guidance. Refer to Slide 31 for additional details and disclosures.
Earnings Growth 2018 – 2023: Targeting 5 - 6% Ongoing EPS CAGR • 2014 - 2018: Achieved 7.6% Ongoing EPS CAGR • 2014 - 2023: Reflects 6-7% Ongoing EPS CAGR 5-6% Target: $2.68 $2.54 $2.55-$2.68 $2.42 $2.20 $2.08 $2.00 $1.94 $1.65 $1.64 $1.49 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Actual Ongoing EPS Midpoint Guidance / Earnings Potential 8
Dividend Growth Consistent Delivery of Dividend Growth At or Above Industry Average Expect future dividend growth to mirror earnings growth (approximately 5-6%) $1.41- $1.34- $1.46 $1.28- $1.38 $1.22- 9% $1.30 $1.23 9% 10% $1.16 10% 8% $1.06 Dec ‘18 $0.97 Dec ‘17 $0.88 $0.80 Dec ‘16 Dec’ 15 Dec ‘14 $0.74 Dec ‘13 55-56% 53-54% 53-54% 53-55% payout payout payout payout Payout based upon midpoint earnings potential Indicative annual dividend rate • Expect dividend growth at or above industry average (~5%) in the future while targeting the middle of a 50% - 60% payout ratio range • Next dividend review in December 2019 9
Liquidity and Debt Maturity Outlook Long-term Debt Maturities Maintain appropriate (in millions) $658 credit metrics $1,003 $300 $140 $35 $350 $57 $306 Remain a solid investment grade 2020 2021 2022 2023 and Beyond PNM TNMP Corporate rated company • Completed: • Extended $700M revolving credit facilities through 2023 Target regulatory capital • Refinanced $172 million of 9.5% TNMP First Mortgage Bonds structures at PNM • Equity issuances of up to $590 million through forward block and/or mandatory convertibles are projected to fund 2020 - and TNMP 2023 expenditures • New debt issuances projected at utilities through 2023 of ~$800 million and $361 million securitization bonds Moody’s S&P Rating/Outlook Rating/Outlook PNM Resources FFO-to-Debt is maintained well within Moody’s Baa investment grade Baa3 (1) / Stable BBB+ (1) / Negative PNM Resources target range of 13% to 22% Baa2 (2) / Stable BBB+ (2) / Negative PNM A1 (3) / Stable A (3) / Negative TNMP 10 (1) Issuer rating (2) Senior unsecured rating (3) Senior secured rating
Generation Portfolio Transformation
New Mexico Energy Policy Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019 2045 100% Carbon-Free • Renewable Portfolio Standards and Carbon-Free Goal 80% Renewables 2040 • Current: 20% renewables by 2020 2030 50% Renewables • Proposed: 2025 40% Renewables • 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 Nuclear • Economic development funds provide needed financial assistance to 30% workers and the communities impacted by retirement of coal-fired generating facilities 12
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