EEI Financial Conference November 2017
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 U.S. 1-505-241-2227 Lisa.Goodman@pnmresources.com Jimmie.Blotter@pnmresources.com 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 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 and ongoing earnings per diluted share), 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: $3.4B Generation Resources and Service Territories Located in New Mexico • 520,449 customers • • 15,049 miles transmission and distribution lines • 2,791 MW generation capacity • Top quartile reliability • Affordable rates Located in Texas • • 246,620 end-users 9,298 miles transmission and • distribution lines • Top quartile reliability • Affordable rates 4
PNM Resources Strategic Direction Strategic Financial • Investing aligned to policy directives, evolving customer Rate Base Goals needs and transforming industry opportunities while Growth ensuring reliability, resulting in cleaner generation fleet Earn authorized return on regulated businesses Earnings • Realizing earnings potential in business Above industry average • Earning our allowed returns Growth earnings growth • Reducing regulatory lag Maintain solid investment grade credit ratings • Sustaining and growing the Dividend dividend Above industry average Growth • Providing above-average dividend growth dividend growth 5
Staying Focused and Flexible in a Changing Environment • PNM 2018 General Rate Case • PNM 2018 Renewable Plan • NMPRC Proposed Rulemaking Workshops • Plans to be Coal-Free in Navigating • TNMP Upcoming General 2031; New Generation Mix the Regulatory Rate Case of Natural Gas, Renewables Transforming Environment and Energy Storage PNM’s • 20% Renewable Energy Generation by 2020 Portfolio • Transparency through Sustainability Portal Responding to Evolving Customer Needs • Integrating technologies and customer insights to new products and services • Energy Efficiency and Electrification Initiatives • Robust Economy in Texas 6
Rate Base Growth: Capital Forecast Targeted Consolidated 2017-2021 Rate Base CAGR (1) : 4.5-5.5% $681 2018–2022 Total Capital Plan: $2.7B $17 Palo Verde Unit 3 (In millions) added to $170 rate base $527 $527 $515 $500 $504 $17 $58 $34 $17 $17 $116 $170 $170 $170 $158 $186 $192 $146 $297 $173 $164 $238 $281 $285 $277 $258 $96 $20 $53 $237 $219 $137 $111 $94 $80 $76 $74 2017 2018 2019 2020 2021 2022 PNM Core Generation PNM Renewables PNM SJGS Replacement Power PNM T&D TNMP Depreciation Corporate/Other Targeted PNM 2017-2021 Rate Base CAGR (1) : 2-4% from 2016 base reflects potential outcomes from the pending NM Supreme Court general rate case appeal of $0-$150M and additional AMI spending of $12/$59/$24 million in 2018/2019/2020 Targeted TNMP 2017-2021 Rate Base CAGR (1) : 11.4% from 2016 base 7 (1) 2017-2021 CAGR measured from a 2016 base Amounts may not visually add due to rounding.
Earnings Growth: Proposed PNM 2018 General Rate Case Settlement Agreement Recommended Decision Key Terms of Proposed Settlement Agreement (1) • ROE unchanged at 9.575% • Current allowed ROE of 9.575% • $62.3M increased revenue requirement • $62.3M increased revenue requirement • $7.5M financial impact from the amortization of excess • $7.5M financial impact from the amortization of excess deferred state taxes over 3 years (2) deferred state taxes over 3 years (2) • Revenue phase-in over 2018 and 2019 ($32.3M in 2018; • Revenue phase-in over 2018 and 2019 ($32.3M in 2018; additional $30.0M in 2019) additional $30.0M in 2019) • Freeze for general rate increases before January 1, 2020 • Freeze for general rate increases before Jan. 1, 2020 • No adjustments to amounts or terms of previous BART • No adjustments to amounts or terms of previous BART settlement settlement • No debt or equity return on Selective Catalytic Reduction (SCR) investment and additional life-extending • Recovery of Selective Catalytic Reduction (SCR) investment investments at Four Corners Power Plant at Four Corners Power Plant at debt-only return • Temporary disallowance of $36.8M of San Juan capital expenditures • Lost Contribution to Fixed Costs (“LCFC”) mechanism • Lost Contribution to Fixed Costs (“LCFC”) mechanism withdrawn; energy efficiency disincentive to be addressed withdrawn; energy efficiency disincentive to be addressed in separate docket and outcome included in PNM’s next in separate docket and outcome included in PNM’s next general rate case general rate case • Increased fixed charge to $7.34 in 2018 and $7.64 in 2019 • Increased fixed charge to $7.34 in 2018 and $7.64 in 2019 • Settlement supported / not opposed by all but one party • Revised settlement requires signatories’ agreement to the filing 8 (1) May 23 Revisions to Proposed Settlement Agreement (2) See slide 32 for details
Earnings Growth: Proposed PNM 2018 General Rate Case Procedural Schedule Procedural Schedule Exceptions to Recommended Decision November 10, 2017 Responses to Exceptions November 20, 2017 Suspension period January 6, 2018 Potential extension of suspension period March 6, 2018 9
Tax Reform Considerations PNM Resources well-positioned for tax reform, customers benefit Key Tax Reform Considerations Reduction of Business Segments Reduced Tax Rate Interest Non- 100% Bonus Production Tax deductibility Depreciation Credits Decreases the tax expense flowing through rates; 30% EBITDA cap; Increases rate base Not applicable to not applicable to PNM & TNMP as excess deferred utilities under No direct impact utilities under taxes are returned House bill House bill to customers over normalization period Decreases the tax 30% EBITDA cap; benefit from not applicable to Corporate/ Other Not applicable No impact Holding Company utilities under losses House bill 10
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