EEI Financial Conference November 2018 Contact Information and Safe - - PowerPoint PPT Presentation

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EEI Financial Conference November 2018 Contact Information and Safe - - PowerPoint PPT Presentation

EEI Financial Conference November 2018 Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and


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SLIDE 1

EEI Financial Conference

November 2018

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SLIDE 2

Contact Information and Safe Harbor Statement

2 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

  • f 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

  • n 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

  • ngoing 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

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SLIDE 3

Company Overview

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SLIDE 4

PNM Resources Overview

4

Generation Resources and Service Territories PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and above industry average earnings and dividend growth to shareholders

NYSE Ticker: PNM Market Cap: $3.2B

  • Energy holding company
  • Based in Albuquerque, New Mexico
  • Located in New Mexico
  • 523,812 customers
  • 15,091 miles transmission and

distribution lines

  • 2,580 MW generation capacity
  • Top quartile reliability
  • Affordable rates
  • Located in Texas
  • 249,632 end‐users
  • 9,338 miles transmission and

distribution lines

  • Top quartile reliability
  • Affordable rates
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SLIDE 5

PNM Resources Strategic Direction and Financial Goals

5

  • Plans to be coal‐free by 2031
  • Retire and replace coal‐fired generation with

cleaner energy portfolio

  • Invest to maintain system reliability

Transform to Cleaner Energy Portfolio

  • Provide reliable, affordable energy while enhancing

customer experience

  • Integrate technologies and customer insights to new

products and services

  • Enhance grid to facilitate evolving customer needs

Meet Customer Expectations

  • Deliver above industry average earnings and

dividend growth

  • Earn allowed returns
  • Maintain investment grade credit ratings

Provide Earnings and Dividend Growth

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SLIDE 6

$216 $215 $220 $220 $220 $122 $125 $130 $125 $91 $109 $98 $97 $79 $82

$20 $27 $25 $20 $20

$38 $49 $79

$10 $61 $2 $32 $29

2018 2019 2020 2021 2022

(in millions) TNMP PNM T&D PNM Existing Generation Corporate/Other PNM Transmission Expansion PNM Renewable Additions 50% NMRD Renewable Additions Depreciation

$517 $607 $444 $413 $580

6

$2.6B five‐year investment plan with opportunities for incremental growth

Reflects $229M increase over prior plan; $176M increase at TNMP

Current 2018 – 2022 Investment Plan

Opportunities for Incremental Growth

Amounts may not visually add due to rounding

(1) Depreciation does not include amounts associated with NMRD

1

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SLIDE 7

2018 ‐ 2021 Potential Earnings Power

7

This table is not intended to represent a forward‐looking projection of 2020 ‐ 2021 earnings guidance. Refer to Slide 32 for additional details and disclosures.

Allowed Return / Equity Ratio

2018 Ongoing Earnings Guidance Midpoint 2019 Ongoing Earnings Guidance Midpoint 2020 Earnings Potential 2021 Earnings Potential

Avg Rate Base Return EPS Avg Rate Base Return EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail 9.575% / 50% $2.3 B 9.4% $1.35 $2.4 B 9.3% $1.40 $2.4 B $1.42 $2.5 B $1.49 PNM Renewables 9.575% / 50% $90 M 9.575% $0.05 $115 M 9.575% $0.07 $150 M $0.09 $145 M $0.09 PNM FERC 10% / ~50% $220 M 8.6% $0.13 $285 M 8.0% $0.14 $330 M $0.15‐$0.19 $370 M $0.16‐$0.21 Items not in Rates ($0.01) $0.01 ($0.04)‐($0.02) ($0.04)‐($0.02) Total PNM $2.6 B $1.52 $2.7 B $1.62 $2.9 B $1.62‐$1.68 $3.0 B $1.70‐$1.77 TNMP 9.65% / 45% $850 M 9.6% $0.63 $1,080 M 9.65% $0.68 $1,220 M $0.71 $1,355 M $0.78 Corporate/Other ($0.18) ($0.17) ($0.18)‐($0.16) ($0.20)‐($0.18) ATM Program ($0.03)‐($0.01) ($0.07)‐($0.04) Total PNM Resources (Before Supreme Court) $3.5 B $1.97 $3.8 B $2.13 $4.1 B $2.12‐$2.22 $4.3 B $2.21‐$2.33 Supreme Court Appeal $0‐150 M $0.00‐$0.09 $0‐150 M $0.00‐$0.09 $0‐150 M $0.00‐$0.09 Total PNM Resources (After Supreme Court) $3.5 B $1.97 $3.8‐3.9 B $2.13‐$2.22 $4.1–4.2 B $2.12‐$2.31 $4.3‐4.4 B $2.21‐$2.42

Strong 2018 revised guidance supports continued success in executing our plan to meet growth expectations

Targeted 2018‐2021 Rate Base CAGR(1): Total 7.5%‐8.5% / PNM 4.5%‐5.5% / TNMP 16.8%

Range at PNM reflects potential outcomes from the pending NM Supreme Court general rate case appeal of $0‐$150M Earnings potential shown above does not include incremental growth opportunities

(1) 2018‐2021 CAGR measured from a 2018 base

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SLIDE 8

Opportunities for Incremental Growth 2020 ‐ 2022

8

New Customer Load and Infrastructure Investments

  • Increasing capital in Texas to support continued strong economic growth while New

Mexico growth prospects are driven by load from new data center interest and existing customer expansions

  • In order to support the increased load growth while maintaining reliability, aging

infrastructure will need to be replaced and further grid modernization investments made to support the changing customer needs, load profiles and generation resource mix

Transmission and Renewable Energy Expansion in New Mexico

  • New transmission growth is driven by demand for renewables to serve the western US as

well as enhancing the capabilities to meet increasing integration of renewables within our service area

Generation Portfolio Transformation

  • Proposed plans to exit coal by 2031 changes the future generation mix by replacing the

power with a more flexible resource mix that may include additional gas peaking units, renewable resources and battery storage

  • The use of securitization is the most favorable economic option for all stakeholders to

achieve New Mexico’s energy transition for a sustainable future

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SLIDE 9

$517 $607 $580 $444 $413

$200 $200 $100 $150 $100 $100 $100

2018 2019 2020 2021 2022

in millions

New Customer Load and Infrastructure Investments Transmissiom and Renewable Energy Expansion in New Mexico Generation Portfolio Transformation Current Plan

up to $780

9

Incremental 2018 – 2022 Investment Opportunities

up to $250M up to $300M up to $400M

Up to $950M of incremental investment opportunities provides additional rate base growth through 2022

up to $894 up to $713

Growth Opportunities

New Customer Load and Infrastructure Investments Transmission and Renewable Energy Expansion in New Mexico Generation Portfolio Transformation

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SLIDE 10

Potential Earnings Power of Growth Opportunities by 2022

10

Growth Opportunities: Avg Rate Base EPS New Customer Load and Infrastructure Investments up to $300M up to $0.18 Transmission and Renewable Energy Expansion in New Mexico up to $250M up to $0.15 Generation Portfolio Transformation(1) up to $400M up to $0.23 Subtotal up to $950M up to $0.56 San Juan Retirement(2) up to ($320M) up to ($0.19) Impact of Financing(3) up to ($0.15)

Value of Growth Opportunities up to $630M up to $0.22

This table is not intended to represent a forward‐looking projection of earnings guidance.

Note: 2018‐2022 CAGR measured from a 2018 guidance midpoint of $1.97

(1) Reflects investment in replacement power resources and supporting transmission needs (2) Reflects projected undepreciated investment San Juan Generating Station (3) Reflects equity financing to maintain capital structure and investment grade credit ratings

2018 ‐ 2022 Earnings Growth Target: 5 ‐ 6%

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SLIDE 11

New Customer Load and Infrastructure Investments: Load and Economic Conditions

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Regulated Retail Energy Sales and Customers

(weather‐normalized)

(1) Primarily Residential usage; represents per‐kWh billings (2) Commercial and Industrial usage excluding Transmission customers; represents per‐kW monthly peak billings (3) U.S. Bureau of Labor Statistics, August 2018

1.3% 2.9% 1.5% 2015 2016 2017 2018 % Change

Employment Growth(3) 12‐Month Rolling Average

Albuquerque Dallas U.S.

PNM / TNMP

Q3 2018 vs. Q3 2017 YTD 2018 vs. YTD 2017 2018E 2019E

PNM Residential & Commercial 0.8% 0.5% ~0.3% 0.3% ‐ 0.5% Total PNM Retail Load 1.1% 0.4% 0% – 0.5% 0.3% – 1.0% PNM Avg. Customers 0.9% 0.8% 0.8% ‐ 1.0% per year TNMP Total Volumetric Load(1) 4.1% 3.2% 2% – 3% per year TNMP Demand‐Based Load(2) 7.0% 6.4% 5% – 7% 6% – 8% TNMP Avg. End Users 1.3% 1.3% 1.5% – 2.0% per year

Monthly Employment Growth(3)

2018 vs. 2017

Abq. U.S.

January 1.2% 1.4% February 1.6% 1.5% March 1.3% 1.6% April 1.3% 1.6% May 1.3% 1.7% June 1.3% 1.6% July 2.1% 1.6% August 1.9% 1.6%

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SLIDE 12

New Customer Load and Infrastructure Investments: Aging Infrastructure and Texas Demand

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  • Texas ranks #1 in the US for total electricity

production and wind energy production(1)

  • ERCOT summer peak demand projected to

grow by 17% over next 10 years(2)

West Texas ~40% North/Central TX ~25% Gulf Coast ~35% TNMP Demand Average Age of Infrastructure

(1) Source: Energy Information Administration (EIA) (2) Source: ERCOT

PNM

  • Transmission lines: ~50 years
  • Overhead distribution lines: ~45 years
  • Substations: ~40 years

TNMP

  • Transmission lines: ~30 years
  • Transmission transformers: ~30 years
  • Distribution lines: ~25 years

TNMP Capital Spend by Region

(committed projects)

  • TNMP Service Area
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SLIDE 13

Transmission and Renewable Expansion in New Mexico: Integration of Renewable Generation

13

Current Renewable Portfolio Standard as a % of Retail Sales

15% 2015 20% 2020

500 1,000 1,500

2012 2015 2020 2025 2035

22 107 287 487 587 204 306 521 521 721 20

49

142 170 205 4 11 11 11

MW Capacity

PNM Planned Renewable Capacity

included in 2017 Integrated Resource Plan

Solar Wind Solar (DG) Geothermal

246 466 961 1,189 1,524

Integration of renewable generation requires T&D investment and addition of supporting peaking capacity

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SLIDE 14

Transmission and Renewable Expansion in New Mexico: Third‐Party Renewable Development

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Third‐party renewable development increases demand for transmission capacity across our system

Source: American Wind Energy Association, Nov. 2018

New Mexico ranks 2nd in US for solar potential and 6th for land‐based wind potential

  • PNM Service Area

El Cabo Broadview Grady

New Mexico added wind capacity at a faster rate than any other state in 2017

  • 1,682 MW installed capacity, 51%

increase over 2016

  • El Cabo Wind Farm (298 MW) and

Broadview Wind Facility (324 MW) added in 2017

  • 1,251 MW under construction,

including 220 MW Grady Wind Facility

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SLIDE 15

983 MW Coal

Generation Portfolio Transformation: PNM’s Cleaner Energy Portfolio

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  • Coal‐free generation portfolio by 2031; develop new generation portfolio that

moves to increased renewable resources

  • Continued power from Palo Verde Nuclear Generating Station
  • Storage or backup power resources to maintain system reliability
  • Transparency through Sustainability Portal

(1) Cost effective replacement power proposals for storage options will also be considered

1

Energy Mix in 2017 Integrated Resource Plan

Nuclear 30%

Coal Free

1

200 MW Coal

Gas 9% Coal 56%

2012

Wind 16% Solar 14%

Geothermal 1%

Nuclear 34% Coal 12% Gas 23%

2025

Wind 22% Solar 15%

Geothermal 1%

Nuclear 31% Gas 31%

2035

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SLIDE 16

Generation Portfolio Transformation: Emission Reductions

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  • Implementation of the Integrated Resource Plan at PNM would reduce GHG by 71% in

2025 and 80% in 2035 (from 2005 levels)

  • Compares favorably to the United States INDC 26% ‐ 28% by 2025 and the former

administration’s effort to achieve an 80% reduction by 2050 983 762 200 2005 2018 2023 2031

Reduction of MW Coal Capacity

22% reduction 80% reduction 100% coal free 7,695 5,128 2,263 1,568

2005 2018 2025 2035

Reduction CO2 Emissions

(tons per year) 33% reduction 71% reduction 80% reduction

Read more in our Climate Change Report at http://www.pnmresources.com/about‐us/sustainability‐portal.aspx

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SLIDE 17

PNM

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SLIDE 18

$68.11 $73.35 $76.78 $98.94 $107.21 $140.90

$50 $100 $150

City of Seattle ‐ (WA) Public Svc Co of Colorado (CO) Public Service Co of NM (NM) El Paso Electric Co (NM) PacifiCorp (UT) Montana‐Dakota Utilities Co (MT) PNM ‐ 2019 (NM) ‐ Proposed El Paso Electric Co (TX) LADWP (CA) City of Colorado Springs ‐ (CO) NorthWestern Energy LLC ‐ (MT) PacifiCorp (WY) Avista Corp (ID) City of Tacoma ‐ (WA) Avista Corp (WA) PacifiCorp (ID) Portland General Electric Co (OR) Southwestern Public Svc Co (NM) US Average Bill Idaho Power Co (ID) Montana‐Dakota Utilities Co (WY) Sacramento Municipal Util Dist (CA) San Diego Gas & Electric Co (CA) Black Hills Power, Inc. d/b/a (WY) Southern California Edison Co (CA) Tucson Electric Power Co (AZ) PacifiCorp (OR) Pacific Gas & Electric Co. (CA) Regional Average Bill PacifiCorp (WA) Nevada Power Co (NV) City of San Antonio ‐ (TX) PacifiCorp (CA) Southwestern Electric Power Co (TX) Modesto Irrigation District (CA) Entergy Texas Inc. (TX) Imperial Irrigation District (CA) Salt River Project (AZ) Arizona Public Service Co (AZ)

Comparison of Average Residential Bills(2)

Western Region Average Bills by Utility

PNM Bills Remain Below National and Regional Averages

18

(1)PNM rates reflect rates approved in the 2018 General Rate Case. All others reflect U.S. Energy Information Administration's

Residential Rate increases through August 2018. ‐ Current US Avg ‐ Current Regional Avg ‐ PNM 2019 ‐ PNM 2018 (Phase I)

Customer bill impacts of increased investments are mitigated by:

  • Return of federal tax

savings to customers

  • Load growth reduces

per‐customer cost of new investments

  • Energy Imbalance

Market and renewable investments result in lower costs for fuel

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SLIDE 19

NMPRC Commissioners and Districts

19

District Name Term Ends Party

District 1 Cynthia Hall, Vice Chairman 2020(1) Democrat District 2 Patrick Lyons Jefferson Byrd 2018 2022(1) Republican Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovejoy Theresa Becenti‐Aguilar 2018 2022(1) Democrat Democrat District 5 Sandy Jones, Chairman Stephen Fischmann 2018 2022(1) Democrat Democrat

NMPRC Districts and PNM Service Areas

(1) Eligible for re‐election to a second four‐year term

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SLIDE 20

PNM Regulatory Agenda

20

Filing Action Timing Docket No.

PNM Appeal of 2015 General Rate Case to New Mexico Supreme Court Oral arguments held October 30, 2017 No statutory timeline S‐1‐SC‐36115 PNM 2017 Integrated Resource Plan Hearing Examiner Recommended Decision to accept received October 26, 2018 Decision expected in Q4 2018 or Q1 2019 17‐00174‐UT PNM Petition for Disincentive Intervenor testimony due November 19, 2018 No statutory timeline 18‐00043‐UT PNM 2019 Renewable Filing Hearings held September ‐ October 2018 Recommended Decision expected Q4 2018 18‐00158‐UT PNM Western Energy Imbalance Market Filing Hearing scheduled for December 12, 2018 No statutory timeline 18‐00261‐UT PNM San Juan Generating Station Compliance Filing Compliance filing due by December 2018 Review of filing expected within six months 13‐00390‐UT

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SLIDE 21

TNMP

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SLIDE 22

TNMP Rates Compare Favorably in Texas

22

$‐ $10 $20 $30 $40 $50 $60 Oncor TNMP Centerpoint AEP North AEP Central

Residential Total Wires Charge for 1,000 kWh

Rates expected to be comparable to other IOUs after upcoming rate filings

Scheduled to File by July 2019 Scheduled to File by May 2019 Scheduled to File by May 2019 Scheduled to File by Oct 2021

Source: TDU tariffs for retail delivery service effective September 1, 2018 and PUCT Filings Interchange.

Settlement

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SLIDE 23

PUCT Commissioners and TNMP Regulatory Agenda

23

Commissioners are appointed by the Governor of Texas and confirmed by the Senate. Length of term is determined by the Governor.

Name Term Began Term Ends Party

DeAnn Walker (Chair)

  • Sept. 2017
  • Aug. 2021

Republican Arthur D’Andrea

  • Nov. 2017
  • Aug. 2023

Republican Shelly Botkin June 2018

  • Sept. 2019

Republican

PUCT Commissioners

Filing Action Timing Docket No.

TNMP General Rate Review Settlement filed November 2, 2018 Final order expected December 2018 / January 2019; rates expected to be implemented January 2019 48401 TNMP TCOS Filings Two filings expected in 2019 First filing after general rate review is resolved TBD

TNMP Regulatory Agenda

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SLIDE 24

TNMP General Rate Review Settlement

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General Rate Review TNMP Filing Settlement Annual revenue increase $25.9M $10.0M ROE (prior authorized 10.125%) 10.5% 9.65% Capital structure (prior authorized 45% equity) 50% Equity 45% Equity Cost of debt 7.2% 6.4% Increase to rate base(1) $90M $73M Return of excess deferred federal income taxes $7.8M $11.0M

(1) Amounts are incremental to previous Transmission Cost of Service (TCOS) filings and Advanced

Metering System (AMS) investments. These are largely related to transmission projects that are expected to be included in subsequent TCOS filings.

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SLIDE 25

Financial Overview

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SLIDE 26

2018 – 2022 Earnings Growth

26 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 $1.41 $1.49 $1.64 $1.65 $1.94 $2.39 $1.97 $2.13 $2.22 $2.31 Target: $2.39‐$2.49 Actual Ongoing EPS Midpoint Guidance / Earnings Potential

2018 – 2022: Targeting 5 ‐ 6% Ongoing EPS CAGR

  • 2013 ‐ 2017: Achieved 8% Ongoing EPS CAGR
  • 2013 ‐ 2021: Reflects 6% Ongoing EPS CAGR

Note: 2018‐2022 CAGR measured from a 2018 guidance midpoint of $1.97

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SLIDE 27

Earnings Growth: Achieving Targets

27

$1.00 $1.25 $1.50 $1.75 $2.00 2012 2013 2014 2015 2016 2017 2018

Actual Ongoing EPS vs Consensus

Actual Consensus

Strong track record of meeting/beating annual expectations

Actuals $1.31 $1.41 $1.49 $1.64 $1.65 $1.94 $1.97 Consensus

(beginning of year)

$1.27 $1.38 $1.48 $1.57 $1.63 $1.82 $1.87

% Difference

3.1% 2.2% 0.7% 4.5% 1.2% 6.6% 5.3%

1 2

(1)Reflects 2018 guidance midpoint of $1.97 (2)Reflects consensus after accounting for revisions to guidance for tax reform

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SLIDE 28

$0.74 Dec ‘13 $0.80 Dec ‘14 $0.88 Dec ‘15 $1.06 Dec ‘17 $0.97 Dec ‘16

8% 10% 10% 9%

$0.66 Feb ‘13

12%

Dividend Growth

28

Indicative annual dividend rate

  • Expect above industry average (~4%) dividend growth in the future while

targeting the 50% ‐ 60% payout ratio range

  • Next dividend review in December 2018

Consistent Delivery of Above Industry Average Dividend Growth

Expect future dividend growth to mirror earnings growth (approximately 5‐6%)

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SLIDE 29

Consolidated Earnings and Quarterly Earnings Distribution Guidance (Ongoing)

29

Consolidated Earnings Guidance

Quarterly Ongoing Earnings Distribution

3% 30% 57% 10% Q1 Q2 Q3 Q4

2018 Previous Narrowed

Consolidated EPS $1.91 ‐ $1.98 $1.95 ‐ $1.98

PNM $1.48 ‐ $1.52 $1.51 ‐ $1.52 TNMP $0.60 ‐ $0.62 $0.62 ‐ $0.63 Corporate/Other ($0.17) – ($0.16) ($0.18) – ($0.17)

2019 Previous Segment Revisions

Consolidated EPS $2.08 ‐ $2.18 $2.08 ‐ $2.18

PNM $1.57 ‐ $1.63 $1.59 ‐ $1.65 TNMP $0.67 ‐ $0.69 $0.67 ‐ $0.69 Corporate/Other ($0.16) – ($0.14) ($0.18) – ($0.16)

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SLIDE 30

Financial Overview: Liquidity and Debt Maturity Outlook

30

  • Extended all revolving credit facilities through 2022
  • Eliminated variable rate debt exposure through Corporate issuance
  • f $300M 3‐year fixed rate notes in March 2018
  • At‐The‐Market equity program will be used to fund 2020 ‐ 2022

expenditures of approximately $150 million

  • New debt issuances expected at utilities 2018 ‐ 2022 of $455 million

$200

$100

$306 $1,060 $172

$20

$353

$100

$300 2018 2019 2020 2021 2022 and Beyond

Long‐term Debt Maturities

(in millions)

PNM TNMP Corporate

Maintain appropriate credit metrics Remain a solid investment grade rated company Target regulatory capital structures at PNM and TNMP

Moody’s Rating/Outlook S&P Rating/Outlook PNM Resources Baa3(1) / Stable BBB+(1) / Negative PNM Baa2(2) / Stable BBB+(2) / Negative TNMP A1(3) / Stable A(3) / Negative PNM Resources FFO‐to‐Debt is maintained well within Moody’s Baa investment grade target range of 13% to 22%

(1) Issuer rating (2) Senior unsecured rating (3) Senior secured rating

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SLIDE 31

Appendix

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SLIDE 32

Potential Earnings Power

32

(1) Average rate base has been reduced by approximately $130M to represent the ($0.05) of Earnings Potential for the lost equity return on the Four Corners investment resulting from the 2018 general rate case

settlement.

(2) PNM Renewables reflect assets collected through the Renewable Rate Rider. (3) PNM FERC reflects a return of 7‐9% versus the allowed return of 10%, as FERC formula rate methodology uses prior year average rate base and provides for mid‐year rate increases. (4) Consists primarily of decommissioning/reclamation trust income (net of fees and taxes), AFUDC, certain incentive compensation, and the 65MW ownership of San Juan Unit 4. (5) TNMP reflects a 9.65% return and 45% equity ratio consistent with the filed general rate review settlement. Earnings also include additional recovery for Competitive Transition Costs (fully recovered in 2020) and

Energy Efficiency, along with items excluded from rates (primarily AFUDC). Earnings also include $0.04 annual interest savings beginning mid‐2019 from the refinancing of existing debt. 2018 average rate base has been held at the year‐end 2017 level to reflect the required suspension of TCOS filings during general rate review proceedings.

(6) Corporate/Other includes earnings associated with short and intermediate term bank debt and 50% equity interest in NMRD. (7) Dilution impact assumes equity issuances up to $50M by 2020 and up to $150M by 2021. (8) Reflects a range of outcomes for the New Mexico Supreme Court appeal of the August 2015 General Rate Case final order. A minimum 28‐month appeal timeframe has

been used for purposes of writing down the value of the assets under appeal. 2019 average rate base presented includes: PV2 64MW Acquisition Adjustment (~$75M), PV2 Leasehold Improvements (~$25M) and Balanced Draft Technology (~$50M).

This table is not intended to represent a forward‐looking projection of 2020 ‐ 2021 earnings guidance.

Allowed Return / Equity Ratio

2018 Ongoing Earnings Guidance Midpoint 2019 Ongoing Earnings Guidance Midpoint 2020 Earnings Potential 2021 Earnings Potential

Avg Rate Base Return EPS Avg Rate Base Return EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail(1) 9.575% / 50% $2.3 B 9.4% $1.35 $2.4 B 9.3% $1.40 $2.4 B $1.42 $2.5 B $1.49 PNM Renewables(2) 9.575% / 50% $90 M 9.575% $0.05 $115 M 9.575% $0.07 $150 M $0.09 $145 M $0.09 PNM FERC(3) 10% / ~50% $220 M 8.6% $0.13 $285 M 8.0% $0.14 $330 M $0.15‐$0.19 $370 M $0.16‐$0.21 Items not in Rates(4) ($0.01) $0.01 ($0.04)‐($0.02) ($0.04)‐($0.02) Total PNM $2.6 B $1.52 $2.7 B $1.62 $2.9 B $1.62‐$1.68 $3.0 B $1.70‐$1.77 TNMP(5) 9.65% / 45% $850 M 9.6% $0.63 $1,080 M 9.65% $0.68 $1,220 M $0.71 $1,355 M $0.78 Corporate/Other(6) ($0.18) ($0.17) ($0.18)‐($0.16) ($0.20)‐($0.18) ATM Program(7) ($0.03)‐($0.01) ($0.07)‐($0.04) Total PNM Resources (Before Supreme Court) $3.5 B $1.97 $3.8 B $2.13 $4.1 B $2.12‐$2.22 $4.3 B $2.21‐$2.33 Supreme Court Appeal(8) $0‐150 M $0.00‐$0.09 $0‐150 M $0.00‐$0.09 $0‐150 M $0.00‐$0.09 Total PNM Resources (After Supreme Court) $3.5 B $1.97 $3.8‐3.9 B $2.13‐$2.22 $4.1–4.2 B $2.12‐$2.31 $4.3‐4.4 B $2.21‐$2.42

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SLIDE 33

Liquidity as of October 30, 2018

33

PNM TNMP PNMR PNM Resources Consolidated PNMR Develop‐ ment Corporate /Other Financing Capacity(1): (In millions) Revolving credit facilities $440.0 $75.0 $24.5 $300.0 $839.5 As of 10/30/18: Short‐term debt and LOC balances $2.5 $27.6 $24.5 $131.2 $185.8 Remaining availability 437.5 47.4 ‐ 168.8 653.7 Invested cash 55.3 ‐ ‐ 0.9 56.2 Total Available Liquidity $492.8 $47.4 ‐ $169.7 $709.9

(1) Excludes intercompany debt and term loans

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SLIDE 34

PNM New Mexico Supreme Court Appeal

34 Appealed Item

Conclusion Resulting Impact Ongoing EPS Impact

Palo Verde Nuclear Generating Station: 64 MW Unit 2 capacity purchase and Units 1 and 2 lease extensions Purchase and extension deemed imprudent Fair market value disallowed; future responsibility for decommissioning shifted to shareholders $0.04 Leasehold Improvements related to previously leased 64MW capacity Included in net book value

  • f purchased 64MW

capacity Leasehold improvements rate base disallowed $0.02 San Juan Generating Station: Balanced Draft Air permit rejected and investment deemed imprudent Rate base disallowed $0.03

  • PNM filed Notice of Appeal with New Mexico Supreme Court on September 30, 2016
  • PNM filed Statement of Issues on October 26, 2016 detailing items for appeal:

Note: As of September 30, 2018, the asset value of the Palo Verde and balanced draft investments pending appeal with the New Mexico Supreme Court were reduced by $12.6 million pre‐tax to reflect a minimum of 28 months disallowed recovery during appeal.

  • Oral arguments held October 30, 2017
  • No statutory timeline; New Mexico Supreme Court to set calendar for remaining process
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SLIDE 35

PNM San Juan Generating Station Ownership and Participants

35 Unit Total MW PNM MW PNM Ownership Other Participants/Ownership 1 340 170 50% Tucson Electric 50% (170 MW) 4 507 327 64.5% City of Farmington 8.5% (43 MW) Los Alamos County 7.2% (36.5 MW) Utah Associated Municipal Power Systems (UAMPS) 7.0% (35.5 MW) PNMR Development Company 12.8% (65 MW) Total 1,684 497

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SLIDE 36

PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases

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MW Owned vs. Leased Lease Expiration

  • Unit 1: January 15, 2015; exercised option to extend leases to 2023
  • Unit 2: January 15, 2016; exercised right to purchase 3 leases in 2016 and option to extend one lease to 2024

Yearly Payment Amounts

  • Total PV Unit 1 ‐ $16.5M
  • Total PV Unit 2 ‐ $1.6M

Unit 1 Owned 2.3% 30 MW Leased 7.9% 104 MW Total 10.2% 134 MW Unit 2 Owned 9.5% 124 MW Leased 0.7% 10 MW Total 10.2% 134 MW