EEI Financial Conference
November 2018
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
November 2018
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
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
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
follows: http://www.pnmresources.com/investors/results.cfm
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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
distribution lines
distribution lines
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cleaner energy portfolio
Transform to Cleaner Energy Portfolio
customer experience
products and services
Meet Customer Expectations
dividend growth
Provide Earnings and Dividend Growth
$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
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$2.6B five‐year investment plan with opportunities for incremental growth
Reflects $229M increase over prior plan; $176M increase at TNMP
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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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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Mexico growth prospects are driven by load from new data center interest and existing customer expansions
infrastructure will need to be replaced and further grid modernization investments made to support the changing customer needs, load profiles and generation resource mix
well as enhancing the capabilities to meet increasing integration of renewables within our service area
power with a more flexible resource mix that may include additional gas peaking units, renewable resources and battery storage
achieve New Mexico’s energy transition for a sustainable future
$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
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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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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)
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
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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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production and wind energy production(1)
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
TNMP
TNMP Capital Spend by Region
(committed projects)
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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
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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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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
El Cabo Broadview Grady
New Mexico added wind capacity at a faster rate than any other state in 2017
increase over 2016
Broadview Wind Facility (324 MW) added in 2017
including 220 MW Grady Wind Facility
983 MW Coal
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moves to increased renewable resources
(1) Cost effective replacement power proposals for storage options will also be considered
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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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2025 and 80% in 2035 (from 2005 levels)
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
$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
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(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:
‘
savings to customers
per‐customer cost of new investments
Market and renewable investments result in lower costs for fuel
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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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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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$‐ $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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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)
Republican Arthur D’Andrea
Republican Shelly Botkin June 2018
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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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.
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
Note: 2018‐2022 CAGR measured from a 2018 guidance midpoint of $1.97
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$1.00 $1.25 $1.50 $1.75 $2.00 2012 2013 2014 2015 2016 2017 2018
Actual Ongoing EPS vs Consensus
Actual Consensus
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
$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%
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Indicative annual dividend rate
targeting the 50% ‐ 60% payout ratio range
Consistent Delivery of Above Industry Average Dividend Growth
Expect future dividend growth to mirror earnings growth (approximately 5‐6%)
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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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expenditures of approximately $150 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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(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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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
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
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
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.
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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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