EEI Financial Conference November 2013 Contact Information and Safe - PowerPoint PPT Presentation

EEI Financial Conference November 2013

Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Investor Relations Manager Allyson Beck, Investor Relations Analyst U.S. 1-505-241-2227 U.S. 1-505-241-4612 Jimmie.Blotter@pnmresources.com Allyson.Beck@pnmresources.com Safe Harbor Statement Statements made in this presentation that relate to future events of PNM Resources’ (“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 Form 10-Q filings with the Securities and Exchange Commission, which 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 EBITDA), 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

Strategic Overview

PNM Resources Overview PNM Resources is a regulated electric utility holding company NYSE Ticker PNM focused on providing a top quartile total return to shareholders Market Cap $1.9B Generation Resources and Service Territories • Energy holding company • Based in Albuquerque, New Mexico • Located in New Mexico • 505,600 customers • 14,663 miles transmission and distribution lines • 2,538MW generation capacity • Top quartile reliability • Affordable rates • Located in Texas • 233,000 end-users • 9,109 miles transmission and distribution lines • Top quartile reliability • Affordable rates 4

PNM Resources Strategic Direction Strategic Goals Earn Authorized Return on Continue to Improve Credit Provide Top Quartile Total our Regulated Businesses Ratings Return Future Well positioned for 2013 - 2014 above average EPS Strategic shift and and dividend growth regulatory successes strengthened Efficient execution 2012 financial position of strategic Repositioned as a redirection of 2011 pure-play electric business utility through competitive business exit 5

Delivering Top Quartile Returns Long-term goal: Provide top quartile total return to shareholders  Total return is 5-year ongoing EPS growth + 5-year average dividend yield  Top quartile total return currently equal to an average annual rate (1) of 10% - 13% over a 5 year period Earnings Growth • Sustaining and growing the dividend • Providing above-average • Investing in core capital, dividend growth expected near- renewables, environmental • Realizing earnings potential in term control equipment, and business replacement power • Improving payout ratio to meet • Continuing to earn our allowed long-term target returns • Reducing regulatory lag Rate Base Dividend Growth Growth 6 (1) Beginning in 2012

Rate Base Growth: Sources of Core Rate Base Growth 2013 – 2017 Core Capital Plan: $1.8B PNM Core Capital: $1.2B 2013 Expected Depreciation: $153M TNMP Core Capital: $477M Other Core Capital: $76M $483 (In millions) PNM Rate Base CAGR: 3% - 5% $14 TNMP Rate Base CAGR: 7% - 9% $383 $130 $352 $14 $22 $76 $47 $292 $280 $91 $13 $13 $88 $136 $140 $93 $49 $62 $65 $104 $158 $153 $129 $109 $86 2013 2014 2015 2016 2017 PNM Generation PNM T&D PNM Renewables TNMP Other San Juan environmental capital spend and any replacement generating capacity excluded from core capital. Amounts may not add due to rounding 7

Rate Base Growth: Investment in Renewable Energy 2011 – 2012 $94M of renewable investments were New Mexico Wind Energy Center placed in service. • 204 MW Wind 2013 – 2014 • 136 turbines Additional renewable investments will • Purchase power agreement with NextEra Energy make up 8% of PNM’s 5 -year core capital. Portfolio Standards as a % of Retail Sales • 22MW PNM-owned facilities currently in service 15% Solar • Solar battery storage facility 10% 20% • Customer-owned solar facilities 2011 2020 2015 New Mexico Renewable Energy Act 2013 Renewable Procurement Plan • Streamlined proceedings for • Construction of 20MW additional owned solar capacity 2013 approval of utilities’ renewable • 10 MW geothermal purchase power agreement energy procurement plans • Additional customer-owned solar facilities • Provides for recovery of program costs under approved procurement plan 2014 Renewable Procurement Plan • Purchase power agreement with NextEra Energy 2014 Renewable Rider Collection Methodology • Construction of 23MW additional owned solar capacity • Recovery of renewable investments • Additional customer-owned solar facilities and REC purchases through Renewable Energy Rider 8

Rate Base Growth: Environmental Control Investment The U.S. Environmental Protection Agency’s (EPA) Clean Air Act requires regional haze reduction near national parks  Compliance should be achieved through Best Available Retrofit Technology (BART)  San Juan Generating Station’s alternative for BART compliance: • Revised State Implementation Plan (RSIP) o Shut down units 2 and 3 by year-end 2017 o Install Selective Non-Catalytic Reduction (SNCR) technology on units 1 and 4 by early 2016 o Recently approved by the NM EIB and submitted to EPA for review Action Item Expected Start Expected Completion EPA review and approval of RSIP Q4 2013 Q4 2014 NMPRC approval for retirement and replacement power December 2013 Q4 2014 – Q1 2015 SNCR construction Q1 2015 Q1 2016 Units 2 & 3 shut down December 31, 2017 9

Rate Base Growth: Sources of Potential BART Rate Base Growth Estimated incremental RSIP (1) capital: $362M (2) PNM rate base CAGR with RSIP (2) : 4% - 6%  Revised State Plan (In millions) • Shut down units 2 and 3 $517 $491  By year-end 2017 $33 $20 $1 • Install SNCRs on units 1 and 4 $428 $87  By early 2016 $362 $355 $148 $10 $63  Potential replacement power options: $483 • Base load (2) $383 $352  134 MW nuclear capacity at Palo $292 $280 Verde 3 • Other capacity  150-200 MW gas peaker  40 MW solar or gas peaker 2013 2014 2015 2016 2017 Total Core Capital Other Capacity SNCRs $1.8B $299M $63M (1) Revised state implementation plan (2) Base load replacement power is not included in the $362M of capital spend Amounts may not add due to rounding 10

Expected NMPRC BART Filing Process Timeline Components  December 2013:  Retirement San Juan Units 2 and 3 PNM submits filing to NMPRC and recovery of undepreciated  December 2013 – September 2014: amounts NMPRC review period  CCNs for Palo Verde Unit 3 and  October 2014 – March 2015: proposed ownership changes in San Potential 6 month extension of Juan review period  Ratemaking treatment Settlement discussions may occur at any time. 11

Earnings Growth: Potential Earnings Power Minimizing regulatory lag, improving market prices, and reducing Corporate debt could improve current EPS by $0.15 to $0.24 without rate base growth Mid Point Potential Earnings Power Guidance Range (1) 2013 Growth Potential Rate Potential Allowed Achievement Base Allowed Resulting EPS Return EPS Equity Return EPS Ratio PNM Retail and renewables $1.9B 10% $1.21 10% 50% - 51% $1.21 FERC Transmission $150M 8% $0.07 9% – 10% 52% $0.08 – $0.09 $0.01 – $0.02 2015 FERC Generation 50% 2015 $69M 4% $0.02 9% – 10% $0.04 – $0.05 $0.02 – $0.03 TNMP $561M 10% $0.33 10% 45% $0.33 Corporate/Other ($0.16) ($0.04) (2) $0.12 2016 PV3 Unregulated Generation* ($0.07) ($0.07) – $0.00 $0.00 – $0.07 See Note 3 Costs not included in rates* (4) ($0.03) ($0.03) Total $2.7B $1.37 $1.52 – $1.61 $0.15 – $0.24 (1) Guidance range as presented December 2012. (2) PNM Resources holding company 9.25% debt matures May 15, 2015. From time to time, the company may buy back debt prior to maturity. (3) The potential earning range assumes a price of $34 to $42 per MWh. (4) Consists primarily of certain incentive compensation and pension-related costs associated with the sale of PNM Gas. * Included in PNM. This table is not intended to represent a forward-looking projection of earnings. 12