Investor Meetings April 2013
Contact Information and Safe Harbor Statement Investor Relations Contact Information Jimmie Blotter, Investor Relations Manager Allyson Beck, Investor Relations Analyst (505) 241-2227 (505) 241-4612 Jimmie.Blotter@pnmresources.com Allyson.Beck@pnmresources.com Safe Harbor Statement Statements made in this presentation that relate to future events or 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 $1.7B Generation Resources and Service Territories • Energy holding company • Based in Albuquerque, New Mexico • Located in New Mexico • 504,700 customers • 14,562 miles transmission and distribution lines • 2,538MW generation capacity • Top quartile reliability • Affordable rates • Located in Texas • 231,700 end-users • 9,080 miles transmission and distribution lines • Top quartile reliability • Affordable rates 4
PNM Resources Strategic Direction Repositioned PNM Resources as a pure- play electric utility through competitive Strategic Goals business exit in 2011 Earn Authorized Return on our Regulated Businesses Management able to efficiently execute strategic redirection of business Continue to Improve Credit Ratings Provide Top Quartile Strengthened financial position as result Total Return of strategic shift and regulatory successes 5
Ongoing Earnings Per Share Improvement Ongoing Earnings Per Share Guidance Range $1.32 - $1.42 $1.31 $1.37 Midpoint $0.32 - $0.34 $0.33 $0.91 $0.29 $0.55 $0.43 $0.17 $1.16 - $1.23 $0.13 $1.14 $0.76 $0.58 $0.50 ($0.14) ($0.16) ($0.16 - $0.15) ($0.20) ($0.20) 2009 2010 2011 2012 2013E PNM TNMP Corporate 6
Delivering Top Quartile Returns Earnings Growth • Sustaining and growing the dividend • Providing above-average • Investing in core capital, dividend growth expected near- environmental control • Realizing earnings potential in term equipment, replacement power business and renewables • Improving payout ratio to meet • Continuing to earn our allowed long-term target returns • Reducing regulatory lag Rate Base Dividend Growth Growth 7
Core Capital Spending 2013 – 2017 Core Capital Plan: $1.8B PNM Rate Base CAGR: 2% - 3% (In millions) 2013 Expected Depreciation: $156M TNMP Rate Base CAGR: 7% - 9% $430 $399 $50 $373 $6 $14 $14 $15 $33 $17 $50 $301 $281 $7 $98 $106 $13 $6 $13 $84 $91 $93 $248 $244 $224 $184 $175 2013 2014 2015 2016 2017 PNM TNMP Renewables Other Peaking Capacity Amounts may not add due to rounding San Juan environmental capital spend for either SCR and SNCR technology and any replacement generating capacity excluded from core capital 8
San Juan BART Update State alternative plan • Shut down units 2 and 3 by year-end 2017 • Install SNCRs on units 1 and 4 by early 2016 (1) • Reduce greenhouse gases and fresh water consumption • Diversify generation portfolio with replacement power 10 th Circuit Litigation • Provided report on Feb. 25 that an agreement has been reached Installation of SCRs • Suspended EPC contractor agreement (1) Installation expected to be complete the later of Jan. 31, 2016 or 15 months after EPA approval of the revised state plan 9
Capital Spending Under Revised State Plan PNM’s share of SNCR Estimated incremental SIP (1) capital: $343M capital costs are PNM rate base CAGR with SIP (2) : 3% - 5% approximately $63M (In millions) $478 $457 $432 $20 $7 $383 Potential replacement $33 $377 $197 $10 power options: $76 • Peaking capacity o 150-200 MW gas peaker $430 $399 o 40 MW gas peaker $373 $301 • Base load (2) $281 o 134 MW nuclear capacity at Palo Verde 3 and/or o Additional gas generation 2013 2014 2015 2016 2017 Core Capital Total Peaking Capacity SNCRs Amounts may not add due to rounding (1) State implementation plan (2) Base load is not included in the $343M of capital spend 10
PNM Renewables New Mexico Renewable Energy Act Wind • Streamlined proceedings for approval of utilities’ renewable energy procurement • New Mexico Wind Energy Center plans • 136 turbines • Provides for recovery of program costs • 204MW under approved procurement plan • Purchase power agreement with FPL Energy Portfolio Standards as a % of Retail Sales Solar • 5 PNM-owned facilities 15% 10% 20% • 22MW 2011 2020 2015 • Solar battery storage facility • Customer-owned solar facilities New Mexico’s Ranking in U.S. 2013 Renewable Procurement Plan • Second in solar potential • Installation of 20MW additional solar capacity • Twelfth in wind potential • First in solar/capita • 10 MW Geothermal purchase power agreement • Additional customer-owned solar facilities Renewable Rider Collection Methodology • Recovery of renewable investments and REC purchases through Renewable Energy Rider 11
Potential Earnings Power Minimizing regulatory lag, improving market prices, and reducing Corporate debt could improve current EPS by $0.16 to $0.25 without rate base growth Mid Point Guidance Potential Earnings Power Growth 2013 % of Range Potential Potential Rate Rate Achievement Allowed Resulting EPS Base Base Return EPS Return EPS PNM Regulated Business PNM Retail $1.8B 86% 10% $1.16 10% $1.16 Renewables (1) $79M 4% 10% $0.05 10% $0.05 FERC Transmission $150M 7% 8% $0.07 9% – 10% $0.08 – $0.09 $0.01 – $0.02 2013 – 2014 2014 (2) FERC Generation $69M 3% 4 % $0.02 9% – 10% $0.04 – $0.05 $0.02 – $0.03 Costs not included in rates (3) ($0.03) ($0.03) 2014 PV3 Unregulated Generation ($0.07) ($0.07) – $0.00 $0.00 – $0.07 See Note 4 TNMP $561M 10% $0.33 10.125% $0.34 $0.01 2013 ($0.04) (5) Corporate/Other ($0.16) $0.12 2016 Total $2.7B $1.37 $1.53 – $1.62 $0.16 – $0.25 (1) Renewable rate rider implemented on August 20, 2012. (2) FERC Generation’s potential achievement would occur with the filing and resolution of new rates for the Gallup contract, whic h is expected in 2014. (3) Consists primarily of certain incentive compensation and pension-related costs associated with the sale of PNM Gas. (4) PV3 generation is currently sold at market. The range assumes a market price of $34 to $42 per MWh. (5) $143M of 9.25% debt at PNM Resources holding company matures May 15, 2015. Repayment funded by operating company dividends. This table is not intended to represent a forward-looking projection of earnings. 12
PNM: Recent Accomplishments Significant progress has been made to improve PNM’s financial health Earning our allowed return at PNM Retail Improving regulatory outcomes • PNM Retail rates increased $72M in August of 2011 • PNM Retail Renewable Rider implemented in August of 2012 • Expected 2013 revenue is $22.7M with rates reset annually • PNM FERC Generation settlement with Navopache Electric increased rates by $5.3M • PNM FERC Transmission revenue increased by $2.9M • FERC Transmission transition to formula rates requested 2012 • Results in requested increase of $3.2M • Improving regulatory environment in New Mexico • Future Test Year construct in place • Voters approved qualification requirement for NMPRC Commissioners 13
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