November 1, 2019 Investor Meetings June 2020
Contact Information and Safe Harbor Statement Investor Relations Contact Information Lisa Goodman Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 Lisa.Goodman@pnmresources.com Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements made in this presentation for PNM Resources, Inc. (“PNMR”), Public Service Company of New Mexico (“PNM”) and Texas- New Mexico Power Company (“TNMP”) (collectively, the “Company”) that relate to future events or 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. The Company assumes no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, the Company cautions readers not to place undue reliance on these statements. The Company’s business, financial condition, cash flow, and operating results are influenced by many factors, which are often beyond its 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 and the information filed on the Company’s Forms 8 -K 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, ongoing earnings per diluted share and ongoing earnings guidance measures), 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
COVID-19, 2020 Guidance and Regulatory Updates
COVID-19 Scenario Analysis: Current Status • Continued scenario analysis and planning under 3 different stages: • Duration / Economic Conditions are entering Stage 2 with some restrictions lifted, monthly impacts will continue to be evaluated during phased re-openings • No Workforce and Supply Chain Disruptions have been experienced Stage 1 Stage 2 Stage 3 Up to 60 day-impact (through 60 - 120 day-impact (through >120 day-impact, duration of 4-6 Duration / May) with closure of non- July), with closure of non- months before recovery begins Economic Conditions essential businesses, restrictions essential businesses, restrictions (continues through the end of (Margin Impact) lifted by end of May lifted beginning of August 2020) No significant disruption to Up to 15% disruption for a Up to 40% disruption for a Workforce Disruption critical workforce; remaining sustained period resulting from sustained period resulting from (Capital Impact) workforce able to work remotely absenteeism absenteeism Disruption in supply chain for Major disruption in supply chain No material supply chain issues, specific capital equipment Supply Chain delays significant capital adequate near-term supply of results in 1 – 2 month delay on Disruption projects; prioritization of capital capital equipment on-site or certain projects; no issues with (Capital Impact) equipment to meet most available maintenance capital necessary essential reliability projects to maintain reliable service 4
COVID-19 Load Impacts May trends are in line with planning assumptions, impacts of phased state re-openings to be evaluated in June PNM Stage 1 and 2 load projections TNMP Stage 1 and 2 load projections • Residential COVID-19 increase +5% • Volumetric COVID-19 increase +5% • Commercial COVID-19 reduction -15% • Demand-based COVID-19 reduction -5% Stage 1 Stage 2 Stage 3 PNM Volumes TNMP Demand- Based TNMP Volumetric Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 2020 Guidance Projection 2019 5
2020 Ongoing Earnings Guidance Affirmed Based on strong May weather impacts, Stage 2 can be managed within guidance $2.16 Consolidated EPS $2.26 March Reduced load impacts were offset by warmer Stage 1: April than normal May temperatures at PNM, lower Manage within interest and financing costs, lower O&M May Guidance June Expected load impacts can be offset by phased-in cost contingency plans, regulatory filings, weather July August Reassess guidance: expected load impacts Stage 3: Outside September cannot be managed within the guidance range of Guidance Q4 Note: Refer to Slide 45 for EPS sensitivities of load impacts under planning assumptions 6
Regulatory Updates PNM Decoupling Filing • Filed Petition for Approval of Rate Adjustment Mechanism to Remove Regulatory Disincentives on May 28, 2020 • Full decoupling focuses on recovery of fixed costs for residential and small commercial customers • Current rate design recovers these fixed costs through volumetric rates, leading to a consistent under-recovery TNMP DCOS Filing • First DCOS filing for TNMP filed April 6, 2020 • Settlement in principle reached with parties in DCOS filing, rates expected to be implemented September 1, 2020 7
PNM Resources Overview
PNM Resources Overview Energy holding company based in Albuquerque, New Mexico • Vertically integrated utility in with two fully regulated electric utility subsidiaries New Mexico focused on clean NYSE: PNM $3.2B market cap energy transformation • $3.0B rate base • 500k retail customers Service Territories and Generation Resources • 2,761 MW resource portfolio • 15k miles transmission and distribution lines • T&D utility operating within the ERCOT market in Texas • $1.3B rate base • 250k consumers • 10k miles transmission and distribution lines 9
Key Investment Themes Create shareholder value through a clean and bright energy future Clean Energy Critical Electricity Strong Financial Focus Infrastructure Profile Reliably support Transparent growth Transformation of PNM growth and integration plan driven by rate generation portfolio of clean energy base investment 10
Focused on Sustainability Environment Social Governance Eliminating emissions Fostering tribal relationships Executing strong governance • • • Carbon-free transition aligns with Active outreach with numerous 9 of 10 directors independent Paris Climate Agreement and is tribes in New Mexico • 40% female board five years ahead of state mandate • Renewed commitment to the • Extensive board expertise across • Elimination of carbon emissions PNM Navajo Nation Workforce finance, environment, labor and will also eliminate mercury, NOx, Training Scholarship Program human resources, and SOx and other pollutants • Joined in the launch of Light up cybersecurity Saving freshwater Navajo to provide residential • Top ISS Governance QualityScore electrification • 36% water intensity reduction from 2007 to 2018 Promoting employee diversity • • Municipal effluent water used to 57% of new hires in 2019 were cool Palo Verde plant minorities and 37% were women • Investing and supporting renewables Overall workforce is 50% minority, 27% female, 8% veterans • 609 MW owned and purchased solar, wind and geothermal Engaging and retaining our workers • • 356 MW approved renewables Competitive benefits open to full- expansion for 2020 time and part-time employees • • 133 MW customer-owned solar Educational assistance program offering up to $5,250 per year • Enhancing grid to facilitate renewables and battery storage 11
Strategic Direction • Transform PNM generation portfolio to exit coal and be 100% emissions-free by 2040 • Enhance PNM transmission grid to facilitate the integration of renewable generation and battery storage • Invest in TNMP infrastructure to reliably support customer demand across high-growth service territory 12
Strong Financial Profile • Expect 8.9% rate base growth 2019-2023 • PNM and TNMP T&D investment continues to Rate Base support critical infrastructure and reliability projects Growth • Generation replacement power investments are balanced with additional opportunities for PNM T&D • Target: 5%-6% earnings growth 2019-2023 Earnings • Earn authorized return on rate base growth Growth • Proven history of building flexible plans that are adaptable in response to changing conditions • Dividend growth to mirror earnings growth Dividend • Quarterly declarations by Board of Directors Growth • Annual dividend evaluated in December • Maintain investment grade credit ratings • Immediate equity needs met through January Liquidity 2020 forward offering • Adequate liquidity remains available to finance business needs 13
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