Q1 2013 Earnings Presentation May 6, 2013
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 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 ongoing 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. 2
Opening Remarks & Overview Pat Vincent-Collawn Chairman, President and CEO
Q1 2013 Financial Results and Company Updates Q1 2013 Q1 2012 Ongoing EPS (1) $0.18 $0.17 GAAP EPS (1) $0.21 $0.13 S&P credit ratings upgrade PNM Resources has moved to investment grade Affirmed 2013 ongoing earnings guidance at $1.32 - $1.42 (1) On a diluted basis 4
Load and Economic Conditions Regulated Retail Energy Sales Growth Q1 2013 vs Q1 2012 (weather-normalized and leap-year adjusted) PNM (1) TNMP (2) Unemployment Rate Residential (0.8%) 4.0% Commercial (1.8%) 0.8% 7.5% Industrial (6.2%) 0.3% 6.9% 6.4% Total Retail (1.9%) 2.2% U.S. (4) NM (3) TX (3) YTD Average Customer Growth PNM TNMP 0.5% 0.9% (1) Excluding Economy Service customers (2) Excluding Transmission Service end-users (3) U.S. Bureau of Labor Statistics, March 2013 5 (4) U.S. Bureau of Labor Statistics, April 2013
Regulatory Update Recent Approvals Action Approval Date Docket No. TNMP TCOS filing Approved with rates in place March 19, 2013 41176 FERC generation case Settlement approved April 5, 2013 ER11-4535-000 and (Navopache Electric Cooperative, Inc.) ER12-72-000 Expected Outstanding Items Action Docket No. Timing FERC generation contract extension Filed May 1, 2013 July 1, 2013 ER13-1396 (City of Gallup) FERC transmission formula rates case Filed December 31, 2012 2014 ER13-685-000 and ER13-690-000 NMPRC Delta Person Generating Station CCN Filed January 3, 2013 Q3 2013 13-00004-UT NMPRC Energy Efficiency Plan Filed October 5, 2012 Q2 2013 12-00317-UT 6
San Juan BART Timeline and Update Revised State Plan Expected Expected Action Item Start Completion PNM submits BART analysis to State Q2 2013 April 1, 2013 EIB approval of new SIP submitted by NMED Q2 2013 Q4 2013 EPA approval of SIP submitted by EIB Q4 2013 Q4 2014 NMPRC approval for retirement and replacement power Q4 2013 – Q1 2014 Q4 2014 – Q1 2015 SNCR construction Q1 2015 Q1 2016 Units 2 & 3 shut down December 31, 2017 10 th Circuit Litigation • Participating in ongoing court-ordered mediation 7
Financial Overview Chuck Eldred Executive Vice President and CFO
Q1 2013 Financial Summary Ongoing EPS $0.01 $0.01 $0.01 $0.18 $0.17 Corp/Other PNM TNMP Q1 2012 Q1 2013 9
PNM and TNMP: Q1 2013 vs Q1 2012 EPS (Ongoing) PNM Q1 2013 Key Performance Drivers ∆ EPS Outage costs $0.02 Rate relief $0.02 $0.18 $0.17 Weather $0.02 PV3 market price $0.01 AFUDC ($0.01) Depreciation ($0.01) Load ($0.04) Other ($0.02) Q1 2012 Q1 2013 TNMP Q1 2013 Key Performance Drivers ∆ EPS Load $0.01 $0.05 Rate relief $0.01 $0.04 Depreciation and property tax ($0.01) Q1 2012 Q1 2013 10
Credit Ratings S&P PNMR PNM TNMP BBB- (1) BBB (1) A- (2) Issuer debt rating Outlook Stable Stable Stable Moody’s PNMR PNM TNMP Debt rating Ba1 (1) Baa3 (1) A3 (2) Outlook Stable Stable Stable (1) Senior unsecured debt (2) Senior secured debt 11
2013 Guidance (Ongoing) $1.32 Consolidated EPS $1.42 PNM TNMP Corp/Other $1.16 - $1.23 $0.32 - $0.34 ($0.16) – ($0.15) 12
2013 Checklist Continue progress toward: Implementing San Juan BART agreement Improving FERC earnings Optimizing the value of TX TCOS filings Maintain strong electric reliability and power plant availability Control O&M and capital costs Continue execution of plan to achieve top quartile total return by 2016 13
Questions & Answers
Appendix
PNM Plant EAF and Outages 97.2% 2013 - 2014 Outage Schedule 92.4% 89.6% 85.5% 84.8% Duration Time 81.5% Unit in Days Period San Juan 4 54 Q1 – Q2 2013 1 12 Q1 2014 2 28 Q1 2014 Four Corners 4 21 Q2 2013 5 13 Q2 2014 4 13 Q4 2014 Palo Verde San Juan Four Corners Palo Verde 1 30 Q1 – Q2 2013 Q1 2012 Q1 2013 3 34 Q4 2013 Annual Top Quartile Numbers (1) 2 34 Q2 2014 Coal 90% 1 34 Q4 2014 Nuclear 93% (1) Annual top quartile numbers from the North American Electricity Reliability Corporation as of September 2012. A-2
Core Capital Spending 2013 – 2017 Core Capital Plan: $1.8B PNM Rate Base CAGR: 2% - 3% (In millions) 2013 Expected Depreciation: $153M TNMP Rate Base CAGR: 7% - 9% $429 $399 $14 $390 $14 $15 $128 $75 $84 $301 $280 $13 $13 $91 $92 $310 $291 $287 $197 $175 2013 2014 2015 2016 2017 PNM TNMP Other $1.3B $470M $69M San Juan environmental capital spend for either SCR or SNCR technology and any replacement generating capacity excluded from core capital A-3
Capital Spending Under Revised State Plan Estimated incremental SIP (1) capital: $344M (2) PNM rate base CAGR with SIP (2) : 3% - 5% Revised State Plan (In millions) • Shut down units 2 and 3 $478 $462 By year-end 2017 $426 • $33 Install SNCRs on units 1 and 4 $400 $20 $377 $7 By early 2016 $10 $198 $76 Potential replacement power options: $429 $399 $390 • Peaking capacity $301 $280 150-200 MW gas peaker 40 MW gas peaker • Base load (2) 134 MW nuclear capacity at Palo 2013 2014 2015 2016 2017 Verde 3 and/or Additional gas generation Total Core Capital Peaking Capacity SNCRs $1.8B $281M $63M (1) State implementation plan (2) Base load is not included in the $344M of capital spend A-4
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 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 and Renewables (1) $1.9B 90% 10% $1.21 10% $1.21 FERC Transmission $150M 7% 8% $0.07 9% – 10% $0.08 – $0.09 $0.01 – $0.02 2014 2015 (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) PV3 Unregulated Generation ($0.07) ($0.07) – $0.00 $0.00 – $0.07 See Note 4 TNMP $561M 10% $0.33 10% $0.33 Corporate/Other ($0.16) ($0.04) (5) $0.12 2016 Total $2.7B $1.37 $1.52 – $1.61 $0.15 – $0.24 (1) Renewable rate rider implemented on August 20, 2012. (2) FERC Generation’s potential achievement would occur with the resolution of new long term rates for the Gallup contract, the f ull impact of which is expected to be achieved in 2015. (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) PNM Resources holding company 9.25% debt matures May 15, 2015. From time to time, the company may buy back debt prior to maturity. This table is not intended to represent a forward-looking projection of earnings. A-5
Weather Impact PNM Q1 2013 Q1 2012 Normal Heating Degree Days 2,079 1,848 1,957 Cooling Degree Days 0 0 0 EPS Impact $0.01 ($0.01) $0.00 TNMP Q1 2013 Q1 2012 Normal Heating Degree Days 916 696 986 Cooling Degree Days 70 182 92 EPS Impact ($0.01) ($0.01) $0.00 A-6
Liquidity as of May 1, 2013 PNM PNM Resources Resources PNM TNMP Consolidated Financing Capacity (1) : (In millions) Revolving credit facility $300.0 $400.0 $75.0 $775.0 As of 5/1/13: Short-term debt and LOC balances $71.6 $19.7 $30.3 $121.6 Remaining availability 228.4 380.3 44.7 653.4 Invested cash 4.5 - - 4.5 Available liquidity as of 5/1/13: $232.9 $380.3 $44.7 $657.9 (1) Not included are PNM Resources’ fully drawn $100M term loan due 12/27/13 and PNM’s fully drawn $75M term loan due 10/21/14. A-7
Regulatory Information
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