November 1, 2019
Investor Meetings August 2020
Safe Harbor Statement
Investor Relations Contact Information
Lisa Goodman Director, Investor Relations and Shareholder Services U.S. [email protected]
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995Statements 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 MeasuresFor 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
Beilen MiddletonSenior Investor Relations SpecialistU.S. [email protected]
http://www.pnmresources.com/investors/results.cfm
PNM Resources Overview
PNM Resources Overview
4
Energy holding company based in Albuquerque, New Mexico with two fully regulated electric utility subsidiaries
NYSE: PNM $3.5B market cap• Vertically integrated utility in New Mexico focused on clean energy transformation
• $3.0B rate base • 500k retail customers• 2,811 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
Service Territories and Generation Resources
Strategic Focus
5
Aggressive transition of PNM resource portfolio,
with support from New Mexico policy
Reliably support growth and integration of clean
energy
Transparent growth plan driven by rate base
investment
Create shareholder value through a clean and bright energy future
Clean Energy Portfolio
Critical Electricity Infrastructure
Strong Financial Profile
Commitment to ESG Strategy
6
SocialEnvironmental Governance
Industry-leadings goals:• Emissions-free by 2040
reflects full elimination of carbon from generation
• 90% reduction in freshwater usage by 2040
• Significant reductions in emissions and freshwater usage achieved 2005-2020 through investments and retirements
Infrastructure investment to support rapid growth in owned and purchased renewable resources delivered to customers
Hiring, training, retention and engagement programs for our diverse workforce (50% minority), focus on safety and company culture
Diversity and inclusion supported in communities, tribal relationships fostered through meaningful partnerships
Transition to clean energy includes support for employees and communities
Diverse (40% women / 20% minorities), engaged Board with extensive experience
Robust top-down ethics program with organization-wide commitment
Strong Financial Profile
7
Rate Base Investments
Earnings Growth
Dividend Growth
Liquidity
• $3.3B investment plan 2020 - 2023• Emphasis on grid infrastructure investments• Reflects investment opportunities balanced with
long-term customer value
• 5%-6% earnings growth target through 2023• Dilution of rate base growth resulting from equity is
partially offset by savings from debt refinancings
• Dividend growth to mirror earnings growth• Quarterly declarations by Board of Directors• Annual dividend evaluated in December
• Maintain investment grade credit ratings• Immediate equity needs met through January
2020 forward offering• Adequate liquidity remains available to
finance business needs
$275 $303 $319$336
$94 $82 $77 $53
$337 $290 $342 $348
$187 $194
$200 $202
$134 $268 $27 $27 $25
$21 $25
$117
$120 $125
2020 2021 2022 2023
(in m
illio
ns)
PNM Existing Generation TNMP PNM T&DPNM Transmission Expansion 50% NMRD Renewable Additions Business Technology Services/General ServicesPNM Wired for the Future Depreciation
$976
$806$760 $753
$3.3B investment plan supports 5-6% earnings growth targetWired for the Future investments focused on delivering clean energy future
2020 – 2023 Investment Plan
8(1) Western Spirit acquisition of $285M reflects assumed purchase price of $360M, net of $75M customer funding(2) Depreciation does not include amounts associated with NMRD
(2)
(1)
https://www.snl.com/InteractiveX/file.aspx?DoNotRedirectTo3=1&id=389372287&KeyFileFormat=26&reqFrom=SNL3&KeyProductLinkType=2&web=1Chart1
2020
2021
2022
2023
Depreciation
275
303
319
336
Sheet1
20202021202220232024
PNM Generation
PNM T&D
PNM Renewables
TNMP
Other
Total
Depreciation$275$303$319$336$358
Check
2020 - 2023 Potential Earnings Power
9This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance.
Refer to Slide 49 for additional details and disclosures.
Earnings Growth Target 5-6% through 2023
Note: 5-6% targeted earnings growth CAGR measured from 2019 Ongoing EPS of $2.16. The number of shares outstanding increases from 80M to 86M in December 2020 resulting from the January 2020 forward equity offering(1) Items not in rates has been updated to reflect interest savings, lower decommissioning costs related to Palo Verde and the retirement of 65 MW of unregulated generation at San Juan
Allowed Return / Equity Ratio
2020 Ongoing Earnings
Guidance Midpoint
2021 Earnings Potential
2022 Earnings Potential
2023 Earnings Potential
Avg Rate Base Return EPS
Avg Rate Base EPS
Avg Rate Base EPS
Avg Rate Base EPS
PNM Retail 9.575% / 50% $2.5 B 9.5% $1.47 $2.5 B $1.41 $2.5 B $1.43 $2.5 B $1.44
PNM Renewable Rider
9.575% / 50% $150 M 9.575% $0.09 $145 M $0.08 $140 M $0.08 $130 M $0.07
PNM FERC 10% / ~50% $0.3 B 7.5% $0.15 $0.5 B $0.20 - $0.23 $0.7 B $0.35 - $0.39 $0.8 B $0.37 - $0.42
Items not in Rates(1) ($0.01) ($0.01) - $0.02 $0.01 - $0.03 $0.03 - $0.06Total PNM $3.0 B $1.70 $3.1 B $1.68 - $1.74 $3.4 B $1.87 - $1.93 $3.5 B $1.91 - $1.99
TNMP 9.65% / 45% $1.3 B 9.65% $0.73 $1.5 B $0.79 $1.6 B $0.87 $1.9 B $0.97
Corporate/Other ($0.22) ($0.13) - ($0.11) ($0.13)-($0.11) ($0.15) - ($0.13)Equity Financing Plans ($0.03) - ($0.01) ($0.11)-($0.09) ($0.11) - ($0.09)
Total PNM Resources $4.3 B $2.21 $4.6 B $2.31- $2.41 $5.0 B $2.50 - $2.60 $5.4 B $2.62 - $2.74
2019-2023 Rate Base CAGR (2019 base): Total 7.8% / PNM 4.2% / TNMP 16.1%
$1.94 $2.00 $2.16 $2.21
$2.36 $2.55
$2.68
2017 2018 2019 2020E 2021E 2022E 2023E
Indicated Annual DividendMidpoint Earnings Guidance/Potential
$0.97Dec ‘16
$1.06Dec ‘17
$1.16Dec ‘18
$1.23Dec ‘19
$1.29-$1.30
$1.36-$1.38
$1.42-$1.46
Dividend Growth
10
Dividend Growth Consistent with Earnings Growth at 5%-6%
56% payout
• Expect dividend growth consistent with earnings growth targeting the middle of a 50% - 60% payout ratio range
• Next dividend review in December 2020
Liquidity and Debt Maturity Outlook
11
PNM Resources FFO-to-Debt is maintained within Moody’s Baa investment grade
target range of 13% to 22%
(1) Senior unsecured rating (2) Senior secured rating
$496 $105$1,255
$843
$140$450
2020 2021 2022 2023 and Beyond
Long-term Debt Maturities(in millions)
PNM TNMP Corporate• Completed:
• $290 million forward equity offering in January 2020• PNM and TNMP issued ~$400M of new debt in 2020 and PNM
addressed its 2020 debt maturities• Planned:
• $250-$300 million mandatory convertibles issuance expected in late 2021 to fund Western Spirit acquisition and strengthen credit metrics
• New debt issuances projected at utilities through 2023 of ~$1.0 billion and $361 million securitization bonds
~$1B available liquidity
Maintain appropriate credit metrics and investment grade
ratings
Target regulatory capital structures at
PNM and TNMP
Moody’s Rating/Outlook
S&P Rating/Outlook
PNM Resources Baa3(1) / Stable BBB-(1) / Stable
PNM Baa2(1) / Stable BBB(1) / Stable
TNMP A1(2) / Stable A(2) / Stable
Key Takeaways
12
Providing critical electricity infrastructure to support the transition to clean energy in New Mexico and growing markets in Texas
Maintaining commitment to strong ESG practices, including the full exit from coal and transition to emissions-free energy by 2040, and continuing to support our customers and communities
Executing on transparent growth strategy to deliver 5% - 6% earnings and dividend growth
COVID-19 Updates and 2020 Earnings Guidance
Our Response to COVID-19
14
Safety of our Team
Caring for Customers and Communities
Managing our Business
• Identification of critical workforce, staging of backups, limited access to control rooms and critical assets
• Minimize critical employee exposure, inter-crew exposures and exposures with the public: eliminate group gatherings, deploy additional fleet vehicles
• Mandatory work-from-home and flexible arrangements for all applicable job functions
• Residential customer disconnects temporarily suspended, late fees waived
• TNMP helped create COVID-19 Electricity Relief Program• PNM Resources Foundation community safety grant
opportunity for PNM and TNMP service territories• PNM and TNMP supporting local businesses• Business continuity plans implemented, daily crisis
team meetings• Coordination with key vendors and suppliers• Close contact with neighboring utilities, regional
operators CAISO and ERCOT, reliability entities WECC and Texas RE, EEI, EPRI and North American Transmission Forum
Phased re-opening began in May and expanded in June; plans suspended in July with some restrictions re-instated
Customer disconnects and late fees suspended, regulatory treatment for COVID-19 expenses supports expanded customer payment plans
No significant workforce or supply chain disruptions
Phased re-opening began May 1st throughout early June; plans suspended and restrictions re-instated in late June following continued growth in case numbers
COVID-19 Electricity Relief Program remains in place
No significant workforce or supply chain disruptions
COVID-19 Update
15
Restrictions continue in New Mexico and Texas in response to rising case numbers during phased re-openings, continue to prioritize the safety of our team, caring for
our customers and communities
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2020 Actuals 2020 Original Guidance 2019 Actuals
Continued COVID-19 Load Impacts
16
Expected impacts reflect continued increases from Residential customers and decreases from Commercial and Industrial customers due to business restrictions
PNM COVID load trends• Residential: +5% increase• Commercial: -10% reduction
TNMPDemand-Based
TNMPVolumetric
PNM Volumes
TNMP COVID load trends• Volumetric: +5% increase• Demand-based: -5% reduction
Note: Refer to Slide 48 for EPS sensitivities of load impacts under planning assumptions
Weather-normalized load:
2020 Consolidated Ongoing Earnings Guidance
17
Clean Energy Focus
Strong Financial Profile
$2.16 Consolidated EPS $2.26
PNM$1.67 – $1.73
TNMP$0.72 – $0.74
Corp/Other($0.23) – ($0.21)
2020 Earnings Guidance
8%
25%
54%
13%
Q1 Q2 Q3 Q4
2020 Annual EPS Distribution by Quarter
$2.16 - $2.26guidance affirmed, targeting midpoint
Q3 reflects the peak load season (cooling season) at
both PNM and TNMP
PNM
New Mexico Energy Policy: Energy Transition Act
19
Nuclear 30%
Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019
• Renewable Portfolio Standards and Carbon-Free Requirement• Previous: 20% renewables by 2020• Current:
• 40% renewables by 2025• 50% renewables by 2030• 80% renewables by 2040• 100% carbon-free by 2045
• Securitization measure for abandonment of coal-fired generating facilities reduces customer bills
• Economic development funds provide needed financial assistance to workers and the communities impacted by retirement of coal-fired generating facilities
50%
Ren
ewab
les
80%
Ren
ewab
les
40%
Ren
ewab
les
100%
Car
bon-
Free2045
20402030
2025
Executing the Energy Transition Act
20
Nuclear 30%
Our Goal: Transform to 100% Emissions-Free Energy by 2040
Step 1: Exit Coal Generation by 2031• San Juan Generating Station:
•Retired Units 2 and 3 in 2017 (221 MWs); Retirement of Units 1 and 4 in 2022 (562 MWs)
• Four Corners Coal Plant: •Exit from ownership participation no later than expiration of
agreements in 2031 (200 MWs)
Step 2: Eliminate emissions from natural gas generation by 2040• Exit from Valencia gas plant in 2028 (158 MWs)• Transform existing and transitional gas plants to carbon-
free capacity resources such as battery storage and pumped storage by 2040
Step 3: Actively pursue the development of carbon-free replacement power alternatives
• Current options: renewable + storage combinations, short-term natural gas peaking units to facilitate transition to emissions-free
983
762
200
2015 2020 2025 2031
80%reduction
Coal-free
22% reduction
Reduction of MW Coal Capacity
• Future options: Regional market participation, next-generation battery, pumped hydro, emissions-free combustion turbines through hydrogen or other clean fuels, emerging technologies
PNM-owned facilities, as reported to EPA, compared to 2005 levels
Emission Reduction Goals:
Freshwater Reduction Goals:
2025 2035 2040CO2 60% 80% 100%NOX 70% 90% 100%SO2 90% 100% 100%
2025 2035 2040Freshwater 70% 80% 90%
Transform PNM Generation Portfolio
21
San Juan abandonment, securitization and replacement power
San Juan abandonment/ securitization unanimously approved on April 1, 2020
San Juan replacement power portfolio issued July 29, 2020
Developing plans to exit Four Corners
200 MW ownership Contracts expire 2031,
PNM looking to exit sooner
Replace Palo Verde leased capacity
104 MW expires 2023 10 MW expires 2024
Balance appropriate level of baseload resources to be emissions-free by 2040 and shift towards additional low-cost renewables and flexible resources
Renewable and Battery Storage Portfolio
22
2019 2022
237
1037356
662
15
15
0.5
300.5
Solar Wind Geothermal Battery Storage
609 MW2020+50MW solar+140MW wind+166MW wind
2021+50MW solar+50MW solar
2022+650MW solar+300MW battery storage
157 MW Solar (Owned)80 MW Solar (PPA)
356 MW Wind (PPA)15 MW Geothermal (PPA)
0.5 MW Battery Storage (Owned)
207 MW Solar (Owned)830 MW Solar (PPA)662 MW Wind (PPA)
15 MW Geothermal (PPA)0.5 MW Battery Storage (Owned)
300 MW Battery Storage (PPA)
2,015 MW
Growth in Renewable and Battery Storage Capacity Reflects Aggressive Clean Energy Transition
Note: represent additions that have been approved by the NMPRC
PNM Investment: Wired for the Future
23
Clean Energy Focus
Strong Financial ProfileDelivering Clean Energy
• Infrastructure expansions to accommodate clean energy resources• Grid reconfigurations that provide enhanced flexibility• Sustainable platforms for distributed resources and electric vehicles
Enhancing Customer Satisfaction• Customer reliability improvements and quality of service enhancement• Customer products and communication that match expectations• Infrastructure expansion for emerging new customer growth
Increasing Grid Resilience• Stabilization of aging asset base through consistent investment• Grid modernization and enterprise-wide technology improvements• Enhanced infrastructure and controls to address security, wildfire risks
New Mexico’s clean energy future depends on a reliable, resilient, secure grid to deliver an evolving mix of energy resources to customers
Infrastructure Investments: Wired for the Future
24
30%
17%53%
Total Investment by Category
Delivering Clean EnergyEnhancing Customer SatisfactionIncreasing Grid Resilience
Investments in grid resilience provide the foundation for a system that can respond and adapt to integrate evolving
technology and provide long-term customer value
Delivering Clean Energy• Reconfiguring substations and lines
beyond the original architecture to accommodate growing amounts of intermittent and distributed generation resources
Enhancing Customer Satisfaction• Strengthening infrastructure that directly
serves customers, focus on reliability and outage restoration
Increasing Grid Resilience• Expanding transmission substations and
lines operating at maximum capacity
Accelerates $450M Investment55% Transmission / 45% Distribution
PNM Retail Transmission Opportunities
25
• Transmission capacity within New Mexico’s grid is constrained• The integration of new renewable resources to meet growing Renewable
Portfolio Standards and replacement of coal retirements will likely require additional T&D expansion
2020 2025 2030 2040
762MW
200 MW 200 MW 0 MW
20%
40%50%
80%
Coal Capacity Renewable Portfolio Standard
Renewable Portfolio Standards GrowthCoal Capacity Retirements
2020 - 2040
FERC Transmission Opportunities
26
Source: American Wind Energy Association, Oct. 2019
New Mexico ranks:
Wind
Solar
Source: NREL
New Mexico’s abundant solar and wind resources also attract third-party development, increasing the demand for transmission capacity and
creating rate base growth opportunities:
Source: WINDExchange.energy.gov, Q3 2019in US wind capacity potential
Source: Nebraska Department of Environment & Energy Sun Index developed for NREL measuring direct sunlight received in each state, accounting for latitude and cloud cover
in US energy potential from solar power
• PNM acquisition of Western Spirit transmission line: $285M in 2021
• New Mexico added wind capacity at a higher growth rate than any other state in 2017 and currently has projects under construction or in advanced development that will more than double current installed capacity
• 1,953 MW installed capacity• 1,227 MW under construction• 1,328 MW in advanced
development
NMPRC Commissioners and Districts
27
District Name Term Ends Party
District 1 Cynthia Hall 2020(1) Democrat
District 2 Jefferson Byrd 2022(1) Republican
District 3 Valerie Espinoza,Vice-Chairman 2020 Democrat
District 4 Theresa Becenti-Aguilar,Chairman 2022(1) Democrat
District 5 Stephen Fischmann 2022(1) Democrat
NMPRC Districts and PNM Service Areas
(1) Eligible for re-election to a second four-year term
2019 Legislative Update – Appointed vs Elected:• A Senate Joint Resolution was passed in the New Mexico legislature to
include a state constitutional amendment on the ballot in the next general election (2020) to move to a 3-member, appointed Commission
• If the amendment is passed by a simple majority:• The legislature defines the nominating committee and the
requirements for Commissioners• The terms for Commissioners elected in Districts 1 and 3 in 2020 will
be for a two-year term ending in 2022; the terms for Commissioners in Districts 2, 4 and 5 already expire in 2022
• Three appointed Commissioners would begin terms January 1, 2023
PNM Regulatory Agenda
28
Filing Action Timing Docket No.PNM:Decoupling Filing (Petition for Approval of Rate Adjustment Mechanism to Remove Regulatory Disincentives)
Filed with the NMPRC on May 28, 2020 Hearings scheduled for October 2020 20-00121-UT
Deferral of Incremental costs related to COVID-19 PNM and other utilities filed joint motion April 27, 2020 Approved June 24, 2020 20-00069-UT
Consolidated Application for San Juan Generating Station(Abandonment, Securitization and Replacement)
PNM filed July 1, 2019; NMPRC bifurcated case; New Mexico Supreme Court ruled January 29, 2020 that Energy Transition Act applies to both dockets.
NMPRC order approving abandonment/securitization issued April 1, 2020
NMPRC replacement power order issued July 29, 2020
Completed 19-00018-UT
19-00195-UT
PNM 2020 Renewable Plan Filing Filed June 1, 2020 Hearings scheduled for September 24-25, 2020 20-00124-UT
FERC Transmission Formula Rate Annual Update Filed June 1, 2020
Informational filing submitted; rates effective June 1, 2020 N/A
Solar Direct ProgramFiled May 31, 2019 for approval of voluntary renewable program expected to begin March 31, 2021; Hearings completed January 2020
Approved March 25, 2020 19-00158-UT
PNM Load and Economic Conditions
29
20-y
r Avg
20-y
r Avg
20-y
r Avg
20-y
r Avg
2015
2015
2015
2015
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
2020
2020
Q1 HeatingDegree-Days
Q2 CoolingDegree-Days
Q3 CoolingDegree-Days
Q4 HeatingDegree-Days
Weather Volatility
(1) Load growth is weather normalized and leap year adjusted
Year-over-Year Growth 2020 YTD 2019 2018
Total Retail Load(1) (0.3%) 0.3% 0.6%PNM Avg. Consumers 0.8% 0.7% 0.8%
Retail Load GrowthReduced load impacts of COVID-19 in 2020 have been offset by increased weather impacts
• 2019 and 2018 load growth reflects customer growth partially offset by Commercial energy efficiency impacts
• Increased cooling-degree days in Q2 2020 increased overall usage, offsetting the impacts of COVID-19 during the same period
• Announcement of an Amazon fulfillment center under development in Albuquerque is the latest result of the continued focus of economic development efforts in New Mexico, expected to bring 1,000 jobs and increase load in 2021
PNM COVID-19 Considerations
30
• PNM comprises the majority of customer non-fuel revenues
• New Mexico’s largest employers include government and health care, with a larger number of small/medium businesses
Customer Class Considerations• Residential: increased volumes during the Stay-at-Home order• Commercial: weighted towards small businesses that are most
impacted by the Stay-at-Home order• Industrial: no significant impacts expectedPNM Sales by Customer Class % Volumes % Revenues
Residential 36% 46%Commercial 41% 42%Industrial 20% 10%
PNM 2019 Revenues by Region
Southern ~15%
Central~85%
New Mexico
74%
PNM Resources Non-Fuel Revenues
PNM Decoupling Filing
31
Stand-alone full decoupling filing
Filed May 28, 2020
Requested 2021
implement-ation
Customer bills more accurately reflect the fixed, non-fuel costs of the service provided
Residential
Small Commercial
Disassociates utility profits from sales volumes
Removes utility disincentives to promote
energy efficiency or conservation programs
Eliminates the upside/ downside risks of
weather for the non-fuel portion of customer bills
Full decoupling filing seeks to recover previously authorized fixed costs,current rate design attempts to recover fixed costs through volumetric rates
Decoupling Financial Impacts – 2020 / 2021 / 2022
32
2020 2021 2022
Customer Bills No Impact No impactRates adjusted to reflect prior year
under/over recovery
Earnings No Impact
Includes recovery true-up for customer use
Current estimate: ~$16M
Includes recovery true-up for customer use
FFO No Impact No Impact No Impact
2020 2021 2022
Customer Bills No Impact No impactRates adjusted to reflect prior year
under/over recovery
Revenues No Impact
Revenues adjusted for under/over recovery
based on customer useCurrent estimate: ~$16M increase in
revenues
Revenues adjusted for under/over recovery
based on customer use
FFO No Impact Includes adjusted revenuesIncludes adjusted
revenues
Cash Flow No Impact No Impact Collect prior year’s under/over recovery
TNMP
TNMP Low-Risk Revenue Profile
34
30%Gulf Coast
3% West Texas
19%North/Central
16%North/Central
12%WestTexas
20%Gulf Coast
• 52% Volumetric Revenues: billed on kWh usage• Residential customers (97%)• Primarily in the Gulf Coast, North/Central regions
• 48% Demand-Based Revenues: billed on the peak hour of kW demand during the month
• Majority of customers subject to billing ratchet, meaning billing is the greater of the current month peak or 80% of prior 11 months peak
2019 Retail Revenues 50% Gulf Coast 35% North/Central Texas 15% West Texas
2019 TNMP Revenues$295M Retail Revenues
Includes $94M of pass-through transmission expense recovery, trued up twice annually
$67M Wholesale RevenuesFixed transmission investment recovery; can
be adjusted twice annually through TCOS filings, $81M approved March 2020
TNMP Regional Breakdown
35
TNMP – Gulf Coast
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
TNMP 2019 Revenues by RegionRegion provided 50% of 2019 retail revenues• Regional economy driven largely by oil refining
and petrochemical industries, supplemented by the aerospace and medical industries
• Sprawl from Houston has led to TNMP’s greatest portion of residential customers in this region, combined with supporting commercial businesses (retail, restaurants, entertainment, schools health care facilities) and the marine and tourism industry native to the coast
• ~60% of 2019 revenues from residential customers, who have increased usage during COVID-19
• Petrochemical companies boosting production of chemicals used in medical personal protective equipment and hand sanitizer during COVID-19
• Largest cities: League City ~100,000 residents and Texas City ~50,000 residents
TNMP Regional Breakdown
36
TNMP – North/Central TX
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
TNMP 2019 Revenues by RegionRegion provided 35% of 2019 retail revenues• Dallas region is home to 250 corporate
headquarters that each employ more than 1,000 people globally, 22 Fortune 500 companies and 8 of Forbes’ largest privately held companies
• The sprawl from Dallas-Ft Worth into the TNMP service territory has resulted in a load profile that is evenly split between residential customers and the commercial businesses supporting these communities (retail, restaurants, entertainment, schools, health care facilities)
• COVID-19 Trends: Increases in residential customer usage are offset by reduced demand-based business usage
• Largest city: Lewisville ~100,000 residents
TNMP Regional Breakdown
37
TNMP – West Texas
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
Region provided 15% of 2019 retail revenues• ~50% of 2019 revenues derived from retail
transmission customers with recovery trued up twice per year
• ~25% of 2019 revenues demand derived from higher-voltage customers that continue to trend above 2019 levels during COVID-19
• Diversification of customers within the oil & gas industry between upstream (production, separation and water handling activities) and downstream (processing and transportation of oil and gas prior to market) activities
• Delaware Basin has one of the lowest break-even price for oil and gas production in the Permian Basin and the entire US, area is only partially served by utility power
• Largest city: Pecos ~10,000 residents
TNMP 2019 Revenues by Region
Permian Basin
Delaware Basin
TNMP Load and Economic Conditions
38
Resilient Texas economy has shown a shift in load between customer classes resulting from COVID-19 with no significant overall impacts
• Customer transmission interconnection requests continue in line with expectations
• Diversified service territory results in minimal impact on overall revenues resulting from fluctuations in West Texas oil and gas industry
(1)Load growth is weather normalized and leap year adjusted
Year-over Year-Growth Q2 2020 vs. Q2 2019YTD 2020 vs.
YTD 2019Volumetric-Based Load(1) 2.9% 1.5%Demand-Based Load(1) (2.8%) 0.0%Avg. Consumers 1.3% 1.3%
Load Growth
West Texas ~15%
North/Central TX ~35%
Gulf Coast ~50%
● TNMP Service Area
TNMP 2019 Revenues by Region
TNMP COVID-19 Considerations
39
• TNMP is a smaller portion of customer non-fuel revenues and is less impacted by changes in load/demand:
TNMP Sales by Tariff Class % Volumes % RevenuesVolumetric 28% 52%Demand-Based 72% 48%
Customer Class Considerations• Volumetric: 97% Residential customers, increased
volumes during the Stay-at-Home order• Demand-Based: Commercial and Industrial customers,
some impacted by the Stay-at-Home order
West Texas4%
Houston/ Bay Area
13%
Dallas/ North TX
Area9%
PNM Resources Non-Fuel Revenues• Transmission recovery (45% of revenues),
trued up twice per year• Majority of demand-based bills based on
greater of peak monthly usage, or 80% of previous 11 months peak
TNMP Demand and Infrastructure Investment
40
• ERCOT summer peak demand projected to grow by ~20% over next ten years(1), extensive regional studies call for increased transmission infrastructure to support reliability and growth, particularly in West Texas region
(1) Source: ERCOT 2019-2028 forecast
Year-over Year-Growth 2017 2018 2019
Demand-Based Load 4.0% 6.8% 4.9%TNMP Avg. Consumers 1.2% 1.3% 1.4%
Texas growth drives infrastructure needs• TNMP has seen consistent consumer growth driven by
strong Texas economy• Rapid demand-based load growth over recent years in
the Commercial and Industrial classes drives need for increased electrification and reliability / system upgrade investments
Load growth is weather normalized and leap year adjusted
2020 Key Capital Projects:• In the Gulf Coast, a 138kV transmission line upgrade will
be completed to help with transmission contingency issues and support the interconnection of a new gas-fired power plant;
• A group of transmission lines and substations in northern West Texas will be upgraded from 69kv to 138kv to support regional growth;
• Begin the replacement of our AMI meters to be compatible with current network capabilities
$337$290
$342 $348
2020 2021 2022 2023
2020 – 2023 Investments
Consistent investment plan reflects system-wide investments coordinated within ERCOT
PUCT Commissioners and TNMP Regulatory Agenda
41
Commissioners are appointed by the Governor of Texas and confirmed by the Senate.
Name Term Began Term Ends Party
DeAnn Walker (Chair) Sept. 2017 Sept. 2021 Republican
Arthur D’Andrea Nov. 2017 Sept. 2023 Republican
Shelly Botkin June 2018 Sept. 2025 Republican
PUCT Commissioners
Filing Action Timing Docket No.TCOS Filing(second 2020 filing) TNMP filed July 14, 2020
Rates expected to be implemented September 2020 51107
DCOS Filing TNMP filed April 6, 2020; Settlement filed June 26, 2020Rates expected to be implemented September 1, 2020 50731
TNMP Regulatory Agenda
TNMP Rate Recovery Framework
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General Rate ReviewDCOS (Distribution
Cost of Service)TCOS (Transmission
Cost of Service)
Process
Standard rate review involving comprehensive filing, discovery, interveners,
hearings, etc.;Staff recommendation and
PUCT approval; 180-day clock (potential for settlement)
Pre-defined schedules limited to distribution investments with
discovery, interveners, hearings;Staff recommendation and PUCT approval; filed 1st week of April with rates implemented Sept 1
(potential for settlement)
Pre-defined schedules; Staff recommendation and PUCT
approval, 60-day clock
Capital Structure / ROE / Cost of Debt Yes No No
Rate Base / Property Tax / Depreciation Yes Distribution only Transmission only
Other expenses Yes No NoTiming (allowed) PUCT defined (1) Once per year Twice per year
Current TNMP Filings
Historical: filed May 2018 (test year of FY 2017), approved
December 2018, rates implemented January 2019:
9.65% ROE, 45% Equity
2020 Filings: Filed April 6, 2020Settlement filed June 26, 2020, rates expected to be implemented September 1, 2020
2020 Filings: 1) Jan 2020 filing, approved/
implemented in Mar 20202) July 24, 2020 filing, rates
expected to be implemented Sept 2020
(1) PUCT rule calls for general rate review within 48 months of most recent order setting rates (TNMP order issued December 2018), unless earning less than 50 basis points over the average authorized ROE of ERCOT investor-owned utilities (based on year-end rate base, weather-normalized)
Appendix
San Juan Abandonment, Securitization and Replacement Power
44
Aban
donm
ent ● Requests
abandonment of San Juan coal plant after participation agreement and coal supply contracts end June 30, 2022 Se
curit
izatio
n ● $283M undepreciated investment in San Juan, proceeds available to fund replacement power
● $29M decommissioning and reclamation costs
● $20M job training and severance costs
● $20M economic development funds
● $9M financing costs
Total $361M securitization
Repl
acem
ent P
ower Prioritizes environmental
benefits and location preferences consistent with the Energy Transition Act
● 650 MW solar PPA● 300 MW battery
storage PPA
● 430 MW located in the Central Consolidated School District and 470 MW in nearby communities
Timing• Filed July 1, 2019• NM Supreme Court ruled January 2020 that the ETA
applies to PNM’s application for abandonment, securitization and replacement power
• NMPRC approved abandonment and securitization on April 1, 2020; replacement resources approved June 29, 2020
San Juan Securitization Next Steps
Securitization next steps:
45
April 1, 2020: Irrevocable NMPRC financing order
Early 2022: PNM forms a Special Purpose Entity (SPE) that will issue the bonds
July 2022: SPE issues securitization bonds
Within 30 days of issuance: PNM files a report with the NMPRC, to include bond pricing and structure
Semi-annually after issuance: PNM files to true up the customer charge for under- or over-collection
Securitization Order issued April 1, 2020 grants irrevocable financing order authorizing the issuance of securitization bonds up to $361 million, to include:
• Abandonment costs, including undepreciated investment in San Juan, decommissioning and reclamation costs, and job training and severance costs
• Financing costs
• Economic development funds
San Juan and Four Corners Generating StationsOwnership and Participants
46
Unit TotalMWPNM MW
PNM Ownership Other Participants/Ownership
1 340 170 50% Tucson Electric 50% (170 MW)
4 507 392 77.3%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)
Total 847 562
Unit TotalMWPNM MW
PNM Ownership Other Participants/Ownership
4 770 100 13%
Arizona Public Service Company 63% (485 MW)Navajo Transitional Energy Company 7% (54 MW)Salt River Project 10% (77 MW)Tucson Electric Power 7% (54 MW)
5 770 100 13%
Arizona Public Service Company 63% (485 MW)Navajo Transitional Energy Company 7% (54 MW)Salt River Project 10% (77 MW)Tucson Electric Power 7% (54 MW)
Total 1,540 200
San Juan Generating Station
Four Corners Generating Station
Palo Verde Nuclear Generating Station Ownership and Leases
47
MW Owned vs. Leased
Lease Expiration• Unit 1: June 11, 2020; notice given to return leased assets upon expiration of the extended lease on January 15, 2023• Unit 2: June 11, 2020; notice given to return leased assets upon expiration of the extended lease on January 15, 2024• PNM has issued an RFP in order to replace the capacity from the leases by mid-2023. the replacement of this leased capacity allows PNM to integrate more renewable resources that provide the best value to customers and support the path to emissions-free energy by 2040
Yearly Payment Amounts Total PV Unit 1 - $16.5M Total PV Unit 2 - $1.6M
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
Unit 3
Owned 10.2% 134 MW
Leased 0% 0 MW
Total 10.2% 134 MW
COVID-19 Load: Assumptions and EPS Sensitivities
48
Clean Energy Focus
Strong Financial Profile
PNM TNMP
COVID-19 Planning Assumptions:Current Expectation
Residential + 5%Commercial -10%
Industrial No significant impacts
10% change in load Monthly EPS Impact
Residential CommercialJuly – September +/- $0.03-$0.04+/- $0.03-$0.04October – December +/- $0.02 +/- $0.02
Monthly rule of thumb:
COVID-19 Planning Assumptions:
Monthly rule of thumb:
10% change in loadMonthly EPS Impact
Volumetric Demand-BasedJuly – September +/- $0.02 +/- $0.01October – December +/- $0.01 +/- $0.01
Current ExpectationVolumetric + 5%
Demand-Based - 5%
2020 - 2023 Potential Earnings Power
49
(1) Average rate base has been reduced by approximately $130M to represent ($0.05) of Earnings Potential for the lost equity return on Four Corners investment determined in the 2018 general rate review. 2022 and 2023 rate base also reflects the removal of $283M undepreciated SJGS investment upon its retirement in mid-2022 to be recovered through securitization.
(2) PNM Renewables reflect assets collected through the Renewable Rate Rider. (3) PNM FERC in 2021-2023 reflects a return of 8%-9% to account for Western Spirit investment recovered through incremental rates.(4) Consists primarily of decommissioning/reclamation trust costs and income (net of fees/taxes), AFUDC, certain incentive compensation, and the 65MW ownership of San Juan Unit 4 (prior
to retirement).(5) TNMP earnings include additional recovery for Energy Efficiency, along with items excluded from rates (primarily AFUDC) and interest savings from the refinancing of existing debt. (6) Corporate/Other includes the earnings impacts associated with short and intermediate term bank debt and the 50% equity interest in NMRD.(7) Equity Financing Plans to fund capital growth reflects debt costs for assumed $250M-$300M mandatory convertibles issued in Q4 2021 that
convert in 2024
This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance.
Allowed Return / Equity Ratio
2020 Ongoing Earnings
Guidance Midpoint
2021 Earnings Potential
2022 Earnings Potential
2023 Earnings Potential
Avg Rate Base
Return EPSAvgRate Base
EPSAvgRate Base
EPSAvgRate Base
EPS
PNM Retail(1) 9.575% / 50% $2.5 B 9.5% $1.47 $2.5 B $1.41 $2.5 B $1.43 $2.5 B $1.44
PNM Renewables(2) 9.575% / 50% $150 M 9.575% $0.09 $145 M $0.08 $140 M $0.08 $130 M $0.07
PNM FERC(3) 10% / ~50% $0.3 B 7.5% $0.15 $0.5 B $0.20 - $0.23 $0.7 B $0.35 - $0.39 $0.8 B $0.37 - $0.42
Items not in Rates(4) ($0.01) ($0.01) - $0.02 $0.01 - $0.03 $0.03 - $0.06Total PNM $3.0 B $1.70 $3.1 B $1.68 - $1.74 $3.4 B $1.87 - $1.93 $3.5 B $1.91 - $1.99
TNMP(5) 9.65% / 45% $1.3 B 9.65% $0.73 $1.5 B $0.79 $1.6 B $0.87 $1.9 B $0.97
Corporate/Other(6) ($0.22) ($0.13) - ($0.11) ($0.13)-($0.11) ($0.15) - ($0.13)Equity Financing Plans(7) ($0.03) - ($0.01) ($0.11)-($0.09) ($0.11) - ($0.09)Total PNM Resources $4.3 B $2.21 $4.6 B $2.31- $2.41 $5.0 B $2.50 - $2.60 $5.4 B $2.62 - $2.74
Liquidity as of July 24, 2020
50
PNM TNMPCorporate/
Other
PNM Resources
ConsolidatedFinancing Capacity(1): (In millions)
Revolving credit facilities $440.0 $75.0 $340.0 $855.0
As of 7/24/20:Short-term debt and LOC balances 96.1 0.1 149.5 245.7
Remaining availability 343.9 74.9 190.5 609.3
Invested cash - 63.5 0.9 64.4
January 2020 Forward Equity Offering 287.1 287.1
Total Available Liquidity $343.9 $138.4 $478.5 $960.8(1) Excludes intercompany debt and term loans(2) Availability does not reflect $100.3M reserved to provide liquidity support for pollution control revenue
refunding bonds remarketed in weekly mode on July 1, 2020
• Available liquidity strengthened by the issuance of long-term debt at PNM and TNMP in Q2 2020, freeing up capacity on revolving credit facilities
(2)
Slide Number 1Safe Harbor StatementSlide Number 3PNM Resources OverviewStrategic FocusCommitment to ESG StrategyStrong Financial Profile2020 – 2023 Investment Plan2020 - 2023 Potential Earnings Power Dividend GrowthLiquidity and Debt Maturity OutlookKey TakeawaysSlide Number 13Our Response to COVID-19COVID-19 UpdateContinued COVID-19 Load Impacts2020 Consolidated Ongoing Earnings GuidanceSlide Number 18New Mexico Energy Policy: Energy Transition ActExecuting the Energy Transition ActTransform PNM Generation PortfolioRenewable and Battery Storage PortfolioPNM Investment: Wired for the FutureInfrastructure Investments: Wired for the FuturePNM Retail Transmission OpportunitiesFERC Transmission OpportunitiesNMPRC Commissioners and DistrictsPNM Regulatory AgendaPNM Load and Economic Conditions PNM COVID-19 ConsiderationsPNM Decoupling FilingDecoupling Financial Impacts – 2020 / 2021 / 2022Slide Number 33TNMP Low-Risk Revenue ProfileTNMP Regional BreakdownTNMP Regional BreakdownTNMP Regional BreakdownTNMP Load and Economic ConditionsTNMP COVID-19 ConsiderationsTNMP Demand and Infrastructure InvestmentPUCT Commissioners and TNMP Regulatory AgendaTNMP Rate Recovery FrameworkSlide Number 43San Juan Abandonment, Securitization and Replacement PowerSan Juan Securitization Next StepsSan Juan and Four Corners Generating Stations�Ownership and ParticipantsPalo Verde Nuclear Generating Station Ownership and LeasesCOVID-19 Load: Assumptions and EPS Sensitivities2020 - 2023 Potential Earnings PowerLiquidity as of July 24, 2020