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 news release for PNM Resources, Inc. (“PNMR”), Public Service Company of New Mexico (“PNM”), or 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. 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. Additionally, there are risks and uncertainties in connection with the proposed acquisition of us by AVANGRID which may adversely affect our business, future opportunities, employees and common stock, including without limitation, (i) the expected timing and likelihood of completion of the pending Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending Merger that could reduce anticipated benefits or cause the parties to abandon the transaction, (ii) the failure by AVANGRID to obtain the necessary financing arrangement set forth in commitment letter received in connection with the Merger, (iii) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (iv) the possibility that PNMR’s shareholders may not approve the Merger Agreement, (v) the risk that the parties may not be able to satisfy the conditions to the proposed Merger in a timely manner or at all, (vi) risks related to disruption of management time from ongoing business operations due to the proposed Merger, and (vii) the risk that the proposed transaction and its announcement could have an adverse effect on the ability of PNMR to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally. For a discussion of risk factors and other important factors affecting forward-looking statements, please see the Company’s Form 10-K, Form 10-Q filings and the information included in 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 at http://www.pnmresources.com/investors/results.cfm. Since the future differences between GAAP and ongoing earnings are frequently outside the control of the Company, management is generally not able to estimate the impact of the reconciling items between forecasted GAAP net earnings and ongoing earnings guidance, nor their probable impact on GAAP net earnings without unreasonable effort, therefore, management is generally not able to provide a corresponding GAAP equivalent for ongoing earnings guidance.
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Proxy filing / Shareholder approval 1/5/2021 N/A Approved 2/12/2021
Department of Justice (Hart-Scott- Rodino Clearance) 12/21/2020 20210767 Waiting period expired
1/20/2021 Committee on Foreign Investment in the United States (CFIUS) 12/11/2020 20-191 Clearance received
02/01/2021
Public Utility Commission of Texas (PUCT) 11/23/2020 51547 Expected May-June
Nuclear Regulatory Commission 12/2/2020 STN 50-528, 50-529 and 50-530 Expected May-June
New Mexico Public Regulation Commission (NMPRC) 11/23/2020 20-00222-UT Expected second half
of 2021
Merger announced October 21, 2020, expected to close in the second half of 2021
Approvals and expected timeframes:
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2021 guidance affirmed
clean energy
energy infrastructure
Financial Results
• 2020 Ongoing Earnings in line with expectations • 2021 Ongoing EPS Guidance $2.27 - $2.37 affirmed
2021 Company Updates • PNM Regulatory Filings:
• Four Corners abandonment / securitization • Integrated Resource Plan with 20-year path to
achieve carbon emissions-free energy • Application to approve PPAs for 240 MW solar and
100 MW storage capacity for data center expansion • TNMP: no significant financial impacts expected from
ERCOT winter storm outages • TNMP Regulatory Filings: Transmission Cost of Service
(TCOS) increase filed in January, expected to be implemented in March
Note: EPS presented on diluted basis; for a reconciliation of GAAP to Ongoing EPS, including a description of adjustments, see earnings release issued February 26, 2021
2020 2019 GAAP EPS $2.15 $0.97 Ongoing EPS $2.28 $2.16
2020 ESG Highlights
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Environmental • Progressed toward PNM’s industry leading goal of providing 100% emissions-free energy by 2040
• Established intermediary emissions reduction goals, along with goals to reduce freshwater usage and increase electrification of vehicle fleet
• Accelerated full exit of coal to 2024 with approval of San Juan abandonment in 2022 and agreement to exit Four Corners Power Plant in 2024
Social • Moved swiftly in response to COVID-19 to support employees, communities and customers:
• Utilized business continuity plans and pandemic protocol to ensure safety and continuation of critical electricity services, modifying in-person customer service centers and programs
• Implemented customer payment protections supplemented by expanded payment plans and COVID Customer Relief Programs at PNM, Texas COVID-19 Electricity Relief Program at TNMP
• Donated PPE, funds, technology and meals to support communities and front-line workers • Employed a diverse workforce comprised of 50% minorities, 26% women and 8% veterans • Implemented an enterprise-wide leadership development program to develop skills and abilities
and embarked on a company-wide culture alignment • Exit from coal includes support for impacted employees and communities • Merger agreement values customers, employees and communities
• Commitments to retain employees, maintain financial support for customers and communities, support economic development
2020 ESG Highlights (cont.)
• 2019 Sustainability Report • SASB and TCFD mapping documents • EEI Quantitative Report
Recognitions • PNM: Recognized as Philanthropy Corporate Champion • PNM: Recognition from J.D. Power as a top performer in the electric utility industry for improved
customer impression based on COVID-19 response • TNMP: Honored for the fifth consecutive year by the Environmental Protection Agency’s ENERGY
STAR program, earning recognition with a third consecutive Partner of the Year Sustained Excellence Award for High Performance Homes program
• PNM Resources: Named to Newsweek’s 2021 list of America’s Most Responsible Companies • PNM Resources: Top overall ISS Governance QualityScore • January 2021: Received MSCI ESG Rating upgrade
• Executed strategic merger through extensive engagement, experience and understanding of industry risks
• Demonstrated Diverse Board leadership (40% women / 20% minorities)
Governance
Investment and Financial Highlights • Announced strategic merger transaction with AVANGRID
• $50.30 share price represents 19.3% premium to 30-day volume weighted average price as of October 20, 2020
• Demonstrated adaptability and resilience during the COVID-19 pandemic, delivering 5.6% earnings growth and 6.5% annual dividend growth over 2019
• Transacted over $2B of financing, including a forward equity offering, to support business needs, strengthen credit metrics and reduce borrowing costs
• Launched PNM Wired for the Future initiative highlighting transmission and distribution investments designed to deliver clean energy, enhance customer satisfaction and increase grid resilience
• Completed the most significant capital investment year in TNMP’s history with transmission line upgrades to support ERCOT and relieve congestion, distribution substation and feeder expansion programs, and new service delivery to subdivisions and small commercial areas across the service territory
2020 Ongoing EPS Financial Summary
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Clean Energy Focus
Strong Financial Profile
2020 Full Year Results reflect: • TNMP rate relief • PNM interest savings from
refinancing of debt at lower interest rates
• Increased load due to higher summer temperatures combined with COVID-19 impacts
• PNM higher transmission margin and lower outage costs
• Expected increases in operational spending, including vegetation management and preventive system maintenance measures
• Higher depreciation and property tax expense from new investments
FY EPS Summary 2019 2020 Change PNM Resources $2.16 $2.28 $0.12 PNM $1.67 $1.76 $0.09 TNMP $0.70 $0.74 $0.04 Corporate/Other ($0.21) ($0.22) ($0.01)
$2.16
2020 vs 2019 Earnings Summary
2020 Key Performance Drivers EPS Interest expense savings $0.08 Weather, retail load and leap year $0.06 FERC transmission margin $0.05 Outage Costs $0.05 Renewable rider $0.03
O&M increases ($0.12) Depreciation and property tax ($0.04) COVID customer relief programs ($0.02)
$1.67 $1.76
2019 2020
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PNM• Refinancing of debt at lower interest rates
• Increased load due to higher summer temperatures combined with COVID-19 impacts (increased residential usage, decreased commercial usage)
• Lower outage costs ahead of San Juan scheduled retirement
• Expected increases in operational spending, including vegetation management and preventive system maintenance measures
• Higher depreciation and property tax expenses on new capital investments was partially offset by property tax reductions
2020 vs 2019 EPS (Ongoing): TNMP and Corporate
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TNMP
Corporate
• Full-year impact of 2019 TCOS increases and 2020 TCOS increases implemented in March and October; DCOS increase implemented in September 2020
• Retail load was reduced by milder temperatures, particularly in Q3; COVID-19 restrictions largely offset between customer classes
• Higher depreciation and property tax expenses on new capital investments
• Expected increases in operational spending, including vegetation management and preventive system maintenance measures
2020 Key Performance Drivers EPS Rate relief (TCOS and DCOS) $0.15 AFUDC $0.02 Weather and load $0.01
Depreciation and property tax ($0.07) O&M increases ($0.07)
$0.70 $0.74
2019 2020
($0.21) ($0.22)
Load and Economic Conditions
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TNMP
PNM Continued customer growth in 2020 was offset by COVID impacts Increased Residential load was more than offset by
reduced Commercial load; Commercial recovery forecasted in the second half of 2021
State economic development efforts continue to bring additional Industrial customers online
PNM 2020 Actuals 2020E 2021E
Total Retail Load(1) (0.8%) ~(0.5%) 0.5% – 1.5%
PNM Avg. Customers 0.9% ~1.0% ~1.0%
(1) Weather normalized and leap year adjusted, excludes Economy customers (2) Primarily Residential per-kwh billings, weather-normalized and leap year adjusted (3) Commercial and Industrial per-kw monthly peak billings, weather-normalized and
leap year adjusted; excludes retail Transmission customers
Continued growth in Texas despite COVID impacts COVID impacts caused a shift to volumetric load from
demand-based load; forecast reflects the shift back to pre-COVID usage patterns in the second half of 2021
2021 increases in demand-based load reflect continued requests for new service, including interconnection of battery storage facilities in the Gulf Coast region
TNMP 2020 Actuals 2020E 2021E
Volumetric Load(2) 2.9% ~3.5% 2.0% – 3.0% Demand-Based Load(3) (1.3%) ~(1.5%) 4.0% – 5.0% TNMP Avg. End Users 1.4% ~1.5% ~1.5%
2020 results in line with COVID-adjusted expectations
2021 Consolidated Ongoing Earnings Guidance
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$2.27 - $2.37 guidance affirmed
2021 EPS reflects the issuance of 6 million additional shares in
December 2020 resulting from the January 2020
forward offering
$277
$34
(in m
ill io
ns )
PNM Generation TNMP PNM T&D (includes Wired for the Future)
PNM Transmission Expansion Business Technology Services/General Services Depreciation
$766
$1,016
2021 – 2025 Investment Plan
15(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)
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Upcoming activities: • PNM annual FERC formula rate and PNM annual Renewable plan filings
Filing Action Timing Docket No.
PN M
N M
PR C
2020 Integrated Resource Plan
Filed Jan. 29, 2021 (2020 filing date delayed to incorporate San Juan replacement power decision)
Variance to 120-day regulatory timeframe to accept or reject plan has been granted, extended timeframe to be established
21-00033-UT
Abandonment/Securitization of Four Corners Power Plant Filed Jan. 8, 2021 6-month statutory timeframe in Energy
Transition Act, extended to 9 months 21-00017-UT
Approval of PPAs and ESA for Data Center Expansion Filed Feb. 8, 2021 Approval requested by June 1, 2021 21-00031-UT
Transportation Electrification Program Filed Dec. 18, 2020 Procedural schedule pending; approval
requested by Aug. 2021 20-00237-UT
Merger transaction approval Filed Nov. 23, 2020 Hearings scheduled to begin May 4, 2021 20-00222-UT
2020 Renewable Plan Filing Order approving PNM 2021 Renewable Plan issued Nov. 18, 2020 Completed 20-00124-UT
Decoupling Filing Procedural schedule has been stayed to clarify the legal application of Efficient Use of Energy Act
Petition for Declaratory Order filed Oct. 30, 2020; expected to include decoupling in next general rate review
20-00121-UT
FE
RC Merger transaction approval Filed Nov. 23, 2020 Order expected by May 2021 (180 days), can be extended by additional 180 days EC21-25-000
TN M
P
Merger transaction approval Filed Nov. 23, 2020 Hearings scheduled to begin Mar. 24, 2021 51547
TCOS Filing (first 2021 filing) Filed Jan. 22, 2021, reflecting $14.1M annual revenue increase and $112.6M additional rate base
Rates expected to be implemented Mar. 2021 51752
Exit from Four Corners Power Plant
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generation with lower-cost, flexible resources
• PNM will not seek cost recovery of $75M payment to satisfy remaining obligations under the coal supply agreement
• Securitization returns undepreciated investment, foregoes shareholder profits and finances the amount with highly- rated securitization bonds, reducing the financing costs in customer rates
PNM Coal-Free by 2024 • Fully removes coal from PNM generation
portfolio serving customers • Facilitates compliance with New Mexico
Renewable Portfolio Standards and carbon-free mandate
Supports Impacted Region • Securitization of early exit provides for
economic development funds to support impacted regional economy
Abandonment/Securitization Filing • Filing submitted to NMPRC Jan. 8, 2021 • 6-month statutory timeframe in Energy
Transition Act, extended to 9 months • Replacement power filing to follow, will
incorporate findings from Integrated Resource Plan, competitive RFP process
$271M undepreciated investment 5M decommissioning costs
17M economic development funds 7M financing costs
$300M total securitization request
Q4 2020 Key Performance Drivers EPS Interest expense savings $0.04
O&M increases ($0.15) Weather and retail load ($0.03) Timing of excess deferred income taxes ($0.02) Other ($0.03)
$0.28
$0.09
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• Expected increases in operational spending, including vegetation management and preventive system maintenance measures
• Milder than normal temperatures and reduced commercial usage were partially offset by continued increased residential usage due to COVID-related restrictions
• Timing of excess deferred income tax amortizations (offsets with Q3 impact)
Q4 2020 vs Q4 2019 EPS (Ongoing): TNMP and Corporate
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TNMP
Corporate
• TCOS increases implemented in September 2019 and March 2020; DCOS increase implemented in September 2020
• Expected increases in operational spending, including vegetation management and preventive system maintenance measures
• Corporate earnings decreased due in part to a lower effective tax rate on pre-tax losses
Q4 2020 Key Performance Drivers EPS Rate relief (TCOS and DCOS) $0.05
O&M increases ($0.02) Weather and retail load ($0.01) Depreciation and property tax ($0.01)
$0.14 $0.15
Q4 2019 Q4 2020
Q4 2020 Key Performance Drivers EPS Effective tax rate ($0.01) Other ($0.02)
Weather Impacts
$0.01 $0.02
$0.00 $0.00
(1) 2020 normal weather assumption reflects the 20-year average for the period 2000 - 2019
PNM Heating Degree Days in Q4 2020 were 4% higher
than Normal
higher than Normal, Heating Degree Days were
15% lower than Normal
Liquidity as of February 19, 2021
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Revolving credit facilities $440.0 $75.0 $340.0 $855.0
As of 2/19/21: Short-term debt and LOC balances 2.2 27.4 52.3 81.9
Remaining availability 437.8 47.6 287.7 773.1
Invested cash 32.6 - 0.9 33.5
Total Available Liquidity 470.4 47.6 288.6 806.6 (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 and equity issuance in Q4 2020, freeing up capacity on revolving credit facilities
(2)
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(1) Net of unamortized debt issuance costs, premiums and discounts (2) Excludes intercompany debt
Amounts may not add due to rounding
(In millions) Dec 31, 2019 Dec 31, 2020
Long-Term Debt (incl. current portion) (1)
PNM $1,748.0 $1,696.6
TNMP 670.7 853.7
Corporate/Other 589.0 744.9
Consolidated $3,007.7 $3,295.2
PNM $1,806.0 $1,706.6
TNMP 685.7 853.7
Corporate/Other 701.1 766.9
Consolidated $3,192.8 $3,327.2
Issuer rating BBB Baa3
Issuer rating BBB Baa2
Issuer rating BBB+ A3
Investment grade credit ratings at PNM Resources, PNM and TNMP
Merger considered credit positive by S&P and Moody’s • S&P: PNM Resources
and Subsidiaries Outlook Revised to Positive on Announced Acquisition by Avangrid, Inc
• Moody’s: Acquisition by Avangrid, Inc would be positive and bring long- term benefits to its utilities
Slide Number 1
AVANGRID and PNM Resources Strategic Merger Update
Slide Number 4
2020 ESG Highlights
2020 vs 2019 EPS (Ongoing): PNM
2020 vs 2019 EPS (Ongoing): TNMP and Corporate
Load and Economic Conditions
2021 – 2025 Investment Plan
Exit from Four Corners Power Plant
Q4 2020 vs Q4 2019 EPS (Ongoing): PNM
Q4 2020 vs Q4 2019 EPS (Ongoing): TNMP and Corporate
Weather Impacts
Selected Balance Sheet Information