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PNM PNM Resources

Participants
Jimmie Blotter Director-Investor Relations
Pat Vincent-Collawn Chairman, President and Chief Executive Officer
Chuck Eldred Executive Vice President and Chief Financial Officer
Greg Gordon Evercore
Alex Morgan Bank of America
Ali Agha SunTrust
Paul Fremont Mizuho Securities USA
Call transcript
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Operator

Good morning, and welcome to the PNM Resources Second Quarter 2019 Conference Call. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Jimmie Blotter, Director of Investor Relations. Please go ahead, ma'am.

Jimmie Blotter

Nancy. you, Thank everyone, PNM you, us morning this And second for quarter the Resources call. XXXX for thank joining earnings conference that this for documents our the and at note website supporting on are conference pnmresources.com. other available Please call presentation

team. President several are Chuck Vincent-Collawn; our other Executive President members Chairman, our Officer, Financial management CEO, and Pat of Joining me Chief Resources' as and today Vice PNM and Eldred, well executive as

some of obligation Before pursuant the that to over and remind should Pat, morning to are PNM to Securities Litigation statements need information assumes I Reform XXXX. I the update be estimates all that that Resources Act based forward-looking turn call to of information. you Private forward-looking statements this this current provided upon of and no you considered caution the We the expectations

affecting a on SEC. Form reports Resources' PNM results, of please quarterly annual as XX-K, as discussion reports XX-Q, For to future with on the current X-K Form filed well detailed and factors our refer Form on reports

with over call to I'll that, turn Pat. And the

Pat Vincent-Collawn

everyone. Jimmie, for you Cream you, Day. Ice nice morning, call for Thank quarter good and today National for joining and Sandwich our second Thank us earnings

on So let's Slide begin X.

were a $X.XX $XXX million base. the after in quarter disallowance GAAP per appeal from was the confirming following their by second This the under earnings that the driven with Supreme in Our Court rate share quarter tax compared of the of of loss XXXX $X.XX second New earnings reflect order of to of items Mexico XXXX. write-off

guidance the quarter our years, $X.XX results. in last to year. that the these was in $X.XX compared in revised that of New per $X.XX of reaffirming financial XX We weather quarter share Mexico July earnings Ongoing $X.XX We're our impacting second to of reported incorporates results. significantly second in during mildest the

we filed power and the to Station. for Transition further July on became our provide San June, X details on abandonment, the passed Juan Energy consolidated few request financials replacement Act securitization the effective for After a Generating newly application in will in approvals Chuck minutes. the

So and June let's The details agreement contracts costs of bonds turn abandonment application after coal end participation to The Slide for $XXX the XXXX bonds. of on the supply financing filing. San and the these lower a million in requests energy the of a provide of Juan issuance of to of financial customers. request transition the benefit X

securitized out benefits community also impacted surrounding significant resources dollars coal. Act includes affected that other coal so of by the in by transition the the economy assist The their by Transition plant Energy to and to amount relied on the The of for the coal transition are and bonds be long. stakeholders has total out the that employees

environmental to system. prepared our In cost the models based experts. the replacement discussions parties with modeling, on and third-party of scenarios results filed the with during we we those legislative the from for and the of reliability and look session, multiple balance parties those to customers team by interest to impacts the our we our by shared power, the As the are continuing share

Our storage area of recommended new also energy XXXX Juan reduce school San by district is that with responsibly to replacement It in revenues emissions, emissions-free on plan goal the saves integrates generates property reliability provides XXXX. system. consistent battery for to tax customer's XXX% and investment maintain money, technology our

abandonment for to and December. the XX nine-month providing securitization months filing in authorized and hearings bifurcated replacement and up for The securitization a time schedule that commission Hearing Examiner The has approvals. a power abandonment its set and extensions schedule took for on

March earlier an of hearings replacement in proposed on the with and then December the schedule of in remaining PPAs power, their accommodates replacement power For consideration XXXX. hearings

progresses it throughout We will as provide the this year. updates on case

to from turn and Before only New commission's and review New me Court. the order Supreme was commission prior and should arguments TNMP. of XXXX General Supreme Mexico it to decommissioning Commission that action. it future Supreme for let disallowed to over clear recovery PNM, oral of further At that the both the Rate The review Court decided our the costs. for the remove revisited regulatory oral taking order the transcripts court to Court, order be the The Mexico PNM through some communicated other that I hear walk updates on Chuck, has any arguments to piece intends remand

project, This commission allows future according this while Moving The to granted the deferring the the ratemaking on CCN Project. to to associated move project schedule. BBX the for treatment a to Transmission review. rate ahead

line, approved Spirit Approval from in FERC and July quarter the incremental required acquisition the New On the Mexico we on the the X. year. Commission and both on rate this transmission fourth Western expect decisions FERC, those of is

Jicarilla voluntary At filed they of that for tribal, large or XX-megawatt in easy requested that to approval supporting of not other governments by XXXX. to municipalities, Walmart We of Apache by solar on end on subscription governments. May, and also on also is facility the half committed program FERC program, for the program customers. is New tribal partnered capacity this our this with the signed of Mexico. available approval is of and City November we Albuquerque take for local commission being land northern signing constructed on We

by last the plan rates an I plan under for The annual renewable to wind quarter rider. power have power would to and a update XXX-megawatt in is year. its noted Hearings renewable expect would we file line our includes standard. to to PPA deliver that PNM proposed been request renewable meet our the it XX% transmission the the XXXX that on wind customers. This of quarter decision to would BBX next for November, first necessary portfolio rely

The annual in we September transmission to this reflects key At reflected TNMP, that XXXX for request base. be filed it million increase $XX cost year. affected X rate of our on of for million we expect and increase July second $X.X a in revenues

With that, over detailed it for the I'll a numbers. look to Chuck turn at

Chuck Eldred

on Beer I'll We recap discussing begin July in also a Day. this Pat. impacts and second morning, with issued release guidance. Happy earnings you, a of Thank morning Slide of the Good the weather quarter. everyone. X International a in It's

are quarter for consistent that information. the earnings of Our $X.XX with

expected, PNM As second was significantly than XXXX. lower quarter

$X.XX are While the all last in primary the the the that to second of appendix, is drivers down included weather quarter a from were year. note load item combined

offset fully of other second was XXXX. drivers Corporate the second quarter XXXX quarter to versus the Other for TNMP, the For $X.XX compared and XXXX. of each down

guidance impact of the of To quarter, address the earnings weather for mitigating As at a we're impacts the year. the the we've result the to for implement second of able year. remainder PNM, revised plans

a way allow our developed budgets the align Our us to prioritized and with are revenues. cost that in with flexibility

as managing course, this when filled the of impact significant, our timing and vacancies as Of size results this are by the also expense. incentive base we're of lowering was offsetting well so compensation

performance resulting also in our NDT We realized market gains. saw in strong

we ongoing to of $X.XX. earnings expect of $X.XX, $X.XX have to For per targeting share XXXX, the midpoint

quarter distribution We We not for have updated to of quarterly XXXX. do items any a expect the expectations. third and impact these EPS fourth

when was second than quarter normal PNM can XX% than X degree Slide PNM's the degree guidance XX% XXXX. load the we see cooling days. Now information. primary and lower look range, for lower turning of the and driver, at our days our In to you were

extreme of isolate have and always While load the we distortion effects weather. worked will between to weather, periods a

the milder As saw second than we has to quarter we summer it quickly roughly TNMP was the normal July, into in move that also normal. but in was into prior with weather return Mexico. temperatures line had year,

that believe of to the are economic results We load. these weather and underlying situation. representative of load changes distortion between to Moving not are and indication the

state expanding public either in sectors both announcements continue into jobs. moving of We adding the and or to the see businesses private

our job Following the there's are Netflix of service been that other several last Mexico territory. coming year, announcements announcement in into

they're load planning by be a growth some year. the online For shifts example, announced venture plans of jobs. end Sandia Albuquerque. the that the over as And of Intel XX-year May this may of add also in it second X,XXX There timing comes year. it announced hire announced to in in to some NBCUniversal the our XXX half employees National launch Laboratories plans in to June, in

half but a customers in timing to expecting of this finish in when these results result range may year. with early last at half strong At the an TNMP, delays. year both timing prior these service second see TNMP, some PNM the or We of of guidance year low accelerated to the the to have exhibit this year, in of our come request and in pace to expected compared the interconnections new and of continuing the next demand first year they are customers lower year. for construction from as the of continue online The changes shifted the bring

range this into However, the of in targeted guidance have midpoint we $X.XX. factored updated our

turning to Now Slide XX.

San In XXXX, scenario. amounts represents leases on million have generation plan, we the Verde. replacement filing Pat transmission. and recommended include a related power As of to investments July we million million made our $XX in discussed, remaining $XXX Juan with related This Palo X. our we $XXX investment in the In capital to included our

the over either and capacity to will need be rate to from capacity. secure in XXXX or based replacement annual $X.X This in the represents leases to started the consider need the we’ll July. XXXX purchase of long billion brings expire, leases evaluated X.X% our term these As compound capital period. the This that process total growth RFP plan XXXX, to to we’ll it

XXXX power XX. we mid-XXXX. rate power. to power The recommended revision of of before a year incorporate Years midpoint. Juan it’s shown with the in year impact a reflect wrap half shows through plan our included made full replacement for on the half July replacement changes. the and year slide of earnings our retirement updates a in guidance have these XXXX XXXX, XXXX, include I’ll the Page base San numbers up XXXX the In

with the power. replacement will Proceeds securitization fund

that needed. able to built the as I When use interim be to the those need no that additional additional any for from power. issued earnings note the is new XXXX, bonds AFUDC. we’ll energy offset in power financing financing and want So to transition in financing XXXX off we’ll pay interim the XXXX, are replacement will bonds is replacement

and Over to TNMP the holding debt growth investment than at levels company the and target FFO The associated debt to course debt. PNM consolidated and are XX% that plan, financing XX% our our reflect of ratio of this continue less plans. we

be our range XXXX. X% We of on X% with track targeted growth through to continue to

my cheers. That you back Pat, and remarks concludes to

Pat Vincent-Collawn

Chuck. you, Thank

to filing the make Energy the San filed is approach spirit from did Before process passage moving Act. this by important no note the four of EPA. our to for forward, led questions, Transition collaboration road acknowledgment want I commitment PNM and begin towards that to the a This The the stakeholders collaboration of competing of keep Juan that replacement Act. in innovative Transition To as stakeholders I goal common the the Energy different. We the welcomed were map power. these scenarios interest been started in with of has continue the multiple cooperation for

for As we session process, model, own two consider legislative community part and that president parties held our along we’ve with employees. alternatives. share specific special running meetings, concerns, meetings, [indiscernible] for and their of session committee, these with listen a to already data meetings own the In resource

So have participated and to expect these grow. far, more meetings that XXX people than we in number only

the incredible But our wrong. from it easy as takes this and isn’t do way is certainly this parties. to know, team things to too other from get important the effort You

around at here to New and everyone PNM Resources to you Mexico all for transition. time energy committing and thank this your So

open that, operator, it up for let’s questions. With

Operator

begin ahead, now Greg the And Please Instructions] first sir. from comes Evercore. question-and-answer go [Operator will We Gordon with session. the question

Greg Gordon

ice morning. my beer but don’t while Good I’ll can I’m it know, eating a I drink cream try. I give think if a I sandwich,

Pat Vincent-Collawn

Chuck Give it try. so… does a it,

Greg Gordon

sort okay. Well, confusion there doing the approvals been happen perhaps made bifurcated what statements little has case the then. these what expectation to commissioners is NMPRC safety with may dissonance some since bifurcation some by a The in of report the numbers proceedings. timing bit of in that and with of these in a of regard have of regard to the – been There’s given the

have your have talk cost the or replacement the approve flexibility they So the And on balanced if least option about perspective to the for flexibility legislation the not with to amount? law flexibility regard can the to approve then has they different most finding the you PRC under power? under ultimately what a securitization, the approve securitization

Pat Vincent-Collawn

the important Resource we’re the moved date an August mean yesterday to very legal you Advocates petition I ETA, at Western is our – back filing. and up motion And Yes. know Fischmann this because securitization responses Greg. confident position including to applies issue. Commissioner I to to on our they get saw legal responded X think that some

that a Advocates the good that all securitization, And and law environmentalist commission a do. Western this. position we believe the for also of at on things you So has really of to checklist Resource look the if have it’s

are very move to moving determination is glad important in we’re because I think the we as through it we And this of So commission confident our see position. is that up, process. that the

Greg Gordon

different options mandated making And presented. then four sort the under that different under pre-existing about to standards, go they the the – PRC decision? they or precedent regard with How are law you of or

Pat Vincent-Collawn

resources scenario cost into look one Well, you precedent, of account the sort you at also environment reliability. kind was called the And that the Juan. but would up second can third in filed and the San we that fourth, scenario The and of for if of law the what’s in the stakeholders’ And take some least pre-existing the we a take we also that’s filed. plan, preference it that response to and presented. interest. And shows then

take So it pick – does that the latitude maintains pick least reliability, plan up those and necessarily has school to them I into the among is the have does flexibility the to resources commission long cost different because district. in Juan commission, not law, as to scenarios as to that put the think, San there the gives them for EPA account flexibility then environment

Greg Gordon

you. a Okay. day. Clear. Have Thank good

Operator

America. Dumoulin-Smith from question of Please next comes Your from ahead. go Julien Bank

Alex Morgan

Julien. is calling Alex Thanks in call. afternoon. much so my taking for Morgan This good Hi,

Pat Vincent-Collawn

Welcome, Alex.

Alex Morgan

My and be any you a cost should not in other few XXXX for cutting vacancies first metrics mostly compensation. cost cutting expectations about thinking bonus I question, mentioned for was I lower this know year? the about as if things potentially we well wondering,

Chuck Eldred

in are the second business revenues think a out very we our – quarter since against as that the and about us in gave use that to align our budgets that time that’s expenses flexibility the mentioned, circumstance lay that plans plan think think really that should to our prioritize I confident be. I sufficient entire with place, flexible I the back happened put and to cover we’re enough just have But making the track can as confident significant, focus mentioned, guidance guidance. the without But where execute. it changes to the on We $X.XX don’t we the we’re in on changing mitigating the $X.XX was and and we change. plans we we

Alex Morgan

equity of And was I – using that that know AFUDC, Okay. no I a a bonds the off San replacement as could more need could offsetting hoping little you and Thank comes because talk power then more just much. you discussed online so you or you or financing the bit the for it less the of financing? plan about little the pay interim Juan back to bit additional

Chuck Eldred

Yes.

that gives then $XXX convert power equity about $XX XXXX. appendix, business financing the issued slide some $XXX in have million and we it some financing if plans, reference million you plan in the which XXXX in So notes million you earnings the And that have detailed mandatory beginning of mid-XXXX. the in includes we we

decision – comes about began So Commissioner for plans. those out we that’s investments. out power, of financing be that get the make some financing securitization, to ability whatever used our assumptions the those to and bonds replacement pursue pay we have the to we also underlying interim off as will the basic of But proceeds

Alex Morgan

Those Okay. Have Thank great question. you are after so much. a my noon.

Chuck Eldred

you. Thank

Operator

comes Agha ahead. SunTrust. Please Ali question next Our go from from

Ali Agha

Thank morning. you, good

Pat Vincent-Collawn

morning, Good Ali.

Ali Agha

Fine.

giving seem – be some securitization more the to I be First question, again, securitization, that on trying come the a so indication stand the on reports little doesn’t in your they’re there’s that that they the that passed to clear some before was aspect given legislation. on commission to of take talk wanted sense a just where legislation financing timeline Chuck, into very starts securitization doesn’t play. the clear What’s somehow also

wrong or of I I hearing what commission? of side you time Supreme the during out that and that decision, of are two, but clear ultimately the give very guess, where to lost to process. you it point and the be commission, part is the the understand part you right your you sense decision a just get seeing one get got Can there’s from the there a legal Court go could scenario but

get to perspective little wanted you’re on more just a what So thinking?

Pat Vincent-Collawn

legal more the Sure. to And what obviously, this anything have newspaper don’t we know – Commissioner talked not asked due by as directly an is won’t case. on think the was and X, that what there. issued right? because I a in But pending commissioners matter for yesterday petition I very we’re I saw on August was and speculate than And our legal because this order confident you our and Fischmann of responses position

later, go we would So that that Supreme it. certainty the we’re getting moves Fischmann’s it good Court, that agree don’t not have other consider some as we about is to of if the rather our can the still get uncertainty And with will soon, we up if a Because Court and move. going we sooner important And we we move supporters to certainty. Supreme see that ETA. or so Commissioner definitely of the

Ali Agha

to that to would decision up give have by day that on so on X, very they moving expect a this you a clear August And to do this you does timeline expect up? them when

Pat Vincent-Collawn

date Because, have their we decision. they for wouldn’t October a And we didn’t it’s and on XX. but due significantly. on expect now the filings have it for would responses right example, decision XX But Hearing No, moved day. Examiner August be set the it that aforesaid up very schedule

months. So they’ve math moved see the my let’s responses two goes, up,

decision, decision it if rather a move we that. than along it cover we have understands [indiscernible], to and have soon that relatively Court on rather have later because obviously if to we Because to doesn’t that need everybody sooner – as would go expect we says it the the will would doesn’t we that. clarity Supreme So after

Ali Agha

second have us, Right. another to back the the rate implications next back in rate that, that of that case in New will filing are increase remind timing you increases and you’ll you file about replacement And question rate Mexico? And for sort given New for How thinking my Mexico? what’s the the power. then and

Chuck Eldred

abandonment. based continue certainly This But sure focus plans focus are pending on And resources have our filing currently we’ve We we current the and And file the to our where on have priority in execution monitor to want to is the we’ll that indicated dedication we final in is. for something – we’ll issuing progress with really rate make really the determine December. our and the plans this Chuck. new is and case that that That’s assessment then that before, plan. to that – on case.

the So go progress again, that’s see we based the consider through plan our on in but is abandonment current process we’ll filing. it what we

Ali Agha

instead roll one, the clear, to there as all cases And Okay. part into it filing? I see. abandonment you two then a be kind Chuck, could of be of of scenario that

Chuck Eldred

we the It’s normal what to then then certain that a of are appropriate do the just that should we’ll it’s needs Pat’s too to itself of rate required and are of amount clear ETA. process a of filing make reflection think it. support see how lend as our to securitization the we more might case might point itself begin just in say be. and and a the what we’ll deal determination to early to with way will And rate mean that we what I proceedings beyond

Ali Agha

you. Thank

Operator

go Paul USA. comes Mizuho question Please [Operator Securities from Instructions] Our Fremont next ahead. from

Paul Fremont

had with I Western that Commissioner for me confused petition. thought Pardon the had Thanks. NMPRC. Becenti-Aguilar But being Resources dismissed the

was a out does So commission's order original that Or how represent Fischmann that position? – put change yesterday, the in rejected? is the still petition does does the

Pat Vincent-Collawn

an So, filed interlocutory it what happened Paul, after denied was was, WRA appeal Commissioner by Becenti-Aguilar.

responding second filing Advocates that Resource Commissioner was Fischmann this a So by Western to. is

Paul Fremont

appeal? commission of they sort could going here the Becenti-Aguilar just same to that does the that basically, with respond or came out the that rejecting is Commissioner essentially still So, response out with come mean

Pat Vincent-Collawn

going did So, responded to X. on they what – that right? they on And this differently, they're hear responses give was said August

respond to they Now, Becenti-Aguilar Commissioner differently can did. what

we So August no is what responses to Commissioner due got X. said hear is this Fischmann this we on want and important,

Commissioner So respond to did. Becenti-Aguilar they could differently what

Paul Fremont

from a commission again, Is and get definite what And in my out then is yourself the then you Okay. a or to then or go rejected you definite then be free said they no court? WRA if of to understanding would – then that… the there's

Pat Vincent-Collawn

correct. That’s

Paul Fremont

Okay.

it. I you think much. Thank that’s very

Pat Vincent-Collawn

Paul. you’re Hey, welcome,

Operator

over closing our concludes Pat session. would now to back This like remarks. I for conference Vincent-Collawn Ms. to turn any question-and-answer the

Pat Vincent-Collawn

Cream Please Thank this summer, thank your us all Day celebrate for you National choose and and or of Thanks. International you morning. I the Beer you you celebrate Ice to enjoy joining or again, hope Day whether safely. rest both. Sandwich Bye-bye.

Operator

concluded. today's now has attending you conference for Thank presentation. The

You disconnect the may and of enjoy rest day. now your