2011 Earnings Presentation February 29, 2012 Safe Harbor Statement - PowerPoint PPT Presentation

2011 Earnings Presentation February 29, 2012

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. These factors include: the ability of PNM and TNMP to recover costs and earn allowed returns in regulated jurisdictions; the ability of the Company to successfully forecast and manage its operating and capital expenditures; state and federal regulatory, legislative, and judicial decisions and actions on ratemaking matters; state and federal regulation or legislation relating to environmental matters, including the resultant impacts on the operations and economic viability of PNM's generating plants; the risk that recently enacted reliability standards regarding available transmission capacity may negatively impact the operation of PNM's transmission system; the performance of generating units, transmission systems, and distribution systems, which could be negatively affected by a number of significant operational issues; variability of prices and volatility and liquidity in the wholesale power and natural gas markets; changes in price and availability of fuel and water supplies; uncertainties surrounding the mine fire incident at the mine supplying coal to San Juan Generating Station; uncertainty surrounding the status of PNM's participation in jointly-owned generation projects resulting from the scheduled expiration of the operational documents for the projects; the risks associated with completion of generation, transmission, distribution, and other projects; regulatory, financial, and operational risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainties; uncertainty regarding the requirements and related costs of decommissioning power plants and coal mines supplying certain power plants, as well as the ability to recover decommissioning costs from customers; the impacts on the electricity usage of the Company's customers due to performance of state, regional, and national economies and mandatory energy efficiency measures, weather, seasonality, and other changes in supply and demand; the Company's ability to access the financial markets, including disruptions in the credit markets, actions by ratings agencies, and fluctuations in interest rates; the potential unavailability of cash from PNMR's subsidiaries due to regulatory, statutory, or contractual restrictions; the impacts of decreases in the values of marketable equity securities maintained to provide for nuclear decommissioning and pension and other postretirement benefits; the effectiveness of risk management and commodity risk transactions; the outcome of legal proceedings, including the extent of insurance coverage; and changes in applicable accounting principles. 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

2011 Key Strategic Goals and Checklist Earn Authorized Return on Our Maximize the Value of Our Regulated Businesses Competitive Businesses  Achieve successful outcomes in:  Maintain profitability of First Choice Power by  PNM retail rate case achieving customer growth and increasing  Achieved by monetizing retention  PNM FERC transmission rate case competitive entities and  Conserve Optim Energy cash and position returning value to shareholders  TNMP AMS case generation assets to capitalize as market conditions improve  Maintain strong electric reliability and power plant availability  Control O&M and capital costs Return to Solid Investment Grade Credit Ratings at PNMR  Become fully investment grade at:  PNM  TNMP 4

2011 Financial Results and Company Updates Q4 2011 Q4 2010 2011 2010 (1) Ongoing EPS $0.22 $(0.03) $1.08 $0.87 (2) (3) (2) (3) (1) GAAP EPS $1.35 $(1.18) $1.96 $(0.49)  Rate relief, lower outage costs and cost control improve PNM, TNMP ongoing EPS  Dividend payment increased 16%  2012 ongoing earnings guidance affirmed at $1.20 - $1.32 (4) (1) On a diluted basis (2) Includes gain from the Nov. 1, 2011, sale of First Choice Power (3) Includes losses associated with the impairment of PNM Resources’ investment in Optim Energy (4) See Appendix slide A-8 5

Economic Conditions Weather-normalized load growth is steady, despite an increase in energy efficiency programs PNM TNMP GWh GWh 2012 Load Growth .5% - 1.5% 9000 5300 2012 Load Growth .5% - 1.5% 5200 8800 5100 8600 5000 8400 4900 8200 4800 (1) (1) 2008 2009 2010 2011 2012E 2008 2009 2010 2011 2012E (1) Assumes mid-point of earnings guidance range 6

New Mexico Regulatory Update Item Action Timing FERC transmission case Settlement discussion N/A FERC generation case Settlement discussion N/A Renewable rate rider Hearing scheduled May 14, 2012 Future-test-year Joint petition for rule- Feb. 8, 2012 rulemaking making filed NMPRC Legislation Three resolutions Feb. 15 – 16, passed 2012 7

Financial Overview Chuck Eldred Executive Vice President and CFO

2011 Financial Summary Ongoing EPS $0.04 ($0.19) $0.06 $0.12 Optim $1.08 $0.18 Corp / Energy (1) First Choice Other TNMP $0.87 Power (2) PNM 2010 2011 (1) Includes PNM Resources’ share of Optim Energy’s ongoing EPS through August 31, 2011 (2) Includes results through October 31, 2011 9

PNM and TNMP: FY 2011 vs FY 2010 EPS (Ongoing) PNM 2011 Key Performance Drivers ∆ EPS $0.76 Rate relief $0.21 $0.58 Lower outage costs $0.10 Load $0.04 Weather $0.03 Cost control/O&M Reductions $0.02 PV Nuclear Decommissioning Trust $0.05 PV3 toll expiration ($0.27) 2010 2011 TNMP 2011 Key Performance Drivers ∆ EPS Rate relief $0.08 $0.29 Weather $0.03 $0.17 Load $0.01 2010 2011 10

Dividend Increase  The annual common stock 2012 Dividend: dividend is raised by $0.08 $0.58  Long-term target: 50% - 60% Payout ratio: payout ratio 46% (1) Dividend yield:  The Board will continue to 3.3% (2) evaluate the dividend on an annual basis considering: (1) Assumes mid-point of the 2012 guidance range (2) Based on 2/28/12 stock price of $17.65 • Sustainability and growth • Capital planning • Industry standards 11

Top Quartile Total Return Long-term goal: Provide top quartile total return to shareholders  Total return goal currently at an average annual rate of 10% - 13% over a 5 year period (1)  Earnings growth driven primarily by rate base growth paired with earning allowed returns  Timing of rate cases and capital spending may cause the earnings growth trajectory to vary year to year  Sustainable and growing dividend (1) Beginning in 2012 12

Key Strategic Goals and 2012 Checklist 2012 Checklist Strategic Goals  Achieve successful outcomes in: Earn Authorized Return on our Regulated Businesses  PNM future test year rulemaking  PNM FERC transmission rate case Continue to Improve  PNM FERC generation rate case Credit Ratings  PNM renewable rider  Maintain strong electric reliability and power Provide Top Quartile Total plant availability Return  Control O&M and capital costs 13

Questions & Answers

Appendix

PNM and TNMP: Q4 2011 vs Q4 2010 EPS (Ongoing) PNM Q4 Key Performance Drivers ∆ EPS $0.15 Rate relief $0.12 Lower outage costs $0.02 Cost control/O&M Reductions $0.02 Load $0.01 $0.03 Weather $0.01 PV3 toll expiration ($0.07) Other $0.01 Q4 2010 Q4 2011 TNMP Q4 Key Performance Drivers ∆ EPS Rate relief $0.01 $0.07 Weather $0.01 $0.03 Other $0.02 Q4 2010 Q4 2011 A-2

PNM Resources: FY 2011 vs FY 2010 EPS (Ongoing) Year ended Year ended Difference Dec. 31, 2011 Dec. 31, 2010 PNM $0.76 $0.58 $0.18 TNMP 0.29 0.17 0.12 First Choice (1) 0.23 0.42 (0.19) Optim Energy (2) (0.06) (0.10) 0.04 Corporate and Other (0.14) (0.20) 0.06 Consolidated $1.08 $0.87 $0.21 (1) First Choice included through October 31, 2011 (2) Optim Energy included through August 31, 2011 A-3