EEI Financial Conference November 2017 Contact Information and Safe - - PowerPoint PPT Presentation

November 2017

EEI Financial Conference

Contact Information and Safe Harbor Statement

2 Investor Relations Contact Information Lisa Goodman Jimmie Blotter, Assistant Treasurer Manager, Investor Relations Director, Investor Relations and Shareholder Services U.S. 1-505-241-2160 U.S. 1-505-241-2227 Lisa.Goodman@pnmresources.com Jimmie.Blotter@pnmresources.com Safe Harbor Statement

Statements made in this presentation that relate to future events or PNM Resources, Inc.’s (“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

• f 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

• n these statements. PNMR's, PNM's, and TNMP's business, financial condition, cash flow, and operating results are influenced by

many factors, which are often beyond their control, that can cause actual results to differ from those expressed or implied by the forward-looking statements. For a discussion of risk factors and other important factors affecting forward-looking statements, please see the Company’s Form 10-K and 10-Q filings with the Securities and Exchange Commission, which factors are specifically incorporated by reference herein.

Non-GAAP Financial Measures

For an explanation of the non-GAAP financial measures that appear on certain slides in this presentation (ongoing earnings and

• ngoing 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

Company Overview

PNM Resources Overview

4

Generation Resources and Service Territories PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and above industry average earnings and dividend growth to shareholders

NYSE Ticker: PNM Market Cap: $3.4B

• Energy holding company
• Based in Albuquerque, New Mexico
• Located in New Mexico
• 520,449 customers
• 15,049 miles transmission and

distribution lines

• 2,791 MW generation capacity
• Top quartile reliability
• Affordable rates
• Located in Texas
• 246,620 end-users
• 9,298 miles transmission and

distribution lines

• Top quartile reliability
• Affordable rates

PNM Resources Strategic Direction

5

Strategic Financial Goals

Earn authorized return on regulated businesses Above industry average earnings growth Maintain solid investment grade credit ratings Above industry average dividend growth

• Investing aligned to policy

directives, evolving customer needs and transforming industry opportunities while ensuring reliability, resulting in cleaner generation fleet

Rate Base Growth

• Realizing earnings potential in business
• Earning our allowed returns
• Reducing regulatory lag

Earnings Growth

• Sustaining and growing the

dividend

• Providing above-average

dividend growth

Dividend Growth

Staying Focused and Flexible in a Changing Environment

6

• Integrating technologies and

customer insights to new products and services

• Energy Efficiency and

Electrification Initiatives

• Robust Economy in Texas
• Plans to be Coal-Free in

2031; New Generation Mix

• f Natural Gas, Renewables

and Energy Storage

• 20% Renewable Energy

by 2020

• Transparency through

Sustainability Portal

• PNM 2018 General Rate Case
• PNM 2018 Renewable Plan
• NMPRC Proposed

Rulemaking Workshops

• TNMP Upcoming General

Rate Case Navigating the Regulatory Environment Responding to Evolving Customer Needs Transforming PNM’s Generation Portfolio

$219 $237 $258 $277 $285

$137 $111 $94 $76 $74

$20

$53 $96 $173 $164 $192 $238 $146 $158 $186 $170 $170 $170

$58 $34 $17 $17 $17

2017 2018 2019 2020 2021 (In millions)

PNM Core Generation PNM Renewables PNM SJGS Replacement Power PNM T&D TNMP Depreciation Corporate/Other

$527 $515 $527

Palo Verde Unit 3 added to rate base

$281

$80 $297 $116 $170

$17

2022

Rate Base Growth: Capital Forecast

7

$681 $504 $500 Targeted Consolidated 2017-2021 Rate Base CAGR(1): 4.5-5.5% 2018–2022 Total Capital Plan: $2.7B

Targeted PNM 2017-2021 Rate Base CAGR(1): 2-4% from 2016 base reflects potential outcomes from the pending NM Supreme Court general rate case appeal of $0-$150M and additional AMI spending of $12/$59/$24 million in 2018/2019/2020 Targeted TNMP 2017-2021 Rate Base CAGR(1): 11.4% from 2016 base

(1) 2017-2021 CAGR measured from a 2016 base

Amounts may not visually add due to rounding.

Earnings Growth: Proposed PNM 2018 General Rate Case Settlement Agreement

8 Recommended Decision Key Terms of Proposed Settlement Agreement(1)

• ROE unchanged at 9.575%
• Current allowed ROE of 9.575%
• $62.3M increased revenue requirement
• $7.5M financial impact from the amortization of excess

deferred state taxes over 3 years(2)

• $62.3M increased revenue requirement
• $7.5M financial impact from the amortization of excess

deferred state taxes over 3 years(2)

• Revenue phase-in over 2018 and 2019 ($32.3M in 2018;

additional $30.0M in 2019)

• Freeze for general rate increases before January 1, 2020
• Revenue phase-in over 2018 and 2019 ($32.3M in 2018;

additional $30.0M in 2019)

• Freeze for general rate increases before Jan. 1, 2020
• No adjustments to amounts or terms of previous BART

settlement

• No adjustments to amounts or terms of previous BART

settlement

• No debt or equity return on Selective Catalytic Reduction

(SCR) investment and additional life-extending investments at Four Corners Power Plant

• Temporary disallowance of $36.8M of San Juan capital

expenditures

• Recovery of Selective Catalytic Reduction (SCR) investment

at Four Corners Power Plant at debt-only return

• Lost Contribution to Fixed Costs (“LCFC”) mechanism

withdrawn; energy efficiency disincentive to be addressed in separate docket and outcome included in PNM’s next general rate case

• Increased fixed charge to $7.34 in 2018 and $7.64 in 2019
• Lost Contribution to Fixed Costs (“LCFC”) mechanism

withdrawn; energy efficiency disincentive to be addressed in separate docket and outcome included in PNM’s next general rate case

• Increased fixed charge to $7.34 in 2018 and $7.64 in 2019
• Revised settlement requires signatories’ agreement
• Settlement supported / not opposed by all but one party

to the filing

(1) May 23 Revisions to Proposed Settlement Agreement (2) See slide 32 for details

Earnings Growth: Proposed PNM 2018 General Rate Case Procedural Schedule

9

Procedural Schedule Exceptions to Recommended Decision November 10, 2017 Responses to Exceptions November 20, 2017 Suspension period January 6, 2018 Potential extension of suspension period March 6, 2018

10

Business Segments

Key Tax Reform Considerations

Reduced Tax Rate Interest Non- deductibility 100% Bonus Depreciation Reduction of Production Tax Credits PNM & TNMP Decreases the tax expense flowing through rates; Increases rate base as excess deferred taxes are returned to customers over normalization period 30% EBITDA cap; not applicable to utilities under House bill Not applicable to utilities under House bill No direct impact Corporate/ Other Decreases the tax benefit from Holding Company losses 30% EBITDA cap; not applicable to utilities under House bill Not applicable No impact

PNM Resources well-positioned for tax reform, customers benefit Tax Reform Considerations

Earnings Growth: Potential Earnings Power

11

Allowed Return / Equity Ratio

2017 Guidance Midpoint 2018 Earnings Potential 2019 Earnings Potential

Avg Rate Base Return EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail / Renewables 9.575% / 50% $2.4 B 9.3% $1.39 $2.4 B $1.43 $2.4 B $1.42 - $1.44 PNM Rate Case Phase-In ($0.23) Supreme Court Appeal $0 - $150 M $0.00 - $0.09 PV3 ($0.12) Included in PNM Retail Included in PNM Retail PNM FERC 10% / ~50% $180 M 7.9% $0.09 $220 M $0.09 - $0.12 $285 M $0.12 - $0.16 Items not in Rates ($0.03) ($0.03) - $0.00 ($0.03) - $0.00 Total PNM $2.6 B $1.33 $2.6 B $1.26 - $1.32 $2.7 - $2.8 B $1.51 - $1.69 TNMP 10.125% / 45% $815 M 10.125% $0.52 $900 M $0.53 $1.0 B $0.60 Corporate/Other ($0.03) ($0.09) - ($0.07) ($0.09) - ($0.07) Total PNM Resources $3.4 B $1.82 $3.5 B $1.70 - $1.78 $3.7 - $3.9 B $2.02 - $2.22

Potential Earnings Power reflects 8% earnings growth through 2019(1) Targeted earnings growth of 6% through 2021(1)

• PNM growth achieved through recovery of 4.5%-5.5% rate base growth in addition to recovery of

existing Palo Verde Unit 3 costs

• Phased-in rate implementation creates transitional year in 2018; 2019 reflects full implementation
• Potential recovery of NMPRC disallowed assets through New Mexico Supreme Court appeal
• TNMP growth achieved by continuing capital investment and recovery through TCOS and general rate

case filings; 2018 reflects one TCOS filing in Q1 to recover 2017 transmission rate base before the suspension of TCOS filings during May 2018 general rate case proceedings

This table is not intended to represent a forward-looking projection of 2018 - 2019 earnings guidance. Refer to Slide 31 for additional details and disclosures.

(1) Calculated from 2016 base period of $1.65

$1.31 $1.41 $1.49 $1.65 $1.77 $1.64

2012 2013 2014 2015 2016 2017E 2018E 2019E Ongoing EPS

$1.87

Dividend Growth

12

(1) Assumes mid-point of 2017 guidance (2) Indicative annual rate

2012 – 2016 Ongoing EPS represents actual results 2017E Ongoing EPS represents ongoing earnings guidance

• Annual common stock dividend raised by 10% to $0.97(2) per share in

December 2016

• Next dividend review in December 2017

53%(1) payout ratio

Expect above industry average dividend growth in the future while targeting the 50% - 60% payout ratio range

$0.58 Feb ‘12 $0.66 Feb ‘13 $0.74 Dec ‘13 $0.80 Dec ‘14 $0.88 Dec ‘15 $0.97 Dec ‘16

Indicated Annual Dividends

Credit Metrics: Liquidity and Debt Maturity Outlook

13

• Extended TNMP’s $75M revolving credit facility in September 2017
• In process of extending PNM Resources’ $300M and PNM’s $400M

revolving credit facilities by one year to 2022

• In process of extending PNM’s $50M community bank revolving

credit facility that expires in January 2018

• Capital expenditures beyond 2019 will be funded through a balance
• f new debt issuances and an At-the-Market equity program

$200

$100

$306 $1,060 $172 $293 $250 2018 2019 2020 2021 2022 and Beyond

Long-term Debt Maturities(1)

(in millions)

PNM TNMP Corporate

Maintain appropriate credit metrics Remain a solid investment grade rated company Target regulatory capital structures at PNM and TNMP

(1) Reflects the execution of PNM’s July 2017 note purchase agreement to refinance an aggregate of $450M long-term debt due in 2018 to varying maturity dates beyond 2021. Excludes $61M of debt related to the Westmoreland financing agreements.

Credit Metrics: Rating Agency Perspectives

14 Moody’s Rating/Outlook S&P Rating/Outlook PNM Resources Baa3(2) / Positive BBB+(2) / Stable PNM Baa2(3) / Positive BBB+(3) / Stable TNMP A1(4) / Stable A(4) / Stable

(1) Issuer/Corporate rating (2) Senior unsecured (3) Senior secured

PNM Resources FFO-to-Debt is maintained well within Moody’s Baa investment grade target range of 13% to 22%

• Moody’s (June 23, 2017):
• “…its solid financial profile including a ratio of cash flow from operations pre-working capital to debt

in the mid-to-high teens range and a view that capital expenditures will be financed in a balanced manner consistent with PNMR's current financial position.”

• “Although the New Mexico regulatory environment remains challenging, PNMR has been able to

maintain strong financial metrics that are similar to Baa2 rated peers.”

• S&P (April 7, 2017):
• “Our financial risk assessment of PNMR reflects FFO to debt that we expect to range from 16%-17%

under our medial volatility benchmark table, reflecting the company's lower–risk, rate-regulated utilities and management of regulatory risk.”

• “Business risk largely reflects the company's management of regulatory risk in New Mexico that we

view as challenging.”

PNM Overview

PNM: Regulatory Update

16

Filing Action Timing Docket No.

NMPRC: PNM 2018 General Rate Case Recommended decision issued October 31, 2017 Suspension period currently ends January 6, 2018; NMPRC has ability to extend to March 6, 2018 16-00276-UT PNM Integrated Resource Plan Procedural order issued September 14, 2017 Briefings and responses on scope of proceeding due Q4 2017; Hearing Examiner to determine scope and whether to hold hearings 17-00174-UT PNM Advanced Metering Infrastructure Hearings held October 25-26, 2017 Decision expected Q1 2018 15-00312-UT PNM 2018 Renewable Plan Recommended decision issued October 17, 2017 Decision expected Q4 2017 17-00129-UT NMPRC Rulemaking on Utility Ratemaking Policies Public workshop held September 14, 2017 Additional public workshops to be held November 6-7, 2017 17-00046-UT PNM Appeal of 2015 General Rate Case to New Mexico Supreme Court Oral arguments held October 30, 2017 No statutory timeline S-1-SC-36115

PNM: 2017 Integrated Resource Plan

17 Note: By December 31, 2018, PNM must make a separate NMPRC filing to determine whether the San Juan Generating Station should continue to serve customers

Roadmap for meeting customer demand over 20-year horizon, provides foundation for the selection of future resources Solicits and incorporates public input Documents four- year action plan Revisited every three years Submitted July 3, 2017 Filed with NMPRC for review and acceptance Proposed resources approved separately

Most cost effective portfolio includes securing remaining Palo Verde leases beyond 2023 and 2024 expiration dates

Plans for Coal-Free Generation Portfolio by 2031

PNM: New Mexico Supreme Court Appeal

18

Appealed Item

Conclusion Resulting Impact

Palo Verde Nuclear Generating Station: 64 MW Unit 2 capacity purchase and Units 1 and 2 lease extensions Purchase and extension deemed imprudent Fair market value disallowed; future responsibility for decommissioning shifted to shareholders Leasehold Improvements related to previously leased 64MW capacity Included in net book value of purchased 64MW capacity Leasehold improvements rate base disallowed San Juan Generating Station: Balanced Draft Air permit rejected and investment deemed imprudent Rate base disallowed

• PNM filed Notice of Appeal with New Mexico Supreme Court on September 30, 2016
• PNM filed Statement of Issues on October 26, 2016 detailing items for appeal:

Note: At September 30, 2016, the asset value of the Palo Verde and balanced draft investments pending appeal with the New Mexico Supreme Court were reduced by $6.8 million pre-tax to reflect a minimum of fifteen months disallowed recovery during appeal.

• Oral arguments held October 30, 2017
• No statutory timeline; New Mexico Supreme Court to set calendar for remaining process

PNM: Load and Economic Conditions

19

Regulated Retail Energy Sales and Customers

(weather-normalized, leap-year adjusted)

(1) U.S. Bureau of Labor Statistics, August 2017

PNM

% of 2016 Sales Volumes Q3 2017 vs. Q3 2016 YTD 2017 vs. YTD 2016 Retail Load: Residential 40% 0.0% 0.3% Commercial 47% (1.5%) (1.2%) Industrial 11% (2.4%) (2.4%) Total Retail Load (0.9%) (0.7%)

2017 Load Growth Forecast: (1%) – 0%

• Avg. Customers

0.6% 0.7%

2017 Customer Growth Forecast: 0.7%

1.0% 1.6%

2014 2015 2016 2017 % Change

Employment Growth(3) 12-Month Rolling Average

Albuquerque U.S.

PNM: Sustainability Portal

20

http://www.pnmresources.com/about-us/sustainability-portal.aspx

PNM: Pathway to Continued Success

21

• Continue to efficiently manage the business with a customer-

centered focus, delivering reliable and affordable energy

• Earn allowed return
• Minimize regulatory lag through timely rate case filings
• Synchronize revenues and expenses
• Use future test year
• Continue to maintain strong investment grade credit metrics

TNMP Overview

TNMP: Regulatory Update

23

Filing Action Timing Docket No.

TNMP TCOS Filed July 19, 2017 Approved September 13, 2017 47422 TNMP General Rate Case N/A Expected to be filed May 2018 N/A

TNMP: Upcoming General Rate Case

24

• TCOS filings update for transmission investments, but distribution assets and
• ther rate base items have not been updated since last rate case filing (test

period ending March 2010)

True-up Transmission and Distribution Recovery

• Operating costs and retail load have not been updated since 2010 rate case

True-up Operating Costs and Load

• Expected to be filed May 2018

Timing

Key Elements

TNMP: Load and Economic Conditions

25

Regulated Retail Energy Sales and End Users

(weather-normalized, leap-year adjusted)

(1) Primarily Residential usage; represents per-kWh billings (2) Commercial and Industrial usage; represents per-kW monthly peak billings (3) U.S. Bureau of Labor Statistics, August 2017

TNMP

% of 2016 Sales Revenues Q3 2017 vs. Q3 2016 YTD 2017 vs. YTD 2016 Volumetric Load(1): Residential 0.2% 2.0% Total Volumetric Load 52% 0.0% 1.7% Demand-Based Load(2) 48% 3.3% 4.3%

2017 Load Growth Forecast: 2% – 3%

• Avg. End Users

1.3% 1.2%

2017 End User Growth Forecast: 1.6%

3.4% 1.6%

2014 2015 2016 2017 % Change

Employment Growth(3) 12-Month Rolling Average

Dallas U.S.

TNMP: Pathway to Continued Success

26

• Continue to efficiently manage the business with an end user-

centered focus, delivering reliable and affordable energy

• Continue to earn allowed rate of return through timely

execution of transmission cost of service and general rate case filings

• Additional investments in the business to support strong growth
• Continue to control costs
• Continue to maintain strong investment grade credit metrics

Financial Overview

Financial Overview: Consolidated Earnings Guidance (Ongoing)

28

$1.77 Consolidated EPS $1.87

PNM $1.30 - $1.37 TNMP $0.51 - $0.53 Corp/Other ($0.04) – ($0.03)

2017 Guidance

Actual results for the first half of the year support full- year performance at upper end of range.

Liquidity as of October 20, 2017

29

PNM TNMP Corporate/ Other PNM Resources Consolidated Financing Capacity(1): (In millions) Revolving credit facilities $450.0 $75.0 $300.0 $825.0 As of 10/20/17: Short-term debt and LOC balances $2.5 $6.0 $181.5 $190.0 Remaining availability 447.5 69.0 118.5 635.0 Invested cash 50.5

• 1.5

52.0 Total Available Liquidity $498.0 $69.0 $120.0 $687.0

(1) Excludes intercompany debt and term loans

Appendix

2017 - 2019 Potential Earnings Power

31

Allowed Return / Equity Ratio

2017 Guidance Midpoint 2018 Earnings Potential 2019 Earnings Potential

Avg Rate Base Return EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail (1) 9.575% / 50% $2.3 B 9.3% $1.33 $2.3 B $1.38 $2.3 B $1.37 PNM Rate Case Phase-In (2) ($0.23) Supreme Court Appeal (3) $0 - $150 M $0.00 - $0.09 PNM Renewables (4) 9.575% / 50% $95 M 9.575% $0.06 $90 M $0.05 $85 - $110 M $0.05 - $0.07 PV3 (5) ($0.12)

Included in PNM Retail Included in PNM Retail

PNM FERC (6) 10% / ~50% $180 M 7.9% $0.09 $220 M $0.09 - $0.12 $285 M $0.12 - $0.16 Items not in Rates (7) ($0.03) ($0.03) - $0.00 ($0.03) - $0.00 Total PNM $2.6 B $1.33 $2.6 B $1.26 - $1.32 $2.7 - $2.8 B $1.51 - $1.69 TNMP (8) 10.125% / 45% $815 M 10.125% $0.52 $900 M $0.53 $1.0 B $0.60 Corporate/Other (9) ($0.03) ($0.09) - ($0.07) ($0.09) - ($0.07) Total PNM Resources $3.4 B $1.82 $3.5 B $1.70 - $1.78 $3.7 - $3.9 B $2.02 - $2.22

(1) Reflects revised settlement in PNM’s ongoing general rate case, including 9.575% currently authorized ROE for all forecasted years. Average rate base in 2018 and 2019 has been

reduced by approximately $65M to represent the ($0.04) EPS impact of the lost equity return on the Four Corners SCR investment (debt-only return included in the proposed 2018 general rate case settlement).

(2) Reflects the $30M of revenue collection delayed to 1/1/2019 as part of the proposed 2018 general rate case settlement. (3) Reflects a range of outcomes for the New Mexico Supreme Court appeal of the August 2015 General Rate Case final order. For purposes of writing down the value of the assets

under appeal at September 30, 2016, a minimum 15-month appeal timeframe was used. Potential average rate base presented in 2019 to be conservative includes: PV2 64MW Acquisition Adjustment (~$75M), PV2 Leasehold Improvements (~$25M) and Balanced Draft Technology (~$50M).

(4) PNM Renewables reflect assets collected through the Renewable Rate Rider; reflects potential timing delay of proposed 50MW solar addition. (5) 2017 Guidance Midpoint assumes a hedged price of $29/MWh; a price of $44/MWh is required to break even. PV3 is included in PNM rates beginning in 2018. (6) PNM FERC earnings potential reflects a return of 7-9% versus the allowed return of 10%, as FERC formula rate methodology uses prior year average rate base and provides for mid-

year rate increases.

(7) Consists primarily of Palo Verde Nuclear Decommissioning Trust gains and losses, AFUDC, certain incentive compensation, earnings in 2017 associated with the assets previously

allocated to the Navopache contract, and the 65MW ownership of San Juan Unit 4 beginning in 2018.

(8) TNMP EPS includes $0.02 of Competitive Transition Charge recovery in 2017 Guidance Midpoint and 2018 Earnings Potential and $0.01 in 2019 Earnings Potential. 2018 average rate

base has been held at the year-end 2017 level to reflect the required suspension of TCOS filings during general rate case proceedings. 2018 reflects one TCOS filing in Q1 to recover 2017 transmission rate base before the suspension of TCOS filings during May 2018 general rate case proceedings

(9) Corporate/Other includes earnings associated with the 65MW ownership of San Juan Unit 4 before PNM assumes ownership in 2018,

short and intermediate term bank debt, and the net impact of Westmoreland financing through NM Capital Utility Corporation. This table is not intended to represent a forward-looking projection of 2018 - 2019 earnings guidance.

Earnings Growth: Financial Impact of Proposed PNM 2018 General Rate Case Settlement Agreement

32

Financial View

Proposed Settlement Agreement Phase I - 2018 Phase II - 2019 (in millions, except EPS) Settlement increase (net revenue increase) $32.3 $62.3 Accelerated amortization of excess deferred state taxes

(1)

7.5 7.5 Financial impact $39.8 $69.8 Income tax (38.62% statutory rate) (15.4) (27.0) After-tax financial impact $24.4 $42.8 EPS (80M shares outstanding) $0.30 $0.53 Impact of phase-in: ($0.23)

(1) New Mexico phased-in a lower state corporate income tax rate from 2014 – 2018. Under the proposed settlement, PNM will begin the return of this benefit through customer rates in 2018, over a 3 year period. This also lowers PNM’s income tax expense in 2018, 2019, and 2020.

PNM: 2018 General Rate Case Drivers (as Filed)

33

Rate Base (in millions) Incremental Revenue Requirement (in millions) Compliance Items: BART Items: Palo Verde Unit 3 $96 $45 Retirement of San Juan Units 2 and 3 (95) (29) 132 MW of San Juan Unit 4 11 16 Accelerated Depreciation on San Juan SNCRs

• 3

Subtotal BART Items $12 $35 Four Corners SCRs 61 9 Subtotal Compliance Items (44% of requested increase) $73 $44 Core Rate Base, Depreciation and Property Taxes 33 20 Energy Sales 11 ROE to 10.125% from 9.575% 10 Re-allocation of FERC Wholesale Generation & Transmission 12 9 Other 5 Total $118 $99

$64.48 $72.21 $80.37 $105.68 $111.79 $138.93

$50 $100 $150

City of Seattle - (WA) Montana-Dakota Utilities Co (MT) PNM (NM) - Current Public Svc Co of Colorado (CO) LADWP (CA) City of Colorado Springs - (CO) El Paso Electric Co (NM) PNM (NM) - Proposed Settlement El Paso Electric Co (TX) NorthWestern Energy LLC - (MT) City of Tacoma - (WA) PacifiCorp (UT) PacifiCorp (WY) Avista Corp (ID) Southern California Edison Co (CA) Montana-Dakota Utilities Co (WY) Tucson Electric Power Co (AZ) San Diego Gas & Electric Co (CA) Avista Corp (WA) Southwestern Pub Svc Co (NM) Portland General Electric Co (OR) Idaho Power Co (ID) Sacramento Muni Util Dist (CA) Black Hills Power, Inc. d/b/a (WY) PacifiCorp (ID) Pacific Gas & Electric Co (CA) PacifiCorp (OR) Regional Average Bill Southwestern Electric Power Co (TX) US Average Bill PacifiCorp (WA) Nevada Power Co (NV) PacifiCorp (CA) City of San Antonio - (TX) Entergy Texas Inc. (TX) Modesto Irrigation District (CA) Salt River Project (AZ) Arizona Public Service Co (AZ) Imperial Irrigation District (CA)

Comparison of Average Residential Bills(2)

Western Region Average Bills by Utility

• Forecasted PNM customer bills remain

below current national and regional averages

PNM: 2018 General Rate Case Proposed Settlement Bill Impact

34

(2)PNM rates reflect current approved rates and proposed rates under the 2018 General Rate Case Proposed Settlement.

All others reflect U.S. Energy Information Administration's Residential Rate increases through March 2017.

Customer Impact

Proposed Settlement Bill Impact(1) Phase I Total Residential

3.9% 7.5%

Commercial

3.4% - 4.0% 6.7% - 7.5%

Industrial

2.9% - 3.5% 5.5% - 6.7%

System Average 3.7% 7.1%

(1) Bill Impact considers impacts of proposed rates under the 2018 General Rate

Case along with Fuel and Purchased Power Cost Adjustment Clause, Renewable Energy Rider and Energy Efficiency Rider changes.

• Current US Avg
• Current Region Avg
• PNM Proposed Settlement
• PNM Current

PNM 2016 General Rate Case Final Order

35

Key Rate Case Elements

(PNM Retail Share, net of ADIT)

Commission Order Original Request Impact to Rate Increase

ROE 9.575% 10.5% ($17) M Rate Base: Palo Verde Unit 2 lease purchase (64 MW) $55 M(1) $153 M(2) ($15) M Leasehold improvements and common plant associated with the 64 MWs of previously leased Palo Verde Unit 2 capacity Disallowed $26 M ($4) M Balanced Draft Technology Disallowed $39 M ($5) M Five months of CWIP $55 M $55 M

No adjustment

Pre-Paid pension asset $83 M $83 M

No adjustment

Other Revenue Requirements: Depreciation Rates $14.2 M $20.6 M ($6.4) M Palo Verde Lease and Property Tax Expense (remaining 114 MW of leased capacity) $19.5 M $19.5 M

No adjustment

• NMPRC approved final order Sept. 28, 2016:
• Non-fuel revenue increase of $61.2M versus $121.5M request
• Retail rate base of $2,263M versus $2,458M request

(1) Reflects 13-month average rate base, equivalent to $1,306/kW (2) Reflects period-end rate base, equivalent to $2,500/kW

NMPRC Commissioners and Districts

36

District Name Term Ends Party

District 1 Cynthia Hall, Vice Chairman 2020(1) Democrat District 2 Patrick Lyons 2018 Republican District 3 Valerie Espinoza 2020 Democrat District 4 Lynda Lovejoy 2018(1) Democrat District 5 Sandy Jones, Chairman 2018(1) Democrat

NMPRC Districts and PNM Service Areas

(1) Eligible for re-election to a second four-year term

NMPRC Rulemaking on Utility Ratemaking Policies

37

NMPRC opened an investigation and rulemaking to consider:

• Developing a standardized method for determining ROE
• After a baseline ROE is determined, should the ROE be adjusted under an incentive/disincentive

mechanism?

• Limitation of utility recovery of attorney and expert witness fees to 50%, except in cases that

are fully resolved by contested or uncontested stipulations approved by the Commission

• Allowing intervenors to recover their expenses to the extent the Commission adopts the

intervener’s position

• If utilities use proprietary software to support their position, should interveners and Staff be

given reasonable access to that software at no cost?

• How should regulatory assets be defined and recovered?

A public workshop was held September 14, 2017; additional workshops have been scheduled for November 6-7, 2017.

PUCT Commissioners

38

Commissioners are appointed by the Governor of Texas and confirmed by the Senate. Length of term is determined by the Governor.

Name Term Began Term Ends Party

DeAnn Walker (Chair)

• Sept. 2017
• Aug. 2021

Republican Kenneth Anderson

• Sept. 2008
• Aug. 2017

Republican Brandy Marty Marquez

• Aug. 2013
• Aug. 2019

Republican

TNMP Rates Compare Favorably in Texas

39

$- $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 AEP Central Centerpoint Oncor TNMP AEP North Sharyland

Residential Total Wires Charge for 1,000 kWh

Source: TDU tariffs for retail delivery service effective September 1, 2017 and PUCT Filings Interchange.

PNM Diversified Generation Portfolio: Capacity

40 Coal 29% Nuclear 15% Natural Gas 38% Renewables 18%

Capacity

2018 Forecasted Generation Mix

(includes renewables related to Facebook data center)

Coal 35% Nuclear 15% Natural Gas 35% Renewables 15%

Capacity

2,791 MW

As of 12/31/2016

(1) The potential retirement of the San Juan Generating Station in 2022 would result in a decrease of

coal to 7% of the forecasted generation capacity mix in 2023.

(1)

PNM Diversified Generation Portfolio: Energy

41

PNM Diversified Generation Portfolio: Energy

Coal 51% Nuclear 29% Natural Gas 11% Renewables 9%

Energy

11,147 GWh

Based on 12 months ending 12/31/16

Coal 41% Nuclear 28% Natural Gas 20% Renewables 11%

Energy

2018 Forecasted Generation Mix

(includes renewables related to Facebook data center) (1)

(1) The potential retirement of the San Juan Generating Station in 2022 would result in a decrease of

coal to 12% of the forecasted generation energy mix in 2023.

PNM Investment in Renewable Energy

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Portfolio Standard as a % of Retail Sales

15% 2015 20% 2020

Renewable Rider Collection Methodology Recovery of renewable investments and REC purchases permitted through Renewable Energy Rider New Mexico Renewable Energy Act Streamlined proceedings for approval of utilities’ renewable energy procurement plans Provides for recovery of program costs under approved procurement plan

Current Renewable Resources

PNM-Owned Renewable Resources 107 MW of solar capacity(1) Solar battery storage facility Purchase Power Agreements (PPA) 204 MW PPA with NextEra Energy’s Wind Center 102 MW PPA with NextEra Energy’s Red Mesa 4 MW PPA with Dale Burgett Geothermal Generating Station Customer-Owned Solar Facilities 70 MW of solar capacity

(1) The 40 MW of PNM-owned solar capacity placed in service in 2015 is recovered through base rates rather than through the

Renewable Energy Rider.

PNM San Juan Generating Station Ownership and Participants

43 Unit Total MW PNM MW PNM Ownership Other Participants/Ownership 1 340 170 50% Tucson Electric 50% (170 MW) 2 340 170 50% Tucson Electric 50% (170 MW) 3 497 248 50% Southern California Power Authority 41.8% (208 MW) Tri-State 8.2% (41 MW) 4 507 195 38.457% M-S-R Public Power Agency 28.8% (146 MW) City of Anaheim 10.04% (51 MW) City of Farmington 8.475% (43 MW) Los Alamos County 7.2% (37 MW) Utah Associated Municipal Power Systems (UAMPS) 7.028% (36 MW) Total 1,684 783 Unit Owner 2018 MW 1 PNM Tucson Electric Power Company 170 170 4 PNM City of Farmington Los Alamos County UAMPS PNMR Development Company 327 43 36.5 35.5 65 Total 847 Exiting Participants: Southern California Power Authority Tri-State M-S-R Public Power Agency City of Anaheim

Ownership Restructuring Changes

PNM Palo Verde Nuclear Generating Station Unit 1 and 2 Leases

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MW Owned vs. Leased Lease Expiration

• Unit 1: January 15, 2015; exercised option to extend leases to 2023
• Unit 2: January 15, 2016; exercised right to purchase 3 leases in 2016 and option to extend one lease to 2024

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