EEI Financial Conference November 2018 Contact Information and Safe - PowerPoint PPT Presentation

EEI Financial Conference November 2018

Contact Information and Safe Harbor Statement 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 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. 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 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

Company Overview

PNM Resources Overview PNM Resources is a regulated electric utility holding company focused on providing environmentally responsible, affordable and reliable electricity to customers and above industry average • Energy holding company earnings and dividend growth to shareholders • Based in Albuquerque, New Mexico NYSE Ticker: PNM Market Cap: $3.2B Generation Resources and Service Territories • Located in New Mexico • 523,812 customers • 15,091 miles transmission and distribution lines • 2,580 MW generation capacity • Top quartile reliability • Affordable rates • Located in Texas • 249,632 end‐users • 9,338 miles transmission and distribution lines • Top quartile reliability • Affordable rates 4

PNM Resources Strategic Direction and Financial Goals • Plans to be coal‐free by 2031 Transform to • Retire and replace coal‐fired generation with Cleaner Energy cleaner energy portfolio Portfolio • Invest to maintain system reliability • Provide reliable, affordable energy while enhancing Meet customer experience Customer • Integrate technologies and customer insights to new Expectations products and services • Enhance grid to facilitate evolving customer needs Provide • Deliver above industry average earnings and Earnings and dividend growth Dividend • Earn allowed returns Growth • Maintain investment grade credit ratings 5

Current 2018 – 2022 Investment Plan $2.6B five‐year investment plan with opportunities for incremental growth Reflects $229M increase over prior plan; $176M increase at TNMP Opportunities for Incremental Growth $607 $580 $32 $29 $517 $61 $2 $79 $10 $49 $38 $444 $25 $20 $27 $413 $20 $20 $97 $109 $98 $79 $82 (in millions) $130 $125 $125 $122 $91 $220 $220 $220 $216 $215 2018 2019 2020 2021 2022 TNMP PNM T&D PNM Existing Generation Corporate/Other PNM Transmission Expansion PNM Renewable Additions 1 50% NMRD Renewable Additions Depreciation Amounts may not visually add due to rounding 6 (1) Depreciation does not include amounts associated with NMRD

2018 ‐ 2021 Potential Earnings Power Strong 2018 revised guidance supports continued success in executing our plan to meet growth expectations Allowed 2018 Ongoing Earnings 2019 Ongoing Earnings 2020 Earnings 2021 Earnings Return / Guidance Midpoint Guidance Midpoint Potential Potential Equity Avg Rate Avg Rate Avg Rate Avg Rate Return EPS Return EPS EPS EPS Ratio Base Base Base Base 9.575% / PNM Retail $2.3 B 9.4% $1.35 $2.4 B 9.3% $1.40 $2.4 B $1.42 $2.5 B $1.49 50% 9.575% / PNM Renewables $90 M 9.575% $0.05 $115 M 9.575% $0.07 $150 M $0.09 $145 M $0.09 50% 10% / PNM FERC $220 M 8.6% $0.13 $285 M 8.0% $0.14 $330 M $0.15‐$0.19 $370 M $0.16‐$0.21 ~50% Items not in Rates ($0.01) $0.01 ($0.04)‐($0.02) ($0.04)‐($0.02) Total PNM $2.6 B $1.52 $2.7 B $1.62 $2.9 B $1.62‐$1.68 $3.0 B $1.70‐$1.77 9.65% / TNMP $850 M 9.6% $0.63 $1,080 M 9.65% $0.68 $1,220 M $0.71 $1,355 M $0.78 45% Corporate/Other ($0.18) ($0.17) ($0.18)‐($0.16) ($0.20)‐($0.18) ATM Program ($0.03)‐($0.01) ($0.07)‐($0.04) Total PNM Resources $3.5 B $1.97 $3.8 B $2.13 $4.1 B $2.12‐$2.22 $4.3 B $2.21‐$2.33 (Before Supreme Court) Supreme Court Appeal $0‐150 M $0.00‐$0.09 $0‐150 M $0.00‐$0.09 $0‐150 M $0.00‐$0.09 Total PNM Resources $3.5 B $1.97 $3.8‐3.9 B $2.13‐$2.22 $4.1–4.2 B $2.12‐$2.31 $4.3‐4.4 B $2.21‐$2.42 (After Supreme Court) Targeted 2018‐2021 Rate Base CAGR (1) : Total 7.5%‐8.5% / PNM 4.5%‐5.5% / TNMP 16.8% Range at PNM reflects potential outcomes from the pending NM Supreme Court general rate case appeal of $0‐$150M Earnings potential shown above does not include incremental growth opportunities (1) 2018‐2021 CAGR measured from a 2018 base 7 This table is not intended to represent a forward‐looking projection of 2020 ‐ 2021 earnings guidance. Refer to Slide 32 for additional details and disclosures.

Opportunities for Incremental Growth 2020 ‐ 2022 New Customer Load and Infrastructure Investments • Increasing capital in Texas to support continued strong economic growth while New Mexico growth prospects are driven by load from new data center interest and existing customer expansions • In order to support the increased load growth while maintaining reliability, aging infrastructure will need to be replaced and further grid modernization investments made to support the changing customer needs, load profiles and generation resource mix Transmission and Renewable Energy Expansion in New Mexico • New transmission growth is driven by demand for renewables to serve the western US as well as enhancing the capabilities to meet increasing integration of renewables within our service area Generation Portfolio Transformation • Proposed plans to exit coal by 2031 changes the future generation mix by replacing the power with a more flexible resource mix that may include additional gas peaking units, renewable resources and battery storage • The use of securitization is the most favorable economic option for all stakeholders to achieve New Mexico’s energy transition for a sustainable future 8

Incremental 2018 – 2022 Investment Opportunities Up to $950M of incremental investment opportunities Growth Opportunities provides additional rate base growth through 2022 New Customer Load up to up to $300M and Infrastructure $894 up to Investments $100 up to $780 $713 Transmission and $100 $150 $100 Renewable Energy in millions $100 up to $250M Expansion in $607 $200 $580 $200 New Mexico $517 $444 $413 Generation Portfolio up to $400M Transformation 2018 2019 2020 2021 2022 New Customer Load and Infrastructure Investments Transmissiom and Renewable Energy Expansion in New Mexico Generation Portfolio Transformation Current Plan 9

Potential Earnings Power of Growth Opportunities by 2022 2018 ‐ 2022 Earnings Growth Target: 5 ‐ 6% Growth Opportunities: Avg Rate Base EPS New Customer Load and Infrastructure up to $300M up to $0.18 Investments Transmission and Renewable up to $250M up to $0.15 Energy Expansion in New Mexico Generation Portfolio Transformation (1) up to $400M up to $0.23 Subtotal up to $950M up to $0.56 San Juan Retirement (2) up to ($320M) up to ($0.19) Impact of Financing (3) up to ($0.15) Value of Growth Opportunities up to $630M up to $0.22 Note: 2018‐2022 CAGR measured from a 2018 guidance midpoint of $1.97 (1) Reflects investment in replacement power resources and supporting transmission needs (2) Reflects projected undepreciated investment San Juan Generating Station (3) Reflects equity financing to maintain capital structure and investment grade credit ratings 10 This table is not intended to represent a forward‐looking projection of earnings guidance.