Investor Meetings June 2020 Contact Information and Safe Harbor - - PowerPoint PPT Presentation

November 1, 2019

Investor Meetings

June 2020

Contact Information and Safe Harbor Statement

2 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 presentation for PNM Resources, Inc. (“PNMR”), Public Service Company of New Mexico (“PNM”) and 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

• f 1995. Readers are cautioned that all forward-looking statements are based upon current expectations and estimates. The

Company assumes no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, the Company cautions readers not to place undue reliance on these statements. The Company’s business, financial condition, cash flow, and operating results are influenced by many factors, which are often beyond its 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 Form 10-Q filings and the information filed on 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,

• ngoing earnings per diluted share and ongoing earnings guidance measures), as well as a reconciliation to GAAP measures,

please refer to the Company’s website as follows: http://www.pnmresources.com/investors/results.cfm.

COVID-19, 2020 Guidance and Regulatory Updates

COVID-19 Scenario Analysis: Current Status

4

Stage 1 Stage 2 Stage 3

Duration / Economic Conditions (Margin Impact) Up to 60 day-impact (through May) with closure of non- essential businesses, restrictions lifted by end of May 60 - 120 day-impact (through July), with closure of non- essential businesses, restrictions lifted beginning of August >120 day-impact, duration of 4-6 months before recovery begins (continues through the end of 2020) Workforce Disruption (Capital Impact) No significant disruption to critical workforce; remaining workforce able to work remotely Up to 15% disruption for a sustained period resulting from absenteeism Up to 40% disruption for a sustained period resulting from absenteeism Supply Chain Disruption (Capital Impact) No material supply chain issues, adequate near-term supply of capital equipment on-site or available Disruption in supply chain for specific capital equipment results in 1–2 month delay on certain projects; no issues with maintenance capital necessary to maintain reliable service Major disruption in supply chain delays significant capital projects; prioritization of capital equipment to meet most essential reliability projects

• Continued scenario analysis and planning under 3 different stages:
• Duration / Economic Conditions are entering Stage 2 with some restrictions lifted,

monthly impacts will continue to be evaluated during phased re-openings

• No Workforce and Supply Chain Disruptions have been experienced

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 2020 Guidance Projection 2019

COVID-19 Load Impacts

5

Stage 1 Stage 2 Stage 3

May trends are in line with planning assumptions, impacts of phased state re-openings to be evaluated in June

PNM Stage 1 and 2 load projections

• Residential COVID-19 increase +5%
• Commercial COVID-19 reduction -15%

TNMP Demand- Based TNMP Volumetric PNM Volumes

TNMP Stage 1 and 2 load projections

• Volumetric COVID-19 increase +5%
• Demand-based COVID-19 reduction -5%

2020 Ongoing Earnings Guidance Affirmed

6

March



April May June  July August September Q4

$2.16 Consolidated EPS $2.26

Based on strong May weather impacts, Stage 2 can be managed within guidance

Stage 1: Manage within Guidance Stage 3: Outside

• f Guidance

Reduced load impacts were offset by warmer than normal May temperatures at PNM, lower interest and financing costs, lower O&M Expected load impacts can be offset by phased-in cost contingency plans, regulatory filings, weather Reassess guidance: expected load impacts cannot be managed within the guidance range

Note: Refer to Slide 45 for EPS sensitivities of load impacts under planning assumptions

Regulatory Updates

7

PNM Decoupling Filing

• Filed Petition for Approval of Rate Adjustment Mechanism to Remove

Regulatory Disincentives on May 28, 2020

• Full decoupling focuses on recovery of fixed costs for residential and small

commercial customers

• Current rate design recovers these fixed costs through volumetric rates,

leading to a consistent under-recovery

TNMP DCOS Filing

• First DCOS filing for TNMP filed April 6, 2020
• Settlement in principle reached with parties in DCOS filing, rates expected to

be implemented September 1, 2020

PNM Resources Overview

PNM Resources Overview

9

Energy holding company based in Albuquerque, New Mexico with two fully regulated electric utility subsidiaries NYSE: PNM $3.2B market cap

• Vertically integrated utility in

New Mexico focused on clean energy transformation

• $3.0B rate base
• 500k retail customers
• 2,761 MW resource portfolio
• 15k miles transmission and

distribution lines

• T&D utility operating within

the ERCOT market in Texas

• $1.3B rate base
• 250k consumers
• 10k miles transmission and

distribution lines

Service Territories and Generation Resources

Key Investment Themes

10

Transformation of PNM generation portfolio Reliably support growth and integration

• f clean energy

Transparent growth plan driven by rate base investment

Create shareholder value through a clean and bright energy future Clean Energy Focus Critical Electricity Infrastructure Strong Financial Profile

Focused on Sustainability

11

Environment

Eliminating emissions

• Carbon-free transition aligns with

Paris Climate Agreement and is five years ahead of state mandate

• Elimination of carbon emissions

will also eliminate mercury, NOx, SOx and other pollutants Saving freshwater

• 36% water intensity reduction

from 2007 to 2018

• Municipal effluent water used to

cool Palo Verde plant Investing and supporting renewables

• 609 MW owned and purchased

solar, wind and geothermal

• 356 MW approved renewables

expansion for 2020

• 133 MW customer-owned solar
• Enhancing grid to facilitate

renewables and battery storage

Social

Fostering tribal relationships

• Active outreach with numerous

tribes in New Mexico

• Renewed commitment to the

PNM Navajo Nation Workforce Training Scholarship Program

• Joined in the launch of Light up

Navajo to provide residential electrification Promoting employee diversity

• 57% of new hires in 2019 were

minorities and 37% were women

• Overall workforce is 50% minority,

27% female, 8% veterans Engaging and retaining our workers

• Competitive benefits open to full-

time and part-time employees

• Educational assistance program
• ffering up to $5,250 per year

Governance

Executing strong governance

• 9 of 10 directors independent
• 40% female board
• Extensive board expertise across

finance, environment, labor and human resources, and cybersecurity

• Top ISS Governance QualityScore

Strategic Direction

12

• Transform PNM generation portfolio to exit coal

and be 100% emissions-free by 2040

• Enhance PNM transmission grid to facilitate the

integration of renewable generation and battery storage

• Invest in TNMP infrastructure to reliably support

customer demand across high-growth service territory

Strong Financial Profile

13

Rate Base Growth Earnings Growth Dividend Growth Liquidity

• Expect 8.9% rate base growth 2019-2023
• PNM and TNMP T&D investment continues to

support critical infrastructure and reliability projects

• Generation replacement power investments are

balanced with additional opportunities for PNM T&D

• Target: 5%-6% earnings growth 2019-2023
• Earn authorized return on rate base growth
• Proven history of building flexible plans that are

adaptable in response to changing conditions

• Dividend growth to mirror earnings growth
• Quarterly declarations by Board of Directors
• Annual dividend evaluated in December
• Maintain investment grade credit ratings
• Immediate equity needs met through January

2020 forward offering

• Adequate liquidity remains available to

finance business needs

$275 $306 $322 $345 $337 $270 $342 $348 $211 $174 $182 $202 $128 $94 $82 $77 $68 $109 $268 $48 $177 $72

$27 $27 $21 $21 $25

2020 2021 2022 2023

(in millions)

TNMP PNM T&D PV Lease Purchases/Other Replacement Power PNM Existing Generation PNM Transmission Expansion SJGS Replacement Power 50% NMRD Renewable Additions Business Technology Services/General Services Depreciation

$771 $993 $853 $695

14

2020 – 2023 Investment Plan

(1) Western Spirit acquisition of $285M reflects assumed purchase price of $360M, net of $75M customer funding (2) For Palo Verde leases that expire in 2023, capex assumes either the purchase of the leases or replacement of the power through new resources (3) Depreciation does not include amounts associated with NMRD (3) (1)

Targeted 2019-2023 Rate Base CAGR (2019 base): Total 8.9% / PNM 6.0% / TNMP 15.9%

(2)

$3.3B investment plan results in 8.9% rate base growth

$35M of incremental PNM T&D added in 2020 to support new customer additions

2020 - 2023 Potential Earnings Power

15

This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance. Refer to Slide 54 for additional details and disclosures.

Earnings Growth Target 5%-6%

Incorporates impact of January 2020 forward equity offering dilution beginning 2021

Note: 5-6% targeted earnings growth CAGR measured from 2019 Ongoing EPS of $2.16. Note: Number of shares outstanding increases from 80M to 86M in December 2020 January forward equity offering (1) Assumes 2022 mid-year implementation of San Juan Replacement (2) Reflects debt costs associated with $250M-$300M mandatory convertibles issued in the second half of 2021 that convert in 2024

Allowed Return / Equity Ratio

2020 Ongoing Earnings Guidance Midpoint 2021 Earnings Potential 2022 Earnings Potential 2023 Earnings Potential Avg Rate Base Return EPS Avg Rate Base EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail

9.575% / 50% $2.5 B 9.5% $1.47 $2.5 B $1.41 $2.4 B $1.37 $2.4 B $1.38

San Juan Replacement(1)

9.575% / 50% $150 M $0.08 $280 M $0.16

PNM Renewables

9.575% / 50% $150 M 9.575% $0.09 $145 M $0.08 $140 M $0.08 $130 M $0.06

PNM FERC

10% / ~50% $340 M 7.5% $0.15 $530 M $0.25-$0.28 $740 M $0.35-$0.39 $780 M $0.36-$0.41

Items not in Rates

($0.01) ($0.03)-($0.01) ($0.03)-($0.01) ($0.03)-($0.01)

Total PNM

$3.0 B $1.70 $3.2 B $1.71-$1.76 $3.5 B $1.85-$1.91 $3.6 B $1.93-$2.00

TNMP

9.65% / 45% $1.3 B 9.65% $0.73 $1.5 B $0.79 $1.6 B $0.83 $1.9 B $0.95

Corporate/Other

($0.22) ($0.13)-($0.11) ($0.11)-($0.09) ($0.15)-($0.13)

Equity Financing Plans(2)

($0.06)-($0.01) ($0.11)-($0.09) ($0.11)-($0.09) Total PNM Resources $4.3 B $2.21 $4.7 B $2.31 - $2.43 $5.1 B $2.46 - $2.56 $5.6 B $2.62 - $2.73

$1.94 $2.00 $2.16 $2.21 $2.37 $2.51 $2.68 2017 2018 2019 2020E 2021E 2022E 2023E

Actual Ongoing EPS Midpoint Earnings Guidance/Potential Indicated Annual Dividend

$0.97 Dec ‘16 $1.06 Dec ‘17 $1.16 Dec ‘18 $1.23 Dec ‘19

$1.29- $1.30 $1.36- $1.38 $1.42- $1.46

Dividend Growth

16

• Expect dividend growth consistent with earnings growth targeting the

middle of a 50% - 60% payout ratio range

• Next dividend review in December 2020

Dividend Growth to Mirror Earnings Growth at 5%-6%

56% payout

Liquidity and Debt Maturity Outlook

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

(1) Senior unsecured rating (2) Senior secured rating

$496 $57 $1,203 $843 $140 $450 2020 2021 2022 2023 and Beyond

Long-term Debt Maturities

(in millions)

PNM TNMP Corporate

• Completed:
• $290 million forward equity offering in January 2020
• PNM and TNMP issued ~$400M of new debt in 2020 and PNM

addressed its 2020 debt maturities

• Planned:
• $250-$300 million mandatory convertibles issuance expected in late

2021 to fund Western Spirit acquisition and strengthen credit metrics

• New debt issuances projected at utilities through 2023 of

~$1.0 billion and $361 million securitization bonds

$1B available liquidity Maintain appropriate credit metrics and investment grade ratings Target regulatory capital structures at PNM and TNMP

Moody’s Rating/Outlook S&P Rating/Outlook PNM Resources Baa3(1) / Stable BBB-(1) / Stable PNM Baa2(1) / Stable BBB(1) / Stable TNMP A1(2) / Stable A(2) / Stable

Key Takeaways

18

Providing environmentally responsible, affordable and reliable electricity to key markets in New Mexico and growing markets in Texas Executing clear growth strategy to deliver 5%-6% earnings and dividend growth Maintaining commitment to strong ESG practices, including transitioning away from coal, being emissions-free by 2040 and shifting towards additional low-cost renewables and flexible resources

PNM

PNM Load and Economic Development

20

Year-over Year- Growth Q1 2020 2019 2018 Total Retail Load 1.1% 0.3% 0.6% PNM Avg. Consumers 0.8% 0.7% 0.8%

Load growth is weather normalized and leap year adjusted

New Mexico Economic Development

• Announcement of an Amazon fulfillment center under development in Albuquerque

demonstrates the continued focus of economic development efforts in New Mexico

• Expected to bring 1,000 jobs and increase load in 2021

Retail Load Growth

• Steady customer growth has been offset

by growing impacts of energy efficiency

• Decoupling filing aims to mitigate

the under-recovery of fixed costs associated with reduced usage

New Mexico Energy Policy: Energy Transition Act

21

Nuclear 30%

Senate Bill 489 (Energy Transition Act): passed in 2019 legislative session and signed by New Mexico Governor Lujan Grisham; effective June 14, 2019

• Renewable Portfolio Standards and Carbon-Free Requirement
• Previous: 20% renewables by 2020
• Current:
• 40% renewables by 2025
• 50% renewables by 2030
• 80% renewables by 2040
• 100% carbon-free by 2045
• Securitization measure for abandonment of coal-fired generating facilities

reduces customer bills

• Economic development funds provide needed financial assistance to workers

and the communities impacted by retirement of coal-fired generating facilities

50% Renewables

80% Renewables

40% Renewables

100% Carbon-Free 2045 2040

2030 2025

7,228 4,315 1,850 755 2015 2020 2025 2035 2040

Carbon- free goal 40% reduction 90% reduction

Executing the Energy Transition Act

22

Nuclear 30%

Our Goal: Transform PNM Generation to 100% Carbon-Free by 2040

Step 1: Exit Coal Generation by 2031

• San Juan Generating Station:
• Retired Units 2 and 3 in 2017 (221 MWs);

Retirement of Units 1 and 4 in 2022 (562 MWs)

• Four Corners Coal Plant:
• Exit from ownership participation no later than expiration of

agreements in 2031 (200 MWs)

Step 2: Eliminate emissions from natural gas generation by 2040

• Exit from Valencia gas plant in 2028 (158 MWs)
• Transform existing and transitional gas plants to carbon-

free capacity resources such as battery storage and pumped storage by 2040

Step 3: Actively pursue the development of carbon-free replacement power alternatives

• Current options: renewable + storage combinations, short-

term natural gas peaking units to facilitate transition to emissions-free

983 762 200 2015 2020 2025 2031

80% reduction Coal- free 22% reduction

Reduction of MW Coal Capacity

• Future options: Regional market participation, next-generation

battery, pumped hydro, emissions-free combustion turbines through hydrogen or other clean fuels, emerging technologies

Reduction of Carbon Emissions

(CO2 short-tons, in thousands)

74% reduction

PNM-owned facilities, as reported to EPA

Transform PNM Generation Portfolio

23

San Juan abandonment, securitization and replacement power

l San Juan abandonment/

securitization unanimously approved on April 1, 2020

l San Juan replacement

power: Hearing Examiner recommended decision and NMPRC order by October 1, 2020

Developing plans to exit Four Corners

l 200 MW ownership l Contracts expire

2031, PNM looking to exit sooner

Evaluating decision to retain / replace Palo Verde leased capacity

l 104 MW expires 2023 l 10 MW expires 2024

Balance appropriate level of baseload resources to be emissions-free by 2040 and shift towards additional low-cost renewables and flexible resources

Third Party Resources PNM Owned Resources __________________ Total 410 MW ________________ Total 350 MW

San Juan Recommended Replacement Power Scenario Details

24

• Competitive RFP processes resulted in a cost-effective mix of resources owned by PNM

and third-party providers

• To manage the risks of integrating new battery storage technology, total storage capacity

does not exceed 5% of peak load and the capacity at each location is limited to 40 MW 280 MW Gas Peaking Units at San Juan $191M investment in-service June 2022 40 MW Storage $50M investment in-service June 2022 30 MW Storage $37M investment in-service June 2022 300 MW Solar PPA + 40 MW Storage ESA $20M transmission investment begins June 2022 50 MW Solar PPA + 20 MW Storage ESA begins Jan 2022

Note: All potential replacement power scenarios incorporated 140 MW wind energy PPA included in June 3, 2019 RPS Filing

Renewable and Battery Storage Portfolio

25

2019 2022

237 530 356 662

15 15

0.5

130.5 Solar Wind Geothermal Battery Storage

609 MW

2020 +50MW solar +140MW wind +166MW wind 2021 +50MW solar +50MW solar 2022 +350MW(1) solar +130MW(1) battery storage 157 MW Solar (Owned) 80 MW Solar (PPA) 356 MW Wind (PPA) 15 MW Geothermal (PPA) 0.5 MW Battery Storage (Owned) 207 MW Solar (Owned) 530 MW Solar (PPA) 662 MW Wind (PPA) 15 MW Geothermal (PPA) 70.5 MW Battery Storage (Owned) 60 MW Battery Storage (PPA)

1445 MW

(1) Pending approval as part of San Juan Generating Station recommended replacement power

PNM Renewable and Battery Storage Capacity

PNM Retail Transmission Opportunities

26

• Transmission service to portions of New Mexico’s grid is fully committed
• The integration of new renewable generation and battery storage will

require additional T&D investment

2023-2025 2026-2030 2031-2035 2036-2038 110 350 570 40 160 340 500 80 310 570 600 Solar Wind Battery Storage 120 580 1,260 1,670

Cumulative Capacity Additions 2023 – 2038 (MW)

Included in Recommended San Juan Replacement Scenario(1)

(1) Consolidated Application for Approvals for the abandonment, financing and resource replacement for San Juan

Generating Station, Phillips - Resource Planning Testimonial as of July 1, 2019

FERC Transmission Opportunities

27

Source: American Wind Energy Association, Oct. 2019

New Mexico ranks:

Wind Solar

Source: NREL

New Mexico’s abundant solar and wind resources also attract third-party development, increasing the demand for transmission capacity and creating rate base growth opportunities:

Source: WINDExchange.energy.gov, Q3 2019

in US wind capacity potential

Source: Nebraska Department of Environment & Energy Sun Index developed for NREL measuring direct sunlight received in each state, accounting for latitude and cloud cover

in US energy potential from solar power

• PNM acquisition of Western Spirit

transmission line: $285M in 2021

• New Mexico added wind capacity at

a higher growth rate than any other state in 2017 and currently has projects under construction or in advanced development that will more than double current installed capacity

• 1,953 MW installed capacity
• 1,227 MW under construction
• 1,328 MW in advanced

development

NMPRC Commissioners and Districts

28

District Name Term Ends Party

District 1 Cynthia Hall 2020(1) Democrat District 2 Jefferson Byrd 2022(1) Republican District 3 Valerie Espinoza, Vice-Chairman 2020 Democrat District 4 Theresa Becenti-Aguilar, Chairman 2022(1) Democrat District 5 Stephen Fischmann 2022(1) Democrat

NMPRC Districts and PNM Service Areas

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

2019 Legislative Update – Appointed vs Elected:

• A Senate Joint Resolution was passed in the New Mexico legislature to

include a state constitutional amendment on the ballot in the next general election (2020) to move to a 3-member, appointed Commission

• If the amendment is passed by a simple majority:
• The legislature defines the nominating committee and the

requirements for Commissioners

• The terms for Commissioners elected in Districts 1 and 3 in 2020 will

be for a two-year term ending in 2022; the terms for Commissioners in Districts 2, 4 and 5 already expire in 2022

• Three appointed Commissioners would begin terms January 1, 2023

PNM Regulatory Agenda

29

Upcoming activities:

• PNM annual FERC formula rate and PNM annual Renewable plan filings

Filing Action Timing Docket No.

PNM:

Decoupling Filing (Petition for Approval of Rate Adjustment Mechanism to Remove Regulatory Disincentives) Filed with the NMPRC on May 28, 2020 Pending 20-00121-UT Deferral of Incremental costs related to COVID-19 PNM and other utilities filed joint motion April 27, 2020 Pending 20-00069-UT Consolidated Application for San Juan Generating Station (Abandonment, Securitization and Replacement) PNM filed July 1, 2019; NMPRC bifurcated case; New Mexico Supreme Court ruled January 29, 2020 that Energy Transition Act applies to both dockets. NMPRC order approving abandonment/securitization issued April 1, 2020 Replacement hearings held January 2020 Replacement power: pending recommended decision and NMPRC Order by October 1, 2020 19-00018-UT 19-00195-UT PNM 2020 Renewable Plan Filing Filed June 1, 2020 Pending 20-00124-UT FERC Transmission Formula Rate True-Up Filed June 1, 2020 Informational filing submitted; rates effective June 1, 2020 N/A Solar Direct Program PNM filed May 31, 2019 for approval of voluntary renewable program expected to begin March 31, 2021; Hearings completed January 2020 Approved March 25, 2020 19-00158-UT

PNM Decoupling Filing

30

Stand-alone full decoupling filing

Filed May 28, 2020 Request

• rder by

year-end

Customer bills more accurately reflect the fixed, non-fuel costs of the service provided

Residential Small Commercial

Disassociates utility profits from sales volumes

Removes utility disincentives to promote energy efficiency or conservation programs Eliminates the upside/ downside risks of weather for the non-fuel portion of customer bills

Full decoupling filing seeks to recover previously authorized fixed costs, current rate design attempts to recover fixed costs through volumetric rates

Decoupling Financial Impacts – 2020 / 2021 / 2022

31

2020 2021 2022 Customer Bills No Impact No impact Rates adjusted to reflect prior year under/over recovery Earnings No Impact Includes recovery true- up for customer use Current estimate: ~$16M Includes recovery true- up for customer use FFO No Impact No Impact No Impact 2020 2021 2022 Customer Bills No Impact No impact Rates adjusted to reflect prior year under/over recovery Revenues No Impact Revenues adjusted for under/over recovery based on customer use Current estimate: ~$16M increase in revenues Revenues adjusted for under/over recovery based on customer use FFO No Impact Includes adjusted revenues Includes adjusted revenues Cash Flow No Impact No Impact Collect prior year’s under/over recovery

$68.59 $76.12 $106.17 $115.42 $137.51

$50 $100 $150

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

Comparison of Average Residential Bills(1)

Western Region Average Bills by Utility

PNM Bills Remain Below National and Regional Averages

32

(1)Based on U.S. Energy Information Administration's Residential Rate increases through June 2019

• Current US Avg
• Current Regional Avg
• PNM 2019

Customer bill impacts of increased investments are mitigated by:

‘

• Return of federal tax

savings to customers

• Load growth reduces

per-customer cost of new investments

• Energy Imbalance

Market and renewable investments result in lower costs for fuel

TNMP

TNMP Demand and Infrastructure Investment

34

TNMP 2020 - 2023 Investment Plan by Region

West Texas ~47% North/ Central TX ~28% Gulf Coast ~25%

• TNMP Service Area
• ERCOT summer peak demand projected to grow by ~20% over next

ten years(1), extensive regional studies call for increased transmission infrastructure to support reliability and growth, particularly in West Texas region

2020 Key Capital Projects

• A group of transmission lines and substations in northern West Texas

will be upgraded from 69kv to 138kv to support regional growth;

• In the Gulf Coast, a 138kV transmission line upgrade will be

completed to help with transmission contingency issues and support the interconnection of a new gas-fired power plant;

• Begin the replacement of our AMI meters to be compatible with

current network capabilities

(1) Source: ERCOT 2019-2028 forecast

Year-over Year-Growth 2017 2018 2019 Demand-Based Load 4.0% 6.8% 4.9% TNMP Avg. Consumers 1.2% 1.3% 1.4%

Texas growth drives infrastructure needs

• TNMP has seen consistent consumer growth driven by

strong Texas economy

• Rapid demand-based load growth over recent years in

the Commercial and Industrial classes driven by energy sector in West Texas and Gulf Coast regions; drives need for increased electrification and reliability / system upgrade investments

• Customers are involved in production, midstream and

refining processes, providing for diversity in customer mix

• Production costs in West Texas, specifically the Delaware

Basin, are some of the lowest in the country

Load growth is weather normalized and leap year adjusted

TNMP Low-Risk Revenue Profile

35

30% Gulf Coast

3% West Texas

19% North/ Central 16% North/ Central 12% West Texas 20% Gulf Coast

• 52% Volumetric Revenues: billed on kWh usage
• Residential customers (97%)
• Primarily in the Gulf Coast, North/Central regions
• 48% Demand-Based Revenues: billed on the peak

hour of kW demand during the month

• Majority of customers subject to billing ratchet,

meaning billing is the greater of the current month peak or 80% of prior 11 months peak

2019 Retail Revenues

 50% Gulf Coast 35% North/Central Texas 15% West Texas

2019 TNMP Revenues

$295M Retail Revenues

Includes $94M of pass-through transmission expense recovery, trued up twice annually

$67M Wholesale Revenues

Fixed transmission investment recovery; can be adjusted twice annually through TCOS filings, $81M approved March 2020

PUCT Commissioners and TNMP Regulatory Agenda

36

Commissioners are appointed by the Governor of Texas and confirmed by the Senate.

Name Term Began Term Ends Party

DeAnn Walker (Chair)

• Sept. 2017
• Sept. 2021

Republican Arthur D’Andrea

• Nov. 2017
• Sept. 2023

Republican Shelly Botkin June 2018

• Sept. 2025

Republican

PUCT Commissioners Filing Action Timing Docket No.

TCOS Filing TNMP filed January 24, 2020; Approved March 27, 2020 Rates implemented March 27, 2020 50481 DCOS Filing TNMP filed April 6, 2020; Settlement in principle reached in May 2020 Rates expected to be implemented September 1, 2020 50731

TNMP Regulatory Agenda

Upcoming activities:

• TNMP second 2020 TCOS filing anticipated for July 2020

TNMP Rate Recovery Framework

37

General Rate Review DCOS (Distribution

Cost of Service)

TCOS (Transmission

Cost of Service)

Process Standard rate review involving comprehensive filing, discovery, interveners, hearings, etc.; Staff recommendation and PUCT approval; 180-day clock (potential for settlement) Pre-defined schedules limited to distribution investments with discovery, interveners, hearings; Staff recommendation and PUCT approval; filed 1st week of April with rates implemented Sept 1 (potential for settlement) Pre-defined schedules; Staff recommendation and PUCT approval, 60-day clock Capital Structure / ROE / Cost of Debt Yes No No Rate Base / Property Tax / Depreciation Yes Distribution only Transmission only Other expenses Yes No No Timing (allowed) PUCT defined (1) Once per year Twice per year Current TNMP Filings Historical: filed May 2018 (test year of FY 2017), approved December 2018, rates implemented January 2019: 9.65% ROE, 45% Equity 2020 Filings: Filed April 6, 2020 Settlement in principle reached in May, rates expected to be implemented September 1, 2020 2020 Filings: 1) Jan 2020 filing, approved/ implemented in Mar 2020 2) Expected July 2020 filing, rates expected to be implemented Sept 2020

(1) PUCT rule calls for general rate review within 48 months of most recent order setting rates (TNMP order issued

December 2018), unless earning less than 50 basis points over the average authorized ROE of ERCOT investor-owned utilities (based on year-end rate base, weather-normalized)

Appendix

Our Response to COVID-19

39

Safety of

• ur Team

Caring for Customers and Communities Managing

• ur Business
• Identification of critical workforce, staging of backups,

limited access to control rooms and critical assets

• Minimize critical employee exposure, inter-crew

exposures and exposures with the public: eliminate group gatherings, deploy additional fleet vehicles

• Mandatory work-from-home and flexible

arrangements for all applicable job functions

• Residential customer disconnects temporarily

suspended, late fees waived

• TNMP helped create COVID-19 Electricity Relief Program
• PNM Resources Foundation community safety grant
• pportunity for PNM and TNMP service territories
• PNM and TNMP supporting local businesses
• Business continuity plans implemented, daily crisis

team meetings

• Coordination with key vendors and suppliers
• Close contact with neighboring utilities, regional
• perators CAISO and ERCOT, reliability entities WECC

and Texas RE, EEI, EPRI and North American Transmission Forum

Texas Status

New Mexico and Texas Status Updates

40

New Mexico Status

• New Mexico Governor and Economic Recovery Council

begin multi-phased plan for “gradual and safe reopening”: limited re-openings began May 16th with capacity restrictions, additional openings beginning June 1st, some areas of state remain restricted

• Texas stay-at-home order expired April 30th, Phase 2 of

state re-opening began May 18th with additional services and activities opened; public schools may begin in- person summer school beginning June 1st, restrictions vary by city/county

Continued Transparency into COVID-19 Financial Impacts

41

Q4 September August July June May April March

Stage 2 Manage within Guidance Stage 3 Outside of Guidance

• Continue to evaluate

impacts and implement mitigating plans

Stage 1 Manage within Guidance

• Q1 results in line with assumptions
• April and May results in line with planning

assumptions, positive offsets from warmer weather at PNM Summer temperatures are key Slow recovery into 2021, potential that some businesses do not reopen

Mitigating Effects of COVID-19 on Customer Collections

42

PNM joint filing on April 27, 2020 with requests deferral of uncollectible payments and incremental costs in response to COVID-19 to regulatory asset, recovery determined in next rate review Proactive outreach to customers with outstanding balances to offer information regarding payment assistance options and programs, including payment plans specifically designed to offer COVID-19 assistance, balances with active payment plans are not subject to write-off as bad debt expense In the absence of approval to defer costs, COVID-19 bad debt assumptions:

Historically ~0.35% of revenues (~$3M) Stage 1: 10% write-off of payment deferrals increases expense by <$0.01 EPS Stage 2: 10% write-off of payment deferrals increases expense by $0.01-$0.02 EPS Stage 3: identify balances associated with discontinued businesses, reassess impacts

TNMP risk mitigated by COVID-19 Electricity Relief Program Deferral of incremental costs associated with COVID-19 to regulatory asset including, but not limited to, bad debt expense As a T&D utility within ERCOT, TNMP’s customers are the Retail Electric Providers, bad debts are associated with these entities and not end users

Regulatory strategies reflect our focus on benefitting customers and communities

PNM COVID-19 Considerations

43

• PNM comprises the majority of customer

non-fuel revenues

• New Mexico’s largest employers include

government and health care, with a larger number of small/medium businesses

Customer Class Considerations

• Residential: increased volumes during the Stay-at-Home order
• Commercial: weighted towards small businesses that are most

impacted by the Stay-at-Home order

• Industrial: no significant impacts expected

PNM Sales by Customer Class % Volumes % Revenues Residential 36% 46% Commercial 41% 42% Industrial 20% 10%

PNM 2019 Revenues by Region

Southern ~15% Central ~85%

New Mexico 74%

PNM Resources Non-Fuel Revenues

TNMP COVID-19 Considerations

44 West Texas ~15% North/ Central TX ~35% Gulf Coast ~50%

• TNMP Service Area

TNMP 2019 Revenues by Region

• TNMP is a smaller portion of customer non-fuel revenues

and is less impacted by changes in load/demand:

TNMP Sales by Tariff Class % Volumes % Revenues Volumetric 28% 52% Demand-Based 72% 48% Customer Class Considerations

• Volumetric: 97% Residential customers, increased

volumes during the Stay-at-Home order

• Demand-Based: Commercial and Industrial customers,

some impacted by the Stay-at-Home order

West Texas 4% Houston/ Bay Area 13% Dallas/ North TX Area 9%

PNM Resources Non- Fuel Revenues

• Transmission recovery (45% of revenues),

trued up twice per year

• Majority of demand-based bills based on

greater of peak monthly usage, or 80% of previous 11 months peak

COVID-19 Load: Assumptions and EPS Rules of Thumb

45

Planning Assumptions:

TNMP PNM

RULE OF THUMB 10% change in load = Monthly EPS Impact Residential Commercial April – May +/- $0.02 +/- $0.02 June – September +/- $0.03- $0.04 +/- $0.03- $0.04 October – December +/- $0.02 +/- $0.02 RULE OF THUMB 10% change in load = Monthly EPS Impact Volumetric Demand-Based April – May +/- $0.01 +/- $0.01 June – September +/- $0.02 +/- $0.01 October – December +/- $0.01 +/- $0.01 Stage 1 and 2 Stage 3 Residential + 5%

• 5%

Commercial

• 15%
• 5%

Industrial No significant impacts Stage 1 and 2 Stage 3 Volumetric + 5%

• 5%

Demand-Based

• 5%
• 5%

Planning Assumptions:

San Juan Abandonment, Securitization and Replacement Power

46

Abandonment

• Requests

abandonment of San Juan coal plant after participation agreement and coal supply contracts end June 30, 2022

Securitization

• $283M undepreciated

investment in San Juan, proceeds available to fund replacement power

• $29M decommissioning

and reclamation costs

• $20M job training and

severance costs

• $20M economic

development funds

• $9M financing costs

Total $361M securitization

Replacement Power

• Recommended

scenario balances environment, cost and reliability

• 350 MW solar drives

62% reduction in carbon emissions

• 130 MW battery

storage capacity responsibly integrates new technology

• 280 MW natural gas

peaking plants ensure reliability during energy transition, provides San Juan property tax base Total $298M investment Timing

• Filed July 1, 2019
• NM Supreme Court ruled January 2020 that the ETA

applies to PNM’s application for abandonment, securitization and replacement power

• NMPRC approved abandonment and securitization on

April 1, 2020; decisions on replacement power expected by October 1, 2020

Approved Pending Approval Approved

San Juan Securitization Next Steps

Abandonment and Securitization Orders approved April 1, 2020:

▪ Approval to abandon Units 1 and 4 ▪ Grants irrevocable financing order authorizing the issuance of securitization bonds up to $361 million, to include:

• Abandonment costs, including

undepreciated investment in San Juan, decommissioning and reclamation costs, and job training and severance costs

• Financing costs
• Economic development funds

Securitization next steps:

47 April 1, 2020: Irrevocable NMPRC financing order Early 2022: PNM forms a Special Purpose Entity (SPE) that will issue the bonds July 2022: SPE issues securitization bonds Within 30 days of issuance: PNM files a report with the NMPRC, to include bond pricing and structure Semi-annually after issuance: PNM files to true up the customer charge for under- or over-collection

San Juan and Four Corners Generating Stations Ownership and Participants

48 Unit Total MW PNM MW PNM Ownership Other Participants/Ownership 1 340 170 50% Tucson Electric 50% (170 MW) 4 507 392 77.3% City of Farmington 8.5% (43 MW) Los Alamos County 7.2% (36.5 MW) Utah Associated Municipal Power Systems (UAMPS) 7.0% (35.5 MW) Total 847 562 Unit Total MW PNM MW PNM Ownership Other Participants/Ownership 4 770 100 13% Arizona Public Service Company 63% (485 MW) Navajo Transitional Energy Company 7% (54 MW) Salt River Project 10% (77 MW) Tucson Electric Power 7% (54 MW) 5 770 100 13% Arizona Public Service Company 63% (485 MW) Navajo Transitional Energy Company 7% (54 MW) Salt River Project 10% (77 MW) Tucson Electric Power 7% (54 MW) Total 1,540 200

San Juan Generating Station Four Corners Generating Station

Palo Verde Nuclear Generating Station Ownership and Leases

49

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 Unit 3 Owned 10.2% 134 MW Leased 0% 0 MW Total 10.2% 134 MW

TNMP Regional Breakdown

50

TNMP – Gulf Coast

West Texas ~15% North/ Central TX ~35% Gulf Coast ~50%

• TNMP Service Area

TNMP 2019 Revenues by Region Region provided 50% of 2019 retail revenues

• Regional economy driven largely by oil refining

and petrochemical industries, supplemented by the aerospace and medical industries

• Sprawl from Houston has led to TNMP’s greatest

portion of residential customers in this region, combined with supporting commercial businesses (retail, restaurants, entertainment, schools health care facilities) and the marine and tourism industry native to the coast

• ~60% of 2019 revenues from residential

customers, who have increased usage during COVID-19

• Petrochemical companies boosting production
• f chemicals used in medical personal protective

equipment and hand sanitizer during COVID-19

• Largest cities: League City ~100,000 residents

and Texas City ~50,000 residents

TNMP Regional Breakdown

51

TNMP – North/Central TX

West Texas ~15% North/ Central TX ~35% Gulf Coast ~50%

• TNMP Service Area

TNMP 2019 Revenues by Region Region provided 35% of 2019 retail revenues

• Dallas region is home to 250 corporate

headquarters that each employ more than 1,000 people globally, 22 Fortune 500 companies and 8 of Forbes’ largest privately held companies

• The sprawl from Dallas-Ft Worth into the

TNMP service territory has resulted in a load profile that is evenly split between residential customers and the commercial businesses supporting these communities (retail, restaurants, entertainment, schools, health care facilities)

• COVID-19 Trends: Increases in residential

customer usage are offset by reduced demand-based business usage

• Largest city: Lewisville ~100,000 residents

TNMP Regional Breakdown

52

TNMP – West Texas

West Texas ~15% North/ Central TX ~35% Gulf Coast ~50%

• TNMP Service Area

Region provided 15% of 2019 retail revenues

• ~50% of 2019 revenues derived from retail

transmission customers with recovery trued up twice per year

• ~25% of 2019 revenues demand derived from

higher-voltage customers that continue to trend above 2019 levels during COVID-19

• Diversification of customers within the oil &

gas industry between upstream (production, separation and water handling activities) and downstream (processing and transportation

• f oil and gas prior to market) activities
• Delaware Basin has one of the lowest break-

even price for oil and gas production in the Permian Basin and the entire US, area is only partially served by utility power

• Largest city: Pecos ~10,000 residents

TNMP 2019 Revenues by Region

Permian Basin Delaware Basin

2020 Consolidated Ongoing Earnings Guidance

53

$2.16 Consolidated EPS $2.26

2020 Earnings Guidance

2020 Annual EPS Distribution by Quarter

8% 22% 55% 15% Q1 Q2 Q3 Q4

2020 - 2023 Potential Earnings Power

54

(1) Average rate base has been reduced by approximately $130M to represent ($0.05) of Earnings Potential for the lost equity return on Four Corners investment determined in the 2018 general

rate review. 2022 and 2023 rate base also reflects the removal of $283M undepreciated SJGS investment upon its retirement in mid-2022 to be recovered through securitization.

(2) Replacement Power includes $298M investment implemented mid-2022; $278M of generation investment and $20M of transmission investment. (3) PNM Renewables reflect assets collected through the Renewable Rate Rider. (4) PNM FERC in 2021-2023 reflects a return of 8%-9% to account for Western Spirit investment recovered through incremental rates. (5) Consists primarily of decommissioning/reclamation trust income (net of fees/taxes), AFUDC, certain incentive compensation, and the 65MW ownership of San Juan Unit 4 (prior to retirement). (6) TNMP earnings include additional recovery for Energy Efficiency, along with items excluded from rates (primarily AFUDC) and interest savings from the refinancing of existing debt. (7) Corporate/Other includes the earnings impacts associated with short and intermediate term bank debt and the 50% equity interest in NMRD. (8) Equity Financing Plans reflect $250M - $300M of mandatory convertibles issued in the second half of 2021 that would convert in 2024.

This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance.

Allowed Return / Equity Ratio

2020 Ongoing Earnings Guidance Midpoint 2021 Earnings Potential 2022 Earnings Potential 2023 Earnings Potential

Avg Rate Base Return EPS

Avg Rate Base EPS Avg Rate Base EPS Avg Rate Base EPS PNM Retail(1)

9.575% / 50% $2.5 B 9.5% $1.47 $2.5 B $1.41 $2.4 B $1.37 $2.4 B $1.38

San Juan Replacement(2)

9.575% / 50% $150 M $0.08 $280 M $0.16

PNM Renewables(3)

9.575% / 50% $150 M 9.575% $0.09 $145 M $0.08 $140 M $0.08 $130 M $0.06

PNM FERC(4)

10% / ~50% $340 M 7.5% $0.15 $530 M $0.25-$0.28 $740 M $0.35-$0.39 $780 M $0.36-$0.41

Items not in Rates(5)

($0.01) ($0.03)-($0.01) ($0.03)-($0.01) ($0.03)-($0.01)

Total PNM

$3.0 B $1.70 $3.2 B $1.71-$1.76 $3.5 B $1.85-$1.91 $3.6 B $1.93-$2.00

TNMP(6)

9.65% / 45% $1.3 B 9.65% $0.73 $1.5 B $0.79 $1.6 B $0.83 $1.9 B $0.95

Corporate/Other(7)

($0.22) ($0.13)-($0.11) ($0.11)-($0.09) ($0.15)-($0.13)

Equity Financing Plans(8)

($0.06)-($0.01) ($0.11)-($0.09) ($0.11)-($0.09)

Total PNM Resources

$4.3 B $2.21 $4.7 B $2.31 - $2.43 $5.1 B $2.46 - $2.56 $5.6 B $2.62 - $2.73

Liquidity as of May 1, 2020

55

PNM TNMP Corporate/ Other PNM Resources Consolidated Financing Capacity(1): Revolving credit facilities $440.0 $75.0 $340.0 $855.0 As of 05/01/20: Short-term debt and LOC balances $47.5 $0.1 $137.4 $185.0 Remaining availability 392.5 74.9 202.6 670.0 Invested cash 1.9 21.9 0.9 24.7 January 2020 Forward Equity Offering

• 287.1

287.1 Total Available Liquidity $394.4 $96.8 $490.6 $981.8

(1) Excludes intercompany debt and term loans