Q1 2019 Earnings Review May 7, 2019 Safe Harbor Statement - PowerPoint PPT Presentation

Q1 2019 Earnings Review May 7, 2019

Safe Harbor Statement Statements made in this presentation for PNM Resources, Inc. (“PNMR”), Public Service Company of New Mexico (“PNM”), or 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 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, ongoing 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. 2

Opening Remarks and Overview Pat Vincent‐Collawn Chairman, President and CEO

Financial Results and Key Highlights Financial Results Q1 2019 Q1 2018 GAAP EPS $0.23 $0.19 Ongoing EPS $0.13 $0.21 • Upper end of earnings guidance increased to $2.20 • Revised 2019 Ongoing EPS Guidance $2.10 - $2.20 Key Highlights • New Mexico Legislative Updates • Energy Transition Act: Securitization, increased Renewable Portfolio Standards, 2045 carbon‐free requirement • PNM goal to achieve 100% emissions‐free by 2040 • Constitutional amendment to move to appointed New Mexico Public Regulation Commissioners will be sent to voters in 2020 general election • Western Spirit acquisition to expand FERC transmission, support renewable development 4 Note: EPS is presented on a diluted basis. For a reconciliation of GAAP EPS to Ongoing EPS and a description of adjustments made, please refer to the first quarter earnings release issued May 7, 2019.

PNM and TNMP Regulatory Agenda Filing Action Timing Docket No. PNM Appeal of 2015 General Rate Case to New Mexico Oral arguments held October 30, 2017 No statutory timeline S‐1‐SC‐36115 Supreme Court Parties’ responses filed with New Mexico NMPRC order issued to file application in support 19‐00018‐UT Supreme Court March 19, 2019 San Juan Generating of abandonment by March 1, 2019; New Mexico Station Compliance Filing / PNM plans to file for abandonment, Supreme Court issued temporary stay of Order on Abandonment Filing securitization and replacement power CCNs March 1, 2019 TBD in June 2019 Final Order issued March 27 th affirmed accounting Western Energy Imbalance PNM plans to join Western Energy Imbalance treatment and Clarifying Order issued April 24 th 18‐00261‐UT Market Filing Market in April 2021 related to future calculation of benefits Final Order issued April 16, 2019 granting CCN and PNM filed on April 29, 2019 for re‐hearing; BB2 Transmission Project 18‐00243‐UT denying PNM’s requested ratemaking treatment. Commission response expected by May 19 17‐00174‐UT 2017 Integrated Resource San Juan Entities filed notice of appeal to New No statutory timeline Plan Mexico Supreme Court January 18, 2019 S‐1‐SC‐37482 NMIEC and New Energy Economy filed notices of 17‐00129‐UT No statutory timeline; oral arguments held 2018 Renewable Plan appeal to New Mexico Supreme Court November May 6, 2019 S‐1‐SC‐36772 29, 2017 TNMP TCOS Filing Filed January 25, 2019 Rates implemented March 21, 2019 49143 5

Financial Overview Chuck Eldred Executive Vice President and CFO

Q1 2019 Ongoing EPS Financial Summary ($0.07) $0.02 $0.21 PNM ($0.03) $0.13 TNMP Corporate Q1 2018 Q1 2019 7 Note: Segment drivers included in appendix

Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather‐normalized) Q1 2019 2019 • Residential and commercial sectors are PNM vs. Guidance expected to be in line with annual guidance Q1 2018 • Revised guidance resulting from stronger PNM Residential & Commercial 0.6% 0.3% - 0.5% economic growth in the industrial sector Total PNM Retail Load (Revised) 1.2% 0.5% – 1.5% PNM Avg. Customers 0.8% 0.8% - 1.0% Q1 2019 2019 • Oil and gas customer requests for new TNMP vs. Guidance service trending ~33% higher than Q1 2018 prior year levels TNMP Total Volumetric Load (1) (1.9%) 2% – 3% • Residential and small commercial TNMP Demand-Based Load (2) 4.7% 6% – 8% TNMP Avg. End Users 1.5% 1.5% – 2.0% requests trending higher (1) Primarily Residential usage; represents per‐kWh billings 8 (2) Commercial and Industrial demand excluding Transmission customers; represents per‐kW monthly peak billings

Consolidated Earnings Guidance (Ongoing) 2019 Earnings Guidance (Revised) $2.10 Consolidated EPS $2.20 PNM TNMP Corp/Other $1.63 – $1.70 $0.67 – $0.69 ($0.20) – ($0.19) 2019 Previous Revised Consolidated EPS $2.10 - $2.18 $2.10 - $2.20 PNM $1.61 ‐ $1.65 $1.63 ‐ $1.70 TNMP $0.67 ‐ $0.69 $0.67 ‐ $0.69 Corporate/Other ($0.18) – ($0.16) ($0.20) – ($0.19) 9

2019 – 2022 Investment Plan $2.6B investment plan achieves targeted earnings growth Growth opportunities realized in the plan: $285M (1) Western Spirit acquisition included as PNM transmission expansion in 2021 • • $40M of additional PNM T&D capital added in 2022 San Juan Replacement Power $804 Additional capital investment to $26 be reflected with June 2019 $660 abandonment filing $634 $34 (1) $285 $30 $25 $21 $37 $528 $88 $20 $60 (in millions) $82 $97 $79 $98 $169 $181 $171 $143 $316 $306 $276 $245 $255 $245 $245 $245 2019 2020 2021 2022 TNMP PNM T&D PNM Existing Generation PNM Renewable Additions (2) PNM Transmission Expansion Corporate/Other 50% NMRD Renewable Additions Depreciation Targeted 2018-2022 Rate Base CAGR (2018 base): Total 8.7%-9.5% / PNM 5.9%-7.1% / TNMP 16.2% Range at PNM reflects the removal of items pending NM Supreme Court general rate review appeal from the base period and includes the potential outcomes of $0‐$150M through the growth period 10 (1) Reflects assumed purchase price of $360M, net of $75M customer funding (2) Depreciation does not include amounts associated with NMRD

2019 - 2022 Potential Earnings Power Earnings Growth Target: 5 - 6% 2019 Ongoing Earnings 2020 Earnings 2021 Earnings 2022 Earnings Allowed Guidance Midpoint Potential Potential Potential Return / Equity Ratio Avg Rate Avg Rate Avg Rate Avg Rate Return EPS EPS EPS EPS Base Base Base Base PNM Retail 9.575% / 50% $2.4 B 9.5% $1.44 $2.4 B $1.44 $2.5 B $1.52 $2.4 B $1.48 PNM Renewables 9.575% / 50% $115 M 9.575% $0.07 $150 M $0.09 $145 M $0.09 $140 M $0.08 PNM FERC 10% / ~50% $275 M 7.4% $0.13 $330 M $0.15‐$0.20 $530 M $0.26‐$0.30 $740 M $0.37‐$0.42 Items not in Rates $0.03 ($0.04)‐($0.02) ($0.04)‐($0.02) ($0.04)‐($0.02) Total PNM $2.7 B $1.67 $2.9 B $1.64-$1.71 $3.2 B $1.83-$1.89 $3.4 B $1.89-$1.96 TNMP 9.65% / 45% $1.1 B 9.65% $0.68 $1.3 B $0.73 $1.4 B $0.80 $1.6 B $0.84 Corporate/Other ($0.20) ($0.21)‐($0.19) ($0.21)‐($0.19) ($0.19)‐($0.17) Equity Financing Plans ($0.01)‐$0.00 ($0.08)‐($0.07) ($0.15)‐($0.13) Subtotal Base PNM Resources $3.8 B $2.15 $4.1 B $2.15 - $2.25 $4.6 B $2.34 - $2.43 $4.9 B $2.39 - $2.50 Supreme Court Appeal (1) $0-$150M $0.00-$0.05 $0-$150M $0.00-$0.09 $0-$150M $0.00-$0.09 $0-$150M $0.00-$0.09 Total PNM Resources up to $3.9 B $2.15 - $2.20 $4.1-$4.3B $2.15 - $2.34 $4.6-$4.8B $2.34 - $2.52 $4.9-$5.1B $2.39 - $2.59 Note: 2018‐2022 CAGR measured from 2018 Ongoing EPS of $2.00 (1) Assumes mid‐year implementation 11 This table is not intended to represent a forward-looking projection of 2020 - 2022 earnings guidance. Refer to Slide 16 for additional details and disclosures.

Questions and Answers

Appendix

Q1 2019 vs Q1 2018 EPS (Ongoing): PNM PNM Q1 2019 Key Performance Drivers ∆ EPS $0.14 $0.12 Weather $0.03 Interest expense savings $0.03 Retail rate phase‐in, including changes in tax rates and retail $0.02 generation portfolio changes approved in BART settlement Retail load $0.01 Outage costs $0.01 O&M increases ($0.04) Depreciation and property tax ($0.02) Q1 2018 Q1 2019 AFUDC ($0.01) Other ($0.01) 14

Q1 2019 vs Q1 2018 EPS (Ongoing): TNMP and Corporate TNMP Q1 2019 Key Performance Drivers ∆ EPS $0.12 Rate relief, including TCOS ($0.04) $0.05 Depreciation and property tax ($0.02) Weather ($0.01) Q1 2018 Q1 2019 Corporate Q1 2019 Key Performance Drivers ∆ EPS ($0.03) ($0.06) Interest expense ($0.01) Westmoreland loan agreements ($0.01) Other ($0.01) Q1 2018 Q1 2019 15