Q2 2019 Earnings Review August 2, 2019 Safe Harbor Statement - PowerPoint PPT Presentation

Q2 2019 Earnings Review August 2, 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 Q2 2019 Q2 2018 YTD 2019 YTD 2018 GAAP EPS ($0.95) $0.48 ($0.72) $0.67 Ongoing EPS $0.37 $0.53 $0.50 $0.73 • Significantly milder temperatures impacted Q2 2019 earnings • GAAP earnings include $104 million after tax write‐off from items previously under appeal with New Mexico Supreme Court • 2019 Ongoing EPS Guidance $2.05 ‐ $2.11 affirmed Key Highlights • PNM Generation Portfolio Transformation • Filed Consolidated Application for San Juan Generating Station on July 1, 2019 to request approvals for abandonment, securitization and replacement power Note: Q2 and YTD 2019 EPS are presented using a non‐diluted basis due to the GAAP net loss. Q2 and YTD 2018 EPS are presented using a diluted basis. For a reconciliation of GAAP EPS to Ongoing EPS and a description of 4 adjustments made, please refer to the second quarter earnings release issued August 2, 2019.

San Juan Abandonment, Securitization and Replacement Power Abandonment Replacement Power Securitization ● Requests ● $283M undepreciated ● Recommended abandonment of San investment in San Juan, scenario balances Juan coal plant after proceeds available to environment, cost and participation fund replacement reliability agreement and coal power ● 350MW solar drives supply contracts end ● $29M decommissioning 62% reduction in June 30, 2022 and reclamation costs carbon emissions ● $20M job training and ● 130MW battery severance costs storage capacity responsibly integrates ● $20M economic new technology development funds ● 280MW natural gas ● $9M financing costs peaking plants ensure reliability during energy transition, provides San Juan property tax base 5

PNM and TNMP Regulatory Agenda Filing Action Timing Docket No. PNM: Consolidated Application for NMPRC decision on abandonment/ San Juan (Abandonment, PNM filed July 1, 2019; NMPRC bifurcated application on securitization expected by April 2020, 19‐00018‐UT Securitization and July 10, 2019 decision on replacement power 19‐00195‐UT expected by October 2020 Replacement) New Mexico Supreme Court issued opinion May 16, 2019 Appeal of 2015 General Rate No statutory timeline; oral affirming NMPRC decision but denying the disallowance of 15‐00261‐UT Case to New Mexico arguments on remand held July 17, future Palo Verde decommissioning costs; full order was S‐1‐SC‐36115 Supreme Court 2019 remanded back to the NMPRC Final Order issued June 12, 2019 affirming CCN; BB2 Transmission Project N/A 18‐00243‐UT ratemaking treatment deferred to next rate case PNM requested NMPRC acquisition PNM filed May 10, 2019 with the NMPRC and FERC for 19‐00129‐UT Western Spirit Transmission approval by November 6, 2019; FERC acquisition approval and FERC approval of incremental ER19‐1824‐000 Line process defines 180 days for rate; FERC approved incremental rate July 9, 2019 EC19‐90‐000 acquisition approval PNM filed May 31, 2019 for approval of voluntary PNM requested NMPRC approval of Solar Direct Program 19‐00158‐UT renewable program expected to begin March 31, 2021 50MW PPA by November 2019 2020 Renewable Plan PNM filed June 3, 2019 NMPRC decision expected in Q1 2020 19‐00159‐UT NMIEC and New Energy Economy filed appeals to New No statutory timeline; oral 17‐00129‐UT 2018 Renewable Plan Mexico Supreme Court November 29, 2017; NMIEC appeal arguments held May 6, 2019 S‐1‐SC‐36772 subsequently dismissed July 5, 2019 per their request TNMP: Rates expected to be implemented TCOS Filing Filed July 23, 2019 49785 September 2019 6

Financial Overview Chuck Eldred Executive Vice President and CFO

Q2 2019 Ongoing EPS Financial Summary and 2019 Consolidated Ongoing Earnings Guidance Q2 EPS Summary Q2 2019 Q2 2018 Change PNM Resources $0.37 $0.53 ($0.16) PNM $0.23 $0.38 ($0.15) TNMP $0.19 $0.19 $ ‐ Corporate/Other ($0.05) ($0.04) ($0.01) Note: Segment drivers included in appendix $2.05 2019 Earnings Guidance $2.11 PNM TNMP Corp/Other $1.59 – $1.62 $0.66 – $0.68 ($0.20) – ($0.19) Quarterly EPS Distribution Q1 Q2 Q3 Q4 6% 18% 59% 17% 8

Load and Economic Conditions • Weather was the most significant driver to sales volumes in Q2 2019 Q2 2019 Q2 2019 Weather Impacts Q2 2019 Q2 2018 Normal (1) vs. vs. Q2 2018 Normal (1) PNM Cooling Degree‐Days 318 674 507 (52.8%) (37.3%) PNM EPS Impact ($0.07) $0.07 TNMP Cooling Degree‐Days 1,015 1,097 1,012 (7.5%) 0.3% TNMP EPS Impacts $0.00 $0.01 Regulated Retail Energy Sales and Customers PNM (weather‐normalized) • Q2 results are driven by the extreme Q2 2019 YTD 2019 weather impacts not captured in weather PNM / TNMP 2019E vs. vs. normalization model Q2 2018 YTD 2018 • Economic indicators continue to be positive PNM Residential & Commercial (1.6%) (0.6%) 0.3% - 0.5% Total PNM Retail Load (1.3%) (0.1%) 0.5% – 1.5% TNMP • Oil and gas customer requests for new PNM Avg. Customers 0.7% 0.8% 0.8% - 1.0% service trending ~33% higher than prior TNMP Total Volumetric Load (2) (0.9%) (1.3%) 2% – 3% year levels TNMP Demand-Based Load (3) • 4.1% 3.7% 6% – 8% Q2 results reflect a change in the timing of demand additions that are expected to TNMP Avg. End Users 1.5% 1.5% 1.5% – 2.0% move to 2020 rather than 2019 (1) 2019 normal weather assumption reflects the 20‐year average for the period 1999 ‐ 2018 9 (2) Primarily Residential usage; represents per‐kWh billings (3) Commercial and Industrial demand excluding Transmission customers; represents per‐kW monthly peak billings

2019 – 2023 Investment Plan $3.6B investment plan reflects $298M replacement power; $278M generation investment and $20M transmission investment $1,013 $26 $208 $699 $665 $27 $635 $34 $20 $22 $285 $47 $571 $71 $30 $44 $20 $88 $43 $128 $59 (in millions) $82 $88 $79 $98 $201 $169 $181 $171 $137 $366 $342 $312 $271 $245 $256 $245 $245 $245 $245 2019 2020 2021 2022 2023 TNMP PNM T&D PV Lease Purchases/Other Replacement Power (3) PNM Existing Generation PNM Renewable Additions PNM Transmission Expansion (2) SJGS Replacement Power 50% NMRD Renewable Additions Corporate/Other (1) Depreciation Targeted 2018-2023 Rate Base CAGR (2018 base): Total 9.3% / PNM 6.6% / TNMP 16.2% (1) Depreciation does not include amounts associated with NMRD (2) Western Spirit acquisition of $285M in 2021 reflects assumed purchase price of $360M, net of $75M customer funding 10 (3) For Palo Verde leases that expire in 2023, capex assumes either the purchase of the leases or replacement of the power through new resources