Q4 2018 Earnings Review February 27, 2019 Safe Harbor Statement - PowerPoint PPT Presentation

Q4 2018 Earnings Review February 27, 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, Key Highlights and Company Updates Financial Results Q4 2018 Q4 2017 2018 2017 GAAP EPS ($0.69) ($0.68) $1.07 $1.00 Ongoing EPS $0.18 $0.24 $2.00 $1.94 • 2019 Ongoing EPS Guidance narrowed to $2.10 ‐ $2.18 Key Highlights and Company Updates 2018 Key Highlights • TNMP continued growth, load growth at PNM • Return of federal tax savings to customers • Investments in reliability and environmentally sustainable power • 9% dividend increase moves payout ratio to middle of 50‐60% targeted range 2019 Company Updates • New Mexico legislative session: Energy Transition Act • Regulatory Updates: NMPRC actions, TNMP TCOS filing 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 fourth quarter earnings release issued February 27, 2019.

PNM and TNMP Regulatory Agenda Filing Action Timing Docket No. PNM Appeal of 2015 General Rate Case to New Mexico Supreme Oral arguments held October 30, 2017 No statutory timeline S‐1‐SC‐36115 Court Filed December 31, 2018, docket closed; Order issued PNM request for reconsideration of 13‐00390‐UT San Juan Generating Station in new docket to file application in support of Order to be addressed by February 27, Compliance Filing abandonment by March 1, 2019 2019 or denied by operation of law 19‐00018‐UT Order governing accounting treatment approved Western Energy Imbalance Procedural schedule or final order December 19, 2018; Order to vacate previous order 18‐00261‐UT Market Filing pending and grant rehearing issued February 6, 2019 Final Order to accept Plan issued December 19, 2018; 17‐00174‐UT 2017 Integrated Resource notice of appeal to New Mexico Supreme Court No statutory timeline Plan received January 18, 2019 S‐1‐SC‐37482 2019 Renewable Plan Hearings held September ‐ October 2018 Approved November 29, 2018 18‐00158‐UT TNMP General Rate Review Settlement approved December 20, 2018 Rates implemented January 2019 48401 TCOS Filing Filed January 25, 2019 Expected to be approved March 2019 49143 5

Financial Overview Chuck Eldred Executive Vice President and CFO

FY 2018 Ongoing EPS Financial Summary $0.11 ($0.11) $0.06 $2.00 $1.94 Corporate TNMP PNM FY 2017 FY 2018 7 Note: Segment drivers included in appendix

Load and Economic Conditions Regulated Retail Energy Sales and Customers (weather‐normalized) Q4 2018 2018 PNM / TNMP vs. vs. 2018E 2019E Q4 2017 2017 PNM Residential & Commercial 1.3% 0.7% ~0.3% 0.3% ‐ 0.5% Total PNM Retail Load 1.3% 0.6% 0% – 0.5% 0.3% – 1.0% PNM Avg. Customers 0.9% 0.8% 0.8% ‐ 1.0% per year TNMP Total Volumetric Load (1) 3.5% 3.2% 2% – 3% per year TNMP Demand‐Based Load (2) 7.8% 6.8% 5% – 7% 6% – 8% TNMP Avg. End Users 1.3% 1.3% 1.5% – 2.0% per year Monthly Employment Growth (3) Employment Growth (3) 2018 vs. 2017 Abq. U.S. 12‐Month Rolling Average January 1.2% 1.4% February 1.6% 1.5% March 1.3% 1.6% 3.1% April 1.3% 1.6% % Change 1.9% May 1.3% 1.7% 1.6% June 1.3% 1.6% July 2.1% 1.6% August 2.1% 1.7% 2015 2016 2017 2018 September 2.5% 1.7% Albuquerque Dallas U.S. October 2.6% 1.7% November 2.4% 1.7% December 2.6% 1.8% (1) Primarily Residential usage; represents per‐kWh billings (2) Commercial and Industrial usage excluding Transmission customers; represents per‐kW monthly peak billings (3) U.S. Bureau of Labor Statistics, December 2018 8

Consolidated Earnings Guidance (Ongoing) 2019 Earnings Guidance $2.10 Consolidated EPS $2.18 PNM TNMP Corp/Other $1.61 – $1.65 $0.67 – $0.69 ($0.18) – ($0.16) 2019 Previous Current Consolidated EPS $2.08 ‐ $2.18 $2.10 ‐ $2.18 PNM $1.59 ‐ $1.65 $1.61 ‐ $1.65 TNMP $0.67 ‐ $0.69 $0.67 ‐ $0.69 Corporate/Other ($0.18) – ($0.16) ($0.18) – ($0.16) 9

2019 – 2022 Investment Plan $2.3B investment plan plus incremental growth opportunities Incremental growth opportunities (previously $950M) • $255M moved into T&D capital at PNM and TNMP • $450M supports new transmission and replacement power • $245M awaiting future capital prioritization Total: $869 $350 Total: $588 $655 $637 $29 $100 $32 $25 $27 Subtotal: $519 $49 $79 Subtotal: $488 $20 $61 $20 $97 $79 $82 $98 $175 $180 $141 $125 $245 $245 $245 $245 2019 2020 2021 2022 TNMP PNM T&D PNM Existing Generation PNM Renewable Additions PNM Transmission Expansion Corporate/Other (1) 50% NMRD Renewable Additions Depreciation Incremental growth opportunities Targeted 2018‐2022 Rate Base CAGR (2018 base) : Total 7.1%‐9.0% / PNM 3.6%‐6.4% / TNMP 16.2% Range at PNM reflects potential outcomes from the pending NM Supreme Court general rate review appeal of $0‐$150M and potential growth opportunities 10 Amounts may not visually add due to rounding (1) Depreciation does not include amounts associated with NMRD

2019 ‐ 2022 Potential Earnings Power Earnings Growth Target: 5 ‐ 6% • Base plan increases as capital opportunities are realized to support growth at PNM and TNMP • Planned San Juan retirement reduces 2022 PNM Retail average rate base • $450M of incremental growth opportunities to be financed with $320M of securitization proceeds and $130M of debt and equity 2019 Ongoing Earnings 2020 Earnings 2021 Earnings 2022 Earnings Allowed Guidance Midpoint Potential Potential Potential Return / Avg Rate Avg Rate Avg Rate Avg Rate Equity Ratio Return EPS EPS EPS EPS Base Base Base Base PNM Retail 9.575% / 50% $2.4 B 9.3% $1.41 $2.4 B $1.44 $2.5 B $1.52 $2.5 B $1.47 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% $285 M 8.0% $0.14 $340 M $0.15‐$0.20 $390 M $0.17‐$0.22 $470 M $0.21‐$0.26 Items not in Rates $0.01 ($0.04)‐($0.02) ($0.04)‐($0.02) ($0.04)‐($0.02) Total PNM $2.7 B $1.63 $2.9 B $1.64‐$1.71 $3.1 B $1.74‐$1.81 $3.1 B $1.72‐$1.79 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 ($0.17) ($0.18)‐($0.16) ($0.20)‐($0.18) ($0.22)‐($0.20) ATM Program ($0.02)‐($0.01) ($0.04)‐($0.03) ($0.06)‐($0.04) Subtotal Base PNM Resources $3.8 B $2.14 $4.1 B $2.17 ‐ $2.27 $4.5 B $2.30 ‐ $2.40 $4.6 B $2.28 ‐ $2.39 Incremental items: Supreme Court Appeal up to $150M $0.09 $150M $0.09 $150M $0.09 $150M $0.09 Growth Opportunities up to $175M $0.10 $400M $0.24 Growth Financing up to ($0.03) ($0.03) Total PNM Resources up to $3.9 B $2.23 $4.3 B $2.36 $4.8 B $2.56 $5.2 B $2.69 Note: 2018‐2022 CAGR measured from 2018 Ongoing EPS of $2.00 11 This table is not intended to represent a forward‐looking projection of 2020 ‐ 2022 earnings guidance. Refer to Slide 20 for additional details and disclosures.

Questions and Answers

Appendix Q4 and FY 2018 Earnings

Q4 2018 vs Q4 2017 EPS (Ongoing): PNM PNM Q4 2018 Key Performance Drivers ∆ EPS $0.16 Outage Costs $0.05 Weather $0.04 $0.10 Interest expense savings $0.03 Retail load $0.01 Transmission margin $0.01 O&M increases ($0.05) Decommissioning/reclamation trust income, net of fees ($0.05) Depreciation and property tax ($0.03) Q4 2017 Q4 2018 Retail rate phase‐in, including changes in tax rates and retail ($0.02) generation portfolio changes approved in BART settlement San Juan unregulated 65MW ($0.02) FERC Generation Navopache contract ($0.01) Other ($0.02) 14