TXNM ENERGY INC Q3 FY2023 earnings call

Management Statement and Operational Highlights

• Financial Results: Ongoing earnings for Q3 2023 were $1.54, up from $1.46 in Q3 2022. Adjusted full-year guidance to a range of $2.75 to $2.80 per share.
• Merger Update: New Mexico Supreme Court heard oral arguments on the merger with AVANGRID on September 15th, with no timeline for the court's decision.
• NMRD Sale: Sale of the joint venture NMRD remains on track to close in the late fourth quarter or early first quarter.
• PNM Operational Highlights: New Mexico saw economic development wins, system peaks in July and August, and filed an application for resources needed in 2026 (100 MW solar, 250 MW battery storage, 60 MW utility-owned battery).
• Regulatory Proceedings: PNM rate change filing hearings complete, expected decision by end of year; battery storage proposal under review; grid modernization filing expected in November, and integrated resource plan to be filed by end of year.
• TNMP Operational Highlights: System demand records in TX, capital investment plan at TNMP increased to $600 million per year, strong customer growth in TX, and transmission expansion proposal vetted by ERCOT.

Segment Performance

• PNM: Ongoing earnings for Q3 2023 were $1.54, compared to $1.46 in Q3 2022. Summer temperatures in NM and TX positively impacted earnings. PNM's capital plan through 2027 totals $5.9 billion, with PNM FERC rate base growing at 9.7%.
• TNMP: System demand at TNMP has grown, with capital spending at TNMP increasing to over $600 million per year. TNMP rate base grows at 14.5%. Distribution customer growth is strong, and transmission expansion proposals in TX are under review.

Guidance

• Raised 2023 earnings guidance to a range of $2.75 to $2.80 per share.
• Plan to issue an average of $100 million annually in equity to fund growth.
• Proceeds from NMRD sale, $200 million in equity, and San Juan securitization bonds to strengthen the balance sheet.
• Assumes $100 million average annual equity to fund capital investments, extending the 5% growth target to 2027.

Risks

• Uncertainty around New Mexico Supreme Court decision on the AVANGRID merger.
• Timing delays with the sale of NMRD due to regulatory processes.
• Potential delays in regulatory approvals for proposed resources and projects.

Question and Answer

Q: About financing plan and NMRD sale timeline A: $100 million average annual equity needs, NMRD sale timeline delayed to end of year or early next year due to bid process and regulatory considerations.

Q: Details on five-year investment plan and batteries A: 12-megawatt battery storage proposal under review, 2026 and 2027 RFPs, balance between customer impact and financing.

Q: Weather-normalized EPS and CapEx plan A: Weather impact on EPS, dynamic O&M management, 60-megawatt utility-owned battery in CapEx plan, transmission projects in TX baked in but subject to regulatory approval.

Q: Alternative equity raising methods A: Issuing equity is preferred, no non-core assets to sell as most are core to business.