Consolidated Application for San Juan Generating Station - July 2019
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Consolidated Application for
San Juan Generating Station
July 2019
Contact Information and Safe Harbor Statement
Investor Relations Contact Information
Lisa Goodman Jimmie Blotter, Assistant Treasurer
Manager, Investor Relations Director, Investor Relations and Shareholder Services
U.S. 1-505-241-2160 U.S. 1-505-241-2227
Lisa.Goodman@pnmresources.com Jimmie.Blotter@pnmresources.com
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.
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Consolidated Application
PNM filed a consolidated application for San Juan Generating Station on July 1, 2019:
• Abandonment of remaining capacity in San Juan coal plant (Units 1 and 4)
• Securitization of approximately $361 million includes
estimated undepreciated investment of $283 million
• Approval for replacement power; recommended scenario
balances costs, the environment and reliability:
Total MW
San Juan location provides regional property
+280 MW tax benefit; ensures reliability while minimizing
new battery technology risks
Competitively-bid solar contracts include one
+350 MW
of the largest solar facilities in the nation
One of the highest percentages of utility
+130 MW
battery storage integration in the nation
Timing: NMPRC decision requested by the end of 2019(1)
(1) NMPRC has the ability to bifurcate the consolidated application, in which abandonment and securitization would be
decided over a 6-month period (can be extended 3 months for good cause) and replacement power could be 3
considered on a separate schedule
Abandonment and Securitization Details
Abandonment:
• Requests abandonment of San Juan coal plant after participation and coal
supply contracts end June 30, 2022
Securitization:
• Requests securitization treatment of approximately $361 million:
undepreciated investment in San Juan Generating Station,
$283 million for which proceeds are available to fund replacement
power resources
$29 million decommissioning and reclamation costs
$20 million job training and severance costs
$20 million economic development funds
$9 million financing costs
4Recommended Replacement Power Scenario Details
• 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
PNM Owned Resources Third Party Resources
280 MW Gas Peaking
Units at San Juan 300 MW Solar PPA +
in-service June 2022 40 MW Storage ESA
begins June 2022
40 MW Storage
in-service June 2022 50 MW Solar PPA +
20 MW Storage ESA
30 MW Storage begins Jan 2022
in-service June 2022
__________________ ________________
Total 350 MW Total 410 MW
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Note: All potential replacement power scenarios incorporated 140 MW wind energy PPA included in June 1, 2019 RPS FilingReplacement Power Scenarios Considered
Recommended Scenario 2 Scenario 3 Scenario 4
Scenario 1 - Hybrid San Juan Location No Fossil Fuel All Renewable
• 280 MW gas(1) • 476 MW gas(1) • 40 MW battery(1) -
PNM Owned Resources
• 70 MW battery • 110 MW battery
PNM Capex $298M $331M $243M $37M
• 350 MW solar • 500 MW solar • 1,059 MW wind
Third Party Resources
• 60 MW battery • 260 MW battery • 975 MW solar
Balancing Cost / Environment / Reliability:
$4,732M $4,834M $5,452M
Incremental cost (NPV) $4,678M
(+$54M) (+$156M) (+$774M)
CO2 emission reduction(2) 62% 59% 65% 67%
Managed risk, Managed risk, Increased risk as Heightened
storage capacity ≤5% storage capacity ≤5% higher % of system reliability risks -
Reliability of energy usage, of energy usage, based on does not meet
each battery location each battery location unproven battery federal reliability
limited to 40 MW limited to 40 MW technology standards
Other Partial San Juan Maximizes San Juan Limited San Juan No San Juan
property tax base property tax base property tax base property tax base
(1) Designates resources located in the San Juan area school district
(2) From 2005 levels in alignment with the Paris Agreement 6
Note: A PPA for 140 MW of wind energy was requested separately in a June 1, 2019 RPS Filing and was incorporated into all contemplated scenarios2019 – 2023 Investment Plan
$3.6B investment plan updated to incorporate $298M replacement power;
$278M generation investment and $20M transmission investment
$1,012
$26
$208
$698
$634 $25 $665
$34 $20
$21
$30 $47 $285 $570 $70
$37 $20
$60 $88 $43 $128
$88 $79 $82
(in millions)
$98
$142 $171 $169 $181 $201
$353
$310 $336
$254 $270 $245
$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
Depreciation (1)
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 7
(3) For Palo Verde leases that expire in 2023, capex assumes either the purchase of the leases or replacement of the power through new resourcesUpdated 2021-2023 Potential Earnings Power
Updates incorporate recommended replacement power scenario, adds 2023
• Partial year of San Juan rate base in 2022, no remaining rate base in 2023
• Interim financing supports replacement power until securitization proceeds received mid-2022
Allowed 2021 Earnings Potential 2022 Earnings Potential 2023 Earnings Potential
Return / Avg Rate Avg Rate Avg Rate
EPS EPS EPS
Equity Ratio Base Base Base
PNM Retail(1) 9.575% / 50% $2.5 B $1.52 $2.4 B $1.48 $2.4 B $1.48
PNM Retail
9.575% / 50% $150 M $0.09 $280 M $0.17
Replacement Power(2)
PNM Renewables(3) 9.575% / 50% $145 M $0.09 $140 M $0.08 $130 M $0.07
PNM FERC(4) 10% / ~50% $530 M $0.26 - $0.30 $740 M $0.37 - $0.42 $780 M $0.39 - $0.44
Items not in Rates(5) ($0.03) - ($0.01) ($0.03) - ($0.01) ($0.03) - ($0.01)
Total PNM $3.2 B $1.84 - $1.90 $3.4 B $1.99 - $2.06 $3.6 B $2.08 - $2.15
TNMP(6) 9.65% / 45% $1.4 B $0.80 $1.6 B $0.84 $1.7 B $0.90
Corporate/Other(7) ($0.21) - ($0.19) ($0.19) - ($0.17) ($0.23) - ($0.21)
Equity Financing Plans(8) ($0.09) - ($0.08) ($0.17) - ($0.15) ($0.17) - ($0.15)
Total PNM Resources $4.6 B $2.34 - $2.43 $4.9 B $2.47 - $2.58 $5.3 B $2.58 - $2.69
(1) Average rate base has been reduced by approximately $130M to represent ($0.05) of Earnings Potential for the lost equity return on the Four Corners investment resulting from the 2018
general rate review settlement. 2022 rate base is reduced by $160M to reflect the projected average rate base retired at SJGS.
(2) Replacement Power includes $298M investment; $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 financing alternatives, including ATM Program issuance of up to $150M (dilution impacts assume $50M issued in 2020
and $100M issued in 2021, with a full year dilution impact in 2022), and $300M mandatory convertibles beginning mid-2021. 8
This table is not intended to represent a forward-looking projection of 2021 - 2023 earnings guidance.You can also read
