Business Overview
PNM Resources, Inc. (NYSE: PNM) is an energy holding company based in Albuquerque, New Mexico, with 2023 consolidated operating revenues of $1.9 billion. Through its regulated utilities, Public Service Company of New Mexico (PNM) and Texas-New Mexico Power Company (TNMP), PNM Resources provides electricity to more than 800,000 homes and businesses in New Mexico and Texas.
PNM serves its customers with a diverse mix of generation and purchased power resources totaling 3.1 gigawatts of capacity, with a goal to achieve 100% emissions-free generation by 2040. The company's strategy is focused on safely providing reliable, affordable, and environmentally responsible power, built on a foundation of Environmental, Social, and Governance (ESG) principles.
PNM's utility operations in New Mexico are subject to regulation by the New Mexico Public Regulation Commission (NMPRC), while TNMP's operations in Texas are regulated by the Public Utility Commission of Texas (PUCT). Both utilities have a strong track record of providing safe and reliable electric service to their customers.
Financial Performance
In the first quarter of 2024, PNM Resources reported net earnings of $50.4 million, or $0.41 per share, exceeding the company's expectations. For the full year 2023, PNM Resources reported net income of $88.3 million on revenues of $1.9 billion, with operating cash flow of $551.2 million and free cash flow of -$524.6 million.
The company's performance was driven by several factors, including rate relief approved in PNM's 2024 rate case, higher transmission margins and distribution rates at TNMP, and increased performance on PNM's nuclear decommissioning and coal mine reclamation investment securities. These positive factors were partially offset by higher employee-related, outside services, and vegetation management expenses, increased depreciation and amortization, and lower transmission margins at PNM.
Regulatory Developments
PNM Resources' utilities are actively engaged in various regulatory proceedings to support their operations and investments. In Texas, TNMP has received approval for a $13 million increase in its Transmission Cost of Service (TCOS) rates, reflecting nearly $100 million in incremental transmission rate base. The company also plans to file its second TCOS and Distribution Cost Recovery Factor (DCRF) applications in the third quarter of 2024.
In New Mexico, PNM has several key proceedings underway, including a proposal for additional solar and battery storage resources to be available for the 2026 summer peak and a grid modernization application. The company also plans to file its next retail rate case in early June 2024, seeking rates effective in July 2025.
Growth and Investment
PNM Resources is committed to investing in its utility infrastructure to support growing demand and the transition to a clean energy future. The company's capital investment plan for 2024-2028 totals $6.1 billion, with a focus on transmission and distribution system upgrades, renewable energy integration, and grid modernization.
TNMP's growth is being driven by the continued high demand in its service territory, particularly in the Permian Basin region of West Texas. The utility plans to file a system resiliency plan in the third quarter of 2024, which could result in additional investments to enhance the reliability and resilience of its grid.
PNM is also making progress on its goal to achieve 100% emissions-free generation by 2040. The company recently integrated an additional 300 megawatts of solar capacity, bringing its portfolio to 60% carbon-free. PNM continues to evaluate its participation in the Four Corners coal-fired power plant, as it works to balance customer costs and environmental considerations.
Liquidity and Capital Structure
As of March 31, 2024, PNM Resources had $644 million in available liquidity under its revolving credit facilities. The company's debt-to-capitalization ratio was 67% at the end of the first quarter.
PNM Resources is actively managing its capital structure, with plans to refinance its holding company debt with more permanent instruments that provide equity credit. The company also expects to issue approximately $500 million in new equity over the next five years to support its strong rate base growth.
Risks and Challenges
PNM Resources faces several risks and challenges, including the potential for increased costs and regulatory uncertainty related to environmental regulations, the ability to recover investments through timely rate proceedings, and the potential impact of severe weather events and wildfires on its operations.
The company's transition to a clean energy portfolio also presents risks, as it must balance the need for reliable and affordable power with the costs of new renewable and storage resources. PNM Resources is actively working to mitigate these risks through its resource planning and regulatory engagement.
Outlook
PNM Resources is affirming its 2024 earnings guidance range of $2.65 to $2.75 per share, supported by its strong rate base growth and ongoing operational improvements. The company also reaffirmed its long-term earnings growth target of 6% to 7%, driven by its investments in utility infrastructure and the transition to a more sustainable energy mix.
Overall, PNM Resources is well-positioned to continue delivering reliable, affordable, and environmentally responsible power to its customers in New Mexico and Texas. The company's focus on safety, operational excellence, and strategic investments positions it for long-term success in the evolving utility landscape.