PR Newswire | Jul 31, 2020 06:30AM EDT

07/31 05:30 CDT

PNM Resources Reports Second Quarter Results2020 Ongoing Earnings Guidance Affirmed, Conference call set for 11 a.m. Eastern today ALBUQUERQUE, N.M., July 31, 2020

ALBUQUERQUE, N.M., July 31, 2020 /PRNewswire/ --

PNM Resources (In millions, except EPS)

Q2 2020 Q2 2019 YTD 2020 YTD 2019

GAAP net earnings (loss) attributable to $57.5 ($75.9) $42.2 ($57.2)PNM Resources

GAAP diluted EPS $0.72 ($0.95) $0.53 ($0.72)

Ongoing net earnings $44.1 $30.2 $58.3 $39.2

Ongoing diluted EPS $0.55 $0.38 $0.73 $0.49

PNM Resources (NYSE: PNM) today released the company's 2020 second quarter results. In addition, management affirmed its 2020 consolidated ongoing earnings guidance of $2.16 to $2.26 per diluted share, targeting the midpoint of this range.

"Warmer temperatures during the second quarter outweighed the reduced load impacts related to COVID-19 and has strengthened our ability to manage within our ongoing earnings guidance range," said Pat Vincent-Collawn, PNM Resources' chairman, president and CEO. "Our top priority continues to be on the safety of our team and caring for our customers and communities. Our response is guided by our vision and values as we manage the current environment while keeping focused on our strategic objectives and goals designed to integrate and deliver the clean energy resources of the future to PNM and TNMP customers."

During today's earnings conference call, PNM Resources will highlight its commitment to ESG principles and share recent achievements in these areas, including additional environmental goals that frame the company's path to emissions-free energy by 2040 and significant reductions in the usage of freshwater. Management will also highlight investment programs that are aligned with these principles, including the recently announced Wired for the Future program to enhance transmission and distribution infrastructure to provide a reliable, resilient and secure energy grid to deliver clean energy.

"PNM is taking a broad view with investments that focus on strengthening our infrastructure to support the transformation to a 100% clean energy portfolio," Vincent-Collawn continued. "Our future investment plans will not reflect new generation additions and will emphasize grid investments to enhance capabilities to adapt and integrate new resources. If regulators determine that PNM should develop new generation resources, however, these projects would need to be balanced with grid investments to maintain the affordability of customer rates. We remain committed to our earnings growth target of 5 to 6 percent through 2023."

The New Mexico Public Regulation Commission issued an order this week on the replacement power for the San Juan Generating Station, which has been approved for abandonment in 2022. The order supports PNM's clean energy goals with a portfolio of renewable energy resources and battery storage. The revised capital investment plan included in the presentation materials for today's call does not include investments for replacement power resources.

SEGMENT REPORTING OF 2020 SECOND QUARTER EARNINGSPNM- a vertically integrated electric utility in New Mexico with distribution, transmission and generation assets.

PNM (In millions, except EPS)

Q2 2020 Q2 2019 YTD 2020 YTD 2019

GAAP net earnings (loss) attributable to $45.5 ($86.9) $29.5 ($67.9)PNM Resources

GAAP diluted EPS $0.57 ($1.09) $0.37 ($0.85)

Ongoing net earnings $31.4 $19.0 $44.4 $28.4

Ongoing diluted EPS $0.39 $0.24 $0.56 $0.36

* GAAP earnings during the second quarter of 2019 included the $104 million after tax write-off of assets previously under appeal with the New Mexico Supreme Court following the order confirming disallowance of these assets from retail rate base. * Higher than normal temperatures in the second quarter of 2020 compared to significantly milder temperatures in the second quarter of 2019 resulted in higher residential load, partially offset by reduced commercial usage resulting from COVID-19 business restrictions in New Mexico. * Earnings were also higher in the second quarter of 2020 due to lower plant outage costs resulting from the completion of planned outages at San Juan Generating Station in 2019, along with higher transmission margins, recovery of new utility-owned solar resources under the renewable rider and the refinancing of debt at lower interest rates. These increases were partially offset by additional depreciation and property tax expenses on new capital investments.

TNMP - an electric transmission and distribution utility in Texas.

TNMP (In millions, except EPS)

Q2 2020 Q2 2019 YTD 2020 YTD 2019

GAAP net earnings attributable to PNM $16.2 $15.3 $23.3 $19.4Resources

GAAP diluted EPS $0.20 $0.19 $0.29 $0.24

Ongoing net earnings $16.2 $15.4 $23.3 $19.5

Ongoing diluted EPS $0.20 $0.19 $0.29 $0.24

* TNMP's GAAP and ongoing earnings increased in the second quarter of 2020 due to the implementation of Transmission Cost of Service (TCOS) rate increases implemented in September 2019 and March 2020. Total customer usage increased as a result of higher than normal temperatures. COVID-19 restrictions increased volumetric (primarily residential) load and reduced demand-based (commercial and industrial) load. * These increases were offset by higher depreciation and property tax expenses resulting from additional capital investments.

Corporate and Other- a segment that reflects the PNM Resources holding company and other subsidiaries.

Corporate and Other (In millions, except EPS)

Q2 2020 Q2 2019 YTD 2020 YTD 2019

GAAP net earnings (loss) attributable to PNM ($4.2) ($4.2) ($10.5) ($8.6)Resources

GAAP diluted EPS ($0.05) ($0.05) ($0.13) ($0.11)

Ongoing net earnings (loss) ($3.4) ($4.2) ($9.3) ($8.7)

Ongoing diluted EPS ($0.04) ($0.05) ($0.12) ($0.11)

* Corporate and Other's ongoing losses were reduced in the second quarter of 2020 due to higher tax benefits resulting from a higher effective tax rate.

Financial materials are available at http://www.pnmresources.com/investors/results.cfm.

SECOND QUARTER CONFERENCE CALL: 11 A.M. EASTERN FRIDAY, JULY 31

PNM Resources will discuss these items during a live conference call and webcast on Friday, July 31st at 11 a.m. Eastern. Speaking on the call will be Pat Vincent-Collawn, PNM Resources chairman, president and CEO, and Don Tarry, PNM Resources senior vice president and CFO.

A live webcast of the call will be archived at http://www.pnmresources.com/investors/events.cfm. Listeners are encouraged to visit the website at least 30 minutes before the event to register, download and install any necessary audio software.

Investors and analysts can participate in the live conference call by pre-registering using the following link to receive a special dial-in number and PIN: http://dpregister.com/10145798. Telephone participants who are unable to pre-register may participate in the live conference call by dialing (877) 276-8648 or (412) 317-5474 fifteen minutes prior to the event and referencing "the PNM Resources second quarter conference call".

Supporting material for PNM Resources' earnings announcements can be viewed and downloaded at http://www.pnmresources.com/investors/results.cfm.

Background:PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2019 consolidated operating revenues of $1.5 billion. Through its regulated utilities, PNM and TNMP, PNM Resources has approximately 2,811 megawatts of generation capacity and provides electricity to more than 790,000 homes and businesses in New Mexico and Texas. For more information, visit the company's website at www.PNMResources.com.

CONTACTS:

Analysts Media

Lisa Goodman Ray Sandoval

(505) 241-2160 (505) 241-2782

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995Statements made in this news release 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, Form 10-Q filings and the information included in the Company's Forms 8-K with the Securities and Exchange Commission, which factors are specifically incorporated by reference herein.

Non-GAAP Financial MeasuresGAAP refers to generally accepted accounting principles in the U.S. Ongoing earnings is a non-GAAP financial measure that excludes the impact of net unrealized mark-to-market gains and losses on economic hedges, the net change in unrealized gains and losses on investment securities, pension expense related to previously disposed of gas distribution business, and certain non-recurring, infrequent, and other items that are not indicative of fundamental changes in the earnings capacity of the Company's operations. The Company uses ongoing earnings and ongoing earnings per diluted share (or ongoing diluted earnings per share) to evaluate the operations of the Company and to establish goals, including those used for certain aspects of incentive compensation, for management and employees. While the Company believes these financial measures are appropriate and useful for investors, they are not measures presented in accordance with GAAP. The Company does not intend for these measures, or any piece of these measures, to represent any financial measure as defined by GAAP. Furthermore, the Company's calculations of these measures as presented may or may not be comparable to similarly titled measures used by other companies. The Company uses ongoing earnings guidance to provide investors with management's expectations of ongoing financial performance over the period presented. While the Company believes ongoing earnings guidance is an appropriate measure, it is not a measure presented in accordance with GAAP. The Company does not intend for ongoing earnings guidance to represent an expectation of net earnings as defined by GAAP. Since the future differences between GAAP and ongoing earnings are frequently outside the control of the Company, management is generally not able to estimate the impact of the reconciling items between forecasted GAAP net earnings and ongoing earnings guidance, nor their probable impact on GAAP net earnings without unreasonable effort, therefore, management is generally not able to provide a corresponding GAAP equivalent for ongoing earnings guidance. Reconciliations between GAAP and ongoing earnings are contained in schedules 1-5.

PNM Resources, Inc. and Subsidiaries Schedule 1 Reconciliation of GAAP to Ongoing Earnings (Preliminary and Unaudited)



PNM TNMP Corporate PNMR and Other Consolidated

(in thousands)

Three Months Ended June 30, 2020

GAAP Net Earnings (Loss) $45,540$16,174$(4,225) $57,489 Attributable to PNMR

Adjusting items before income tax effects:

Net change in unrealized gains and losses on (17,359)- - (17,359) investment securities^2a

Regulatory disallowances^2b1,911 - - 1,911

Pension expense related to previously disposed of gas 1,131 - - 1,131 distribution business^2c

Costs to review strategic - - 1,233 1,233 growth opportunities^2d

Total adjustments before (14,317)- 1,233 (13,084) income tax effects

Income tax impact of above 3,637 - (313) 3,324 adjustments^1

Timing of statutory and effective tax rates on (3,481) - (103) (3,584) non-recurring items^3

Total income tax impacts^4 156 - (416) (260)

Adjusting items, net of (14,161)- 817 (13,344) income taxes

Ongoing Earnings (Loss) $31,379$16,174$(3,408) $44,145



Six Months Ended June 30, 2020

GAAP Net Earnings (Loss) $29,483$23,266$(10,520)$42,229 Attributable to PNMR

Adjusting items before income tax effects:

Net change in unrealized gains and losses on 14,279 - - 14,279 investment securities^2a

Regulatory disallowances^2b1,911 - - 1,911

Pension expense related to previously disposed of gas 2,262 - - 2,262 distribution business^2c

Costs to review strategic - - 1,233 1,233 growth opportunities^2d

Total adjustments before 18,452 - 1,233 19,685 income tax effects

Income tax impact of above (4,687) - (313) (5,000) adjustments^1

Timing of statutory and effective tax rates on 1,146 - 284 1,430 non-recurring items^3

Total income tax impacts^4 (3,541) - (29) (3,570)

Adjusting items, net of 14,911 - 1,204 16,115 income taxes

Ongoing Earnings (Loss) $44,394$23,266$(9,316) $58,344



^1 Tax effects calculated using a tax rate of 25.4%

^2 The pre-tax impacts (in thousands) of adjusting items are reflected on theGAAP Condensed Consolidated Statements of Earnings as follows:

^a (Increases) decreases in "Gains on investment securities" reflecting non-cash performance relative to market, not indicative of funding requirements

^b Increases of $1.9 million in "Interest Charges" and less than $0.1 millionin "Other income" reflecting disallowances of previously capitalized AFUDC for certain costs included in the AFUDC computation, resulting from a FERC audit.

^c Increases in "Other (deductions)"

^d Increases in "Administrative and general"

^3 Income tax timing impacts resulting from differences between the statutorytax rate of 25.4% for PNM and the average expected statutory tax rate of 23.9% for PNMR, and the GAAP anticipated effective tax rates of 8.7% for PNM and 6.2% for PNMR, which will reverse by year end

^4 Income tax impacts reflected in "Income Taxes"

PNM Resources, Inc. and Subsidiaries Schedule 2 Reconciliation of GAAP to Ongoing Earnings (Preliminary and Unaudited)



PNM TNMP Corporate PNMR and Other Consolidated

(in thousands)

Three Months Ended June 30, 2019

GAAP Net Earnings (Loss) $(86,944)$15,267$(4,237)$ (75,914)Attributable to PNMR

Adjusting items before income tax effects:

Mark-to-market impact of (28) - - (28) economic hedges^2a

Net change in unrealized gains and losses on 504 - - 504 investment securities^2b

Regulatory disallowances 149,254 - - 149,254 and restructuring costs^2c

Pension expense related to previously disposed of gas 1,044 - - 1,044 distribution business^2d

Process improvement 410 135 - 545 initiatives^2e

Four Corners coal mine (284) - - (284) reclamation^2f

Total adjustments before 150,900 135 - 151,035 income tax effects

Income tax impact of above (38,329) (28) - (38,357) adjustments^1

Deferred income tax impact (7,485) - - (7,485) of regulatory disallowances

Timing of statutory and effective tax rates on 823 16 45 884 non-recurring items^3

Total income tax impacts^4 (44,991) (12) 45 (44,958)

Adjusting items, net of 105,909 123 45 106,077 income taxes

Ongoing Earnings (Loss) $18,965 $15,390$(4,192)$ 30,163



Six Months Ended June 30, 2019

GAAP Net Earnings (Loss) $(67,932)$19,365$(8,647)$ (57,214)Attributable to PNMR

Adjusting items before income tax effects:

Mark-to-market impact of (56) - - (56) economic hedges^2a

Net change in unrealized gains and losses on (12,490) - - (12,490) investment securities^2b

Regulatory disallowances 150,599 - - 150,599 and restructuring costs^2c

Pension expense related to previously disposed of gas 2,089 - - 2,089 distribution business^2d

Process improvement 410 135 - 545 initiatives^2e

Four Corners coal mine (284) - - (284) reclamation^2f

Total adjustments before 140,268 135 - 140,403 income tax effects

Income tax impact of above (35,628) (28) - (35,656) adjustments^1

Deferred income tax impact (7,485) - - (7,485) of regulatory disallowances

Timing of statutory and effective tax rates on (795) 16 (86) (865) non-recurring items^3

Total income tax impacts^4 (43,908) (12) (86) (44,006)

Adjusting items, net of 96,360 123 (86) 96,397 income taxes

Ongoing Earnings (Loss) $28,428 $19,488$(8,733)$ 39,183



^1 2019 income tax effects calculated using a tax rate of 25.40% for PNM and 21% for TNMP

^2 The pre-tax impacts (in thousands) of adjusting items are reflected on theGAAP Condensed Consolidated Statement of Earnings as follows:

^a (Reductions) in "Electric Operating Revenues" and "Cost of energy" of $235and $263 in the three months ended June 30, 2019 and $480 and $536 in the sixmonths ended June 30, 2019

^b (Increases) decreases in "Gains and losses on investment securities"

^c Increases in "Regulatory disallowances and restructuring costs"

^d Increases in "Other (deductions)"

^e Increases in "Administrative and General"

^f (Decreases) in "Cost of energy"

^3 Income tax timing impacts resulting from differences between the statutorytax rate of 25.4% for PNM and the average expected statutory tax rate of 24.0% for PNMR, and the GAAP anticipated effective tax rates of 11.9% for PNMand 9.4% for PNMR, which will reverse by year end

^4 Income tax impacts reflected in "Income Taxes"

PNM Resources, Inc. and Subsidiaries Schedule 3 Reconciliation of GAAP to Ongoing Earnings Per Diluted Share (Preliminary and Unaudited)



PNM TNMP CorporatePNMR and OtherConsolidated

(per diluted share)

Three Months Ended June 30, 2020

GAAP Net Earnings (Loss) $0.57$0.20$(0.05)$0.72 Attributable to PNMR

Adjusting items, net of income tax effects:

Net change in unrealized gains and (0.16)- - (0.16) losses on investment securities

Regulatory disallowances 0.02 - - 0.02

Pension expense related to previously disposed of gas 0.01 - - 0.01 distribution business

Cost to review strategic growth - - 0.01 0.01 opportunities

Timing of statutory and effective (0.05)- - (0.05) tax rates on non-recurring items

Total Adjustments (0.18)- 0.01 (0.17)

Ongoing Earnings (Loss) $0.39$0.20$(0.04)$0.55

Average Diluted Shares Outstanding: 79,875,557



Six Months Ended June 30, 2020

GAAP Net Earnings (Loss) $0.37$0.29$(0.13)$0.53 Attributable to PNMR

Adjusting items, net of income tax effects:

Net change in unrealized gains and 0.13 - - 0.13 losses on investment securities

Regulatory disallowances 0.02 - - 0.02

Pension expense related to previously disposed of gas 0.02 - - 0.02 distribution business

Cost to review strategic growth - - 0.01 0.01 opportunities

Timing of statutory and effective 0.02 - - 0.02 tax rates on non-recurring items

Total Adjustments 0.19 - 0.01 0.20

Ongoing Earnings (Loss) $0.56$0.29$(0.12)$0.73

Average Diluted Shares Outstanding: 79,978,535



PNM Resources, Inc. and Subsidiaries Schedule 4 Reconciliation of GAAP to Ongoing Earnings Per Diluted Share (Preliminary and Unaudited)



PNM TNMP CorporatePNMR and OtherConsolidated

(per diluted share)

Three Months Ended June 30, 2019

GAAP Net Earnings (Loss) $(1.09)$0.19$(0.05)$(0.95) Attributable to PNMR^1

Adjusting items, net of income tax effects:

Mark-to-market impact of economic - - - - hedges

Net change in unrealized gains and0.01 - - 0.01 losses on investment securities

Regulatory disallowances and 1.39 - - 1.39 restructuring costs

Pension expense related to previously disposed of gas 0.01 - - 0.01 distribution business

Process improvement initiatives - - - -

Four Corners coal mine reclamation- - - -

Deferred income tax impact of (0.09) - - (0.09) regulatory disallowances

Timing of statutory and effective0.01 - - 0.01 tax rates on non-recurring items

Total Adjustments 1.33 - - 1.33

Ongoing Earnings (Loss) $0.24 $0.19$(0.05)$0.38

Average Diluted Shares Outstanding: 79,917,269



Six Months Ended June 30, 2019

GAAP Net Earnings (Loss) $(0.85)$0.24$(0.11)$(0.72) Attributable to PNMR^1

Adjusting items, net of income tax effects:

Mark-to-market impact of economic - - - - hedges

Net change in unrealized gains and(0.12) - - (0.12) losses on investment securities

Regulatory disallowances and 1.41 - - 1.41 restructuring costs

Pension expense related to previously disposed of gas 0.02 - - 0.02 distribution business

Process improvement initiatives - - - -

Four Corners coal mine reclamation- - - -

Deferred income tax impact of (0.09) - - (0.09) regulatory disallowances

Timing of statutory and effective(0.01) - - (0.01) tax rates on non-recurring items

Total Adjustments 1.21 - - 1.21

Ongoing Earnings (Loss) $0.36 $0.24$(0.11)$0.49

Average Diluted Shares Outstanding: 79,904,858



^1 EPS is presented on a non-diluted basis for the three and six months ended June 30, 2019 due to the consolidated GAAP net loss

PNM Resources, Inc. and Subsidiaries Schedule 5 Condensed Consolidated Statements of Earnings (Preliminary and Unaudited)



Three Months Ended Six Months Ended June 30, June 30,

2020 2019 2020 2019

(In thousands, except per share amounts)

Electric Operating Revenues:

Contracts with customers $343,075$314,917 $666,057$630,614

Alternative revenue programs4,466 5,844 4,892 6,480

Other electric operating 10,108 9,467 20,322 42,778 revenue

Total electric operating 357,649 330,228 691,271 679,872 revenues

Operating Expenses:

Cost of energy 93,863 83,782 192,573 205,408

Administrative and general 50,453 42,833 96,485 95,170

Energy production costs 33,345 42,905 66,963 77,977

Regulatory disallowances and- 149,254 - 150,599 restructuring costs

Depreciation and 70,022 66,065 138,995 131,421 amortization

Transmission and 18,034 19,195 35,320 35,872 distribution costs

Taxes other than income 20,782 19,809 42,047 40,317 taxes

Total operating expenses 286,499 423,843 572,383 736,764

Operating income (loss) 71,150 (93,615) 118,888 (56,892)

Other Income and Deductions:

Interest income 3,071 3,460 6,494 7,048

Gains (losses) on investment21,620 4,599 (11,229) 18,613 securities

Other income 4,390 3,350 6,706 6,795

Other (deductions) (3,307) (3,117) (6,780) (6,369)

Net other income and 25,774 8,292 (4,809) 26,087 deductions

Interest Charges 31,088 29,791 61,522 61,425

Earnings (Loss) before 65,836 (115,114) 52,557 (92,230) Income Taxes

Income Taxes (Benefits) 4,275 (42,831) 2,395 (41,608)

Net Earnings (Loss) 61,561 (72,283) 50,162 (50,622)

(Earnings) Attributable to Valencia Non-controlling (3,940) (3,499) (7,669) (6,328) Interest

Preferred Stock Dividend (132) (132) (264) (264) Requirements of Subsidiary

Net Earnings (Loss) $57,489 $(75,914)$42,229 $(57,214)Attributable to PNMR

Net Earnings (Loss) Attributable to PNMR per Common Share:

Basic $0.72 $(0.95) $0.53 $(0.72)

Diluted $0.72 $(0.95) $0.53 $(0.72)

Dividends Declared per $0.308 $0.290 $0.615 $0.580 Common Share

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SOURCE PNM Resources, Inc.