PR Newswire | Feb 26, 2021 06:30AM EST

02/26 05:30 CST

PNM Resources Reports 2020 Earnings Results2021 Ongoing Earnings Guidance Affirmed ALBUQUERQUE, N.M., Feb. 26, 2021

ALBUQUERQUE, N.M., Feb. 26, 2021 /PRNewswire/ --

* 2020 GAAP earnings of $2.15 per diluted share * 2020 Ongoing earnings per share of $2.28 in line with expectations * Affirmed 2021 Ongoing earnings guidance range of $2.27 to $2.37 per diluted share

PNM Resources (In millions, except EPS)



2020 2019

GAAP net earnings attributable to PNM Resources$172.8$77.4

GAAP diluted EPS $2.15 $0.97

Ongoing net earnings $182.8$172.5

Ongoing diluted EPS $2.28 $2.16

PNM Resources (NYSE: PNM) today released its 2020 year-end results in line with previously published ongoing earnings guidance. In addition, management affirmed its 2021 consolidated ongoing earnings guidance of $2.27 to $2.37 per diluted share.

"Our fourth quarter results finished the year in line with expectations, demonstrating resilience and adaptability during the continued effects of the COVID-19 pandemic," said Pat Vincent-Collawn, PNM Resources' chairman, president and CEO. "We look forward to bringing the benefits of our merger with Avangrid to customers, employees and communities and are progressing through the remaining regulatory approvals. We continue to expect the merger to close in the second half of 2021."

ERCOT WINTER STORM OUTAGES

During the severe winter storm impacting Texas this month, TNMP complied with the Electric Reliability Council of Texas (ERCOT) directives to curtail the delivery of electricity in its service territory, reducing the record-setting demand created by arctic temperatures. TNMP did not experience significant outages on its system outside of the ERCOT-directed curtailments.

In the event a Retail Electric Provider files for bankruptcy, TNMP is permitted to defer any associated uncollected amounts to a regulatory asset for recovery through a future general rate proceeding.

At this time, PNM Resources does not expect significant financial impacts related to these events.

UPDATE ON MERGER AGREEMENT

On October 21, 2020, PNM Resources announced an agreement to enter into a merger with AVANGRID. Under the terms of the proposed merger, PNM Resources shareholders will receive $50.30 in cash for each share of PNM Resources common stock held at closing.

Shareholders approved the merger on February 12, 2021. Clearances have been received from the Department of Justice under the Hart-Scott-Rodino Act and the Committee on Foreign Investment in the United States (CFIUS). Approvals continue to be pursued from the Federal Communications Commission, Federal Energy Regulatory Commission, Nuclear Regulatory Commission, Public Utility Commission of Texas and New Mexico Public Regulation Commission.

PNM Resources continues to anticipate that the closing of the merger will occur in the second half of 2021, subject to the satisfaction or waiver of the remaining customary conditions to closing, including among other things, receipt of other required state and federal regulatory approvals.

SEGMENT REPORTING OF 2020 EARNINGS

* PNM - a vertically integrated electric utility in New Mexico with distribution, transmission and generation assets. * TNMP - an electric transmission and distribution utility in Texas. * Corporate and Other - reflects the PNM Resources holding company and other subsidiaries.

EPS Results by Segment

EPS Results by Segment

GAAP Diluted EPS Ongoing Diluted EPS

2020 2019 2020 2019

PNM $1.81 $0.51 $1.76 $1.67

TNMP $0.73 $0.70 $0.74 $0.70

Corporate and Other ($0.39) ($0.24) ($0.22) ($0.21)

Consolidated PNM Resources$2.15 $0.97 $2.28 $2.16

GAAP earnings increased in 2020 resulting from $150.6 million of PNM pre-tax regulatory disallowances and restructuring costs in 2019, partially offset by $17.0 million of Corporate and Other pre-tax merger related expenditures in 2020. GAAP and ongoing earnings also increased in 2020 resulting from:

* PNM: interest savings from refinancing of debt at lower interest rates, higher sales volumes as COVID-19 impacts were more than offset by higher summer temperatures, higher transmission margins and lower outage costs, partially offset by expected increases in operational spending and higher depreciation and property tax expenses resulting from additional capital investments. * TNMP: Distribution Cost of Service (DCOS) and Transmission Cost of Service (TCOS) rate increases were partially offset by expected increases in operational spending and higher depreciation and property tax expenses resulting from additional capital investments.

Additional materials with information on quarterly and full-year results are available at http://www.pnmresources.com/investors/results.cfm.

Background:PNM Resources (NYSE: PNM) is an energy holding company based in Albuquerque, N.M., with 2020 consolidated operating revenues of $1.5 billion. Through its regulated utilities, PNM and TNMP, PNM Resources provides electricity to approximately 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 2.8 gigawatts of capacity, with a goal to achieve 100% emissions-free energy by 2040. 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. Additionally, there are risks and uncertainties in connection with the proposed acquisition of us by AVANGRID which may adversely affect our business, future opportunities, employees and common stock, including without limitation, (i) the expected timing and likelihood of completion of the pending Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the pending Merger that could reduce anticipated benefits or cause the parties to abandon the transaction, (ii) the failure by AVANGRID to obtain the necessary financing arrangement set forth in commitment letter received in connection with the Merger, (iii) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (iv) the possibility that PNMR's shareholders may not approve the Merger Agreement, (v) the risk that the parties may not be able to satisfy the conditions to the proposed Merger in a timely manner or at all, (vi) risks related to disruption of management time from ongoing business operations due to the proposed Merger, and (vii) the risk that the proposed transaction and its announcement could have an adverse effect on the ability of PNMR to retain and hire key personnel and maintain relationships with its customers and suppliers, and on its operating results and businesses generally. 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 Consolidated and Other

(in thousands)

Quarter Ended December 31, 2020

GAAP Net Earnings (Loss) $16,671 $11,398$(19,291)$8,778 Attributable to PNMR:

Adjusting items before income tax effects

Net change in unrealized gains and losses on (16,015) - - (16,015) investment securities^2a

Regulatory disallowances 1,098 - - 1,098 and restructuring costs^2b

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

Merger related costs^2d 72 95 15,429 15,596

Total adjustments before (13,714) 95 15,429 1,810 income tax effects

Income tax impact of above 3,483 (20) (3,919) (456) adjustments^1

Income tax impact of non-deductible merger 752 428 1,257 2,437 related costs^3

Total income tax impacts^4 4,235 408 (2,662) 1,981

Adjusting items, net of (9,479) 503 12,767 3,791 income taxes

Ongoing Earnings (Loss) $7,192 $11,901$(6,524) $12,569



Year Ended December 31, 2020

GAAP Net Earnings (Loss) $145,473$58,585$(31,283)$172,775 Attributable to PNMR:

Adjusting items before income tax effects

Net change in unrealized gains and losses on (14,513) - - (14,513) investment securities^2a

Regulatory disallowances 3,009 - - 3,009 and restructuring costs^2b

Pension expense related to previously disposed of gas 4,525 - - 4,525 distribution business^2c

Merger related costs^2d 72 95 17,016 17,183

Total adjustments before (6,907) 95 17,016 10,204 income tax effects

Income tax impact of above 1,754 (20) (4,322) (2,588) adjustments^1

Income tax impact of non-deductible merger 752 428 1,257 2,437 related costs^3

Total income tax impacts^4 2,506 408 (3,065) (151)

Adjusting items, net of (4,401) 503 13,951 10,053 income taxes

Ongoing Earnings (Loss) $141,072$59,088$(17,332)$182,828



^1 Tax effects calculated using a tax rate of 21.0% for TNMP and 25.4% for other segments

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

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

^b Increase of $1.9 million in "Interest Charges", decrease of less than $0.1million in "Other income" for the year ended December 31, 2020, reflecting disallowances of previously capitalized AFUDC for certain costs included in the AFUDC computation, resulting from a FERC audit; and a net increase of $1.1 million in "Regulatory disallowances and restructuring costs" for the three months and year ended December 31, 2020, resulting from coal mine reclamation remeasurements

^c Increases in "Other (deductions)"

^d Increases in "Administrative and general" of $15.6 million and $17.2 million for the three months and year ended December 31, 2020; and increases of less than $0.1 million in "Taxes other than income taxes" for the three months and year ended December 31, 2020

^3 Additional income tax expense of $1.2 million for non-deductible transaction costs and $1.2 million for merger-related non-deductible compensation for the three months and year ended December 31, 2020.

^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 Consolidated and Other

(in thousands)

Quarter Ended December 31, 2019

GAAP Net Earnings (Loss) $27,856 $11,347$(7,398) $31,805 Attributable to PNMR:

Adjusting items before income tax effects

Mark-to-market impact of (10) - - (10) economic hedges^3a

Net change in unrealized gains and losses on (7,590) - - (7,590) investment securities^3b

Regulatory disallowances and restructuring costs^2, - 496 - 496 3c

Pension expense related to previously disposed of gas 1,045 - - 1,045 distribution business^3d

Process improvement - - - - initiatives^3e

Four Corners coal mine - - - - reclamation^3f

Cost to review strategic - - 1,571 1,571 growth opportunities^3e

Total adjustments before (6,555) 496 1,571 (4,488) income tax effects

Income tax impacts of above1,665 (104) (399) 1,162 adjustments^1

Deferred income tax impact - - - - of regulatory disallowance

Impairment of state tax - - 425 425 credits

Timing of statutory and effective tax rates on 52 (12) (6) 34 non-recurring items^4

Total income tax impacts^5 1,717 (116) 20 1,621

Adjusting items, net of (4,838) 380 1,591 (2,867) income taxes

Ongoing Earnings (Loss) $23,018 $11,727$(5,807) $28,938



Year Ended December 31, 2019

GAAP Net Earnings (Loss) $40,653 $55,799$(19,090)$77,362 Attributable to PNMR:

Adjusting items before income tax effects

Mark-to-market impact of (94) - - (94) economic hedges^3a

Net change in unrealized gains and losses on (21,282) - - (21,282) investment securities^3b

Regulatory disallowances and restructuring costs^2, 150,599 496 - 151,095 3c

Pension expense related to previously disposed of gas 4,179 - - 4,179 distribution business^3d

Process improvement 559 186 - 745 initiatives^3e

Four Corners coal mine 794 - - 794 reclamation^3f

Cost to review strategic - - 1,571 1,571 growth opportunities^3e

Total adjustments before 134,755 682 1,571 137,008 income tax effects

Income tax impacts of above(34,228) (143) (399) (34,770) adjustments^1

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

Impairment of state tax - - 425 425 credits

Timing of statutory and effective tax rates on - - - - non-recurring items^4

Total income tax impacts^5 (41,713) (143) 26 (41,830)

Adjusting items, net of 93,042 539 1,597 95,178 income taxes

Ongoing Earnings (Loss) $133,695$56,338$(17,493)$172,540



^1 2019 income tax effects calculated using tax rates of 21.00% for TNMP and 25.40% for other segments

^2 Regulatory disallowances and restructuring costs are primarily related to the NM Supreme Court's decision to affirm the NMPRC's disallowance of certaincosts included in PNM's NM 2015 Rate Case and disallowance of certain costs in TNMP's 2018 Rate Case

^3 The pre-tax impacts (in thousands) of adjusting items are reflected on theGAAP Consolidated Statement of Earnings as follows:

^a (Reductions) in "Electric Operating Revenues" and "Cost of energy" of $260and $270 in the three months ended December 31, 2019 and $997 and $1,091 in the year ended December 31, 2019

^b (Increases) in "Gain (loss) on investment securities"

^c Increases in "Regulatory disallowances and restructuring costs"

^d Increases in "Other (deductions)"

^e Increases in "Administrative and general"

^f Increases in "Cost of Energy"

^4 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 10.8% for PNMand 8.4% for PNMR, which has reversed

^5 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 CorporateConsolidated and Other

(per diluted share)

Quarter Ended December 31, 2020

GAAP Net Earnings (Loss) $0.21$0.14$(0.24)$0.11 Attributable to PNMR:

Adjusting items, net of income tax effects

Net change in unrealized gains and(0.15)- - (0.15) losses on investment securities

Regulatory disallowances and 0.01 - - 0.01 restructuring costs

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

Merger related costs 0.01 0.01 0.15 0.17

Total Adjustments (0.12)0.01 0.15 0.04

Ongoing Earnings (Loss) $0.09$0.15$(0.09)$0.15

Average Diluted Shares Outstanding: 81,340,639



Year Ended December 31, 2020

GAAP Net Earnings (Loss) $1.81$0.73$(0.39)$2.15 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 and 0.03 - - 0.03 restructuring costs

Pension expense related to previously disposed of gas 0.04 - - 0.04 distribution business

Merger related costs 0.01 0.01 0.17 0.19

Total Adjustments (0.05)0.01 0.17 0.13

Ongoing Earnings (Loss) $1.76$0.74$(0.22)$2.28

Average Diluted Shares Outstanding: 80,302,542

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



PNM TNMP CorporateConsolidated and Other

(per diluted share)

Quarter Ended December 31, 2019

GAAP Net Earnings (Loss) $0.35$0.14$(0.09)$ 0.40 Attributable to PNMR:

Adjusting items, net of income tax effects

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

Net change in unrealized gains and (0.07)- - (0.07) losses on investment securities

Regulatory disallowances and - - - - restructuring costs

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

Cost to review strategic growth - - 0.02 0.02 opportunities

Impairment of state tax credits - - 0.01 0.01

Total Adjustments (0.07)- 0.03 (0.04)

Ongoing Earnings (Loss) $0.28$0.14$(0.06)$ 0.36

Average Diluted Shares Outstanding: 80,022,823



Year Ended December 31, 2019

GAAP Net Earnings (Loss) $0.51$0.70$(0.24)$ 0.97 Attributable to PNMR:

Adjusting items, net of income tax effects

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

Net change in unrealized gains and (0.20)- - (0.20) losses on investment securities

Regulatory disallowances and 1.40 - - 1.40 restructuring costs

Pension expense related to previously disposed of gas 0.04 - - 0.04 distribution business

Process improvement initiatives - - - -

Four Corners coal mine reclamation 0.01 - - 0.01

Cost to review strategic growth - - 0.02 0.02 opportunities

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

Impairment of state tax credits - - 0.01 0.01

Total Adjustments 1.16 - 0.03 1.19

Ongoing Earnings (Loss) $1.67$0.70$(0.21)$ 2.16

Average Diluted Shares Outstanding: 79,990,498

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



Year Ended December 31,

2020 2019 2018

(In thousands, except per share amounts)

Electric Operating Revenues $1,523,012$1,457,603$1,436,613

Operating Expenses:

Cost of energy 447,241 412,812 399,726

Administrative and general 216,334 189,227 188,470

Energy production costs 137,977 142,545 149,477

Regulatory disallowances and 1,098 151,095 65,598 restructuring costs

Depreciation and amortization 275,612 267,808 241,188

Transmission and distribution costs 77,943 69,862 76,434

Taxes other than income taxes 81,526 80,054 79,673

Total operating expenses 1,237,731 1,313,403 1,200,566

Operating income 285,281 144,200 236,047

Other Income and Deductions:

Interest income 14,223 14,022 15,540

Gains (losses) on investment 21,599 29,589 (17,176) securities

Other income 19,973 15,382 17,586

Other (deductions) (18,732) (15,328) (15,696)

Net other income and (deductions) 37,063 43,665 254

Interest Charges 114,392 121,016 127,244

Earnings before Income Taxes 207,952 66,849 109,057

Income Taxes (Benefits) 20,636 (25,282) 7,775

Net Earnings 187,316 92,131 101,282

(Earnings) Attributable to Valencia (14,013) (14,241) (15,112) Non-controlling Interest

Preferred Stock Dividend (528) (528) (528) Requirements of Subsidiary

Net Earnings Attributable to PNMR $172,775 $77,362 $85,642

Net Earnings Attributable to PNMR per Common Share:

Basic $2.16 $0.97 $1.07

Diluted $2.15 $0.97 $1.07

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SOURCE PNM Resources, Inc.