PR Newswire | Oct 28, 2021 05:30PM EDT

10/28 16:30 CDT

PNM Resources Reports Third Quarter ResultsContinued Expectation for Merger to Close in 2021 ALBUQUERQUE, N.M., Oct. 28, 2021

ALBUQUERQUE, N.M., Oct. 28, 2021 /PRNewswire/ --

* 2021 third quarter GAAP earnings of $1.32 per diluted share * 2021 third quarter ongoing earnings of $1.37 per diluted share reflects increased earnings compared to the third quarter of 2020, offset by the dilutive impact of additional shares

PNM Resources (In millions, except EPS)



Q3 2021Q3 2020YTD 2021YTD 2020

GAAP net earnings attributable$113.3 $121.8 $184.6 $164.0 to PNM Resources

GAAP diluted EPS $1.32 $1.52 $2.14 $2.05

Ongoing net earnings $118.0 $111.9 $193.3 $170.3

Ongoing diluted EPS $1.37 $1.40 $2.25 $2.13

PNM Resources (NYSE: PNM) today released its 2021 third quarter results. Additionally, based on the completion of the third quarter and the continued expectation for the pending merger with AVANGRID to close during the fourth quarter, ongoing earnings guidance for 2021 has been withdrawn.

"Our third quarter financial results reflect continued growth in transmission demand to support grid reliability," said Pat Vincent-Collawn, PNM Resources' chairman, president and CEO. "As we await the final required regulatory approval on our merger with AVANGRID from the New Mexico Public Regulation Commission, we remain focused on meeting the needs of our customers and communities today and in the future. We continue to expect the merger to close in 2021."

UPDATE ON MERGER AGREEMENTOn October 21, 2020, PNM Resources announced an agreement to enter into a merger with AVANGRID, approved by shareholders in February 2021. 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. The transaction is pending approval from the New Mexico Public Regulation Commission, which is expected to address the application in the coming weeks. The transaction has received regulatory approval from all other required federal and state agencies. PNM Resources continues to anticipate that the closing of the merger will occur in 2021, subject to the satisfaction or waiver of the remaining customary conditions to closing.

SEGMENT REPORTING OF 2021 THIRD QUARTER 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



GAAP Diluted EPS Ongoing Diluted EPS

Q3 2021 Q3 2020 Q3 2021 Q3 2020

PNM $1.01 $1.24 $1.05 $1.12

TNMP $0.33 $0.30 $0.33 $0.30

Corporate and Other ($0.02) ($0.02) ($0.01) ($0.02)



Consolidated PNM Resources$1.32 $1.52 $1.37 $1.40

Net changes to GAAP and ongoing earnings in the third quarter of 2021 compared to the third quarter of 2020 include:

* PNM: Higher transmission margins resulting from increased demand on the transmission system and the addition of a new customer, higher decommissioning and reclamation trust realized gains and interest savings from refinancing of debt at lower interest rates increased earnings. These increases were partially offset by planned increases in operational spending, the expiration of a state income tax amortization and higher property tax resulting from additional capital investments and reduced retail load compared to record-high temperatures in the third quarter of 2020. The net increase in ongoing earnings was offset by the dilutive impact of additional shares. * TNMP: Rate relief from Distribution Cost of Service (DCOS) and Transmission Cost of Service (TCOS) increases were partially offset by higher depreciation and property tax expenses resulting from additional capital investments and the dilutive impact of additional shares. * Corporate and Other: Losses were reduced by the interest savings from repayment of debt with proceeds from additional shares issued in December 2020.

GAAP earnings were also lower as a result of net changes in unrealized gains on investment securities for decommissioning and reclamation trusts in 2020.

Additional materials with information on quarterly 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 3.1 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 the Company (the "Merger") by AVANGRID which may adversely affect the Company's 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 occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (iii) the risk that the parties may not be able to satisfy the conditions to the proposed Merger in a timely manner or at all, (iv) risks related to disruption of management time from ongoing business operations due to the proposed Merger, and (v) the risk that the proposed transaction and its announcement could have an adverse effect on the ability of the Company 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 PNMR and Other Consolidated

(in thousands)

Three Months Ended September 30, 2021

GAAP Net Earnings (Loss) $86,915 $27,942$(1,536) $113,321 Attributable to PNMR

Adjusting items before income tax effects:

Net change in unrealized gains and losses on 2,512 - - 2,512 investment securities^2a

Regulatory disallowances 436 - - 436 and restructuring costs^2b

Pension expense related to previously disposed of gas 849 - - 849 distribution business^2c

Merger related costs^2d 204 5 1,364 1,573

Total adjustments before 4,001 5 1,364 5,370 income tax effects

Income tax impact of above (1,016) (1) (346) (1,363) adjustments^1

Income tax impact of non-deductible merger 12 1 130 143 related costs^3

Timing of statutory and effective tax rates on 317 226 (14) 529 non-recurring items^4

Total income tax impacts^5 (687) 226 (230) (691)

Adjusting items, net of 3,314 231 1,134 4,679 income taxes

Ongoing Earnings (Loss) $90,229 $28,173$(402) $118,000



Nine Months Ended September 30, 2021

GAAP Net Earnings (Loss) $146,804$52,326$(14,521)$184,609 Attributable to PNMR

Adjusting items before income tax effects:

Net change in unrealized gains and losses on (3,594) - - (3,594) investment securities^2a

Regulatory disallowances 436 - - 436 and restructuring costs^2b

Pension expense related to previously disposed of gas 2,547 - - 2,547 distribution business^2c

Merger related costs^2d 562 433 9,743 10,738

Total adjustments before (49) 433 9,743 10,127 income tax effects

Income tax impact of above 12 (91) (2,475) (2,554) adjustments^1

Income tax impact of non-deductible merger 24 36 835 895 related costs^3

Timing of statutory and effective tax rates on - 128 135 263 non-recurring items^4

Total income tax impacts^5 36 73 (1,505) (1,396)

Adjusting items, net of (13) 506 8,238 8,731 income taxes

Ongoing Earnings (Loss) $146,791$52,832$(6,283) $193,340



^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 the GAAP 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 in "Regulatory disallowances and restructuring costs"

^c Increases in "Other (deductions)"

^d Increases in "Administrative and general"

^3 Increases in "Income Tax Expense"

^4 Income tax timing impacts resulting from differences between the statutory tax rates of 25.4% for PNM, 21% for TNMP and the average expected statutory tax rate of 24.2% for PNMR, and the GAAP anticipated effective tax rates of 15.4% for PNM, 11.1% for TNMP, and 13.1% for PNMR, which will reverse by year end

^5 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 September 30, 2020

GAAP Net Earnings (Loss) $99,319 $23,921$(1,472) $121,768 Attributable to PNMR

Adjusting items before income tax effects:

Net change in unrealized gains and losses on (12,776) - - (12,776) investment securities^2a

Regulatory disallowances^2b- - - -

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

Costs to review strategic - - 354 354 growth opportunities^2d

Total adjustments before (11,645) - 354 (11,291) income tax effects

Income tax impact of above 2,958 - (90) 2,868 adjustments^1

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

Total income tax impacts^4 1,812 - (374) 1,438

Adjusting items, net of (9,833) - (20) (9,853) income taxes

Ongoing Earnings (Loss) $89,486 $23,921$(1,492) $111,915



Nine Months Ended September 30, 2020

GAAP Net Earnings (Loss) $128,802$47,187$(11,992)$163,997 Attributable to PNMR

Adjusting items before income tax effects:

Net change in unrealized gains and losses on 1,502 - - 1,502 investment securities^2a

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

Pension expense related to previously disposed of gas 3,394 - - 3,394 distribution business^2c

Costs to review strategic - - 1,587 1,587 growth opportunities^2d

Total adjustments before 6,807 - 1,587 8,394 income tax effects

Income tax impact of above (1,729) - (403) (2,132) adjustments^1

Timing of statutory and effective tax rates on - - - - non-recurring items^3

Total income tax impacts^4 (1,729) - (403) (2,132)

Adjusting items, net of 5,078 - 1,184 6,262 income taxes

Ongoing Earnings (Loss) $133,880$47,187$(10,808)$170,259



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

^2 The pre-tax impacts (in thousands) of adjusting items are reflected on the GAAP Condensed Consolidated Statement 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 decrease of less than $0.1 million in "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 statutory tax 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 11.3% for PNM and 8.4% 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 September 30, 2021

GAAP Net Earnings (Loss) $1.01$0.33$(0.02)$ 1.32 Attributable to PNMR

Adjusting items, net of income tax effects:

Net change in unrealized gains and 0.02 - - 0.02 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

Total Adjustments 0.04 - 0.01 0.05

Ongoing Earnings (Loss) $1.05$0.33$(0.01)$ 1.37

Average Diluted Shares Outstanding: 86,112,742



Nine Months Ended September 30, 2021

GAAP Net Earnings (Loss) $1.70$0.61$(0.17)$ 2.14 Attributable to PNMR

Adjusting items, net of income tax effects:

Net change in unrealized gains and (0.03)- - (0.03) losses on investment securities

Regulatory disallowances and 0.01 - - 0.01 restructuring costs

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

Merger related costs - 0.01 0.10 0.11

Total Adjustments - 0.01 0.10 0.11

Ongoing Earnings (Loss) $1.70$0.62$(0.07)$ 2.25

Average Diluted Shares Outstanding: 86,105,871



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 September 30, 2020

GAAP Net Earnings (Loss) $1.24$0.30$(0.02)$ 1.52 Attributable to PNMR

Adjusting items, net of income tax effects:

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

Regulatory disallowances - - - -

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

Cost to review strategic growth - - - - opportunities

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

Total Adjustments (0.12)- - (0.12)

Ongoing Earnings (Loss) $1.12$0.30$(0.02)$ 1.40

Average Diluted Shares Outstanding: 79,906,216



Nine Months Ended September 30, 2020

GAAP Net Earnings (Loss) $1.61$0.59$(0.15)$ 2.05 Attributable to PNMR

Adjusting items, net of income tax effects:

Net change in unrealized gains and 0.02 - - 0.02 losses on investment securities

Regulatory disallowances 0.02 - - 0.02

Pension expense related to previously disposed of gas 0.03 - - 0.03 distribution business

Cost to review strategic growth - - 0.01 0.01 opportunities

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

Total Adjustments 0.07 - 0.01 0.08

Ongoing Earnings (Loss) $1.68$0.59$(0.14)$ 2.13

Average Diluted Shares Outstanding: 79,954,429





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



Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

(In thousands, except per share amounts)

Electric Operating Revenues:

Contracts with customers $481,881$455,120$1,197,359$1,121,177

Alternative revenue (9,483) (12,376) (3,156) (7,484) programs

Other electric operating 82,153 29,721 151,595 50,043 revenue

Total electric operating 554,551 472,465 1,345,798 1,163,736 revenues

Operating Expenses:

Cost of energy 199,380 133,991 467,452 326,564

Administrative and general56,520 51,611 168,458 148,096

Energy production costs 32,374 31,148 106,709 98,111

Regulatory disallowances 436 - 436 - and restructuring costs

Depreciation and 71,438 68,400 212,039 207,395 amortization

Transmission and 19,996 18,742 56,166 54,062 distribution costs

Taxes other than income 22,678 20,768 65,440 62,815 taxes

Total operating expenses 402,822 324,660 1,076,700 897,043

Operating income 151,729 147,805 269,098 266,693

Other Income and Deductions:

Interest income 3,329 3,180 10,466 9,674

Gains on investment 1,948 14,401 16,108 3,172 securities

Other income 5,686 7,022 14,592 13,728

Other (deductions) (5,098) (7,361) (13,836) (14,141)

Net other income and 5,865 17,242 27,330 12,433 deductions

Interest Charges 23,244 27,263 73,247 88,785

Earnings before Income 134,350 137,784 223,181 190,341 Taxes

Income Taxes 16,668 12,331 26,533 14,726

Net Earnings 117,682 125,453 196,648 175,615

(Earnings) Attributable to Valencia Non-controlling (4,229) (3,553) (11,643) (11,222) Interest

Preferred Stock Dividend (132) (132) (396) (396) Requirements of Subsidiary

Net Earnings Attributable $113,321$121,768$184,609 $163,997 to PNMR

Net Earnings Attributable to PNMR per Common Share:

Basic $1.32 $1.52 $2.14 $2.05

Diluted $1.32 $1.52 $2.14 $2.05

Dividends Declared per $0.3275 $0.3075 $0.9825 $0.9225 Common Share

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SOURCE PNM Resources, Inc.