PNM Resources(US:PNM)2024-05-03 20:21PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) This section presents unaudited condensed consolidated financial statements for PNMR, PNM, and TNMP for Q1 2024, including earnings, cash flows, balance sheets, and notes PNM RESOURCES, INC. AND SUBSIDIARIES Financial Statements PNMR's Q1 2024 net earnings decreased to $47.2 million from $55.0 million year-over-year, with diluted EPS falling to $0.52 from $0.64, and operating cash flow declining to $92.8 million PNMR Condensed Consolidated Statements of Earnings (Unaudited) | Indicator | Three Months Ended March 31, 2024 ($ million) | Three Months Ended March 31, 2023 ($ million) | | :--- | :--- | :--- | | Electric Operating Revenues | $436.9 | $544.1 | | Operating Income | $80.6 | $99.1 | | Net Earnings Attributable to PNMR | $47.2 | $55.0 | | Diluted EPS | $0.52 | $0.64 | PNMR Condensed Consolidated Statements of Cash Flows (Unaudited) | Indicator | Three Months Ended March 31, 2024 ($ million) | Three Months Ended March 31, 2023 ($ million) | | :--- | :--- | :--- | | Net cash flows from operating activities | $92.8 | $131.5 | | Net cash flows used in investing activities | ($184.4) | ($251.4) | | Net cash flows from financing activities | $99.5 | $120.0 | PUBLIC SERVICE COMPANY OF NEW MEXICO (PNM) AND SUBSIDIARIES Financial Statements PNM's Q1 2024 net earnings decreased to $41.9 million from $54.6 million year-over-year, driven by lower electric operating revenues and operating income PNM Condensed Consolidated Statements of Earnings (Unaudited) | Indicator | Three Months Ended March 31, 2024 ($ million) | Three Months Ended March 31, 2023 ($ million) | | :--- | :--- | :--- | | Electric Operating Revenues | $308.1 | $430.2 | | Operating Income | $51.0 | $77.9 | | Net Earnings Available for PNM Common Stock | $41.9 | $54.6 | TEXAS-NEW MEXICO POWER COMPANY (TNMP) AND SUBSIDIARIES Financial Statements TNMP's Q1 2024 net earnings significantly increased to $14.6 million from $10.0 million year-over-year, driven by higher electric operating revenues and operating income TNMP Condensed Consolidated Statements of Earnings (Unaudited) | Indicator | Three Months Ended March 31, 2024 ($ million) | Three Months Ended March 31, 2023 ($ million) | | :--- | :--- | :--- | | Electric Operating Revenues | $128.8 | $113.9 | | Operating Income | $30.7 | $21.8 | | Net Earnings | $14.6 | $10.0 | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section details accounting policies, segment performance, financing activities including TNMP's $285 million bond issuance, regulatory matters like PNM's 2024 Rate Change, and environmental commitments - On February 27, 2024, PNMR Development sold its interest in NM Renewable Development, LLC (NMRD), receiving net proceeds of $117.0 million and recognizing an after-tax gain of $4.4 million293 - On March 28, 2024, TNMP entered into an agreement to sell $285.0 million of first mortgage bonds in four series, with the first two series totaling $117.0 million issued on March 28, 2024148 - PNM's 2024 Rate Change, effective January 15, 2024, authorized a $15.3 million increase in non-fuel base rates, significantly less than the $63.8 million requested, and included a 9.26% ROE and a disallowance of $81.0 million from the Four Corners net book value due to imprudence244245 - PNM remeasured its San Juan mine reclamation liability in Q1 2024, resulting in a $20.9 million increase in estimated costs and a $4.5 million regulatory disallowance charge due to a regulatory cap on cost recovery231 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PNMR's Q1 2024 net earnings declined to $47.2 million, driven by PNM's lower results offset by TNMP's growth, with projected $6.8 billion capital requirements for 2024-2028 and a 2040 emissions-free goal PNMR Net Earnings Summary | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Earnings Attributable to PNMR | $47.2 million | $55.0 million | ($7.8) million | | Diluted EPS | $0.52 | $0.64 | ($0.12) | Change in Net Earnings by Segment (Q1 2024 vs Q1 2023) | Segment | Change in Net Earnings (in millions) | | :--- | :--- | | TNMP | $4.6 | | PNM | ($12.7) | | Corporate and Other | $0.3 | | Net Change | ($7.8) | - The company projects total capital requirements of $6.8 billion for 2024-2028, consisting of $6.1 billion in construction expenditures and approximately $700 million in dividends397 - PNMR is focused on transitioning to an emissions-free generating portfolio by 2040, which is ahead of the New Mexico state mandate of 2045313443 Results of Operations by Segment Q1 2024 saw TNMP's earnings rise by $4.6 million to $14.6 million, while PNM's earnings fell by $12.7 million to $41.9 million due to weather and regulatory disallowances - TNMP's utility margin increased by $11.8 million, driven by $5.8 million from transmission rate relief/load and $2.4 million from distribution rate relief370371 - PNM's utility margin decreased by $9.6 million, primarily due to a $12.7 million drop in transmission revenue and a $3.2 million negative impact from milder weather, partially offset by $3.4 million from rate relief375378 - PNM's operating expenses increased by $7.8 million, which includes a $4.5 million regulatory disallowance for the unrecoverable portion of the San Juan Coal Mine reclamation remeasurement378 - Corporate and Other segment results include a $15.1 million pre-tax loss on the sale of the NMRD equity investment, but the income tax benefit was $18.6 million, largely due to recognizing a $15.7 million Investment Tax Credit upon the sale382383 Liquidity and Capital Resources Operating cash flow decreased to $92.8 million in Q1 2024, with projected $6.8 billion capital requirements for 2024-2028, supported by amended credit facilities and $644.0 million consolidated liquidity Projected Capital Requirements (2024-2028) | Category | 2024 ($ million) | 2025-2028 ($ million) | Total ($ million) | | :--- | :--- | :--- | :--- | | Construction expenditures | $1,176.3 | $4,876.9 | $6,053.2 | | Dividends on PNMR common stock | $139.8 | $559.3 | $699.1 | | Total capital requirements | $1,316.6 | $5,438.3 | $6,754.9 | Liquidity Availability as of April 26, 2024 | Entity | Total Financing Capacity ($ million) | Remaining Availability ($ million) | | :--- | :--- | :--- | | PNM | $440.0 | $229.8 | | TNMP | $200.0 | $158.0 | | PNMR Separate | $300.0 | $256.2 | | PNMR Consolidated | $940.0 | $644.0 | - On April 1, 2024, PNMR, PNM, and TNMP amended or entered into new revolving credit facilities, extending maturities to March 30, 2029, with options to extend to 2031401 Other Issues Facing the Company The company targets a 100% emissions-free portfolio by 2040, ahead of the 2045 state mandate, actively managing 2.7 million metric tons of CO2 emissions in 2023 through renewable investments and navigating regulatory oversight - PNMR has set a goal for a 100% emissions-free generating portfolio by 2040, which is more aggressive than the state-mandated 2045 target415443 - In 2023, GHG emissions from PNM's fossil-fueled plants were approximately 2.7 million metric tons of CO2419 - As of March 31, 2024, PNM has 1,577 MW of renewable/storage capacity in service and another 1,392 MW of approved projects expected by 2025, with an additional 410 MW requested for the 2026 summer peak421 - On April 25, 2024, the EPA signed a final rule under CAA Section 111 for GHG emissions from power plants, requiring existing coal units to use technologies like CCS or co-firing gas, and setting standards for new gas turbines, with the company assessing the impact433 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company manages market risks including commodity, credit, interest rate, and equity, with $1.0 billion in variable-rate long-term debt and potential $25.2 million impact from a 10% equity price drop in trust funds Variable Rate Debt Exposure (as of April 26, 2024) | Debt Type | Balance Outstanding ($ million) | | :--- | :--- | | Short-term Debt (Revolving Credit Facilities) | | | PNMR Revolving Credit Facility | $40.7 | | PNM Revolving Credit Facility | $170.2 | | PNM New Mexico Credit Facility | $40.0 | | TNMP Revolving Credit Facility | $42.0 | | Total Short-term | $292.9 | | Long-term Debt (Term Loans) | | | PNMR 2021 Delayed-Draw Term Loan | $500.0 | | PNMR 2023 Term Loan | $500.0 | | Total Long-term | $1,000.0 | - A hypothetical 10% decrease in equity prices would reduce the fair value of the decommissioning and reclamation trust funds by $25.2 million483 - A hypothetical 50 basis point increase in interest rates would decrease the fair value of fixed-rate securities in the decommissioning and reclamation trusts by $1.0 million (1.3%)481 CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during Q1 2024 - The Chief Executive Officer and Chief Financial Officer of PNMR, PNM, and TNMP concluded that the company's disclosure controls and procedures are effective as of March 31, 2024484 - No changes in internal control over financial reporting occurred during Q1 2024 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting485 PART II. OTHER INFORMATION LEGAL PROCEEDINGS This section incorporates by reference detailed legal and regulatory proceedings from Notes 11 and 12 of the financial statements, covering various rate cases and environmental matters - Information regarding legal proceedings is incorporated by reference from Note 11 and Note 12 of the financial statements486 RISK FACTORS No material changes to risk factors since the 2023 Annual Report, except for an expanded discussion on wildfire risks, which could lead to higher costs, liabilities, and service disruptions - A key risk factor is the potential negative impact of wildfires on operations and financial results, including higher maintenance costs, increased insurance premiums, liability for damages, and potential for intentional power interruptions490491 OTHER INFORMATION No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q1 2024492 EXHIBITS This section lists exhibits filed with Form 10-Q, including supplemental indentures, amended credit agreements, incentive plans, and CEO/CFO certifications - Filed exhibits include updated credit agreements for PNMR, PNM, and TNMP, a new Bond Purchase Agreement for TNMP, and new long-term incentive plans493494