PNM Resources Q2 Earnings

PNM Resources' 2019 numbers reflect the revision of guidance to focus on the midpoint. The company's four-year, $3.6-billion capital plan incorporates PNM's recommended plan for replacement power at the San Juan Generating Station, scheduled to close in June 2022. PNM's recommended plan, as well as other aspects of its abandonment filing, are subject to approval by state regulators. 

PNM Resources, the parent company of Public Service Company of New Mexico, reported a loss of $75.9 million in the second quarter of 2019 that executives say is largely attributable to weather.

“Temperatures, and financial results during the quarter, reflected New Mexico’s mildest second quarter in 20 years,” Pat Vincent-Collawn, the company’s chairman, president and CEO, told participants on an Aug. 2 conference call to discuss second-quarter results. PNM Resources reported earnings of $38.2 million for the same period in 2018.

Ongoing earnings per share reflected a slight gain of 37 cents, but still fell below the 53-cent EPS in Q2 2018. Year-to-date results were a loss of $57.2 million compared with earnings of $53.2 million in 2018.

“We believe that these results are representative of the distortion between weather and load and are not an indication of changes to the underlying economic situation,” Chuck Eldred, chief financial officer for PNM Resources, said on the call. NBC Universal, Sandia National Laboratories and Intel have recently announced new ventures or expansions of their New Mexico operations, Eldred said, anticipating growth. “There may be some timing shifts in our load as some of this growth comes on line in the second half of the year,” he added.

Eldred reaffirmed EPS guidance of $2.05 to $2.11 for 2019, but said he is “targeting the midpoint of $2.08” and has updated a quarterly distribution for third- and fourth-quarter EPS expectations. “We do not expect any of these items to impact 2020,” he said.

“Our budgets are developed with flexibility and prioritized in a way that allows us to align our cost with the revenues,” Eldred said on the call. “Of course, the size of this impact was significant, so we’re also offsetting this by managing the timing of when vacancies are filled as well as lowering our results base and incentive compensation expense.”

Vincent-Collawn worked to reassure analysts who voiced confusion on the conference call over a recent decision by state regulators.

The New Mexico Public Regulation Commission at its July 10 meeting voted to oversee abandonment of the San Juan Generating Station, the state’s largest remaining coal-fired power plant, using a proceeding that predates passage of the state’s Energy Transition Act. The sweeping law, signed by the governor in March, provides for securitization to recover stranded assets and invest in replacement resources for the plant, of which PNM is the majority owner.

“There’s some talk that [the commission is] trying to take a timeline that starts before the legislation was passed so that somehow securitization doesn’t come into play,” Ali Agha of SunTrust said on the call.

Agha envisioned a scenario in which the NMPRC decided to continue with the abandonment proceeding absent the new legal provisions, leading to a potential battle at the New Mexico Supreme Court.

“We’re very confident of our legal petition and our legal position,” Vincent-Collawn responded. While Agha, along with others, expressed concern over the time lost to a legal proceeding, he said he shared PNM’s confidence that it would ultimately result in “the right decision.”

Vincent-Collawn also remarked on an Aug. 1 order issued by NMPRC Commissioner Stephen Fischmann (who cast the lone vote against using the earlier abandonment proceeding at the July 10 meeting) that parties wishing to respond to Western Resource Advocates’ July 22 motion for clarification from the commission and expedited response time do so by noon Aug. 9.

Fischmann’s order, which does not affect the timeline for the commission’s decision, came in response to a July 24 order from NMPRC Chairwoman Theresa Becenti-Aguilar that effectively dismissed WRA’s motion and a subsequent filing from WRA July 29 requesting reconsideration [19-00195-UT] (see CEM No. 1549 [17.1]).

“Everybody understands that we need to have clarity as we move along, and we would rather have the decision sooner rather than later,” Vincent-Collawn said. If the commission finds the Energy Transition Act does not apply to the filing on abandonment, financing and replacement resources, “we will obviously go to the Supreme Court on that,” she added, suggesting the company would join forces with “some of our other supporters of the ETA.”