TXNM ENERGY INC Q2 FY2023 earnings call

• Merger: Extended pending merger agreement with AVANGRID to Dec 31, with option for further 3-month extension to Mar. New Mexico Supreme Court denied motions and rescheduled oral arguments for merger appeal from Sep 12 to 15. Confident in legal arguments for the appeal.
• Four Corners: Court confirmed need to file proposed plan for replacement resources to exit the plant early. Remain committed to exiting coal and removing carbon from the resource portfolio.
• NMRD: Sales process continuing, bid due in Q3, expected to close by end of year.
• PNM operational: Continuing clean energy transition, expecting 410 MW of solar and storage in Q3, aiming for 60% carbon-free by end 2023 and 70% by end 2024. Grid modernization application update, general rate case timeline updated with hearings in Sep and decision expected in Nov/Dec.
• TNMP operational: Hit new system peaks, annual capital investment doubled in 5 years to over $400M. Transmission expansion projects in West Texas, DCRF settlement approved. Pursuing federal funding under Infrastructure Investment and Jobs Act.

In the second quarter of 2023, ongoing earnings were $0.55 compared to $0.57 in the second quarter of 2022. Weather in both states reduced EPS by $0.04 year-over-year. At PNM, higher transmission margins and lower costs from generation portfolio transition and gas plant outages in 2022 contributed positively. TNMP had higher transmission and distribution investment recovery and load growth, but this was partially offset by expenses for depreciation, property tax, and interest associated with new rate base investments.

• Affirming 2023 guidance range of $2.65 to $2.75. July temperatures indicate likely top half of range, will reevaluate based on Q3 results. Refinanced $500M holding company term loan, updated equity ATM program to sell another $100M of equity.
• Will provide update on capital plan in Q3, incorporating Texas legislation, grid modernization timing changes, etc.

• Uncertainty around New Mexico Supreme Court's decision on merger appeal.
• Timing risks with grid modernization and rate case proceedings.
• Dependence on favorable weather for O&M and system performance.
• Regulatory changes impacting capital plans and returns.

Q: Could you give color on the scope and opportunity evaluating capital program changes related to Texas legislation and timeline for Q3 disclosure?

A: Will take into account recent legislation, grid mod timing changes, etc., and update in Q3.

Q: What are the obligations and how does it influence the path forward for Four Corners exit?

A: Guided by what's right for customers, merger agreement still requires regulatory filing and signed contract in place.

Q: Any visibility on load forecast, especially AI-related?

A: Seen economic development in New Mexico and Texas, but no specific AI load yet, but healthy economic development pipelines.

Q: About merger timeline, what will be known by end of December?

A: Pretty confident Supreme Court will have a decision by end of year, telling commission what to do to fix issues.

Q: View on intervener positions in rate case and settlement timeline?

A: Interveners focused on generation resource transition, settlement not ruled out but focus is on preparing for Sep hearings.

Q: Details on Four Corners refiling and 2026 resource filing?

A: Need to file actual replacement resources, RFP results coming in next few weeks, filing planned in next 2-3 weeks, seeking commission approval.