TXNM Energy, Inc. Q1 FY2024 earnings call

• Pat mentioned closing the sale of NMRD in February, receiving $117 million in proceeds.
• Don discussed ERCOT's new planning effort, $100 million reliability project in West Texas, plan to file system resiliency plan in third quarter, wildfire mitigation with increased vegetation management, PNM's public safety power shutoff plan filing, integration of 300 MW solar PPA making portfolio 60% carbon-free, TCOS and DCRF filings at utilities, and regulatory proceedings at PNM including solar/battery resources and grid modernization.
• Lisa affirmed 2024 guidance range of $2.65 to $2.75, adjusted quarterly earnings distribution, and affirmed long-term rate-based growth and earnings growth targets of 6%-7%.

TNMP implemented new retail rates in Q1 2024, which were based on a 2024 future test year and incorporated expected cost increases. PNM had load growth primarily from industrial customers but was offset by return to normal weather compared to 2023. Transmission margins at PNM were higher in Q1 2023 due to market power prices, and depreciation/interest expense from new rate-based investments reduced earnings. No detailed revenue contribution % provided for segments.

• Affirmed 2024 earnings guidance range of $2.65 to $2.75.
• Quarterly earnings distribution adjusted, with third quarter accounting for about half of earnings.
• Affirmed long-term rate-based growth and earnings growth targets of 6%-7%.

• Renegotiating wildfire insurance expiring in summer, details not disclosed during negotiation period.
• Regulatory and legislative processes (e.g., ERCOT and PUCT assessments, mobile generation rulemaking) could impact CapEx and investments.

Q: What's the current amount of wildfire insurance that the company has in Texas and New Mexico. And are you able to share what the cost that you paid to procure that insurance and when it expires?

A: Ryan, we're actually right in the midst of renegotiating our insurance that will expire this summer. Giving kind of information publicly during that negotiating period probably isn't a good idea. So, we're not talking about that right now.

Q: In the prepared remarks was mentioned, an opportunity to potentially increase vegetation management to the extent that that were, to be supported. Any sense around the impact to O&M outlook in your plan as an effort to harden the system or reduce risk?

A: No, absolutely Ryan. Just a little bit of background. We've continuously increased our vegetation management, both in Texas and New Mexico over the last several years. The resiliency filing in Texas allows you to take any amount over your last rate case, and our last rate case was in the 2018 time period and be able to collect that through a rider along with whatever plans you put in place for veg, additional veg management that you would you'd look at doing. So that will be part of our resiliency filing that we file in the third quarter.

Q: And then any update around the CapEx opportunity for mobile generation or the legislative process or regulatory process to pursue that?

A: Let me hit a few of those legislative factors. Because I think they're important. DCRF, we've checked that box and we filed our first one and we'll look to file another one in the September timeframe. If you go to the system resiliency, we've talked about that. We plan to file that in the third quarter, the mobile gen. We expect a proposed rule in June, but that'll then take comments into place from all the different interveners and so forth. And so we expect a rule by the end of the year. So I'm not going to get in front of where that CapEx would come into, but we would expect that at the final rule at the end of the year. And then the West Texas planning, I talked a little bit about that with and ERCOT just released some pretty strong information about they expect to file their plan with the PUCT and in July. And then we'll kind of work through the process to see comes out, what comes out of that.

Q: And then last question from me, in terms of some of the recent disclosure around new potential load in Texas that came out of ERCOT, or any implications for your business?

A: No, absolutely. As we've talked before, one of the areas that we serve in Texas is kind of that West Texas area. And that's, if you look at the ERCOT presentation, I think one of the bullets said they recommend transmission projects to meet large loads starting in the premium basin. And that's where we operate at. I think we have to wait to see what comes out in July and then how the PUCT deals with it. But there are opportunities for incremental investments as you look at the load that's expected in that area.