TXNM Energy, Inc. Q2 FY2024 earnings call

Management Statement and Operational Highlights:

• Financial results: Second quarter earnings per share were $0.60, above expectations. Affirmed 2024 guidance range of $2.65 to $2.75.
• Name change: Shareholders approved name change to TXNM Energy, with trading starting under the TXNM ticker on the New York Stock Exchange.
• Weather response: Responded to Hurricane Beryl and New Mexico fires, emphasizing safety and restoration efforts.
• TNMP operations: System peak growth, Hurricane Beryl response, and regulatory filings (TCOS, DCRF, upcoming Resiliency Plan).
• PNM operations: Battery deployment, fire response, regulatory updates (FERC, New Mexico Commission, grid modernization, 2025 rate request).
• Resiliency Plan: Filing in Texas with approximately $600 million in investments, aiming for a six-month approval process.
• Transmission: ERCOT studies for West Texas, mobile generation rule developments in Texas, and New Mexico transmission planning.

Segment Performance:

• TNMP: Reached an all-time system peak in May at over 2,700 megawatts, 6% higher than the previous summer. Impacted by Hurricane Beryl, which left over 116,000 customers without power, but 50% were restored within 24 hours. TCOS and DCRF filings recovered $300 million in investments, with a second set of filings submitted. TNMP is 40% of the rate base and growing.
• PNM: Two 6 megawatt batteries became operational. Responded to the South Fork and Salt fires, filed an annual update to the FERC formula rate, received approval for the 2026 resource adequacy filing, and has grid modernization and 2025 rate request filings in progress.

Guidance:

• Affirmed 2024 earnings guidance range of $2.65 to $2.75.
• Long-term targets include 10% rate-based growth (before incorporating additional $150 million resiliency investments).
• Financing plans: Issued $550 million in junior subordinated convertible notes, plan to refinance remaining corporate term loans, issue $100 million of equity annually, and use interest rate hedges ($600 million in 2024 and $300 million in 2025) to reduce volatility.

Risks:

• Extreme weather events posing challenges to service restoration and infrastructure.
• Regulatory lag in capital recovery affecting investment timelines.
• Transmission constraints limiting resource deployment for new projects.
• Volatility in interest rates impacting financial metrics.

Question and Answer: Q: Julien Dumoulin-Smith asked about resource filing, transmission constraints, and mobile generation.

A: Don Tarry discussed resource filing focusing on customer benefits, transmission constraints in West Texas, and mobile generation being targeted for rural areas.

Q: Nicholas Campanella inquired about the resiliency filing and New Mexico rate case.

A: Don Tarry and Pat Vincent-Collawn addressed resiliency filing details and the New Mexico rate case process, including timeline for stipulation and intervener testimony.

Q: Michael Lonegan asked about Texas CapEx and New Mexico rate case settlement.

A: Don Tarry talked about Texas CapEx increments and the New Mexico rate case settlement process, noting it's early but legacy issues improve negotiation positions.

Q: Ryan Levine questioned ERCOT transmission and Texas Resiliency Filing.

A: Don Tarry discussed ERCOT transmission opportunities in West Texas and the components of the $150 million incremental Resiliency Filing, emphasizing post-hurricane review for improvements.