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Second Quarter Earnings Aug. 3, 2007

Second Quarter Earnings Aug. 3, 2007. Jeff Sterba Chairman, President & CEO Chuck Eldred Executive Vice President & CFO . Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.

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Second Quarter Earnings Aug. 3, 2007

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  1. Second Quarter EarningsAug. 3, 2007 Jeff SterbaChairman, President & CEO Chuck Eldred Executive Vice President & CFO

  2. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 Statements made in this presentation that relate to future events or the Company’s expectations, projections, estimates, intentions, goals, targets and strategies are made pursuant to the Private Securities Litigation Reform Act of 1995. You are cautioned that all forward-looking statements are based upon current expectations and estimates and the Company assumes no obligation to update this information. Because actual results may differ materially from those expressed or implied by these forward-looking statements, the Company cautions you not to place undue reliance on these statements. The Company’s business, financial condition, cash flow and operating results are influenced by many factors, which are often beyond its control, that can cause actual results to differ from those expressed or implied by the forward looking statements. These factors include the risk that EnergyCo is unable to identify and implement profitable acquisitions, including development of the Cedar Bayou Generating Station and implementation of the acquisition of the Lyondell facility, or that the contribution of assets to EnergyCo by the Company may not be implemented as expected, the potential unavailability of cash from the Company’s subsidiaries or EnergyCo due to regulatory, statutory or contractual restrictions, the outcome of any appeals of the Public Utility Commission of Texas order in the stranded cost true-up proceeding, the ability of First Choice Power to attract and retain customers, changes in Electric Reliability Council of Texas protocols, changes in the cost of power acquired by First Choice Power, collections experience, insurance coverage available for claims made in litigation, fluctuations in interest rates, conditions affecting the Company’s or EnergyCo’s ability to access the financial markets, weather, water supply, changes in fuel costs, availability of fuel supplies, the effectiveness of risk management and commodity risk transactions, seasonality and other changes in supply and demand in the market for electric power, variability of wholesale power prices and natural gas prices, volatility and liquidity in the wholesale power markets and the natural gas markets, changes in the competitive environment in the electric and natural gas industries, the performance of generating units, including the Palo Verde Nuclear Generating Station, the San Juan Generating Station, the Four Corners Plant, and EnergyCo generating units, and transmission systems, the ability to secure long-term power sales, the risk that the Company and its subsidiaries and EnergyCo may have to commit to substantial capital investments and additional operating costs to comply with new environmental control requirements including possible future requirements to address concerns about global climate change, the risks associated with completion of generation, including pollution control equipment at the SJGS, the expansion of the Afton Generating Station, and the EnergyCo Cedar Bayou Generating Station, transmission, distribution, and other projects, including construction delays and unanticipated cost overruns, state and federal regulatory and legislative decisions and actions, the outcome of legal proceedings, changes in applicable accounting principles and the performance of state, regional and national economies. For a detailed discussion of the important factors that affect the Company and that could cause actual results to differ from those expressed or implied by the Company’s forward-looking statements, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s current and future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and the Company’s current and future Current Reports on Form 8-K, filed with the SEC. Non-GAAP Financial Measures For an explanation of the non-GAAP financial measures that appear on certain slides in this presentation (ongoing earnings, ongoing earnings per diluted share and EBITDA), as well as a reconciliation to GAAP measures, please refer to the Company's website as follows: http://www.pnmresources.com/fin

  3. Highlights and Operational Review • 2nd Quarter ongoing EPS $0.13, down from $0.25 in 2006 • YTD ongoing EPS $0.52, down from $0.63 in 2006 • Gas rate case appeal • Strong progress made on executing EnergyCo strategy • Lowering 2007 guidance

  4. Quarter-over-Quarter EPS Variances (1) Excludes mark-to-market changes

  5. 2nd Quarter Plant Performance Equivalent Availability Factor Lignite: 88%* Nuclear: 91%* Coal: 89%* * Annual top quartile numbers from the North American Electricity Reliability Council

  6. First Choice Power 2nd Quarter Performance Drivers • Negative drivers: • Overall weighted average use per customer was 12% lower than same period 2006 • Milder weather • Change in customer mix • Realized unit gross margins were lower than same period in 2006, but still in line with targeted expectations of mid-$20’s/MWh • Positive drivers: • Overall 8.4% increase in customers • 15.7% decrease in operating expenses • Increase in delivered volume to Commercial and Industrial customers

  7. First Choice Power Looking Ahead • Regulatory uncertainty removed, partially mitigating issues with switch rates • Headroom is improving and expect continued good unit margins • July enrollments exceeded two times those in June • 100% of total supply requirements are hedged for Q3 • For Q4: 100% of fixed price sales requirements are hedged • 50% of variable price sales requirements are hedged • Customer Information System conversion under way • Driving many enrollment and service calls to the web and IVR • Should positively impact both cost and customer levels

  8. YTD Walk Across (ongoing) $0.52 MtM WholesaleMarketing Activity Plant performance Coal costs Dilution Load growth and weather Financing FCP YTD 2006 YTD 2007

  9. YTD Mark-to-Market Changes2007 vs. 2006 PNM Strategy: Hedge 2007 uncertainty around plant performance with forward purchases of gas and electricity Q3/Q4 Impact: MtM will reverse, however higher energy costs are expected due to fixed-price hedged position FCP Strategy: Hedge wholesale supply associated with retail load and optimize hedged positions Q2 Impact: MtM essentially flat in 2007. Unfavorable variance versus last year reflects non-recurrence of 2006’s gain.

  10. YTD EPS by Segment (ongoing)

  11. $1.80 $2.00 2007 Guidance Update Original Guidance 1st Half Expectations $.85 - $.95 2nd Half Expectations $.95 - $1.05 1st Half Actual $.52 Shortfall primarily due to: Plant performance ~ $ (0.15) Higher coal costs ~ $ (0.05) Mark-to-market loss ~ $ (0.09) Gas rate case delay ~ $ (0.04)

  12. $1.80 $2.00 2007 Guidance Update Original Guidance 2nd Half Expectations $.95 - $1.05 1st Half Expectations $.85 - $.95 Revised 2nd Half Expectations $.78 - $.88 1st Half Actual $.52 Drivers of Change Plant performance ~ $ (0.07) Afton start-up ~ $ (0.04) Higher energy costs ~ $ (0.04) Gas rate increase ~ $ (0.02)

  13. $1.80 $2.00 $1.30 $1.40 2007 Guidance Update Original Guidance 1st Half Actual $.52 Revised 2nd Half Expectations $.78 - $.88 Revised Guidance

  14. + + - - + - Other Guidance Assumptions EFOR Sensitivity (EPS) 2% EFOR San Juan: $0.04 Four Corners: $0.01 Palo Verde: $0.02 2nd Half Price Assumptions Permian gas: ~ $6.50/mmbtu PV on-peak: ~$68/MWh Gas Price Sensitivity 10% change in gas & power prices equates to EPS change of $.05 + -

  15. EnergyCo Strategy 2007 Targeted EBITDA: $14 million ($0.07 EPS to PNMR) Location Constrained zones Primarily ERCOT Long-term goal of regional diversity Contracts/Hedges Target 50%+ of portfolio Protect against price declines & capture value of volatility Financial Criteria Strong cash flow 5 yr. avg. cash on cash returns of 13%+ Unlevered IRR in excess of 8.5% Measured, disciplined growth Seek strong cash flow over short-term accretion Fuel Mix & Technology Base load assets for stability Peaking in load-serving areas State-of-art emission controls Operations Strong on-site operating team Reliable low-cost technology

  16. EnergyCo Development Project Cedar Bayou Generating Station Unit 4 • Joint project with NRG Energy • 550-MW unit at Cedar Bayou facility • 275 MW available to EnergyCo by summer 2009 • Existing site within Houston zone • Approximate $390 million project costs(1) or $710/kW • Use EnergyCo credit facility during construction • $0.04 to $0.06 EPS accretion in first full year (1) Excludes interest during construction

  17. EnergyCo Update EnergyCo’s Growing Portfolio 1.Twin Oaks 305 MW 2.Altura Cogen 614 MW 3.Cedar Bayou 270 MW(1) Total 1,189 MW Altura Cogen (formerly Lyondell) • Purchased from Dynegy • Acquisition completed Aug. 1 • 614 MW facility • Two off-take contracts • >400 MW available to market • Purchase price: $467.5 million • Slightly accretive in 2008 1 3 2 (1) Online summer 2009

  18. Gas Rate Case PNM Gas Rate Case • Order issued: June 29, 2007 • Rate base: $377.3 million • Cap Structure: 49/51 • ROE: 9.53% Appealed to state Supreme Court • Filed a notice of appeal on July 30 • Cross appeal due within 10 days • PNM’s statement of issues due Aug. 29

  19. Other Updates Management • Pat Vincent, Utilities President • Jim Ferland, Senior Vice President of Energy Resources • Bill Real retirement after 29 years • Cindy McGill, Senior Vice President of Public Policy PNM Electric Rate Case Schedule • Sept. 4 Staff and intervener testimony due • Oct. 1-8 Hearing • Dec. 31 Recommended decision expected • Feb. 21, 2008 Suspension period expires

  20. Path Forward Earn allowed regulated rate of return by addressing: • Regulatory environment • Legislative initiatives • Operating efficiency • Capital allocation Achieve growth through unregulated investments: • Focus on value of systems and portfolio optimization • Apply conservative approach of future contributions to EnergyCo • Seek long-term earnings and cash generation through EnergyCo acquisitions

  21. Questions and Answers

  22. Second Quarter 2007 Appendix

  23. GAAP-Ongoing Reconciliation

  24. 2nd Quarter EPS by Segment(ongoing)

  25. 2nd Quarter Margin by Segment

  26. 2nd Quarter EBITDA by Segment(ongoing)

  27. YTD Margin by Segment

  28. YTD EBITDA by Segment(ongoing)

  29. YTD Plant Performance Equivalent Availability Factor Lignite: 88%* Nuclear: 91%* Coal: 89%* * Annual top quartile numbers from the North American Electricity Reliability Council

  30. 2nd Quarter Weather Data Heating-Degree Days Cooling-Degree Days The heating-degree day (HDD) value is the accumulation in degrees that the daily mean temperature was below 65 degrees F. The cooling-degree day (CDD) value is the accumulation in degrees that the daily mean temperature was above 65 degrees F.

  31. YTD Weather Data Heating-Degree Days Cooling-Degree Days The heating-degree day (HDD) value is the accumulation in degrees that the daily mean temperature was below 65 degrees F. The cooling-degree day (CDD) value is the accumulation in degrees that the daily mean temperature was above 65 degrees F.

  32. Cap-ex increase reflects: • Accelerated expenditures at San Juan • Transfer of Twin Oaks to EnergyCo • Additional environmental expenditures • Forward nuclear fuel purchase 2007 Capital Expenditures (In millions) $415 $386 Includes AFUDC and capitalized interest

  33. Five-Year Capital Expenditures (In millions) $1,991 Includes AFUDC and capitalized interest

  34. Utility Rate Base

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